Efficient agricultural production in selected countries: a comparison with Kosovo

Abstract

This study emphasizes the main economic features of selected countries, including Kosovo, alongside agricultural development conditions. Such conditions include: agricultural production efficiency, agricultural gross value added, income conditions, use of water resources and innovation of agricultural production in order to increase agricultural results in terms of yield and income – as price income or taxed factor income. Analysing the efficiency of the agricultural industry based on the agricultural value added, the statistical data at national levels in researched countries will be processed based on the Statistical Program for Social Sciences, as statistical analyses which includes seven economic variables of 21 countries.

There are inverse correlations between renewable water resources and GDP growth rate levels of the selected countries based on the decreasing GDP growth by 8.47%, and the slight decrease of water resources by 0.15-0.38%. There are inverse correlations between agricultural value added and GDP growth rate in selected countries. Although the decreasing GDP growth was 8.47%, the agricultural value added increased considerably by 2.97%. There are middle-strong correlations between the total country area cultivated and the human development index level of selected countries. The increase of total country area cultivated can provide increased yield only by innovating technological development including human development.

Keywords: Cultivated areas, GDP growth, Human development, Income value added

Innovating development

JEL Code: O4, Q1

Introduction

The study emphasizes some main economic features of the selected countries, including Kosovo, as well as agricultural development conditions. These include: agricultural production efficiency, agricultural gross value added, income conditions, use of water resources and innovation of agricultural production in order to increase agricultural results in terms of yields and incomes (as price-to-incomes or taxed factor incomes). The agricultural results of Kosovo can be compared with some EU member states in the fields of production efficiency in agricultural production.

The study analyses the agricultural conditions of the selected countries of the world economy, including Kosovo, in the fields of production efficiency, income conditions of farm households and subsidies for farmers. The selected 21 countries in this scientific research are: Albania, Austria, Bosnia-Herzegovina, Brazil, Bulgaria, China, Croatia, Czech Republic, Egypt, Finland, Greece, Hungary, Kosovo, Portugal, Romania, Russian Federation, Serbia, Spain, Turkey, Ukraine and the UK. EU-member states constitute 11 countries from the selected group. At the time of the research period, the UK was still a member state of the EU. The selected countries are in four continents namely, Europe, Asia, Africa and America; therefore, this research of agricultural efficient production was implemented on a wide, international level. The selected countries can play important roles in the development of efficient agricultural production.

The main aims of the research are as follows:

1 Analysing the efficiency of the agricultural industry based on the agricultural value added, total country area cultivated and renewable water resources along with human development index in the selected countries.

2 How the improving technological development concerning the fixed capital and industrial inputs (based on the mechanization of water use management) can influence the production efficiency in the countries researched in the study.

The farmers in Kosovo need both adequate financial subsidies and credit possibilities in order to improve their agricultural production. The latter also requires the setting up of a well operated bank system for the realization of this aim (Lentner et al., 2019).

In addition to the financial background of farming, in order for farmers to decrease their cost of production and transaction costs, they are stimulated to strengthen their cooperation for accessing cheaper inputs alongside improving labour input (Vasa et al., 2014; Angeloska et al, 2018; Bite et al, 2020) and improving agricultural productivity even in Kosovo (Shaqiri – Trendov, 2018). The new technology should even be used in the field of digital development trends to improve the agricultural sector (Trendov et al, 2019).

The successful economic conditions in Hungary is proved by some experts (Széles et al, 2014) in the field of financial background of taxes and loan conditions. The agricultural development proved the importance of more concentrated land use to increase efficiency and productivity in agricultural production (Vasa et al., 2020). Also, the international comparison among the newly joined EU member states in Central-East Europe can demonstrate the higher rate of increase of agricultural production in this region than the increasing rate of the EU-28 (Zsarnóczai-Zéman, 2019; Sokil et al, 2018).

Material and Methods

In this scientific research I would like to compare the differences and similarities between the selected economies in the field of the economic background of productivity of the agricultural production concerning water management. The general research methods consist of two main parts, namely statistical analyses:

1 The methodology focuses on analysing the efficiency of the agricultural industry based on the agricultural value added, total country area cultivated and renewable water resources accompanying the human development index in the 21 selected countries. Using the data collected from the different national data resources and international institutions.

2 Analyses focusing on possible improving technological developments and their influences on the production technology and production efficiency in the countries researched in the study.

In the first case of analysing the efficiency of the agricultural industry based on the agricultural value added, the statistical data at national levels in the researched countries will be processed based on the SPSS (Statistical Program for Social Sciences) statistical analyses which includes seven economic variances.

