Se ssion
Abstract
There are different aims of undertaking investment in agriculture. They vary for example due to the analyzed time in the case of the particular country or the level of economic `development. In Europe, the increase in agricultural production was crucial after the Second World War and now it is important in many developing countries suffering hunger or malnutrition. In these countries investment is essential to the promoting agricultural growth and reducing poverty and hunger (The State of Food and Agriculture, 2012). The modernization of technological processes is the second, very often pointed out aim especially from the perspective of the competition on a global agricultural product market. Reyes et al. (2012) indicate that market-oriented farmers need more capital for three main reasons: to invest in new technologies, to meet the requirements of international regulations on quality and food safety, and to obtain scale and scope economies. Because of the importance of investment, the vast range of support measures are offered to farmers under CAP and domestic support policy. They influence the level and structure of the investment. The aim of the paper is to analyze the level, dynamics and structure of the investment in the Polish agriculture and to recognize determinants of the investment. The analyses in papers should answer for following questions: (i) what was the level and structure of investment (ii) what tendencies in agricultural investment were observed especially after EU accession, (iii) what was the role of the support for the investment in agriculture. In the paper, the main subject of the investigation is capital investments. The analyses encompass the years 2000-2010. The data are taken from The Central Statistic Office and the Agency for Restructuring and Modernization of Agriculture. The main method used in the analyses is descriptive method based on the statistical data.
Keywords: investment outlays, agriculture, support measures, preferential credits Introduction
There are different aims of undertaking investment in agriculture. They vary for example due to the analyzed time in the case of the particular country or the level of economic development. In Europe, the increase in agricultural production was crucial after the Second World War and now it is important in many developing countries suffering hunger or malnutrition. In these countries investment is essential to the promoting agricultural growth and reducing poverty and hunger (The State of Food and Agriculture, 2012). The modernization of technological processes is the second, very often pointed out aim especially from the perspective of the competition on a global agricultural product market. Reyes et all (2012) indicate that market-oriented farmers need more capital for
influenced investment decisions are long. At macro level, it is worth to mention fiscal policy, savings, economic freedom, or monetary policy (Jedruchniewicz, 2012). Because of the importance of investment, in many countries the vast range of support measures are offered to farmers under agricultural policy. In EU agriculture investment are supported under the Common Agricultural Policy and domestic policy. The support measures influence the level and structure of the investment intentionally.
The aim of the paper is to analyze the level, dynamics and structure of the investment in the Polish agriculture and to recognize determinants of the investment. The analyses in papers should answer for following questions: (i) what was the level and structure of investment (ii) what tendencies in agricultural investment were observed especially after EU accession, (iii) what was the significance of the support for the investment in agriculture.
Materials and methodology
In the paper, the main subject of the investigation is investment in the sector of agriculture. The analyses encompass the years 2000-2010.
The investment is defined as outlays on fixed assets. They include outlays on: 1. buildings and structures, machinery, 2. technical equipment and tools, 3. transport equipment 4. other outlays (meliorations, costs incurred for purchase of land, second-hand fixed assets, basic herd, long term plantings, interests on investment credits and loans). The purchase of land is not included into investment.
The data are taken from The Central Statistic Office and the Agency for Restructuring and Modernization of Agriculture. The analyses of the dynamics of investment outlays were carried out in constant prices. To their calculation, the price indices of investment goods and services purchased by private farms in agriculture were used.
The descriptive method based on the statistical data is the main method used in the analyses.
The scope and structure of investment in agriculture
The share of agriculture in creating gross added value in Poland in the course 2000-2010 fluctuated between 2.3% to 2.9%, however, a very slight tendency to decrease in this variable is observed during the second part of the examined decade (table 1). The share of investment outlays on fixed assets in agriculture in investment outlays on fixed assets in economy was considerably lower and changed from 1.6% to 2.0%. There was no regularity in these changes. What more, the analyses of fluctuation of the both indicators does not show any connection between them. The scope of investment was generally low. The dynamics of investment value was negative in six years and positive in five years of examined period, but what is worth to underline, the four decreases were quite deep - about 7-9%, whereas in the case of two ones - about 3-4%. In the two in five years of growth, the value of investment rose very considerably - 15-20%. These years were preceded and followed by the years with increase of investment outlays however, only one digital. This positive period started in 2005 - the first full year of Poland’s membership in European Union and lasted till 2009. During these years, the Poland’s economy developed quickly - the rate of growth of GDP was over 6% in 2006 and 2007.
Table 1. The level and dynamics of investment outlays in agriculture
Source: Own calculations based on data from Statistical Yearbooks 2001-2011, Central Statistical Office Warsaw 2002-2012.
In 2009, due to the recession in economy the investment outlays decreased noticeably.
