ROMANIAN AGRIFOOD SECTOR – MACROECONOMIC CORRELATIONS OF DOMESTIC COMPETITIVENESS

1

ROMANIAN AGRIFOOD SECTOR – MACROECONOMIC CORRELATIONS OF DOMESTIC

COMPETITIVENESS

Filon TODEROIU1

Abstract

The paper focuses on analyzing the influence of extensive and intensive factors from agriculture

upon gross value added in the period between 1990 and 2000. The extensive factors are labor force

and fixed capital endowment, while the intensive factors are gross efficiency of fixed capital and

gross value added intensity. We, also, analyze the agricultural and food production dynamics, the

share of agriculture in final output, intermediary consumptions and gross value added in national

economy, the structure of agrifood economy, the structure of final output and net efficiency of

intermediary consumptions in agrifood economy, the dynamics of final output, intermediary

consumption and gross value added in agriculture, food industry and national economy, the

dynamics of labor, fixed capital and intermediary consumptions productivity in agrifood economy in

the period of transition (1989-2000), in Romania. The paper ends with forecast scenarios of gross

value added in the Romanian agriculture based on the multiple regression model.

Keywords: agrifood economy, competitiveness, agricultural development correlations.

JEL Classification: D24, O13

1. Internal factor correlations of the agrifood sector

National economy restructuring had in view, among others, reestablishing sectoral

equilibrium based upon domestic and international competitiveness criteria,

macroeconomic growth and export development, food security and increasing living

standard in the rural area.

The total agricultural output in 1999 was at the level of that in 1989. Crop production

was up by about 12%, in the same period, while livestock production significantly declined,

by 16.2% (Table 1.1).

Table 1.1. Agricultural and food production dynamics, 1989 - 2000

(volume indices, 1989 = 1)

Agricultural production

Total Vegetal Animal Food production

1989 1,000 1,000 1,000 1,000

1990 0,971 0,928 1,022 0,807

1991 0,978 0,968 0,983 0,658

1992 0,848 0,825 0,879 0,545

1993 0,935 0,945 0,917 0,470

1994 0,937 0,948 0,916 0,527

1 Institute of Agricultural Economics, the Romanian Academy.

2

1995 0,978 0,999 0,944 0,539

1996 0,991 1,017 0,949 0,550

1997 1,025 1,118 0,890 0,468

1998 0,948 0,994 0,878 0,465

1999 0,998 1,120 0,838 0,539

2000 0,857 0,892 0,813 0,586

Sourse : Calculations based upon AS-RO 1991-2001, NIS;

Although closely dependent upon agricultural production, Romanian food production

declined throughout the transition years; in the year 2000 this was by 41.4% below the 1999

level, which means that the agrifood processing industries do not have the capacity to

absorb the relatively stable domestic supply of agricultural raw materials.

On the other hand, a narrowing of aggregate domestic demand for domestic agrifood

products was noticed. This was due to the diminution of population’s purchasing power and

to certain facilities for domestic market penetration by the agrifood imports. Population’s

final consumption declined in 1999 by 2.2% compared to that in 1989, in the context of the

diminution of purchasing power and incomes.

A relevant modality to determine the influence of extensive and intensive factors

upon the evolution of sectoral output is the utilization of synthetic indicators of agricultural

production from the national accounts. We refer here to the aggregate relation for

expressing the dynamics of gross value added as a result of the algebraic product of four

extensive and intensive factors (Table 1.2), namely:

Y = [ L * K/L * P/K * (1 – C/P)] [1.1] , where:

Y = gross value added; L = labour force; K = fixed capital stock; P = final agricultural output;

C = intermediate consumptions; K / L = fixed capital endowment; P / K = gross efficiency of

fixed capital; Y / P = gross value added intensity.

In the previous relations [1.1], we mention that the extensive factors are labour force

and fixed capital endowment, while the intensive factors are gross efficiency of fixed capital

and gross value added intensity.

