Presentation Kis Austria

Private land and forest ownership in Hungary

by Miklos Kis, Association of Hungarian Small Holders and Cooperatives

Introduction

Ladies and Gentleman, please let me introduce myself shortly. My name is Miklos Kis representing the Association of Hungarian Small Holders and Cooperatives. Actually I am a family farmer; our main profile is integrated fruit production and crop management. Now a few words about our association: Our pre-association was founded in 1886 and represented the Hungarian farmer’s interests till 1945. The activities of the association was restarted in 1989, located in all 19 shires and we have now about 40.000 members including firstly the small and medium -sized farmers and family farmers, which means that we are the biggest agricultural advocacy group in Hungary. I would like to introduce the history and the structure of the Hungarian land ownership in the last decades, the acquiring of agricultural land in Hungary, the registration of the real estates and finally a special fund, the National Land Fund.

History of the Hungarian land ownership Changes in land use The economic and social changes of the nineties have radically transformed the organizational and ownership structures of agriculture. Due to the changes of the ownership structure, 86% to 88% of arable lands (and 41% of forests) is now privately owned. Land use, however, has greatly fundamentally changed and separated from land ownership. Private farms cultivate 40% of arable land. The composition of land users, as well as their share of the total agricultural land has significantly changed.

The changes between 1989 and 2001 are indicated in the following figure. Diagram 1.: Changes in land use

Business firms: Business firms without legal personality are: general (ordinary) partnerships and limited partnerships. Business firms with legal personality are: joint enterprises (ventures), limited liability companies and shareholding companies. This category includes partly State owned large companies as well.

Transformed cooperatives: the legal successors of former cooperatives transformed according to the Act I. of 1992 on cooperatives. The assets remained the property of the cooperative members while the land ownership was restituted to the eligible people defined by the law. In most of the cases the land is leased and used by the cooperatives.

Due to the compensation in nature, the changes in farm structure, the privatisation and the bankruptcy of large farms, after the change of the political and economic system the average farms size significantly reduced. Land use is strongly differentiated according to the size and type of farms. According to the General Agricultural Census (GAC) of the Central Statistical Office, in 2000: 40% of the total land area used by farms was cultivated by the nearly 925 thousand private owners. The larger part of land (60%) cultivated by economic organisations and transformed cooperatives is leased land.

Holdings structure 83% of Hungary’s total territory of 9,3 million hectares, that is 7,7 million ha (2001) is cultivated land, which has shown a continuous decline since the early 1990s (in 1990, it

was 8,2 million ha). Agricultural land use is characterised by relative stability. In comparison with the European Union, the ratio of agricultural areas and especially arable land is much higher, while the ratio of forest areas and grassland is substantially lower. As a side-effect of the property and structural changes in agriculture, the proportion of unused or abandoned lands is rather high even today. Table 1.: Breakdown of land areas by cultivation branches (1992-2001)

After the restructuring of ownership, land use and production structures are only partly adapted to the characteristics of cultivated areas. Arable land plays a traditionally significant role, while nearly half of the yield of grasslands is unused, and the opportunities offered by special cultivated areas are only utilised to a marginal extent. 88% of arable land is privately owned, 10% is held by the state and 2% is held by cooperatives. 59% of all forests are state- or community-owned, while 41% of the forests is in private hands. A smaller proportion of state-owned cultivated land is used by businesses owned by the state permanently, while the larger part is used by forestries (19 state forestries) also owned by the state. The majority of the private owners who became owners of cultivated land during the political and economic transition period let their land, thus land ownership and land use structures differ substantially. It is estimated that approximately 60% of all cultivated land is rented.

The number of landowners is 2.2 million with an average cultivated area of 3,65 hectares, 2,14 hectares of arable land per landowner. Utilisation of the private-owned forests usually appears as a complementary activity. The majority of the actual work, even in the case of state-owned forests, is performed by enterprises that contract with the owners. Forestry encounters problems due to the scattered property structure. The average forest parcel is less than 2 hectares. Table 1.: Changes in land use by organizational form (1990-2001)

By 2001, the share of co-operatives in the utilisation of agricultural areas dropped to less than a fifth of the 1990 level, while that of economic organisations was almost halved. In contrast, the proportion of individual farmers quadrupled. The majority of economic organisations are partnerships that were established as the result of the transformation of ventures that had operated as cooperatives and state farms prior to 1 January 1993. They operate as limited companies or as public limited corporations. Limited companies or deposit partnerships operated by family farms are represented by a smaller ratio. Individual farmers usually operate as private entrepreneurs or full-time primary producers. The number of agricultural economic organisations increases steadily, propelled by the growing number of micro and small businesses representing family farms. The laws introduced after the political and economic transition of the early 90s (Compensation Act, Transformation of Cooperatives

Act, New Cooperatives Act, Land Act) brought about a decisive shift in land ownership, land use and the forms of businesses involved in agriculture.

