UNIUNEA EUROPEANĂ Romania Mountain Area Development Support Romanian Mountain Area Diagnostic Report SYNOPSIS Ministerul Agriculturii și dezvoltării Rurale Disclaimer This report is a product of the International Bank for Reconstruction and Development / the World Bank. The findings, interpretation, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. This report does not necessarily represent the position of the European Union or the Romanian Government. Copyright Statement The material in this publication is copyrighted. Copying and/or transmitting portions of this work without permission may be a violation of applicable laws. For permission to photocopy or reprint any part of this work, please send a request with the complete information to either: Ministry of Agriculture and Rural Development (Carol I Blvd, No. 2-4, Sector 3, Bucharest, Romania); or (ii) the World Bank Group Romania (Vasile Lascăr Street, No 31, Et 6, Sector 2, Bucharest, Romania). This report has been delivered under the Reimbursable Advisory Services Agreement on Romania Mountain Area Development Support (P176070) signed between the Ministry of Agriculture and Rural Development and the International Bank for Reconstruction and Development on November 25, 2021. It corresponds to Output No. 1 under the above-mentioned agreement. Note to the reader. This document presents a summarized version of the full “Diagnostic Report: Romanian Mountain Area: Then and Now,” prepared by the World Bank in April 2023. The full report can be accessed through the websites of the Ministry of Agriculture and Rural Development and of the World Bank. Cover Photo Credits: Photo by George Maier UNIUNEA EUROPEANĂ Romanian Mountain Area Diagnostic Report SYNOPSIS August 2023 Proiect cofinanțat din Fondul Social European prin Programul Operațional Capacitate Administrativă 2014-2020! www.poca.ro Ministerul Agriculturii și dezvoltării Rurale TABLE OF CONTENTS III Table of Contents ACKNOWLEDGMENTS/VII ACRONYMS AND ABBREVIATIONS/VIII EXECUTIVE SUMMARY/XI INTRODUCTION/1 CHAPTER I. Romanian Policy Ambition for Mountain Development and the EU Policy Context/3 1. Romanian mountain legislation and strategies, 2004-2018/3 2. Mechanism for realizing the Mountain Law policy goals: a comparative perspective/4 3. Implications for a mountain development strategy/8 CHAPTER II. Mountain Territories Socio-Economic Profile/11 1. Socio-economic challenges faced by Romanian mountain areas/11 2. Methods of compensation for population and labor force decline in mountain areas/15 3. Improving the mountain workforce ecosystem/21 4. Living standards in mountain and other areas of Romania/29 5. Implications for a mountain development strategy/30 CHAPTER III. Mountain Territories Development/33 1. Economic growth since 2014 has seen inequalities in living standards between rural and urban and mountain and lowland areas continue to widen/33 2. Rural growth in Romania since 2014 had far larger employment effects than urban/35 3. Mountain group public administration performance reflects underlying economic fundamentals/37 4. Proximity to a city has been a key growth factor/38 5. A one-size-fits-all approach cannot be applied/41 6. Implications for a mountain development strategy/42 CHAPTER IV. Sectoral Deep-Dive: Mountain Agriculture/43 1. The role of agriculture in mountain development/44 2. Agriculture: labor, farm size and rural poverty/46 3. Small and medium size farm agricultural enablers/50 4. Agricultural performance in Romania/57 5. Farm support in the Romanian CAP Strategic Plan/61 6. Implications for a mountain development strategy/64 IV ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS CHAPTER V. Sectoral Deep-Dive: Mountain Tourism/67 1. Tourism in a mountain development strategy/67 2. Mountain tourism potential is poorly developed/68 3. Recommendations for improving professional services in mountain tourism/70 4. Implications for a mountain development policy/73 CHAPTER VI. Mountain Area Natural Resource Assessment/75 1. The significance of Romanian mountain natural resources/75 2. Selected stressors in natural resource management/76 3. Increasing stringency of conservation regimes/80 4. Fulfilling EU and Romanian conservation ambitions will require more sustainable governance design/83 5. Sustainable resource management and building a strong mountain-based bioeconomy/86 6. Implications for mountain development policies/86 CHAPTER VII. Conclusions of the diagnostic and their relevance for a mountain development strategy/89 Conclusions of the diagnostic assessment/89 Conclusions for mountain specific policy and strategies/93 CHAPTER VIII. SWOT Analysis/97 1. An assessment of the goals of the 2018 Mountain Law/97 2. Views of mountain stakeholders on mountain development/99 3. SWOT analysis of mountain development/101 ANNEX. Mountain Area Key Facts/105 REFERENCES/111 LIST OF FIGURES FIGURE 1. Population changes by mountain group, 2011-2021 (percent)/13 FIGURE 2. Population loss in Romania by location and age group, 2012-2021 (percent)/14 FIGURE 3. A shortage of skilled workforce has become the top constraint for business/15 FIGURE 4. Real GDP per capita in mountain and lowland counties, and Bucharest, 1995-2020 (constant 2000 prices)/17 FIGURE 5. Employment in agriculture in EU countries, 2005 and 2020 (percent of total employment)/18 FIGURE 6. Share of 15–74-year-old population in the EU 27 with tertiary education, 2021/20 FIGURE 7. Share of 25–34-year-old population in the EU 27 with tertiary education, 2021/21 FIGURE 8. Average i-connect index at Mountain Group level./26 FIGURE 9. Number of employees and resident population, by territory, 2014-2021 (2014=100)./34 FIGURE 10. Mountain ATUs arrayed by growth in real sales and the A-P expenditure ratio, 2014-2021/35 FIGURE 11. A theoretical typology of mountain localities/36 FIGURE 12. Distribution of local public administration performance of ATUs by mountain group (aggregation by population)/38 TABLE OF CONTENTS V FIGURE 13. Most Romanians in the bottom income quintiles did not work or relied on agriculture in 2020 /42 FIGURE 14. Frequency distribution of agricultural holdings in Romania and EU27, 2020 /47 FIGURE 15. European Union Farm Distribution by Standard Output (in % of total farms)/49 FIGURE 16. Romania: labor productivity by farm size, 2010 and 2020/49 FIGURE 17. Share of mountain land area registered, by mountain group, vs lowlands/51 FIGURE 18. Share of land registered in the ANCPI database by type of land use/52 FIGURE 19. Total crop production value (million Lei RON, 2015 constant value)/60 FIGURE 20. Total animal production by county group (million Lei RON, 2015 constant value)/60 FIGURE 21. Land use area by Mountain Massif/109 LIST OF TABLES TABLE 1. Romanian legislation and strategies relevant for mountain development/7 TABLE 2. Population changes in Romanian ATUs, 1992-2021/12 TABLE 3. Romanian natural rate of population changes by locality, 1992-2020/12 TABLE 4. Net internal in-migration of county populations, 1992-2021 (persons)/13 TABLE 5. Population loss in Romania by location, 2012-2021/14 TABLE 6. Investment as a share of GDP in selected countries, 2012-2022 (%)/15 TABLE 7. County civil employment by broad sector, 2008-2021 (millions)/16 TABLE 8. County civilian employment in Romania, by industry, 2008-2021 (thousands)/16 TABLE 9. County civilian employment in mountain areas of Romania, 2008-2021 (thousands)/17 TABLE 10. Employment rates in the European Union, 2010 and 2021 (ratio of employed to working age population, percent)/19 TABLE 11. County employment rate of the working age population (labor resources), 1992-2021 (percent)/19 TABLE 12. Residences connected to infrastructure services by ATU locality, 2011 (percent)/22 TABLE 13. Residences connected to infrastructure services by massif, 2011 (percent)/23 TABLE 14. Road and rail density by ATU locality (MDLPA spatial data estimate)/24 TABLE 15. i-connect index at national level (2021)/25 TABLE 16. Schools in mountain and lowland ATUs, 2020/28 TABLE 17. Medical services in mountain and lowland ATUs, 2020/29 TABLE 18. Romanian living standards compared to the EU average, 2021/29 TABLE 19. ATU level indicators of living standards in mountains and lowlands, 2018/30 TABLE 20. Mountain and lowland area growth in net sales per capita, 2014-2021/34 TABLE 21. Increased disparities in sales per capita between mountain and lowland areas, 2014-2021/35 TABLE 22. Effects of growth by performance typology (administrative performance, A-P ratio)/37 TABLE 23. Distribution of rural localities according to their proximity to a city /39 TABLE 24. Isolated locations with shrinking economies and exposed to severe risks of depopulation and material and social deprivation./40 TABLE 25. Agriculture’s role in the Romanian economy over 20 years/45 VI ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS TABLE 26. Most rural inhabitants work part time on family farms/46 TABLE 27. Romania: Persons at risk of poverty or social exclusion by degree of urbanization, 2015 and 2021/47 TABLE 28. National at-risk-of-poverty rates in Romania, 2020/47 TABLE 29. Share of agricultural holdings by size category, Romania and EU27 /47 TABLE 30. Number of farms in Romania, 2010 and 2020/48 TABLE 31. Distribution of land in farms in mountain and other counties, by farm size, 2020/50 TABLE 32. Certified products by certification type /56 TABLE 33. The types of products certified under all the quality systems (national level, 2022)/56 TABLE 34. Value of agricultural production in 2021 (2000=100)/57 TABLE 35. Selected crop and livestock production in tons, 2000-2021/57 TABLE 36. Crop yields in tons per ha, 2010-2021/58 TABLE 37. Average crop yields for selected crops in the European Union 27, 2021 (tons per ha)/59 TABLE 38. Changes in livestock value of production and head, 2000-2021 (2000=100) /59 TABLE 39. Crop and livestock production in mountain counties and Romania (percent of total)/60 TABLE 40. Area cultivated with main crops in mountain and lowland counties, 2000-2021 (1,000 ha.)/60 TABLE 41. Selected crop and livestock production in tons in mountain and lowland counties, 2000-2021/61 TABLE 42. CAP budget allocation for rural development interventions/63 TABLE 43. Distribution of Romanian farm holdings by value of standard output in 2020/63 TABLE 44. Contribution of tourism to GDP and exports in selected European countries, latest pre-COVID figures/68 TABLE 45. Distribution of Protected Areas (PA) per mountain group and type of land cover, 2018/81 TABLE 46. Criterion applied for the delimitation of Romania mountain area, 2019./105 TABLE 47. Romanian mountain area and massif key fact figures/106 TABLE 48. Mountain area connectivity facts/108 LIST OF MAPS MAP 1. i-connect index at ATU level for mountain areas/27 MAP 2. Territorial distribution of mountain ATU performance/39 MAP 3. Territorial representation of mountain ATUs according to their proximity to a large city/40 MAP 4. Share of mountain land registered by mountain group/51 MAP 5. Status of surface waters in the mountain area, 2013–2018/78 MAP 6. Nitrogen conditions on groundwater bodies, period 2020-2022/78 MAP 7. Trends in temperature and precipitation the mountain area, 1987–2018/1 MAP 8. Mountain area delimitation and population/1 MAP 9. Romania Mountain Massifs/1 MAP 10. Per capita profitability and Urban Agglomerations in Mountain Areas/1 MAP 11. Mountain area in Romania: Distance to main city/1 ACKNOWLEDGEMENTS VII Acknowledgements This document presents a summarized version of the full “Diagnostic Report: Romanian Mountain Area: Then and Now,” prepared by the World Bank in April 2023. The synopsis diagnostic report was prepared by David Sedik (Senior Agriculture Economist); Luz Diaz Rios (Senior Agribusiness Specialist); and Fang Zhang (Agriculture Economist). The team is thankful for the helpful guidance received from the technical team appointed by the Ministry of Agriculture and Rural Development, as well as from the National Agency of Mountain Area and to all stakeholders for their invaluable contribution to the full diagnostic study, with findings summarized in this report. The team expresses its gratitude to Anna Akhalkatsi (Country Manager, ECCRO) for providing strategic guidance. VIII ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS LIST OF ACRONYMS AFIR Agentia pentru Finantarea Investitiilor (Rurale Agency for Financing Rural Investments) AKIS Agricultural Knowledge and Innovation Systems ARC Appalachian Regional Commission ATTA Adventure Travel Trade Association ANZM/NMAA Agentia Nationala a Zonei Montane (National Mountain Agency Area) ANCT National Agency for Territorial Cohesion ATU Administrative Territorial Unit AWU Annual Work Unit ANM National Administration for Meteorology AZM Mountain Area Agency CAP Common Agriculture Policy CAGR- Compound Annual Growth Rate CGAP compulsory measures for farmers CGET General Commission for Territorial Equality CLLD Community Led Local Development CRISS Complementary redistributive income support for sustainability CPIER State-Region Interregional Plan Contracts EAFRD European Agricultural Fund for Rural Development EBRD European Bank for Reconstruction and Development EEA European Environmental Agency EIB European Bank of Investment EU European Union GDP Gross Domestic Product GAEC Good Agricultural and Environmental Conditions ha Hectare HNV High Value Nature Farmland IBRD International Bank for Reconstruction and Development IDS Integrated Development Strategy ITI Integrated Territorial Investments Km Kilometer LAGs Local Action Groups ACRONYMS AND ABBREVIATIONS IX LEADER Liaison Entre Actions de Développement de l'Économie Rurale LFMA Less Favored Mountain Area MARD Ministerul Agriculturii si Dezvoltarii Rurale (Ministry of Agriculture and Rural Development) MC Massif Committee MMAP Ministerul Mediului Apelor si Padurilor (Ministry of Environment, Waters, and Forests) MDLPA Minister of Regional Development and Public Administration Ministerul Dezoltarii lucrarilor publice si Administratiei (Ministry of Development Public Works MDLPWA and Administration) MDRAPFE Ministry of Regional Development, Public Administration and European Funds MG Mountain Group NMAA National Mountain Area Agency NMC National Mountain Council NVZs Nitrate vulnerable zones NRRP National Recovery and Resilient Plan NGO Non-Governmental Organization PNDR Programul National Dezvoltare Rurala (National Rural Development Program) PNS National Strategic Plan RAS Reimbursable Advisory Services R&D Research and Development RD&I Research, Development, and Innovation SP Strategic Plan SAPS- Single Area-Based Payments SM- Sub-Measure SME Small and Medium Enterprise SO Standard Output STEM Science, technology, engineering, and mathematics SWOT Strengths, Weaknesses, Opportunities, Threats TD Territorial Delegates UAA Utilized Agricultural Area UNWTO The World Tourism Organization US United States US$ United States Dollar EXECUTIVE SUMMARY XI Executive Summary The mountain areas of Romania constitute a special territory of national interest with significant growth potential. Mountain areas have potential as places where many people may wish to work, live, and raise families. Proximity to nature, clean air, a less crowded and hurried lifestyle, as well as cultural heritage, tradition and community are attractive to many. Moreover, vibrant urban areas such as Cluj-Napolca, Ploiesti, and Brasov, combined with the possibility of remote work, should be able to offer employment opportunities for the young and educated. Furthermore, mountain areas have unique economic potential to build on their natural assets to develop as green energy oases and develop high quality tourism based on their natural and cultural heritage. However, mountain region development has been held back by their distance from and poor connectivity to dynamic growth in Romania centered on Bucharest and other cities, poor living conditions, infrastructure and business environment, and limited access to medical and education services. Though the process is not straightforward, mountain areas can develop their distinct territorial and cultural resources to raise living standards, stem the outward migration of the young and educated, and make mountain areas attractive places to live. The overall aim of investment efforts in mountain areas is to make them attractive places to live, to develop and retain a skilled workforce, and to attract high paying jobs to the region. To attain these goals, mountain areas require public investment in transport, utilities, skills training programs for the local workforce, good higher education facilities, pre-school, and continuing education. Mountain areas also require public support to develop and maintain cultural heritage sites combined with strategies to attract tourism to and develop tourism services around these sites. Thus, the most salient constraints on mountain development are not “natural constraints.” Rather, they are a lack of effective dedicated public and private policies and programs to develop them. The 2018 Mountain Law set out specific goals to raise living standards in mountain areas through sustainable and inclusive development in a process initiated, led, and controlled by the population. However, to date, there has weak follow up efforts to establish viable institutions to realize these goals or set up funded development programs. Based on the examples of France, and to some extent, the Appalachian region of the United States and Romania’s own past efforts to build an institutional framework for mountain policy, a more workable institutional design could be a mountain development agency outside the aegis of the Ministry of Agriculture under the Prime Minister with the authority and means to attract earmarked cohesion funds for mountain development and develop a mountain development strategy in collaboration with the National Mountain Council (NMC) and the massif committees. Certainly, this institutional design would require the support and political will of the Romanian Parliament to make the system work for mountain development, as it was this body which passed the 2018 Mountain Law. XII ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Population decline, migration, and loss of the young and educated population through migration are the most severe challenges to economic growth in Romanian mountain areas. The decline in population and the loss of the young and educated affect the mountain economy through their influence on the labor force. Future economic growth in higher wage occupations depends on building and retaining an educated and skilled workforce. However, mountain areas offer less incentives for retained skilled workers than lowland areas. The intensity of housing construction has been significantly lower in mountain areas than in lowlands. Though utility connections in mountain areas are not worse than in lowland regions, road and rail connectivity is considerably less developed. The quality of education in mountain areas is constrained by limited financial resources and the difficulty of retaining qualified teachers, and there are far fewer medical practices, doctors, and polyclinics per 1,000 km2 in mountain areas, mostly due to a low number of these professionals in towns and rural communes. Finally, and perhaps most significantly, income per capita in mountain areas was about 73 percent of the country average (without Bucharest). Instruments utilized in other countries to retain skilled labor in mountain areas include investments in physical infrastructure, education, workforce development programs and incentives for young professionals. Infrastructure investments may include assistance to mountain and rural housing through low- cost loans, investments in connections to public utilities in mountain areas, and in transportation connectivity (roads, rail). The purpose of educational investments is to provide mountain pupils and students with skills for long-term employment success. They should therefore include support for educational programs from early childhood through high schools. Some examples of special programs for mountain areas are cross-school education programs for mountain high school students in science, technology, engineering, and mathematics (STEM), subsidized research opportunities for college students interested in mountain development, and local college mountain studies programs. Adult education aimed at providing a means for skill-building for career advancement and career transition is also critical for building a skilled workforce in mountain areas. Typically, adult education is through online education through local colleges or universities. A critical part of workforce development is consultation between public education leaders, development and industry representatives, vocational education institutions, and local colleges to identifiable education-industry career pathways within mountain areas. Collaboration can facilitate retention of a skilled mountain workforce through providing better awareness of occupational and career prospects within mountain areas. There are fewer medical practices, doctors, and polyclinics per square kilometer in mountain areas primarily because of a low number of these professionals in towns and rural communes. Part of improving the mountain workforce ecosystem could be to facilitate low-cost housing loans and modern office facilities to young professionals, including doctors, dentists, teachers, etc., to attract them to and retain them in mountain areas. The growth process observed in mountain areas between 2014 and 2021 illustrates several important factors that have shaped growth in mountain areas. First, neither rural nor mountain living standards are catching up to urban and lowlands. Second, rural growth has generally been more employment intensive and thus pro-poor than urban growth. Third, the main growth accelerators in mountain areas have been cities through their ability to support growth and raise incomes in their surrounding areas. Fourth, declining sectors, such as coal and heavy industry, require active government revitalization policies without which they continue to decline, depressing incomes. EXECUTIVE SUMMARY XIII Despite higher rates of growth in a proxy for income per capita, rural regions in Romania are not catching up to urban ones in either mountains or lowlands. Moreover, income differences between mountain and lowland regions have also been growing. Thus, with current policies, income inequalities between mountain and lowlands and between rural and urban areas will continue to grow. World Bank (2007) found that agricultural growth has been particularly effective at reducing rural poverty because of its employment intensive nature. Data on Romanian mountain Administrative Territorial Unit (ATUs) shows that rural economic growth in mountain areas has affected a far larger area, a larger population, and was responsible for a far larger employment effect than growth in mountain urban territories. Thus, rural economic growth in Romania is likely to have similar poverty reducing effects. Geographic proximity to a city (greater than 30,000 inhabitants) and good road connectivity are fundamental factors responsible for economic growth in mountain rural areas. The average growth of real sales per capita in 833 mountain ATUs was positively correlated with the degree of connectivity of mountain ATUs to cities. Moreover, the number of ATUs with negative growth grew larger as connectivity decreased. Mountain groups with a high concentration of counties focused on coal and heavy industry performed poorly between 2014 and 2021. Banatului and Poiana Ruscă as well as Reteza Godeanu Mountain Groups had the highest proportion of low performing ATUs, a result of their inclusion of large cities in counties like Caras-Severin and Hunedoara. These were historically counties with economies focused on coal and heavy industry. Coal and heavy industry focused towns evidently require active environmental cleanup and redevelopment programs to revitalize these regions through focusing on new sectors. Though the data on economic growth in mountain areas yielded the above regularities, there were countless further factors that determine the success of mountain ATUs in generating economic growth. Further factors that matter included large investments, nearby tourist attractions, community leadership, innovativeness of the population and the ingenuity of local administrations. These factors illustrate the difficulties in planning economic development from afar and underline the need to involve local governments, the public, and stakeholders in consultations and implementation of mountain development programs. Though the share of agriculture in GDP and the agriculture workforce in Romania is declining, it is still a vital sector for mountain economic activity and its development. It provides labor for the expansion of manufacturing and services, part time income for most of the rural population, and farm structure has made agriculture a poverty pocket that no development strategy can ignore. Agriculture in Romania is composed of not one sector but two or three. The commercial agricultural sector produces primarily field crops, such as maize, oilseeds and wheat, and is primarily responsible for the good growth and yield performance of the sector. On the other hand, there is a sector of small subsistence farms which makes up a poverty pocket in the Romanian countryside which deserves its own set of policies. Nearly 40 percent of the poorest income quintile of households in 2020 were reliant on low productivity agriculture. In 2020, over 90 percent of holdings in Romania in 2020 were under 5 ha, and 70 percent were under 2 ha in size. The small size of land holdings is an issue common to mountain and lowland areas, though it is more severe in mountain counties. In between the commercial and subsistence farm sectors, is a continuum of struggling small to medium farmers with the ambition to improve their performance. XIV ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS The dualistic or trichotomous structure of farming in Romania requires different policy regimes. The CAP provides a policy regime suitable for the class of commercial farmers and to some extent for small and medium sized farms. However, Romania has underinvested in policy instruments to support small to medium sized farms. To grow and prosper, these farms require a working cadaster and farm registration system to facilitate the transfer of land and labor from the subsistence farm sector to the small to medium aspiring commercial farm sector. They require extension and advisory services to improve their productivity, and assistance with access to markets (including marketing associations) to sell their production. Further efforts to encourage farm associations in mountain areas should include investments in collection centers and support to farmers to cooperate, either formally or informally, to collect production in one location. Territorial development strategies utilize programs that focus on cross-sectoral issues such as the development of entrepreneurship across sectors, facilitating structural change to increase overall economic productivity, and laying the institutional foundations for high value employment for specific geographical areas to achieve their main goal of raising living standards. The role of commercial agriculture in a mountain territorial development program is like that of other industries. Agricultural producers may be expected to participate in and benefit from programs aimed at developing entrepreneurship in small and medium sized (SME) businesses (typical of mountain areas) for specific geographical areas. The role of subsistence agriculture in a mountain development strategy differs from that of commercial agriculture. Considering its close connection with poverty, subsistence agriculture may merit its own program for sectoral transformation within a mountain development strategy. The European Union has a special program related to coping with the effects of the declining coal sector, the Just Transition Fund. In addition, Member Countries may access funds for coping with the social and economic effects of the decline of the coal sector under the European Structural and Investment Funds (European Court of Auditors, 2022). There is currently no dedicated program to cope with the effects of a declining subsistence agricultural sector. A special program for agricultural transformation within a mountain development strategy could be developed in consultation with subsistence agriculture stakeholders, local government officials, the Ministry of Agriculture and Rural Development, and the Ministry of Labor and Social Protection. The program should aim to facilitate the movement of labor and land out of subsistence agriculture by providing better access to financial assistance for subsistence landowners, access to an improved land registration system, and the development of non-agricultural industry and services within high poverty areas to provide alternative opportunities for labor transfer. The mountain tourism sector is important for a mountain development strategy not only for its own growth. Tourism generates demand in other sectors, such as hotels, retail sales, craft production, food service, winter and summer recreation, and transportation. Increasing tourism revenues can help to attract investment in cultural attractions, as well as the many sectors dependent upon it for growth. Mountain areas of Romania seem to have good potential for attracting tourists. Mountains have many National and Nature Parks, several UNESCO sites, thermal and spa resorts, and many ski slopes. Likewise, biking, hiking, paddling, and wildlife viewing attracts visitors to the region and creates job opportunities. However, the tourist sector in Romanian mountain areas is not well developed with poor accommodation infrastructure, food service, transportation, and IT. Moreover, the sector is characterized mostly by SMEs with a lack of innovative, diversified and quality services. These deficiencies of the sector limit its positive knock-on effects on developing business in mountain areas. EXECUTIVE SUMMARY XV Several interventions, based on examples from other countries, can be recommended for the improvement of professional services in the tourism sector in mountain areas. These range from ways to increase sustainability accreditation within the tourism industry to developing professional development opportunities, to promoting more innovative tourism offerings and to improving the targeting of tourist marketing. These changes have been developed in other countries by industry associations, UN organizations, national tourism agencies, regional governments, public-private tourism partnership associations, EU-funded INTERREG projects, the French government, and through collaboration between European Bank of Investment (EIB), the Italian government and the regional government of Trento.1 A mountain development strategy cannot solve all these problems. But it can help by supporting the development of regional and local mountain tourism boards or associations to build the sustainability profile of the sector, establish certification standards, provide information about local attractions, and upgrade tourism services, including digitalization. It can build tourism into area development projects based on cultural heritage and promote sponsorship of related cultural events. It can support the renovation of village main streets to express a distinctive vision based on a region’s history and heritage to attract both visitors and business investment within a local territorial development plan. Finally, it can promote infrastructure investment in the tourist sector and tourist attractions as a mean to support wider place-based mountain development. Romania’s mountain area, which covers nearly one-third of the national territory, is richly endowed in natural resources which require sustainable and effective management. Natural resource conservation efforts face challenges in several areas, such as illegal logging and unsustainable exploitation of forests, grassland degradation linked to overgrazing and under- grazing, water pollution linked to agriculture and residential wastewater, ecosystem damage due to (unplanned) forest access and tourism in areas lacking infrastructure, waterway and aquatic ecosystem damage by hydroelectric expansion, risk of persistent soil and water pollution near mining sites, and the ramifications of a warming and drying mountain climate increasingly exposed to extreme weather. However, the system of public governance of these natural resources has not fully adapted to the fundamental changes that have occurred over the past 30 years—and has seen its efficacy decline. Romania transitioned to a market economy, and in the mountains, the defining features of that transition included the restitution of state-owned forests to private landowners and the privatization of forest concessions. One third of Romania’s forests and most of its grasslands and protected areas are privately owned. The peculiar tenure arrangement in Romania implies that implementation of conservation measures relies substantially on the acceptance and actions of private landowners, resource consumers and communities, so ensuring that those voices are heard in the design of regulations is key for effective governance. However, the dominant natural resource governance paradigm has remained one defined by prescriptive laws and regulations with little differentiation between different forms of ownership. Natural resource conservation regimes have gradually expanded and grown more stringent. Over time, protective measures have covered an increasing range of activities and territory and deepened in terms of environmental stringency. These trends have followed from the adoption of laws and regulations focused on putting in place restrictions on land-use, and increasingly, the means to monitor and enforce them. 1 Interreg is a key European Union (EU) funding instrument that strengthens cooperation between regions and countries within the EU. XVI ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Increasingly restrictive resource conservation policies that mandate ecosystem services in exchange for providing public good benefits are costly for landowners, both in terms of direct outlays and foregone income. Mechanisms for compensating private landowners for ecosystem services have been in place under Romanian law since 2008. However, payments have been very limited and made sporadically (in 2009 and 2017). Thus, few landowners whose forests or grasslands have been subsumed into protected areas, including Natura 2000 sites, have received compensation. Thus, there is a need to strike more of a balance between enforcement of conservation regimes, prompt remuneration for ecosystem services, and self-regulation as a means of implementing protections. The recent approved Forest Strategy addresses challenges related to monitoring systems, institutional arrangements, bureaucratic requirements, forest owners’ compensation, forest management plans and more, while taking greater account of the sustainability and effectiveness of preservation regimes through public consultation. A mountain development strategy can help in calling for fundamental changes in the conservation governance of natural resources in mountain areas. A useful role within a mountain development strategy would be to call for stakeholder thematic reviews of Romanian natural resource governance policies to propose changes to better adapt them to mountain territories. The French Mountain Laws of 1985 and 2016 contain an article that mandates that allowances should be made in French Law to adapt their implementation to the specific needs of mountain areas. The mandate for adaptation of French Law to mountain conditions within the French Mountain Law has been used to invigorate the stakeholder consultation process within France related to both the implementation of legal regulations in mountain areas, and the institutions for mountain development (the National Mountain Board and the Range Committees). Part of the implementation of the French Mountain Law is the regular review of legislation related to its implementation in mountain areas. As in the case of the French Mountain Law, this process would be initiated by and enjoy the political support of the Romanian Parliament, the body that approved the 2018 Mountain Law. Unlocking the potential of Romania mountain areas requires an approach that balances natural protections with sustainable management, and that supports the development of a strong mountain- based bioeconomy. Many untapped opportunities for further developing an innovative bioeconomy in Romania’s mountain area exist. Such opportunities range from adding value to already existing supply chains and improved territorial marketing of mountain-based products, to further valorizing side-streams from agricultural and food production or expanding and tapping into existing resources coming from agriculture, animal farming, and forestry. Although, traditional farming and forestry are an integral and indispensable part of the bioeconomy because the traditional know-how of managing these resources was passed on from generation to generation, they can only be part of the solution for creating prosperity in mountain areas if mountain traditions and products are better valorized. Such valorization implies optimizing supply chains, incentivizing technological innovations, and thereby aiming to create new products and innovations alongside the already existing products stemming from the agricultural and forest sectors (i.e., animal husbandry products, vegetables, and fruits, pulp and paper, construction wood, sawlogs, pellets, etc.). Emerging innovations around sheep wool pellets, natural products, carbon credits, could potentially help jumpstart the sustainable circular-bioeconomy transition in Romania’s mountain area and add value to already existing products and services coming from the region. To support the establishment of a vibrant mountain bioeconomy, long-term investments in Research and Development (R&D), especially in transdisciplinary research with direct practical applicability are needed. EXECUTIVE SUMMARY XVII As part of this diagnostic work, local mountain region consultations were held to gauge the views of stakeholders on mountain development. Mountain stakeholders named the following strengths and opportunities in mountain areas: Natural assets, such as the healthy environment, local traditions, and good and healthy food; local food products and recipes; existing quality schemes for food products and current efforts to promote added value of mountain products; a recent trend towards more sustainable tourism, though there is much more potential for such tourism to be explored; adequate road accessibility and quality in most areas; collaboration with other mountain areas in Europe; access to the internet with the promise of enhancing collaboration between local stakeholders; the well-preserved sense of community in mountain areas; and the availability of some specific funds for mountain development. They named the following threats and weaknesses for the development of mountain areas: a. Depopulation of mountain areas, because mountain areas are currently not sufficiently attractive for youth; small scale labor-intensive agriculture with few rewards and remuneration; mono-industrial and mining areas requiring special programs for reconversion and job retraining with high rates of poverty. b. Local stakeholders recognized the weaknesses of mountain areas for development, such as remoteness, the climate, and an aging population. They noted several key weaknesses, such as the poor quality of education, poor utility connections, a lack of doctors, a lack of management and administrative professionals in all fields, poorly adapted and unclear legislation on forestry, environmental protection, veterinary issues, etc. Moreover, stakeholders noted that bureaucratic procedures tended to take a long time and the requirements for subsidy applications were often ill-adapted to mountain conditions and rigid. c. The poor infrastructure of mountain areas was also of concern to mountain stakeholders. There is a lack of investment in basic utility connections in mountain areas, waste disposal services are inadequate, pollution from neighboring areas often negatively impacts on landscapes and livelihoods, and there is a lack of communication technology and equipment for local police and emergency services. Stakeholders noted the following priorities actions for mountain development: a. Supporting youth to remain in mountain areas, by supporting them more directly to improve their livelihoods, improving education, and offering opportunities for professional development. Priority actions in this category include organization of courses for lifelong education, training of local producers, vocational training for traditional food products, and improvements in school education. b. Simplifying funding schemes and improving mountain population’s accessibility to funding. Under this rubric, stakeholders included reduction of Common Agriculture Policy (CAP) co- funding requirements for mountain producers, improving access to financing for cooperatives and pilot producer organizations, extension of the LEADER2 model to mountain areas, funding Local Action Groups (LAGs) from public institutions, simplification of legislation on labeling for small producers, and others. c. Ensuring conservation and sustainable use of the natural resources, as well as the adaptation and resilience to climate change. In this respect, stakeholders mentioned shelter belts, multiple rows of trees or shrubs established to protect farmsteads, livestock areas, and wildlife habitats. d. Supporting economic sectors which can build on the strengths of mountain areas, such as tourism, and gastronomy based on local products. 