Agricultural Development of Eastern Europe Countries: Investments in This Sector Their Way out of Crisis: Case of Albania
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International Journal of Economics and Financial Issues Vol. 3, No. 4, 2013, pp.964-972 ISSN: 2146-4138 www.econjournals.com Agricultural Development of Eastern Europe Countries: Investments in this Sector their way out of Crisis: Case of Albania Ilir Binaj CPA, CGMA, Phd Candidate, University of New York in Tirana, Albania. Email: [email protected] Dudie Suli Agricultural University of Tirana, Albania. Email: [email protected] ABSTRACT: This paper emphasizes the vital importance of the agriculture sector to the food security for Albania and other neighboring post-communist countries. The aim of this study is to illustrate how investments in agricultural development and food security can protect these countries form future global crisis. Agriculture sector used to be a major contributor to the Albanian economy until the 90’s and its role decreased with the liberalization of the economy. Albanians are of the opinion that more investment opportunities within the agricultural sector are required to decrease poverty at the national level and to make sustainable development possible for Albania. To achieve this, agricultural development and food security must be at the focus of the Albanian economy. This paper recommends an increase in investment within the agricultural sector across the nation. The mixed research approach method was used to validate these claims. Keywords: agricultural development; Albania; Eastern-Europe; food security; global financial crisis; investment; mixed research method JEL Classifications: Q01 1. Introduction Food resources are becoming scarcer around the world thus developing countries are finding it exceedingly difficult to sustain and improve the life quality of their populations. As a result, especially after the global crisis, agricultural development and food security have become crucial for the economies of many countries. Also, Albanian government, especially during the past five years, has taken into consideration its development strategies and has programs into place that promote food production and local products consumption at national level. During most of the transition years, as many other Eastern European countries, Albania has experienced a decline followed by a slow growth of the agriculture sector. In order for agriculture to become more successful in Albania, investment that promotes agricultural development and food security must be increased. This paper emphasizes the vital importance of the agriculture sector to the food security for Albania and other neighboring post-communist countries. The object of this study is to illustrate how investments in agricultural development and food security can protect these countries form future global crisis. Agriculture sector used to be a major contributor to the Albanian economy until the 90s and its role decreased with the liberalization of the economy and the destruction of cooperatives. After the fall of the communism, there was a high migration of the population from the rural to the urban areas and an increase of the construction, real estate, tourism and financial services sectors with agriculture being in decline until the early 2000’s. The situation has shown some improvement in the last 5 years with an annual growth of 4-5% but that is not satisfactory especially when even today there are still many unresolved problems with land ownership. This research is based on a mixed research method in order to challenge the research question from any relevant angle. The method employs both qualitative and quantitative approach by offering the advantages and disadvantages of both methods. This approach provides the best of the in-depth but 964 Agricultural Development of Eastern Europe Countries: Investments in this Sector Their way out of Crisis: Case of Albania more time-consuming insights of qualitative research together with the more-efficient and predictive power of quantitative research. The study begins with a wide-ranging survey in order to generalize the results of a population and then focuses on detailed qualitative, closed-ended and open-ended interviews in order to collect detailed opinions from participants. The disadvantages of this research method are the time consuming collection and analysis of the qualitative and quantitative data. Nevertheless, in this case the mixed research method was thought to be the best option since, considering the demographic, this study was expected to be confronted by complex and multiplex social phenomena which are considered from evaluators not easily amenable to single frame probing (De Lisle, 2011). Additionally, inducing participants through online surveys is considered a real challenge. During this study people had to be contacted repeatedly and by using other communication and social networks except for emails in order to encourage a considerable participation. This study highlights the significant role of agriculture development since it can increase the food production capacity in Albania which would promote food security. Additionally, an increase in food production capacity would place Albania in a better position to control food nutritional content which could decrease expenditures from the health sector. If food production increases beyond national consumption, exports will increase and Albania will have an opportunity for trade with EU members. This paper follows with section two that introduces agricultural developments and food security in Albania and beyond. Section three explains the research methodology. Section four summarizes the results and presents some recommendations. Section five draws final research conclusions. 2. Agricultural Development and Food Security Agriculture includes the production of food and goods through farming and forestry and within this sector the cultivation of crops on arable land and the pastoral herding of livestock on rangeland have always been and still are its most important elements (International Labour Organization, 2000). However agriculture is much more than just the production of food and goods. In fact it is a much more complex system of the input, production, processing, transportation, and marketing sector (Baruah, 2005). During the 80’s in Albania, agricultural production provided about 35% of GDP and it used to employ about half of the population and accomplish about 40% of exports in the country (INSTAT, 1980-2011). Therefore the agricultural sector accounted for a very significant role in the Albanian economy. In the 90’s the level of agricultural production fell to 25% of the level of GDP (INSTAT, 1980-2011). As for most of the post-communist countries, throughout the period of transition during the 90's, the shift from a centralized to a market economy was accompanied by an immediate fall in the agricultural sector. However, from the beginning of transition, income inequalities between rural and urban areas have increased in the Eastern European countries and rural areas have become highly heterogeneous with specific characteristics which vary within a country and even more across countries (IAMO, 2004). Concerning agriculture production in Albania, compared with 1989, production of field crops decreased with approximately 45%, livestock production did not suffer any significant decline, while the number of fruit trees and vineyard surface decreased with an average of 37% (MBUMK, 1989- 2011). The decline of the agricultural product supply resulted in a worsening of the population supply with fresh agricultural products. In 2000, it was forecasted that there would be negative trends for the less developed countries at the beginning of the 21st century, since these countries faced adverse climatic conditions, together with the economic impact of the financial crisis that erupted in 1997 with declining prices for several of the main commodity exports as well as political instability and conflicts. Financial aid programs and foreign donations that until then had been the basis of economic growth were halted. As a result, despite a 4-5% annual growth in the agricultural sector, till 2002 was not yet achieved the level of agricultural production of 1989 (Agolli & Permeti, 2003). By 2003, the services sector overtook agriculture, for the first time in history, and now employs the most people worldwide. Not surprisingly, a similar trend has manifested itself also in Albania, as construction, the tourism, and the service sector are now the leading sectors within the Albania economy. Agribusiness currently occupies a relatively considerable part of GDP in Albania 965 International Journal of Economics and Financial Issues, Vol. 3, No. 4, 2013, pp.964-972 and employs about 50% of the total employed population at a time when the registered unemployment rate is over 14% (INSTAT, 2012). Agricultural production has increased by 5% when compared to 2011 which is a nice trend for countries for Eastern Europe where Turkey shows a 3.3% growth while other countries around Albania show a decline or no growth of the agricultural products like Serbia or Slovenia (WIIW, 2013). However, agribusiness in Albania has had a very slow growth compared to other sectors. Nevertheless, in the last 5 years the agricultural sector shows stable results as a percentage of the GDP. In 2008 and 2009 the agribusiness sector constituted 16.7% of GDP, while from 2010 until today it represents about 17.5% of GDP. While the industrial sector in the last 5 years has composed about 10% of GDP, construction has suffered a decline from 13% in 2008 to 9.6% in 2012,