The Collapse of Croatian Agriculture

AIM Zagreb, December 9, 2001

In the past 10 years Croatia imported over US$10 billion in food, meaning US$1 billion each year! A simple comparison can show just how big a sum this actually is -- Croatia's annual budget is just slightly over $9 billion. When the parties currently in power were opposition, they most often criticized the ruling Croatian Democratic Union for paying little attention to the development of agriculture and excessive food imports. The most vocal was the Croatian Peasant Party, which today has an important place in the cabinet of Ivica Racan. Although Agriculture and Forestry Minister Bozidar Pankretic comes from that party, judging by the first nine months of this year, food imports are very likely to exceed US$1 billion. This simply shows that the new government has not only done nothing to improve agriculture, but has also done nothing to reduce food imports.

"Croatia imports everything, as if we did not even have agriculture of our own," bitterly says Stanko Zdravcevic, secretary of the Alliance of Farmers of Slavonia and Baranja. The alliance became a well-known group after it organized farmers protests. But its blockades and occasional loud criticism of the cabinet were mostly prompted by delayed payments for wheat, corn, or some other crop, and almost never lack of a clear farming strategy.

Zdravcevic is right: Croatia indeed imports everything, and import declarations list many an odd item, such as, for example, leaves and branches for the florist industry, straw, and bread crumbs! Garlic imports alone cost US$2.7 million a year, even though the crop is easily grown in Croatia.

"Since 1995, when the trade balance began to deteriorate, including the period when the Racan cabinet was in charge, nothing has changed. Only import quotas are going up," says Antun Debrecin, long-time director of the Belje Agricultural Combine and head of President Stjepan Mesic's expert team for agriculture, which drafted an agriculture strategy document that was rejected by the cabinet.

At the beginning of the 1990s, Croatia had a US$16 million foreign trade surplus when it came to farm products. This ratio has now drastically changed, and the current deficit almost reached US$500,000 million annually. This simply says that in the past decade Croatian agriculture has been completely ruined.

It is a tragic fact that Croatian agriculture today has only five products that suffice to meet domestic demand: wine, wheat, corn, eggs and poultry. Everything else has to be imported. Maybe the most drastic situation is in the production of cooking oil and sugar. Croatia's oil and sugar processing facilities are big enough to provide exports. The problem is that farmers do not want to grow sugar beet and sunflower because the price offered by oil and sugar producers cannot cover even production costs.

This example reveals the full extent of the paradox: production is much more expensive than in the countries from which Croatia gets most of its food imports, these mostly being EU countries. There, farming is highly subsidized and farmers have firm guarantees that everything they harvest will be paid at a price that offers a decent income. In Croatia the situation is quite the opposite: there is almost no incentive, guaranteed prices are low, and payments are delayed for months and are made only when farmers demonstrations reach a point threatening the stability of the cabinet.

European Union countries meet about 93 percent of their food demand by themselves and import only what they cannot grow because of the climate. Croatia's exports officially cover about 60 percent of imports, but these figures include only large quantities. Enormous amounts are imported individually from neighboring countries (especially Slovenia and Hungary, and as of lately from Bosnia and Herzegovina as well) where food is much cheaper because of lower taxes.

Since Croatian agriculture production is expensive and cannot compete internationally, and the kuna's unrealistically high exchange rate makes it even less profitable, imported food is cheaper, and the import lobby formed as a consequence is making enormous profits. In addition, the struggle for higher importer commissions results in the import of substandard food. Officials like Zdravcevic who claim that Europe's waste food ends up in Croatia are quite right.

Croatia's joining the World Trade Organization, which the Racan cabinet has declared a major foreign policy success, has negatively affected agricultural production. Furthermore, a series of free trade agreements, such as one signed with Hungary, has resulted in an increase in food imports (in the first half of 2001, imports from Hungary grew 34 percent!). By further reducing customs duty and opening its market (which as a new WTO member it is obliged to do over a seven-year transitional period), Croatia will experience additional difficulties in farming, which will only further reduce its export capacities. No one will need expensive Croatian products even at home, not to mention abroad.

The most tragic fact is that Croatia has based its entire development strategy on food production and tourism. A combination of the two could indeed guarantee prosperity, if agriculture were profitable and well-organized and, after meeting domestic demand, surplus food were used in tourism and exported. The situation now, however, is quite the opposite. Foreign tourists in Croatia's coastal hotels are offered foreign dairy products, meat and fruit, and even imported fish. And since hotels are also up for sale, tourism will soon face the same conditions existing already in food production. Tourists will soon sleep in hotels owned by foreigners, eat food coming from across the border, and most of the profit from tourism will leave Croatia. True, tourists will swim in the Croatian sea and breathe Croatian air, but such services -- unfortunately for Croatia's tourist industry -- are free of charge.

Drago Hedl

(AIM)