26 July - 1 August 2001

“Earthquake” expected in agriculture industry

• Farmers and producers awaiting compensation
• Levies to start being removed in first quarter of 2002
• Position paper tries to retain current status quo

by Ivan Brincat

A massive upheaval is expected in the agriculture industry and the impact will be akin to an “earthquake”, sources told The Malta Business Weekly. This news-
paper has also learnt that farmers and producers are eagerly awaiting the next budget to see what compensation they will receive from the government as levies on their products are removed.
Industry sources also claimed yesterday that the industry could become another “Malta Drydocks”.
The government’s position paper on the agricultural chapter – of which The Malta Business Weekly has a copy – has created an uproar in the sector and it has also revealed the difficulties and problems existing in the Ministry of Agriculture and the department.
After operating in a protected environment for so many years, levies on agricultural products will start being removed as from the first quarter of next year, in approximately six to nine months’ time. This will affect not only farmers and producers in the pig or dairy sectors but all agro-industry firms.
Meanwhile, the government has pledged to hold various meetings with interested parties on the planned timetable for the removal of these levies. A decision has to be taken within the coming weeks, however, because the government, in the Position Paper, says that this timetable will be forwarded to the European Commission by the end of September.
Sources within the industry said they are expecting an “earthquake”, a situation that has been in the offing for at least 11 years.
“The government is changing its policy completely in the next 12 months – changing what has been in place for more than 30 years. It is going to introduce a system which has not been tested and the Position Paper leaves many questions unanswered,” sources said. The problem, sources added, is that the government is trying to retain a status quo in the sector which is not possible. It also confirms the government’s ultra-cautious approach in dealing with the sector.
Apart from removing levies and the importance of the special package as requested by the government, capacity building will be a huge task. The position paper states that more information will be submitted to the European Commission in the coming months. At a glance, one gets the impression that the government position not to give too much importance to the sector because it only represents two per cent of GDP has backfired.
There are numerous issues that have to be tackled, including taxation, regional policy, the environment, free movement of goods and trade.
Many questions still remain unanswered. Will compensation be a one-off payment or annually? How will the government’s liberalisation plan work? How much is the government going to pay in compensation? Who will administer these funds? Will farmers still be paid if they are not producing anything? Who will determine how much each farmer will receive?
In a report by CIHEAM on the sector, which has however been deemed to be static, it is estimated that over Lm7m would be needed per year to compensate farmers. Apart from this, one also has to add the losses incurred when the levies are lifted.
In the Position Paper, the government is asking for a special supply arrangement whereby Malta will be able to purchase sugar and wheat, among others, at world market prices. This is deemed to be a crucial demand. The price of sugar will affect various industries such as tomato processing plants, soft-drink manufacturers, biscuit producers and confectioneries. Wheat prices would affect the price of bread.

Operators have already called on the government to ask for this concession from the EU and a number of them told The Malta Business Weekly that they might move their operations to countries in North Africa if this does not happen during the negotiations.
The government acknowledges in the Position Paper that the adoption of the acquis will put considerable pressure on Malta’s agri-food sector. Therefore, Malta was requesting the adoption of a Special Market Policy programme for Maltese agriculture. This programme will also be submitted to the European Commission by the end of September.
The sensitive sectors which are to be included in this programme include milk and milk products, potatoes for human consumption, wine, processed tomatoes, fresh fruit and vegetables, pig meat, eggs and poultry meat.
The envisaged measures range from special assistance to compensation or substantial price reductions, among others. A special programme for the Maltese islands is required because the protection offered by the CAP to European farmers is based on products which are of minor importance to Malta.
The government also says that Malta has specific socio-economic concerns relating to the supply of food and agricultural products essential for daily consumption, agricultural production as well as for processing. It was therefore asking for special supply arrangements on essential basic products.
The government intends to start removing the existing levies on a number of agricultural and agri-food products before accession. It says: “The phasing out process of existing levies will be initiated during the first quarter of next year and appropriate compensatory measures will be introduced to avoid any negative social and economic impact on the sector. This process will ensure market access for Maltese products and will assist farmers to compete of a level-playing field.”
After months of criticism, the government has decided to draw up a Rural Development Plan, which will be completed by March 2002.
The government said this programme will provide a general framework to develop, over the medium- to long-term, a new agricultural sector deeply integrated with the rest of the economy. This programme will define projects for the restructuring of Maltese agriculture and prepare for its full integration in the CAP.
The government is also committing itself to set up a Paying Agency within the Ministry of Agriculture and Fisheries by the first quarter of 2002. This agency will be responsible for all EU funds. The administrative work is deemed to be extensive but there is still a huge lack of human resources.
A Producers’ Organisations Act will be adopted by Parliament in the final quarter of the year. This act will enable producers’ organisations to have access to market intervention and to submit proposals for multi-annual operational programmes for progressive measures aimed at improving their production and marketing. Funds have been allocated in the 2001 budget for assistance in the setting up and recognition of these organisations but sources said this was not enough. They will need staff with good qualifications to be able to tap funds.
The government is also requesting a number of transitional periods and derogations.