2 The acronym 'LEADER'' derives from the French phrase "Liaison Entre Actions de Développement de l'Économie Rurale" which means, 'Links between activities for the development of rural economy''.  INTRODUCTION 1 Introduction The mountain areas of Romania constitute a special territory of national interest. Romania’s natural landscape is almost evenly divided between mountains (31 %), plains (36 %), and hills (33%) (World Bank, 2023a). Within this land cover triad, mountains are important sources of mineral reserves, forest and water resources, and hydro energy generation. About 37 percent (3.3 million ha) of mountain areas overlap with national and international designated protected areas in the country, so that mountain areas play a vital role in biodiversity, as they are the home to a rich diversity of plant and animal species, many of which are found nowhere else. They are the source of major rivers and watersheds, providing freshwater for downstream communities and ecosystems, and regulate the water cycle by capturing, storing, and releasing water slowly, which helps to reduce the impacts of floods and droughts. Mountain areas also have a unique cultural heritage and traditional knowledge that is closely tied to the natural environment. Preserving the cultural heritage of mountain areas is important not only for its intrinsic cultural value but also for its potential to support sustainable development and conservation. In framing development strategies, the focus of attention has historically been on the natural constraints and disadvantages of the mountain environment. Article 174 of the Treaty on the Functioning of the European Union describes mountain areas as characterized by “severe and permanent natural . . . handicaps”. Article 1 of the 2018 Romanian Mountain Law indicates that mountain areas are considered disadvantaged due to limited area of cultivatable land, poor living conditions, infrastructure and business environment, and limited access to medical and education services. Yet mountain areas have considerable potential as places where many people may wish to work, live, and raise families. Proximity to nature, clean air, a less crowded and hurried lifestyle, as well as cultural heritage, tradition and community are attractive to many. Moreover, vibrant urban areas such as Cluj-Napolca, Ploiesti, and Brasov, combined with the possibility of remote work, should be able to offer employment opportunities for the young and educated. Furthermore, mountain areas have unique economic potential to build on their natural assets to develop as green energy oases and develop high quality tourism based on their natural and cultural heritage. Though the process is not straightforward, mountain areas are capable of developing their distinct territorial and cultural resources to raise living standards, stem the outward migration of the young and educated, and make mountain areas attractive places to live. In this respect the natural constraints and disadvantages of mountain areas, such as short growing seasons or soil erosion, are largely irrelevant. The extraordinary outmigration since 1990, particularly of the young and educated, is a result not of the natural constraints of mountain areas, such as limited land suitable for agricultural cultivation. Rather, people have fled mountain areas because of a lack of economic opportunities, poor housing conditions, limited access to education and medical services, and poverty. 2 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS In Romania, the 2018 Mountain Law specifies policy goals for mountain development and lays out a mechanism for state assistance for development of mountain areas and raising living standards. While the 2018 Mountain Law could be part of an effort for laying the foundation for mountain development, it has been hindered by a lack of follow through on its promises, the absence of workable funded mechanisms for developing mountain areas, and a lack of a specific strategy backed by funding, contrary to examples analyzed here, such as France and the Appalachian Mountain region of the United States. The Ministry of Agriculture and Rural Development (MARD), following the approval of the Mountain Law in 2018, has embarked in the process of developing an integrated development strategy (IDS) for the mountain area, to target the needs of these areas more effectively. The World Bank, under a Reimbursable Advisory Services (RAS) Program, supports MADR in strengthening its capacity to put in place an Integrated Development Strategy (IDS) that is consistent with both the national and European Union frameworks. The RAS is made of several interconnected activities which together support the institutional capacity of MADR and its National Mountain Area Agency (ANZM). This Synopsis is based on the Diagnostic Report: Romanian Mountain Area: Then and Now completed in April 2023 (World Bank 2023b). The Diagnostic Report was the first phase of the development of the IDS for mountain areas, a territorial diagnostic to provide evidence and further validate and help build consensus on the challenges and development priorities of the mountain area in Romania. The Synopsis is an attempt to synthesize the main messages of the Diagnostic Report and point to their implications for a future Integrated Mountain Development Strategy. As in the larger report, the synopsis is divided into chapters reviewing mountain development policies and institutions (Chapter I), socio-economic trends in mountain areas (Chapter II), actual recent growth experience in mountain areas (Chapter III), mountain agriculture (Chapter IV), mountain tourism (Chapter V), natural resource conservation in mountain areas (Chapter VI), conclusions (Chapter VII), and a SWOT analysis (Chapter VIII). The characterization of mountain areas in the Diagnostic Report and this Synopsis is based primarily on ATU-level data available from the Territorial Observatory and county-level data from the Romanian Institute of National Statistics Tempo Online database. Whereas the ATU data from the Territorial Observatory can be aggregated to conform exactly to the official 2019 Romanian mountain area definition that includes 947 ATUs (plus one localities component/component town),3 the aggregates derived from county-level data (an aggregate of 15 counties containing the highest proportion of mountain area) provide only a rough characterization of mountain areas, because they include information from non-mountain ATUs within the county aggregate. The analyses using approximate county-derived mountain region aggregates, imply that judgments regarding mountain areas based on them are necessarily tentative and need to be taken with caution. The potential for error underlines the need for a more accurate dedicated system of data reporting for mountain areas. 3 Ministry of Agriculture and Rural Development Ordinance Nr. 97, 19 February of 2019. CHAPTER I. ROMANIAN POLICY AMBITION FOR MOUNTAIN DEVELOPMENT AND THE EU POLICY CONTEXT 3 CHAPTER I. Romanian Policy Ambition for Mountain Development and the EU Policy Context The Romanian government has long established policies and proposed mechanisms and governance structures for the development of mountain areas. The vision of Romanian mountain development policy has been wide-ranging, but the steps towards the operationalization of the vision have been more narrowly focused on agriculture. The Romanian efforts at mountain development through sectoral programs contrasts with the economy-wide development programs accompanied by mechanisms for consultation and implementation observed in Europe, for example cases of France and Italy, and outside Europe, as the example of the Appalachian region of the United States. In addition to the Mountain Law and its associated investment program, other legislation has been passed with possible application to mountain areas in Romania. Some of these policies and programs constitute funding sources that, though not ringfenced for mountain development, may provide sources of development aid for mountain areas. 1. Romanian mountain legislation and strategies, 2004-2018 The Romanian government has long devoted attention to setting goals for the conservation and development of mountain areas. The 2004 Mountain Law (347/2004) sought to regulate the methods of development and protection of mountain areas (art. 1), focusing on preservation of the landscape and biodiversity, maintaining agricultural land use and conservation of rural areas (art. 3), and overcoming the innate disadvantages of mountain areas for development. The 2018 Mountain Law (197/2018) widened the scope of mountain development goals to include, among others, raising mountain population living standards through government support in a process initiated, led, and controlled by the mountain population. To realize the goals defined in mountain laws, the Romanian government has proposed strategic guidelines for mountain development and established an institutional framework for mountain policy formulation and implementation. The 2004 Mountain Law was followed quickly with a strategy for development of mountain areas. On October 21, 2004, the Romanian government approved a strategy for the sustainable development of mountain areas, maintaining the focus of the 2004 law on agriculture and the position of the Ministry of Agriculture and Rural Development as the central government agency responsible for sustainable mountain development. The National Strategic Guidelines for the Sustainable Development of Less Favored Mountain Area in the period 2014-2020” (LFMA) were prepared prior to the approval of the CAP programmatic cycle for the period 2014-2020 and marked a palpable change in the tone of the 4 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Romanian vision of mountain area development. The guidelines presented the main policy directions and measures “to ensure the increase in the attractiveness and sustainable development of the mountain area, by valuing the resources, stabilizing the population, maintaining the cultural identity, increasing the economic power at the local level, under the conditions of preserving the ecological balance and protecting the natural environment” (Introduction to the strategy). For the first time the strategy focused on an integrated approach (economic, social, environment, culture, heritage, tourism etc.) for increasing attractiveness and sustainable development of less favored mountain areas rather than an agriculture-centric view of development. Efforts to create institutions with specific responsibilities in mountain policy in Romania date from the early 1990s. However, following the approval of the first Mountain Law in 2004, the National Mountain Area Agency (NMAA or ANZM, per the Romanian acronym) was established in 2007 as a General Directorate with territorial structures within the Ministry of Agriculture that was intended to coordinate measures of the government by multiple agencies Law n. 181/2007 designating the NMAA as a General Directorate capped a long evolution since 1990 of such structures devoted to mountain areas (Ungureanu and others 2020), but the General Directorate provisions of the 2007 law were never actually applied (World Bank, 2023c). Instead, the NMAA was abolished in 2010, only to be reestablished in 2014 as the Mountain Area Agency (AZM) (Law no. 139/2014). The 2018 Mountain Law (Chapter II, Institutional Framework) reorganized the AZM as the National Agency of the Mountain Area (NMAA) and reformulated its responsibilities to include the formulation, implementation, monitoring, and evaluation of a government strategy for the development and protection of mountain areas (World Bank 2023c). Furthermore, the Law’s Chapter II, also proposes NMAA’s regional/local structures to include 7 regional centers and 32 Mountain Development Offices. In addition, the 2018 Mountain Law designated two public-private entities with advisory roles for mountain development—the National Mountain Council (NMC) and the Massif Committees (MC) for the nine massif mountain groups defined by the Law. Decades of institutional reconfiguration have not been successful in delivering a working mechanism for the formulation and implementation of a mountain development strategy initiated, led, and controlled by the mountain population. The 2018 Mountain Law includes a new governance mechanism, with a stronger involvement of stakeholders. However, as discussed below, experiences from other countries and Romanian’s own experience suggest that further improvements are needed to ensure the effectiveness of the 2018 Mountain Law’s proposed institutional framework, as discussed in the next section. 2. Mechanism for realizing the Mountain Law policy goals: a comparative perspective The Romanian policy legislation and institutions for mountain development resemble those applied in other countries, supporting a bottom-up approach to policymaking, however, key features set Romanian apart for other relevant country examples. The example of France provides a good context for such comparisons. Outside Europe, the case of the Appalachian Mountain range in the United States (US) serves to emphasize identified key differences. France’s mountain policy institutional framework provides clear provisions on the consultative role of regional and national structures in relation to mountain policies. In France, the first Mountain Law (Mountain Law Act I) was enacted in 1985, aimed at improving life in the mountains while considering local specificities and giving more powers to decentralized authorities to manage urban planning matters. In 2016, a new law on the modernization, development and protection CHAPTER I. ROMANIAN POLICY AMBITION FOR MOUNTAIN DEVELOPMENT AND THE EU POLICY CONTEXT 5 of mountain territories called “Act II of the Mountain Law” was enacted, to address issues of governance and update provisions to consider developments in the areas of digital technology, employment, agriculture and even public services. The structures set by the Law for mountain policy governance in Romania, resemble those of France. At the central level, the National Mountain Council (NMC) in France has a mandatory standing committee whose purpose is to supervise and monitor the implementation of the Council’s recommendations and proposals. The NMC in France defines the objectives and actions for developing, managing, and protecting mountains. It provides consultations to French planning bodies on the priorities and conditions of mountain areas. The NMB is chaired by the Prime Minister, and the members of the board are national, regional, and local elected officials, advisory bodies, professional and trade union associations, and range committee chairs. There are also seven Massif/Range Committees (MC) in France, each chaired by the representative of the central government, generally the regional Prefect. Each committee is composed of representatives of the regions, departments, municipalities or groups of municipalities, national and regional park representatives, social and professional organizations involved in development, management, and protection of the massif/range. The MC define the objectives and actions for developing, managing, and protecting their range of mountains. They make proposals, advise, and draw up guidelines for the interregional range plan, are involved in the programming of economic, social, and cultural development of the range, which are part of regional as well as town plans. The MCs receive an annual report on monies spent from the local office of the French territorial planning authority, as well on agricultural development and investment programs of central, regional, and departmental governments, and of the public corporations in the range/massif. The National Agency for Territorial Cohesion (ANCT) (and previously to 2020, the General Commission for Territorial Equality) acts as the Secretariat of the NMC and the MC, and coordinates with these bodies for the preparation of programs and their financing. The French Mountain Law Act II issued in 2016, introduced a set of changes strengthening the mountain governance structures. For example, it enhances the regional and parliamentary participation at the NMC resulting in a much wider political and civil-society composition (much larger than in the case of Romania’s NMC). The 2016 Mountain Law Act II clearly stipulates that the massif committees (MC) are to be consulted during the preparation of the relevant policies, including draft directives for territorial planning and sustainable development, on interregional conventions, European programs specific to the massif and state-region plan contracts). In addition, the MC’s association with the development of regional plans for sustainable development and equality of territories is defined as mandatory by the Law. Although the French governance model has still room for improving the enforcing of provisions in relation to the consultation with mountain structures, the fact that the law establishes clear mandates of on this regard, elevates the relevance of these bodies in the policy processes. These clear mandates are absent from Romania’s mountain law. As in the case of NMAA/ANZM in Romania; in France, National Agency for Territorial Cohesion (ANCT) acts as the Secretariat of the National Mountain Council and NMC and the Massif Committees, yet, ANCT has a stronger role in the coordination and preparation of mountain related policies/programs and their financing. ANCT aims to facilitate local authorities’ access to resources necessary to carry out their projects, including financial resources but also technical support. The agency facilitates the establishment of partnerships and place a key coordination role. ANCT carries out its actions through the network of territorial delegates (TD) and department prefects. ANCT’s territorial delegates are the entry point for coordination and submission of financial requests from local authorities to ANCT. The Local Territorial Cohesion Committee and the Regional Financing Committee are also local structures through which ANCT operates. There is a commissioner from ANCT for each massif, 6 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS which ensures the coordination and secretariat function of the Massif Committee. A large part of the support provided by ANCT to the massif and local structures for project development support is done through private external consultants hired by the Agency. In the case of Romania, Massif Committees have roles in the preparation of proposals, however, there are few mechanisms in place to support CMs in preparing these proposals for submission to various agencies. Yet, perhaps the most significant difference between Romania’s mountain policy governance and the French one, is that in Romania there is no mechanism of dedicated funding for mountain development and a weak institutional basis for the collaborative consultation and negotiation required for formulation and implementation of a mountain development programs. The 2018 Mountain Law proposes a mountain policy process “initiated, led and controlled by the population of the mountain area with the support of the Romanian state (Article 1).” To support this ambition, the Law proposes an institutional framework for mountain policy that: (a) provides an expanded and central role of the NMAA for the development, implementation, and monitoring of mountain area development policies, (b) establishes the NMC, and (c) establishes nine Massif Committees. However, several factors may constitute a threat to the functioning of the mountain policy institutional framework ambitioned by the 2018 Mountain Law, largely including the lack of a specific mechanisms for funding. In the case of France, there is a dedicated centralized funding for mountain development, in fact such dedicated funding for mountain area development from the central government has been in place, at least since the issue of the 1985 Mountain Law. These funds have been distributed through the General Commission for Territorial Equality (CGET) and since 2020, through the ANCT, which replaced CGET. State-Region Interregional Plan Contracts (CPIER) are the main instrument to operationalize the priorities defined for the massif (e.g., through the interregional convention plans). Beyond cohesion funding, other ministries and regions also contribute to the implementation of these plans. Examples outside Europe, also highlight the relevance of dedicate and strong coordinating institutions supported through clear funding mechanisms. For example, in the case of the Appalachian region of the United States, The Appalachian Regional Commission (ARC)4 , an economic partnership between the Federal government and governors of 13 Appalachian states, focuses on narrowing development gaps between the mountain range and the rest of the country. ARC leadership includes the governors from each of the 13 Appalachian states and a federal co-Chair who is appointed by the President and confirmed by the Senate. ARC staff supports regional economic growth in partnership with state staff and other local officials. Goals and investment priorities are outlined in a strategic plan, developed with strong grassroot participation. The US Congress allocates a dedicated budget to the Commission which is granted to state-level government and civil society organizations on a copay basis according to strategic investment grant programs formulated by the Commission (ARC 2023). In the case of Romania, dedicated funding mechanisms for mountain priorities is absent. Although MARD took some steps toward the development of a “Mountain Development Program” in October 2022, with an allocated budget of 47.5 million US dollars, this program focused on agriculture investments and no specific funding for more cross sectoral investments have been allocated. At the institutional level, the public-private organizations (NMC and MCs) with advisory roles for mountain development were set up only quite recently and have yet to be utilized for advice/ consultation on mountain development. Massif Committees were established in 2022, and the 4 The Appalachian Regional Commission (ARC) is an economic development partnership entity of the federal government and 13 state governments focusing on 423 counties across the Appalachian Region. ARC’s mission is to innovate, partner, and invest to build community capacity and strengthen economic growth in Appalachia to help the Region achieve socioeconomic parity with the nation. CHAPTER I. ROMANIAN POLICY AMBITION FOR MOUNTAIN DEVELOPMENT AND THE EU POLICY CONTEXT 7 NMC met for the first time in April 2023. In fact, the Mountain Development Program, and subsequent regulations, was developed prior to the setting of the mountain policy structures. In the case of NMAA/ANZM, At the strategic and advocacy level, the subordination of NMAA/ ANZM to MADR does not give the Agency sufficient autonomy and flexibility to respond to the multisectoral needs of the mountainous areas and to influence the agenda of other ministries. At the operational level, constraints from the point of view of human resources, as well as financial, logistical and administrative blockages constitute important challenges for NMAA/ANZM to fully exercise the range of roles and functions provided by the Law. Moreover, and though the institutional governance for Romania’s mountain areas appears to have followed the French model, in France mountain development is anchored in the territorial development institutional framework. In obvious contrast to the French case, in Romania, MADR both funds and plays a leading role in mountain development policy. In addition to the Mountain Law and its associated investment program, other legislation and strategic investments financed largely through European Union funding has been passed with possible application to mountain development in Romania). Although none of these policies constitute a program for mountain development, much less a strategy for the attainment of the goals of the 2018 Mountain Law, they can certainly contribute to the achievement of the law ambitions. The following policy documents and programs relevant to mountain areas include (i) policy mandates concerning mountain area natural resources (e.g., the Carpathian Convention); (ii) emerging policy orientations in response to EU policy developments (e.g., the Circular Economy Strategy, new policy orientations for CAP and Cohesion Policy funds, etc.); and (iii) sectoral efforts to address needs and priorities of national subsectors (e.g., Forest Strategy). These largely provide strategic orientations relevant for mountain areas (a, b, c, d, e, and f, in Table 1), but those particularly linked to EU operational or strategic programs (g, h and i in Table 1) could potentially represent sources of funding, but probably for specific mountain priorities rather than for a comprehensive integrated strategy. TABLE 1. Romanian legislation and strategies relevant for mountain development Document Year Body Framework Convention on the Protection and Sustainable a 2003 Parties to the Carpathian Convention Development of the Carpathians Territorial Development Strategy of Romania 2030: Ministry of Regional Development and Public b Polycentric Romania (specific recommendations for 2016 Administration mountain areas) c Romania Sustainable Development Strategy 2030 2018 Government of Romania Ministry of Regional Development and Public Declining rural areas - Challenges, actions, and perspectives d 2020 Administration. Policies and Strategies for territorial governance Directorate. Government of Romania, Department of e Romanian Strategy for the Circular Economy (1172/2022) 2022 Sustainable Development f National Forest Strategy 2030 2022 Ministry of Environment, Waters and Forests Cohesion policy Operational Programs approved for the Ministry of European Investments and g 2022 period 2023-2027 Projects National Recovery and Resilient Plan 2021-2027 & Just h 2021 Ministry of Economy and Finance Transition Fund i Romania CAP Strategic Plan (SP), 2023-2027 2022 MARD 8 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS 3. Implications for a mountain development strategy Based on the examples of France and the United States, and Romania own past efforts around setting an institutional framework for mountain policy, a more workable institutional design seems to be needed. Although the 2018 Mountain Law calls for the integrated development of mountain territories, its structures are disconnected from the territorial development structures currently established in Romania for the operationalization of cohesion policies. By putting MADR in the center of mountain development, the Mountain Law directly linked financing to MADR’s own budget and EU funds for rural and agricultural development programs. However, the nature and ambition of mountain development calls for territorial development planning and financing, and would benefit from strong links with territorial structures, therefore, finding ways to integrate mountain development planning and funding with the activities of the Ministry of Regional Development and Public Administration (MDLPA), establishing strong links with territorial development agencies, and using cohesion policy instruments such as Integrated Territorial Investment (ITI) and Community Local Development (CLLD) would be essential to align funding to mountain development priorities. As in France, the Massif Committees and National Mountain Council could play a critical role as consultative bodies for developing programs using cohesion, CAP, national funds. There are important opportunities to strengthening the current mountain policy institutional framework to enhance its effectiveness. Including to fully equip NMAA/ANZM with sufficient financial, logistical and human resources to strengthen its operational capacity. Furthermore, greater collaboration between the NMAA/ ANZM, other ministries, as well as with MARD General Directorates is critical to improving the effectiveness of NMAA for guiding mountain policy. Potential opportunities for a stronger institutional framework could include: introducing adjustments to the current normative acts, allowing for a more relevant role of the MRDPA, as co-president of the technical commission of the NMC; involving the relevant regional entities (e.g. Regional Development Agencies) in the composition of the MC; amending the Ordinance setting the MCs to strengthen their role as a key consultative body for mountain policy in Romania, across ministries; and creating a fund to support the identification and formulation of Integrated Territorial Investments (ITI) and Local Development Through the Community (CLLD) in the massif and in coordination with Ministry of Regional Development, Public Administration and European Funds (MDRAPFE). A more ambitious institutional approach for mountain policy, which could potentially yield more effective results, includes a mountain development agency outside the aegis of the MARD under the Prime Minister. This implies an agency with the authority and means to attract earmarked cohesion and other funding for mountain development through specific massif priorities defined in collaboration with the NMC and the MCs. Certainly, this institutional design would require the support and political will of the Romanian Parliament to make the system work for mountain development, as it was this body which passed the 2018 Mountain Law.5 Establishing monitoring mechanisms are key to ensure that progress is made in addressing mountain development priorities. In France, a robust evaluation of the progress made in the implementation of the 2016 Mountain Law II, has provided great insights into areas for continued improvement, similar evaluations could be implemented in Romania. 5 Background Report on the Institutional Regulatory Framework for Mountain Development Policy, prepared as part the Reimbursable Advisory Services (RAS). Romania Mountain Area Development Support – (P176070). World Bank, 2023. CHAPTER I. ROMANIAN POLICY AMBITION FOR MOUNTAIN DEVELOPMENT AND THE EU POLICY CONTEXT 9 An emerging issue that would require attention, as the MARD and Romanian Government moves into the definition and operationalization of policies for mountain area, is the issue of the mountain area delimitation. The 2018 Mountain Law, under Chapter II, included a set of definitions in relation to mountain area, mountain villages, mountain basins and mountain groups. The mountain area definition in the law is largely based on the criterion of disadvantage area based on the combination of altitude and slope. However, following the same approach applied by the 2016 Mountain Law in France; the 2018 Mountain Law in Romania introduces the concept of massif. The massif encompasses not only mountain areas, but also areas immediately adjacent to them: piedmonts, or even plains if they ensure the continuity of the massif. This enlargement considers the interactions and exchanges between the territories in the high altitudes and the plains, which makes it possible to adopt territorial/ spatial planning approaches. The 2018 Mountain Law provided ground for the establishment of listing criteria and list of mountain area localities by a joint order of the MARD and of the Minister of Regional Development and Public Administration (MDLPA), at the proposal of the National Mountain Area Agency, based on the massif concept. This led to a delimitation approved by Ordinance Nr. 97, 19 February of 2019, covering 948 territorial entities (947 ATUs, plus one localitate component/component town), expanding considerably the mountain area from 7.14 million to 9.13 million hectares, based on five additional criteria other that the one defined by the combination of altitude and slope. This delimitation based on the massif definition was applied along this diagnostic. From an operational perspective, the strategic planning and specific programs aligned to mountain development, need to clearly reflect the distinction between massifs versus “disadvantaged mountain area” (based in the slope/altitude criteria). In the latter, the focus has traditionally been on compensating farmers for the nature-related disadvantages of mountains for agricultural purposes (e.g. compensation payments to mountain farmers under the CAP, such as the National Strategic Plan (PNS) (2023-2027). Under a massif approach, the focus is towards a more integrated development to narrow gaps and enhance territorial cohesion. Yet, even in programs that attend to open development opportunities for farmers in massifs, considerations on the appropriate delimitation to be applied is critical. A clear example is the application of the mountain product labelling scheme to lowland and highland areas within a massif. Evidence collected during the preparation of this diagnostic indicates, a risk of low consumer confidence in the label, when applied to lowlands within a massif, which are areas that not strictly relate to the understanding that consumers have of a mountain product.6 Therefore, the existence of a delimitation based only on the disadvantaged area definition and the one extended to cover massifs for a more strategic territorial planning process, brings complexity to the application of policies and programs and would need to be managed strategically. 