The analyses of the structure of investment indicates that investment in buildings and structures prevailed (Table 2). At least, one third of outlays was devoted for this type of investment every year.
They exceeded the investment in machinery, technical equipment and tools in eight in eleven examined years. The differences varied from 1 to 10 percentage points. The highest share of buildings in investment outlays was observed in the mid of the analyzed period - since 2002 to 2006 except 2004. The share of investment in machinery oscillated about 33% of investment outlays. It changed year to year but the differences were generally lower than 5 percentage points. Investment in transport equipment took a little more than 10% at the beginning of the examined period but was rising gradually till 2007 and got nearly 17%. In following years it was falling and in 2010, it was at the initial level. The group of other investment encompasses very different kinds of investment. In 2000, it was very popular direction of investment with the share amounted at more than 20 %, but it was falling gradually till 12% during following years. In the last analyzed year, it rose rapidly to more than 21%.
Table 2. Investment outlays by the type of outlays (%) Year Buildings and
structures
Machinery, technical equipment and tools
Transport equipment Others
2000 33.7 32.7 12.4 21.2
2001 37.1 33.3 10.4 19.2
2002 40.1 31.7 11.4 16.8
2003 40.5 30.0 12.1 17.4
2004 34.9 35.2 15.3 14.6
2005 39.3 32.2 15.7 12.8
2006 39.4 32.5 15.9 12.2
2007 36.9 34.3 16.7 12.1
2008 35.5 36.5 15.3 12.7
2009 34.5 38.3 14.6 12.6
2010 33.7 32.7 12.4 21.2
Source: Statistical Yearbook of Agriculture and Rural Areas 2005, 2007, 2009, 2011, Central Statistical Office Warsaw 2006-2012.
Tendencies in agricultural investment before and after EU accession
It can be expected that accession to EU gave the strong impact for the investment in agricultural sector due to the access to the different measures of the support. At the beginning of membership, the support programs under Rural Development Programme for 2004-2006 (PROW 2004-2006) and Sectoral Operational Programme (SOP) were offered. The measures under PROW (except support for agricultural holdings in less favoured areas) were addressed generally to a few groups of farmers and the required effects were of different character not only strict economic. Measures under SPO were aimed for modernization of the food sector and rural development. The list of measures addressed to farms included: investment in agricultural holdings, setting up of young farmers, diversification of agricultural activities, improving processing and marketing of agricultural products, and activities close to agriculture to provide multiple activities or alternative incomes, development and improvement of the infrastructure related to agriculture. Moreover, every year farmers get direct payments what could influence positively the investment. Rural Development Programme for 2007-2013 replaced two above mentioned programmes from former financial perspective. It has involved four axes under which 21 support measures were offered. Some schemes has supported directly modernization of farms and restructuring of agriculture (setting up young farmers, modernization of farms, participating farmers in the quality food systems, afforestation) support directly modernization of farms and restructuring of agriculture.
Table 3. Dynamics of investment outlays in the Polish agriculture Year Dynamics of investment outlays
(constant prices, previous year =100)
Dynamics of investment outlays per 1 ha of agricultural land
(constant prices, previous year =100)
2000 92.8 96.1
2001 95.9 92.9
2002 101.9 110.9
2003 91.1 95.2
2004 95.9 95.0
2005 104.6 107.4
2006 120.8 120.5
2007 115.0 113.4
2008 103.1 105.4
2009 92.3 90.7
2010 99.0 102.9
Source: Own calculations based on data from Statistical Yearbooks 2001-2011, Central Statistical Office Warsaw 2002-2012.
The data in table 3 confirms assumption about the positive influence of Poland accession to EU for investment. Till 2005, the rate of growth of investment outlays was negative, in 2005 the small growth appeared and in the next year, the outlays increased noticeable – more than 20%. This positive phenomenon repeated next year. In 2008, the rate of growth fell but was still positive but in 2009, the investment has decreased significantly and in 2010 stay nearly at the same level. The results of the analyses of tendencies in investment outlays per 1 ha agricultural land are in the line with the results of examination of the tendencies in total outlays.
