Eastern Europe

Rural development in Hungary
Entrepreneurship in rural development background and experiences in Slovenia

Rural development in Hungary

László Kulcsár and Imre Madarász

Mr. L. Kulcsár is professor and Mr. I. Madarász associate professor at the Department of Rural Sociology, University of Agricultural Sciences, Gödöllö, Hungary.

Introduction

Introduction

This paper deals with recent developments in the countryside of Hungary including social and economic processes before and after transition, relevant concepts of rural development and institutional and policy environment for rural development.

Social and economic processes before and after transition

SINCE THE DRASTIC ECONOMIC AND POLITICAL changes in Central and Eastern Europe in 1990, many elements of rural life have changed in Hungary. The country has begun the process of developing a market-oriented economy and a democratic political system, both of which have had a great impact on rural areas, rural people and the agricultural sector.

When a Dutch sociologist who was in rural Hungary as a visiting researcher at the Department of Rural Sociology said, "Everything but nothing changed," she was referring to the enormous difficulties of the transition process. According to her experience, it seems relatively easy to establish new institutions and organizations, but very complicated to change thinking and behaviour that are influenced by economic and social interests, traditions and culture.

In Table 1, the main characteristics of rural development and the agricultural sector of Hungary before and after 1990 are summarized.

The transition from a centrally-planned to a market-oriented economy in Hungary is based on two very important laws governing the rural transition process, i.e. the Compensation Law of 1991 and the Transition Law for Agricultural Cooperatives of 1992.

According to the Compensation Law, the former land owners, whose property had been collectivized, are entitled to the restoration of their property rights. However, instead of getting back the land which they previously owned, they received government bonds which expressed the value of the land. With these bonds they could buy land at village auctions. As a result, there are now more than one million new farms in Hungary with a very small average size. We have no reliable data on ownership structure because of the very slow and complicated process of land registration.

According to the Transition Law, all former agricultural cooperatives had to change their formal structure. Most of them have become share-holding companies or companies with limited liability. The members of the former cooperatives were given the opportunity to decide whether to continue working in the agricultural enterprise or to leave.

Table 1 MAIN CHARACTERISTICS OF THE AGRICULTURAL SECTOR OF HUNGARY BEFORE AND AFTER 1990

BEFORE 1990		AFTER 1990
AGRARIAN STRUCTURE
Strongly controlled local 'self-government'		Independent local government
All local services provided and controlled by the state and/or agricultural cooperatives		Some local services provided by local government, others by NGOs, entrepreneurs and state
Stability of rural employment		High rate of unemployment in rural areas
Limited number of private entrepreneurs		Huge number of private entrepreneurs, most of them 'self-employed
Limited size of private land holdings		Almost unlimited size of private land holdings
1989 1245 'socialist' agri-cooperatives		1994 1410 agri-cooperatives
SHARE OF AGRICULTURE AND FOOD INDUSTRY IN GDP
1989	Agriculture 13.7 %	1994	Agriculture 6.3 %
	Food ind 1.8 %		Food ind. 4.6 %
SHARE OF EMPLOYMENT
1989	Agriculture 17.9 %	1994	Agriculture 6.7 %
	Food ind. 4.3 %		Food ind. 5.2 %
AGRICULTURAL EMPLOYMENT
1990 995 000		1994 370 000

The Hungarian concept of rural development

In Hungary, there are both horizontal and vertical approaches to rural development. The horizontal concept focuses on separate interventions for managing rural problems. The development programme based on the horizontal concept covers only agriculture, social, infrastructure, or labour aspects. There are at present some horizontal rural development programmes in operation in Hungary, but most are implemented independently of each other.

The vertical rural development programme focuses on a region or area, combines different concepts and methods and puts them into an integrated system. In this system every sphere of interest (agricultural, social, infrastructural, etc.) has a certain role and its relative importance depends on the characteristics of the region.

This model was developed by the Department of Rural Sociology with the help of other departments and researchers. It focuses attention on the endogenous resources of rural areas with activities carried out in four stages.

