Proceedings of the 2015 International Conference ECONOMIC SCIENCE FOR RURAL DEVELOPMENT No37

Jelgava, LLU ESAF, 23-24 April 2015, pp. 64-75

ECONOMIC POLICY INCENTIVES ENCOURAGING AGRICULTURAL

PRODUCTION: A COMPARATIVE ANALYSIS OF LITHUANIAN RURAL
DEVELOPMENT PROGRAM FOR 2007-2013 AND 2014-2020
Egl Stonkut, Assoc. Prof. Dr.; Jolita Vveinhardt, Assoc. Prof. Dr.
Vytautas Magnus University

Abstract. The new European Unions financial perspective for rural development policy
started in 2014 bringing the need to assess the results of past policies and to design future
rural development in line with new strategic objectives. While Rural Development program for
Lithuania for 2014-2020 being still under development it is important to implement ex-ante
evaluation of economic incentives being created (maintained) under these programs in order to
detect relative changes in economic policy incentives encouraging agricultural production in the
future. Thus, the aim of the paper is to define relative changes in economic policy incentives
encouraging agricultural production being created by the structural support for agriculture
under Rural Development program for Lithuania for 2014-2020. For that purpose a
comparative analysis of selected quantitative measures aimed at support for business entities
(producers) under Rural Development programs for 2007-2013 and 2014-2020 is made. The
results of the comparative analysis revealed that total support and its intensity is decreasing in
the period 2014-2020 compared to that in the period 2007-2013. That decrease can induce
both: lagging in structural changes or advancement in productivity as an option to overcome
structural deficiencies.
Key words: economic incentives, rural development measures, investment support, Lithuania.
JEL code: Q18.

Introduction
The new European Unions (EU) financial perspective for rural development policy started in
2014 bringing the need to assess the results of past policies and to design future rural
development in line with new strategic objectives. The potential changes in support for
agricultural sector could bring new incentives for changes in structure of agricultural sector, its
competiveness, productivity, farm income and welfare as well as other broader benefits for
whole rural and national society through economically viable, competitive, agri-environmentaly
friendly and sustainable agricultural sector. As the decoupling of support under the called First
Pillar (direct payments) of the EU Common agricultural policy (CAP) is implemented its
incentives being created for agricultural production have become limited. In that context
64

attention shift to the EU CAPs support for rural development (called also as Second Pillars and
even Third Pillars support) support measures and their impact on agricultural production.
While Rural Development program for Lithuania for 2014-2020 being still under development it
is important to implement

ex-ante

evaluation

of economic incentives

being created

(maintained) under these programs in order to detect relative changes in economic policy
incentives encouraging agricultural production in the future. Thus, the aim of the paper is to
define relative changes in economic policy incentives encouraging agricultural production being
created by the structural support for agriculture under Rural Development program for
Lithuania for 2014-2020.
The aim of the paper is to define relative changes in economic policy incentives encouraging
agricultural production being created by the structural support for agriculture under Rural
Development program for Lithuania for 2014-2020.
In order to achieve the aim of the paper, three tasks are formulated:

To analyse and classify measures under Rural Development programs for Lithuania for

2007-2013 and 2014-2020 in order to define those directly linked to productive assets, income
and costs of agricultural producers.

To compare the intensity of support for agricultural producers under Rural Development

programs for Lithuania for 2007-2013 and 2014-2020 based on structural indicators of the
sector (a structural approach).

To compare the intensity of support for agricultural producers under Rural Development

programs for Lithuania for 2007-2013 and 2014-2020 based on economic indicators of the
sector (an economic approach).

