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VI
Executive summary
targeted and, because of this, tend to consolidate structures instead of promoting
structural change. Generally, all farm subsidies should be brought in line with EU
measures as early as possible, which means that if direct farm support is desired,
Croatia should opt for direct payments which are decoupled as much as possible.
Direct payments have proven useful for securing certain income levels, for
example in Slovenia. But compensation payments which aim at tiding over the
adjustment pressures should be designed according to a clearly-defined transitional
period; i.e. such payments should not be made permanent since their distortion
potential would increase and lead to a slowdown of structural change.
Exit schemes for farmers. Only about 10% of the farms want to exit farming
within the next five years, while 45% of the farms intend either to retain their
present state of development or continue as hobby farmers. However, for successful
structural change, farm exit is crucial as a driver of farm development. Incentives
are needed to convince farmers to give up farming and release their land to those
who are willing to expand. Therefore, (semi-)subsistence and hobby farms
should be excluded from regular farm subsidy programmes. Positive incentives
for farm exit could be set, for example by an early retirement scheme as offered
within the EU, or other monetary or social benefits that are offered under the
condition of giving up farming.
Food processing sector. Generally, the question applies, and could not be finally
answered in this study, whether the lack of competitiveness at farm level can be
compensated somewhat at processing level. It is likely, however, that this assumption
is true to some degree, as with increasing depth of processing Croatia’s food
sector becomes more competitive on EU markets. However, this issue should be
looked into more closely in order to further accelerate structural change in the
agricultural sector.
Agricultural extension service. The manpower and background of the extension
service in Croatia is sub-optimal and needs to be strengthened substantially in
order to come to terms with the challenge of structural change in the Croatian farm
sector. As of 2007, 215 extension workers (thereof 198 agricultural specialists)
within the Croatian Agricultural Extension Institute (CAEI, founded in 1997)
potentially service 448,000 thousand family farms. This means every extension
worker is responsible for more than 2,000 farms. Obviously, the overwhelming
task ahead requires many more qualified extension workers. These ought not to
be solely experts in agronomy, but also agricultural economists and persons
experienced in regional rural development. Furthermore, to advise interested
farmers in the correct application procedures, the development of business plans,
and the assessment of associated risks, these workers will need professional