Table 1.2. Influence of extensive and intensive factors from agriculture upon GVA,

1990 - 2000 (1989 = 1,000)

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Labour force

(Lq) 1,014 1,034 1,116 1,174 1,182 1,058 1,078 1,103 1,094 1,135 1,169

Fixed capital

stock(Kq) 0,789 0,757 0,795 0,843 0,881 0,955 0,939 0,933 0,854 0,786 0,765

Final

agricultural

output (Pq)

1,070 1,051 0,917 1,034 1,038 1,080 1,086 1,110 1,022 1,083e 0,929e

Intermediary

consumptio0,736 0,843 0,941 0,823 0,803 0,831 0,886 0,942 0,898 0,876e 0,928e

3

ns (Cq)

Gross value

added (Yq) 1,394 1,228 1,066 1,218 1,253 1,313 1,257 1,242 1,110 1,146 0,930

Fixed capital

endowment

(Kq/Lq)

0,778 0,732 0,712 0,718 0,745 0,903 0,871 0,846 0,781 0,693 0,654

Gross

efficiency of

fixed capital

(Pq/Kq)

1,356 1,388 1,153 1,227 1,178 1,131 1,156 1,190 1,197 1,378 1,215

Gross value

added

intensity

(Yq/Pq)

1,303 1,168 1,162 1,178 1,207 1,216 1,157 1,119 1,086 1,058 1,001

Source: calculations on the basis of data from AS-RO 1991 - 2001, NIS; e = estimate;

Analysing the four extensive and intensive factors that contributed to gross value

added, the conclusion is:

• Labour force in agriculture (extensive factor) increased in the period 1989-2000 by

almost 17%;

• Fixed capital endowment (extensive factor) declined by 28.8% in the year 1992

compared to 1989, owing to the fixed capital diminution in agriculture and the

increase in the number of persons employed in agriculture; although after 1992 a

slight revigoration of agricultural technical endowment was noticed (until 1995), the

systematic involution of fixed capital stock in agriculture until 2000 resulted in a

strong regressive trend in agricultural technical endowment (down by 34.6%

compared to 1989);

• Gross efficiency of fixed capital (intensive factor) slightly improved until 1991 (mainly

due to the value added increase and considerable diminution of fixed capital stock);

after this, an oscillating trend could be noticed resulting from the yearly variations of

final agricultural output;

• Gross value added intensity (intensive factor) experienced a relatively show increase

until 1995; after this moment, a decreasing trend could be noticed.

To sum up, the gross value added was mainly due to the extensive factor (labour force) and

the two intensive factors (gross efficiency of fixed capital and the gross value added

intensity). The extensive factor (fixed capital endowment) had a negative influence upon

gross value added.

The experience of countries with performing economies shows that if the added

value modification is more than one (is positive), on the basis of intensive factors, this trend

can be appreciated as an economic efficiency increase.

2. Partial factor productivity – correlation in the competitiveness context

The share of the three main synthetic indicators of agriculture (final output, intermediary

consumption and gross value added) in national economy, the share of intermediary

consumptions and of gross value added in final production and the net efficiency of

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intermediary consumptions, as well as the evolution of these indicators in the period 1989-

1998, may be considered as the “structural battery” of agrifood economy efficiency. On the

basis of information from the National Accounts, for the period 1989 - 1998, it results that

the share of final agricultural output in the national economy ranged from 10.4% (1989) to

16.1% (1998), with an average share of about 15% (Table 2.1).

Table 2.1. Share of agriculture in final output, intermediary consumptions and gross

value added in national economy, 1989 – 1998

Final output

(%)

Intermediary

consuptions(%)

Gross value added

(%)

1989 10,4 7,9 15,2

1990 14,0 8,6 23,0

1991 14,5 11,5 19,6

1992 14,6 11,8 18,9

1993 18,2 15,1 22,2

1994 17,4 14,4 20,9

1995 16,4 13,1 20,9

1996 15,5 12,1 20,1

1997 15,1 12,0 19,1

1998 14,1 12,8 15,6

Source: calculations on the basis of National Accounts data, 1989-2001, INS;

In the first decade of transition, the share of agriculture’s intermediary consumption

in national economy ranged from 7.9% (1989) to 12.8% (1998), with a peak level of 15.1% in

the year 1993.

Romanian’s agrifood economy structure is strong highly dependent upon agriculture.

This sector ha the highest share in final output and in the gross value added of the agrifood

sector. Food industry has the highest share in the intermediary consumption of the agrifood

sector. The other activities do not have significant shares in the agrifood sector structure

(Table 2.2).

