EC/FAO Programme on Information Systems to Improve Food Security Decision-Making in the ENP East Area Policy Seminar Developmen

EC/FAO Programme on Information Systems to Improve Food Security decision-making in the ENP East Area

Policy seminar Development of a Farm Data Monitoring System Baku, 29 March 2012

Background

The policy seminar on Development of a Farm Data Monitoring System (FDMS) was jointly organized by the Research Institute of Economy and Organization of Agriculture (IEOA), Ministry of Agriculture (MoA), and FAO through the EC/FAO Programme on Information Systems to Improve Food Security Decision-making in the ENP East Area. The objective of the Programme in Azerbaijan is to contribute to Government’s priority to improve the performance and competitiveness of agriculture, in particular of small and medium farms, as a part of the Government’s strategy to diversify the economy with the development of non-oil sectors.

The establishment of a country-wide FDMS is one of the two priority areas of intervention of the Programme which was identified in collaboration with all stakeholders. The objective is to enhance the capacity of the IEOA to collect and analyze farm level data to support Government’s food security policies and interventions. Consensus between producers (IEOA) and potential users of the information and analyses (government and its institutions) on the objectives and activities of the Programme was reached at the inception workshop which was held on 16-17 December 2010.

In 2011, Programme activities have been implemented in line with the workplan and with the active engagement of the Ministry of Agriculture which, together with IEOA, financially contributed to the implementation of field activities. One of the milestones of Programme workplan was the organization of this policy seminar during which the achievements and plans have been presented to stakeholders from the government and other relevant institutions of the country. The agenda of the seminar is provided in Annex 1.

Seminar objectives

The objectives of the seminar were to: (i) raise awareness of the importance of reliable information to support decision-making processes that aimed at increasing the economic performance of small family farms; and (ii) demonstrate the potential of FDMS to support the formulation and monitoring of policies and interventions for the development of agriculture in Azerbaijan. 1

Participation

The seminar was attended by more than 50 representatives from the main institutions concerned with the development of FDMS: Cabinet of Ministers, Ministry of Agriculture, Ministry of Economic Development, Ministry of Finance, State Statistical Committee, Agrarian Scientific Centre (central and regional offices), EU Delegation and FAO Representation. The Seminar was also attended by six representatives from Georgian and Moldovan national institutions interested in FDMS. The list of participants is provided in Annex 2.

Figure 1. Policy seminar on development of FDMS

Process

The welcoming speeches were delivered by Mr Bahram Aliyev, Deputy Minister of Agriculture, Ms Tarana Bashirova, Assistant FAO Representative, Mr Salahov, Director of IEOA, and Ms Francoise Trine, Programme Coordinator, FAO.

Mr Aliyev welcomed the participants and noted that there was a strong need for appropriate and reliable information to formulate and monitor/assess the food security policies of the country and support vulnerable layers of population. He underlined the fact that agriculture has become a priority on the policy agenda of the Government, the dominant contribution of the small-scale farmers in developing the agricultural sector, and the acute need for improving

2 the integration of small farms into markets.

Mr Aliyev summarized the policies, programmes and targets of the Government for the development of the agricultural sector and the ongoing support provided to the agricultural sector. The relevance of systematic collection and analysis of farm data, especially in small and medium farms for policy formulation, monitoring and evaluation was highlighted.

After welcoming participants, Ms Bashirova noted that despite the overall economic stabilization and the improvement of the population wellbeing during the last decade, poverty and food security remained important issues in the countries covered by the Programme. Unbalanced growth among and within the countries has resulted in increased urban-rural differentiation. She highlighted the role of the Programme in the systematic collection and analysis of farm data, especially in small and medium farms, to support the formulation, monitoring and evaluation of policies on food security and supporting poor segments of population.

Mr Salahov underlined the objectives of the Programme and their contribution to food security in the country and noted that there was a strong need to continue supporting the development, adaptation and application of appropriate methods and tools to operate the system.

Before land reform in 1996 each kolkhoz and sovkhoz in the country farmed in average between 500 and 3 000 ha of land. Accountancy was compulsory for these enterprises and was a precious source of information for policy-makers. Agrarian reforms were initiated in 1996 and have resulted in the allocation of land and property of these enterprises to private farmers and inhabitants of villages. More than 870 000 families have received land ownership titles for a total of 1.4 million ha. The average size of family farm owned land is 1.6 ha. Currently, about 99 percent of agricultural output is produced in these farms. Accountancy is however not compulsory for family farms and there are no common standards, which complicates the analysis of production costs and farm profitability to support decision-making for agricultural development and improvement of food security. Mr Salahov emphasised the importance for the government to pursue FDMS establishment in order to overcome deficiencies in accurate and timely information on the situation in farming sector. He presented participants the concept note which has been prepared for the development of country-wide FDMS (Annex 6) and which presents all operational, technical, methodological and financial aspects.

Ms Trine informed participants that the seminar was organized under the EC/FAO Food Security Programme and summarized the objectives and expected results of the Programme in Azerbaijan. The seminar was one of the activities of the Programme to support the establishment of FDMS in Azerbaijan, which is built on the results achieved during the pilot phase with FAO assistance. Other activities are being successfully implemented in line with the country workplan which was prepared in close cooperation with stakeholders.

She underlined the importance of government support to ensure food security in the country. The involvement of users and the rapid establishment of a country-wide system is essential for sustainability.