Table 4. Investment outlays in agriculture and hunting per 1 ha of agricultural land by voivodships (in PLN, current prices)
Voivodships 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Poland 116.7 113.7 129.2 125.3 132 151.4 185.9 223.7 248.3 230.2 239.7
Dolnośląskie 149.6 116.8 122.7 99.0 93.8 148.4 175.1 207.1 206.4 199.9 176.4 Kujawsko-pomorskie 148.5 128.1 103.6 94.3 98.6 136.0 181.8 194.3 226.6 203.8 215.9
Lubelskie 54.4 84.3 86 102.6 111.9 127.5 145.9 173.5 201.9 193.4 214.1
Lubuskie 95.1 75.9 114.1 134.7 158.3 142.5 211.3 183.5 221.4 205.5 291.1
Łódzkie 129.2 138.5 135.6 135.4 131.2 163.5 191.8 236.3 224 224.7 234.3
Małopolskie 73.2 73.7 97.5 116.4 114.7 137.3 157.2 190.5 200.9 203.1 274.9
Mazowieckie 127.4 109.3 131.8 135.7 146.2 141.0 176.4 230.5 266.9 243 273.9
Opolskie 189.9 138.6 136.9 128.1 155.2 175.1 254.5 263.8 256.6 285.2 249.1
Podkarpackie 46.3 59 76 85.5 86.7 107.7 125.6 165.7 174.1 173.8 190.3
Podlaskie 116 86.3 124.9 124.2 117.6 138 182.5 227.2 231.3 238.9 259.7
Pomorskie 191.8 154.5 110.5 108.1 125.4 155.3 148.2 198.2 274.2 207.6 229.0
Śląskie 108.8 112.7 147.3 137.9 172.2 163.2 202.4 268.6 330.6 313.3 251.0
Świętokrzyskie 93.4 107.1 125.7 109.7 186.6 136.9 156.8 177.2 183.8 186.5 202.5 Warmiosko-mazurskie 78.8 98.2 132.8 124.9 158.3 155.3 189.6 220.5 225 200 194.2
Wielkopolskie 152 178.7 213.1 191.2 162.9 204.5 254.1 319.6 402.6 342.8 322.4
Zachodniopomorskie 118.3 116.8 146.9 116.9 119.4 166.7 207.4 239.0 216.7 185.2 182.3
Source: Statistical Yearbook of Agriculture and Rural Areas 2005. 2007. 2009. 2011. Central Statistical Office Warsaw 2006-2012.
The analyses of regional differentiation of investment outlays in the Polish agriculture indicates very big differences among the voivodships at the beginning of the examined period. The distance between the podkarpackie voivodship with the lowest outlays per 1 ha and pomorskie voivodship with the highest one was nearly 4 times. The voivodships with the lowest value of the indicator are generally these with the lowest level of agricultural development in Poland. In these voivodships, the farms play mainly nonagricultural role (Sikorska et al, 2009). The lubelskie voivodship has other characteristics. It is a typical agricultural region with the medium size of farms and relatively small level of specialization. The voivodships with the highest investment outlays belong to regions with well developed agriculture.
During the examined 11 years some very interesting phenomena considering the regional differentiation took place.
First, the big gap between investment outlays per 1 agricultural land decreasd significantly to less than 2 times. Second, in 2010 compared to 2000, two other voivodships were characterized by the lowest value of investment outlays per 1 ha. Third, in preaccession period, the investment outlays fluctuated while after accession till 2009 increased gradually every year.
The support for the investment in the Polish agriculture
Introduction of market rules into economy in 1990 caused the elimination of farm and food subsides. However, the deep worsening of the situation in agricultural sector made the government to intervene rather quickly. Already in April, the agriculture was offered the help in the form of the preferential credits for the financing mainly current activity. The preferences took form of subsidies to interest. The scope of this form of the support developed quickly and at the end of 1993, the special state agency – Agency for Modernization and Restructuring of Agriculture was established. It was responsible for the maintaining of the preferential credit system. The scope of credit support was noticeable. The share of expenditures due to subsidies to interest on preferential agricultural credit of different kinds in the state budget for agriculture was very high. in the peak years – 1997, 1998 reached nearly 60% (Danilowska 2005). It was clear that the system charged the budget too much and in 1998, the scope of the credit help was limited. The number of granted preferential investment credits decreased from 50 thousands in 1997 to 16 thousands in 1998. In the following years, the raise was observed and in the year before EU accession, the number of investment credits was amounted at 24.5 thousands (Danilowska 2005).
Table 5. Preferential investment credits and Value of investment outlays Year Value of investment
1 Value of preferential investment credits encompasses credits which were granted only to the farms under three credit lines: for young farmers, basic investment and branch credits
Sources: Own calculation based on data from Annual Reports on Activity of the ARMA (1995-2003). ARMA 1995-2004 and Statistical Yearbooks 2001-2011. Central Statistical Office Warsaw 2002-2012.
Data in table 5 shows the very important role of credit support in financing the investment outlays in agriculture. In the course 2000-2007, the proportion of value of preferential credits to the value of investment outlays exceeded 50%17. The share of preferential credits was extremely high in 2003 just before the Poland’s accession to EU. It stemmed from the fact that till new financial perspective 2007-2013 the preferential credits were the main forms of investment support available for average farm. As aforementioned, among the measures offered agriculture under PROW 2004-2006 and Sectoral Operational Programme only a few were intended for investment. Moreover, the farmers were not yet familiar with the procedure of applying for the support.
