New York Times | 31 October 2012
By PALKO KARASZ
PARIS — When Reinhard Weratschnig’s father, an Austrian, set up a farm in and around a small Hungarian village in 1996, most of the land had gone to waste.
“When we arrived, no one cared for buying the land here,” Mr. Weratschnig said in a telephone interview from Szentgyorgyvolgy, on the Slovenian border. “All the small owners begged that someone work the land, and we got it almost for free.”
The family started breeding cattle, bringing in millions of schillings, the currency of the time, to keep the business going, said Mr. Weratschnig, 30, who now manages the farm. But things have changed, and he has become wary of investing more amid a rising Hungarian debate about the role of foreign farmers and landowners.
To honor a major campaign promise, the government of the country’s conservative prime minister, Viktor Orban, has pledged to draw the lessons of decades of mismanagement and increase the competitiveness of its agriculture. But his pledge revived sore memories of the post-communist privatizations of the 1990s, returning landownership to the center of political debate.
Shady privatization deals, the shock of opening up to a market economy and competition from Western Europe after four decades of communist rule still haunt this country of 10 million, where almost half of the population lives in predominantly rural regions.
“Time has passed over socialist agriculture and its loyalists who have outlived socialism,” Mr. Orban said in a recent address, referring to both the former communist regime and opposition socialists who were the governing Fidesz party’s main adversaries before it won a two-thirds majority in Parliament in 2010.
“Hungary’s traditions, ancestral instincts, genetic heritage, bind us to agriculture,” Mr. Orban told young farmers at a conference in mid-October. “This is what we have skills for,” he said: “We need to succeed in what we can master.”
Mr. Orban spoke days before the start of parliamentary debates on a proposed bill to overhaul the legislation regulating land sales. Among other things, the bill would end a moratorium granted by the European Commission, the European Union’s executive body, on sales of farmland to non-Hungarian E.U. nationals.
Rather than freeing up sales, however, the bill is intended to stop them, and specifically to end hidden speculative deals to circumvent the moratorium, which Mr. Orban and senior members of his cabinet say have been done by foreigners, big corporations and members of former socialist administrations.
Speaking of the proposed changes, Mr. Orban said: “We will put an end to the possibility for foreigners to acquire farmland. With this land law, it is over, it is no more.”
Julia Lakatos, a political analyst with the Center for Fair Political Analysis, an independent research organization in Budapest, said that playing the landownership card appealed to patriotic sentiment, something that Mr. Orban is very good at doing. “There will always be people who are happy to see the Hungarian land protected,” she said.
According to Ms. Lakatos, the post-communist privatization process still resonates in peoples’ minds as a mostly bad experience. “People don’t see it as something good that creates competition,” she said. “They rather see it as a way of annihilating the country, taking from us the little that we have.”
The debate is fueled by a separate issue, the renewal by tender of leases on 65,000 hectares, or 161,000 acres of state-owned land. A series of reports on those tenders by Jozsef Angyan, a former secretary of state and Fidesz lawmaker, found that small, independent local farmers had not been favored, as promised by the government. In one region, Fejer County, for example, last spring, more than half of the parcels had been awarded to just two bidders.
Mr. Angyan, who resigned his post as secretary of state with the Ministry of Rural Development over the issue, was not available to comment on his reports. But his findings have led to widespread allegations of cronyism, which the government has denied.
According to data from the Central Statistical Office, the number of small family farms in Hungary fell by almost half in the past decade because of a lack of capital, a shortage of skilled workers and consolidation of the fragmented plots that emerged from privatization. Rural areas now have some of the country’s highest unemployment rates.
Since 2011, agriculture has shown some signs of recovery. Output is rising, led by cereals and industrial crops, which now count for almost half of all production, contributing significantly to Hungary’s export-based economy; exports made up 92 percent of gross domestic product in 2011, according to the World Bank.
Istvan Szabo, in the agrarian investment branch of OTP Bank, said agriculture had a good year in 2011. Production and prices rose, lifting incomes, while a high euro exchange rate helped farmers who received E.U. subsidies.