Figure 1 A HORIZONTAL MODEL FOR RURAL DEVELOPMENT

STAGE 1 DEFINING THE CHARACTERISTICS OF THE REGION

Geographic, ecological, historical, economic, social characteristics

STAGE 2 EXPLORATION OF ENDOGENOUS REGIONAL RESOURCES

The impact of regional and agricultural policies

Land and other asset ownership, conditions of local development, subsidies, entrepreneurship

Natural (ecological) resources

Agricultural conditions, soil, water, etc.

Economic resources

Production, consumption, infrastructure, transport, communication, trade, savings, credit, companies

Historical and cultural resources

Traditional products, small industries, rural institutes, level of integration in local society, nationality, rural and agrarian tourism

Human and social resources

Demographic processes, social structures, employment programmes, level of education, level of entrepreneurial skills, attitudes toward farming, changing and risk, new land and new farmers

STAGE 3 PROGRESS REPORTS

Policy report
Infrastructure report
Ecological and agricultural report
Social report
Economic report
Development trends and recommendations

STAGE 4 COMMUNITY DEVELOPMENT

Training for changing the way of thinking and for improved use of the endogenous resources of the area

Training farming as business, improving skills and attitudes of entrepreneurship

Assistance to establish new firms, new cooperatives

Organizing a local centre of information and development table

Table 2 PROBLEMS OF RURAL REGIONS IN HUNGARY

Problem areas	Number of references	Number of ICCs asked
Natural endowments		63
· Imperfect infrastructure (telephone, natural gas, sewer)	58
· Environmental hazards	9
Backwardness		50
· Economic backwardness in general	9
· Defective social services	6
· Defective regional support	3
· Unfavourable physical endowments	6
· Lack of mechanization, motorization	4
· Lack of processing industry	13
· Weakness of education and training	13
· Lack of retaining and culture centres	2
Isolation		48
· Unfavourable economic-geographical location	5
· Majority of tiny villages	3
· Many isolated settlements	20
· Strong depopulation processes	19
· Strong population aging tendencies	23
Welfare and social problems		29
· High gypsy population	13
· General poverty	15
· Unsatisfactory public security	2
Unorganized economy		92
· Crisis of agriculture in general	29
· Demolition of agricultural cooperatives	35
· Demolition of local industry	38
· Deformed industrial structure	21
· Collapse of outlet market	35
· Lack of information in general	21
Obstacles in entrepreneurship management		53
· Lack of capital	41
· Many forced entrepreneurs	7
· Weak entrepreneurial willingness/skills	8
Impediments facing enterprises		38
· Lack of entrepreneurial enabling conditions	9
· Lack of market information	13
· Lack of economic linkages	4
· Unorganized enterprises	9
· Lack of entrepreneurial knowledge	11
· Lack of financial services	6
Problems related to manpower		118
· Unemployment in general	96
· Manpower surged back to villages	18
· Unskilled manual manpower	41
· Lack of technical and intellectual ability	28

Table 3 ADVANTAGEOUS CONDITIONS AND DEVELOPMENT DIRECTIONS FOR RURAL DEVELOPMENT

Conditions	Number of references	Number of ICCs asked
Promising geographical location		54
· Proper economic-geographic location	33
· Suitable traffic position	7
· Advantageous landscape conditions	14
· Untouched environment	13
Natural, historic and cultural conditions for tourism		71
· Arboretum, national park	15
· Thermal springs	6
· Ancient monuments	26
· Popular art and handicraft industry	36
Agricultural conditions (implements, knowledge, skills)		96
· Agriculture in general	52
· Physical, natural conditions	26
· Land-cultivated conditions	30
· Forestry conditions	12
· Animal husbandry	21
· Small-scale processing technology	34
Industry promotion conditions		13
· Available industrial capacity	13
Economic conditions (actors, linkages)		57
· Existing enterprises	14
· Existing farmers	22
· Evolved production chain	5
· External economic linkages	12
· Inventions, activity	8
· Cooperation	32
Human conditions		30
· Skilled manpower	12
· Production and labour culture	16
· Disengaged manpower	5
· Education and training system	9
Development directions of tourism		92
· Tourism in general	59
· Curative tourism	19
· Hunting tourism	14
· Sport tourism	18
· Rural tourism	23
Directions of sectoral development	36
· Retail services	19
· Industry	12
· Processing Industry	14

In order to identify the main problems and possibilities of rural development in Hungary, comprehensive surveys have been carried out among intercommune cooperators. Their results are summarized in Tables 2 and 3.