To draw conclusions, proposals and recommendations for further development of rural

development policy with the aim to support competitiveness and sustainability of agricultural
activity.
The comparative analysis of selected quantitative measures is applied in order to define
relative changes in economic policy incentives encouraging agricultural production being
created by the structural support for agriculture under Rural Development program for
Lithuania for 2014-2020. For that purpose packages of measures under Rural Development
programs for Lithuania for 2007-2013 and 2014-2020 are analysed and compared. The main
data sources used for the comparative analysis of packages of measures are Rural
Development Programme for Lithuania 2007-2013 (e.g. Ministry of Agriculture of the Republic
of Lithuania, 2014), Lithuania - Rural Development Programme for 2014-2020 (e.g. Ministry of
Agriculture of the Republic of Lithuania, 2014), Lietuvos kaimo pltros 2014-2020 met
programos priemoni pagrindins nuostatos background presentation prepared by the
Ministry of Agriculture of the Republic of Lithuania (e.g. Ministry of Agriculture of the Republic
of Lithuania, 2014) and Regulation (EU) No 1305/2013 of the European Parliament and of the
Council of 17 December 2013 on support for rural development by the European Agricultural
Fund for Rural Development (EAFRD and repealing Council Regulation (EC) No 1698/2005 (e.g.
65

European Parliament and the Council, 2013). The data on agricultural structural (on UAA)
statistics (UAA, number of holdings) for Lithuania are the data of National Paying Agency
(2014) while data on agricultural labour and economic accounts statistics for Lithuania are the
data taken from Eurostat (2014).
The discussion on the impact of structural (EU CAPs Second and Third Pillars) support on
agricultural sector of the world, EU and that of Lithuania is never ending. Rural development
policies as a part of common agricultural policy affect structural changes in agricultural sector
to the extent it makes the effect on agricultural production incentives, output and input
markets, and farm household income (e.g. OECD, 2011). The structural changes in agricultural
sector will be always the result of many complex interactions among different policies and
economic realities, thus it is difficult to identify impact of specific policy measures onto
structural changes in the agricultural sector. The same applies for the impact of agricultural
policies on agricultural productivity and competitiveness (e.g. OECD, 2011). Thus, the relative
importance and the changes in support intensity can be these measurable elements in order to
identify the orientation the support policy is changing towards even if the Second and Third
Pillars support remains relatively modest compares to that of the First Pillar (e.g. Dwyer et al.,
2007) and its suitability for Central and Eastern countries is under discussion itself. It is
perceived that direct support being relatively important compared to farm income generated in
the market (the case of Lithuania; e.g. Stonkut, 2013), it decreases the likelihood of farm
households to diversify into new, non-agricultural businesses or entering the labour market,
i.e. increases stagnation of the structure of rural economy (e.g. Gorton et al., 2009) decreases
like hood to reform (Jensen et al., 2009). And while future of the rural development being
rather dependant on diversification into food and non-food production (e.g. Dammers and
Keiner, 2006; Hodge, 2003), the importance of incentives being created under rural
development measures (the Second and Third Pillars support) is increasing and need to be
analysed.

Research results and discussion

The comparative analysis of changes in economic policy incentives for encouraging
agricultural production during the periods of 2007-2013 and 2014-2020 in Lithuania focusses
on the

economic policy incentives designed,

planned and implemented under Rural

Development programs for Lithuania for respective periods. The packages of measures
included into Rural Development programs are analysed and compared in order to detect main
changes in intensity of economic policy incentives being created and implemented (2007-2013)
or that will be created and implemented (2014-2020) during two periods.
The analysis starts with the analysis and definition of each measure in terms of its purpose
and comparative analysis of financial importance of each type of measure in Rural
Development programs for Lithuania for 2007-2013 and 2014-2020. The analysis of the
measures and their classification is based on the identification of producer (business entity)
66