6 Background Report on the Mountain Product Quality Scheme in Romania, prepared as part the Reimbursable Advisory Services (RAS). Romania Mountain Area Development Support – (P176070). World Bank, 2023. CHAPTER II. MOUNTAIN TERRITORIES SOCIO-ECONOMIC PROFILE 11 CHAPTER II. Mountain Territories Socio-Economic Profile Population decline, migration, and loss of the young and educated population through migration are the most severe challenges to economic growth in Romanian mountain areas. Mountain areas have lost population at a rate nearly three times that of lowlands. Within Romania, there has been a net outmigration from mountain to lowland areas and from rural to urban areas throughout the country. Much of the international emigration has been of the most valuable labor resources, the educated. The World Bank estimated that 23 percent of international outmigration through 2010 was of the highly educated (World Bank 2018). Losses in the educated have contributed to labor shortages for skilled professionals such as doctors (World Bank 2018, World Bank 2022a). The decline in population and the loss of the young and educated affect the mountain economy through their influence on the labor force. In Romanian mountain counties employment has declined at a rate of about 1.6 percent per year since 2012. With a mountain county economy expanding at a rate of 2.8 percent per year (2012-2020), declining employment, particularly of the young and educated, will prove to be an impediment to economic growth. Future economic growth in higher wage occupations depends on building and retaining an educated and skilled workforce. However, mountain areas offer less incentives for retained skilled workers than lowland areas. Available (and sometimes limited indicators) suggest that the intensity of housing construction has been significantly lower in mountain areas than in lowlands. Though utility connections in mountain areas are not worse than in lowland regions, road and rail connectivity are considerably less developed. The quality of education in mountain areas is constrained by limited financial resources and the difficulty of retaining qualified teachers and there are far fewer medical practices, doctors, and polyclinics per 1,000 km2 in mountain areas, mostly due to a low number of these professionals in towns and rural communes. Finally, and perhaps most significantly, income per capita in mountain areas was about 73 percent of the country average (without Bucharest). 1. Socio-economic challenges faced by Romanian mountain areas Population decline, migration, and the disproportionate loss of the young and educated population through migration are the core challenges faced by Romanian mountain areas. Mountain ATUs have lost population at a rate nearly three times that of lowlands between 1992 and 2021 (Table 2). This is primarily due to a higher rate of net outmigration because the natural rate of population decline has been slower in mountain ATUs between 1992 and 2020 (Table 3). 12 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS TABLE 2. Population changes in Romanian ATUs, 1992-2021 Annual growth (% per year) Population (Millions) 1992 2002 2012 2021 1992-2002 2002-2012 2012-2021 1992-2021 All ATUs 23.13 22.75 22.40 22.05 -0.16 -0.15 -0.18 -0.16 Cities (municipalities) 8.45 8.45 8.16 7.91 0.00 -0.35 -0.34 -0.23 Towns (oras) 2.35 2.36 2.35 2.35 0.05 -0.05 -0.02 -0.01 Rural Communes 10.13 9.78 9.74 9.62 -0.35 -0.04 -0.13 -0.18 Bucharest 2.19 2.15 2.15 2.16 -0.18 0.00 0.05 -0.05 Share communes (%) 44 43 43 44 Mountain ATUs 5.26 5.11 4.97 4.79 -0.29 -0.29 -0.41 -0.33 Cities (municipalities) 1.65 1.62 1.55 1.46 -0.17 -0.48 -0.62 -0.42 Towns (oras) 0.91 0.90 0.86 0.82 -0.15 -0.39 -0.50 -0.34 Rural Communes 2.70 2.59 2.56 2.50 -0.41 -0.14 -0.25 -0.27 Share communes (%) 51 51 51 52 Lowland ATUs 15.67 15.48 15.28 15.10 -0.12 -0.13 -0.14 -0.13 Cities (municipalities) 6.80 6.83 6.61 6.45 0.04 -0.32 -0.27 -0.18 Towns (oras) 1.44 1.47 1.49 1.52 0.18 0.15 0.25 0.19 Rural Communes 7.43 7.19 7.18 7.13 -0.33 -0.01 -0.09 -0.15 Share communes (%) 47 46 47 47   Source: Territorial Observatory 2023 (POP UAT 211). Legally resident population. July 1. The Romanian figures on legally resident population differ from the UN population (UN POP 2023) estimates which are (1992--23.4. 2002— 21.9. 2012—20.2. and 2021—19.3 million). TABLE 3. Romanian natural rate of population changes by locality, 1992-2020 Average natural rate of change per 1,000 inhabitants Category 1992-2001 2002-2011 2012-2020 1992-2020 All ATUs -1.27 -1.95 -2.51 -1.89 Cities (municipalities) 0.72 0.24 -0.87 0.06 Towns (Oras) 0.73 -0.49 -1.22 -0.30 Rural Communes -2.97 -4.33 -4.58 -3.94 Bucharest -3.54 -1.29 -0.68 -1.88 Mountain ATUs -0.67 -1.98 -2.83 -1.79 Cities (municipalities) 0.85 -0.10 -1.80 -0.30 Towns (Oras) 0.89 -0.96 -2.48 -0.79 Rural Communes -2.15 -3.49 -3.57 -3.05 Lowland ATUs -1.16 -2.04 -2.66 -1.93 Cities (municipalities) 0.69 0.33 -0.66 0.15 Towns (Oras) 0.63 -0.22 -0.51 -0.02 Rural Communes -3.26 -4.63 -4.94 -4.26 Sources: Territorial Observatory 2023 (POP UAT211, NAT UAT 214, MORT UAT 215). The natural rate of change of the population is defined as the birth rate (births per 1000 population) minus the death rate (deaths per 1000 population). CHAPTER II. MOUNTAIN TERRITORIES SOCIO-ECONOMIC PROFILE 13 Over a more recent period of 2011 to 2021, all nine mountain groups showed declines in population between 1 to 11 percent over the decade (Figure 1). Mountain groups Parâng, Banatului and Poiana Ruscă and Retezat Godeanu had the largest declines with population decreases of 10, 8.6 and 7.8 percent, respectively. Several counties had severe declines akin to that experienced by Tulcea county, one of the most peripheral areas affected by depopulation. FIGURE 1. Population changes by mountain group, 2011-2021 (percent) Banat & Poiana Ruscă Non - Mountain Area Retezat-Godeanu Mountain Area București Romania Apuseni Făgăraș Central Bucegi Tulcea Parîng South North 0,02 0.19% 0 -1.15% -1.01% -1.24% -0,02 -1.76% -2.24% -3.15% -0,04 3.91% -3.73% -4.76% -0,06 -0,08 -7.82% -8.80% -8.61% -0,1 -9.95% -0,12 Source: Calculations based on publicly available data (Territorial Observatory) Within Romania, there has been a net outmigration from mountain to lowland areas and from rural to urban areas. County-level data on internal (without international) migration illustrate that between 1992-2021 mountain counties experienced a higher rate of rural outmigration than lowland areas. Whereas mountain counties were home to about one-third of the rural population of the country, they were responsible for 40 percent of rural net outmigration. Moreover, there was a net migration from mountain to lowland areas (Table 4). TABLE 4. Net internal in-migration of county populations, 1992-2021 (persons) Share of total rural or Country/Region 1992-2001 2002-2011 2012-2021 1992-2021 urban net migration, 1992-2021 (%) Mountain counties -123,978 -65,421 -62,415 -251,814 Urban 242,270 90,210 54,471 386,951 24 Rural -366,248 -155,631 -116,886 -638,765 40 Rural as % of total changes* 60 63 68 62 Lowland counties 123,978 65,421 62,415 251,814 Urban 758,657 272,122 186,345 1,217,124 76 Rural -634,679 -206,701 -123,930 -965,310 60 Rural as % of total changes* 46 43 40 44 Source: RNIS 2023. Calculated from yearly net changes in residency registrations (POP306A). *Calculated as the share of the absolute value of rural changes in the sum of the absolute values of urban and rural changes. 14 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS International emigration has played a substantial role in population losses in Romania. Between 2012 and 2021, Romania lost 4.7 percent of its population, mostly from urban areas (Table 5). TABLE 5. Population loss in Romania by location, 2012-2021 Category Change in population, 2012-2021 (persons) Change in population, 2012-2021 (%)   Total Urban Rural Total Urban Rural All counties -933,880 -693,344 -240,536 -4.7 -6.4 -2.6 Mountain counties -296,203 -237,025 -59,178 -4.4 -6.8 -1.8 Lowland counties -637,677 -456,319 -181,358 -4.8 -6.2 -3.0 Source: RINS 2023 (POP106A). The UN Population Division estimates that 42 percent of the population loss during this period was international emigration (UN POP 2023). These population losses were not evenly distributed over the age spectrum (Figure 2). While the number of 20-29-year-olds from urban areas declined by between 35 and 40 percent, and the number between 30 and 44 declined by about 20 percent, the number of 65-69-year-olds increased by near 60 percent. In rural areas, the population between 35 and 39 declined by about 20 percent, while the number of the population over 85 increased by about 40 percent. Much of these declines are simply the result of the aging of the population. Yet, a good part of the population decline in the younger age groups is likely emigration, most of it coming from urban areas in mountains and lowlands alike. FIGURE 2. Population loss in Romania by location and age group, 2012-2021 (percent) Urban area population change, 2012-2021 (%) Rural area population change, 2012-2021 (%) 85 years and over 84 years and over 80-84 years 50-54 years 55-59 years 60-64 years 65-69 years 30-34 years 35-39 years 25-29 years 40-44 years 20-24 years 45-49 years 70-74 years 75-79 years 15-19 years 80-84 years 50-54 years 55-59 years 60-64 years 65-69 years 30-34 years 35-39 years 25-29 years 40-44 years 20-24 years 45-49 years 70-74 years 75-79 years 15-19 years 0-14 years 0-14 years Loss or gain of urban population, 2012-2021 (%) Loss or gain of rural population, 2012-2021 (%) 80 60 50 60 40 40 30 20 20 0 10 0 -20 -10 -40 -20 -60 -30 Mountain Low Mountain Low Source: RINS 2023 (POP106A). Much of the international emigration has been of the most valuable labor resources, the educated. The World Bank estimated that 23 percent of international outmigration through 2010 was of the highly educated (World Bank 2018). Losses in the educated have contributed to labor shortages for skilled professionals such as doctors (World Bank 2018, World Bank 2022a). CHAPTER II. MOUNTAIN TERRITORIES SOCIO-ECONOMIC PROFILE 15 The decline in population and the loss of the young and educated affect the mountain economy through their influence on the labor force. In Romanian mountain counties employment FIGURE 3. A shortage of skilled workforce has between 2012 and 2020 has declined at a become the top constraint for business rate of about 1.6 percent per year. With a Inadequately educated workforce mountain county economy expanding at a rate tax rates of 2.8 percent per year (2012-2020), declining political instability corruption employment could prove to be an impediment access to finance 2019 to growth. Moreover, the loss of the younger tax administration 2013 and more educated through migration limits transportation business licensing and permits the quality of the labor pool upon which practices of the informal sector businesses can draw, which in turn limits their labor regulations ability to expand into knowledge-based sectors -5 5 15 25 35 45 of the economy. A shortage of educated skilled workers is already the top constraint cited by Source: World Bank 2022b, citing World Bank business (Figure 3). Enterprise Surveys 2013, 2019. 2. Methods of compensation for population and labor force decline in mountain areas Population declines have been compensated for at the country level primarily through high rates of investment and improving the sectoral allocation of labor through transfers out of agriculture. The Romanian Institute of National Statistics does not publish investment rates by county, so it is not possible to estimate the share of investment in the regional GDP of mountain counties. National rates calculated by the International Monetary Fund illustrate that Romania has one of the highest investment rates among Western high-income economies. Within the European Union, investment as a share of GDP in Romania is surpassed by only Estonia (28 percent) and Ireland (31 percent) (Table 6). TABLE 6. Investment as a share of GDP in A second means for compensating for a shrinking selected countries, 2012-2022 (%) population is the reallocation of labor out of agriculture Category 2012-2022 average (%) into other sectors. The reasons for employment loss in Romania 25 agriculture are manifest. Wages in agriculture ranked European Union 22 18 out of 21 sectors on average between 2017 and Euro area 21 2021 (RINS, 2023, FOM103D and FOM107E), and Major advanced about 28 percent of the poorest 40 percent of income 21 economies (G7) earners in the Romanian economy were engaged in France 24 subsistence agriculture (World Bank 2018). Broad sector Germany 21 employment numbers illustrate that nearly all declines Austria 25 in employment between 2008 and 2021 have come Belgium 25 in agriculture, with moderate declines in industry and Hungary 25 expanding employment in services. In mountain and Estonia 28 lowland counties alike, Romania has seen only moderate Ireland 31 declines in industrial employment and an increase in employment in services because of a transfer of labor Emerging and 40 from agriculture to other sectors (Table 7). developing Asia Source: IMF 2022. 16 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS TABLE 7. County civil employment by broad sector, 2008-2021 (millions) Category 2008 2013 2016 2019 2020 2021 Total counties 8.75 8.53 8.32 8.49 8.44 7.60 Agriculture. forestry. fisheries 2.41 2.38 1.73 1.75 1.68 0.85 Industry 1.98 1.78 1.96 1.90 1.89 1.84 Services 4.36 4.37 4.63 4.85 4.87 4.92 Mountain counties 2.88 2.81 2.73 2.76 2.75 2.45 Agriculture. forestry. fisheries 0.85 0.84 0.61 0.61 0.59 0.30 Industry 0.71 0.64 0.71 0.69 0.69 0.68 Services 1.32 1.33 1.41 1.46 1.47 1.48 Lowland counties 5.87 5.72 5.59 5.73 5.69 5.15 Agriculture. forestry. fisheries 1.55 1.54 1.12 1.13 1.09 0.55 Industry 1.27 1.14 1.24 1.21 1.20 1.16 Services 3.04 3.04 3.23 3.39 3.40 3.44 Source: RINS 2023 (FOM103D). The employment situation in mountain territories differs little from that in Romania as a whole (Table 8 and Table 9). A similar fall in agricultural employment is observed, while jobs in manufacturing, public administration and education have fallen much more modestly. As in the rest of the country, employment in construction, trade, transport, hotels and food service, administration and health and social work has increased. The key difference between mountain areas and the rest of the country is the smaller decrease in manufacturing jobs. TABLE 8. County civilian employment in Romania, by industry, 2008-2021 (thousands) Change, Category 2008 2013 2016 2019 2020 2021 2008-2021 (%) Total county civilian employment 8,747 8,531 8,318 8,493 8,441 7,601 -13 Agriculture, forestry, fisheries 2,407 2,380 1,727 1,747 1,681 847 -65 Manufacturing 1,691 1,532 1,718 1,660 1,647 1,602 -5 Construction 692 632 684 723 750 743 7 Trade; vehicle repair 1,168 1,229 1,226 1,268 1,259 1,235 6 Transportation, storage 422 430 445 482 494 494 17 Hotels, food service 162 156 193 224 206 219 35 Administration, support services 217 271 321 337 334 340 57 Public administration, social security 220 191 203 212 208 212 -4 services, defense Education 432 379 378 375 376 376 -13 Health, social work 402 373 403 439 455 480 20 Other 935 959 1,021 1,028 1,032 1,054 13 Source: RINS 2023 (FOM103D). CHAPTER II. MOUNTAIN TERRITORIES SOCIO-ECONOMIC PROFILE 17 TABLE 9. County civilian employment in mountain areas of Romania, 2008-2021 (thousands) Change, Category 2008 2013 2016 2019 2020 2021 2008-2021 (%) Total county civilian employment, 2,880 2,811 2,727 2,763 2,749 2,451 -15 mountain areas Agriculture, forestry, fisheries 854 840 607 614 591 296 -65 Manufacturing 610 560 636 614 612 602 -1 Construction 215 197 218 229 239 236 10 Trade; vehicle repair 376 405 398 412 407 396 5 Transportation, storage 132 137 141 153 157 156 18 Hotels, food service 57 54 66 77 71 76 33 Administration, support services 44 60 71 75 73 75 71 Public administration, social security 66 57 60 62 61 62 -6 services, defense Education 146 128 129 127 127 128 -13 Health, social work 131 119 128 140 144 154 18 Other 248 253 273 260 266 271 9 Source: RINS 2023 (FOM103D). While both high investment and labor reallocation can be a part of a strategy to compensate for population losses in mountain areas, they are limited in their effectiveness over the long run. The so-called “growth poles of development,” which include Bucharest and other major cities, attract most of the investment in the economy. In 2022, Bucharest itself attracted 44 percent of investment (RINS 2023). This trend is likely to continue, as growth rates in Bucharest are substantially higher than in the rest of the country. County-level data show that GDP per capita in Bucharest grew by 5.01 percent per year from 2000-2019, while that in the rest of the country grew by 3.98 percent per year (Figure 4). FIGURE 4. Real GDP per capita in mountain and lowland counties, and Bucharest, 1995-2020 (constant 2000 prices) 25,000 GCP per capita (constant 2000 let per person) 20,000 15,000 Mountain counties Lowland counties 10,000 Bucharest 5,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: RINS 2023, (CON103C and CON103l) using Romanian deflator from IMF, 2022. Note: Lowland counties do not include Bucharest. 18 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS The greater rate of decline in employment in agriculture compared to other sectors (Table 8 and Table 9) implies that the share of employment in agriculture has fallen from over 30 percent in 2005 to 20 percent in 2020 and to around 11 percent in 20217. At the current rate of decline, the share of employment in agriculture in Romania should reach the 2020 EU average level of 4 percent within about 15 years after which it will be substantially more difficult to reduce agricultural employment. The agricultural employment share in several EU countries is visible in Figure 5. FIGURE 5. Employment in agriculture in EU countries, 2005 and 2020 (percent of total employment) Employment in agriculture (% of total employment, 2005 and 2020) 35 30 25 20 15 10 5 0 EU Romania Bugaria Greece Poland Portugal Slovenia Latvia Lithuania Croatia Ireland Hungary Spain Italy Cyprus Austria Czechia Finland France Netherlands Denmark Estonia Slovakia Sweden Germany Belgium Luxembourg Malta Iceland Norway (1) Liechctenstein (1) North Macedonia (1) 2005 2020 Source. Eurostat (online data code: nama_10_a64_e) Mountain areas can compensate for declines in population further by raising employment rates. Romania still has one of the lowest employment rates as a share of the working age population (between 20 and 64 years or age) of any EU country (Table 10). Only Italy and Greece employed less of their working age population. Romania lags far behind the high-employment countries in the EU, such as the Netherlands, Sweden, the Czech Republic, and Estonia. Employment rates in mountain counties are currently higher than in lowland counties, but much lower than Bucharest (Table 11). In 2020, before the employment redefinition and COVID-19, mountain counties had an employment rate of 68 percent, while employment rates were nearly 4 percentage points lower in the lowlands. 7 Thevery steep decrease in agricultural employment between 2020 and 2021 was due to a statistical accounting change designed to exclude subsistence producers from the labor force. “Subsistence producers” included those for whom (1) most of the production obtained in the household was consumed in the own household with only a small part of the agricultural production obtained was intended for sale, or (2) for whom agricultural production was intended exclusively for own consumption and represented a substantial part of the total consumption of the household. Starting from the first quarter of 2021, persons in the above categories were considered either inactive or unemployed. CHAPTER II. MOUNTAIN TERRITORIES SOCIO-ECONOMIC PROFILE 19 TABLE 10. Employment rates in the European Union, 2010 and 2021 (ratio of employed to working age population, percent) Country/Region 2010 2021 Country/Region 2010 2021 European Union - 27 67.0 73.1 Bulgaria 64.1 73.2 Netherlands 77.0 81.7 Poland 62.2 75.4 Sweden 77.5 80.7 Ireland 65.5 74.9 Czechia 70.4 80.0 France 69.6 73.2 Estonia 67.6 79.3 Luxembourg 70.7 74.1 Germany 74.0 79.6 Belgium 67.6 70.6 Denmark 74.9 79.1 Croatia 62.1 68.2 Hungary 62.2 78.8 Spain 62.8 67.7 Malta 60.1 79.1 Romania 56.3 67.1 Latvia 63.9 75.3 Italy 60.5 62.7 Lithuania 64.3 77.4 Greece 63.5 62.6 Finland 71.9 76.8 Non-EU countries Cyprus 75.0 75.9 Serbia 53.3 66.7 Austria 73.9 75.6 North Macedonia 48.1 : Slovenia 69.7 76.1 Türkiye 50.0 : Slovakia 66.5 74.6 : Portugal 66.9 75.9 Source: Eurostat 2023 (Employment as a share of number of people from 20 to 64). TABLE 11. County employment rate of the working age population (labor resources), 1992-2021 (percent) Category 1992 2002 2012 2019 2020 2021 Total counties 79.6 62.4 61.1 69.6 69.1 62.3 Mountain counties 79.9 61.7 58.4 68.7 68.3 60.9 Lowland counties 78.6 62.6 59.2 65.1 64.5 56.8 Bucharest 83.9 63.9 82.3 97.7 97.6 97.1 Sources: RINS 2023 (FOM101A, FOM103A, FOM103D, FOM116A). The World Bank Systemic Country Diagnostic (World Bank 2018) notes that low employment rates represent a constraint on future growth, because they mean that a significant portion of the potential labor force is not employed. A comparison with EU countries shows that the labor participation rates of women and young people in Romania are lower than in other economies (World Bank 2022b). Though raising employment rates in Romania could be a source of additional labor, experience in other countries shows that bringing more women and youth into the employed labor force often requires proactive policies to facilitate their entry. This may include more participation in early- childhood education, state-subsidized day care, less crowded schools, after school programs, and other programs to bring more women into the active labor force. Bringing young people into the labor force may require programs such as internships and vocational training. To raise the employment rates of older workers may require more life-long learning participation, whereas Romania currently has the lowest participation rate in lifelong learning in the EU (World Bank 2022b). 20 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS However, future economic growth in higher wage occupations depends on building and retaining an educated and skilled workforce. The productivity of labor and the ability of the economy to absorb and utilize the capital invested depends on the degree to which the labor force is equipped to participate in the knowledge intensive, high-paying sectors of the economy. Tertiary education plays a primary role in workforce improvements, but skill-building through vocational education, on the job training, improvements in lifelong learning opportunities, or improving school curricula to include the digital and other skills required by business are also important. On these measures, Romania has a long way to go. Tertiary education attainment is a bellwether indicator of the degree to which the labor force possesses the requisite skills for employment in knowledge intensive, higher income sectors. Romania has the lowest tertiary education attainment levels in the EU (Figure 6) and is last on the EU DESI index of digital skills (EC 2023). Only 15 percent of the population between the ages of 15 and 74 has received university degrees. FIGURE 6. Share of 15–74-year-old population in the EU 27 with tertiary education, 2021 50 45 40 Share of 15-74 year old population (%) 35 30 25 20 15 10 5 0 Ireland Luxembourg Cyprus Sweden Lithuania Belgium Estonia Netherlands Spain Finland France Denmark Slovenia Latvia Austria Greece EU 27 Germany Poland Malta Portugal Bulgaria Hungary Slovakia Czechia Croatia Italy Romania Tertiary education (levels 5-8) Source: Eurostat 2023 (EDAT_LFS_99). Though the share of tertiary education achievement of younger workers 25-34 years of age is much higher, Romania still ranks last in the EU on this measure as well (Figure 7). Only 23.3 percent of 25-34-year-olds have received university or college degrees, about half of the EU 2020 target. CHAPTER II. MOUNTAIN TERRITORIES SOCIO-ECONOMIC PROFILE 21 FIGURE 7. Share of 25–34-year-old population in the EU 27 with tertiary education, 2021 70 60 Share of 25-34 year old population (%) 50 40 30 20 10 0 Luxembourg Ireland Cyprus Lithuania Netherlands Belgium France Denmark Sweden Spain Slovenia Portugal Latvia Greece Estonia Malta Austria EU 27 Poland Finland Slovakia Germany Croatia Czechia Bulgaria Hungary Italy Romania Tertiary education (levels 5-8) 2020 EU Target Sources: Eurostat 2023 (EDAT_LFS_99). Eurostat, Eurostat statistics explained, 2023. 3. Improving the mountain workforce ecosystem To retain workers in mountain areas it is thus important to improve the mountain workforce ecosystem to make mountain areas more attractive places to live. Housing stock development In the last decade (2010-2020), housing development has been less rapid in the mountain area compared to lowland areas, according to the number of building permits issued at the ATU level. Though the annual number of building permits issued in mountain areas remained relatively stable in the last decade, the intensity of construction has been significantly lower than in lowland regions. Mountain ATUs issued less than half the number of building permits per 1,000 square km than lowlands. In 2020, there were 235.6 building permits issued per 1,000 square km in lowland areas, while in mountain ATUs only 98.4 building permits were issued per 1,000 square km. A second indicator of the development of housing infrastructure at the ATU level is the annual number of finished dwellings. In 2020, the number of finished dwellings in mountain ATUs was less than half the number in other regions of the country, reflecting the limited number of people moving into the region. Utility connections Romania has significantly worse rates of connection of housing to water and wastewater systems than the average in the EU. For instance, the share of the population with running water in the EU was 95.7 percent in 2021 compared with 69.4 percent in Romania (EurEau 2021)8. The share of the population with connection to a wastewater network was 86.5 in the EU and 52.9 in Romania (EurEau 2021). 8 TheEU figure pertains to EurEau members which include 25 of the 27 member states (without Latvia and Lithuania) plus Switzerland, Norway, Serbia. and the UK (EurEau 2021). 22 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Data at the ATU level on the state of housing infrastructure comes from Population and Housing Census data of 2011 (Territorial Observatory 2023). Though these data are now over 10 years old, they do not indicate that mountain areas have lower rates of water, sewer, hot water, or electrical connections (Table 12). Table 12 indicates that the most significant infrastructure divide in Romania is between urban and rural ATUs. Mountain cities had connection rates nearly double those in rural areas, and lowland cities (without Bucharest) had connection rates almost three times that in rural areas. For cities, both mountain and lowland connection rates were nearly on the level of Bucharest, except for hot water. While larger municipalities are getting closer to complying with EU standards, smaller communities (especially in rural areas) are lagging considerably. TABLE 12. Residences connected to infrastructure services by ATU locality, 2011 (percent) Share of residences with (%) Category Sewage connections Running water Hot water connections Electrical connection All ATUs 68 79 59 99 Cities (municipalities) 96 98 88 100 Towns (oras) 76 86 61 99 Rural Communes 39 58 29 98 Bucharest 99 100 96 100 Mountain ATUs 71 79 58 99 Cities (municipalities) 96 98 87 100 Towns (oras) 84 90 66 99 Rural Communes 52 65 39 98 Lowland ATUs 63 76 55 99 Cities (municipalities) 96 98 89 100 Towns (oras) 72 84 57 99 Rural Communes 34 56 26 98 Source: Territorial Observatory 2023 (RPL_UAT_457, RPL UAT 45131, RPL UAT 45132, RPL UAT 4512). Lowland ATUs do not include Bucharest. This clear differentiation between urban and rural areas is evident on the data at the mountain massif level (Table 13), with pronounced gaps identified in the provision of services for hot water, sewage, and water supply between urban and rural areas in the massif. As per 2011 data, the Parâng Mountain Group (MG) had one of the lowest number of connections to public utilities in urban setting of all mountain groups. Yet, rural areas in the South and Retezat Godeanu MGs performed the poorest among the mountain groups. CHAPTER II. MOUNTAIN TERRITORIES SOCIO-ECONOMIC PROFILE 23 TABLE 13. Residences connected to infrastructure services by massif, 2011 (percent) Share of residences with (%) Category Sewage connections Running water Hot water connections Electrical connection Nordic Group Urban ATUs 89 92 79 92 Rural ATUs 56 67 41 98 South Group Urban ATUs 95 97.3 86.8 99.6 Rural ATUs 44.5 60 32 97.3 Apuseni Group Urban ATUs 89 93 78 100 Rural ATUs 56 71 44 98 Central Group Urban ATUs 89.6 94 78 99.4 Rural ATUs 51.9 62 40 97.7 Parâng Group Urban ATUs 87.3 92 68.8 99 Rural ATUs 60 72 43 98.3 Retezat Godeanu Group Urban ATUs 94.6 97.2 75.2 99.4 Rural ATUs 45.3 59.1 33.1 97.3 Făgăraș Group Urban ATUs 92 95 76 99.1 Rural ATUs 48 64 36 98.4 Banatului and Poiana Ruscă Group Urban ATUs 94 95.6 78.4 99.6 Rural ATUs 61 70 36.3 98.3 Bucegi Group Urban ATUs 89.5 94.6 74.2 99.7 Rural ATUs 54.7 72.2 39.5 98.5 Source: Based on data from Territorial Observatory 2023. Source: Based on data from the Romania Territorial Observatory 2023. (RPL_UAT_457, RPL UAT 45131, RPL UAT 45132, RPL UAT 4512). Road and rail networks The density of roads and rail in mountain areas is significantly less than in the rest of the country. According to MDLPA spatial data estimates, road density in mountain areas is about 75 percent of that in other areas of the country (Table 14). In rural areas it is 60 percent of other regions. Rail density is much lower than road density in both mountain and lowland regions. Rail density in mountain areas is about half of that in lowland areas and in rural communes about 60 percent of that in lowlands. 24 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS TABLE 14. Road and rail density by ATU locality (MDLPA spatial data estimate) Km per 10,000 km2 Persons per km2 Public road Rail Area (sq. Category Road Rail Population density network (km) network (km) km) density density (2021) All ATUs 68,225 9,855 238,501 2,861 413 92 Cities (municipalities) 3,686 1,220 9,645 3,821 1,265 820 Towns (oras) 6,008 1,405 20,923 2,871 672 112 Rural Communes 58,360 7,211 207,690 2,810 347 46 Bucharest 171 19 243 7,035 770 8,877 Mountain ATUs 21,810 2,594 91,403 2,386 284 52 Cities (municipalities) 907 267 3,427 2,645 781 427 Towns (oras) 2,323 401 10,029 2,316 400 82 Rural Communes 18,581 1,925 77,947 2,384 247 32 Lowland ATUs 46,243 7,242 146,855 3,149 493 103 Cities (municipalities) 2,779 953 6,218 4,469 1,532 1,036 Towns (oras) 3,685 1,004 10,894 3,383 922 140 Rural Communes 39,779 5,285 129,743 3,066 407 55 Source: Territorial Observatory 2023 (DENSDP UAT 4411, DENSCF UAT 4412). Note: The year of the estimate is not clear. Low connectivity and limited access to infrastructure constrains the development of the mountain area, by restraining access to economic opportunities and public amenities. Despite significant efforts to close the rural infrastructure gap, access to infrastructure is still lagging in many rural areas9, particularly small and remote localities, like many of those located in the mountain area. Nearly half of all mountain ATUs, concentrating one quarter of the total population of the mountain area, are not connected to a national road, and seven of these localities are not connected to a county road either, indicative of their remoteness. The Southern Group has the largest concentration of ATUs without access to a national road (51%), followed by the Nordic Group (49%), and in these localities, the access to country roads is lower than the mountain average. These factors diminish the quality of life and overall attractivity of the mountain area for both residents and businesses, as reflected in the small share of people living in these rather extensive remote areas.10 Internet penetration In relation to internet penetration/connectivity, analyses are based on the number of fixed internet connections at the end of 202111 and the number of private dwellings/homes also for 2021 to generate a i-connect index.12 The index is defined as simple average (each ATU accounted the same in calculation of the massif mean), as well as weighted by the population of each ATU, results are presented in Table 15 below. The assessment highlights, as expected, that larger cities experience better internet penetration compared to smaller ATUs. Cities have the highest penetration of internet, followed by towns and rural communes. When simple averages are analyzed, there are 9 World Bank 2018. 10 Romanian National Urban Policy (citadini.ro). The European Framework for Sustainable Cities Database. Indicators 21.35 National Road Accessibility (km) and 21.36 Accessibility of county roads (km). 11 Based on a survey of telecom operators that covered more than 95% coverage of the entire country carried out by the National Institute of Statistics of Romania (NIS). 12 The i-connect index is computed by dividing the number of fixed internet connections to the number of dwellings/homes at ATU level. For convenience, the result is multiplied by 100. CHAPTER II. MOUNTAIN TERRITORIES SOCIO-ECONOMIC PROFILE 25 relatively small differences in internet penetration rates between ATUs in mountain areas (38.6%) and non-mountainous areas (38.8%) (Table 15). However, when the information is gathered into a weighted average i-connect index, considering ATU population, an almost 4 percentage points difference can be observed between mountain regions and non-mountain areas. Overall, mountain ATUs have less access to internet infrastructure, regardless of the ATU’s rank (municipality, city, or commune) compared to the equivalent type of ATU in non-mountain areas/ lowlands, those differences widen when using weighed averages considering population, as this better reflects the attractiveness of ATUs from the perspective of fixed internet network expansion. Aggregated data at the mountain group level presented in Table 15 shows that Parâng group is the group that has the highest average of internet penetration (53.55 weighted index), while Bucegi has the lowest average. As it can be observed, the differences between mountain groups are larger in the case of simple average compared to weighted averages, as the larger ATUs (usually with better internet penetration) mitigate these differences. TABLE 15. i-connect index at national level (2021) Type i-connect (simple average) i-connect (weighted average, considered population) All ATUs 38.71 51.37 Cities (municipalities) 58.94 63.16 Towns (oras) 51.61 54.12 Rural Communes 36.96 40.96 Bucharest 65.94 65.94 Mountain ATUs 38.60 48.65 Cities (municipalities) 57.86 60.01 Towns (oras) 51.71 52.91 Rural Communes 36.60 40.54 Non-Mountain ATUs (Lowlands) 38.75 52.23 Cities (municipalities) 59.36 63.88 Towns (oras) 51.56 54.77 Rural Communes 37.12 41.10 Mountain Group average Apuseni Group 33.76 46.32 Banatului and Poiana Ruscă Group 38.06 48.03 Central Group 39.48 46.08 Făgăraș Group 43.54 48.18 Nordic Group 40.22 48.50 Bucegi Group 41.95 46.05 Parâng Group 49.76 53.55 Retezat Godeanu Group 35.34 49.08 South Group 36.35 51.96 Source: Authors’ calculation based on the National Institute of Statistics and Ministry of Agriculture and Rural Development data. 26 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Figure 8 presents average internet penetration by type of territorial entity (cities, towns and rural communes) at the massif group level. As it can be observed, the gap between internet penetration (fixed connection) among urban and rural areas is large, with the lowest levels of internet penetration in rural areas found in the Retezat Godeanu, Central and South massif groups, with weighted averages of internet penetration of 33.77, 37.27 and 39.84, respectively. At the town level, the massifs with lower internet penetration include Apuseni, Banatului and Poiana Ruscă and Nordic massif groups; at the city level the lowest internet penetration (based on weighted index) is found at Făgăraș, Banatului and Poiana Ruscă and Retezat Godeanu massif groups. Observing the averages at mountain group is not enough to assess the full picture of internet connectivity/penetration. Map 1 presents the i-connect index at ATU level. As it can be observed, there is increased heterogeneity both between mountain groups as well as within mountain groups. One striking example is the Southern Group where the ATU located in Transylvania, in proximity to Brasov have very good internet penetration, while the ATUs located over the mountains, in Muntenia, have very poor internet penetration. The map reflects, in part, the reality of geography. One simple interpretation is that the higher the altitude range of the ATUs the less likely is to have good internet penetration. However, altitude alone is not a sufficient factor to explain internet penetration. FIGURE 8. Average i-connect index at Mountain Group level. 