Due to the Compensation Act private ownership evolved in following ways: •

by the owner’s compensational claim to the state (“compensation ticket”)

•

former cooperative employees without land ownership got it as a personal allowance

•

former cooperative employees with land ownership got them back

In spite of that, till today a lot of cooperative-members didn’t get their share back, they land are still in common use. The Hungarian Land Act became operative only in 1994, and was modified by the present government in September 2002. The Land Act is adjusted to the EU laws. The most important points of the act regulate the acquiring of the land and the land leasing.

Acquiring of the land: “10.§. (1) In case soil or homestead is being sold - if it is not stipulated otherwise - the following persons - in due ranking - should be entitled to exercise the pre-emption rights: - the leaseholder, the person, who partially possesses or cultivates the land; in case a legal person or an organization not bearing a legal personality is in the position of a landholder, then its natural person member or local resident shareholder should be entitled to exercise its pre-emption right. - the local resident neighbour - the local resident - the State of Hungary on the basis of the regulations set forth by the Act on the National Land Fund.” The land leasing period is limited between 5 and 20 years.

The size of the area subject to leasehold 22. § (1) A domestic natural or legal person, respectively a domestic organization not bearing legal personality - aside from the State of Hungary, local governments and except the regulations set forth in Section (2) downunder - is entitled to leasehold soil up to a maximum area of 300 acres or up to a maximum value of 6000 AK ‫٭‬. (2) An economic corporation or a so called co-operative society is entitled to leasehold soil up to a maximum area of 2500 acres or up to a maximum value of 50000 AK. This limitation should be void in case the soil is leased by the co-operative society from its own member, respectively in case the soil is leased by a company from its own member or shareholder or from the National Land Fund. 23. § A foreign natural or legal person is entitled to leasehold soil up to a maximum area of 300 acres or up to a maximum value of 6000 AK. ‫(٭‬AK means “gold crown”, which is a unit for measure for the quality of the soil, coming from the Monarchy times.) This determination is not unknown, see Denmark or France. Acquiring of agricultural land by foreigners According to the relevant legal regulations a foreign legal entity or a natural person is not permitted to acquire agricultural land for the next 7 years (till 2011) with 1 exception: foreign natural persons living more than 3 years ago in Hungary and doing agricultural activities as their lifestyle are adjudicated as the Hungarian citizens. After 3 years (2007) the Committee makes a general review in the new member countries and based on this review the Council is in the position to abolish these restrictions. After 7 years transitional stage the Hungarian government can ask the Committee for a maximum 3 year prolongation: If Hungary demonstrates that Hungarian land prices

are essentially lower than the EU 15 average land prices, the Committee can decide to prolong the transitional stage.

Real estate registration Land and immovable in Hungary are registered in the Land Registration Office. The registration is unfortunately not always exact, the Compensation increased the problem, and it is discovered by the new parcel identify maps. In addition, the special Hungarian heredity system cumulated the registration’s problem. It means, all members of the family inherit the same portion independent of the fact who is farming. This heredity system causes smaller and smaller land sizes. The former government proposed to draw these small lands together and founded the National Land Fund. The Fund is still acting, but focusing mainly on the “annuities for land” program.

National Land Fund The National Land Fund facilitating the streamlining of land use was set up in 2002 with central and regional offices, for the structured and rational utilization of state-owned agricultural land the National Land Fund (NLF). The main task of the NLF is to utilize and/or purchase agriculture land in accordance with the land policy principles. The principles of the utilization of state owned land are the followings: - to promote the formulation of viable farm-structure, - to provide land-base for voluntary land-exchange, - to provide land for special programs (protected areas, experimental crops, etc.) Also the NLF takes the agricultural lands offered by farmers over 60 years in the framework of the "annuities for land” program introduced by Government Decree. As the above activities are operational for only one year these trends may affect the utilization of those state-owned

agricultural lands: selling, exchange, utilization for special program or by land-lease by private companies. These activities may affect in the coming years the agricultural land use in Less Favoured Areas, the potential for afforestation and also the need and potential for early retirement.

Conclusion These were the most important points of the subject of the Hungarian land ownership. I think all members of this conference from Austria, Czech Republic, Slovakia and Slovenia know exactly, how long and difficult period the candidate countries had in the last years. Land ownership was one of the critical issues in the course of the enlargement, and I think we did not reach the required level. Now we are all the members of the European Union, we have the same rules. After the changes of the land use in Center –and Eastern Europe the extremity of small plants and big plants stands opposite. To our belief, the negotiations favored rather to the squatters and not to the smallholders. This is confirmed also from the interest of the international agricultural investors, and this is the reason why our association has to join with our members. We can be successful only together against the selfish squatters. This is one of the most important tasks, and I wish all of you persistence and calling enough.

Thank you for your attention.