“Compared to neighboring countries like Austria or Slovenia, land prices in our country are still lower,” Mr. Szabo said in an e-mail. But prices are going up, he said, referring to a report by OTP Bank that showed an average price per hectare of 567,000 forints, or about $2,600, up 7.7 per cent from 2010.
Most buyers of land were active farmers, he said.
Still, rising land values have highlighted the issues around foreign ownership. Foreigners have been banned from buying farmland in Hungary since 1994. After the country joined the E.U. in 2004 it was granted a moratorium, later extended to 2014, on sales to buyers from older member states, to give time for land prices and incomes to align with the rest of the Union. Similar arrangements were applied, calibrated to specific circumstances, to other new member states.
Yet foreigners have been able to purchase and lease arable land using legal devices like buying land-owning companies, or informal deals, known as pocket contracts, under which they have allegedly agreed with Hungarian owners to buy their land on pre-arranged conditions when the moratorium expires.
News reports have described how foreign nationals have acquired large areas of land, and pocket contracts are willingly discussed off the record. No overall figures are available, however, to show the extent of the practice.
A government committee was set up in March to shed some light on the scale of such practices. But a report submitted by the committee and accepted by the government has not so far been made available by the agriculture ministry.
“I can understand part of it, because there are many of what I call agritourists, who live in Austria but buy or lease land in Hungary,” Mr. Weratschnig, the Austrian farmer, said — in fluent Hungarian.
“They harvest here and take the crops to Austria directly, I guess without paying much in taxes,” he added.
Still, he said, he regretted that people like him, who had a family and children living in Hungary, were being lumped in with profiteers.
“In our village, I believe, only my business is working properly, if you don’t count the local bar,” said Mr. Weratschnig, who owns 140 hectares of land that he purchased through a company and leases the rest of the 800 hectares that he works.
In a village of about 400 people, with few opportunities for local employment, he said, he provided jobs for as many as eight workers, depending on the season.
Ernst Zimmerl, the Austrian embassy’s agricultural attaché in Budapest, said that administrative practices directed against foreigners had become a major cause for concern. He said he knew of two cases in which land had been expropriated from farmers who had legally acquired it through the privatization process between 1990 and 1994. Other cases were being processed, he said, including that of Mr. Weratschnig, who risks losing the right to use some land that he leases.
In a statement online, the agriculture ministry says that a 1995 bill permits buying back or expropriating protected land or land proposed for protection.
The ministry has earmarked funds for such operations in this year’s budget. The objective, the statement says is to “protect and extend state-owned farmland and bar presumable foreign land use and forbidden acquisition of land.” It adds that national park administrations will be allowed to lease the land to Hungarian farmers who use ecological methods.
Mr. Zimmerl said that so called pocket contracts were being exploited for polemical reasons to attack foreign landowners and farmers. Although some undeclared deals certainly existed, he said, their extent was being exaggerated for political ends.
He acknowledged that specific rules existed in Austria for farmland purchases, but he said these rules were not directed against citizens of other E.U. member states. He said a Hungarian investor in Austria would face problems buying land: “But if someone comes and rents land and cultivates it for some years personally — so we can see that he is able and willing to be a farmer — then he will not have problems to buy land.”
The bill now before Parliament would introduce similar conditions for both Hungarian and E.U. citizens.
Intended to prevent speculation in farmland, it would limit the amount of land held by any owner, exclude corporate buyers from acquiring land, establish a requirement of residence close to the purchased land and require a buyer to have at least a high school diploma in agriculture. Sales would be subject to administrative approval and could be rejected for more than a dozen reasons.
These rules would confirm and strengthen existing conditions under the 1994 land law and apply them equally to Hungarian and E.U. citizens.
“We will bar speculators from arable land once and for all,” said the rural development minister, Sandor Fazekas, in an e-mail, noting that there is still a wide differential in farmland prices between Hungary and Western Europe.
Still, he said Hungary would comply with E.U. regulations, like other member states that have introduced similar rules for land sales.