These seven economic variables are as follows: the total country area cultivated (TAreaCult1), the Gross Domestic Product growth (GDPGrowth2), agricultural value added in percent of GDP (AgrVaAd3), Human Development Index (HDI, HDIndex4), total internal renewable water resources per capita (InterWRCap5), total renewable water resources per capita (TRenewWRCap6) and dam capacity per capita (DamCapita7). In addition to statistical analysis, both data management (case selection, file reshaping, creating derived data) and data documentation (a metadata dictionary is stored in the data file) are features of the base SPSS software (Argyrous, 2005; Nie et al, 1970). The statistical analyses of this study focuses on the measure of correlations among economic variables concerning the economic features. Additionally, the factor score within the coordinate system demonstrates the positions of the researched countries divided into four quarters based on their economic features.

Results and Discussion

The Lewis Model of economic development is important concerning the economic conditions of Kosovo. This is because in this country, the disguised unemployment also appeared in the agricultural sector, which could stimulate the outflow of workers-employees from this sector to the industrial sectors. These industrial sectors can provide more machines and chemicals as fertilisers and pesticides for the agricultural sector in order for it to be more industrialised in the possible near future. The future mechanization process in agricultural production can make this sector more mechanized and therefore more efficient and productive. The mechanization process also demands more land use concentration implemented by a smaller number of land owners and land users.

Scientific results requested, as hypotheses are as follows:

1 I would like to prove that the total internal renewable water resources per capita (InterWRCap5) and total renewable water resources per capita (TRenewWRCap6) and dam capacity per capita (DamCapita7) have very strong correlations among themselves.

2 I wish to prove that there are inverse correlations between renewable water resources and the GDP growth rate level of the selected countries.

3 There are negative correlations between the agricultural value added and the GDP growth rate level of the selected countries based on improving mechanization in agricultural production.

4 There are strong correlations between the total country area cultivated and the human development index level of the selected countries.

5 There are middle-strong correlations between the total country area cultivated and the agricultural value added level of the selected countries.

The essence of the development process in such an economy is, “the transfer of labour resources from the agricultural sector, where they add nothing to production, to the more modern industrial sector, where they create a surplus that may be used for further growth and development.” (Fei-Ranis, 1961).

Given that the agricultural industry and production are based on land use, the share of the total country area cultivated is therefore important. As such, the research should be extended to include this. All of the aims of this research should be summarised by the seven economic variances mentioned in the above chapters of my study and dissertation. Table-1 shows the trends of economic growth and the water use and supply in the selected 21 countries of Europe, Asia, Africa and South-America in percent between 2008-2017 based on the FAO (2018). At the same time, by a value of 0.934 (93.4%), there is also a very strong correlation between total internal renewable water resources annually per capita (m3/inhab/year; InterWRCap5) and total renewable water resources per capita (TRenewWRCap6). This strong correlation is very logical because the total internal renewable water resource per capita comes from the total renewable water resource per capita. The latter as an amount of water has additional water coming from abroad i.e. it originally flows from the neighbouring countries.

The other strong correlation is between GDP growth (GDPGrowth2) and the agricultural value added in percent of GDP: -0.692 (-69.2%). In this case, the GDP growth means that this economic variable has an inverse correlation with the other economic variances – in this example with the agricultural value added in percent of GDP. This means that if the GDP growth increases in any country of this selected group, the agricultural value added in percent of GDP (AgrVaAd3) decreases, or behaves in an opposite manner to these conditions. In the selected countries during the research period, if the GDP growth decreases the agricultural value added mostly increases. If the agricultural value added in percent of GDP increases (because of increasing yields based on using more water resources and increasing the investment and consumption of fixed capital), the other economic sectors provide lower results compared to the agricultural sector. This can lead to the decreasing trend or less increasing trend of the GDP growth. The development of the agricultural industry has not stimulated the increasing GDP growth rate in the selected countries for the period of 2008-2017 (see also data of Table-1-2; FAO, 2018, AQUASTAT).

The other correlation was middle-strong or middle-weak, because this was 0,495 (49,5%) between percent of total country area cultivated and Human Development Index (HDIndex4). When economic variables have positive values in their correlations, this means that the development or increase of one variable stimulates the development of the other variable. In this case, the increase of percent of total country area cultivated has an influence on the increase of HDI. In addition, the increase of HDI has an influence on the percentage increase of the total country area cultivated. The standard of living included in the HDI means that consumers, as a population of the countries, have higher salaries based on the increasing of their standard of living. They have more willingness to buy more food therefore, the agricultural industry should increase its yield by extending methods to increase the cultivated areas in percent of the total country area. Also, there are very strong correlations among the annual total renewable water resources per capita, total internal renewable water resources per capita and dam capacity per capita. This is because, if the renewable water resource per capita is increasing, the dam capacity can also increase. Despite this, investment should be realised for the creation of dams producing renewable water-energy. If any country does not have enough water resources to produce water energy or due to a lack of water resources, this water energy production will be missed.