Industrial and political background to rural development

IN EARLY 1996, THE HUNGARIAN PARLIAMENT passed the Bill of Regional Development. According to this law, a new institutional structure of regional development is being established. The outline of this new structure is shown below.

National Council of Regional Development Members:

- representatives of country level regional development councils
- presidents of chambers
- representatives of ministers
- representative of the Mayor of Budapest
- representative of the National Association of Local Governments

County Council of Regional Development

Members:

- president of local county government
- mayors of county cities
- representatives of ministers (Ministry of Regional Development and Environment)
- representatives of county chambers
- representatives of intercommune cooperations (ICC)
- representatives of County Employment Council

Conclusions

ACCORDING TO THE RECENT EXPERIENCE of rural development in Hungary, the following conclusions can be drawn.

· We should accept an approach which is more complex, considers rural areas in a holistic way, and gives consideration to the specific conditions of endogenous resources.

· All efforts aimed at alleviating rural poverty must be better coordinated, in order to improve their effectiveness.

· We have to influence governments and institutions to develop a well-functioning, decentralized network for rural development and to create opportunities for rural people to play a significant role in these actions.

Entrepreneurship in rural development background and experiences in Slovenia

Mateja Mesl

MATEJA MESL is director of Novna, Studio for Rural Development, Ljubljana, Slovenia

Introduction

Introduction

The objective of this paper is to illustrate the impact of the political and economic changes taking place in the process of transition of the rural sector of Slovenia, Northern Republic of former Yugoslavia. Special emphasis is given to the new approach to rural development, based on entrepreneurship as a vehicle for economic diversification and sustainable development of rural areas. A review of the state of the rural sector before 1990 and the most important political, economic and social changes is presented as a background for understanding the new strategy and policy orientations. This is followed by an analysis of the concept and experiences of the entrepreneurial approach to rural development which is based on practical examples from different parts of Slovenia.

The state of the rural sector before 1990

SLOVENIA IS KNOWN AS A HIGHLY industrialized country, but has always been strongly characterized by agriculture and forestry. Although the share of the agricultural sector in GDP decreased from 7 percent in 1971 to 4.5 percent in 1990, agriculture is still important for the national economy.

· Land use: 94 percent of the total land area (2 025 500 ha) is agricultural land (866 400 ha) and forests (1 024 500 ha).

· Population and settlement: approximately 65 percent of the population of Slovenia lives in rural areas.

· Economy: 11 percent of the active population is directly engaged in agriculture and forestry, and at the same time almost one-third of all employees are connected to and dependent on the rural sector (processing industry, machinery, services, tourism, etc.).

The state of the rural sector before 1990 can be described in more detail by its socio-economic structure, population trends, size structure and the natural conditions for farming.

SOCIO-ECONOMIC STRUCTURE

A TOTAL OF 112 000 FARMS WAS REGISTERED in Slovenia in 1990, which represented a ten-year decrease of 4.5 percent. Almost one-half of them were part-time farms which combined income from agriculture and full-time employment outside agriculture (49.8 percent), 19.2 percent were supplementary farms with basic income from non-farm activities, 9.7 percent were aged farms (older farmers) and only 21.3 percent were full-time farms. Between 1981 and 1990, there was an increase in the number of farms with income from both agriculture and non-farm activities and a relatively stable percentage of full-time farms. The increase in the number of so-called part-time farms was due to the decrease of supplementary farms, which means that the significant changes occurred in the group of farms that did not derive income solely from farming. That was most probably influenced by the economic recession in the 1980s which caused a drop in non-farm employment and encouraged farm family members to become active on the farms again.