Table 2.2. Structure of agrifood economy (%)

Years Final output Intermediary

consumption

Gross value added

1989 49,1 38,8 66,1

1990 55,5 39,8 73,3

1991 58,7 48,7 73,4

1992 58,4 48,9 72,3

1993 63,5 55,3 73,4

1994 61,6 52,8 71,3

1995 60,0 50,7 70,8

1996 56,0 46,7 67,0

1997 53,7 44,2 65,1

Agriculture

1998 55,4 48,6 63,9

1989 1,9 1,1 3,3 Sylvicuture,

forestry and 1990 1,7 1,1 2,2

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1991 1,5 1,0 2,1

1992 1,2 0,9 1,8

1993 1,1 0,8 1,4

1994 1,3 0,9 1,8

1995 1,3 0,9 1,7

1996 1.3 1,0 1,6

1997 1,1 0,8 1,4

hunting

1998 1,4 1,1 1,9

1989 0,4 0,7 -0,06

1990 0,6 1,2 -0,02

1991 0,3 0,5 -0,04

1992 0,4 0,6 0,03

1993 0,3 0,5 0,03

1994 0,1 0,3 0,02

1995 0,1 0,2 0,01

1996 0,1 0,1 0,01

1997 0,1 0,1 0,02

Fishery and

pisciculture

1998 0,1 0,1 0,02

1989 45,7 56,5 27,8

1990 39,6 56,3 20,7

1991 38,2 48,6 22,8

1992 39,0 48,8 24,5

1993 34,4 42,9 24,3

1994 36,0 45,3 25,8

1995 37,9 47,6 26,8

1996 41,9 51,6 30,6

1997 43,7 53,5 31,8

Food and

beverages industry

1998 41,5 48,8 32,3

1989 2,9 2,9 2,9

1990 2,6 1,6 3,7

1991 1,4 1,2 1,8

1992 1,0 0,8 1,3

1993 0,7 0,6 0,8

1994 0,9 0,8 1,1

1995 0,7 0,6 0,7

1996 0,7 0,7 0,8

1997 1,5 1,4 1,7

Tobacco industry

1998 1,6 1,4 1,9

Source : calculations on the basis of National Accounts data 1989 - 2001, INS;

Final output in agriculture accounted for 49.1% (1989) and 63.5% (1993) in the final

output of agrifood economy, while food industry accounted for 36% (1994) to 45.7% (1989).

At the same time, intermediary consumption in agriculture accounted for 38.8%

(1989) and 55.3% (1993) in the intermediary consumption of the agrifood economy

aggregate; i.e. lower levels compared to the share of intermediary consumption from the

food industry (42.9% in 1993 and 56.5% in 1989).

The lower level of the share of intermediary consumption in agriculture explains the

high share of gross value added, as a result of a massive presence of manual labour. This

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ranges from 66.1% (1989) to 73.4% (1993). At the same time, in the food industry, the gross

value added does not exceed 32.3% (1998). This sector, although featuring a better technical

endowment, does not provide a high productivity level that could reduce the price of

products and lead to profit increase and to a significant share of gross value added.

Other important indicators for measuring agriculture performance are the following:

shares of intermediary consumptions and gross value added in final output and the net

efficiency of intermediary consumptions (Table 2.3).

Table 2.3. Structure of final output and net efficiency of intermediary consumptions in

agrifood economy, 1989 - 1998

Intermediary

consumption

share (CI) in final

output (%)

GVA share (GVA) in

final output (%)

Net efficiency of

intermediary

consumption

(ROL GVA / 1 ROL

CI)