The correlations of economic variables in selected countries with Kosovo

The 21 countries are selected into four country groups within the coordinate system based on their economic features. Three economic variables of component-1 are at the principle lines “X” in the coordinate system. Namely, annual total renewable water resources per capita, total internal renewable water resources per capita and dam capacity per capita (m3/inhab/year). Component-2 includes GDP growth and agricultural value added at the principle lines “Y”. In the majority of cases, those countries are selected together to one session of the coordinate system, of which economic features are close to each other (Figure-1). In Figure-2 in the coordinate system, three economic variables of component-1 are the same as in Figure-1, at the principle lines “X”. However, at the principle lines “Y”, component-3 includes two other economic variables, namely total country areas cultivated in percent and HDI (Human Development Index).

Kosovo somehow had slightly more favourable conditions in the agricultural industry concerning renewable water resources in its three kinds. Despite the water resources decreasing by just over 0.5% more than in Albania, the agricultural value added increased by 6% against Albania’s 1.6%. This difference could result from more mechanized agricultural production in Kosovo as well as more favourable arable land conditions and less mountainous areas than in Albania. Also, in Kosovo the GDP growth rate has increased by 3% for the researched period. This was more considerable than in Albania, where the GDP growth even decreased by 6.5% (due to investments being realised more in the agricultural sector than in industry). Generally, the FDI of foreign transnational corporations had no considerable activities in Albania. They could have been more active if the governmental economic policy had been more open to foreign investments. It is likely that the tax policy of Albania regarding foreign transnational corporations was not as flexible as was needed or requested by the foreign companies. Also, in Kosovo either the increasing GDP growth rate or the agricultural value added were more considerable than the average levels of two economic variances of 21 selected countries in this study. Naturally, the negative trends were mostly decided by the economic decline of Ukraine, Russian Federation and Brazil in the field of GDP growth.

In Kosovo there was a developing trend and inverse correlation between the GDP growth and agricultural value added as the other economic variance. The GDP growth rate increased by 3%, while the agricultural value added increased more by 6%. This latter could be realised because the amount of the total renewable water resources per capita only decreased by 0.5% at the lower level. Therefore, the yield-trend of the agricultural production could increase mostly by twice the average level of the selected 21 economies of the four continents in terms of this economic variance. Despite the GDP growth not being considerable, this increase could ensure enough economic background for the increase of the agricultural industry including the agricultural gross value added (GVA). This last one is equal to the difference of the agricultural output and input as intermediate consumption. In this statistical analyses, the total area cultivated increase could influence the increase of the HDIndx4. At the same time, the latter can have an influence on the increase of the total area cultivated. The total area cultivated increased by 1.4% and also the HDI increased to the level of the value of 0.6. This middle-strong correlation, as its value of 0.495 suggests, means that the general increase of total country area cultivated could accompany the increase of agricultural yields by increasing price income for the farming households. In turn, this could lead to the increase of improved health and standards of living. The latter could naturally increase the purchasing power parity of the consumption of farmers and annual working units in the agricultural industry, as part of the consumer population in Kosovo. In this quarter of the coordinate system, the countries where the economic variances at the “Y” line can develop, the economic variances actually decreased. This contradiction can be solved by increasing the water yield in terms of the total renewable water resources and dam capacity per capita.

Conclusions and main results of the research

1 It is proved that total internal renewable water resources per capita and total renewable water resources per capita and dam capacity per capita have very strong correlations among themselves in the 21 selected countries. Therefore, the first hypothesis is accepted.

2 There are inverse correlations among the renewable water resources and the GDP growth rate level of the selected countries based on the decreasing GDP growth by 8.47% and slight decrease of the total renewable water resources by under 0.4%. This developing trend shows how important increasing GDP growth is through increasing efficient industrialised agricultural production based on increasing water resource use. Thus, the second hypothesis is accepted.

3 There are inverse correlations between the agricultural value added and the GDP growth rate in the cases of the selected countries. The decreasing GDPGrowth2 was 8.47%, while the agricultural value added increased considerably by 2.97%. Hence, the third hypothesis is accepted.

4 There are middle-strong correlations between total country area cultivated and the human development index level of the selected countries. The total country area cultivated decreased very little and the human development index increased moderately. Therefore, the fourth hypothesis is accepted.

5 It cannot be accepted that there are middle-strong correlations between the total country area cultivated and the agricultural value added level of the selected countries. This is because the increase of the agricultural value added can be connected with technological development and improving the irrigation system. Simply put, the total country area cultivated cannot be useful for increasing the yield without technological development. The increase of the total country area cultivated can only provide more yield through technological development. Thus, the fifth hypothesis is not accepted.

The agricultural sector should be developed through mechanization, increasing consumption of fixed capital and using more industrialised input to make this sector further integrated into the vertically integrated product channel and agricultural business. Therefore, farming subsidies should be increased in order to develop fixed capital. In addition, the credit system should be applied to the long-term credit system for this investment.

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Fisnik Shaqiri
Szent István University, Doctoral School of Management and Rural Development

Dr. László Vasa
Institute of Foreign Affairs and Foreign Economics chief adviser