Mr Stjepan Tanic, FAO Agribusiness and Enterprise Development Officer and Mr Namik Shalbuzov, head of IEOA Farm Data Unit delivered a presentation on the results achieved so far, lessons learned and plans for the establishment of the FDMS in all the regions of the

3 country. They noted that consensus between producers and potential users on the activities for the development of the FDMS has been achieved, recognizing necessity for demand-driven country-wide FDMS, and its role in evidence-based policy making. Programme delivered technical and logistical support to establishment of FDMS. The presentation underlined the following points: • Overall, the outputs have been delivered and the targets reached; • The commitment of IEOA and its staff have significantly contributed to the achievements; • Additional efforts were needed to improve quality of data collection at the farm level; • Limited financial support calls for rethinking the arrangements for data collection; • More efforts should be invested to improve communication between stakeholders.

The summary of the presentation is provided in Annex 3.

Mr Csaba Pesti, International Consultant Farm Economics and Data Systems, FAO, presented the use of agricultural census data for definition of farm typology and representative sample plan for country wide FDMS. Main aspects of his presentation are provided in Annex 5.

Guests from Moldova and Georgia briefed participants about the situation and activities of the Programme related to the improvement of data and information for food security in their countries.

All the presentations were followed by discussions. All participants acknowledged the importance of FDMS to provide needed information to inform policy decisions.

Final discussions focused on the identification of the main threats for the establishment of a country-wide FDMS, which is planned to be completed by the end of 2015, and on the actions needed to institutionalise FDMS. Participants agreed that the concept note should be submitted to the Cabinet of Ministers and relevant ministries, together with the summary of the seminar, to ensure government’s support at the highest level.

Main results and follow up activities

The workshop achieved its main objectives, which was to inform all main stakeholders on achievements and plans for the development of a country wide FDMS; demonstrate FDMS potential for analyzing productive and economic performance of farms, and importance in supporting policy-makers in designing and implementing food security strategies, policies and interventions; and establish consensus between stakeholders on the proposal developed in the concept note for the development of country wide FDMS.

The discussions during the workshop confirmed that FDMS continues to raise much interest and enthusiasm among stakeholders but a number of factors threaten its sustainable establishment and operation. Urgent actions have to be taken for the system to be established in all the regions of the country (by the end of 2015 as per planning) and to operate in a sustainable way after the end of the programme (end of 2012). Specifically:

1. Institutionalization of the system: FDMS has imperatively to be institutionalized and its operation to become part of the regular activities of the MoA/IEOA in order to receive financial support

from the Government budget every year. FDMS already received financial support from government budget in 2011 but this support was provided on an ad hoc basis.

Proposed action: Finalize FDMS concept note, which will be used by MoA/IEOA to discuss with government and active lobbying for institutionalization of FDMS.

2. FDMS relevance to policy-making processes: stakeholders’ understanding of FDMS potential relevance to country-specific policy-making processes remains limited, which is a major obstacle to successful lobbying for the institutionalization of the system.

Proposed action: strengthen FDMS relevance to country-specific policy-making processes by providing information and analyses that are directly useful to monitor and assess the impact of the State Programmes related to food security and agriculture. It is recommended to recruit as soon as possible an international consultant to prepare a few policy briefs taking into account government priority concerns and train IEOA Farm Data Unit staff in their preparation.

3. FDMS establishment in all the regions of the country: it is important to establish FDMS in all regions of the country as soon as possible as the use of the system for policy-making processes is limited until it covers the whole country. Major step in that direction should be the establishment of FDMS in the three first regions by the end of 2012 as per planning. This will require considerable efforts from IEOA as the number of farms covered has to increase by more than three times, from the 300 farms currently covered to 1 171 farms (as per sample plan).

4. Survey fatigue: IEOA decentralized staff, who is responsible for collecting the data, mentioned a risk of survey fatigue from the farmers providing the data.

Proposed action: IEOA to identify incentives to maintain collaboration with farmers, taking examples of the incentives which are being provided in other countries that implement systems similar to FDMS. It is important that the farmers benefit from the system, e.g. through regular feedback on the results of the analyses being carried out with the information provided. Collaboration could e.g. be rewarded through privileged access to advisory services and subsidies.

5. Common language between users and producers of FDMS information: the interventions during the seminar have pointed out the lack of common definitions of the terms which are used to report FDMS results.

Proposed action: ensure better communication between users and producers of FDMS information, and active participation of representatives of FDMS users in remaining training activities.

6. Limited awareness among national institutions of what FDMS is and its potential for supporting decision-making processes.

Proposed action: organize a public campaign with the development of leaflets and support documentation to be widely disseminated through relevant communication means.

Annex 1. Agenda Policy Seminar - Development of Farm Data Monitoring System in Azerbaijan 29 March 2012 Ganjali Plaza, 48, U. Hajibeyov Street, Baku, Azerbaijan

09:00 Opening session Dr Bahram Aliyev, Deputy Minister, Ministry of Agriculture Ms Tarana Bashirova, FAO Assistant Representative Dr Sadikh Salahov, Director, Azerbaijan Scientific Research Institute of Economics and Organization of Agriculture Ms Francoise Trine, Programme Coordinator, FAO 10:00 Report on achievements and lessons learnt for the development of country wide FDMS in 2011 Mr Stjepan Tanic, FAO Mr Namik Shalbuzov, IEOA Q&A 11:00 Coffee/tea break 11:30 Analysis of productive and economic performance of small farms in Lenkoran, Guba-Khachmaz and Aran regions – Preliminary results based on 300 sampled farms Mr Namiq Shalbuzov, IEOA Mr Stjepan Tanic, FAO Q&A 13:00 Lunch 14:00 The use of agricultural census data for definition of farm typology and representative sample plan for country wide FDMS Mr Csaba Pesti, International Consultant Farm Economics and Data Systems, FAO 15:00 Introduction of the final draft Concept Note for Development of Country-wide FDMS Dr Sadikh Salahov, Director, Azerbaijan Scientific Research Institute of Economics and Organization of Agriculture Discussion 16:00 Coffee/tea break 16:30 Further steps for the development of country-wide FDMS Discussion 17:30 Conclusions and recommendations of the seminar