oriented measures having direct impact on the producers productive assets, income (or
income foregone) or costs, general services (or common benefit) for agriculture, rural
development, and forestry oriented measures. The analysis and comparison of measures
packages is made eliminating certain financial engagements (measures) having no analogies in
the programs being compared. For that reason and having in mind that Rural Development
program for 2014-2020 is not approved by the European Commission, differences in support
amounts can be observed (other than official documents). The classification made takes no
account of the priorities and objectives being stated in Rural Development programs as aims to
be achieved by measures being planned, undertaken.
The analysis of support intensity changes is made taking into account structural changes in
agricultural sector (a structural approach) and in economic accounts of agriculture (an
economic approach) during respective periods. The analysis is based on the comparison of the
intensity of support for agricultural producers under Rural Development programs for Lithuania
for 2007-2013 and 2014-2020 based on structural indicators of the sector (a structural
approach), such as such as utilized agricultural area (UAA), total number of holdings, annual
working units (AWU), and on economic indicators, such as agricultural output, net fixed capital
formation, and net value added. The calculation of support intensity per structural and
economic indicators is calculated as follows: first, AvgS n = Sn / 7; AvgIn = Int / T, (t=1),
third, AvgSIn = AvgSn / AvgIn, where: AvgSIn average annual support intensity per indicator
in n period; AvgSn average annual support in n period; S n support under Rural
development program for n period; AvgIn average annual value of the selected indicator in n
period; In annual value of the selected indicator in n period (selected structural and economic
indicators); T total number of years in n period; t year in n period; n period. It should be
noticed that the total number of year in periods 2007-2013 (period n 1) and 2014-2020 (period
n2) is seven years, however, for the calculation of AvgIn in n2 period only three year period is
taken (as n2 period have just started), i.e. 2012-2014 and that is the past period as starting
point (in terms of structural and economic indicators) for the new financial period. The data on
UAA and total number of holdings are data of annual UAA declaration reports (e.g. National
Paying Agency, 2014) and other data are data on agriculture from Eurostat (2014).

1.

Comparison of rural development measures packages

There are rural development measures packages being planned under Rural Development

programs for Lithuania for the periods 2007-2013 and 2014-2020. The analysis and
classification of these measures according their purpose is made. The measures directly
oriented and making effect on agricultural producer (agricultural business entities) productive
assets, income (or income foregone) or costs are grouped into the package of support for
business entities (Table 1). There are two types of support for business entities: support for
investments and support in form of compensations of additional costs and income foregone.
Investments in physical assets and support for farm and business development (eligible for
business development support are also non-agricultural businesses in rural areas but can be
67

undertaken by farmers as business diversification strategy), are two measures aimed at

investment support. Compensational support for business entities can be allocated under
measures of quality schemes, agri-environmental climate, organic farming, Natura 200 and
Water Framework Directive payments, payments to areas facing natural or other specific
constrains and as partial compensation of insurance premiums (risk management).
Measures of knowledge transfer and information actions, advisory services, support for
starting-up of producer groups and organizations, co-operation and national rural network is
classified as being measures of general interest for all agricultural and rural development
actors. Even if advisory services and knowledge transfer measures are targeting mostly
concrete agricultural producers, their impact on the economics of business entities remains
indirect. The development of basic services in rural areas and Leader are two measures
oriented towards development of rural infrastructure (small, social, broadband). Support for
forestry is allocated through one main measure of investments in forest area development and
improvement of the viability of forest.
For the purpose of the research only support for business entities is analysed in depth while
some broad analysis of other types of support is made just for the completeness and
argumentation of the main research objective.
Table 1

Comparison of rural development measures in Lithuania in the periods 2007-2013 and 2014-2020
Measures/ purpose of measure

20072013

20142020

Total

2226.6

100.0

1851.1

100.0

Support for business entities

1750.5

78.6

1404.4

75.9

1027.5

46.1

852.1

46.0

727.9

32.7

647.3

35.0

investments in agricultural holdings

Investments in processing, marketing, and/or development
of new products

464.6

20.9

429.2

23.2

148.0

6.6

111.9

6.0

investments into infrastructure

investments into non-productive assets (agrienvironmental, climate objectives)

109.5

4.9

102.7

5.5

Investment support
Investments in physical assets

Farm and business development

start-up aid for
for young farmers
for non-agricultural activities in rural areas