The role of preferential credits decreased in the period of a new financial perspective because the list of support measures widened and farmers got experience in applying for the support. Some from 21
support schemes under axes 1 and 2 have supported directly modernization of farms and restructuring of agriculture by size of area and age of owners. They are: setting up young farmers, structural pensions, modernization of farms, participating farmers in the quality food systems, afforestation. Taking into consideration the idea and aims of support, the schemes: modernization of farms and setting up young farmers are close to the preferential investment credit support18.
Table 4. Applications for support under PROW 2007-2013 measures Modernization agricultural holdings and setting up young farmers and for preferential investment credits in 2007-2010
Specification Number Value (mln PLN)
Preferential credits 1 31 128 5 122.6
Modernization agricultural holdings 342232 33 3483 26 4474
4 707.92 3 434.83
Setting up young farmers 15 7462
5 9263 5 9264
1 032.22 302.93
1 lines: for young farmers. basic investment and branch credits
2 accepted applications 2007-2010 (Table 6). The number of agreements under the measures Modernization agricultural holdings and Setting up young farmers was higher than number of granted investment preferential credits. It is a natural phenomenon as a support in form of return of a part of investment outlays is more attractive compared to subvention to interest on credit. The expected payments due to measures: Modernization agricultural holdings and Setting up young farmers are amounted at 40% of the value of investment outlays in years 2007-2010 while the realised payments at 25%. The preferential investment credits covered about 35% of investment outlays. These figures illustrate the crucial role of the support measures in financing investment in the Polish agriculture. It can be supposed that many investments were undertook because of the support.
Conclusions
The scope of investment in the Polish agriculture is low and does not reflect the share of agriculture in creating GDP. The investment activity in agriculture is differiented regionally, however, during the 11 examined years these differences decreased noticebly. Poland’s EU accessecion influenced very positivly the scope of investment in agriculture but did not change the structure of investment.
Before the Poland’s EU accessecion the preferential credits played the vital role in financing the investment in agriculture. After the accession this tool has been still used but its importance fell on behalf of the support measures offered under CAP.
The analyses indicates that the support for investment played the crucial role in financing the investment and influenced the decisions about undertaking the investment by the farmers.
18 Of course the character and terms of this two tools of economic policy are different.
References
Annual Reports on Activity of the ARMA (2000-2010). ARMA 2001-2010
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Reyes A.. Lensink R.. Kuyvenhoven A.. Moll H.: Dynamics of Investment for Market-Oriented Farmers in Chile. International Association of Agricultural Economists. 2012 Conference. August 18-24.
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Abstract
Why has corporate social responsibility towards society and the environment become so important and „popular”? The answer is inherent in Krisztina Szegedi’s 2012 study: because companies are in continuous interaction with their environment. The environmental movements of the 70s and the social changes after the turn of the millennium have made companies „open their gates.” Friedman’s most disputed assertion in his famous 1970 article, namely that the one and only responsibility of a company is to create profit, seems to be challenged nowadays. The company is a kind of human association, which operates in a well defined society and environment, and therefore has to play an active and positive role in the social and environmental processes and should consider the environmental and social impacts of its activities (Kun, 2004). Freeman and Hanasaoui have correctly asserted in their study that CSR is divided into several parts with several discussion purposes by many authors. These contain definitions such as corporate responsibility, the status of the corporate citizen, sustainability and corporate social performance. These definitions are used synonymously by a few authors, while the others define corporate sustainability as one part of CSR (Agle et al., 1999; Graves and Waddock, 1994; Turban and Greening, 1997), further researches state that CSR is a part of ethics (Argandona and von Weltzien Hoivik 2010; Weitzner and Darroch, 2009). In the opinion of Koleva, CSR is the micro economical translation of sustainable development (Koleva, 2005), while other researchers consider CSR to be an organic concept that doesn’t need any definition. (Campbell, 2007;
Palazzo and Scherer, 2006). This antagonism exists not only among the researchers but in the practice as well. Personally I first met the abbreviation of CSR in 2006. Since that I have heard about it on several lectures and conferences presented by different participants of the field. Unfortunately my experience shows that it is not even yet decided who is really responsible for doing CSR, where it should be integrated within the company, how we should measure the benefit of CSR, what kind of indicators we should use etc. In spite of that, nowadays companies cannot exist without a CSR
Palazzo and Scherer, 2006). This antagonism exists not only among the researchers but in the practice as well. Personally I first met the abbreviation of CSR in 2006. Since that I have heard about it on several lectures and conferences presented by different participants of the field. Unfortunately my experience shows that it is not even yet decided who is really responsible for doing CSR, where it should be integrated within the company, how we should measure the benefit of CSR, what kind of indicators we should use etc. In spite of that, nowadays companies cannot exist without a CSR