NeweuropeDuring times of crises and uncertainty, policy making becomes more important than usual for almost every business. Vast, elemental, and thoughtless actions that are not based on numbers, statistics, and analyses can cause more harm than good in such difficult periods. This is what seems to have recently happened in Bulgarias agro-food sector.
Phrases ranging from re “populism”, “lobbying”, and “market interference” and as hard as “protectionism”, “corruption” and “the trampling of EU values” are, unfortunately, often mentioned from different stakeholders who trying to determine the actions of the government.
The entire situation in the agro-food sector doesnt seem to have worsened as a result of the COVID-19 pandemic. There is no reliable data that the industry has experienced any measurable harm or significant damages from either the virus or the anti-outbreak measures that have been taken on the national and EU level.
The Bulgarian government – represented by the Ministry of Agriculture, Food and Forestry – suddenly took emergency measures to help small and medium agro-food producers …or at least it said so. When looking at the regulations in detail, it seems that they are not made for small businesses at all. Its true that the devil is in the details and the effects of these measures are very controversial as they openly call into question the core concepts of a free market and European values, all which is happening at a time when Bulgaria is struggling to join the Eurozone.
Lets start from the beginning…just a few days ago
Bulgaria is one of the oldest countries in Europe and has strong, centuries-old traditions in the agriculture and food industries. Those sectors have helped the country overcome the two world wars, two national catastrophes, and 45 years of Communism. After the COVID-19 crisis hit Bulgaria and the countrys health measures were applied, all eyes turned to the agro-food sector.
Bulgarians then started asking questions such as: “Is there going to be enough food for everybody?” or “Are there enough agricultural resources to overcome the crisis?” These same questions were asked not only in Bulgaria, but in each EU Member State. The “everyone for themselves” approach is definitely not working, so that now begs the question as to how the decision makers on the national and EU level plan to answer to these questions, all of which are of great importance in order to calm society in these strange and uncomfortable times, and make adequate decisions in the future.
The first to react was the European Commission. Its measures – like creating green corridors for food supply and agricultural workers; have more flexible rules for the use of EU agricultural funds, etc. – were not only on time, but also very adequate. They secured the EU market and the supply chain between all of the Member States.
At almost the same time, each country in the EU started enacting its own measures to guarantee food security. Fortunately, those measures are quite different, and Bulgaria probably leads the pack for the most exotic procedures offered.
With or without corona
Bulgaria has already initiated its own national measures, but before explaining them to the public it is important to know exactly what the situation actually is in the countrys agro-food sector. Since 2007, as a Member State of the European Union, Bulgaria started implementing the rules of the Common Agricultural Policy. As with every policy, the results from its implementation have so far been both positive and negative, depending on how theyre looked at.
A snapshot of Bulgarias agro-food sector before COVID-19 produced a picture that includes:
- Agriculture contributes to 3.9% of the countrys total gross value added (GVA);
- Well-developed grain production that is traded on the global market. Production over the years showed that Bulgarian grain producers are highly competitive both in the EU and on the international market;
- Highly reduced production of fruit and vegetable compared to what Bulgaria used to produce 30 years ago;
- Radically reduced animal husbandry which reflected on milk and meat production;
- Due to the outbreak of the African Swine Fever, and the measures taken to fight the disease, around 40% of pork on the Bulgarian market is imported.
- The supply chain is weak and the relations between all stakeholders (farmers, processors, retailers, traders, logistic companies, consumers) remains unclear;
- The value added tax (VAT) for food products is one of the highest in the EU at 20%;
- Grey sector;
- Little-to-no entrepreneurship in the sector;
- Limited innovations and digitisation.
- With the main raw materials, Bulgarian production is more than sufficient to satisfy the domestic consumption of wheat, maize, and sunflowers. The balance of beans and eggs is positive. For the bulk of other main goods the country depends on imports. Domestic production of meat – pork and poultry, which make up 64% of the meat consumed by households in Bulgaria – is particularly weak.
A decades-old lack of a work force and producer organisations lead to fragmented production, especially in fruit and vegetable sector. Combined with a dearth of irrigation facilities and a heavy levy on VAT makes any sort of business planning for the agricultural producers quite difficult. The impossibility to secure large quantities, with the required quality that producers need, is reflected by the price that they receive.
Measures to help who? Are they really for small vulnerable farmers?
“Having in mind the current status quo in the sector, the measures taken by Bulgarias administration in the agro-food sector seem a little bit hysterical as none of the problems are due to COVID-19,” said Svetlana Boyanova, the Chairwoman of the Institute for Agrostrategies and Innovation, Chair of the Digital Innovation Hub for Agriculture, and ex-Deputy Minister Of Agriculture.
The Bulgarian government, through current Agricultural Minister Desislava Taneva, has decided to take some measures to help farmers place their production on the shelves of major retailers. This was done, however, in a way that just some of the producers could benefit from the new rules and its because of this that Taneva was suspected of lobbying for some organisations through the media.
“Standing behind the idea of supporting small and medium-sized farmers, the Ministry of Agriculture began a very noisy and not-very-sophisticated war with both retailers and producers that somehow previously found their way to the dreamed shelves without being protected by the government. At the same time, the Minister didnt explain how many farmers and what type and quantity of production is under the threat of not being sold and has to be protected,” said Boyanova.
A decree was issued by the Council of Ministers in which the retailers are legally required to buy Bulgarian farmers products that they would normally not buy and to have at least 90% of the milk and milk products in the stores come from Bulgarian producers. These measures seem to be against the normal economic principles of the free market and there is a high degree of uncertainty about which farmers interests are attempting to be protected.
Unfortunately, experts like Boyanova are afraid that the risk of implementing them ultimately could, in practice, be borne by the Bulgarian consumer.
It remains an open question if the new rules will be applied in the coming days while Bulgarians are celebrating Orthodox Easter. One thing is sure – after a period when consumers became calmer about their food and main household supplies, some reckless actions by Bulgarias Agricultural Ministry have led to unnecessary tensions between participants in the agro-food chain.
Other instruments for support
The Ministry of Agriculture decided also to use state-provided aid to give away national money. The de minimis aid was given to slaughter houses, not because they said they needed help, but in order to encourage them to buy only Bulgarian lambs for the upcoming Easter holiday. Almost the same de minimis aid was given to small local retailers to buy fruits and vegetables from domestic farmers, which they normally do at this time of the year.
For now, the only real problem related to the coronavirus epidemic seems to be the closing of two of the supply channels – the National Association of Hotels Restaurants Caffeterias (HoReCa) and municipality markets, where farmers usually sell their fresh products. Due to the failure to cope with the organisation and the precautionary measures associated with the coronavirus, the Health Minister closed the markets.
Farmers, however, expect the government to put more of an effort into re-opening these markets as they are the most preferable and effective venues for small producers to sell their goods.
The cherry on the top of the cake should be Bulgarian
In order to appropriately top those measures, one of the Vice-Prime Ministers of Bulgaria, Krasimir Karakachanov, proposed a ban on the import of fruits and vegetables from third countries for the duration of COVID-19 crisis. As the government showed some understanding that this measure would deprive the Bulgarian consumer from fresh products that EU does not produce, this proposal is still under discussion.
“It seems that because of the COVID-19 crisis, the Bulgarian government has started to forget about traditional EU values. Measures that impose national protectionism will, at the end of the day, pull us away from the idea of one strong and united European Union. At a time when all of us should wear masks, it is good to not forget what is behind them. It is also good that once we take them off were not ashamed of what we have to face. We are going to undoubtedly face the consequences of the decisions we made,” said Boyanova.