5.9

0.3

3.5

0.2

299.6

13.5

204.8

11.1

0.0

0.0

0.0

0.0

87.5

3.9

64.7

3.5

0.0

0.0

34.8

1.9

17.3

0.8

16.9

0.9

194.9

8.8

44.9

2.4

0.0

0.0

0.0

0.0

0.0

0.0

43.4

2.3

723.0

32.5

552.4

29.8

2.3

0.1

4.2

0.2

Agri-environmental-climate

170.0

7.6

55.9

3.0

Organic farming

137.6

6.2

163.9

8.9

5.6

0.3

6.6

0.4

for development of small farms

investments in creation and development of nonagricultural activities
annual payments or one-off payments for farmers eligible
for small farmer scheme
biogas production development (from agricultural waist)
Compensation of costs (additional cost) and income foregone
Quality schemes for agricultural products, and foodstuffs

Natura 2000 and Water Framework Directive payments

68

Payments to areas facing natural or other specific constraints

370.4

16.6

287.0

15.5

Risk management

37.1

1.7

34.8

1.9

financial contributions to premiums

General services, common benefits for agricultural
sector

37.1

1.7

34.8

1.9

38.4

1.7

58.4

3.2

24.4

1.1

23.4

1.3

Advisory services, farm management and farm relief services

6.3

0.3

4.6

0.2

Starting-up of producers groups and organizations

0.0

0.0

1.8

0.1

Co-operation

0.0

0.0

24.0

1.3

National rural network

7.7

0.3

4.6

0.3

Rural infrastructure

201.6

9.1

190.0

10.3

67.2

3.0

76.2

4.1

134.4

6.0

113.8

6.1

145.5

6.5

122.4

6.6

145.5

6.5

122.4

6.6

90.7

4.1

75.9

4.1

Knowledge transfer and information actions

Basic services and village renewal in rural areas

Leader
Support for forestry
Investments in forest are development and improvement of
the viability of forests
Technical support

Source: authors construction and calculations based on data Rural Development Programme for Lithuania
2007-2013 (e.g. Ministry of Agriculture of the Republic of Lithuania, 2014), Lithuania - Rural Development
Programme for 2014-2020 (e.g. Ministry of Agriculture of the Republic of Lithuania, 2014), Lietuvos
kaimo pltros 2014-2020 met programos priemoni pagrindins nuostatos background presentation
prepared by the Ministry of Agriculture of the Republic of Lithuania (e.g. Ministry of Agriculture of the
Republic of Lithuania, 2014) and Regulation (EU) No 1305/2013 of the European Parliament and of the
Council of 17 December 2013 on support for rural development by the European Agricultural Fund for
Rural Development (EAFRD and repealing Council Regulation (EC) No 1698/2005 (e.g. European
Parliament and the Council, 2013).

The total support amount under Rural Development program for 2014-2020 is lower than
that for 2007-2013 (Table 1). The total support for the period 2007-2013 was 2227 million EUR
and for the period 2014-2020 is planned 1851 million EUR or 17% lower. The structure of the
allocation of support remains rather similar during these two periods, i.e. support for producers
(agricultural business entities) accounted for 78.6% of all support (1750.5 million EUR) during
2007-2013 and it will remain dominant support purpose in 2014-2020 (75.9% of total support
or 1404.4 million EUR). Support for general services, common benefits for agriculture (or that
with no direct link to productive assets, income or costs of the particular producers) as
economic sector accounted for 1.7% of total support (38.4 million EUR) in the period 20072013 and will account 3.2% of total support (or 58.4 million EUR) in the period 2014-2020.
The amount of support for rural infrastructure (small, broadband, social) remain rather stable
and accounts for 9.1% of total support (201.6 million EUR) in the period 2007-2013 and
10.3% (190.0 million EUR) in the period 2014-2020. The same importance in the Rural
Development program is put on support for forestry during two periods with marginal
difference in its share (6.5% of total support in the period 2007-2013 or 145.5 million EUR and
6.6% in the period 2014-2020 or 122.4 million EUR). Even if the support for technical
administration of the Rural Development programs implementation will be lower in the period
2014-2020 (75.9 million EUR) than in the period 2013-2020 (90.7 million EUR), the