1989 49,3 50,7 1,03

1990 38,2 61,8 1,62

1991 49,6 50,4 1,02

1992 49,7 50,3 1,01

1993 47,6 52,4 1,10

1994 45,0 55,0 1,22

1995 44,5 56,6 1,27

1996 45,1 54,9 1,22

1997 45,0 55,0 1,22

Agriculture

1998 48,7 51,3 1,05

1989 35,0 65,0 1,85

1990 36,5 63,5 1,74

1991 41,0 59,0 1,44

1992 41,9 58,1 1,39

1993 40,4 59,6 1,48

1994 37,0 63,0 1,70

1995 38,4 61,6 1,61

1996 41,7 58,3 1,40

1997 41,6 58,4 1,40

Sylvicuture,

forestry and

hunting

1998 41,5 58,5 1,41

1989 104,9 -4,9 -0,05

1990 101,6 -1,6 -0,02

1991 105,8 -5,8 -0,05

1992 96,6 3,4 0,04

1993 95,6 4,4 0,05

1994 93,4 6,6 0,07

1995 95,1 4,9 0,05

1996 94,3 5,7 0,06

1997 85,2 14,8 0,17

Fishery and

pisciculture

1998 85,0 15 0,18

1989 77,1 22,9 0,30

1990 75,6 24,4 0,32

Food and

beverages industry

1991 76,0 24,0 0,32

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1992 74,5 25,5 0,34

1993 68,0 32,0 0,47

1994 66,0 34,0 0,52

1995 66,1 33.9 0,51

1996 66,4 33,6 0,50

1997 67,0 33,0 0,49

1998 65,3 34,7 0,53

1989 63,0 37,0 0,59

1990 33,5 66,5 1,98

1991 49,9 50,1 1,00

1992 47,3 52,7 1,11

1993 46,0 54,0 1,17

1994 43,2 56,8 1,31

1995 47,5 52,5 1,11

1996 48,5 51,5 1,06

1997 49,9 50,1 1,01

Tobacco industry

1998 48,2 51,8 1,07

1989 62,3 37,7 0,60

1990 53,2 46,8 0,88

1991 59,7 40,3 0,68

1992 59,4 40,6 0,68

1993 54,7 45,3 0,83

1994 52,5 47,5 0,91

1995 52,7 48,0 0,91

1996 54,0 46,0 0,85

1997 54,7 45,3 0,83

Agrifood economy

1998 55,5 44,5 0,80

Source : calculations on the basis of National Acounts data 1989-2000, NIS;

In the period 1989-198, while intermediary consumption in final output of food

industry accounts for 77.1% (1989), intermediary consumption in agriculture does not

exceed 49.7% (1992). In agriculture, the share of intermediary consumption in final output

ranged from 38.2% (1990) to 49.7% (1992). This low share was mainly due to the diminution

of farmers’ capacity to procure the necessary production means.

The share of gross value added in agriculture ranged from 50.3% (1992) to 61.8%

(1990) throughout the investigated period. In the final production of food industry, as a

consequence of high intermediary consumptions and low labour productivity, the gross

value added in the period 1989-1998 had a maximum share of 34.7% (1998), with negative

effects upon the net efficiency of intermediary consumption.

The net efficiency of intermediary consumption is over 1 ROL in the case of

agriculture and tobacco industry, out of different economic reasons: in the case of

agriculture, a production system prevails based upon providing inputs from farmer’s own

production, which deepens the subsistence character of this sector; in the case of tobacco

industry, the labour productivity level is much higher and this is a profitable sector

considering the specific character of products and their market.

However, in the food industry this indicator does not exceed 0.53 ROL (1998), leading

to a lower efficiency of intermediary consumptions. As a result of the low performance level

throughout the agrifood economy, the intermediary consumption exceeds 50%, mainly due

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to the share of over 67% of intermediary consumption in the food industry. The lowest net

efficiency of the agrifood economy, i.e.0.60 was noticed in 1989, due to the artificial

maintenance of consumer prices at a low level. The maximum value of this indicator was

reached in 1995 (0.91); after this moment a decreasing trend followed.

The share of gross value added in final output of agrifood economy is lower

compared to that of agriculture. The explanation for this lies in the self-sustaining character

of agriculture and in the increased natural economy character, as a result of excessive

diminution of industrial inputs. On the longer term, the continuation of this state of things

led to agriculture collapse, its getting away from the market and increase of rural population

self-consumption. Contraction of domestic market for certain agricultural products and the

increase of imports is more and more harmful to the agricultural balance of trade and to

food security on longer term.

Agriculture and forestry mainly contributed to the increase of intermediary

consumption efficiency in the agrifood economy. In volume terms, in the period 1989-1998,

significant discrepancies were experienced as regards the dynamics of the three investigated

indicators, both at the level of sectors providing and processing agricultural raw materials and

at the national economy level (Table 2.4).

Table 2.4. Indices of final output, intermediary consumption and gross value added in

Romania’s agrifood economy, 1989 - 98 (1989 = 1)