140 120 100 80 60 40 20 0 Cities (municipalities) Towns (Orașe) Rural Communes Cities (municipalities) Towns (Oraș) Rural communes Towns (Oraș) Rural communes Cities (municipalities) Towns (Orașe) Rural Communes Cities (municipalities) Towns (Orașe) Rural Communes Cities (municipalities) Towns (Orașe) Rural Communes Towns (Orașe) Rural Communes Cities (municipalities) Towns (Orașe) Rural Communes Cities (municipalities) Towns (Orașe) Rural Communes Apuseni Banatului Bucegi Central Făgăraș Nordic Group Parâng Retezat Go- South Group Group and Poiana Group Group Group Group deanu Group Ruscă Group In colors simple averages, in shadow weighted averages. Source: Authors’ calculation based on the National Institute of Statistics and Ministry of Agriculture and Rural Development data. CHAPTER II. MOUNTAIN TERRITORIES SOCIO-ECONOMIC PROFILE 27 An analysis of the correlation between Connectivity Index (described in the previous section) and i-connect index, prepared as part of the diagnostic studies showed that for Parâng and Sothern Groups, there is a strong correlation between the road connectivity and internet connectivity, indicating that the better connected an ATU is with a large nearby city, the higher the chances of good internet penetration as well. For the other groups the correlation is low to moderate, but despite this, all the groups present an underlying ascending trend. Other factors affecting rates of internet connectivity include: (i) the technology used to access the internet. For instance, in remote area mobile internet connections (such as routers/SIM dedicated exclusively to use in fixed places) may be technologically preferred to costly fix internet infrastructure. In this case an inverse correlation is expected between distance/road connectivity and mobile internet penetration; and (ii) the specificities of each ATU or zone of the mountain group depending on its specialization (e.g., zones specialized in forestry and other agricultural activities may have a lower internet coverage compared to the ones focused on tourism). MAP 1. i-connect index at ATU level for mountain areas. Source: Authors’ calculation based on the National Institute of Statistics and Ministry of Agriculture and Rural data. Education services In terms of access to high quality education infrastructure, mountain areas face similar challenges to other rural areas of Romania. Even though access can be further restricted by the remoteness and the fragmented and dispersed nature of mountain settlements, the lower population density and aging trends of rural areas result in a significantly higher number of schools per school- age population when compared to urban centers which struggle with school overcrowding, yet the quality of education in mountain areas is constrained by limited financial resources and the difficulty of retaining qualified teachers. 28 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Romania has an extensive network of educational infrastructure (Ministry of European Funds. 2020) with 18,283 establishments in 2019 organized into 7,047 legal entities and 11,369 subsidiaries, out of which 4.8 percent were private. The high level of fragmentation of rural settlements in mountain areas drive the large number of primary schools, yet this dispersed network of schools calls for significant investments to upkeep and improve facilities. Overall, in 2020, 23.1 percent of Romania’s schools (1,550 units) and 18.4 percent of school age children were in mountain areas (Table 16). Although started 10 years ago with the reform in education (Law 1/2011) the school network is still unequally divided between rural and urban areas, so that the access of students from rural areas is limited and conditioned by the daily commute or the availability of places on campuses. The National Recovery and Resilience Plan includes large investments in the education infrastructure aiming to facilitate access to high quality education. TABLE 16. Schools in mountain and lowland ATUs, 2020 Number of School population Schools per 1,000 Teachers per 1,000 Category schools, 2020 (1,000s) school-aged children school-aged children All ATUs 6,696 3,495 1.92 67 Cities (municipalities) 2,404 1,735 1.39 63 Towns (oras) 626 352 1.78 68 Rural Communes 3,115 944 3.30 80 Bucharest 551 464 1.19 58 Mountain ATUs 1,550 642 2.41 73 Cities (municipalities) 447 278 1.61 64 Towns (oras) 222 119 1.87 70 Rural Communes 881 245 3.59 83 Lowland ATUs 4,595 2,389 1.92 68 Cities (municipalities) 1,957 1,457 1.34 63 Towns (oras) 404 233 1.73 67 Rural Communes 2,234 699 3.20 78 Source: Territorial Observatory 2023 (SCL UAT 411, SCL UAT 413, SCL UAT 414, SCL UAT 415, SCL UAT 416, SCL UAT 417, SCL UAT 418, SCL UAT 4110, SCL UAT 4111, SCL UAT 4113, SCL UAT 4114, SCL UAT 4115, POP UAT 211). Medical services There are far fewer medical practices, doctors, and polyclinics per 1,000 km2 in mountain areas, mostly due to a low number of these professionals in towns and rural communes (Table 17). There are very few medical practices, doctors and practically no hospitals or polyclinics in rural areas either in mountain or lowland regions. The remoteness and lower connectivity to large urban centers of many localities of mountain areas further limit people’s access health care units and specialized doctors. The most significant divide between mountain and lowland ATUs and Bucharest is in the number of doctors per 10,000 population. In mountain areas there are only 2/3 the number of doctors per 10,000 population compared with lowland regions and 40 percent of the number of doctors per 10,000 people compared with Bucharest. Throughout the country, there are many more doctors per 10,000 people in cities than in towns or rural areas. The number of doctors per 10,000 people CHAPTER II. MOUNTAIN TERRITORIES SOCIO-ECONOMIC PROFILE 29 in rural areas is so low that rural dwellers most likely need to go to towns or cities to be seen by a doctor. Though the number of family medical practices and health units per 10,000 population do not seem to be worse in mountain ATUs than in lowland ATUs on average, their number in both regions is about 70-75 percent of that in Bucharest (Table 17). TABLE 17. Medical services in mountain and lowland ATUs, 2020 Number per 1,000 km2 Number per 10,000 population Category Health units Health units Family medical Family medical Doctors (hospitals or Doctors (hospitals or practices practices polyclinics) polyclinics) All ATUs 45 276 3 4.8 29.6 0.28 Cities (municipalities) 411 4.201 38 5.0 50.6 0.45 Towns (oras) 50 226 6 4.4 20.0 0.50 Rural Communes 21 27 0 4.4 5.8 0.05 Bucharest 5.688 61.255 333 6.4 69.1 0.38 Mountain ATUs 25 96 2 4.7 18.2 0.29 Cities (municipalities) 222 1.669 22 5.1 38.6 0.52 Towns (oras) 39 170 5 4.7 20.5 0.60 Rural Communes 14 18 0 4.5 5.5 0.06 Lowland ATUs 48 286 3 4.6 27.7 0.26 Cities (municipalities) 516 5.597 46 4.9 53.4 0.44 Towns (oras) 59 277 6 4.2 19.8 0.45 Rural Communes 24 32 0 4.4 5.9 0.05 Source: Territorial Observatory 2023 (SAN UAT 421, SAN UAT 422, SAN UAT 423, POP UAT 211). Note: Figures for lowland ATUs do not include Bucharest. 4. Living standards in mountain and other areas of Romania A summary indicator of the challenges to keeping a quality workforce in mountain areas is income per capita. Income per capita in mountain areas was only 73 percent of the average in Romania without Bucharest. Rural mountain areas were a mere 23 percent of the country average. Living standards in Romania are still far lower than the EU average. Romania ranks near the bottom of the EU in terms of population at risk of poverty or social exclusion, GDP per capita, and the UNDP Human Development Index (HDI) (Table 18). TABLE 18. Romanian living standards compared to the EU average, 2021 Romania Rank European Union Category Romania in EU 27 average Population at risk of poverty or social exclusion (%) (2021) 34.5 27 21.7 GDP per capita, PPP (constant 2017 international $) (2021) 30,771 25 44,138 UNDP HDI rank (of EU countries, 2021) 0.821 26 0.903 Sources: World Bank WDI; Eurostat; UNDP Human Development Index (HDI), 2023. 30 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS ATU level indicators of living standards in 2018 show a much larger gap in living standards between mountain and lowland regions than Romanian county level statistics. GNI per capita in mountain areas using ATU level data was about 73 percent of the country average (without Bucharest) (Table 19). TABLE 19. ATU level indicators of living standards in mountains and lowlands, 2018 GNI dollars per capita 2018 (without Bucharest)** Category LHDI 2018* Atlas dollars All ATUs=100 All ATUs 58.8 8,899 100 Urban 67.3 13,867 156 Rural 47.7 3,566 40 Mountain ATUs 56.6 6,507 73 Urban 64.1 10,335 116 Rural 49.5 2,961 33 Lowland ATUs 59.4 9,665 109 Urban 68.0 14,894 167 Rural 47.1 3,779 42 Bucharest 74.9 25,502 287 *Bucharest included in urban, all ATUs, and lowland ATUs. **Bucharest not included in urban, all ATUs, or lowland ATUs. Source: World Bank estimates. The greatest differences in the ATU-level estimate of GNI per capita in 2018 were still between urban and rural areas throughout the country. GNI per capita in rural areas in mountain areas was a mere 33 percent of the average for the country without Bucharest ($2,961 vs. $8,899) and not much more in lowland areas. The GNI per capita of Bucharest was 187 percent higher than that of the country as a whole (without Bucharest). 5. Implications for a mountain development strategy Though rapid economic growth in Romania has reduced the share of the population at risk of poverty or social exclusion from 44.5 percent in 2015 to 34.4 percent in 2022 (Eurostat, 2023, ILC_ PEPS01N), large disparities between living standards in rural and urban, mountains and lowlands continue to grow. In 2018, income per capita in mountain ATUs was less than three quarters of that in the rest of the country (without Bucharest), and income per capita in rural mountain ATUs was only 33 percent that of the average of the country (without Bucharest). With such inequities between mountain (particularly rural mountain) regions and the rest the country, the negative migration trends will likely continue. Though there are ways to temporarily compensate for population and employment decline, a strategy for mountain growth ultimately will need to include measures to stem outmigration and prepare the mountain are workforce with the skills for high quality jobs. While mountain region incomes may never achieve parity with the lowlands, improvements in the workforce “ecosystem” of housing, utility connections, transportation connectivity, education, and health services may help to stem the outflow of the educated and skilled workforce. CHAPTER II. MOUNTAIN TERRITORIES SOCIO-ECONOMIC PROFILE 31 Instruments utilized in other countries for this purpose include investments in: 1. Infrastructure. This may include assistance to mountain and rural housing through low-cost loans, investments in connections to public utilities in mountain areas, and in transportation connectivity (roads, rail). 2. Education. This may include support for educational programs from early childhood through high schools. The purpose is to provide mountain pupils and students with skills for long-term employment success. Some examples of special programs for mountain areas are cross-school education programs for mountain high school students in science, technology, engineering, and mathematics (STEM), subsidized research opportunities for college students interested in mountain development, and local college mountain studies programs. A second area is adult education, aimed at providing a means for skill-building for career advancement and career transition. Typically, adult education is through online education through local colleges or universities. 3. Workforce development programs. A critical part of workforce development is consultation between public education leaders, development and industry representatives, vocational education institutions, and local colleges to identifiable education-industry career pathways within mountain areas. Collaboration can facilitate retention of a skilled mountain workforce through providing better awareness of occupational and career prospects within mountain areas. 4. Incentives for young professionals. There are fewer medical practices, doctors, and polyclinics per square kilometer in mountain areas primarily because of a low number of these professionals in towns and rural communes. Part of improving the mountain workforce ecosystem could be to facilitate low-cost housing loans and modern office facilities to young professionals, including doctors, dentists, teachers, etc., to attract them to mountain areas. None of these interventions will completely halt the outflow of young, skilled, and educated labor from mountain areas. However, they are a prerequisite to building a competitive economy in mountain areas that has the potential to raise living standards through high paying jobs. Labor force ecosystem programs have been used by the Appalachian Regional Commission (ARC, 2023) for decades, combined with targeted investment entrepreneurship and infrastructure grants, leadership training, and other programs to retain a quality workforce to improve living standards in Appalachia. CHAPTER III. MOUNTAIN TERRITORIES DEVELOPMENT 33 CHAPTER III. Mountain Territories Development Chapter III differs from the other chapters in this summary in that it is less about policies leading to economic growth and more about the growth process actually observed in mountain areas between 2014 and 2021. An analysis of data from 2014-2021 in mountain areas demonstrate that, despite higher rates of growth in employment and sales per capita, rural living standards in Romania are not catching up to urban ones. Absolute differences in sales per capita between rural and urban and mountain and lowland ATUs continue to grow meaning that economic living standards between rural and urban ATUs have actually widened. Second, in contrast to mountain cities, growth within rural areas affected more territory, more population, and, significantly, led to a much larger employment response. Thus, considering that poverty is predominantly rural in Romania, rural growth appears to be more pro-poor. Third, geographic proximity to a city (greater than 30,000 inhabitants) and good road connectivity have generated higher economic growth for rural areas. The average growth of real sales in 833 mountain ATUs is positively correlated with the degree of connectivity of mountain ATUs to cities. Moreover, and the number of ATUs with negative growth grew larger as connectivity decreased. Though the data on economic growth in mountain areas yields some regularities, there are countless factors that determine the success of mountain ATUs in generating economic growth. Proximity to a city plays a large role, but other factors that matter include large investments, nearby tourist attractions, community leadership, innovativeness of the population and the ingenuity of local administrations. Contrariwise, the presence of declining industries such as coal are associated with a general economic decline. These factors illustrate the difficulties in planning economic development from afar. There is a need to involve local governments, the public, and stakeholders in consultations and implementation of mountain development programs. 1. Economic growth since 2014 has seen inequalities in living standards between rural and urban and mountain and lowland areas continue to widen World Bank (2018, 2023d) showed that Romanian economic growth has led to growing unequal living standards. It might be thought that faster rates of growth and employment in rural and mountain areas could close the living standards gap. Data from 2014-2021 demonstrate that this is not true. Despite higher rates of growth in employment and sales per capita, rural regions in Romania are not catching up to urban ones. Rural employment in Romania is growing faster than urban employment. Between 2014 and 2021 (Figure 9), the number of employees in rural areas increased while those in urban ATUs 34 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS were relatively constant, even though the population decreased in both rural and urban mountain and lowland ATUs. Much of the employment effect is undoubtedly due to the migration of the rural agricultural self-employed into employment outside of agriculture. As self-employment in agriculture has proven to be a core factor correlated with poverty, this characteristic of rural growth and its employment effects should be taken account of in designing mountain development and anti-poverty programs. FIGURE 9. Number of employees and resident population, by territory, 2014-2021 (2014=100) 160% 0.5% 150% 0.0% -0.5% 140% -1.0% 130% -1.5% 120% -2.0% 110% -2.5% -3.0% 100% -3.5% 90% -4.0% 80% -4.5% 2014 2015 2016 2017 2018 2019 2020 2021 2014 2015 2016 2017 2018 2019 2020 2021 MA: Rural MA: Urban MA: Rural MA: Urban NMA: Rural NMA: Urban NMA: Rural NMA: Urban Source: Calculations using ATU data from the Ministry of Public Finance and the National Institute of Statistics.13 The analysis excludes Bucharest. Over the same period, despite the inherent growth potential of cities, growth rates of per capita sales (a proxy for GDP per capita) in rural areas have been higher than in urban areas (Table 20). TABLE 20. Mountain and lowland area growth in net sales per capita, 2014-2021 Mountain area net sales per capita (Lei) Lowland area net sales per capita (Lei) Environment Annual average Annual average 2014 2021 2014 2021 growth (%) growth (%) Urban 37,526 52,534 4.92 59,930 85,411 5.19 Rural 11,495 21,729 9.52 16,605 34,214 10.88 Source: Calculations based on data from the Ministry of Public Finance. Companies located in Bucharest are excluded from this dataset. The analysis excludes Bucharest. Despite higher rates of growth in employment and sales per capita, rural regions in Romania are not catching up to urban ones. Discrepancies between rural and urban ATUs have actually widened, with the largest relative increase in the discrepancy between lowland and mountain rural areas (about 144 percent). The reason for this result is the substantial difference between the base (2014) level of sales per capita in rural lowland and mountain areas and the slightly higher rate of growth of sales per capita in lowland rural areas (Table 21). 13The number of employees (including seasonal workers and management) are those with a work contract for a fixed or indefinite period, both full and part time (including those working on contracts that have been temporarily suspended), in the company's records at the end of the reference period. Resident population is that on January 1 of the reference year representing the number of people with Romanian citi- zenship and domicile on the territory of Romania. In establishing the value of this indicator, neither the usual residence, nor the period and/or the reason for the absence from home are considered. CHAPTER III. MOUNTAIN TERRITORIES DEVELOPMENT 35 TABLE 21. Increased disparities in sales per capita between mountain and lowland areas, 2014-2021 Absolute difference (Lei) Area Difference in sales per capita Change in difference (%) 2014 2021 Urban Lowland vs Mountain 22,404 32,877 +46.7 Rural Lowland vs Mountain 5,110 12,485 +144.3 Lowland Urban Areas vs Rural Areas 43,325 51,197 +18.2 Mountain Urban Areas vs Rural Areas 26,031 30,805 +18.3 Source: Calculations based on data from the Ministry of Public Finance. The analysis excludes Bucharest. 2. Rural growth in Romania since 2014 had far larger employment effects than urban World Bank (2007) found that agricultural growth has been particularly effective at reducing rural poverty because of its employment intensive nature. Data on Romanian mountain ATUs shows that rural economic growth in mountain areas has affected a far larger area, a larger population, and was responsible for a far larger employment effect than growth in mountain urban territories. Thus, rural economic growth in Romania is likely to have similar poverty reducing effects. The rural growth phenomenon can be demonstrated using data from 2014-2021 on annual real economic growth per capita (using sales per capita as a proxy) and local government expenditures in mountain ATUs. Figure 10 plots the real growth rate of sales per capita on the Y axis and the average annual value of the ratio of active (i.e., productive) to passive (i.e., strictly necessary) local administration expenditures by mountain ATU between 2014 and 2021 as an indicator of administrative performance. A ratio greater than 1 shows a focus of public spending on productive expenses (i.e., that will generate future growth), while a ratio lower than 1 suggests a focus on current functional expenses (i.e., personnel and social assistance). FIGURE 10. Mountain ATUs arrayed by growth in real sales and the A-P expenditure ratio, 2014-2021 Source: Prepared based on publicly available data 36 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS By quantifying these two performance indicators for mountain localities, the median value can be used to separate them into groups. Thus, applying this two-dimensional approach, each ATU can be categorized in one of the following four quadrants, presented in Figure 11: ● Public-driven growth – Economic growth is higher than the benchmark national median value between 2014 and 2021, and local public administration has an active to passive expenditure ratio greater than one. ● Private-drive growth – Economic growth is higher than the national median value, although local public administration has an active to passive expenditure ratio lower than one. ● Underperformers – Localities with positive economic growth that is lower than the national median value and local public administration performance is also subpar. ● Laggards - Localities with positive economic growth that is lower than the national median value, though with good performance of local public administration. ● Ineffective public spending – Localities with negative economic growth and an active to passive administrative expenditure ratio higher than one. ● “Shrinking” areas – Localities with negative economic growth and an active to passive administrative expenditure ratio less than one. FIGURE 11. A theoretical typology of mountain localities according to their performance To further enhance the analysis, an index of connectivity based on the distance of the ATU to the nearest city with a population above 30,000 was constructed. The index has a range of values between 0 and 1, with values closer to 1 indicating better connectivity than values closer to 0. Source: Authors. What conclusions pertaining to urban and rural ATUs can be drawn? First, most urban ATUs are in the “underperforming” quadrant, a result of two factors: (1) ATUs with high populations usually have high passive expenses because more people need social assistance, which involves direct social assistance expenditures as well as the supplementary services needed to provide them, and (2) large cities, due to their more complex and larger economies compared to rural areas, are affected by a base effect in terms of the annual growth of real sales14. 14 In the context of economic growth rate. the base effect refers to the fact that economic indicators (GDP, sales, employment, etc.) are influ- enced by previous levels of these indicators. If the base level is very low, then even a modest increment will result in a high growth rate. CHAPTER III. MOUNTAIN TERRITORIES DEVELOPMENT 37 Second, in contrast to mountain cities dominated by “underperformance,” growth within rural areas affected more territory, more population, and, significantly, led to a much larger employment response (Table 22). The data set used covered only a portion of agricultural labor, only those workers employed on contracts in legal entities. Nevertheless, growth, whether private or public driven, impacted on agricultural employment just as it did on other sectors. Thus, it would seem from the experience of 2014 to 2021 that rural growth has a far larger potential to increase employment than urban growth. TABLE 22. Effects of growth by performance typology (administrative performance, A-P ratio) Share of total (%) Employment change (persons) Category ATUs Territory Population Sales revenue Total Agriculture Total 100 100 100 100 Rural (only growth) 80 77 50 30 67,405 2,633 Private-driven growth 23 20 14 6 20,203 1,407 Public-driven growth 26 24 15 11 30,980 1,416 Laggards 17 19 11 10 12,233 -562 Underperformers 14 14 10 3 3,989 372 Ineffective public spending 4 4 2 1 -1,259 -194 "Shrinking" areas 4 4 2 0 -1,355 -43 Urban (only growth) 10 12 40 65 15,225 -1,056 Private-driven growth 1 1 2 3 3,767 66 Public-driven growth 1 1 1 5 6,096 54 Laggards 2 2 3 5 4,336 99 Underperformers 6 8 34 52 1,026 -1,275 Ineffective public spending 0 0 0 0 -318 3 "Shrinking" areas 2 2 7 5 -23,332 -125 Source: Calculations based on publicly available data. 3. Mountain group public administration performance reflects underlying economic fundamentals The analysis of the previous section focused on the economic growth and local public administration capacity of ATUs with no indication of the size of the population affected by the performance represented in six categories. To compare the size of the population affected by levels of public performance at the mountain group level the number of persons in each ATU was multiplied by the proportion of each of the categories (i.e., the six quadrants) based on the population of the ATUs instead of simply counting the number of ATUs in each category. By using this approach, Figure 12 presents the proportion of people of each mountain group living in certain types of ATUs categorized by performance. Figure 12 illustrates the importance of economic fundamentals in characterizing the performance of mountain groups. Mountain groups with a high concentration of counties focused on coal and 38 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS heavy industry performed poorly. Banatului and Poiana Ruscă as well as Reteza Godeanu Groups have the highest proportion of low performing ATUs, a result of their inclusion of large cities in counties like Caras-Severin and Hunedoara. These were historically counties with economies focused on coal and heavy industry. Furthermore, mountain groups may benefit considerably from spillovers from tourism and large urban centers. For the Bucegi Mountain Group, the good performance may be due to its proximity to Prahova Valley and the northern part of Dambovita county which are popular tourist destinations generating significant spillover effects. For the Apuseni Group the good results are mostly spillover effects of Cluj-Napoca city. Low performing ATU’s in the Apuseni Group are situated in remote areas. FIGURE 12. Distribution of local public administration performance of ATUs by mountain group (aggregation by population) 100% 11.7% 8.6% 8.2% 15% 14.3% 90% 21.6% 17.7% 5.3% 24.9% 29.8% 16.9% 16.9% 80% 16.0% 11.4% 16.2% 8.7% 70% 14.1% 9.1% 9.8% 43.2% 24.6% 16.9% 17.4% 60% 15.0% 36.0% 11.2% 14.0% 50% 4.9% 12.7% 40% 2.0% 60.3% 9.8% 30% 49.9% 47.7% 41.5% 29.5% 44.0% 48.2% 22.4% 20% 37.1% 10% 0.5% 4.2% 0.7% 2.3% 0.5% 9.6% 2.2% 9.2% 7.3% 0% 2.5% 1.5% 4.6% 1.2% North Central Southern Bucegi Făgăraș Parâng Retezat Banatului Apuseni Group Group Group Group Group Group Godeanu and Poiana Group Group Ruscă Group Shrinking areas Underperformers Private-driven growth Ineffective public spending Laggards Public-driven growth Source: Calculations based on publicly available data. 4. Proximity to a city has been a key growth factor Another key factor affecting the growth experience of mountain ATUs is the proximity to a bustling metropolitan center. To test the hypothesis that geographic proximity to a city (greater than 30,000 inhabitants) and good road connectivity generate higher economic growth for rural areas we defined 3 categories for ATUs: 1. Close proximity: a 30-minute driving distance around cities as an inner ring 2. Medium proximity: 30 to 90-minute driving distance around cities as an outer ring 3. Isolated ATUs: Greater than a 90-minute driving distance from cities Out of the total of 833 rural localities in the mountain areas, 278 were inside the inner ring, 513 in the outer ring, and 42 were classified as isolated mountain localities (Table 23). CHAPTER III. MOUNTAIN TERRITORIES DEVELOPMENT 39 TABLE 23. Distribution of rural localities according to their proximity to a city Number of Average growth Average ATUs with Share of ATUs with Category rural ATUs of real sales (%) Connectivity Index negative growth negative growth (%) Less than 30 minutes 278 11.02 0.50 21 7.55 from a large city Between 30 and 90 513 9.96 0.38 53 10.33 minutes from a large city More than 90 minutes 42 7.43 0.23 6 14.28 from a large city Source: Calculations based on publicly available data. It can thus be observed that there is an average growth differential of 1.06 percentage points (p.p.) between localities from the inner ring and outer ring and a more than 2.5 p.p. growth differential between localities from the outer ring and isolated areas (Table 23). There is also a dramatic15 difference between the average connectivity index of close-proximity and isolated rural areas which confirms the fact that the geographical proximity to large cities has a significant impact on the development of rural areas. The percentage of rural areas with negative growth (shrinking and inefficient public administration typologies) in isolated rural areas is almost double that of rural ATUs near large cities. MAP 2. Territorial distribution of mountain ATU performance Source: Prepared based on publicly available data 15A 0.25 points difference between average connectivity indexes is very large given the fact that the scale is logarithmic (as the earthquake Richter scale). 40 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS The strong correlation between connectivity to a city and development may also be demonstrated using maps. A map of ATUs graded by performance suggests a strong correlation between connectivity to a city and development (Map 2). The best performing ATUs are the ones closer to the edge of the mountain area or near a large urban center. Most of the localities that are isolated from large cities perform poorly by the metrics described. However, proximity alone is not sufficient to explain the performance of mountain localities. Map 2 shows that some of the mountain localities manage to overcome their geographical challenges and relative isolation through leveraging local landscape to their advantage and focusing on tourism (see the case study section on Dubova (village in Mehedinți County) – isolated but thriving), but this is not a panacea. If we overlap the results obtained through the connectivity index and the classification of cities in close proximity, medium proximity, and isolated rural areas on the road map of Romania, we notice that the road network plays a very important role in the growth potential of localities (Map 3). MAP 3. Territorial representation of mountain ATUs according to their proximity to a large city Source: Prepared based on publicly available data. TABLE 24. Isolated locations with shrinking economies and Table 24 shows the most vulnerable localities exposed to severe risks of depopulation and material and where neither public administration nor the social deprivation. private sector managed to generate economic Real Sales growth Locality Name County growth. These localities are more than 90 (2014-2021) minutes away from a large city by car, which Pojejena Caras-severin -2.30% leaves them at a disadvantage in two ways: Breaza Suceava -8.60% First, it is not profitable for companies to carry Iacobeni Suceava -4.60% out economic activity in these areas. Second, it Sopotu nou Caras-severin -1.20% is also very difficult and expensive (at least in Carbunari Caras-severin -12.20% terms of time spent) for residents to commute Grinties Neamt -4.40% to work in the nearest large city (30,000 Source: Calculations based on connectivity index and inhabitants). Compound Annual Growth Rate (CAGR). CHAPTER III. MOUNTAIN TERRITORIES DEVELOPMENT 41 5. A one-size-fits-all approach cannot be applied The growth experience in mountain areas demonstrates that there are many factors determining the success of mountain ATUs in generating economic growth. Proximity to a bustling metropolitan center plays a primary role in driving growth. The importance of road connectivity as a determining factor of economic growth is illustrated by the pair of communes Turdaș and Vorta, both located in Hunedoara County at a distance of 54 kilometers from each other and at an average travel time of 50 minutes. Turdaș (connectivity index 0.55) is located between Orăștie, a city of 20 thousand inhabitants, at 10 minutes driving time, and Deva, a city of 68 thousand inhabitants with a 20-minute driving time. Vorta (connectivity index 0. 0.41) is a much more isolated commune, with a 40-minute driving time from Deva. Even though the public administration in Vorta has a positive active to passive expenditure ratio and has attracted non-reimbursable funds (for the energy efficiency of the town hall and the development of sanitary and social infrastructure) business activity in the commune has decreased, mostly due to bankruptcies. Turdaș, even without attracting non- reimbursable financing and with a subpar active to passive public expenditure ratio, benefited from an investment by a German-Spanish consortium in a technologically advanced pig farm. A critical reason is its location near Orăștie directly on the A1 highway. In the case of this pair of communes, connectivity plays an important role. The difference in the connectivity indices is quite large (0.14 score difference).16 The innovativeness of the population and the ingenuity of local administrations in taking advantage of the factors at hand are difficult to quantify but also play an important role in economic growth. Dubova is an example of such a locality. Though Dubova has a low value connectivity index of 0.29 and a 60-minute driving time from the nearest large city (Drobeta-Turnu Severin), the locality has blossomed into a highly sought-after tourist destination because of its location adjacent to the famed “Iron Gates” national park and the renowned statue of King Decebal. Between 2014-2021, the number of hotels and restaurants has proliferated with an estimated surge of approximately 60% (with some guesthouses built through the aid of European funds). The local administration played a vital role in promoting and fostering tourism in the area by channeling investments into the construction of bridges and rehabilitating communal roads, drawing on a mix of self-financing and non-reimbursable funds. This case study serves as a pertinent illustration that proficient local administration that adeptly capitalizes on the region’s comparative advantages can surmount geographical isolation and foster prosperity. A further factor in supporting growth can be one massive investment. The commune of Reci exhibits a high connectivity index of 0.55 due to its location near two large cities, Sfântul Gheorghe (55,000 inhabitants, 16 kilometers distance) and Brasov (40 kilometers distance), and an accessible exit point to the European road E 574. Although the local public administration has an A-P expenditure ratio above one, the impressive growth rate of 60 percent over a period of eight years is not due to administrative capacity. Rather, this exponential growth can be traced back to the 2015 inauguration of a mammoth sawmill, presently generating over 90 percent of the total sales of the commune. This specific case emphasizes the significance of the base effect, highlighting how a substantial investment can catalyze a complete transformation of the economic landscape of a small commune. 