69

importance of it remains the same in both periods (4.1% of total support in periods 2007-2013
and 2014-2020).
Investment support remains dominant support in the package of support for business
entities. It accounted for 58.75 of total support (1027.5 million EUR) for business entities in
the period 2007-2013 and will account for 60.7% (852.1 million EUR) of total support in the
period 2014-2020 while compensational support respectively 41.3% (723.0 million EUR) and
39.3% (552.4 million EUR) of total support. The importance of investments into physical
assets, even if the support in EUR is lower, is higher in the period 2014-2020. The investments
into physical assets accounts for 76.0% (647.3 million EUR) of total investment support in the
period of 2014-2020, while in the period 2007-2013 it accounts for 70.8% (727.9 million EUR)
of total investment support. More than a half of investments in physical assets were in the
period 2007-2013 and will be in the period 2014-2020 will be investments in agricultural
holdings (respectively 464.6 and 429.2 million EUR). Support for farm and business
development accounted for 29.2% (299.6 million EUR) in the period 2007-2013 and will reach
24.0% (204.8 million EUR) in the period 2014-2020 of total investment support for business
entities.
Payments

to

areas facing

natural or other

specific constrains remains the

main

compensational measure and it accounted in the period 2007-2013 and will account in the
period 2014-2020 more than 50% of all compensational support (respectively 51.2% or 370.4
million EUR and 52.0% or 287.0 million EUR). Support for organic farming is becoming more
important and in the period 2014-2020 will account for 29.7% (163.9 million EUR) of total
compensational support where it accounted for 19.0% (137.6 million EUR) in the period 20072013. Measures to support agri-environmental climate objectives of the European Union
agricultural policy remain of rather limited importance and its share decreases the period
2014-2020 (10.1% or 55.9 million EUR) compared to the period 2007-2013 (23.5% or 170.0
million EUR).
Even if the total amount of support for rural development and business entities is
decreasing in the period 2014-2020 compared to the period 2007-2013, the structure of the
support remains rather the same preserving broadly the same policy orientation.

2.

Support intensity: a structural approach

In order to scale the changes of support for business entities in the period 2014-2020

compared to the period 2007-2013, the average planned support intensity during respective
period is compared in respect to changes of structural indicators. For that purpose averages of
total annual support for business entities, investment support and compensational support are
calculated by dividing amounts of support for the periods by the duration of periods in years (7
years). The average of total annual support for business entities, investment support and
compensational support in the period 2007-2013 is, respectively, 250.1, 146.8, and 103.3
million EUR. In the period 2014-2020 these support measures accounted for, respectively,
200.6, 121.7, and 78.9 million EUR.
70

The average numbers of UAA, holdings and AWU were calculated finding arithmetical
average of respective numbers in the period 2007-2013 for the analysis of support in the
period 2007-2013 and in the period 2012-2014 for the analysis of support in the period 20142020. The average area of UAA for the calculations of support intensity in respective periods is
2693.6 thous. ha for the period 2007-2013 and 2772.9 thous. ha for the period 2014-2020.
Analogically, the average number of holdings was found being 171.9 thous. and 149.2 thous.
holdings and the average number of AWU 147.5 thous. and 145.7 thousand.
Table 2

Average support intensity for business entities per ha of UAA

Support type/period

2007-2013

2014-2020

2007-2013

EUR/ha

2014-2020

2007-2013 = 100

Support for business entities

92.8

72.4

100.0

77.9

Investment support

54.5

43.9

100.0

80.6

Compensational support

38.3

28.5

100.0

74.2

Source: authors calculations based on agricultural structural (on UAA) statistics for Lithuania (e.g.
National Paying Agency, 2014) and data generated in Table 1.

