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Internal research projects - year 2016

Project No.: 1273

Project title:

The impact assessment of investment support provided within frame of Rural Development Plan 2007-2013 (Medonos)

Responsible solver:

Ing. Tomáš Medonos, Ph.D.

Aim of the project:

Completion of analytical work started in 2015, with a particular focus on the evaluation of the effects according to different types of enterprises (degree grassing, farming intensity ruminants belonging to the LFA and the combination of these criteria) or types of projects for the farm sample in the database Albertina. Consideration temporal aspects when aid is taken with possible time offsets the initial years for supported businesses in various stages e.g. max. 3 years.

Summary of the project:

Politicians and taxpayers are increasingly interested in the evaluation of the effects of investment support. It is also necessary to continuously evaluate and setting conditions for preferential criteria favouring certain groups of recipients of these supports. Evaluation of the impact of structural policy and the development of these measures requires and will require additional analytical approaches and their application. Own analysis focuses on evaluating the effect of preferential criteria favouring enterprises in LFA areas and to evaluate the impact of investment support from the Rural Development Programme of the Czech Republic for 2007-2013 (RDP) between the LFA areas and non LFA areas using counterfactual approach. Analyses were based on data from following databases: Bisnode Albertina, SZIF on the beneficiaries of subsidies, Ministry of Agriculture – as LPIS and IZR for the years 2007-2013. The solutions were used methods of descriptive analysis and counterfactual analysis to measure the impact of investment support.
The results show that the agricultural land operated by farms that received support from the modernisation measure (M121), and its share of total agricultural land in each area according to LPIS shows that the largest part of the supported area of the total area in the region accounted for 52.9% in LFA other than mountain - those were the most supported in terms of area, as well as 45.7% of the LFA in mountainous areas and 42.3% in regions non LFA. The total amount of investment support paid from 2008 to 31. 12. 2015, converted into hectares of agricultural land according to the cadastre where the project was realised, amounts to CZK 6,163 per ha in the case of LFAs and CZK 4,623/ha for areas non LFA. At the same time as a proportion of total preferential points gained in the total number of preferential criterion favouring the realization of investments in LFA regions, combined with a reduction in co-financing rate ranked second out of a total of 39 preferential criteria applied in all rounds of the RDP 2007-2013, with a total share of 12.3%. It can therefore be concluded that the preferential criterion important contributes to the relief allocation of investment support to LFA areas.
The results of counterfactual analysis showed that the achieved effects of investment support in LFA areas and non LFA areas are different and within applied methods often poorly significant. Overall, it can be said that in LFA areas were demonstrated impact, especially on additionality external funding in the form of a higher level of bank indebtedness in supported against non-supported farms, further labour productivity and return of operational capital. For enterprises supported against non-supported in non LFA areas was achieved higher value of total production, higher level of gross value added and higher indebtedness as well as in the case of enterprises in LFA areas. We have also seen that there are some methodological issues and data problems that affect the importance of the results in different samples, considered various funding period and circumstances of measurement effects. Various methods can give slightly or appreciably different results.
An analysis focused on generating internal resources for investment shows that companies in LFA areas generate slightly less resources to renewal capital in comparison with those in non LFA. On the other hand, it was shown that farms their advantage combined with a decrease in the percentage of co-financing probably in order to get security receiving of a support because applicants with this concession insisted on higher average support level of 39.2% of eligible costs, which is only 6.2 percentage points more in comparison with projects without this preference. At the same time the average rate of support in LFA is 42.4% and in non LFA areas is 34.1%. This fact again confirms the reduction of support by the applicants on average by 8.3%. Therefore, a compromise solution would be to reduce this advantage in case of LFA for example at 5% instead of currently applied 10%.

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