Years Final output Intermediary

consumption Gross value added

1989 1,000 1,000 1,000

1990 1,070 0,736 1,394

1991 1,051 0,843 1,228

1992 0,917 0,741 1,067

1993 1,034 0,823 1,219

1994 1,038 0,803 1,254

1995 1,080 0,831 1,313

1996 1,086 0,886 1,257

1997 1,110 0,942 1,242

Agriculture

1998 1,022 0,898 1,110

1989 1000 1,000 1,000

1990 0,928 0,928 0,928

1991 0,750 0,851 0,692

1992 0,691 0,793 0,633

1993 0,631 0,721 0,580

1994 0,642 0,722 0,596

1995 0,671 0,767 0,616

1996 0,673 0,772 0,617

1997 0,621 0,689 0,583

Sylvicuture, forestry

and hunting

1998 0,620 0,683 0,584

1989 1,000 1,000 1,000

1990 1,354 1,311 0,462

1991 0,682 0,688 0,862

1992 0,760 0,701 0,975

1993 0,624 0,575 0,812

1994 0,468 0,427 0,754

1995 0,389 0,359 0,538

Fishery and

pisciculture

1996 0,258 0,237 0,376

9

1997 0,246 0,226 0,346

1998 0,203 0,186 0,283

1989 1,000 1,000 1,000

1990 0,961 0,944 1,021

1991 0,885 0,870 0,935

1992 0,865 0,852 0,909

1993 0,848 0,844 0,864

1994 0,926 0,951 0,880

1995 1,065 1,098 1,004

1996 1,274 1,298 1,228

1997 1,246 1,282 1,178

Food and beverages

industry

1998 1,146 1,177 1,088

1989 1,000 1,000 1,000

1990 0,932 0,488 1,685

1991 0,438 0,250 0,757

1992 0,374 0,213 0,645

1993 0,390 0,233 0,645

1994 0,369 0,266 0,503

1995 0,330 0,238 0,450

1996 0,317 0,231 0,428

1997 0,327 0,243 0,433

Tobacco industry

1998 0,290 0,213 0,390

1989 1,000 1,000 1,000

1990 0,852 0,786 0,976

1991 0,744 0,682 0,861

1992 0,668 0,608 0,783

1993 0,688 0,626 0,809

1994 0,715 0,648 0,844

1995 0,780 0,719 0,901

1996 0,730 0,678 0,836

1997 0,683 0,640 0,775

Agrifood economy

1998 0,650 0,612 0,733

Source: calculations based on National Accounts data 1989-2001, NIS;

Final agricultural output experienced a descending trend until 1992; after this moment, a

revigoration followed, until 1997; after this a decrease by almost 8% was noticed in this last

year. This sinuous trend also continued after 1998.

In the food industry, final output declined by 15.2% in the period 1989-1993; then it

significantly increased, by over 50%, in the period 1994-1996; then it declined again, to

reach in 1998 only about 90% of the 1996 level. The lack of stability in food industry is

influenced by agricultural production variation and by the slow rate of privatization and

restructuring. The decrease of population incomes and demand for certain refined food

products led to the low level and slow rate of food industry final output. To this are added

the food imports pressure as well as the low quality in certain products that also have the

same influence.

The intermediary consumption in agriculture has an oscillating evolution, its index

being systematically less than one, throughout the investigated period, ranging from 0.736

(1990) to 0.942 (1997) compared to 1989. On the other hand, in the food industry the

intermediary consumptions have an oscillating decreasing trend first, to reach 0.951 (1994);

then a relatively continuous increasing trend follows, to reach values by 29.8% higher in the

year 1996 than in 1989.

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The gross value added in agriculture had an oscillating trend, the slight increase in

1993-1995 being followed by an almost continuous decline until the year 2000. In the food

industry the gross value added decreased in 1989-1993, followed by a slight recovery until

1996 and by a new decline in the next years.

In the national economy, all the three indicators in the period 1989-1992 have a

decreasing trend, the strongest being in the intermediary consumption (by 39.2% lower in

1992 compared to that in 1989); then these indicators had a slight increasing trend until

1995, to decline again in the next years.

Comparing the dynamics of synthetic indicators in agriculture and food industry to

those in national economy, in all three indicators the dynamics of national economy is

outstripped by the two component of the agrifood sector (Figures 2.1 – 2.3).

Figure 2.1. Dynamics of final output in agriculture, food industry and national economy,

1990 - 1998 (1989 = 1)

Figure 2.2. Dynamics of intermediary consumption in agriculture, food industry and national

economy, 1990 - 1998 (1989 = 1

0,5

0,6

0,7

0,8

0,9

1

1,1

1,2

1,3

(19

89=1)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Agriculture Food industry National economy

0,5

0,6

0,7

0,8

0,9

1

1,1

1,2

1,3

(1989=1)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Agriculture Food industry National economy

11

Figure 2.3. Dynamics of gross value added in agriculture, food industry and national

economy, 1990 - 1998 (1989 = 1)

The performance of a certain branch or sector from the national economy can be

established, among others, by the productivity indicator, calculated by the relation between

an indicator of economic activity effect (gross value added, final output) and an indicator of

effort (active employed population, fixed capital, intermediary consumption).

In order to evaluate the performance in agrifood economy, the dynamics of labour

productivity and fixed assets, as well as of intermediary consumptions in agriculture and

food industry was calculated. A first modality to evaluate performance in agrifood economy

is based upon labour productivity, calculated as a ratio of final output to gross value added

and active population employed in agriculture (Table 2.5).