“We will put an end to the possibility for foreigners to acquire farmland. With this land law, it is over, it is no more,” says Hungary's Prime Minister Victor Orbán.
By PALKO KARASZ
PARIS — When Reinhard Weratschnig’s father, an Austrian, set up a farm in and around a small Hungarian village in 1996, most of the land had gone to waste.
“When we arrived, no one cared for buying the land here,” Mr. Weratschnig said in a telephone interview from Szentgyorgyvolgy, on the Slovenian border. “All the small owners begged that someone work the land, and we got it almost for free.”
The family started breeding cattle, bringing in millions of schillings, the currency of the time, to keep the business going, said Mr. Weratschnig, 30, who now manages the farm. But things have changed, and he has become wary of investing more amid a rising Hungarian debate about the role of foreign farmers and landowners.
To honor a major campaign promise, the government of the country’s conservative prime minister, Viktor Orban, has pledged to draw the lessons of decades of mismanagement and increase the competitiveness of its agriculture. But his pledge revived sore memories of the post-communist privatizations of the 1990s, returning landownership to the center of political debate.
Shady privatization deals, the shock of opening up to a market economy and competition from Western Europe after four decades of communist rule still haunt this country of 10 million, where almost half of the population lives in predominantly rural regions.
“Time has passed over socialist agriculture and its loyalists who have outlived socialism,” Mr. Orban said in a recent address, referring to both the former communist regime and opposition socialists who were the governing Fidesz party’s main adversaries before it won a two-thirds majority in Parliament in 2010.
“Hungary’s traditions, ancestral instincts, genetic heritage, bind us to agriculture,” Mr. Orban told young farmers at a conference in mid-October. “This is what we have skills for,” he said: “We need to succeed in what we can master.”
Mr. Orban spoke days before the start of parliamentary debates on a proposed bill to overhaul the legislation regulating land sales. Among other things, the bill would end a moratorium granted by the European Commission, the European Union’s executive body, on sales of farmland to non-Hungarian E.U. nationals.
Rather than freeing up sales, however, the bill is intended to stop them, and specifically to end hidden speculative deals to circumvent the moratorium, which Mr. Orban and senior members of his cabinet say have been done by foreigners, big corporations and members of former socialist administrations.
Speaking of the proposed changes, Mr. Orban said: “We will put an end to the possibility for foreigners to acquire farmland. With this land law, it is over, it is no more.”
Julia Lakatos, a political analyst with the Center for Fair Political Analysis, an independent research organization in Budapest, said that playing the landownership card appealed to patriotic sentiment, something that Mr. Orban is very good at doing. “There will always be people who are happy to see the Hungarian land protected,” she said.
According to Ms. Lakatos, the post-communist privatization process still resonates in peoples’ minds as a mostly bad experience. “People don’t see it as something good that creates competition,” she said. “They rather see it as a way of annihilating the country, taking from us the little that we have.”
The debate is fueled by a separate issue, the renewal by tender of leases on 65,000 hectares, or 161,000 acres of state-owned land. A series of reports on those tenders by Jozsef Angyan, a former secretary of state and Fidesz lawmaker, found that small, independent local farmers had not been favored, as promised by the government. In one region, Fejer County, for example, last spring, more than half of the parcels had been awarded to just two bidders.
Mr. Angyan, who resigned his post as secretary of state with the Ministry of Rural Development over the issue, was not available to comment on his reports. But his findings have led to widespread allegations of cronyism, which the government has denied.
According to data from the Central Statistical Office, the number of small family farms in Hungary fell by almost half in the past decade because of a lack of capital, a shortage of skilled workers and consolidation of the fragmented plots that emerged from privatization. Rural areas now have some of the country’s highest unemployment rates.
Since 2011, agriculture has shown some signs of recovery. Output is rising, led by cereals and industrial crops, which now count for almost half of all production, contributing significantly to Hungary’s export-based economy; exports made up 92 percent of gross domestic product in 2011, according to the World Bank.
Istvan Szabo, in the agrarian investment branch of OTP Bank, said agriculture had a good year in 2011. Production and prices rose, lifting incomes, while a high euro exchange rate helped farmers who received E.U. subsidies.