16Given that the connectivity index takes a finite range of values from components that can take infinite values, the transformations performed on the connectivity measures #2 and #3 imply that even very small differences in the aggregate index (e.g., 0.02 points) can still imply different orders of magnitude in the extent of the access to large cities. 42 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS The growth experience of the worst performing mountain ATUs, those within the “shrinking areas” quadrant (bottom left), exhibited negative economic growth and a low active to passive expenditure ratio (Figure 13). These ATUs have both an overburdened public administration as well as economic decline. A good example is the city of Petroșani with an economy highly concentrated in the coal sector. Petroșani, with a Connectivity Index of 0.40, is a relatively large city in comparison to other mountain cities. However, it has experienced significant economic decline and may be considered a textbook example of a “shrinking city.” Until 2014, the Hunedoara Energy Complex and the National Company for Mine Closure in Jiu Valley were major employers in the city, contributing 58 percent of employment and 54 percent of the city’s sales revenue. However, both companies have since disappeared and the number of private sector employees in the city has declined from 14,600 to 5,800. 6. Implications for a mountain development strategy The continuing rural-urban and mountain-lowland divergence in living standards indicates that without specific policies to raise living standards in rural and mountain areas, these inequities will continue to widen. An inclusive mountain development strategy should incorporate, to the extent possible, pro-poor targeted policies without compromising economic growth. Nearly 70 percent of the poor reside in rural areas (World Bank, 2023d), and nearly 90 percent of Romanian households in the lowest income quintile in 2020 were either not working (50%) or relied on low productivity agriculture (38%) for their livelihoods (World Bank, 2022a). A mountain development strategy with programs to create employment opportunities in rural areas would be pro-poor not only because it would target rural areas where most poverty is located. It would be pro-poor because rural growth, as was shown in Table 22, is employment-intensive growth. FIGURE 13. Most Romanians in the bottom income The evidence that connectivity to a city is highly quintiles did not work or relied on agriculture in 2020 correlated with ATU growth prospects has 100% several implications for a mountain development 90% strategy. First, it makes clear the importance 80% Not working 70% Industry and of increasing the transportation network 60% manufacturing density within rural areas. Second, among the Services 50% Agriculture most effective strategies for achieving above 40% 30% Construction average economic growth is the establishment 20% of well-connected regional hubs centered around 10% the competitive advantage of the region and 0% Q1 Q3 Q3 Q4 Q5 its workforce, particularly in burgeoning or Income quintile prospective economic sectors. The establishment Source: World Bank 2022a. World Bank calculation based on of regional hubs can be a means to extend the EU SILC 2020. Romania Systematic Country Diagnostic connectedness of outlying districts, by bringing Update December 1, 2022. direct connections to cities closer. Last, the sheer variety of successful growth patterns found in Romania is an indication that it would likely be counterproductive for a mountain development strategy to attempt to identify specific interventions across territories according to a plan. Rather, the task of a strategy is to promote policies for poverty alleviation and growth for mountain territories, and to offer investment, training, education, and transportation programs to be targeted and implemented by local regional organizations, county and municipal governments. Developing the series of development programs for the mountain development strategy requires stakeholder consultation and close involvement with local regional institutions such as the Massif Committees, which include also participation of regional and municipal governments. CHAPTER IV. SECTORAL DEEP-DIVE: MOUNTAIN AGRICULTURE 43 CHAPTER IV. Sectoral Deep-Dive: Mountain Agriculture Consistent with urbanization patterns and agriculture transformation, agriculture has grown more slowly than other sectors in the Romanian economy. However, it is a vital sector for a mountain development strategy. It provides labor for the expansion of other (more remunerative) sectors in the mountain economy, such as manufacturing and services. It provides part time income for most of the rural population in mountain and lowlands areas alike. Last, farm structure in agriculture has made it a poverty pocket that no development strategy can ignore. Agriculture in Romania is not one sector but two or three. On one hand there is a commercial agricultural sector which produces field crops, such as maize, oilseeds and wheat, and is primarily responsible for the good growth and yield performance of the sector. Romanian agriculture has performed well (in terms of growth and yields) since 2000 compared with other EU East European transition economies. Agricultural performance in Romania in both mountains and lowlands between 2000 and 2021 has been characterized by the substitution of crop for livestock production, a relative increase in the production of cereals and other field crops, and a relative decline in high value, labor intensive crops such as potatoes and vegetables. Crop production in lowland counties has increased at a faster rate than in mountain counties, and the area cultivated with main crops appears to have fallen by nearly 20 percent in mountain counties while remaining stable in lowlands. On the other hand, there is a sector of small subsistence farms. These are predominantly part time farms, but those who have little or no employment outside of these farms make up an underclass of rural poor. The subsistence farm sector is a poverty pocket in the Romanian countryside which deserves its own set of policies. Nearly 40 percent of the poorest income quintile of households in 2020 were reliant on low productivity agriculture. In 2020, over 90 percent of holdings in Romania in 2020 were under five hectares, and 70 percent were under two hectares in size. The small size of land holdings is an issue common to mountain and lowland areas, though it is more severe in mountain counties. In between these two extremes, sharing characteristics of both, is a continuum of struggling small to medium farmers with the ambition to improve their performance. The dualistic or trichotomous structure of farming in Romania requires different policy regimes. The CAP provides a policy regime suitable for the class of commercial farmers and to some extent for small and medium sized farms. However, Romania has underinvested in policy instruments to support small to medium sized farms. To grow and prosper, these farms require a working cadaster and farm registration system to facilitate the transfer of land and labor from the subsistence farm sector to the small to medium aspiring commercial farm sector. They require extension and advisory services to improve their productivity, and assistance with access to markets (including marketing associations) to sell their production. Further efforts to encourage farm associations in mountain areas should include investments in collection centers and support to farmers to cooperate, either formally or informally, to collect production in one location. 44 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS The Romanian CAP Strategic Plan is targeted towards commercial and aspiring commercial farms. The pro-poor effects of CAP support are extremely limited. The income support Pillar I payments of the Romanian CAP Strategic Plan in 2023-2027 will be restricted to farms over 1 ha in size, just as they were in the previous CAP period. In 2019, about 28 percent of farms accessed these funds, about the same share of farms with holdings above 2 ha. CAP Pillar II payments are aimed at supporting financially viable farms and are limited to holdings above various standard output (SO) value thresholds. 1. The role of agriculture in mountain development The 2018 Mountain Law sets out an agenda of raising living standards in mountain areas through an inclusive and sustainable process supported by the Romanian state. Thus, a mountain development strategy should address the needs of all three subsectors of agriculture, as well as on the structural transformation of the sector. The overall aim of raising overall living standards in mountain areas in the 2018 Mountain Law suggests that a mountain development strategy built upon it should focus both on raising living standards for farmers who remain in agriculture and for those who seek to exit the sector. Raising living standards within agriculture is usually associated with raising labor productivity through capital investments, technical change, and yield growth. A further factor supporting labor productivity increases is increasing holding sizes. Larger holding sizes can be facilitated through a functioning land cadaster and farm registration system, land consolidation programs, support for extension and advisory services to support medium-sized holdings, and support for agricultural marketing associations for small and medium sized farmers. Living standards in rural areas can also be raised through the facilitation of labor transfer out of low-productivity agriculture into other sectors. Such labor transfers often require assistance with finding jobs, lifelong learning and training opportunities, and on-the-job training. The most important role the state can play in raising living standards is to support the development of the mountain economy with enabling institutions that support structural change with effective institutions that are responsive to mountain population needs. An inclusive mountain development strategy should contain provisions to address the needs of the poorest rural households through separate policies that stress income support, training for employment outside of agriculture and lifelong learning opportunities. Structural funds and other funding sources should be used to target poverty in mountain areas. Agriculture in the Romanian economy is undergoing a structural transformation characterized by a decline in the share of GDP produced by and labor force employed in agriculture. Since 2000, the sector has grown at one third the rate of the economy shrinking its contribution to less than 5 percent of value added (Table 25). Agriculture’s share in employment (without subsistence farmers) fell to 11 percent of the labor force in 2021. Labor productivity in agriculture is a mere 14 percent that of that in the Romanian economy. Mountain and lowland counties do not differ much on these basic measures, although it important to state this is based on county level data, rather than specific ATU data, which indicates extrapolations at the massif level need to be considered with caution. CHAPTER IV. SECTORAL DEEP-DIVE: MOUNTAIN AGRICULTURE 45 TABLE 25. Agriculture’s role in the Romanian economy over 20 years Agriculture value added and GDP (1999/2001=100) 1999-2001 2019-2021 Agriculture 100 132 GDP 100 211 Agriculture, share of GDP (%) 2000 2020 Total 10.8 4.2 Mountain counties 13.7 4.6 Lowland counties 9.6 4.0 Agriculture, share of employment (%) 2000 2021 Total 41 11 Mountain counties 42 12 Lowland counties 41 11 Real value added per worker in agriculture (2000 prices, Lei) (3-year average) 1999-2001 2018-2020 Total 2,329 3,241 Mountain counties 2,830 3,580 Lowland counties 2,055 3,058 Ratio: Labor productivity in agriculture to labor productivity in Romanian economy (%) 21 14 Sources: Estimates based on RINS 2023 (AGR206A, AGR204A, FOM103A, FOM103D) and World Bank WDI (2023). Overall, agricultural patterns of growth are not contributing to unleash the potential of the sector to expand rural prosperity. The added value of agricultural production (in real terms) has grown at very modest rates in comparison with the overall economy. The sector grew at a negative rate during the 2000s (-1.2% average annual growth rates), and well below the growth rates displayed for the rest of the economy (5% ). However, during the last decade, agriculture growth accelerated (2.8% during the period 2011-2021), and although still below the rates experienced by the overall economy (3.5%), this represents a significant improvement from the poor performance in the previous decade. Despite its lessening importance in the Romanian economy, mountain agriculture is still a vital sector for a development strategy aimed at raising living standards for three reasons. First, despite an overall decline in the labor force, agriculture has provided labor for the expansion of other (more remunerative) sectors in the mountain economy, such as manufacturing and services. Second, agriculture provides part time income for most of the rural population in mountain and lowlands areas alike. Thus, improvements in the opportunities offered in agriculture have the potential to reach the majority of rural residents. Third, farm structure in agriculture has made it a poverty pocket that no development strategy can ignore. Finally, beyond a mountain development strategy, agriculture will continue to demand the attention of policy makers in Romania, even as its contribution to GDP continues to fall for several reasons. First, a dynamic and resilient commercial agricultural sector can contribute significantly to growth, value addition, and the creation of more and better jobs on and off the farm. Second, expanding agricultural growth to the struggling small to medium farmers with the ambition to improve their performance is essential for reducing rural poverty. Third, although the share of total harvested area in mountain counties is small (17.4% in 2021), production in mountain counties is more diverse 46 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS than in lowland counties. Therefore, sustaining growth in mountain agriculture is important for the support of a diversified agrifood sector in Romania. Fourth, a large percentage of mountain farming is conducted in grasslands and arable land defined as High Nature Value Farmland (HNV). On these lands agriculture performs ecosystem services and preserves valuable landscapes. Maintaining these services, provided they are remunerated sufficiently, is one of the multiple functions of mountain agriculture. 2. Agriculture: labor, farm size and rural poverty Agriculture has provided a source of labor for other sectors during a period of overall employment decline and part time employment for most of the rural population. Between 2008 and 2020, agricultural employment in Romanian declined by 700 thousand workers (Table 8). Though some of this decline undoubtedly resulted in labor force exits, a portion of this workforce took up employment in manufacturing, construction, and services where labor declines were considerably less than average. This phenomenon characterizes both mountain (Table 9) and lowland regions. Between 2014 and 2021, despite falling population (and overall employment) in rural mountain areas, Figure 9 illustrated that employment in registered companies grew. One source of this growing employment was a move of workers from working as physical entities in agriculture to employment in legal entities, predominantly outside of the sector (Table 20). TABLE 26. Most rural inhabitants work part time on family farms Agriculture provides part time employment for most of most of the County typology Share of time worked (Annual Work Unit, AWU) % rural population. In 2016, about 65   0–25 25–50 50–75 75–100 100 percent of rural inhabitants worked under quarter-time on their own family 2013 71 20 5 3 1 Mountain  farms (Table 26). 2016 68 20 6 4 2 2013 70 21 5 3 2 Lowland  2016 63 23 7 4 3 2013 70 20 5 3 2 TOTAL  2016 65 22 7 4 3 Source: World Bank, 2022b. However, subsistence agriculture in Romania is a source of poverty. Romania has made important economic development progress, but this progress has been unequal across the country with persistent and widening gaps in living standards between urban and rural areas (Table 27). Poverty is concentrated in rural areas where 70 percent of the poor reside (World Bank, 2023d). According to Eurostat, the national at-risk-of-poverty or social exclusion rates in rural areas exceeded those in cities in 2022 by over 30 percent and those in towns and suburbs by 20 percent. According to the World Bank (2023d), the national at-risk-of-poverty rates in rural areas were nearly six times higher than in cities (Table 28). In 2021, per capita income in rural areas was 64 percent of that in urban areas, while farm household per capita income was 41 percent of that in urban areas (RINS, 2023). CHAPTER IV. SECTORAL DEEP-DIVE: MOUNTAIN AGRICULTURE 47 TABLE 27. Romania: Persons at risk of TABLE 28. National at-risk-of-poverty rates in Romania, 2020 poverty or social exclusion by degree of Population Share of population living in poverty (%) urbanization, 2015 and 2021 Cities 6.9 2015 2021 2022 Towns/suburbs 16.9 National 23.4 Cities 31.5 16.1 18.9 Rural 38.9 Towns and 37.7 30.6 30.8 Elderly/living alone 40.5 suburbs Self-employed 55.7 Rural areas 57.8 50.3 47.9 Unemployed 58.9 Source: Eurostat. 2023. Persons at risk of Primary education 64 poverty of social exclusion by degree of Roma* 78 urbanisation. (https://ec.europa.eu/eurostat /databrowser/view/ilc_peps13n/default/ Source: World Bank, 2023d. World Bank calculation based on EU table?lang=en). Statistic of Income and Living Conditions 2020; *Roma poverty is based on EU Agency for Fundamental Rights 2022, which might not be fully comparable to the national poverty rate based on EU SILC 2020. Subsistence agriculture throughout Romania is at risk of becoming a poverty pocket due to the slow agricultural transformation in Romania which has kept labor productivity and wages low in agriculture. The value of agricultural value added per worker in agriculture was about 14 percent of average output per worker in the Romanian economy in 2018-2020 (Table 25) and 38 percent of the bottom income quintile households depend on low-productivity subsistence agriculture (Figure 13). A primary reason for rural poverty in Romania is the small size of most farms in Romania. In 2020, over 90 percent of holdings in Romania in 2020 were under 5 ha, and 70 percent were under 2 ha in size. The farm size issue is a result of the 1991 land reform that favored atomization of farmland and left farmers with few opportunities for profitable production (Otiman, 2012, Tara, 2020). Over 70 percent of Romanian agricultural holdings are 2 hectares or smaller, while in the EU only 41.2 percent are of this size (Table 29). The median farm size in Romania and the EU2717 is similar, but the share of holdings in Romania between 0 and 2 ha is much higher than the average for the EU27 (Figure 14). In 2020, Romania was home to 55 percent of the EU agricultural holdings in the 0-2 ha category. TABLE 29. Share of agricultural holdings by size FIGURE 14. Frequency distribution of agricultural category, Romania and EU27 holdings in Romania and EU27, 2020 Romania: percent EU27: Percent of 80 Farm holding of holdings by size holdings by size 70 size 2010 2020 2010 2020 60 0 ha 3.5 1.6 2.1 1.4 50 0-2 ha 70.8 70.8 47.7 41.2 >2-5 ha 18.8 18.0 20.5 21.2 40 >5-10 ha 4.7 5.6 10.9 12.4 30 >10-20 ha 1.1 1.9 7.4 8.7 20 >20-30 ha 0.3 0.6 3.0 3.8 10 >30-50 ha 0.2 0.6 3.1 3.9 0 >50-100 ha 0.2 0.4 3.0 3.9 0 ha 0-2 ha 2-5 ha 5-10 ha 10-20 ha 20-30 ha 30-50 ha 50-100 ha 100+ ha >100+ ha 0.4 0.6 2.4 3.6 Total 100.0 100.0 100.0 100.0 Romania EU27 Source: Eurostat, 2023. 17 Abbreviation of EU which consists of 27 countries (Belgium, Bulgaria, Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slo- vakia, Finland, Sweden), as of 1 February 2020. Source: https://trade.ec.europa.eu/access-to-markets/en/glossary/eu-27. 48 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Romania has experienced some restructuring of its farm sector. The number of agricultural holdings has contracted over the decades. In 2020, there were nearly 1 million less agricultural holdings in Romania compared to 2010, a contraction of 25 percent (Table 30). The most impressive declines have been in farms under 5 ha. Equally impressive is the fact that the number of farms over 10 ha has grown for each category. Despite these changes, Romania is still home to 32 percent of all agricultural holdings in the EU 27. TABLE 29. Number of farms in Romania, 2010 and 2020 TABLE 30. Share of total land in farms by size category, Romania and EU27 Farm holdings Number of farms % change Utilized Agricultural Area(UAA) (%) size Agriculture 2010 2020 Romania EU27 holding size class 0 ha 134,710 45,570 -66.2 2010 2020 2010 2020 0-2 ha 2,731,730 2,042,630 -25.2 0-2 ha 13 10 3 2 2-5 ha 727,390 519,440 -28.6 >2-5 ha 17 13 5 4 5-10 ha 182,440 161,020 -11.7 >5-10 ha 9 9 6 5 10-20 ha 43,610 56,200 28.9 >10-20 ha 4 6 8 7 20-30 ha 9,730 18,160 86.6 >20-30 ha 2 3 6 5 30-50 ha 8,210 16,890 105.7 >30-50 ha 2 5 9 9 50-100 ha 7,480 11,150 49.1 >50-100 ha 4 6 16 16 100+ ha 13,730 16,010 16.6 >100+ ha 49 48 48 52 Total 3,859,030 2,887,070 -25.2 Total 100 100 100 100 The decline in the number of agricultural holdings in Romania is important, but more important for production has been transfer of land from holdings under 5 ha to larger farm size categories (Table 31). Fully 30 percent of utilized agricultural area was held in farms under 5 ha in 2010. In the EU27 this share was only 8 percent. The Romanian 2010 share was decreased to 23 percent by 2020, while in the EU27 this share fell to 6 percent. On the other end of the size spectrum, farms over 50 ha in size now hold 54 percent of UAA in Romania. This share of land in farms can be compared with that of the EU 27 which is 68 percent. The maintenance of such a large share of land in small holdings is an obstacle to the development of commercial agriculture in Romania. Despite the recent changes, Romania has yet to establish a viable, commercially oriented middle-sized family farming sector. In 2020, about 70 percent of farmers in Romania produced a standard output (SO)18 per year of less than 2,000 euros (Eurostat 2023). This contrasts with countries such as Poland and Italy, which also have large populations of small-scale farmers that produce a higher standard output (Figure 15). 18 Standard Output refers to the average monetary value of the agricultural output at farm-gate prices. CHAPTER IV. SECTORAL DEEP-DIVE: MOUNTAIN AGRICULTURE 49 FIGURE 15. European Union Farm Distribution by Standard Output (in % of total farms) 80 70 60 50 Poland 40 Romania 30 20 Italy 10 0 Less than €2,000 €2,000 - €3,999 €4,000 - €7,999 €8,000 - €14,999 €15,000 - €24,999 €25,000 - €49,999 €50,000 - €99,999 €100,000 - €249,999 €250,000 - €499,999 €500,000 or over Source: Calculations based on Eurostat, 2023. Furthermore, as in the rest of the EU, the average age of Romanian farmers is high and increasing. Only 11.9 percent of EU farm managers were under the age of 40 years old in 2020 (Eurostat 2023, farmers and the agricultural labor force). As per the latest official EU statistics available, in 2016, over two thirds of Romanian farmers were 55 years old or above,19 and only 3.1 percent of farmers were younger than 35. Older farmers tend to operate smaller farms and have lower educational levels. It is expected that the aging of the farm population will lead to major shifts in land ownership and management in the next 15 years and has the potential to increase farm size and commercial viability of farm operations (World Bank 2018, Background Note: Agriculture). There is a renewed call for the new generation of young farmers to be better educated, digitally literate, and interested in adopting agricultural technology. In summary, Romanian farming is undergoing structural transformation, however, as of 2021, this structural change has yet to significantly affect the average labor productivity in agriculture. The smallest farms are becoming fewer, there are more larger farms, and the share of land cultivated by larger units has increased. But labor productivity of the smallest farms (71 percent of the total number) fell between 2010 and 2020, while labor productivity for all other classes increased (Figure 16). FIGURE 16. Romania: labor productivity by farm size, 2010 and 2020 80 70 60 2010 50 40 2020 30 20 10 0 0-2 ha 2-5 ha 5-10 ha 10-20 ha 20-30 ha 30-50 ha 50-100 ha 100+ ha Source: Eurostat, 2023. 19 Specifically, 44.3 percent were above 64 years of age, and 22.4 percent were between 55 and 64 years. 50 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS The small size of land holdings is an issue common to mountain and lowland areas. However, it is worse in mountain counties. The size distribution of land in mountain counties is significantly shifted toward small farms, while that in lowlands emphasizes large farms. Mountain county farms hold nearly half of all UAA in farms under 10 ha in size, while lowland county farms hold only 24 percent of total land in such farms. On the high end, in lowlands, 60 percent of land is held in farms over 50 ha in size. This share is only a little over 30 percent in mountain counties. TABLE 31. Distribution of land in farms in mountain and other counties, by farm size, 2020 Mountain Counties Rest of the Country Total Agricultural holdings Size (ha) 1000s 1000s Cumulative % 1000s Cumulative % Cumulative % (ha) (ha) <0.5 97 2.5 165 1.9 262 2.1 0.5-1.0 147 6.3 178 3.8 325 4.6 1–2 326 14.8 403 8.4 729 10.3 2–5 732 33.9 868 18.1 1,600 22.8 5 - 10 528 47.6 560 24.4 1,088 31.4 10 - 20 326 56.1 437 29.3 763 37.4 20 - 30 153 60.1 289 32.5 442 40.8 30 - 50 211 65.6 453 37.6 664 46.0 50 - 100 240 71.8 544 43.7 784 52.2 100+ 1,082 100.0 5,023 100.0 6,105 100.0 Total 3,842 100.0 8,921 100.0 12,763 100.0 Source: RINS, 2022, v. 2 of 2020 agricultural census. 3. Small and medium size farm agricultural enablers Romania has underinvested in instruments for small and medium-sized farm support. These include: modernization of the cadaster and agriculture and innovation systems Cadaster Land registration and the cadaster is underdeveloped in Romania. The knowledge of who owns the land and what rights, restrictions, and restrictions are attached to individual parcels as well as these parcels’ geographical limits are not legally settled for a large share of agricultural (and other) lands. On average, little more than a third of the land is registered by the National Agency for Cadaster and Real Estate Advertising (ANCPI). This lack of registration has a detrimental effect on land markets and investment opportunities, leading to high transaction costs and hindering the transfer of land to more productive uses. The challenges faced by mountain areas are reflected in the share of mountain area that is recorded in the cadaster. Map 4 and Figure 17 below show that less than a quarter of the total mountain area is recorded in the land registry. By comparison, more than 40 percent of the non-mountain is registered. There are however differences between mountain groups, with the Mountain Group 8 (Banatului and Poiana Ruscă Mountains) having the lowest share of registered land (around 16 percent) and the South, Făgăraş and Retezat-Godeanu Groups having the highest share of registered land (at around 25 percent). CHAPTER IV. SECTORAL DEEP-DIVE: MOUNTAIN AGRICULTURE 51 MAP 4. Share of mountain land registered by mountain group Source: World Bank estimates based on ANCPI data (February 2022)) FIGURE 17. Share of mountain land area registered, by mountain group, vs lowlands 45,00 40,00 35,00 30,00 25,00 20,00 15,00 10,00 5,00 0,00 Nordic Central South Bucegi Făgăraș Parâng Retezan-Godeanu Banatului&Poiana Rusca Apuseni Mountain area (total) Lowlands (total) Source: World Bank estimates based on ANCPI data (February 2022)) In terms of land registration by land use type, agricultural areas have a higher rate of registration compared to forestry and non-agricultural areas. With around 30 percent of agricultural areas in the mountain being recorded in the land books, followed by 26 percent of non-agricultural areas and less than 20 percent of forestry areas. Again, there is some degree of variation between mountain groups (Figure 18). Agricultural areas in Retezat-Godeanu Group have a higher-than- average share of registration (around 39 percent) while the South and Făgăraş Group have around 25 percent of their forestry areas recorded in the land books. At the other end, the Nordic and Banatului and Poiana-Ruscă Groups have the lowest share of registration for all types of land. 52 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS The poor situation of land tenure documentation in the Romanian mountains creates a series of problems. Lack of clarity on ownership titles cause additional efforts for accessing loans since banks typically collateralize loans with land. Untitled land without a clear ownership structure makes lending against land owned by smallholders very difficult, and such borrowers often do not have other assets to collateralize. Farmers face high transaction costs of land transfer. Problems of land registration negatively impact land markets and agricultural investments because of the high transaction costs of land transfer and the difficulties of transferring land from low productivity farmers to higher productivity ones. Schwabe, and others (2022) illustrates the problems faced by younger, entrepreneurial mountain farmers wanting to grow. One farmer interviewed reported that he rents 20 hectares from about 30 people and that he wants to consolidate the land he uses by buying it. He states that the biggest hurdle for consolidation is that the owners miss the papers for the land they own. The problem of land market transaction costs is particularly severe, because of the strong need for consolidation. World Bank (2022b) observes that the value of the output is as little as 2,000 euros on more than 70 percent of agricultural holdings. The study furthermore finds that a small farm is viable is it produces a production value of at least 8,000 euros with an additional 20 percent below that point still having the opportunity to grow. If the 8,000 euros threshold were to be used, it would mean that only 6 percent of the farms are economically viable. FIGURE 18. Share of land registered in the ANCPI database by type of land use 45,00 40,00 35,00 30,00 25,00 20,00 15,00 10,00 5,00 0,00 Mountain area (total) Nordic Central South Bucegi Făgăraș Parâng Retezan-Godeanu Banatului&Poiana Rusca Apuseni Registered agricultural area Registered forestry area Registered non-agricultural area Source: World Bank estimates based on ANCPI data Poor land registration impacts access to EU support. Poor registration furthermore negatively impacts the implementation of EU-funded projects, such as those in transportation, environmental protection, and regional development, as well as farmers’ access to funds under the CAP. The problems created by the poor land tenure situation in Romania’s mountain areas may be addressed by improving the process of land registration and the cadaster. This task requires that the ANCPI, the Ministry of Justice, and other national and local authorities work together. MARD should seek a partnership with ANCPI to improve the system. Special attention should be given to young farmers wanting to establish themselves or expand. Currently, there is a lack of support and advisory services on how to deal with the system. Assisting young farmers to ensure land CHAPTER IV. SECTORAL DEEP-DIVE: MOUNTAIN AGRICULTURE 53 access could be a priority during a reform of the land registration and cadaster system. Romanian Local Action Groups could also provide critical support services alongside other associations like cooperatives. Learning how to navigate the difficulties of accessing land, including dealing with absent, poor, and incomplete registration, could be combined with providing access to finance. Lowering land market transaction costs by improving land registration and the cadaster is one needed change to facilitate the structural transformation of the sector. Studies suggest that a relatively low number of small farmers have the potential and desire to grow and will need land transfers from a large number of other small farmers to allow them to do so (World Bank 2022b). The big challenge of Romanian agricultural policy is to identify the potential future rural entrepreneurs and put in place the legal frameworks and support instruments that allow them to fulfill their potential while ensuring that the exit of many others from farming does not lead to social problems. A functional land market based on proper registration and cadaster system is key to facilitate farmer choice. Romania may need to adapt its way of reforming land registration and the cadaster to its history and specific circumstances. Reforming land registration and the cadaster is an old theme in Romanian agricultural policy. Păunescu, and others (2022) observe that the existing National Program of Systematic Land Registration aims to register all land by 2023 but finds that this goal appears unrealistic as the project was very far from its target. They observe that the rigidity of the process may be an explanatory factor. They also acknowledge the richness of the current Romanian debate on why the reform process is so slow. Different Romanian professionals argue that the delays are caused by legislative issues, technical land surveying, and procedural aspects. Păunescu, and others (2022) find that a less rigid approach may prompt a speedier implementation. The current Romanian approach is modelled on the approach in EU countries with long standing traditions in land registration. Instead, Păunescu, and others (2022) recommend the application of a ‘fit-for-purpose’ approach considering the different historical context of Romania. This approach is participatory and uses methods adapted to a country’s specific challenges. The fit-for-purpose approach is based on four principles: visible (physical) boundaries rather than fixed boundaries, aerial images rather than field surveys, accuracy linked to purpose rather than technical standards, and incremental improvement. Romania could consider adopting fit-for-purpose principles. One way to begin could be to implement a pilot project testing the approach. Agricultural knowledge and innovation systems. Romania’s Agricultural Knowledge and Innovation System (AKIS) is one of the weakest and most underfunded in the EU. The European Union in its recent review of Romania research, development, and innovation (RD&I) system highlights that Romania has the lowest RD&I intensity across the EU (EC, 2022 Country Review). Data from Eurostat shows that Romania has one of the lowest gross domestic expenditures on RD&I and one of the lowest shares of rural development funding spent on RD&I. Underfunding limits institutional capacity to maintain staff, premises, and major equipment. AKIS in Romania is weak due to over-fragmentation and overlapping roles, limited incentives for cooperation, and weak accountability measures. Lack of coordination still exists between national and regional bodies, though this situation has been recently improving. Limited integration of agricultural research, extension and advisory services (EAS) and education activities results in inefficient assistance to farmers (Zaalmink and de Groot, 2022). Government support programs promoting digital agriculture are limited, and not enough is being done to promote training, e-extension, or education programs focusing on ICT applications for agriculture (World Bank, 2018). Furthermore, the EU review also highlights that lack of transparency on funds allocation and of robust impact evidence, results in mis-funding of Romanian AKIS, which hinders policy effectiveness. 