Annex 2. List of participants # Name Position Organization 1 Chingiz Alizade Agro-Industry Department Cabinet of Ministers 2 Bahram Aliyev Deputy Minister MoA 3 Rasim Aliyev Economy and finance department 4 Qadir Hasanov Agrarian reforms, rural and entrepreneurship 5 Bakhtiyar Mammadov development department

6 Sabir Veliyev Head of Department of Crop production, processing and state regulation of food reserves 7 Rovshan Aliyev Deputy head of Department of Crop production, processing and state regulation of food reserves 8 Shaig Azimov Department of livestock production, processing, pedigree cattle and pasture 9 Sevda Imamverdiyeva Stratgic Planning Department Ministry of 10 Farhad Alekberov International Relations Department Economy Development 11 Elshan Ahmedov Department on Financing of Sectors of Economy Ministry of Finance

12 Reshad Bayramov Deputy head of Agriculture Statistics Department State Statistics 13 Vugar Valiyev Agriculture Statistics Department Committee 14 Nail Imanov Household Budget Survey Department 15 Parviz Yusifov Programme Manager Delegation of the European Union 16 Natavan Aslanova Deputy Coordinator EU, Implementation of Twinning, Taiex & Sigma operations 17 Eduardo Murillo Resident Twinning Advisor EU Twinning Peñacoba Project 'Support to the State Veterinary service in Azerbaijan' 18 Vugar Mohumayev Head of Program Department Ganja Agribusiness Association (GABA) 19 Mihai Suvac Chief of the Production policies and quality Moldova reglamentation of plant origin products division, MoA 20 Eugenia Dumbraveanu Chief of the Agricultural Statistics and Marketing Information Systems Service, MoA 21 Viorica Gira Consultant in Agricultural Statistics and Marketing Information Systems Service, MoA 22 Vasil Tsakadze Head of Agricultural and Environmental Statistics Georgia Division, Geostat 23 Giorgi Gotsiridze Agricultural and Environmental Statistics Division, Geostat 24 Omar Teodoradze Head of Department on Agricultural technologies', MoA

25 Sadig Salahov Director IEOA 26 Rasul Balayev Deputy Director

27 Namik Shalbuzov Head of sector

28 Ramil Huseyn Deputy head of sector

29 Mehdi Mehdiyev Head of sector 30 Vusale Babayeva Scientist 31 Rena Aliyeva Scientist 32 Guler Mahmudova Scientist 33 Matanet Nabizade Junior researcher 34 Sevinj Bunyadova Junior researcher 35 Sona Nabizade Economist 36 Khadica Agamaliyeva Scientist 37 Elshan Zeynalov Scientist 38 Dinara Babayeva Junior researcher 39 Akif Sadigov Scientist 40 Sahib Najafov Leading researcher IEOA, Regional Unit 41 Nazir Ahmedov Programmer IEOA, Regional Unit 42 Niftulla Azizov Chief scientist IEOA, Regional Unit 43 Eldar Kosayev Deputy Director Agrarian Scientific Centers 44 Zeydulla Zeynalov Director Kurdamir Regional Agrarian Scientific Centers (RASC) 45 Elkhan Ilyasov Director Sheki RASC 46 Vahid Aliyev Director Quba RASC 47 Ilgar Zeynalov Director Ganja RASC 48 Teyyub Rzayev Director Lenkoran RASC 49 Sadraddin Ibrahimov Director Salyan RASC 50 Tarana Bashirova Assistant Representative FAO 51 Csaba Pesti International Consultant 52 Francoise Trine Programme Coordinator 53 Stjepan Tanic Agribusiness and Enterprise Development Officer 54 Rasmiyya Aliyeva Country Coordinator

Annex 3. Development of Farm Data Monitoring System in 2011 - Activities, achievements and lessons learnt Presentation Inception Workshop Development of Farm Data Monitoring System 16-17 December 2010 • Consensus between producers and potential users on the activities for the development of the FDMS Built ; • Recognized necessity for demand-driven country-wide FDMS, and its role in evidence based policy making; • The recommendations of the group work were used for elaboration of detailed workplan toward establishment of country-wide FDMS and throughout of the programme Table 1. Procurement and installation of IT equipment and software Description Type Qty Notebook (with Win7) Latitude E6410 4 Desktop (with Win7) Optiplex 370 4 WiFi router Linksys (WRT54G) 1 Network Switch Linksys (EZXS16W) 2 Server Dell T310 1 Network Printer HP LaserJet M3027 1 Colour printer HP Color LaserJet 1 Total

Study tour to Hungary Objectives were the following: • Get familiar with all issues related to the establishment of FADN; • Analyse legislative framework and institutional setting of FADN; • Review FADN data collection, processing, analysis and dissemination practices; • Discuss human, financial and technical resource requirements for setting up and operating FADN; • Better understand technical matters regarding: sampling, quality checks and IT structure; • Analyse options for ensuring sustained interest of farmers in cooperating with FADN.