The support for business entities, investment support and compensational support per
hectare of UAA in the period 2007-2013 was higher than that it is planned to be in the period
2014-2020. In the period 2007-2013 the total support for business entities amounted to 92.8
EUR/ha of UAA where in the period 2014-2020 it will be some 22.1% lower and will amount to
72.4 EUR/ha (Table 2). Relatively smaller decrease is observed in investment support (by
19.4%) than in compensational support.
Table 3

Average support intensity for business entities per holding

Support type/period

2007-2013

2014-2020

2007-2013

EUR/holding
Support for business entities

2014-2020

2007-2013 = 100

1454.7

1344.5

100.0

92.4

Investment support

853.9

815.8

100.0

95.5

Compensational support

600.8

528.9

100.0

88.0

Source: authors calculations based on agricultural structural (on number of holdings) statistics for
Lithuania (e.g. National Paying Agency, 2014) and data generated in Table 1.

The average support intensity per holding, as number of holdings is decreasing, will
decrease just slightly in the period 2014-2020 compared to the period 2007-2013. The
average support for business entities per holding will be 1344.5 EUR/holding in the period
2014-2020 and it will account for 92.4% of the average support in the period 2007-2013
(Table 3). The average investment support per holding was 853.9 EUR/holding in the period
2007-2013 and will be 815.8 EUR/holding in the period 2014-20120.
Table 4

Average support intensity for business entities per AWU

71

Support type/period

2007-2013

2014-2020

EUR/AWU
Support for business entities

2007-2013

2014-2020

2007-2013 = 100

1695.6

1376.7

100.0

81.2

Investment support

995.3

835.3

100.0

83.9

Compensational support

700.3

541.5

100.0

77.3

Source: authors calculations based on agricultural labour statistics for Lithuania (e.g. Eurostat, 2014) and
data generated in Table 1.

As total amount of support for business entities is decreasing and the average AWU in
respective periods is rather similar, the support per AWU is decreasing (Table 4). The average
support for business entities per AWU was 1695.6 EUR/AWU in the period 2007-2013 and will
be 1376.7 EUR/AWU in the period 2014-2020 (it will account for 81.2% of the support per
AWU in the period 2007-2013).

3.

Support intensity: an economic approach

For the economic importance of the changes in support for business entities being planned

and foreseen in Rural Development programs for Lithuania, average annual amounts of
agricultural output, net fixed capital formation and net value added were divided by the
average annual support amounts.
The average annual amounts of agricultural output, net fixed capital formation and net value
added were calculated by finding arithmetical average of respective numbers in the period
2007-2013 for the analysis of support in the period 2007-2013 and in the period 2012-2014
for the analysis of support in the period 2014-2020. The average agricultural output is 2253.3
million EUR for the period 2007-2013 and 2635.6 million EUR for the period 2014-2020.
Analogically, the average number of net fixed capital was found being 126.7 million EUR and
224.2 million EUR holdings and the average number of net value added 601.4 million EUR
and 769.2 million EUR.
Table 5

Average support intensity for business entities in relation to agricultural output

Support type/period

Support for business entities

2007-2013
2014-2020
Agricultural output per 1 EUR
of support

2007-2013

2014-2020

2007-2013 = 100

9.0

13.1

100.0

145.8

Investment support

15.4

21.7

100.0

141.0

Compensational support

21.8

33.4

100.0

153.1

Source: authors calculations based on economic accounts for agriculture for Lithuania (e.g. Eurostat,
2014) and data generated in Table 1.

The average support intensity for business entities in relation to agricultural output is lower
in the period 2014-2020 compared to the period 2007-2013 (Table 5). If in the period 20072013 one EUR of support for business entities were relative to 9.0 EUR of agricultural output,
then in the period 2014-2020 one EUR of support will be relative already to 13.1 EUR of
agricultural output. The intensity of support will decrease by 45.8% in the period 2014-2020
72

compared to the period 2007-2013. The same applied for investment support and
compensational support.
Table 6

Average support intensity for business entities in relation to net fixed capital formation
Support type/period

2007-2013
2014-2020
Net fixed capital formation per
1 EUR of support

2007-2013

2014-2020

2007-2013 = 100

Support for business entities

0.5

1.1

100.0

220.5

Investment support

0.9

1.8

100.0

213.3

Compensational support

1.2

2.8

100.0

231.6

Source: authors calculations based on economic accounts for agriculture for Lithuania (e.g. Eurostat,
2014) and data generated in Table 1.