54 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Romanian agricultural research needs a stronger vision, talent attraction and more cooperation with the private sector. The EU’s review pointed out that despite the existence of strategies and laws governing the research system in Romania, the system lacks a sufficiently articulated vision to channel efforts towards correct streams and that efforts to increase stakeholder engagement in the design of strategies has been insufficient, leading to questions on the openness of decisions and the endorsement of research strategies. The inability to attract early career researchers limits work on innovation and weakens capacity to compete for EU funds. Furthermore, public-private cooperation is limited, although some successful cases such as the AgriLink Living Labs signal a way forward. However, most of these cases have taken place on an ad hoc basis and due to the availability of external funding. Public support to private innovation initiatives is still limited and the system lacks the right incentives. Other studies have also pointed out weaknesses of the system, such as its inability to attract human resources, due to small wages, frozen posts, unpredictable career tracks, unattractive framework conditions, and weak funding capacity for programs. Lack of coordination among EAS actors limits the effectiveness of consulting services offered to farmers. Romania has a multiplicity of actors in the EAS sector, with different skillsets and unequal presence over the territory. Romania’s public sector EAS has limited human resources, poor area coverage and skill gaps in emerging market needs, which affects the quality of assistance to farmers (OECD, 2022). EU-supported Local Action Groups cover 93 percent of the rural territory and provide beneficial information to farmers regarding accession to funds or rural development projects, however, they lack other forms of EAS expertise needed by farmers.20 A growing number of private sector players are offering EAS, in part due to the financing opportunities provided by EU programs. Particularly to larger players, consulting firms help in project grant applications, along with technical support for the duration of projects (Rusu, 2014). Over 700 non-governmental organizations are quite dynamic in offering EAS to farmers, in areas including associative action, animal breeding or food processing (GFRAS, 2023). Enhancing the complementarity of public and private EAS professionals could strengthen the institutional architecture of the system and ultimately improve services offered to farmers and rural populations. There is ample supply of agricultural education in Romania, but despite low levels of education of the agricultural workforce, demand is not growing. There are a significant number of institutions involved in agriculture education, however, skills offered by Romania’s agriculture education don’t necessarily match market requirements and the sector’s needs (Zaalmink and de Groot, 2022). The majority of educational programs are theory-oriented, and have limited links with agriculture research and consulting, and with the private sector. Furthermore, there is a lack of specialized and entrepreneurial knowledge among agriculture education teachers. Romania’s agriculture sector farm managers and workers have limited formal and digital skills, which is an obstacle to efficient work and hinders the international competitiveness of the sector. However, demand for agriculture education is falling, in part because low wages in the sector are not competitive with those offered in the tertiary sector or with job opportunities elsewhere in the EU. Investments under the National Recovery and Resilience Plan (NRRP) aim at supporting priorities stated in the national strategic framework for education towards 2030, including in agriculture. Other EU-funded programs (such as the European Social Fund+ education and employment program) are to complement these measures by investing in improving the quality of teaching through staff training, and support for improved participation of students from disadvantaged groups. 20 LEADER is a local development method which has been used for 30 years to engage local actors in the design and delivery of strategies, decision-making and resource allocation for the development of their rural areas. It is implemented by around 2,800 Local Action Groups (LAGs), covering 61% of the rural population in the EU and bringing together public, private and civil-society stakeholders in a particular area (situation as of end 2018 - EU-28). In the rural development context, LEADER is implemented under the national and regional Rural Develop- ment Programs (RDPs) of each EU Member State, co-financed from the European Agricultural Fund for Rural Development (EAFRD) (https:// enrd.ec.europa.eu/leader-clld_en.). CHAPTER IV. SECTORAL DEEP-DIVE: MOUNTAIN AGRICULTURE 55 Though Romania has promoted aggregation via agricultural associations, agricultural cooperatives, and producer groups, most of these organizations have been formed in the lowlands. Limited integration of mountain farms in agri-food chains constrains sector capacity to add value. Romania’s mountain area is a supplier of quality food raw materials, and this could be well exploited in the long term, primarily given the growing demand for products from sustainable agriculture and from an area that preserves a high level of biodiversity (Satului 2022). Small and medium- sized farms are actively involved in short supply chains, particularly with local farmer markets. However, they are not integrated into the larger agri-food sector. They lack market information, the scale required by large retail chains or processors, and the capacity to meet trader compliance or traceability rules (World Bank 2022b). Low integration between these players constrains the sector’s capacity to generate value added (World Bank 2022c). Associative forms of agriculture have the potential to provide individual farmers with the benefits arising from economies of scale (bulk purchase of inputs, shared costs of certifications, standards or equipment, or collective marketing among others), to facilitate knowledge, and provide technical and human support to individual members. Romania has promoted aggregation via three legal entities: agricultural associations, agricultural cooperatives, and producer groups. Most of them have been formed in the lowlands and focus on grains, oilseeds, and horticulture, though some exist in mountain areas, focusing on dairy and to a lesser extent horticulture. Improved collective action of farmers for product aggregation and service provision in mountain areas is possible. Steps to promote aggregation of production to reduce inefficiencies associated with collection of small quantities from many farmers include investment in collection centers and encouragement and support to farmers to cooperate, either formally or informally, to collect their production in one location. Efforts to promote collective action of farmers through the establishment of producer/cooperatives organizations have so far been met with limited success and only a very small percentage of farmers are members of cooperatives. Therefore, it may be opportune to explore other modes of cooperation and aggregation that may be more widely accepted as well as providing information on the benefits to be gained by stronger collaboration. Continued efforts, as proposed in the National Strategic Plan (PNS 2023-2027), need to be undertaken to support farmers, producer groups, cooperatives, and local communities to further develop short value chains, including efforts to develop closer links with supermarkets. Further analysis on farmer collective action can be found in the report: Approaches to Support Downstream Value Chain Integration in Romania Mountain Area, prepared by the World Bank as part of the Romania Mountain Area Development Support (P176070). Reimbursable Advisory Services (RAS) agreement (P176070) established with the Ministry of Agriculture and Rural Development (MARD). The Mountain Products scheme is promising yet further efforts should be made to bolster consumer demand and ensure more reliable supply chains. An example of an effort to promote consumer demand with potential for tourism tie-ins is small home restaurants specializing in the preparation of mountain product meals. Products originating in the mountain area are supported through the dedicated “mountain product” quality scheme. In 2012, the EU adopted regulation No. 1151/2012, that, among other things, launched the “Mountain Product” quality scheme. This scheme seems to protect the authenticity of mountain products by defining what constitutes a mountain product and by certifying them. The designation may only be applied for products made from raw materials including feed coming from mountain areas and processing must take place in mountain areas. The Romanian Mountain Area Agency (AZM) has established the legal framework for Romanian farmers to apply the “Mountain 56 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Product” label.21 addition, 1,104 products are certified under other quality systems22, of which 409 are in the mountain area. Beyond the mountain quality scheme, the uptake of other quality schemes in Romania is very low (Table 32). According to the most recent information provided by ANZM, as of December 2022, there are 3905 products certified in the “mountain product” quality system. Most certified products are fruit and vegetable-based and or minimally processed. The share of certifications for value-added products via secondary processing, like tinned meat or bakery products is lower in comparison to primary products or with minimum processing (Table 33). Qualitative research, particularly interviews with key stakeholders indicate that farmers rely on direct sales on site or in farmers’ markets or in small shops and that there are some difficulties in marketing the mountain products in large supermarkets, due to the lower predictability in production and the smaller quantities produced. TABLE 32. Certified products by certification type TABLE 33. The types of products certified under all the quality systems (national level, 2022) Type of Certification Products Product % in Product % in Protected Designation of Origin (DOP) 1 No. No. type total type total National Protected Products 2 Fruit & Bread & Traditional Specialty Guaranteed (TSG) 2 vegetable 2317 46% bakery 136 3% products products Geographical Indication of Spirit Drinks (GI) 9 Milk & dairy 1327 26% Wine 130 3% Protected Geographical Indication (IGP) 26 products Ecologically Certified Product 55 Honey & Fish related 526 11% 51 1% Certified Wines 130 products products Established Recipe 146 Meat Spirit 473 9% 33 0.7% products drinks Traditional Product 733 Mountain Product 3905 Source: Calculation based on data provided by ANZM and AFIR in December 2022 TOTAL 5003 Source: Calculation based on data provided by ANZM & Rural Agency for Financing Rural Investments (AFIR) in December 2022. The Mountain Products scheme is promising, yet efforts around strengthening supply and demand are needed. Efforts to strengthen market demand and consumer recognition are key. The marketing of Mountain Products could be combined with similar means of diversification for a stronger effect. Popescu and others (2022) mention the development of ‘Local Gastronomic Points’ which are authorized food venues established in private kitchens in rural areas preparing food according to local culinary recipes using only local produce and served to a maximum of 12 consumers. These small home restaurants are registered and follow food safety rules. In 2021, there were 121 such venues in the mountain areas. Linking the concept of Mountain Products with supporting concepts may provide a stronger identify as consumers may not find origin itself a sufficient quality attribute but would require more specific attributes like standardization of production methods based on traditional recipes. Yet efforts to develop markets and create awareness among consumers about the quality and environmental services provided by mountain products need to be aligned with the development of supply chains that can deliver consistent quality and volume. 21 Through Order 52/2017 of the Minister for Agriculture and Rural Development, amended by Order 31/2018. 22 Other quality systems: Tradition Product, Established Recipe, Protected Designation of Origin, Protected Geographical Indication, Geo- graphic Indication Spirit Drinks Certified Viticultural Product, Product with National Protection, Traditional Specialty Guaranteed, Ecologically Certified Product. CHAPTER IV. SECTORAL DEEP-DIVE: MOUNTAIN AGRICULTURE 57 4. Agricultural performance in Romania Romanian agriculture has performed well since 2000 compared with other EU East European transition economies such as Bulgaria, Hungary, Poland, Slovakia, and Slovenia, though not as well as Ukraine (Table 34). Production in Romania has behaved similarly to that in most comparator countries, including (1) a substitution of crop for livestock production, (2) a relative increase in the production of cereals and other field crops, (3) a relative decline in high value, labor intensive crops such as potatoes and vegetables. TABLE 34. Value of agricultural production in 2021 (2000=100) Bulgaria Hungary Poland Romania Slovakia Slovenia Ukraine Agriculture 114 101 119 132 95 93 184 Crops 168 114 106 167 137 75 248 Livestock 49 84 137 83 55 107 90 Cereals 266 139 145 264 191 138 348 Roots and 49 28 29 40 36 29 108 Tubers Vegetables 29 53 107 73 34 146 187 Source: FAO FAOSTAT (2023). Table 35 shows strong production increases in field crops, such as cereals and oil crops, while production of potatoes, vegetables and other high value crops has decreased between 2000 and 2020. The changing mix of crop production reflects the changes in farm size previously shown in Table 29 and Table 30. The increase in area tilled by larger farms allows for higher production of field crops, while the decrease in the area under small farms has cut into production of the high value crops typically raised on these farms such as potatoes and vegetables. TABLE 35. Selected crop and livestock production in tons, 2000-2021 Total percent change 2000 2010 2021 2000-2010 2010-2021 Cereals for grains 10,478 16,713 27,791 59.5 66.3 Rye 22 34 35 57.2 2.4 Total wheat 4,434 5,812 10,434 31.1 79.5 Barley 561 777 1,594 38.6 105.1 Oats 244 304 210 24.9 -31.1 Maize grains 4,898 9,042 14,821 84.6 63.9 Oil crops 869 2,378 4,574 173.8 92.4 Sunflower seed 721 1,263 2,844 75.2 125.2 Rapeseed 76 943 1,375 1,138.8 45.8 Soya beans 69 150 348 115.8 131.8 58 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Total percent change 2000 2010 2021 2000-2010 2010-2021 Potatoes, vegetables, and melons 6,529 7,810 5,275 19.6 -32.5 Total potatoes 3,470 3,284 1,398 -5.4 -57.4 Vegetables total 2,528 3,864 3,495 52.8 -9.5 Tomatoes 629 769 753 22.2 -2.0 Dry onion 296 369 357 24.6 -3.2 White cabbage 732 981 920 34.1 -6.2 Green pepper 175 243 249 39.3 2.2 Watermelons and melons 531 663 382 24.8 -42.3 Fodder 12,052 13,016 12,451 8.0 -4.3 Multi annual fodder 9,212 9,974 9,577 8.3 -4.0 Annual green fodder 10,478 16,713 27,791 59.5 66.3 Source. Source: Calculations using RINS Tempo Data – AGR109A. Production increases have been primarily a result of higher yields. Crop yields have increased substantially for field crops (cereals and oil crops) and more modestly for potatoes and vegetables (Table 36). A comparison with average yields in the European Union 27 indicates that Romanian yields are still low except for sunflower seeds (Table 37). TABLE 36. Crop yields in tons per ha, 2010-2021 Total percent change Category 2000 2010 2021 2000-2010 2010-2021 Cereals for grains 1.85 3.32 5.19 79.0 56.5 Rye 2.36 2.36 2.90 0.0 23.1 Total wheat 2.29 2.69 4.80 17.6 78.5 Barley 2.61 3.00 4.79 15.0 59.4 Oats 1.05 1.68 2.41 59.9 43.7 Maize grains 1.60 4.31 5.80 168.8 34.6 Oil crops Sunflower seed 0.82 1.60 2.53 94.5 58.4 Rapeseed 1.11 1.76 3.08 57.7 75.7 Soya beans 0.59 2.35 2.49 294.8 6.1 Potatoes, vegetables, and melons Total potatoes 12.25 13.35 16.54 9.0 23.9 Tomatoes 12.82 15.44 21.68 20.5 40.4 Dry onion 7.99 10.91 12.21 36.5 12.0 White cabbage 16.56 20.86 24.23 25.9 16.2 Green pepper 9.12 11.59 13.62 27.1 17.5 Watermelons and melons 11.49 21.06 29.23 83.3 38.8 CHAPTER IV. SECTORAL DEEP-DIVE: MOUNTAIN AGRICULTURE 59 Total percent change Category 2000 2010 2021 2000-2010 2010-2021 Fodder Multi annual fodder 13.49 15.67 13.67 16.2 -12.8 Annual green fodder 8.98 14.14 15.92 57.4 12.6 Source: Calculations using RINS Tempo Data – AGR110A. TABLE 37. Average crop yields for selected crops in the European Union 27, 2021 (tons per ha) Tons per ha, Potatoes and Tons per ha, Cereals, primary Tons per ha, 2021 Oilseeds 2021 vegetables 2021 Wheat 5.7 Sunflower seed 2.4 Potatoes 36.0 Barley 5.1 Rape seed 3.2 Tomatoes 77.2 Rye 4.1 Soya beans 2.9 Maize (corn) 7.9 Source: FAO FAOSTAT 2023. For livestock, the situation has been less positive than for crops. The number of bovine animals and swine in Romania has fallen quite dramatically since 2000, a development similar to other transition countries. Sheep and goat inventories have grown, indicating a return to extensive grazing, while poultry numbers have been growing quite slowly. Falling inventories have led to decreases in milk and meat production (Table 38). TABLE 38. Changes in livestock value of Agricultural growth in the mountain counties during the past production and head, 2000-2021 (2000=100) decades followed national trends: a dynamic recovery of the 2000 2010 2021 crop sector in the last decade, and an overall contraction of Value of production the animal sector. Livestock 100 100 83 Both crop and animal product production stagnated in the Meat, total 100 93 75 years through 2012 (Figure 19 and Figure 20). After 2012, Milk, Total 100 103 95 crop production grew through 2018, particularly in non- mountain counties, while livestock production continued Livestock head to stagnate. Mountain and lowland counties seem to Bovine animals 100 70 64 have recovered quickly from the COVID-19 decline, while Pigs 100 113 75 counties with some area in mountains recovered more slowly. Sheep 100 110 132 Goats 100 231 277 Poultry 100 115 110 Source. Source: Calculations using RINS Tempo Data – AGR201A (head) and FAO FAOSTAT, 2023 (value of production). 60 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS FIGURE 19. Total crop production value (million lei FIGURE 20. Total animal production by county group RON, 2015 constant value) (million Lei RON, 2015 constant value) 30,000 12,500 25,000 9,000 20,000 15,000 5,500 10,000 5,000 2,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Mountain counties Mountain counties Counties with some area in mountains Counties with some area in mountains Non mountain counties Non mountain counties Source: Calculations from county level data, RINS, 2023 using deflator from Eurostat national crop data in in real prices, 2023. The trend towards specialization in crop production observed across Romania is less evident in mountain areas. Nationally, the share of crops in total production value increased from 63.5 percent in 2001 to 72.5 percent in 2021. This change reflects the expansion of crop production in the lowlands. In mountain counties, crop production is gaining some ground, with a slight increase in its share in total production (Table 39). However, the animal sector retained its important role in the value of production, with a 38.9 percent share in 2021. The dynamic development of lowland crop production caused the share of mountain counties of total country agricultural production value to fall from 33.1 percent to 28.5 percent between 2001 and 2021. TABLE 39. Crop and livestock production in mountain counties and Romania Part of the reason for the (percent of total) lower crop production increases Mountain Counties (%) All counties (%) in mountain areas may be a Category loss of area. While the area 2001 2021 2001 2021 cultivated with main crops in Total 100 100 100 100 lowland counties expanded Livestock 41.3 38.9 36.5 27.5 slightly between 2000 and Crops 58.7 61.1 63.5 72.5 2021, in mountain counties area decreased by nearly 20 percent Source: Calculations using RINS Tempo Data – AGR206A (county level) and (Table 40). the Eurostat Mountain Area Definition TABLE 40. Area cultivated with main crops in mountain and lowland Despite the decrease in cultivated counties, 2000-2021 (1,000 ha.) land in mountain areas, Table 41 2000 2010 2021 2021 (2000=100) shows that between 2000 and 2021 production there increased Total 8,500 7,807 8,264 97 for field crops (cereals and oil Mountains 1,786 1,432 1,439 81 crops) and fell for high value Lowlands 6,714 6,375 6,825 102 products (particularly potatoes), Source: Calculations from county level data, RINS, 2023 (AGR 108A). just as in lowland counties. CHAPTER IV. SECTORAL DEEP-DIVE: MOUNTAIN AGRICULTURE 61 TABLE 41. Selected crop and livestock production in tons in mountain and lowland counties, 2000-2021 Mountain counties Lowland counties 2000=100 2000=100 2000 2021 2000 2021 2021 2021 Cereals for grains 2,156,541 3,933,413 182 8,320,965 23,857,845 287 Oil crops 41,064 361,384 880 827,467 4,212,657 509 Potatoes, vegetables, 3,086,787 1,873,908 61 3,441,921 3,401,234 99 and melons Total potatoes 2,335,780 1,064,557 46 1,134,025 333,278 29 Vegetables total 736,491 801,082 109 1,791,285 2,694,023 150 Tomatoes 134,262 144,474 108 494,413 608,903 123 Dry onion 109,408 127,615 117 186,889 229,598 123 White cabbage 227,752 270,187 119 504,145 649,774 129 Green pepper 48,486 54,063 112 126,350 194,672 154 Watermelons and 14,516 8,269 57 516,611 373,933 72 melons Source. Source: Calculations using RINS Tempo Data – AGR109A. 5. Farm support in the Romanian CAP Strategic Plan The safety net effects of Romanian CAP Strategic Plan Pillar I payments to address rural poverty are limited due to provisions that restrict access to farms over 1 ha. In 2019, only about 795,000 Romanian farms accessed CAP pillar I funds, about 28 percent of the total number of farms (World Bank, 2022b). Coincidentally, about 28 percent of the total number of farms were over 2 ha in size in 2020 (Table 29). Romania’s CAP Strategic Plan restricts Pillar I payments to farms over 1 hectare. The main Pillar I measures are: • The single area-based payment (SAPS) (4.82 billion euros, 43.7 percent of the budget for direct payments) is the main instrument to stabilize the income of farmers under the CAP SP 2023- 2027. Beneficiaries of direct payments must comply with Good Agricultural and Environmental Conditions (GAEC) standards and cross compliance. These obligations require adoption of agri- environmentally friendly practices, protection of water, soil, animal welfare and public health. • A second obligatory form of direct payments is the complementary redistributive income support for sustainability (CRISS) under which Member States make additional payments to farmers for the first few hectares, resulting in higher per ha payments for small farms. For the 2023-27 CAP, Member States were required to allocate at least 10 percent of direct payments to redistributive payments, but they could allocate up to 30 percent of their Pillar I budget. Romania will make CRISS supplementary payments to small farms between 1-50 ha, totaling 10 percent of the Pillar I budget. • A third obligatory Pillar I payment is for young farmer payments (YFP). Member States are obliged to allow at least 2 percent of direct payments to YFP to promote the generational renewal of the farm sector (EC ARD, 2022a). In 2023-27, Romania opted to allow both 62 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS installation aid and complementary income support for young farmers. This included transfer of 2% of Pillar I funds to Pillar II to add to funds for young farmer setup grants. In addition, 1.03% of Pillar I funds were reserved for young farmer income support (MARD Pillar I, 2022). • For the 2023-27 CAP, Member States were invited to propose their own eco-schemes under direct payments to promote environmentally friendly practices. For the 2023-27 CAP, Romania proposed 5 eco-schemes for a total of 25 percent of Pillar I funds (MARD Pillar I, 2022). Small farmers can benefit from several of these measures: • Environmentally beneficial agricultural practices in small farms—traditional households (restricted to farms from 1-10 ha.) • Environmentally beneficial practices on arable land (for farms >5 ha) • Weeding intervals between rows in orchards, vineyards, and nurseries • Well-being practices for young cattle under fattening • Increasing the well-being of dairy cows. · Pillar I also includes coupled support and sector interventions targeted at specific commodities and sectors. Coupled support is provided to plant products (potato seed, field vegetable, fruits, hemp etc.) and livestock (cow milk, meat bulls, buffalo milk, sheep and goat), while sector interventions are provided for bee keeping (pest management, improving honey quality) fruit and vegetable (e.g., climate adaptation measures) and the wine sector. CAP Pillar II payments are aimed at supporting financially viable farms and are limited to holdings above various standard output (SO) value thresholds. CAP pillar II payments are investment grants for assisting farmers to diversify production, move into higher value production, and develop their farms for higher production. Not all farms are capable of taking advantage of CAP pillar II support. Grants require copayments which imply considerable up-front costs for investments. Moreover, as one of the main purposes of pillar II funding is to make farms more competitive, certainly the smallest farms are unlikely to be able to advance in this direction due to their basic function as social support structures rather than commercial agriculture. Thus, there is an argument that eligibility for Pillar II funds should be limited to those farms capable of advancing the objectives of the program, namely, to become more competitive commercial producers. In an exchange of letters on the Romanian CAP strategy in 2022, the Commission noted that under the Romanian CAP Strategy nearly all Pillar II payments will go to large farms, and there is no investment for on farm processing, an issue common to small farms (EC, 2022, Commission observation letter). The Romanian MARD replied in a letter to the EC that Romania has two categories of farms: small farms, most of which they view as peasant households, and large farms which are commercial farms (MARD, 2022 Romania’s comments on Commission observation letter). The approach to each should be different. The MARD stated that rural development interventions are intended to strengthen farms that reach the minimum cost-effectiveness threshold. These are defined as farms earning 12,000 SO or more. This is based on economic analysis of the minimum point of profitability to support investments needed to increase competitiveness. Approximately 5 percent of Romanian farms had an SO of 12,000 EUR or more in Romania in 2020 (estimate based on splitting the 8-15k EUR category into two equal parts, 8-12k and 12- 15k), and about 4.2 percent of farms in Romania are over 10 ha. in size. Thus, the claims of the EC that Pillar II funding is directed towards large farms may be overdrawn. However, small farms are certainly left out of a Pillar II policy aimed at those farms with an SO of 12,000 or more EUR. CHAPTER IV. SECTORAL DEEP-DIVE: MOUNTAIN AGRICULTURE 63 CAP Pillar II payments seek to increase the market orientation and competitiveness of farms, but also to make the agriculture sector more sustainable and resilient and to support the socioeconomic development of rural areas (Table 42). Rural development related interventions are closely linked to farm size. TABLE 42. CAP budget allocation for rural develop- For example, measures targeting investments ment interventions in the vegetable sector, including purchase of Allocated funds machinery; investments in the consolidation of Rural Development Interventions in mill. Euros holdings of young farmers installed and of newly Investments in farm development 907.1 settled farmers; and investments in livestock, set Investments in processing & storage 375.2 12,000 SO as an eligibility criterion for farmers/ Irrigation infrastructure & on farm 502.4 farmer groups. This is about 5 percent of total farms (Table 43). Young farmers (installations, business 420.3 investments) Mountain farmers benefit of specific eligibility Agri-environment, climate 492.3 criteria, for example, in the case of livestock Organic farming 389.1 (bovine) investments, the minimum farm size is Areas facing natural constrains (incl. 663.9 set at 8,000 SO for mountain farmers, and in the mountain areas) 174.5 case of investments in small ruminants, specific Forestry Animal welfare 736.3 criteria for mountain areas is established at 60- 500 female sheep. LEADER /Community lead local 500.0 development 150.0 For investments in fruit farms, floriculture and Diversification non-agricultural activities Rural roads 201.0 medicinal plants, and non-productive investments at the farm level, the minimum holding size is 4,000 Insurance premium & risk management 97.9 SO. This instrument targets 14 percent of holdings. Producer Groups 15.4 Cooperation & Innovation 40.2 Investments in small farms are for those of Know ledge transfer and advisory services 10.0 between 4,000 and 11,999 SO, and 2,000 and Technical Assistance 193.4 11,999 SO for livestock farms populated with Source: Romania’s CAP Strategic Plan 2023-2027. native breeds. TABLE 43. Distribution of Romanian farm holdings by value of standard output in 2020 Number (1,000) Percent (%) Cumulative percent (%) Zero euros 28.3 1.0 1.0 Over zero euros to less than 2000 euros 2,064.2 71.5 72.5 From 2 000 to 3 999 euros 395.9 13.7 86.2 From 4 000 to 7 999 euros 215.8 7.5 93.7 From 8 000 to 14 999 euros 90.1 3.1 96.8 From 15 000 to 24 999 euros 38.6 1.3 98.1 From 25 000 to 49 999 euros 29.3 1.0 99.1 From 50 000 to 99 999 euros 12.9 0.4 99.5 From 100 000 to 249 999 euros 7.5 0.3 99.8 From 250 000 to 499 999 euros 2.6 0.1 99.9 500 000 euros or over 1.9 0.1 100.0 Total 2,887.1 100.0 100.0 Source: Eurostat (2023) (EF_M_FARMLEG). 64 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS The menu of interventions under rural development of the Romania CAP Strategic Plan provides a comprehensive set of support to foster the greening of agro-food activities and rural development. Access to rural development funds for investments is conditioned on compliance with defined requirements and criteria. The general and specific eligibility criteria are determined in the CAP Strategic Plan and the national implementation framework for each of the interventions selected by the MADR and mentioned in Table 42. Many measures exclude small-scale farmers, unless they operate through producer groups. Many types of investments, such as those dedicated to silvo-environment and climate, require areas are at least 100 ha, further limiting access. Therefore, cooperation is a key condition to enable small- scale farmers access to the entire palette of support measures. 6. Implications for a mountain development strategy Territorial development strategies work differently than sector development strategies. The Romania CAP Strategic Plan utilizes instruments (programs) to achieve its goals most (not all, as rural development investments have a broader focus) of which are related to sector development. This can roughly be understood as raising the quantity and quality of production through raising the quantity and improving the quality of agricultural inputs. In contrast, territorial development strategies utilize instruments (programs) that focus on cross-sectoral issues such as the development of entrepreneurship across sectors, facilitating structural change to increase overall economic productivity, and laying the institutional foundations for high value employment for specifically identified geographical areas to achieve their main goal of raising living standards. The role of commercial agriculture in a mountain territorial development program is like that of other industries. Agricultural producers may be expected to participate in and benefit from programs aimed at developing entrepreneurship in small and medium sized (SME) businesses (typical of mountain areas) for specifically identified geographical areas. Support for SMEs may be of two types: support for entrepreneurship and start-ups, and support for established businesses. New businesses in all industries might draw on programs offering low-cost loans, physical infrastructure for business incubators, start-up technical assistance, or entrepreneurial support networks, all within defined place-based development strategies. Established business support within a mountain development strategy may include support for place based economic development and growth strategies that take advantage of regional assets. Such place-based strategies are necessarily local in nature, and thus should be developed by regional, municipal, and local government or stakeholder groups. Agricultural business leaders should be involved in consultations for the development of a mountain development program. In addition, agriculture’s dedicated development program, the CAP, needs to be adapted to mountain areas. A mountain development program should include provisions to facilitate access to CAP support and development funds for mountain commercial agriculture. The role of subsistence agriculture in a mountain development strategy differs from that of commercial agriculture. Considering its close connection with poverty, subsistence agriculture may merit its own program for sectoral transformation within a mountain development strategy. The CAP, as demonstrated earlier, does not fulfill this role. The European Union has a special program related to coping with the effects of the declining coal sector, the Just Transition Fund. In addition, Member Countries may access funds for coping with the social and economic effects of the decline of the coal sector under the European Structural and Investment Funds (European CHAPTER IV. SECTORAL DEEP-DIVE: MOUNTAIN AGRICULTURE 65 Court of Auditors, 2022). There is currently no dedicated program to cope with the effects of a declining subsistence agricultural sector. This may be because in most countries agricultural employment is quite low, and the subsistence sector is more a part-time sector in which rural inhabitants use agriculture to supplement their earnings in other sectors. Though this is also the case in Romania (Table 26), there is also a portion of the rural population that relies heavily on subsistence agriculture and is poor (Figure 13). A special program for agricultural transformation within a mountain development strategy could be developed in consultation with subsistence agriculture stakeholders, local government officials, the Ministry of Agriculture and Rural Development, and the Ministry of Labor and Social Protection. The program should aim to facilitate the movement of labor and land out of subsistence agriculture by providing better access to financial assistance for subsistence landowners, access to an improved land registration system, and the development of non-agricultural industry and services within high poverty areas to provide alternative opportunities for labor transfer. Such a program could provide simpler access to a land registration mechanism that would rely on a ‘fit-for-purpose’ approach to land registration. The fit-for-purpose approach is based on four principles: visible (physical) boundaries rather than fixed boundaries, aerial images rather than field surveys, accuracy linked to purpose rather than technical standards, and incremental improvement. Learning how to navigate the difficulties of accessing land, including dealing with absent, poor, and incomplete registration, could be combined with providing access to finance. Such a program would require that the ANCPI, the Ministry of Justice, MARD, and other national and local authorities work together. In addition to such a program, the Ministry of Agriculture could respond to the needs of the sector by improving its small-medium farm support policies, particularly for cadaster, agricultural knowledge, and innovation systems, as well as extension and research. CHAPTER V. SECTORAL DEEP-DIVE: MOUNTAIN TOURISM 67 CHAPTER V. Sectoral Deep-Dive: Mountain Tourism Like agriculture, the mountain tourism sector is important for a mountain development strategy not only for its own growth. Tourism generates demand in other sectors, such as hotels, retail sales, craft production, food service, winter and summer recreation, and transportation. Increasing tourism revenues can help to attract investment in cultural attractions, as well as the many sectors dependent upon it for growth. Mountain areas of Romania seem to have good potential for attracting tourists. Mountains have many National and Nature Parks, several UNESCO sites, thermal and spa resorts, and many ski slopes. But the tourist sector in Romanian mountain areas is poorly developed with deficient infrastructure in accommodations, food service, transportation, and IT. Moreover, the sector is characterized mostly by SMEs with a lack of innovative, diversified and quality services. Several improvements based on examples from other countries can be recommended for the improvement of professional services in the tourism sector in mountain areas. These range from ways to increase sustainability accreditation within the tourism industry to developing professional development opportunities, to promoting more innovative tourism offerings and to improving the targeting of tourist marketing. These changes have been developed in other countries by industry associations, UN organizations, national tourism agencies, regional governments, public-private tourism partnership associations, EU-funded INTERREG projects, the French government, and through collaboration between European Bank of Investment (EIB), the Italian government and the regional government of Trento. 