Concept for establishment of country wide FDMS • Background, purpose and justification for establishment of FDMS • Functional and organizational setup: organization, staffing, responsibilities

• Mid-term development plan for a country-wide coverage: time frame for development, human resources, infrastructure and financial resources needed • Institutional setup

Technical support missions • Revised versions of farm survey questionnaire, simple farm records, guidelines and training materials delivered; • Log books for farm record keeping by farmers developed and in use; • Organizational structure of FDU and job descriptions developed; • Standard Output coefficients for all products given in the agricultural census in 2005 defined and documented.

Technical support missions • Farm typology based of total standard farm output, and relative contribution of different agricultural products to the total standard farm output defined; • Farm typology algorithm with modified and product lists adapted and documented; • Sample plan (including representative sample size and distribution of sample farms by regions and type of farming categories) using agricultural census database at farm level developed; • Selection plan guidelines for FDU staff developed.

On the job training • Data processing, retrieval and management On farm data collection and training Enhancement of analytical and computer use skills Group training of selected farmers in keeping of the farm records

Data collection and input Data of 300 farms collected from Aran, Guba-Khachmaz and Lankaran regions; • Data collection and input is implemented by well trained FDU staff; • Collected data validated and stored into the main database; • Data additionally checked by the software with the use of more than 500 quality checks.

Managerial and organizational capacity in IEOA • Appointment of Deputy Director for FDMS

• Establishment of departments for FDMS – Department of Organization of Farm Data Collection – Department of Information and Organization of Monitoring System • Recruitment of out posted data collectors in three regions

Annex 4. Analysis of productive and economic performance of small farms in Lenkoran, Guba-Khachmaz and Aran regions – Preliminary results based on 300 sampled farms The purpose of this analysis is to describe briefly the farm structure and demonstrate the capacities of Farm Data Monitoring System based on the data collected from 300 randomly selected farms in 2011 and is not intended to be representative for analysed regions or country. The analysis is aimed at providing input for policy making and is performed both on country (total for three regions) and individual region level.

Table 2. Number of sampled farms

Aran Guba-Khachmaz Lenkaran Total/type

Crop 16 7 21 44

Livestock 41 29 13 83

Mixed 41 20 10 71

Perennial 40 6 46

Untypical 2 2

Vegetable 2 2 50 54

Total/ region 100 100 100 300

Figure 2. Average used land area per farm

8.00 6.00 4.00 2.00 Average/type

Hectares - Lenkaran Guba-Khachmaz Aran

Table 3. Family farm labour

Other Farmer/ Familiy Farmer’s wife Brother Sister relatives manager labour, Total (women)

Crop 1.00 1.00 0.27 - 1.41 3.68

Livestock 1.00 0.95 0.07 - 1.67 3.73

Mixed 1.00 0.92 0.17 0.07 1.62 3.77

Perennial 1.00 0.96 - 0.04 0.96 2.96

Untypical 1.00 1.00 - - 2.00 4.00 Vegetable 1.00 0.96 0.09 0.17 1.09 3.31 Average/ region 1.00 0.95 0.12 0.05 1.41 3.54

Table 4. Working days per year Other Farmer/ Family Farmer’s wife Brother Sister relatives manager labour, Total (women)

Crop 188.45 177.09 30.43 - 96.07 492.05

Livestock 261.22 221.27 7.75 4.40 146.87 641.49

Mixed 243.72 198.61 17.52 5.46 118.30 583.61

Perennial 181.35 106.54 - 1.09 73.72 362.70

Untipical 229.00 109.00 - - 67.50 405.50

Vegetable 139.35 123.91 5.13 3.70 53.98 326.07

Average 212.01 173.56 11.68 3.34 104.19 504.78

Table 5. Tomato gross margin by region and farm type

Guba- Aran Lenkaran Khachmaz

Farm type crop livestock mixed vegetable vegetable mixed vegetable Area (ha) 0.1 0.0 0.1 0.4 1.0 1.0 1.6 Produced (tonnes) 4.4 1.6 2.7 10.5 20.0 25.2 39.6 Yield 38.8 36.9 22.0 29.9 20.0 25.2 24.5 Sold 1,085.0 537.9 846.1 3,612.5 2,001.6 3,472.5 5,077.7 Home consumption - - - - - 67.2 37.2

Fodder farm use 90.4 57.6 73.4 443.3 - - 22.0 Totall gross income 1,175.4 595.5 919.5 4,055.8 2,001.6 3,539.7 5,136.9 Direct subsidies ------Crop gross income 1,085.0 537.9 846.1 3,612.5 2,001.6 3,539.7 5,114.9

Crop variable costs 241.7 125.9 215.0 905.8 5,080.0 1,028.0 1,881.2 Crop gross margin 843.8 412.7 631.8 2,707.2 -3,078.4 2,511.7 3,233.9