To illustrate the socio-economic structure, it is also important to look at the differences of Slovenia's farming regions. The percentage of full-time farms is significantly greater in high mountain regions, which points to a more intensive emigration of 'surplus' population and a larger-than-average size structure, due to ownership of forests. On the other hand, the share of full-time farms in Karst regions is less than the average because of better access to employment centres.

POPULATION TRENDS

AN IMPORTANT ELEMENT OF THE AGRARIAN structure is represented by the population on farms and its participation in production. The number of people living on farms decreased by 11.5 percent (69 000) in the period 1981-1991. In-depth analyses show that aging of the population was the main reason for this trend; the aging index increased from 78 to 85 in this period. The age structure again differed substantially on farms of different socio-economic types. In general, farms with combined sources of income were economically more viable than full-time farms.

The decreasing viability of farm families is shown in data on the size of farm families. The average farm family size was 3.7 persons. Full-time farm families were much smaller than the average of all farm families and the number of family members on full-time farms has decreased by almost one-third.

Other important data related to the socio-economic transformation of farms covers the structure of the work force on farms. An increasing share of the agricultural production is produced by retirees and people with off-farm employment. The average manpower unit (MPU) on all farms is 1.1 and on full-time farms 1.8. About 20 percent of all agricultural labour is provided by part-time farmers and almost 25 percent by older people who are still active on the farms.

SIZE STRUCTURE

THE STRUCTURE OF THE FARM SIZE IS ONE of the most important indicators for the competitive ability of the farm and its income efficiency. The size structure of farms in Slovenia is one of the biggest problems because 28.4 percent of farms have less than 1 ha of land, 36 percent have between 1 and 5 ha, 18 percent are between 5 and 10 ha and 17.6 percent have more than 10 ha. The average farm size is 7.8 ha in all land categories. In recent years, the average size of the farms has decreased despite the reduction in the number of farms.

Another important indicator which has relevance to the transitional process in agriculture is the ownership distribution of holdings. The potential land reserve for improving the farm structure is represented primarily by land which is owned by supplementary and older farmers. But the data show that almost one-half of the land holdings of farms is owned by part-time farmers and this share has increased by 20 percent since 1981. The supplementary farms and the farms of old people comprise less than one-fourth of all land. This allows the conclusion that part-time farms are economically the most viable ones and that the potential land reserve for the improvement of the size structure is relatively modest.

PRODUCTION STRUCTURE

IN THE STRUCTURE OF AGRICULTURAL production in Slovenia, livestock farming has been the predominant branch. As a result of the agrarian strategy started in early 1970s, about 31 000 farms were included in the programme of intensification and market-oriented production, mostly milk and meat production. This orientation resulted in market disparities with surplus production of milk and meat and low production of all other basic agricultural goods.

Another important phenomenon was the orientation towards self-sufficiency production on farms, especially on supplementary farms and on a significant part of part-time farms.

In conclusion, the rural sector at the beginning of 1990s was characterized by:

· unfavourable size structure, small farms, fragmentation of holdings and no land market;

· a limited number (only 20 percent) of full-time farms due to the small size of the farms and to unfavourable natural conditions for farming (i.e. high-mountain farming or Alpine climate);

· continued depopulation trends mostly due to the unfavourable age structure but also to lack of stimulation in income and living conditions; and

· self-sufficiency in production and market disparities due to the past policy orientation.

POLITICAL AND ECONOMIC CHANGES: OUTLOOK

AS STATED BEFORE, IN THE BEGINNING OF the 1970s a so-called agrarian reform was initiated in former Yugoslavia and the Republic of Slovenia. It aimed at overcoming the negative trends in agriculture and the growing disparities in regional development. It was oriented toward achieving higher intensity and market orientation of the farms, stimulating investments in intensive production especially in livestock-farming, and also toward assuring better living conditions and employment possibilities in rural areas in order to stimulate investments in industry and infrastructure. The programmes did not solve the main problems as shown in the introduction. On the contrary, at the end of 1980s when the global transition process started, two main problems emerged that were directly influenced by the past policy orientation.