1. Tourism in a mountain development strategy The tourist sector in Romania is small but is important for a mountain development strategy not only for its own sake but because of its potential knock-on effects. The Romanian tourism sector is generally smaller than the sector in other European countries. Tourism in Romania accounted for 2.9 percent of GDP in 2019, compared with an EU average of 4.3 percent (Table 44). Moreover, Romanian tourist services account for 4.2 percent of total exports, the lowest figure in Table 44. Like most countries, domestic tourism in Romania dominates the tourism sector. Approximately 81 percent of total tourists were domestic (UNWTO, 2023). 68 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS TABLE 44. Contribution of tourism to GDP and exports in selected European countries, latest pre-COVID figures Share of tourism sector in International tourism, receipts Country Year GDP (%) (% of total exports) Romania 2.9 4.2 2019 European Union 4.3 2019 East and South Europe and Turkiye Poland 1.2 4.7 2019 Hungary 6.7 7.6* 2017 Croatia 11.4 2016 Portugal 8.0 23.5 2018 Turkey 4.6 16.9 2019 Slovakia 2.8 3.5* 2016 Czech Republic 2.9 4.3* 2017 Greece 6.8 28.3* 2017 Cyprus 16.4* 2019 Other countries with mountains France 7.5 7.9 2019 Switzerland 2.9 2018 Slovenia 5.4 7.4 2019 Spain 6.6 2018 Italy 5.9 8.2* 2015 Austria 6.5 10.5* 2018 Sources: Share of tourism in GDP: UNWTO, 2023. Turkey, France, Slovenia: OECD, 2023. International tourist receipts from World Bank WDI 2023. *2019. Yet, tourism is important for a mountain development strategy both because of its own potential and because of its knock-on effects. Tourists spend money with a community’s businesses. Restaurants, retail stores, and other businesses of all varieties have the potential to earn more when their community attracts tourists. As a result, everyone from business owners to employees will have more to spend within the local economy. 2. Mountain tourism potential is poorly developed Romania’s tourist sector has potential, but investments are needed to accelerate its development. Romania’s mountain region has potential as a nature, adventure, and skiing destination, as well as a destination for cultural attractions and thermal spas. Mountains are the country’s second most popular tourist destination and mountain areas have valuable natural beauty, including extensive protected areas and Natura 2000 sites. In 2021, protected or Natura 2000 areas were in 47 percent of mountain ATUs compared to 24 percent of ATUs in lowlands. According to natural protected area legislation, Romania has thirteen (13) National Parks and fourteen (14) Natural Parks. Mountain areas also have several UNESCO sites, including cultural ones. These include: • Churches of Moldavia (particularly in Suceava, Neamț and Vrancea) but also in Maramureș (wooden churches part of Romania’s UNESCO World Heritage Sites), CHAPTER V. SECTORAL DEEP-DIVE: MOUNTAIN TOURISM 69 • Dacian Fortresses of the Orăștie Mountains, • Historic Centre of Sighișoara, • Monastery of Horezu, • Roșia Montană Mining Landscape, • Villages with Fortified Churches in Transylvania, such as Viscri and Prejmer (Brașov), Dârjiu (Harghita), or Câlnic (Alba), which are also included in the list of UNESCO World Heritage Sites. An extensive thermal and spa resorts network is found in the mountain area across all mountain groups, and the winter sports sector also has good economic potential. Skiable areas with approved slopes have been identified in most of the mountain areas. According to the consumer protection organization Infocons , Harghita county has the highest number of approved slopes (32), followed by Prahova county (28) and Brașov county (23 slopes in Bran, Poiana Brașov, Fundata and Predeal). According to results of in-depth interviews and surveys of public and private sector actors,23 5 factors constrain tourism development in Romania’s mountain areas: • Demand for mountain tourism. Though mountain areas were the second most visited region for tourism in Romania in 2020, following Bucharest, demand for tourism there is mostly domestic, and generally limited to short stays (average, 2 nights, mostly on weekends), subject to seasonality (winter skiing, and summer holiday travel). • Undeveloped infrastructure. Accommodations, food service, transportation and IT infrastructure are undeveloped or of low quality. Most accommodations are of a lower grade. Nearly 60 percent have 3-star and 2-star ratings on a 5-star scale category of tourist and agritourism boarding houses. Tourists visiting the mountain-based area have few places offering food services, which are unevenly distributed and lacking altogether in certain areas. The number of certified food service facilities is even lower than accommodation facilities and remains concentrated in urban centers, such as Brașov, Baia Mare, Reșița, and in tourist resorts such as Râșnov, Sinaia, Predeal, Sovata, Băile Herculane, Bușteni or Vatra Dornei. Transportation infrastructure in the mountain area is limited, with no well-planned mobility system for inbound, outbound, and internal transportation. Finally, though IT has a strong presence in urban mountain areas, there is currently scarce use of technology for the tourist’s journey, from the planning phase to the destination and post-travel phases.24 The IT sector is concentrated in urban centers or in ATUs within metropolitan areas where the specialized workforce is present (e.g., Florești in Cluj Metropolitan Area) - Brașov, Baia Mare, Florești, Piatra-Neamț, Sfântu Gheorghe, Miercurea Ciuc, Deva, Zalău. Rural mountain territories do not have a significant presence of IT companies, as more than 64 percent of ATUs have no such companies registered. • Tourism services and personnel. Rural businesses in mountain areas suffer from a lack of IT service suppliers and digital competence in general. The tourism value chain in mountain areas is characterized by energy inefficiency and a lack of awareness of sustainable waste management practices, and there is little encouragement to implement sustainability policies defined by regional and global frameworks, such as the Carpathian Convention and the latest EU regulations (e.g., encouraging green labeling of products). There is also a shortage of specialized and skilled labor in the industry, limited capacity-building, and difficulty in accessing working capital finance to spur growth. • Strategy, Structure and Competition. The sector is characterized mostly by SMEs with lack of innovative, diversified and quality services in general. 23 For details, please see RAS Romania Mountain Area Development Support, Mountain Tourism Deep Dive. 24 This statement was mentioned by several stakeholders during the conducted interviews. 70 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS • Government. Respondents noted that there is weak informational and analytical support provided to the main tourism stakeholders and a lack of public-private models to promote regional touristic destinations. There is also insufficient collaboration between different levels of government and between ministries, little support to run a network of protected areas that can provide additional value to the tourism sector. Furthermore, some ATUs have empty tourist information centers, and there is a lack of awareness and adoption of national and EU sustainability frameworks, as well as confusion between the Mountain Law and the Carpathian Convention. 3. Recommendations for improving professional services in mountain tourism The following measures are recommended to improve professional services in the tourism sector in mountain areas. Raise the sustainability profile of mountain tourism throughout the value chain with industry association branding. Almost all strategic plans and policies affecting the mountain area include calls for sustainability measures to preserve the natural and cultural heritage of their territories. Yet, there is poor communication of government environmental regulations to the tourism sector in Romania, and the sector itself is fragmented. Industry associations in other countries have enacted branding programs for tourism-related businesses to support sustainability throughout the tourist value chain. In Switzerland, for example, Switzerland Tourism, a business-supported industry association, offers a sustainability branding program (Swisstainable brand) for tourist-related businesses. Branding is based upon a sustainability commitment from the tourism business that forms the basis of the program, containing statements on the values and responsibilities of the businesses and organizations. Businesses are allowed to use the Swisstainable brand in their advertising and display it. The Swisstainable sustainability program aims at a more sustainable development of Switzerland as a tourist destination and makes the sustainability efforts of tourism service providers more visible to guests. Improve professional development and accreditation in the tourist industry. The tourism sector requires acknowledged professional standards to improve skills of personnel. A first means to improve skills is to work with educational institutions to upgrade professional training based on new trends in the industry. This should also include improved accessibility of courses for potential new professionals (e.g., digital classes where it is difficult to access physical institutions). A skill gap analysis—an updated analysis of the missing vital skills in the value chain—would establish the differences between the skills that the workforce has and those that employers need now and in the future. A second means to improve skills is improve the level of professionals through expanding opportunities for vocational education of artisanal and tourism jobs in rural areas, including chefs, hoteliers, bakers, farmers, wood makers, tourist guides, and yoga instructors. Improved vocational education should allow more professionals to pass government or business association certification and licensing exams. This action may involve promoting the recognition of prior learning through vocational education certifications and accessible training courses for current and aspiring professionals. A third way to improve professionalism of businesses in the industry is to promote quality accreditation ratings of tourist businesses by local tourist associations. The Catalonian region in northeastern Spain, has more than 2,000 rural tourism establishments that are accredited by the regional government. They are classified under a system-based on wheat spikes, from one to five according to the level of accommodation comfort. The accreditation is given according to the status of their indoor facilities, outdoor space, rooms, furniture, common areas, services (reception, restaurant, wellness) and agritourism activities offered to the guests. The government also has a website with a booking system for the guests. CHAPTER V. SECTORAL DEEP-DIVE: MOUNTAIN TOURISM 71 Improve product development within the industry. Local firms’ innovation is rare within the tourism value chain in Romania. There is a lack of diversity in the tourism offerings at the destination level and the perceived low quality of some services. According to survey results of public stakeholders conducted for this report, ATUs fail to attract more tourists mainly due to: (1) a lack of specific mountain area tourism products, (2) poor quality of tourist services, (3) insufficient number of accommodations and restaurants, and (4) poor tourist promotion. A main conclusion of the SWOT analysis was to strengthen programs to foster diversified product development, even though this is presented as a priority in several national programs and plans. Globally, there are several experiences in programs to develop new capacities in companies and other actors of the tourism value chain to design innovative products and define targeted market strategies. The UNWTO has focused on providing digital tools for SMEs to enhance their marketing activities. Projects such as Tourism4.0 is aimed at developing capacity building, technology transfer, support, and assistance, enabling tourism sector SMEs to improve their productivity, sustainability, and overall business performance, by leveraging emerging digital technologies (Tourism4.0. 2023. Co-funded by the COSME program of the European Union. https://tourism4-0.eu/project- summary/). Other tourism programs focus on direct connections with key players in the target market segment, such as outbound tour operators, to design their products. PROCOLOMBIA, the national tourism agency of Colombia, takes a more collaborative approach with its “Product Club25” workshops in which local and invited stakeholders (communities, specialized tour operators, and accommodation facilities) come together to design sustainable and inclusive tourism products that address the specific needs of a niche market. In specific segments such as adventure and nature, PROCOLOMBIA partners with recognized global players, associations such as the Adventure Travel Trade Association (ATTA) or niche tour operators, co-invest in knowledge exchange trips to learn about current and potential portfolios of products in the country. PROCOLOMBIA then uses these spaces as main inputs in the designing of new products and the promotion of improvements. Improve targeted marketing strategies for Romanian tourist businesses. The dearth of local innovation noted previously is also a factor underlying a lack of targeted marketing strategies for Romanian mountain tourism in general and at a regional level. Developing targeted marketing strategies is a learning by doing process. The cooperation model between Business Iceland (a public-private partnership association) and Visit Iceland (a product of the government-run Icelandic Tourist Board) is an excellent reference for a targeted marketing program. Together, these two organizations manage an integrated consumer marketing campaign and gather market trend information, including tourism profiles, traveler flows, transport, and target groups in crucial Icelandic tourism markets, which are regularly updated. Additionally, Business Iceland conducts surveys on Iceland’s prospects in key markets, generates reports, and provides valuable insights to market Iceland as a destination by way of statistical reports. Improve the digitalization and technological awareness of businesses in Romania’s mountain areas. Currently, 96 percent of tourism businesses in Romania’s mountain area are SMEs (National Institute of Statistics. 2018), often with poor knowledge of IT. Moreover, IT infrastructure in mountain areas outside of large cities is extremely limited. In rural areas, particularly mountain areas, digitalization can bring new market opportunities to the rural economy. To fully realize these benefits, policies must be implemented to: 1) secure reliable, high-quality broadband connectivity in rural regions, 2) reinforce essential infrastructure such as telecommunications and transportation, 3) provide training opportunities to develop the rural workforce, and 4) create forward-thinking regulations through active involvement of rural communities (OECD 2020). 25 The PROCOLOMBIA product club is a component of the institution's Synergies and Innovation Management division. 72 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS An example of assisting SMEs into technology adoption is the project “Business ecosystem for tradition and innovation’ (TRINNO)”, developed in Slovenia, Ireland, Italy, and Hungary. TRINNO aims at helping SMEs and inspiring entrepreneurs in traditional sectors to adopt digital innovations, such as digital manufacturing, the internet of things, or big data. The Slovenian Ministry of Economic Development and Technology designed a local innovation voucher scheme for SMEs that helps to develop new product and services using digital or other innovation tools. It has also created training projects to support local tourism service providers to grow through digital innovation (Interreg Europe n.d.). As of 2020, more than 950 vouchers had been distributed in 14 calls with a value of 3.58 million euros. The TRINNO project is part of the International Cooperation Program “INTERREG”, which is co-funded by the EU and aims at reducing disparities in the level of development, growth, and quality of life across Europe (Interreg Europe n.d.). Improve transportation infrastructure in mountain areas. Mountain tourism is constrained by a lack of public transport aligned with potential tourist destinations. Thus, national projected investments in infrastructure should be aligned with strategic regional tourism development projections and investment strategies should be aligned with tourism strategies, to create a sustainable vison of the mountain area. Other European countries are doing this. In Italy, the European Bank of Investment (EIB) financed the “Trento Public Infrastructure Framework Loan” comprising a small loan program for infrastructure that aimed at financing multi-sector investment schemes. By 2018, 393 projects in multiple municipalities of Trento were financed. Among the beneficiary sectors were transport, urban infrastructure, infrastructure for public services, transport environmental infrastructure, education, and rural tourism infrastructure. The following are a set projects funded by this loan related to tourism in the mountain area (EIB 2019). • Restructuring of mountain trails along First World War ruins (‘Herta Miller Haus’) in the municipality of Telve (40,000 euros) • Construction of an alpine trail information point in the Val di Non in the municipality of Sanzeno (79,000 euros) • Restructuring of mountain trails in Val del Sarca (‘Rino Pisetta’) in the municipality of Vezzano (82,000 euros) • Construction of a small hydroelectric power plant with a capacity of 1,941 KW in the Municipality of Dimaro-Folgarida (7.7 million euros) • Modernization of facilities and scientific research at the Trento University (70 million euros). France is also prioritizing sustainable infrastructure linked with tourism. To link mountain villages with significant transportation routes, the country is implementing cable cars known as “valley elevators.” These investments reduce traffic congestion and its associated pollution and provide a convenient connection between valley communities and ski resorts (UNIMONT 2021). Furthermore, as a way of proposing more integrated solutions for sustainable mountain tourism, France launched in 2021, the Future of Mountains plan (Avenir Montagnes); a plan promising 1.8 billion EURO in investments, to enhance sustainable and resilient mountain tourism which addresses its objectives through three priorities: encouraging the diversification of the tourism offer and the development of new customers; accelerating the ecological transition of tourism activities in the mountains; and revitalizing recreational real estate and stop the formation of “cold beds”, out of the market economy. Financial incentives and soft loans to SMEs are being provided, CHAPTER V. SECTORAL DEEP-DIVE: MOUNTAIN TOURISM 73 as well as innovative initiatives such as support for “learning camps” in the mountains, negotiation of a national agreement on preferential rates for establishments organizing mountain stays for children, and support to mountain schools. For the second pillar, the focus is to make biodiversity an asset in local tourism development by developing and restoring 1,000 km of mountain trails, as well as by protecting biodiversity in a recovery process, and support first and last mile sustainable mobility solutions. For the third pillar, improving tourism housing that have deteriorated is an emerging priority as well as facilitating transferability of pre-empty leasing. All these measures are accompanied by significant investments in mountain tourism promotion. 4. Implications for a mountain development policy Tourism is always part of mountain development programs because it has knock on effects through its ability to bring in business for the rest of the mountain economy. Cultural tourism is an economic engine that brings visitors into cities and small towns to shop, eat, play, and sleep. Investments in cultural tourism should not only provide interesting urban experiences but also point to opportunities to experience Romanian spas, outdoor sports, and wildlife viewing. Likewise, biking, hiking, paddling, and wildlife viewing attracts visitors to the region and creates job opportunities. But investments in these attractions should not only help develop outdoor experiences, but also connect them to surrounding rural communities, guiding visitors into small towns, which boosts local tourism, increases tax revenues, and expands existing business and new start-up opportunities. Tourist attractions are thus ideal focal points upon which to construct wider development strategies. Visitors, however, are only one part of tourism. A thriving mountain tourist sector must include entrepreneurs, marketers, local businesses, and a flexible workforce to create opportunities in hospitality, outdoor recreation, and related local business. In Romanian mountain areas the effectiveness of tourism knock-on effects is limited by poor infrastructure, the low sustainability profile of the sector, a dearth of professional development opportunities, a low level of innovation and digitalization in tourist services, and by less developed transportation infrastructure. Mountain policies can help to focus actions on areas or higher need/opportunity, including the emergency of local structures to support dialogue and prioritization, such as the development of regional and local mountain tourism boards or associations to build the sustainability profile of the sector, establish certification standards, provide information about local attractions, and upgrade tourism services, including digitalization. It can build tourism into area development projects based on cultural heritage and promote sponsorship of related cultural events. It can support the renovation of village main streets to express a distinctive vision based on a region’s history and heritage to attract both visitors and business investment within a local territorial development plan. Finally, it can promote infrastructure investment in the tourist sector and tourist attractions as a mean to support wider place-based mountain development. Mountain development policy should also consider the risks of an unplanned tourism expansion and include mechanisms, both incentives and regulatory ones to address negative impacts. CHAPTER VI. MOUNTAIN AREA NATURAL RESOURCE ASSESSMENT 75 CHAPTER VI. Mountain Area Natural Resource Assessment The 2018 Mountain Law contains an entire chapter (Chapter VII) devoted to the protection and development of the mountain environment and the conservation of biodiversity. Romania’s mountain area, which covers nearly one-third of the national territory, is richly endowed in natural resources. Natural resource conservation efforts face challenges in several areas, such as illegal logging and unsustainable exploitation of forests, grassland degradation linked to overgrazing and under- grazing, water pollution linked to agriculture and residential wastewater, ecosystem damage due to (unplanned) forest access and tourism in areas lacking infrastructure, waterway and aquatic ecosystem damage by hydroelectric expansion, risk of persistent soil and water pollution near mining sites, and the ramifications of a warming and drying mountain climate increasingly exposed to extreme weather. Conservation regimes for natural resource have generally expanded and grown more stringent, particularly in relation to biodiversity protections. Over time, protective measures have covered an increasing range of activities and territory and deepened in terms of environmental stringency. These trends have followed from the adoption of laws and regulations focused on putting in place restrictions on land-use, and increasingly, the means to monitor and enforce them. But increased success has come from increased funding rather than from more stringent regulation. Fulfilling growing EU and Romanian conservation ambitions will likely require fundamental changes in the conservation governance of natural resources in mountain areas. The Romanian system of conservation governance has not fully adapted to the fundamental changes that have occurred in natural resource ownership over the past 30 years and has seen its efficacy decline. New approaches to mountain resource governance are already emerging and being embraced through recent policy reforms. 1. The significance of Romanian mountain natural resources Romania’s mountain area, which covers nearly one-third of the national territory, is richly endowed in natural resources. Romania’s mountain area is prized for having some of the largest and best protected expanses of primary, intact, and old-growth forests still standing in the European Union (EU). The mountain area also contains some of Europe’s largest expanses of traditionally managed grasslands, in particular hay meadows (Emanuelsson 2009). With over 86 percent of its territory covered by forest, grassland, and mosaic farmland, Romania’s mountain area is particularly biodiverse and harbors significant numbers of rare, threatened, or endemic species. Romania’s forests and mountain landscapes are important carbon sinks that are critical to preserve from a climate stabilization perspective. Romania’s forest-timber sector sequesters more carbon than it releases. 76 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Romania’s mountain area also provides a variety of other ecosystem services of importance to local and national populations. These range from the provisioning of clean water, food, and fiber to aesthetic and culturally important landscapes and resources, cultural significance, and natural erosion and flood control. Mountain resources are also a central feature of the mountain economy. Mountain resources are a key part of the mountain economy, including forestry, agriculture, tourism, mining, and related activities. As of 2020, Romania’s forestry and wood processing sector accounted for 4.5 percent of the country’s gross domestic product (GDP) and supported nearly 160,000 (158K) rural jobs including ones in wood processing and furniture making, and over 330,000 jobs counting those in services, transportation, and related industries (PWC 2022). Romania’s net exports of wood-based products have generated about EUR 2.4 billion in revenues in recent years (RINS 2023). Forest and agriculture combined accounted for roughly one-quarter of mountain area employment in 2012–2019. As discussed in the agriculture chapter, livestock rearing and dairy production are significant productive sectors and pillars of the mountain agrifood economy; and since its expansion in 2019, the mountain area has encompassed more commercial agricultural production. Although the COVID-19 pandemic disrupted the trend, tourism anchored in mountain natural resources at large is a small but growing part of the mountain economy and an indispensable source of income for several households (World Bank 2023a). While mining, in contrast, has declined in Romania’s mountain area since the 2000s, the durable impact of mine closures on communities again underscores mountain populations’ natural resource dependence. Mountain resources are also a critical contributor to national fresh water and energy supply and are arguably important contributors to Romania’s clean energy mix. Some 69 percent of Romania’s inland surface waters (excluding Danube inflows) comes from the Carpathians, in terms of volume. The mountains are also home to 8 percent of groundwater surface area (FAO 2019). Hydropower accounted for over one-quarter (28 percent) of Romania’s electricity generation mix in 2020, making it the country’s leading source of electricity and renewable power (IEA 2022). Forest biomass—as much of 90 percent of which is harvested from mountain area counties (RINS 2023)—remains a leading source of fuel for Mountain communities. 2. Selected stressors in natural resource management Key areas of natural resource stress have been (1) continued illegal logging and the unsustainable exploitation of forests, (2) grassland degradation linked to overgrazing and under-grazing, (3) water pollution linked to agriculture and residential wastewater, (4) ecosystem damage due to (unplanned) forest access and tourism in areas lacking infrastructure, (5) waterway and aquatic ecosystem damage by hydroelectric expansion, (6) potential risk of persistent soil and water pollution near mining sites, and (7) the varied ramifications of a warming and drying mountain climate increasingly exposed to extreme weather. Illegal logging. Despite considerable progress since the 1990s, Romania is still likely contending with “high” rates of illegal logging. The Ministry of Environment, Waters, and Forests (MMAP) reported 213,425 cubic meters (m3) of illegally harvested timber in 2020 (MMAP 2021). This estimate is an order of magnitude below the roughly 20 million m3 difference between the amount of timber that was legally harvested in 2018 according to the Second National Forest Inventory (38 million m3) and the government-authorized volume of wood production (18 million m3 reported by the NIS based on forest management plans) (WWF 2019a and c; Schickhofer et al. 2019; SPF 2018). While some media have reported the difference as corresponding to levels of illegal logging, this CHAPTER VI. MOUNTAIN AREA NATURAL RESOURCE ASSESSMENT 77 interpretation of the so-called “missing timber” lacks scientific rigor and the reality of illegal logging likely lies somewhere in between this high end and the official estimates (WWF 2019a). 26 Taking a more historic perspective, a study by the government focused on a limited set of illegal harvesting methods, estimated that 80 million m3 of timber, accounting for nearly one-quarter (24%) of the harvest, was illegally cut in Romania from 1990–2011 (EP 2021). Some progress in controlling illegal logging has been reported in recent years. For example, it has been noted in connection to the operationalization, in 2021, of the second version of SUMAL, Romania’s timber traceability system, which added new digital controls to the previous version (Nichiforel pc 2023). To some extent, too, the wave of illegal cutting that occurred in small forest holdings in the decades following land restitution could not be sustained as forest stocks were simply cleared. Nonetheless, a substantial amount of timber continues to be illegally harvested to the extent that it is not accounted for by (or compliant with) Romania’s timber traceability system. Grassland overgrazing, under-grazing, and abandonment. Grassland under-grazing and abandonment are among several threats to the (managed) health of mountain grasslands. Decreasing livestock numbers have led in some cases to the abandonment of entire pasture areas. These phenomena have been particularly noted in the Apuseni, Banatului, and Poiana Rusca Mountain Groups. At the same time, livestock densities have increased in parts of the mountain area leading to instances of overgrazing. Hotspots have been concentrated in the Făgăraș , Nordic, South, and Central Mountain groups, or generally, in the outer Carpathians and areas subsumed in the mountain area when its delimitation was expanded in 2019. While overgrazing, under-grazing and abandonment are thought to be affecting hundreds of thousands of hectares, instances of pasture conversion to arable land are more limited. Still, the 2020 Agricultural Census showed a decline in Romania’s permanent pastures of about 18% compared to a 4.5 million ha baseline, a change that exceeds the 10 percent allowed by the CAP and the Romanian Law of Meadows. Land conversions have been reported in the South, Făgăraș , and Apuseni mountain groups, and land abandonment hotspots are observed in Alba country in the Apuseni mountains, Hunedoara country in the Banatului and Poiana Ruscă mountain group and around the Harghita area in the Central Mountain group. “Suboptimal” grazing levels are disrupting the balance of managed grassland ecosystems, harming their levels of carbon storage and biodiversity as well as their productive capacity. However, as livestock inventories shrink and the farming population falls, it is not clear that there are viable policy options to prevent the phenomenon. Water pollution. Although mountain water quality has been improving, water pollution linked to fertilizer and manure management, and especially residential wastewater, are an enduring concern in the mountain area. Since Romania’s EU accession, the mountain area has made progress mitigating nitrate pollution in rivers, lake, and groundwater sources and most mountain waters broadly meet drinking water quality standards (World Bank 2023b).27 As of 2018, 75 percent of mountain surface waters were in “good” or “high” status by EU standards However, the remainder of mountain surface waters (20 percent) were in “moderate” to “poor” status (EEA 2020b) (Map 5, left).28 Nitrogen pollution is especially pronounced in the surface waters and groundwaters of the Brasov and Covasna counties, and notable in the surface waters of Cluj, Alba, and Bistrita (Map 5, 26 Atthe time of writing, the National Forest Inventory numbers had not been fully validated and the estimate of illegal logging was the subject of ongoing political and scientific debate (Nichiforel pc 2023). 27 About 98 percent of monitored mountain rivers and 100 percent of monitored mountain lakes had nitrate concentrations of less than 10 mg NO3/l in 2020–2022. Of note, however, eutrophication risk is associated with far lower concentrations (of nitrate/nitrogen-equivalent). 28 Some bodies of water were in “moderate” condition in the Central mountain group in Bacau and the South mountain group in Vrancea; and “poor” in the Nordic and Apuseni mountain groups. The unaccounted for 5 percent correspond to uncategorized bodies of water (mostly lakes). 78 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS right, and Map 6). Hence, mountain waters do not meet the “good status” to which the EU aspires, across the mountain territory.29 Mountain nutrient pollution has generally contributed to eutrophication in the mountain area and as far as downstream as the Black Sea. There, substantial levels of eutrophication are impacting biodiversity, marine life, and the recreational and commercial value of marine resources (World Bank 2023b). Agriculture was estimated to account for 13 percent of total national nitrogen emissions in 2021 (down from 18 percent in 2012), while human settlements were responsible for 31 percent in 2021 (up from 27 percent in 2012).30 MAP 5. Status of surface waters in the mountain area, 2013–2018. Ecological status of surface waters Nitrogen conditions of surface waters Source: European Environmental Agency (EEA) 2020a. MAP 6. Nitrogen conditions on groundwater bodies, period 2020-2022 Source: National Administration of Romanian Water (ANAR) 2022b. 29 Under EU Water Framework Directive, "good surface water status" is achieved when both the ecological and chemical status of a water body are at least "good." Good groundwater status is defined by its own set of criteria. 