“Compared to neighboring countries like Austria or Slovenia, land prices in our country are still lower,” Mr. Szabo said in an e-mail. But prices are going up, he said, referring to a report by OTP Bank that showed an average price per hectare of 567,000 forints, or about $2,600, up 7.7 per cent from 2010.
Most buyers of land were active farmers, he said.
Still, rising land values have highlighted the issues around foreign ownership. Foreigners have been banned from buying farmland in Hungary since 1994. After the country joined the E.U. in 2004 it was granted a moratorium, later extended to 2014, on sales to buyers from older member states, to give time for land prices and incomes to align with the rest of the Union. Similar arrangements were applied, calibrated to specific circumstances, to other new member states.
Yet foreigners have been able to purchase and lease arable land using legal devices like buying land-owning companies, or informal deals, known as pocket contracts, under which they have allegedly agreed with Hungarian owners to buy their land on pre-arranged conditions when the moratorium expires.
News reports have described how foreign nationals have acquired large areas of land, and pocket contracts are willingly discussed off the record. No overall figures are available, however, to show the extent of the practice.
A government committee was set up in March to shed some light on the scale of such practices. But a report submitted by the committee and accepted by the government has not so far been made available by the agriculture ministry.
“I can understand part of it, because there are many of what I call agritourists, who live in Austria but buy or lease land in Hungary,” Mr. Weratschnig, the Austrian farmer, said — in fluent Hungarian.
“They harvest here and take the crops to Austria directly, I guess without paying much in taxes,” he added.
Still, he said, he regretted that people like him, who had a family and children living in Hungary, were being lumped in with profiteers.
“In our village, I believe, only my business is working properly, if you don’t count the local bar,” said Mr. Weratschnig, who owns 140 hectares of land that he purchased through a company and leases the rest of the 800 hectares that he works.
In a village of about 400 people, with few opportunities for local employment, he said, he provided jobs for as many as eight workers, depending on the season.
Ernst Zimmerl, the Austrian embassy’s agricultural attaché in Budapest, said that administrative practices directed against foreigners had become a major cause for concern. He said he knew of two cases in which land had been expropriated from farmers who had legally acquired it through the privatization process between 1990 and 1994. Other cases were being processed, he said, including that of Mr. Weratschnig, who risks losing the right to use some land that he leases.
In a statement online, the agriculture ministry says that a 1995 bill permits buying back or expropriating protected land or land proposed for protection.
The ministry has earmarked funds for such operations in this year’s budget. The objective, the statement says is to “protect and extend state-owned farmland and bar presumable foreign land use and forbidden acquisition of land.” It adds that national park administrations will be allowed to lease the land to Hungarian farmers who use ecological methods.
Mr. Zimmerl said that so called pocket contracts were being exploited for polemical reasons to attack foreign landowners and farmers. Although some undeclared deals certainly existed, he said, their extent was being exaggerated for political ends.
He acknowledged that specific rules existed in Austria for farmland purchases, but he said these rules were not directed against citizens of other E.U. member states. He said a Hungarian investor in Austria would face problems buying land: “But if someone comes and rents land and cultivates it for some years personally — so we can see that he is able and willing to be a farmer — then he will not have problems to buy land.”
The bill now before Parliament would introduce similar conditions for both Hungarian and E.U. citizens.
Intended to prevent speculation in farmland, it would limit the amount of land held by any owner, exclude corporate buyers from acquiring land, establish a requirement of residence close to the purchased land and require a buyer to have at least a high school diploma in agriculture. Sales would be subject to administrative approval and could be rejected for more than a dozen reasons.
These rules would confirm and strengthen existing conditions under the 1994 land law and apply them equally to Hungarian and E.U. citizens.
“We will bar speculators from arable land once and for all,” said the rural development minister, Sandor Fazekas, in an e-mail, noting that there is still a wide differential in farmland prices between Hungary and Western Europe.
Still, he said Hungary would comply with E.U. regulations, like other member states that have introduced similar rules for land sales.