Gross margin/ha 7,500.1 9,286.2 5,186.5 7,734.9 -3,078.4 2,511.7 2,001.0

Table 6. Gross margin comparison for spring wheat Area Crop Crop Crop Farm Spring Farm Yield (ha) / Produced gross gross gross gate wheat type (T/ha) farm (T) margin margin/ha margin/T price crop 4.3 9.0 2.1 1,105.0 254.9 532.3 186.6 livestock 0.8 2.6 3.2 105.2 126.0 33.3 61.2 Aran mixed 2.3 4.5 1.9 313.1 134.0 161.0 147.9 vegetable 2.0 4.0 2.0 274.2 137.1 137.1 187.5 Total 2.5 5.1 2.1 434.7 176.1 210.8 154.7 crop 2.0 4.3 2.1 411.2 205.6 193.5 155.9 Guba- livestock 13.3 8.3 0.6 626.0 47.2 1,005.4 121.2 Khachmaz mixed 2.7 6.9 2.5 799.6 292.3 317.8 179.5 Total 3.5 6.5 1.9 424.3 120.5 228.3 170.4 crop 4.2 9.8 2.3 1,934.6 464.3 823.4 212.6 livestock 2.4 6.4 2.7 -550.6 -229.4 -205.5 129.4 Lenkaran mixed 3.8 9.5 2.5 3,651.4 973.7 1,449.0 295.2 Total 3.8 9.3 2.4 2,230.7 582.2 918.7 234.2

Table 7. Business results summary per region

Guba- AZN/farm Aran Lenkaran Grand Total Khachmaz Crop gross margin 1,138 2,505 4,213 2,618 Livestock gross margin 2,241 1,015 1,433 1,563 Farm gross margin 3,379 3,520 5,645 4,181 Other income 119 338 76 178 Overhead costs 455 556 763 591 Depreciation 221 290 1,267 593 Net farm income 2,822 3,012 3,690 3,175 Net farm earnings 2,822 3,012 3,690 3,175 Off farm income 646 1,868 4,716 2,410 Family farm earnings 3,467 4,880 8,406 5,585

Table 8. Business results per farm type compared to the average

AZN/farm Crop Livestock Mixed Perennial Untypical Vegetable Crop gross margin -378 -1,563 -1,165 3,343 -2,618 1,491 Livestock gross margin -671 172 1,902 -1,563 -1,563 -829 Farm gross margin -1,049 -1,391 737 1,780 -4,181 662 Other income -89 9 82 1 1,672 -111

Overhead costs -275 -54 77 -167 345 335 Depreciation 187 -149 -183 -273 -206 557 Net farm income -1,050 -1,179 924 2,221 -2,647 -340 Net farm earnings -1,050 -1,179 924 2,221 -2,647 -340 Off farm income 176 -845 -829 -165 -935 2,420 Family farm earnings -874 -2,024 95 2,056 -3,582 2,080 Table 9. Farms’ performance, assets and labour Live Pere Un Vege Crop Mixed Average stock nnial typical table Farm gross margin AZN 3,133 2,791 4,918 5,961 - 4,844 4,181

Net farm income AZN 2,125 1,995 4,098 5,396 528 2,835 3,175

Net farm earnings AZN 2,125 1,995 4,098 5,396 528 2,835 3,175

Family farm earnings AZN 4,710 3,560 5,679 7,641 2,003 7,665 5,585

Total land used ha 4.42 5.09 4.39 2.49 2.00 2.66 3.97

Total assets value AZN 23,462 28,505 27,262 18,639 27,250 40,775 28,159

Family labour days - total 492 641 584 363 406 326 505

Family labour days - male 219 269 261 181 229 144 224

Family labour days - female 273 373 322 181 177 182 281

Figure 3. Gross margin – assets ratio 0.35 3,000.00

0.30 2,500.00 0.25 GM/asse… 2,000.00 0.20 1,500.00 0.15 1,000.00 0.10 0.05 500.00 - -

Figure 4. Gross margin – labour ratio (AZN/day) 40.00 30.00 GM/family labour 20.00 10.00 -

Annex 5. Development of a representative sample and farm typology for FDMS in Azerbaijan Why do we need a representative sample for FDMS? Collecting micro-economic data from farmers is always based on samples as the cost of data collection is relatively high. If there is a well-defined sample, the data of FDMS farms will represent the agricultural production of whole Azerbaijan.

Population and sample The last full agricultural census was held in 2005 in Azerbaijan. The proportion of corporate farms (companies and cooperatives) that provide financial data to SSC is small. For that reason FDMS concentrates only on individual farms, for which there is no reliable data about production and socio-economic characteristics. Table 10. Land use of individual farms and corporate farms Farm Agricultural Arable Orchards Cows Sheep Chicken number area land

ha ha ha head head head

Corporate farms 1 800 726 480 47 796 3 953 18 948 244 500 3 854 306

Individual farms 1 175 493 1 897 900 1 290 297 54 786 2 046 936 6 577 211 19 203 202

Total 1 177 293 2 624 380 1 338 093 58 739 2 065 884 6 821 711 23 057 508

Source: State Statistical Committee, Agricultural Census, 2005

Based on the census data, the approach of Farm Accountancy Data Network (FADN), a sample based farm monitoring system in EU, was used to determine the sample size and distribution of sample farms among regions and farm type categories. Figure 5. Population and Sample in FDMS

Most of the 1.2 million farmers in census are subsistence farmers who are not linked to the market. The 1.2 million farms in the census are called Universe. The Universe of farms is not aimed to be represented by FDMS, as the purpose of farm monitoring systems is to provide information about market production that is strongly linked to food security. Agricultural households which produce for home consumption are monitored by other statistical surveys. FMDS collects data from farms that sell a part of their products to the market. The farms represented by the FDMS Sample are called Population. Their minimum farm size or lower threshold is used to exclude agricultural households from the Population of farms.