Table 2.5. Dynamics of labour productivity in agrifood economy, 1989 - 1998 (1989 = 1)

Years Employed

population

Final

output

Gross value

added

Gross

productivity

Net

productivity

1989 1,000 1,000 1,000 1,000 1,000

1990 1,014 1,070 1,394 1,055 1,375

1991 1,034 1,051 1,228 1,015 1,186

1992 1,116 0,917 1,067 0,823 0,956

1993 1,174 1,034 1,219 0,882 1,038

1994 1,182 1,038 1,254 0,880 1,061

1995 1,058 1,080 1,313 0,912 1,107

1996 1,078 1,086 1,257 1,007 1,166

1997 1,103 1,110 1,242 1,006 1,126

Agriculture

1998 1,094 1,022 1,110 0,934 1,015

1989 1,000 1,000 1,000 1,000 1,000

1990 1,152 0,961 1,021 0,856 0,909

1991 1,139 0,885 0,935 0,778 0,822

Food and

beverages

industry

1992 1,083 0,865 0,909 0,800 0,841

0,5

0,6

0,7

0,8

0,9

1

1,1

1,2

1,3

1,4

(1989=1)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Agriculture Food industry National economy

12

1993 1,135 0,848 0,864 0,749 0,763

1994 1,096 0,926 0,880 0,846 0,804

1995 1,035 1,065 1,004 1,031 0,972

1996 0,974 1,274 1,228 1,308 1,261

1997 0,948 1,246 1,178 1,314 1,243

1998 0,956 1,146 1,088 1,199 1,138

Source: calculations on the basis of National Accounts data 1989-2001, NIS;

In agriculture, due to the absolute and relative growth of active employed

population, in 1989-1998 gross labour productivity declined; in 1998 this was by 6.6% lower

compared to that in 1989, while the net productivity was by only 1.5% higher than its level in

1989. In the food industry, the two derived indicators had an oscillating evolution

throughout the whole investigated period; the strongest decline was found in the gross

labour productivity (by 25.1% in 1993 compared to 1989), and by 23.7% in net productivity.

Both gross and net labour productivity in the last years of the investigated period

experienced a slight recovery in the period 1993-1997; then the declining trend continued.

This period correspond to the agricultural production revigoration as a result of the

application of Law 83/1993 on farmer support. In the years that followed the farm support

system suffered a lot of changes and the negative effects of these changes were amplified in

the process of expanding the internal resources of agriculture and getting away from the

market rules. Another indicator that reflects the agrifood economy performance is fixed

capital productivity (Table 2.6).

Table 2.6. Dynamics of fixed capital productivity in agrifood economy, 1989 - 1998 (1989 = 1)

Years Fixed

capital Final output

Gross value

added

Gross

productivity

Net

productivity

1989 1,000 1,000 1,000 1,000 1,000

1990 0,789 1,070 1,394 1,356 1,767

1991 0,757 1,051 1,228 1,388 1,622

1992 0,795 0,917 1,067 1,155 1,342

1993 0,843 1,034 1,219 1,228 1,446

1994 0,881 1,038 1,254 1,179 1,423

1995 0,955 1,080 1,313 1,133 1,375

1996 0,939 1,086 1,257 1,157 1,339

1997 0,933 1,110 1,242 1,190 1,331

Agriculture

1998 0,854 1,022 1,110 1,196 1,300

1989 1,000 1,000 1,000 1,000 1,000

1990 1,069 0,961 1,021 0,899 0,955

1991 1,119 0,885 0,935 0,791 0,836

1992 1,151 0,865 0,909 0,752 0,790

1993 1,231 0,848 0,864 0,689 0,702

1994 1,318 0,926 0,880 0,702 0,668

1995 1,633 1,065 1,004 0,652 0,399

1996 1,695 1,274 1,228 0,752 0,724

1997 1,714 1,246 1,178 0,727 0,687

Food and

beverages

industry

1998 2,486 1,146 1,088 0,461 0,438

Source: calculations on the basis of National Accounts data 1989-2001,NIS;

13

Against the background of fixed capital stock decrease in agriculture throughout the

investigated period and of a slight increase of final output, an increase of gross productivity

of fixed assets in agriculture took place (by 19.6% in 1998 compared to 1989); this indicator

reached a maximum level in 1991 (1.388) mainly due to the diminution by almost 24% of the

physical volume of fixed capital stock in agriculture. Later on, the destruction of the capital

stock from agriculture lowered the performance of this sector and exhausted the

revigoration sources.