· Market disparities - surplus production of milk and meat, limited market outlets, loss of markets in former Yugoslavia and new marketing trends which did not give small producers a chance to compete.

· Growing unemployment - changing markets and global restructuring of the economy strongly effected industry in rural areas as well as part-time farmers; unemployment among farmers increased by 150 percent in two years.

After the first democratic elections in 1989 and especially after the separation of Slovenia from the former Yugoslavia in 1991, the country faced all the problems and challenges of countries in transition from planned to market-oriented economies. There is no need to introduce in details all the changes which are similar to other countries. The aim of this paper is to stress the most important which launched positive development processes as a basis for changing unfavourable structures and trends in agriculture and rural development in Slovenia and which are crucial for the explanation of the new policy orientation and experiences in its current implementation.

Political and economic changes that influenced the rural sector

DEMOCRATIZATION

THE PROCESS OF DEMOCRATIZATION HAS directly influenced the whole political, economic and social system. The redistribution of power is shown in the new governmental structure, policy orientation and structural adjustments. The Farmers' Party achieved and maintained from the first elections a very strong position, which can be seen in several practical achievements and changes.

· A new agricultural development strategy was prepared and adopted in 1992.

· A special law on stimulating development of depopulated rural areas was introduced in 1991 with new development support measures - such as providing information and knowledge (local development programmes), infrastructure (investment grants) and start-up capital (stimulate loans).

The Slovenian Constitution (in principle) and the Law on Enterprises (in practice) determined private initiative as a basis and vehicle for economic development in all sectors, including agriculture, with several sector support measures (support institutions and instruments for entrepreneurship development) that opened new opportunities and challenges in the rural sector.

"Rural development = development of the countryside which addresses the needs of all groups and individuals within a given rural population (women, youth, farmers, second-home owners, retirees) and aims at increasing the quality of their lives and their natural environment." Ms. ALENKA VERBOLE - SLOVENIA

DECENTRALIZATION

A VERY IMPORTANT CHANGE FOR THE rural sector, also strongly influenced by the Farmers Party, was the decentralization process, i.e. the transformation of the regional system, and the establishment of 148 local communities and 60 administration units at the end of 1994. This process was followed by the preparation of the regional development strategy, including:

· distribution of power and direct support for local development (budgeting);

· decentralization and transformation of the support institutions (i.e. agricultural advisory service); and

· development of new programmes and support measures for local development (as a national programme for rural development and village renewal at the Ministry for Agriculture and Forestry).

PRIVATIZATION

THE PRIVATIZATION LAW OF 1991 CONSTITUTES the basis for the whole economic restructuring process. This created new conditions, legislation and structures which are very important for the rural sector, such as:

· denationalization of forests - 90 percent of the agricultural land had been in private ownership before 1945 and now is to be given back to the original owners;

· establishment of the National Land and Forest Fund as a basis for creation of a land market; and

· privatization and new legislation on cooperatives which destroyed the monopoly they had in marketing agricultural products.

New orientations

THE STRUCTURAL REFORMS LAUNCHED THE most crucial conditions for long-term solutions to the basic problems in the rural sector such as:

· size structure - opening a land market;
· socio-economic structure - new opportunities for economic activities in rural areas; and
· new market conditions and opportunities - new income generation opportunities.

But at the same time they opened new questions and raised new problems and challenges for the rural sector in general, such as:

· activation of the land market - how to stimulate capitalization of land within the existing income structure as well as the dependency of part-time and supplementary farms on the income from agriculture;

· diversification of economic activities - how to stimulate development of new economic activities on farms and in rural areas within the population structure (aging), income structure (low investment ability) and educational structure (lack of information, knowledge and tradition); and

· access to the market - how to supplement the function of cooperatives in marketing of the small-scale agricultural production under the new marketing conditions.

