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Algora Publishing - Farm Sector In Hungary Stumbles
                                               For a Kinder, Gentler Society
Farm Sector In Hungary Stumbles
By Krisztina Than

BUDAPEST - In communist times, Hungary was one of Central Europe's granaries. Today, as Hungary eyes EU membership, its farms are more basket case than breadbasket.

''While all sectors of Hungary's economy are in an upswing, agriculture has plunged to lows never seen before,'' said Tamas Nagy, chairman of the Farmers' National Association.

As Hungary inches toward membership in the European Union, no economic sector is in as dire need of EU subsidies as agriculture.

Hungary's gross domestic product grew by an unprecedented 6.6 percent in the first quarter of 2000 and analysts expect annual growth at about 5.5 percent. At the same time, the research institute GKI projects that the country's gross farm output will rise by just 1 percent this year, barely reaching 73 percent of its 1990 production level.

Farming generates about 5 percent of Hungary's output and accounts for 7 percent to 8 percent of total employment. Yet Hungary's farming sector has had almost no share of the huge amount of foreign direct investment capital, some $22 billion, that has poured into the country over the past decade.

Farm companies use outdated machinery and have some 270 billion forints ($1 billion) of total debts in overdue loans, Mr. Nagy said.

Successive governments have failed to devise a comprehensive agricultural policy, while a parceling-out of land after communism created a patchwork of small, inefficient farms - some owned by town dwellers who do no farming.

It is an embarrassing state of affairs for some Hungarians who remember with pride the days when they say their large, communist-era collective farms could give the West a run for its money.

''Don't even ask me about our last year's result,'' said Pal Muhari, deputy chief executive of DPMG Rt, a state-owned farming company in Cegled, a typical agricultural town 80 kilometers (50 miles) southeast of Budapest. ''We still have enough harvesters to cut this year's crop, but the average age of our machinery is over 10 years.''

DPMG, with an annual revenue of around 4 billion forints, cultivates 10,000 hectares (24,710 acres) of land with 720 employees - half the number of staff that it had under communist rule in the 1980s.

It once had a prestige business producing high-grade hybrid seed from stocks developed by Western seed companies. But when the Iron Curtain came down, permission to produce the seed was withdrawn and DPMG had to develop a new business plan.

Today the firm gets 60 percent of its revenue from livestock farming - a sector that has been stagnating in the past few years. But at least it is still afloat, unlike many others. The country's biggest farm group, Babolna Rt, has piled up losses of nearly 13 billion forints.

Hungary plans to join the EU on January 1, 2003, but the EU still has not come up with a schedule for enlargement. Experts say making the reforms demanded by the EU, and getting infusions of subsidy cash from the its Common Agricultural Policy are the only hope for Hungarian farming.