Lower threshold The farm size expressed in Standard Output1 (SO) was calculated for all farms in census. Table 11 shows the population represented by FDMS sample with different lower threshold values. Together with all concerned experts the Institute for Economics and Organization of Agriculture (IEOA), 1 000 AZN SO farm size was determined for lower threshold. This means that FDMS covers 80 percent of agricultural area and 83 percent of livestock production in Azerbaijan. 1000 AZN farm size equals to two hectare wheat or 1.2 hectare corn or 0.3 hectare tomatoes or 0.4 hectare apple or two dairy cow or 44 sheep or 36 goat.

Table 11. Number of farms in the population based on different versions for lower threshold Utilized agricultural area Arable land Livestock Unit

Lower threshold Farm number ha ha/farm % ha ha/farm head %

>2000 AZN SO 224 744 1 148 142 5.1 60.3% 836 377 3.7 1 839 396 61.9%

>1500 AZN SO 306 195 1 320 556 4.3 69.4% 960 015 3.1 2 164 631 72.9%

>1000 AZN SO 419 152 1 511 264 3.6 79.4% 1 091 605 2.6 2 474 466 83.3%

>750 AZN SO 500 536 1 614 835 3.2 84.8% 1 158 859 2.3 2 627 449 88.5%

>500 AZN SO 588 536 1 707 668 2.9 89.7% 1 221 709 2.1 2 728 857 91.9%

>250 AZN SO 722 810 1 795 597 2.5 94.3% 1 270 041 1.8 2 833 196 95.4%

>100 AZN SO 903 378 1 841 544 2.0 96.8% 1 284 439 1.4 2 878 777 96.9%

All individual farms 1 266 297 1 903 254 1.5 100.0% 1 293 520 1.0 2 970 521 100.0%

Source: own calculations based on Agricultural Census, 2005

Farm typology To assure full relevance and reliability of results generated by FDMS it is essential to define a representative set of sample farms covering all regions in Azerbaijan. Both sample size and distribution of sample farms among regions and farm type categories have implications on the

1 Average potential output in Azerbaijan of one hectare crop or one head of livestock. Standard Output was calculated on the basis of statistical data of five years (2006-2010) and is expressed in AZN. 18 structure and deployment of out-posted staff engaged in data collection, and in the final instance on total resources needed to develop a full country-wide FDMS.

Farm type (crop farms, dairy farms, vegetable farms etc.) and farm size were determined for all farms in agricultural census on the basis of EU typology algorithm. SO coefficients were calculated per hectare and per livestock head as average values for Azerbaijan (For example, SO for one ha of wheat equals to 548 AZN, SO for one dairy cow equals to 664 AZN). Total SO calculated for all farms and farm type was determined according to the proportions of SO. Table 12 demonstrates the farm typology of two farms from agricultural census. Farm size and farm type are calculated for both farms. Table 12. Two examples for farm typology Farm 1 Wheat 1 hectare Fruits temperate climate 0.014 hectare Nuts 0.02 hectare Standard Output=1*482AZN+0.014*2183AZN+0.02*885AZN=530 Standard output of cereals >66% Farm type: field crop farm

Farm 2 Vegetables under shelter 0.02 hectare Fruits temperate climate 0.026 hectare Fruits tropical climate 0.044 hectare Nuts 0.014 hectare Chicken 10 head Hens 3 head Standard Output=0.02*36766AZN+0.026*2183AZN+0.044*3502AZN +0.014*885AZN+10*3.4AZN+3*5.4AZN=1009 AZN Standard output of vegetables indoor 66% Farm type: vegatable farm Source: own calculations based on Agricultural Census, 2005 Sampling criteria Sample size is always a trade-off between representatives and costs of data collection. More farms in FDMS sample represent the population better but cost higher. For FDMS a sample of 2 000 farms was determined to represent the ca. 400 000 farms over 1 000 AZN farm size. It is a sample of 0.482 percent. As Azerbaijan's agricultural area is largely diverse according to geographic location, first sampling criteria is rayon. Second sampling criteria is farm type. There are almost 50 particular farm types in EU farm typology, but they cannot be adapted directly to Azerbaijan agriculture. Five main farm types were used for sample plan: field crop farms, vegetable producers, perennial producers, livestock farms and mixed farms. There was an additional criteria: in a national average, 50 percent of FDMS farms must be over 2 000 AZN farm size to fit the farm size proportions in the census. For the distribution of 2 000 sample farms to rayon and farm type combinations proportional allocation was used. It means that 0.482 percent of population farms in each rayon/farm type is to be chosen in the sample.

Figure 6. Sample plan at rayon level

Source: own calculations based on Agricultural Census, 2005 Table 13. Sample plan by economic region Crop Vegetabl Perennia Livestoc Mixed Regions Total farms e farms l farms k farms farms Absheron Economic region 4 11 4 19 Aran Economic region 179 42 20 256 279 776 Dakhlik Shirvan Economic 40 32 53 125 region Ganja-Gazakh economic 110 27 5 105 63 310 region Guba-Khachmaz economic 52 6 22 45 63 188 region Lankaran economic region 46 16 13 82 63 220 Nakhchivan AR 12 14 41 22 89 Shaki-Zagatala economic 59 21 70 74 224 region Yukhari Garabagh economic 13 5 13 18 49 region 511 135 60 655 639 2 000

Sample plan for 2012 For 2012 a sub-sample of 2 000 farms was defined according to the clustering rules above. 1 203 farms will be chosen to fully represent four regions (Guba-Khachmaz, Lankaran, Aran and Absheron). Farm data in Absheron will be collected by FDU (Department of Data Collection), while 15 out-posted staff of IEOA will collect the data in the other three regions.