The average support intensity for business entities in relation to net fixed capital formation
will decrease in the period 2014-2020 compared to the period 2007-2013 (Table 6). The one
EUR of support for business entities was relative to 0.5 EUR of net fixed capital in the period
2007-2013 and will be relative to 1.1 EUR in of net fixed capital in the period 2014-2020. The
rather sharp decrease in average support intensity for business entities is linked to rather
sharp increase in average net fixed capital formation during the last three years (2012-2014).
Table 7
Average support intensity for business entities in relation to net value added
Support type/period

2007-2013
2014-2020
Net value added per 1 EUR of
support

2007-2013

2014-2020

2007-2013 = 100

Support for business entities

2.4

3.8

100.0

159.4

Investment support

4.1

6.3

100.0

154.2

Compensational support

5.8

9.7

100.0

167.4

Source: authors calculations based on economic accounts for agriculture for Lithuania (e.g. Eurostat,
2014) and data generated in Table 1.

The average support intensity for business entities in relation to net value added is
decreasing in the period 2014-2020 compared to the period 2007-2013 (Table 7). The average
net value added was 2.4 EUR per 1 EUR of support for business entities in the period 20072013 and will be some 3.8 EUR for each one EUR of support in the period 2014-2020. The
support intensity per net value added is decreasing and follows the patterns of the changes in
average support intensity per agricultural output.
The average support intensity per agricultural output, net fixed capital formation and net
value added is decreasing. The bigger decrease in average support intensity relative to net
fixed capital formation is due to the sharp increase in fixed capital formation during the last
three years as the last years of the period 2007-2013.
The results of the analysis can be used with caution as the calculation of average support
intensity in the period 2014-2020 is based on average annual structural and economic
indicators values in the period 2012-2014. That period should be considered as starting point
73

for structural changes expected or foreseen in the Rural Development program for Lithuania for
2014-2020. Another option would be use forecasted future values of structural and economic
indicators; however, for the incentives being created among farmers past and present situation
(known situation) seem to be more relevant.

Conclusions, proposals, recommendations

The comparative analysis of support for business entities in the periods 2007-2013 and
2014-2020, done by comparing packages of relative measures being planned in Rural
Development programs for Lithuania, implies generation of these conclusions:
1. The rural development policy in the period 2014-2020 remains rather similar to that
being applied in the period 2007-2013 with dominant support for producers (business
entities) in the form of investment support and compensational support.
2. The investment support (investments into productive assets) remains the most
important support in the structure of the policy measures package, while the
importance of agri-environment oriented measures (sustainability oriented measures)
remains rather limited.
3. The support (in total amounts) and its intensity (relative to structural and economic
indicators of agricultural sector) for business entities in form of investments and
compensational support in the period 2014-2020 are decreasing compared to the period
2007-2013.
4. The unchanging orientation of rural development policy with its decreasing intensity,
could be believed, would decrease economic incentives for agricultural production;
however, previously high dependability on supports on products and decreasing
intensity of supports for producers could generate incentives to increase productivity in
order to compensate decreasing support intensity and to maintain the economic viability
of business entities and help to overcome the subsidy trap (e.g. Stonkut, 2013)
being perceived in Lithuanias agriculture.
5. The decreasing intensity of structural support for business entities and decreasing
maximum amounts of investment support together could initiate some sort of
stagnation in structural changes of agricultural sector with still rather small average size
of holdings. In that case the policy creating incentives for high value added or
exceptional quality in order to overcome structural deficiencies to benefit from
economies of scale would be needed and that is rather limited.

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