Past development trends and new challenges in the transition process in Slovenia, as well as global development trends and experiences of other countries, have led to some basic conclusions which should be introduced into Slovenia's recently developed agricultural development strategy and implementation programmes.

DEVELOPMENT OF AGRICULTURE IN THE CONTEXT OF RURAL/REGIONAL DEVELOPMENT

This can be argued from a sectoral and regional point of view.

· The small size of the farms is the main constraint to adoption of the new market conditions. Development of large, market-oriented farms that are strong functional cells in agriculture can only be achieved through diversification of the economic activities in rural areas, opening opportunities for supplementary income and employment in other sectors in connection with agriculture.

· Agriculture can no longer be the sole economic basis for long-term, sustainable development of rural areas. Raising the quality of life is a precondition for the viability of rural areas and can be achieved through job creation and development of a new economic structure that can stimulate income growth.

SUSTAINABLE RURAL DEVELOPMENT BY MAINTENANCE OF ITS IDENTITY AND DIVERSITY

TRADITIONAL INDUSTRIALIZATION, BRINGING programmes and capital from outside, is not the right solution. Defining and activating local development and the endogenous potential of rural areas in their diversity of geography, culture and natural phenomena is a new development orientation which means that there is a need for

· a changed development support policy and

· a more global, comprehensive development approach that builds coalitions and linkages between different sectors and institutions.

MAIN ACTORS

ALTHOUGH NOT FORMAL DEVELOPMENT policy, the above-mentioned statements have been accepted by different institutions and development groups and have formed the basis for several development activities in different parts of Slovenia.

The following are the most important institutions and actors promoting the new approach.

· Ministry of Agriculture and Forestry has an organized programme for rural development and village renewal. A special fund is available to promote rural development through supporting local development initiatives in development planning, local coalition building and creating an entrepreneurial climate. More than 60 local initiatives were supported through co-financing of the global rural development programmes in rural areas between 1992 and 1995.

· Public Agricultural Advisory Service, established in 1992 (the former Agricultural Extension Service), offers its clients more than traditional advice on increasing agricultural production. It is primarily oriented towards training and awareness-raising of the rural population to develop a sense of responsibility and creative thinking about the opportunities for jobs that use existing resources and cooperation for success.

· Ministry of Economy and Development oversees a fund for supporting development of the depopulated rural areas. The fund is available to support the implementation of local development programmes based on self-initiative and entrepreneurial development. This includes grants for initial development projects and development of the necessary infrastructure for new economic activities and start-up capital for new self-managed enterprises (SME's). Several local community development projects were initiated (supplementary activities on farms, rural tourism development, small business development) and supported in the implementation through that programme.

· National Centre for Small Business Development was organized by the Ministry for Economic Affairs, Ministry for Labour and Chamber of Economy. A group of consultants was trained to support SME development in different regions in Slovenia. One of the groups specializes in consultancy and development support for entrepreneurship in rural areas. This group, through organizing entrepreneurial development projects and linking with other institutions and development programmes as mentioned, developed an entrepreneurial approach to rural development which has been successfully implemented in some regions. The concept and some practical results are presented in the following chapters.

Rural development through entrepreneurship:

Presentation of the experiences in Slovenia THE AIM OF THIS CHAPTER IS TO PRESENT experiences and practical results of the first steps in implementing the new approach to rural development in Slovenia, initiated by the changing orientations and development policy - rural development through entrepreneurship. The initiative started in 1990 in three regions in Slovenia. It was stimulated directly by political and economic changes at that time, both negative (rising unemployment) and positive (new opportunities in the privatization and democratization process). The methodology and the concept was built upon known experiences in other countries with technical support from FAO's Regional Office for Europe (Training in the Methodology of Global Management to Rural Development).

BACKGROUND

THE OBJECTIVE OF RURAL DEVELOPMENT is to assure a higher quality of life in rural areas through diversification of the economy and the development of new economic activities which will, in long term, lead to harmonized and sustainable development. The task of the development policy in this sense is to support local communities in recognizing and activating local development potentials in natural resources, heritage, knowledge and people skills. This is exactly what entrepreneurship is about - the ability to use existing resources in different, more productive ways.