Annex 6. Concept for the establishment of country-wide Farm Data Monitoring System in Azerbaijan

Background The Ministry of Agriculture (MoA), the and the Ministry of Economic Development (MED) are determined to implement new reforms in agriculture and rural sectors, so as to improve rural livelihoods and make agricultural activities and related investments more competitive in an open market scenario. However, current information available on farm and rural enterprises performance in Azerbaijan is limited and does not necessary information for well informed policy decisions. At present there are no readily available comprehensive farm and regional level data sets. Institutional arrangements, and human resources needed to provide a basis for such a complex information and decision support system are also lacking. Available reports and studies show that information on economic characteristics of farms is limited and there is an acute lack of data and analyses on economic efficiency and profitability of farming. The Research Institute of Economy and Organization of Agriculture (IEOA) under MoA has piloted the introduction of a Farm Data Monitoring Systems (FDMS), with assistance from an FAO/TCP project. Significant achievements have been made, such as the establishment of the Farm Data Unit (FDU) within IEOA, the development and testing of questionnaire and farm management and surveys guidelines to conduct surveys, development and testing of a computer-based farm management survey data system, a pilot survey of 140 farms conducted in three regions, training of core staff. However the capacity within IEOA and other concerned institutions to collect and analyze farm data and is insufficient to establish a country-wide sustainable farm data system which could provide reliable information on the state of farming sector. In this regard EC/FAO Programme on information systems to improve food security decision- making in the European Neighbourhood Policy (ENP) East Area, through the component “Establishment of a sustainable Farm Data Monitoring System at national level to support decision-making” provides unique opportunity to build up on so far provided assistance. The resources available under the Programme will allow to initiate the establishment of the system in the three regions covered by TCP assistance, as well as to support the preparation of analytical outputs for decision-makers. This requires financial contribution from the Government as the resources available under the Programme are not sufficient to establish the system in all regions. The sustainability of the system will also depend on Government’s continued support to the system after the end of the Programme. In this regard, the Government is committed to follow-up on the project’s recommendations for the institutionalization of the FDMS and to provide the financial resources needed for its regular functioning. The purpose FDMS to be developed will provide the information needed for analysis and assessment of profitability and production efficiency at farm level with the possibility to also serve in provision of advice on improvement of productivity and profitability of production. Furthermore, based on the analyses of collected data, decision makers and policy analysts will have the possibility to assess the competitiveness of Azerbaijani farm products on international markets, as well as the effectiveness of implemented policy measures. This will provide the base for making informed decisions on appropriate incentives and measures to improve food security and the use of agricultural resources and assets. In addition to that, the

22 system will provide data for research related to long term perspectives of socio-economic development of Azerbaijani agriculture. Functional and organizational setup Conceptual framework for functioning of FDMS as developed during the TCP assistance, was discussed and agreed by stakeholders at the Project Inception workshop held in December 2010. Based on that proposal, new modified framework also reflects functional relationship with other Government institutions and potential users of FDMS information, namely MED, State Statistical Committee (SSC) and the Cabinet of Ministers (CoM). In addition to that this proposal also includes the setup of Steering Committee. This conceptual framework envisages establishment of country-wide FDMS under the authority of Ministry of Agriculture. Operational responsibility would be entrusted to IEOA which would through FDU be responsible for coordination of farm data collection, management and processing of collected data. Main outputs of FDU will be production of analytical reports for policy purposes needed by the Government and Ministries, dissemination of information for the needs of advisory services. To assure regular communication and access to information generated by FDU, each of involved Government institution will nominate Focal Point for coordination of FDMS related matters within the Government institutions. Coordination of Government institutions with respect to information requirements from FDU would be entrusted to the Steering Committee (SC) which will be composed of delegated representatives of MoA, MED, SSC and CoM.

Figure 7. Conceptual framework for functioning of FDMS

Organization, staffing, responsibilities The core of FDMS will be FDU which will be under direct responsibility of Deputy Director IEOA. Besides coordination of work of two departments: Department of Information and Organization of Monitoring System (DIOMS) and Department of Organization of Farm Data Collection (DOFDC), his main responsibilities will also include effective communication with other Government institutions in order to assure relevance of FDU reporting as well as regular financing of FDMS. As per Organizational chart in figure 7 main responsibilities of DIOMS will include data processing and preparation of reports to Government institutions and other relevant stakeholders, such as advisory services and research institutions. To assure high quality of output DIOMS will also permanently update and upgrade software and data processing methodology. This will initially be done by five staff members with required competences. With the expansion of FDMS to a country-wide coverage and increase of demand for analytical reporting the staffing will be reviewed and increased as necessary. Main responsibilities of DOFDC will include data collection from farms in the sample through predefined farm records system and preparation of collected data for processing by