The net productivity of fixed assets in agriculture increased by 30% throughout the

investigated period; however, the maximum level was reached in 1990 (1.767), when the

increase of gross value added by 39.4% was accompanied by a diminution by almost 21% of

fixed assets. A continuous exhaustion of sources for performance growth in agriculture is

noticed. In the food industry, the productivity of fixed assets significantly declined in the

investigated period; this decline was result of the absolute fixed capital stock and the

increase in the price of purchased equipment. The fixed capital stock increase thus exceed

the improvement rate of final output and gross value added. The gross productivity of fixed

assets declined in the period 1989-1998 by 53.9%, while the net productivity by 56.2%. The

large food processors have not suffered any restructuring, some of them went bankrupt,

while others succeed in becoming performing.

When comparing the productivity of fixed assets in the two sectors of the agrifood

economy, one can notice a higher dynamics of productivity in fixed assets in agriculture,

compared to that in the food industry, due to their lower level and to the underutilization of

production capacities in the large food processors.

Another modality by which agrifood economy performance can be measured is the

determination of intermediary consumption productivity (Table 2.7).

Table 2.7. Dynamics of intermediary consumption productivity in agriculture and food

industry, 1989 - 1998 (1989 = 1)

Years Intermediary

consumptions

Final

production

Gross

value

added

Gross

productivity

Net

productivity

1989 1,000 1,000 1,000 1,000 1,000

1990 0,736 1,070 1,394 1,454 1,894

1991 0,843 1,051 1,228 1,247 1,457

1992 0,741 0,917 1,067 1,241 1,442

1993 0,823 1,034 1,219 1,259 1,483

1994 0,803 1,038 1,254 1,296 1,564

1995 0,831 1,080 1,313 1,304 1,582

1996 0,886 1,086 1,257 1,226 1,419

1997 0,942 1,110 1,242 1,178 1,318

Agriculture

1998 0,898 1,022 1,110 1,138 1,236

1989 1,000 1,000 1,000 1,000 1,000

1990 0,944 0,961 1,021 1,018 1,082

1991 0,870 0,885 0,935 1,017 1,075

1992 0,852 0,865 0,909 1,015 1,067

1993 0,844 0,848 0,864 1,005 1,024

1994 0,951 0,926 0,880 0,975 0,926

Food and

beverages

industry

1995 1,098 1,065 1,004 0,971 0,915

14

1996 1,298 1,274 1,228 0,982 0,946

1997 1,282 1,246 1,178 0,972 0,920

1998 1,177 1,146 1,088 0,974 0,924

Source: calculations on the basis of data from “Romania’s Statistical Yearbook” 1989 - 2001, NIS;

Owing to the lower intermediary consumption in agriculture and to the higher final

output compared to food industry, gross productivity of intermediary consumption is higher

in agriculture; this was by 13.8% higher in the year 1998 compared to 1989, while that the

food industry decreased by 2.6% compared to 1989. However, these evolutions are not

favorable to any sector; they rather reflect the aggravation of the destructuring process and

the limitation of opportunities for production revigoration due to the lack of technical

endowment and modern technology and the low utilization of production capacities in the

food industry and the excessive dependency of farm production upon the weather

conditions.

3. Agricultural development correlations – prospective evaluations

Subchapter 2.1 presented the levels and trends of agrifood sector development through the

endowment with resources, final output structure and productivity of production factors,

both from the perspective of domestic competitiveness and by comparison with the

European Union. The reference period was 1989-2000, which is at the lower level of the

confidence interval in an eventual prognosis produced on the basis of suitable data.

Prognostic estimations on the future development of the Romanian agrifood sector

are relatively few and their scope is incomplete. One of these prognoses2presents data

referring to the agrifood sector development in the period 1999-2005, under two

hypostases:

• Relative yearly modifications of the gross value added in agriculture, in the period

1999-2005;

• Yearly rates of total agricultural production growth, in the period 1999-2005.

According to these prognosis estimates, the gross value added in agriculture will increase by

22.9% until 2005 compared to the year 2000, a rate lower by 5.1% compared to the GDP in

total economy. In consequence, total agricultural production would increase by 22.6% in the

year 2005 compared to 2000.

Unfortunately, no estimates for the gross value added are available referring to the

food industry; the only remark is that “food industry, as main beneficiary of the agricultural

raw materials, took over the deep changes produced in the agricultural sector from our

country after the year 1990”.