Entrepreneurship can be seen as a main force of economic growth and development of rural areas in Slovenia, because it provides solutions to some of the main problems listed below.

· Alternative use of the existing resources and local development potentials which is the only way to assure long-term sustainable development of rural areas.

· Development of new products and services on the basis of existing potentials which do not demand large and special infrastructure.

· Explores the existing diversity of small products and potentials which is both the main characteristic and problem of rural areas.

· Organizes entrepreneurial initiatives in small production units that need only small investments to start.

Entrepreneurship is a group phenomenon, and entrepreneurial ideas are generated and follow one another which can help solve problems of isolation and economy of size in rural areas.

Entrepreneurship can be defined as a method of management that is led by opportunities. However, development problems and new trends can also hide a lot of new opportunities. So it is necessary to combine both positive and creative thinking and a problem-solving orientation, in order to react at the right time and right place.

The concept of rural development through entrepreneurship is thus built on two main principles.

· Positive, problems-solving approach - defining sources of opportunities for solving problems.

· Global management approach - management of the whole development process including analyzing, programming, motivating and institution building.

SOURCES OF OPPORTUNITIES FOR ENTREPRENEURSHIP IN RURAL AREAS

FOUR YEAR'S EXPERIENCE IN MANAGEMENT of the rural development programmes based on entrepreneurship in 12 regions in Slovenia (initiated by the National Programme for Rural Development and Village Renewal and supported by the National Fund for Development of Depopulated Rural Areas) proved the existence of the hidden potential and opportunities for development of new, sustainable economic activities. The results show that the main sources of entrepreneurial opportunities in rural areas are the following.

Political, economic and social changes

Changes in the political, economic and social system of Slovenia after 1990 opened numerous opportunities for new economic activities and income generation on farms.

Home processing on farms is the most illustrative example. The destroyed monopoly of the processing industry on one hand and new market demand on the other opened an opportunity for supplementary income generation on small farms. For example, a farm in a fruit and wine growing area in northeastern Slovenia quadrupled its income by developing its own fruit drying unit. The whole investment, covered by a loan from the Development Fund, was DM 5000. This same example also shows the positive effect of idea generation. The success of the farmer's fruit drying unit motivated a neighbour, who produces traditional baskets, to cooperate with him. Together they created a new product - dried fruit in a traditional package, which increased their income sevenfold.

Problems and obstacles

A problem can also be an opportunity. There are many examples of how people found their entrepreneurial ideas in the existing problems of rural areas. The problems of low quality of life and lack of infrastructure and services have been made even worse by the process of privatization and economic restructuring and several shops and services, organized by large state owned companies, were closed due to economic inefficiency. But, small private shops and family businesses offering household services were successfully developed with low investment and low risk by using existing buildings, working in known local markets, lowering costs with flexible organization, etc.

Existing products and services used in different ways

Stimulated by recent political and economic changes (market trends, open market, stimulated private initiative), several new income generation and employment possibilities were opened on the basis of existing products on farms. The most illustrative example is tourism which offers an opportunity for marketing a variety of agricultural products on self-sufficient farms. The institution of so-called open farms, for instance, enables small farms to sell their products directly, which had not been possible before because of the small production. Calculations show that this allowed individual farms to achieve full-time employment. People found very innovative ways to use tourism to explore their potential using empty buildings for apartments, unused land for recreation, or turning traditional farming into attractions with zoo farms or farm museums.

Another example is the use of the traditional knowledge and home services. For instance, on a high mountain farm that was self-sufficient in agricultural production and home services, knowledge and equipment for wood processing were used to develop a countryside furniture production unit. Because of the exclusiveness of the product, within two years the supplementary farm activity became an enterprise with nine employees.