DIOMS. DOFDC will also permanently upgrade and adjust data collection tools and methodologies. This will initially be done by five staff members with required competences, located in FDU and out-posted staff members located in the regional offices. With the expansion of FDMS to a country-wide coverage and expansion of the sample farms to the country representative level, the staffing arrangements will be reviewed and adjusted as approriate. Mid-term development plan for a country-wide coverage Based on the outcomes of TCP assistance and commitment of Government to support IEOA in data collection and operational costs of FDU during the EC/FAO Programme, coverage of FDMS in 2011 was limited to only three regions of the country (Guba-Khachmaz, Aran and Lenkaran). In each region FDU staff randomly selected 100 farmers (300 in total) who participate in the farm record keeping. Based on that preliminary and non-representative sample, results preliminary results were presented at the Policy Seminar on development of FDMS held at the end of March 2012. To assure full relevance and reliability of results generated by FDMS it is essential to collect the data from representative set of sample farms covering all regions in Azerbaijan. The approach used to determine the sample size and distribution of sample farms among regions, farm size and farm type categories is based on experience and the approach of Farm Accountancy Data Network (FADN), a sampling based farm monitoring system in EU. The sampling and weighting process was coordinated between IEOA and SSC. The outcome of that work is the representative sample of 2 000 farms which will be drawn from population of 414 940 farms with the annual income larger the 1 000 AZN. Table 14. Country-wide FDMS - sample plan

Crop Vegetable Perennial Livestock Mixed Regions Total farms farms farms farms farms

Absheron Economic region 0 4 0 11 4 19

Aran Economic region 179 42 20 256 279 776

Dakhlik Shirvan Economic 40 0 0 32 53 125 region

Ganja-Gazakh economic region 110 27 5 105 63 310

Guba-Khachmaz economic 52 6 22 45 63 188 region

Lankaran economic region 46 16 13 82 63 220

Nakhchivan AR 12 14 0 41 22 89

Shaki-Zagatala economic 59 21 0 70 74 224 region

Yukhari Garabagh economic 13 5 0 13 18 49 region

511 135 60 655 639 2 000

Time frame for development, human resources, infrastructure and financial resources needed International practice shows that the full scale establishment of FDMS has to be implemented gradually. Depending on the total sample size this process takes between four to ten years. In the case of Azerbaijan fully operational country-wide FDMS can be established by 2015. This will also depend on the Government’s decision to allocate necessary financial resources for coverage of operational costs. Fully fledged FDMS would have total staff of 43 persons, out of which 29 would be engaged on contractual basis while 14 persons would be permanently employed and located in central FDU office. Preliminary estimated annual resources needed to be provided by the Government for fully fledged country wide FDMA are estimated at the level of 206 000 AZN. More detailed annual cost breakdown is provided in the following table 15. Table 15. Estimated budget for the establishment of country-wide FDMS

2012 2013 2014 2015

Personnel 76 632 86 832 97 032 101 112

Travel 45 720 56 520 67 320 71 640

Trainings to data collectors 6 000 6 000 6 000 6 000

Equipment and software 10 500 13 000 15 500 16 500

Reporting and analysis 3 000 3 000 3 000 3 000

General operating expenses 7 600 7 600 7 600 7 600

Grand Total 149 452 172 952 196 452 205 852

Sample size 1 203 1 562 1 911 2 000

Cost per farm 124 111 103 103

Institutional setup Necessary legislative and institutional arrangements for the establishment of country wide system have to be introduced. In Azerbaijan, majority of farmers do not keep accounts. There is no obligation for bookkeeping, which disables proper involvement of farms into statistical surveys. Log book is introduced to the farmers involved in the pilot FDMS regions. Preliminary structure and procedures have already been developed in the national and regional level for pilot regions. In order to be able to do large scale data collection, permanent structure and procedures must be introduced. This Concept Note is the first step with regard to legislative basis, requiring identification of the focal points at the: 1. Agro-industry Department of the Cabinet of Ministers; 2. Ministry of Economic Development; 3. Economy and finance department, MoA; 4. Department of Development and Entrepreneurship, MoA; 5. Agriculture statistics Department, SSC; 6. Scientific Centre, SSC. Focal points will be responsible for the coordination, promotion and implementation of FDMS related issues, as well as increasing awareness within their competency. The IEOA will be in liaison with focal points as often as necessary. Focal points will also be members of the FDMS Steering Committee (SC), which will be the main oversight mechanism of the FDMS. The SC, established and headed by the Minister of Agriculture will review the achievements and plans for the FDMS on a regular basis, facilitate the resolution of the problems met. The SC is expected to meet regularly, at least once every six months, and on an ad hoc basis when needed. The IEOA represented in the SC by the Deputy Director, will prepare documents and reports for review and approval of the SC. Presented concept was discussed and agreed upon between relevant stakeholders and representatives on Ministry of Agriculture, Cabinet of Ministers, Ministry of Economy Development, Ministry of Finance and State Statistical Committee, at the policy seminar on Development of Farm Data Monitoring System, which was held on 29 March 2012 in Baku. The next step for the formal arrangements has to be development and approval of the Government’s Decree on Official institutionalisation of the FDMS.

Figure 7. Organizational structure of FDMS

Deputy Director IEOA General supervision and coordination of FDMS

DIOMS DOFDC Head of Department Head of Department Co-ordinates data processing Co-ordinates data collection

Deputy Head of Department Deputy Head of Department FDMS data analysis; Keeps questionnaire & Communication with quality checks up to date. stakeholders.

Programmer Data entry Data entry Data entry Weighting Queries Maintains server and From log-books into the From log-books into the From log-books into the Designs selection plan; Designs and prepares database; input forms of FDMS input forms of FDMS input forms of FDMS Calculates weight numbers. queries on FDMS results. Provides IT support. software. software. software.

Data Collector Data Collector Data Collector Recruits farmers; Recruits farmers; Recruits farmers; Advises farmers; Advises farmers; Advises farmers; Fills in the log-books. Fills in the log-books. Fills in the log-books.

Data Collector Data Collector Data Collector

Data Collector 28 Data Collector Data Collector