Another prognosis3 refers to the agrifood sector on the same disparate and

incomplete basis. If the dynamics of valor indicators stop at the forecast year 2005 (at the

agricultural production value4), the quantitative estimations of the physical indicators of the

agricultural and food production reach the forecast horizon 2010. No reference is made to

other sectoral synthetic indicators, i.e. gross value added, production value, etc.

2 We refer here to the Economic Preaccession Program (EPP) of the Government, September

2001; 3 We refer to the “Strategy of Agriculture, Food Industry and Forestry Development on the

Medium and Long Term (2001-2004 and 2005-2010), Synthesis, December 2001. 4 The same yearly growth rates from the Pre-accession Program are taken over.

15

The incomplete character of available forecasts on the future development of the

agrifood sector as a whole or by its components made it necessary to produce forecasts that

should take into consideration the inertial trends of the main indicators of resources and

results, on a longer term.

The first forecast is based upon the multiple regression model in which the resulting

variable is gross value added in agriculture (Y), while the factor variables are: total

agricultural area (S), active population employed (L), fixed capital stock (K) and the average

yield per hectare in grains (T) as an expression of technical progress.

The period to which the empirical data on the five variables refers is 1980-2000,

which is quite a relevant period for reflecting the great number of situations that occurred in

the level of indicators considered.

The final expression of the multiple regression5 of the gross value added (Yf),

depending on the four factor variables is the following:

Yf = [ 65,866 + 0,324*T+ 0,185*K + 0,322*L - 6,233*S ] [3.1], with

CD6 = 0,534 and DW

7 = 2,169

For the use of the multiple regression [3.1], in the forecast on the gross value added, three

scenario hypothese were considered, reffering to the expected levels of the four factor

variables (Table 3.1).

Table 3.1. Scenario hypotheses of the forecast on gross value added in romania’s agriculture

Gross value added (Y) Agricultural area

(S)

Employed

population in

agriculture (L)

Fixed capital

stock (K)

Grain yields /

ha (q) Empirical

level

Prognostical

level

Scenario

mio.ha mio.pers. Thou. Billion

ROL 2000 quintals

Thou. Billion

ROL 2000

Thou. Billion

ROL 2000

S1: Average

period

1980 – 00

14.885 3.1814 25.0118 28.84 102.4225 102.4768

S2: Average

period

1993 – 96

14.794 3.3836 28.0188 26.78 115.3280 108.2726

S3: Average 14.796 3.3900 25.8438 27.83 101.2770 107.9868

5 The multiple regression model operated with the logarithm vectors of the quantitative

variables (agricultural area, active population employed in agriculture, average yield/ha in

grains) and valoric variable (gross value added and fixed capital stock, both recalculated in

2000 prices), the matrix solving up being through “Mathcad 4.0 “ software. 6 Multiple determination coefficient, with a minimal semnification level by 0.500.

7 Durbin – Watson coefficient, which is relevant when the value is almost 2.

16

period

1997 – 00

Source: calculation on the regressional model [2].

According to the first scenario, in which the four variables would be beyond their

yearly averages throughout the reference period 1980-2000, the gross value added forecast

for Romania’s agriculture would be 102.4768 thou. bln. ROL (2000 prices), i.e. almost equal

to the multiannual average, but by about 20.5% higher than its level in the year 2000. The

significance of this scenario resides in the fact that we can expect economic growth in

agriculture even though the agricultural area and the employed population decrease, but

the fixed capital stock increases and the grain yields/ha improve.

In the second scenario, for factor variables equivalent to the annual averages of the

period 1993-1996, the first interval of transition when economic growth was experienced in

the national economy, the gross value added forecast in agriculture would be 108.2826

thou. bln. ROL (2000 prices); this value is by 6.1%lower than the 1993 - 1996 average but by

27.3 higher than its level in the year 2000, taken as reference in the few prognoses produced

on this subject. This scenario also confirms that the multiplying factors of the newly created

value in Romania’s agriculture are labour and fixed capital, to which the average yields / ha

are also added.

In the third scenario, in which the levels of the four factor variables are placed

between those from the two above – mentioned hypotheses (except for the population

employed in agriculture), a gross value added of 107.9868 thou. bln. ROL (2000 prices) is

envisaged by 6.6% higher than the 1997-2000 average (period characterized by a general

economic decline) and by 26.9% higher than the value in the year 2000.

Thus, from a comparative perspective, the increase by 29.4% of the gross value

added in agriculture in the year 2005 compared to the year 2000, foreseen in the

Government’s Economic Pre-accession Program, would be placed within the interval of

values forecasted by the multiple regression model presented before.

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