Technology development

Technology development in general changed the importance of the location of the industry significantly. Rural areas became interesting (low costs, the environment, special stimulation) for investments. For example, in northeast Slovenia a local community offered buildings and locations, special task reductions and other stimulation to investors in small scale and high tech programmes. They attracted an investor for information technology. The purpose of that idea was not to solve the unemployment problem by bringing programme and capital from outside, but to open new opportunities for using local resources such as development of services (transport, package, food supply), development of supplementary programmes and cooperation (i.e. training centre and tourism offer).

"Rural development is to assure conditions for viability and long-term sustainability of rural areas, that means: · diversification of the economic basis (income and employment possibilities for the whole population) · improvement of the living conditions and communication/infrastructure." Ms. MATEJA MESL - SLOVENIA

Special skills and creativity of people

Entrepreneurship is about people who are capable of seeing and using opportunities in the environment. Because of past negative development trends, rural areas in general are characterized by passivity and lack of intuitiveness. Business idea generation therefore usually cannot start on its own. It must be motivated. And the best motivation is the good examples of individuals with their own ideas.

A very successful development process was started by an individual entrepreneur in the high mountain village of Sorica in central Slovenia. A local artist designed a special tourism offer for painters, including the provision of an apartment and studio space. When the first tourists came to the village, other residents were motivated to expand his idea and develop their own supplementary offers. The project started in 1992. Now, a central painter's house with two studios and four apartments has been developed by the local community. There are also eight farm tourism houses with 38 rooms plus a village restaurant and a special programme for recreation.

EXAMPLE OF A GLOBAL RURAL DEVELOPMENT ENTREPRENEURIAL PROGRAMME

ENTREPRENEURSHIP IS A PROCESS. THE acceptance of entrepreneurship as a central development force by itself will not lead to rural development. What is needed is an environment enabling and sup- porting entrepreneurship. Rural development through entrepreneurship demands a comprehensive and systematic approach which involves four main steps.

· Analyzing, programming - defining development potentials
· Motivating - creating entrepreneurial climate in the community
· Supporting - assuring support in start up and development of new activities
· Organizing - institution building

The best illustration is the practical example of a success story, this one from the community of Gornja Radgona in northeastern Slovenia. It is a primarily agricultural (wine growing) area that faces all the mentioned problems. The changes at the end of 1980s influenced the area very much. It was the area with the fastest growing unemployment (25 percent in 1990). To solve the problem, local government initiated a rural development program, following the four steps mentioned above.

Analyzing: Development potentials included its location (Austrian border near a developed health resort), natural resources (wine and fruit growing), landscape and natural heritage, traditional farming and skills of the people. The main problem appeared to be passivity and negative climate in the community due to the negative trends and the recent situation.

Motivating: In order to solve that problem, several motivational activities were organized. A group of people accepted the offer to explore the potential for development of community-based tourism. A concept of an integrated tourism product was developed, including a horse trail through the area.

"RD should improve the conditions of the lives of rural people. In other words, rural areas are not perceived as leading or dominating in the contemporary world. The rural areas, therefore, have big disadvantages in relation to the non-rural world. The task of RD in this sense should be to turn the disadvantage into an advantage (change)." MR. MICHAL LOŠT'ÁK - CZECH REPUBLIC

Supporting: A development team provided necessary support for the first group of eight people to develop their entrepreneurial ideas - farm tourism, open farms, shop, horse breeding farm. Support was given for organizing the whole offer into a special integrated product using basic marketing activities.

Organizing: The first positive results motivated other people in the community. Several new entrepreneurial ideas were generated which needed to be supported. The initial tourism product became a strong basis for community development which needed a new organization and institutional support. A local development and marketing agency was established in 1994 as a central support institution to follow the initiatives, to link with the regional and national support institutions and to organize marketing of all new products.

Within three years, the programme had achieved the initiation of 48 individual entrepreneurial programmes, an attractive community-based tourism product and a new local development company. But the indirect impact of the development process is even more important, because the creation of a new image and the promotion of the area created a new entrepreneurial climate which resulted in more new initiatives, positive attitudes and a sense of responsibility in the community.