30 According to Romania’s national report to the EU on the implementation of the Nitrates Directive for 2016–2019, in the Mountain Nitrate Assessment 2023. CHAPTER VI. MOUNTAIN AREA NATURAL RESOURCE ASSESSMENT 79 Lack of mountain roads. While access roads can and do increase extractive pressure on forests, a lack of such roads can backfire in terms of biodiversity and resource protection. The uneven or inadequate development of access roads can lead to excessive pressure on forests that are better served. It can also result in damage to poorly served forests since trucks enter forests anyway (offroad). To date, the development of such roads has been held back by the availability of funding as well as administrative challenges relating to the construction, ownership, and concession of public assets on privately held lands. Hydropower plants in protected areas. During the 2010s, an expansion of run-of-river hydroelectric generation—encouraged by incentives for small-scale hydropower plants (Marinescu 2020)— placed considerable pressure on riverine ecosystems and aquatic species in Romania’s mountain area, including in protected areas. These areas are where much of the potential for small- scale hydropower is concentrated. A 2021 study found that nearly half of Romania’s operating hydroelectric installations were in or near Natura 2000 or other protected areas and negatively affecting fish populations (Costea et al 2021). In 2015, the EU opened an “infringement” procedure against Romania for micro-hydropower plants built in Natura 2000 sites. Contaminated mining sites. Although Romania’s mountain mining industry waned during the 1990s and 2000s as operations struggled to compete, many sites were significantly contaminated. As of 2013, there were 1,183 potentially contaminated sites in Romania, including in the mountain counties of Arges (111) and Maramures (109) (MMAP 2015b), although this is a ten-year old statistic, heavy metal pollution can last years and even decades after their source has ceased emitting. Studies undertaken early in the past decade showed that in historically mined areas like Sibiu, Cuceava, Mures, Harghita, Covasna, and Brasov, lead, arsenic, and copper levels in soils continued to exceed “threshold” or “alert” levels years after closure, with potential affectations in air and water resources in these areas (Moldoveanu 2014).31 Climate change in mountain areas. Climate change is driving increasing aridity, land instability, and extreme weather in Romania’s mountain area, putting strain on mountain resources and related activity. Romania’s mountain area is experiencing increased aridity due to changes in precipitation patterns and increased temperatures. Map 7 shows trends in average climate variables from 1987–2018. The southern part of the Carpathian Mountains is facing a particularly significant warming trend (Micu et al. 2021). Although the mountain area is not the worst-affected part of the country,32 Romania is particularly prone to heat waves and droughts, and climate change is tending to increase their frequency (Nagavciuc, Scholz, and Ionata 2022). These and other changes are expected to affect crop yields, the survival of certain tree species, the productivity and stability of grasslands and the biodiversity they harbor, the supply of fresh water available to households, livestock, plants, and turbines, and the soundness of human structures and recreational activities like camping, hiking, and skiing. 31 In this study, soil samples were taken in 2012. 32 The area inside the Carpathians is one of the most affected areas, nationally. 80 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS MAP 7. Trends in temperature and precipitation the mountain area, 1987–2018 Source: Pravalie et al., 2022 based on National Administration for Meteorology (ANM) data More intense rainstorms have increased the risk of landslides, especially in deforested and degraded areas. Romania is already among the European countries that is the most affected by landslides. Around 63 percent of the mountain area has a “high” to “very high” susceptibility to landslides based on a landslide frequency index (Wilde et al. 2018 and Gunther et al. 2014). They are a particularly common hazard in the Carpathian and hilly regions of the country. There, past land-use changes have contributed, together with steep slopes, curvature elements, altitude, and precipitation dynamics, to high rates of erosion (Minea et. al 2022). While not as pronounced in the mountains as it is in other parts of Romania, land degradation has affected an estimated 28 percent of mountain land, including 40 percent of arable lands, 30 percent of pasture, 13 percent of pasture, and 4 percent of meadows (Pravalie et al. 2021). In the context of the changing climate, soil erosion is a significant source of vulnerability; and increasing aridity and other effects of climate change are now among the drivers of this degradation. 3. Increasing stringency of conservation regimes Conservation of natural resource regimes has generally expanded and grown more stringent. Over time, protective measures have covered an increasing range of activities and territory and deepened in terms of environmental stringency. These trends have followed from the adoption of laws and regulations focused on putting in place restrictions on land-use, and increasingly, the means to monitor and enforce them. Protected areas. Romania’s biodiversity and ecosystem protection policies made a leap forward in the lead-up to EU accession and have continued to grow more elaborate since. Initially, Romania prioritized the adoption of legal frameworks conforming to the EU’s Birds and Habitats Directives. As a result, protected areas more than doubled as a share of the national territory, increasing from 7 percent on the eve of accession (2007) to 17 percent in 2014 (Martin-Russu 2022). Subsequently, Romania adopted the National Biodiversity Strategy and Action Plan 2014–2020, establishing the general strategic framework for biodiversity and nature protection in the country (BISE 2023). Biodiversity and ecosystem policies have expanded protected areas (PA) to 43 percent of forest lands, 50 percent of grasslands, 29 percent of pasturelands, and 18 percent of arable lands in mountain areas (Table 45). CHAPTER VI. MOUNTAIN AREA NATURAL RESOURCE ASSESSMENT 81 TABLE 45. Distribution of Protected Areas (PA) per mountain group and type of land cover, 2018 Proportion of PA per Land Cover Type (%) Natural Protected Proportion Forested Grassland Pastures in Arable lands Place code/Mountain of PA per area in PA area in PA PA related in PA related Area (PA) Group (MG) Mountain related to related to to total to total (N2K or PS) Group area total forest total natural pasture in arable lands (ha) (%) in MG. grassland in MG. in MG. MG. Romania 5,606,691 24 39 51 24 8 Mountain area 3,331,553 37 43 50 29 18 Nordic Group 377,848 31 37 57 21 10 Central Group 613,456 32 36 37 31 22 South Group 250,207 20 25 33 16 8 Bucegi Group 44,723 21 27 33 9 0 Făgăraș Group 489,167 63 68 79 72 45 Parâng Group 234,566 39 45 54 11 4 Retezat-Goldeanu Group 495,677 65 72 82 55 30 Banatului & Poiana Ruscă 286,275 40 44 49 22 26 Apuseni Mountains 539,635 32 44 45 16 8 Source: MMAP 2015a and EU 2018 CORINE Data Forestry conservation and management The 1990s saw the adoption of a new legal and institutional architecture governing the management of public and private forests, including a new Forest Code which has been frequently revised, becoming more stringent at each iteration, In 2008, for example, the government established a digital timber flow system (SUMAL) to control and track wood provenance and use.33 Since its operationalization in 2014, all timber suppliers and timber buyers are required to report transactions using the system. Any timber that is not recorded in the system is considered illegally harvested. The 2015 and 2016 iterations of the Forest Code reinforced measures to curb forest degradation and illegal logging in response to public concern. In 2016, for instance, it established higher penalties for forestry law infringements, recognizing over 200 new forestry-related infractions (Albulescu et al. 2021). In 2020, any volume of illegal cutting, already considered a crime, became punishable with jail time and vehicles used for timber theft could be seized by the state. In addition, wood product traceability and transportation requirements were tightened and public access to certain types of forests became more controlled. The adoption of the National Forest Strategy in 2022 potentially marked a profound change in Romania’s forest policy by signaling the government’s intent to diversify the instruments it uses for forest and resource protection. The extent of its reliance on prescriptive regulatory instruments is viewed as being increasingly out of step with European practices and funding mechanisms (notably, environmental conditionality and results-based incentives), and at times lacking in effectiveness, particularly for privately or commercially managed forests. A wholesale revision of the Forest Code is expected in 2023, breaking with the past tradition of updating the law of the forest incrementally. 33 GD996/2008. 82 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Water pollution protection. Romania has also adopted increasingly stringent laws and implementation plans over time for water conservation. The evolution of water protections has been guided by Romania’s obligation to implement and comply with the EU’s water directives. Those include the Water Framework Directive, the Nitrates Directive, the Urban Wastewater Treatment Directive, and several others. Romania transposed the EU Nitrates Directive into national legislation in 2000 as part of the EU accession negotiations.34 To implement the legislation, Romania formulated codes of good agricultural practices (CGAPs) to guide farm management on a voluntary basis (revised in 2005, 2017 and 2021); designated nitrate vulnerable zones (NVZs); and in 2003, established a nitrate action program (NAP) defining compulsory measures for farmers (including CGAPs) within NVZs (revised in 2008 and 2012). However, in 2013, to address the deteriorating eutrophication situation in the Black Sea, into which most national waters drain, Romania shifted to a whole- country approach. CGAPs became compulsory not just in NVZs but across the country.35 To date, Romania’s CGAPs have been strongly focused on manure management, including its storage and application to agricultural land. Romania followed a similar trajectory with respect to the implementation of the Urban Wastewater Treatment Directive. In 2005, recognizing the need to protect the Danube River and Black Sea basins, Romania opted to designate its entire territory a “sensitive” area, subjecting it to more stringent requirements.36 Soil protection. Since Romania’s accession to the EU, several restrictions and requirements relating to the use of agricultural soil have been elaborated. The transposition of the EU Nitrates Directive into national legislation has required that farmers in Romania abide by codes of good agricultural practices and are barred from applying fertilizer at rates equivalent to over 170 kg of nitrogen per hectare (or any during prohibition periods) since 2013. Romania is also committed to maintaining a certain area under permanent pasture. Under the EU’s Common Agricultural Policy (CAP) and Romania’s Law of Meadows (214/2011), permanent pasture in Romania is not allowed to decrease by more than 10 percent from its 2007 level (considered the baseline). And since 2013, Romania has forbidden the removal of permanent pasture from agricultural use.37 But increased success has come from increased funding rather than from more stringent regulation. In several areas of land and water resource protection, increased effectiveness has come less from increasingly stringent legal requirements and enforcement than from an expansion of funding and incentive programs. Resources available to support sustainable resource management have generally been expanding at the European level including ones of potential and realized relevance to the Romanian mountain context. Key sources of funding include those committed under the CAP, the Cohesion Fund, the European Bank for Reconstruction and Development (EBRD), the International Bank for Reconstruction and Development (IBRD), and the EU LIFE Program,38 and going forward, more will flow from the Recovery and Resilience Facility, which funds the PNRR. 34 Government Decision no. 964/2000 2000 with subsequent amendments and additions. 35 NAPs must be revised every four years and must (i) limit the periods when certain types of fertilizers can be applied; (ii) put in place capac- ity requirements for the storage of manure; (iii) set conditions for fertilizer applications; and (iv) limit the amount of livestock manure applied to the land each year to conform to EU limits. 36 This means that all agglomerations over 10,000 p.e. must apply biological treatment with nitrogen and phosphorus removal (tertiary/ advanced treatment of wastewater) and all agglomerations between 2,000 and 10,000 p.e. must apply at least biological treatment (sec- ondary treatment of wastewater). 37 Under government emergency ordinance (GEO) 34/2013. 38 The LIFE Programme funds environmental and climate action. CHAPTER VI. MOUNTAIN AREA NATURAL RESOURCE ASSESSMENT 83 4. Fulfilling EU and Romanian conservation ambitions will require more sustainable governance design To some extent, Romania’s relative success at protecting its forest, grasslands, and other mountain resources, has made these a target of European and national environmental ambitions—and community ambivalence. These include increasing the protection (and restoration) of ecosystems and nature including carbon storage and biodiversity, conserving traditional agricultural landscapes and practices, developing more clean energy resources, and developing the bioeconomy. However, the rise in what is being expected of mountain resources is occurring in an increasingly anxious policy context. Indeed, the implementation of mountain resource protections and governance have likely been hindered by policy, institutional, and implementation shortcomings. These circumstances call into question the feasibility of achieving increased levels of conservation in the absence of fundamental governance reforms. A fundamental conundrum of natural resource conservation policies in Romania is that they often promise social benefits predominantly at private cost. Over one-third of Romania’s forests and most of its grasslands and protected areas are privately owned.39 Resource conservation policies that mandate ecosystem services in exchange for providing public good benefits are costly for landowners, both in terms of direct outlays and foregone income. For example, one study estimated that the addition of biodiversity-related restrictions to existing forest management plans in Romania could cost forest owners an average of EUR 88 per hectare (Nichiforel et al. 2022). Another study—this time in Germany—found that biodiversity protections could cut the net present value of forest management by 3.7–4.2 percent (Augustynczik et al. 2018). Meanwhile, natural resource protections are often at odds with existing uses of natural resources and the preferences of mountain communities (Vasile 2019, MMAP 2020b, Aastrup 2020, Benedek 2018, Hossu et.al 2017). Mechanisms for compensating private landowners for ecosystem services have been in place under Romanian law since 2008. However, payments have been very limited and made sporadically (in 2009 and 2017). Thus, few landowners whose forests or grasslands have been subsumed into protected areas, including Natura 2000 sites, have received compensation. In addition, compensation payments have not been designed to cover the full costs associated with the recurring investments that are required to maintain protected areas in line with the requirements of their management plans, but only to cover the costs of foregone income (notably from lost timber or other product sales). In parallel, Romania has a compensation program in place for property damage arising from protected wildlife. However, farmers report challenges in obtaining timely compensation that requires navigating a complex and time-consuming bureaucratic process. By some accounts, it can take up to one year for victims to receive compensation, and sometimes the amount of compensation is seen as not being worth the time and energy spent on the filing process (WWF 2019b). Owners of small forests and areas of land face particular challenges in relation to compensation; and no compensation mechanism has been put in place for nonlandowners. The poor incentives inherent in this system are likely a reason why sustainable resource management laws and protocols are not systematically implemented to their fullest extent by mountain landowners and resource-users. 39 Asof 2018, 48 percent of forests were state-owned, another 16 percent were public properties (notably municipal forests), 34 percent were private properties of natural or juridical entities, and under 2 percent were private properties owned by administrative-territorial units (MMAP 2020a). Meanwhile, most farmland is privately owned. 84 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Romania’s mountain area has had better access to incentives targeting farmland under the CAP. CAP incentives for the maintenance of HNV farmland have in some instances cross-compensated landowners for Natura 2000 protection, as over one-third (34%) of HNV farmland coinciding with Natura 2000 sites in the mountain area.40 Over the period 2014–2020, Romania absorbed 67 percent of its CAP Pillar 2 allocation and about 81 percent of the allocation most directly relevant to environmental measures.41 Another way of casting the tensions and gaps that are surfacing around mountain resource governance is that the system of governance has not fully adapted to the fundamental changes that have occurred over the past 30 years—and has seen its efficacy decline. Romania transitioned to a market economy, and in the mountains, defining features of that transition included the restitution of state-owned forests to private landowners and the privatization of forest concessions.42 Compared to the major socioeconomic and technological changes that have reshaped the valuation and uses of Mountain resources since then, their governance can seem ossified. The dominant governance paradigm has remained one defined by the formulation of prescriptive laws and regulations (with little differentiation vis a vis different forms of ownership) by public agencies shaped by law-and-order concepts of governing. Although they have already started taking new directions, Romania’s policymaking processes have likely suffered from inadequate local stakeholder input. In general, inadequately consultative processes can lead regulators to misunderstand the realities, constraints, and intentions of those they are regulating, and vice versa, leading to policies that are either poorly designed or poorly understood—and hence ineffective and costly. Conversely, there is evidence that participation can positively affect environmental governance and outcomes (Jager et al. 2020). In the context of Romania’s mountain area, the style of policymaking used until recently has been identified as a source of misunderstanding and mistrust between regulators and the regulated, at times producing inefficient policy approaches that (actually or are perceived to) place undue burden on those expected to change their practices. Such issues were notably revealed during the broad forest sector consultation initiated by the government in 2020, a process that was indicative of the government’s awareness of the issue and readiness for change. They have also been observed in the context of protected area designation (Manolache et al. 2017, Iordăchescu 2021, Aastrup, 2020). For example, studies have noted that, until recently, the designation of Natura 2000 protected sites has involved Non-Governmental Organizations (NGOs) and experts from universities, research institutions, and government agencies, but has not fully involved local communities and local administration, with consequences for implementation (Benedek 2018, Iordăchescu 2021, Nostra Silva 2019). Stakeholder consultations suggest that resource protection measures are sometimes misaligned with mountain realities, and at times, needlessly prescriptive and costly. Mountain farms and forests are far from uniform in their scale and intensity, and one charge is that—while exceptions are made for small land holdings—protection measures have not been adequately differentiated. For example, it is possible at times that some restrictions on mountain farming, grassland management, and grazing practices are more grounded in the realities of larger-scale, more capital-intensive and commercially- 40 The mountain area encompasses nearly 2.6 million hectares of HNV farmland. 41 Calculated based on MADR data on the implementation of National Rural Development Program (PNDR) projects. https://www.madr.ro/ pndr-2014-2020/implementare-pndr-2014-2020/situatia-proiectelor-depuse-2014-2020.html. 42 Mountain area agricultural lands were not subject to the centralized economy or to a similar restitution process, and hence, subject to different drivers. CHAPTER VI. MOUNTAIN AREA NATURAL RESOURCE ASSESSMENT 85 oriented farming systems than those of Romania’s traditional, lower-intensity ones.43 In any event, some see Natura 2000 and other protected area plans as imposing bureaucratic hurdles (requiring approvals) and imposing restrictions on practices commonly used under the very systems that fostered the biodiversity they are trying to protect (Iordachescu 2021, Bauer and Mondini 2014, Bauer and Gutzwiller 2018, Vasile 2019). In general Romania’s Natura 2000 conservation plans have erred in a restrictive direction, even though the program encourages plans to allow human activity that is not particularly threatening to species and habitat (Stancioiu et al. 2010). In other cases, policy measures with strong public good justifications have lacked mountain resource-users’ understanding and acceptance because they have been developed with inadequate communication and community involvement. Protective measures that interfere with traditional practices may have strong environmental and social grounds yet still be misunderstood and viewed unfavorably by the mountain communities with whose ways they interfere. For example, certain restrictions on the application of manure to agricultural fields intended to mitigate nonpoint source water pollution downstream may be misunderstood because the measures’ benefits materialize further downstream and can be diffuse and hard to perceive. A lack of information and understanding among landowners and local communities about protected area requirements or their rationale is among the issues highlighted by Romania’s Natura 2000 Prioritized Action Framework 2021–2027. At the same time, the applicability and efficacy of “payment for ecosystem services” approaches— grounded in financial incentives and compensation—cannot be taken for granted in some contexts. The question has most notably been raised in the context of the protection and preservation of grasslands whose use for grazing has decline due to falling livestock inventories. Views differ both on whether funding has the power to salvage these threatened ecosystems, and whether this is the most sustainable outcome to aim for in the first place. New approaches to mountain resource governance are already emerging and being embraced in ongoing policy reforms. While the experiences of countries like Germany, Austria, France, Switzerland, and Sweden offer relevant learning in this regard, so does Romania’s own recent experience. Signs of change in the approach to mountain resource governance have been on display in at least five recent developments. They are: (1) the identification of environmental policy, natural resource governance, and other indirectly related reforms in the PNRR; (2) the making of the National Forest Strategy to 2030; (3) the planning/implementation of biodiversity policy reforms; (4) the tabling of a proposal to revive eco-compensation efforts; and (5) and the recent establishment of the National Mountain Council and nine Massif Committees. These experiences underscore how new orientations of policymaking are both needed and possible in the face of the complexity and ambitions at play. Indeed, changes in policymaking processes and a diversification of policy instruments could, together, potentially help accelerate the elaboration and implementation of more sustainable, effective, and ambitious Mountain resource management policies going forward. Promising shifts include ones involving more: • participatory and inclusive processes for elaborating laws, regulations, standards, and more; • mountain-specific protection measures that better reflect mountain realities (including labor, infrastructure, spatial, biophysical, cultural, and socioeconomic realities); 43 Needlessly prescriptive from an environmental protection perspective and needlessly costly from a mountain farmer’s perspective. 86 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS • cooperative approaches to implementation that leverage tools like economic incentives and compensation, capacity building and extension, community-based enforcement, and self-regulation; • streamlined administrative processes; and • strategic monitoring and enforcement systems that are better at detecting and deterring violations of resource protections (notably using risk-based approaches and leveraging stakeholders’ economic interests). 5. Sustainable resource management and mountain-based bioeconomy development Unlocking the potential of Romania mountain areas would need to look natural resources not only from the conversation point of view, but also from the opportunities for their sustainable use and development of a stronger mountain-based bioeconomy. Romania is well positioned to develop a circular-bioeconomy in its mountain areas. The mountains hold rich and diverse natural resources that coupled with a long tradition of sustainable management are the cornerstones for further developing a sustainable circular-bioeconomy in this region. Opportunities range from adding value to already existing supply chains and improved territorial marketing of mountain-based products, to further valorizing side-streams from agricultural and food production or expanding and tapping into existing resources coming from agriculture, animal farming, and forestry. Specifically, three types of bioeconomy-related innovations can arise from the mountain area: (i) Product Innovations such as bio-based products coming from the agriculture and forest sectors to be used in novel ways e.g., sheep wool used as fertilizer or housing insulation, biochar production, or the use of plants for biocosmetics; (ii) Process Innovations related to processes that complement existing means of producing and processing, such as biomass side-streams into energy production or fertilizer use (manure as fertilizer and for biogas production) or agricultural residues and sawdust from forestry operations for their use in bioenergy; (iii) Service Innovations relate to new forms of organizational (re)structuring that supports cooperation between farmers and other local and international stakeholders to expand their businesses, and add value to or expand existing services e.g., farmer cooperatives, agrotourism farms or carbon farming. In France, for example, in the Massif Central Interregional Agreement 2021-2027, has included soil and increase in storage and carbon sequestration as a key driver of investments, including the continue efforts to offsetting carbon emissions by financing forestry or agricultural projects. The Plan also supports investments for the production of bio-sourced materials to valorized wood and agricultural products. The consolidation of a mountain bioeconomy will require support to enablers such as financial, human, and natural resource mobilization; influencing the direction of research, knowledge development and diffusion through substantial investments in resource and development (R&D) and through supporting international research collaboration and entrepreneurial experimentation through funding for innovative programs.. CHAPTER VI. MOUNTAIN AREA NATURAL RESOURCE ASSESSMENT 87 6. Implications for mountain development policies The conservation and sustainable use of mountain natural resources is an issue usually addressed through environmental and other laws and regulations, yet, the implementation of such policies relies largely in the sectors, whether agriculture, forestry, water, tourism, etc. Mountain specific policies can and should influence and inform such environmental laws and regulations. A useful role within the context for the mountain specific policy governance, is to call for period stakeholder thematic reviews of policies of relevance of mountain stakeholders, including on Romanian natural resource governance policies to propose changes to better adapt them to mountain territories. The case of the French Mountain Law, described below, illustrates the richness of undertaking such periodic review processes, which should be initiated by and enjoy the political support of the Romanian Parliament, the body that approved the 2018 Mountain Law. The French Mountain Law of 1985 contained an article that mandated that allowances should be made in French Law to adapt their implementation to the specific needs of mountain areas. Part of the implementation of the French Mountain Law is the regular review of legislation related to its implementation in mountain areas. Thus, the revision to the Mountain Law in 2016 contained numerous revisions and modifications to French legislation (such as the Forest Code, Public Health Code, Agriculture Code, Transport Code, Local Safety Code, Building Code, etc.) designed to adapt it to mountain conditions. Furthermore, a 2020 evaluation of the 2016 Mountain Law by the Economic Affairs Committee of the French Parliament systematically reviewed the implementation the Law and proposed new policy adaptations to the particularities of mountain territories. According to this document, the “main purpose of the Mountain II law was to recall the specificity of mountain territories so as to fight against their trivialization and their dissolution in the notion of ‘rural areas’. It reinforced the right to adapt public policies to the particularities of these territories . . ..” (National Assembly of the Republic of France 2020). The mandate for adaptation of French Law to mountain conditions within the French Mountain Law has been used to invigorate the stakeholder consultation process within France related to both the implementation of legal regulations in mountain areas, and the institutions for mountain development (the National Mountain Board and the Range Committees). Regular reviews of the Mountain Law have worked to “fight against the trivialization” of mountain territory differences to make certain that the voice of the mountain population is heard at the highest level of policy formulation, the French Parliament. Furthermore, the strengthening of mountain governance structures, such as the establishment of the Massif Committees represents an opportunity for bringing mountain community issues and perspectives to mountain policymaking table in a bottom-up fashion, and hopefully this bodies will become truly consultative bodies for discussions of environmental and natural resource conservation policies. CHAPTER VII. CONCLUSIONS OF THE DIAGNOSTIC AND THEIR RELEVANCE FOR A MOUNTAIN DEVELOPMENT STRATEGY 89 CHAPTER VII. Conclusions of the diagnostic and their relevance for a mountain development strategy The preceding chapters have provided an assessment of several aspects of Romanian mountain development issues and pointed out some of the implications of those issues for a mountain development strategy built upon raising living standards in an inclusive process initiated, guided, and led by mountain populations. This conclusion summarizes the main arguments of the assessment and the implications of that assessment for mountain specific policy making. Conclusions of the diagnostic assessment After several decades of efforts around establishing a specific governance structure for mountain policy, the promises and objectives of the efforts are hardly being realized in raising living standards through inclusive and sustainable development and the participation of the stakeholders. Pronounced gaps between urban and rural areas also persists. Though average living standards in Romania are undoubtedly rising through economic growth, those in mountain areas, particularly in rural mountain areas, are advancing at a slower rate than in the rest of the country. There has been no catching up process between rural and urban areas or between mountains and lowlands. The current status quo without a program of public policies, effective institutions, and a dedicated budget for mountain areas can be expected to continue and deepen the divergence between mountains and lowlands. This Diagnostic has provided evidence on the challenges and development priorities faced by mountain areas. Chapter I demonstrated largely, through comparisons with the French model, that efforts around establishing an institutional framework for mountain policy, including recent adjustments proposed by the 2018 Mountain Law, face challenges to truly fulfil their objectives. A more robust institutional framework to plan and realize programs from dedicated funds through a consultative process involving both local and central stakeholders, is required, as illustrated by the discussion under Chapter I. The institutional framework for mountains established by the 2018 Mountain Law, including the establishment of Massif Committees and the National Mountain Council (NMC) is a step forward toward a more participatory process in the setting of mountain priorities and alignment of funding. Yet, these structures are too new, and would need to be strengthened to truly become consultative bodies for mountain policies. NAAM/ANZM needs also to be strengthened to fulfill the roles given byt he Mountain Law and play a stronger convening role across sectors. Specific suggestions include to fully equip NMAA/ANZM with sufficient financial, 90 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS logistical, and human resources to strengthen its operational capacity; greater collaboration between the NMAA/ ANZM, other ministries, as well as with MARD General Directorates is critical to improving the effectiveness of NMAA for guiding mountain policy. A more ambitious institutional approach for mountain policy, which could potentially yield more effective results, includes a mountain development agency outside the aegis of the MARD under the Prime Minister. This implies an agency with the authority and means to attract earmarked cohesion and other funding for mountain development through specific massif priorities defined in collaboration with the National Mountain Council (NMC) and the Massif Committees. Certainly, this institutional design would require the support and political will of the Romanian Parliament to make the system work for mountain development. Chapter II analyzed mountain areas’ socio-economic profile including depopulation of mountain areas and the means of compensating for it. The mountain workforce is the mountain region’s most valuable resource and the key to improved living standards. Education, training, and improvement of the workforce service “ecosystem” are critical for attracting higher paying jobs to mountain areas. Depopulation is not a mountain specific problem, although it has hit mountain areas harder. But it is a common difficulty faced by mountain areas all over the world. The key to an effective mountain development policy is an agreed upon program to mitigate the effects, to compensate for them, and to gain public support through public consultations. Even if it is impossible to halt outmigration, programs agreed with local communities aimed at public infrastructures such as housing utilities and road and rail network improvements, improvements in education and health service availability and internet penetration, as well as programs to stimulate innovation and raise the skill levels of the mountain labor force can demonstrate the commitment of the government to mountain areas. But none of this will be possible without a whole-of-economy approach agreed upon with local stakeholders to mountain development. The case studies of Chapter III demonstrated that that there are several factors determining the success of mountain ATUs in generating economic growth. There is no “one size fits all” approach to growth. The proximity to a bustling metropolitan center certainly plays a primary role in driving such growth. A second issue is the degree to which public administrations expend on growth supporting measures and how well they can attract non-reimbursable funds. However, none of these factors provide a panacea for growth. The innovativeness of the population and the ingenuity of local administrations in taking advantage of the factors at hand are difficult to quantify but play an important role. In this respect, the LEADER program provides a useful program for local territorial development. Furthermore, the formulation of Integrated Territorial Investments (ITI) and Local Development Through the Community (CLLD) are also instruments to facilitate local based- planning processes. Chapter IV on agriculture highlighted the fact that agriculture in Romania is not one sector but two or three: a commercial sector, a small subsistence farm sector and a continuum of struggling small to medium farmers with the ambition to improve their performance. The dualistic or trichotomous structure of farming in Romania requires different policy regimes. The CAP provides a sector development program suitable for the commercial sector of Romanian farming as well as for the struggling small to medium farmers with the ambition to improve their performance. Overall, the commercial sector of Romanian farming has performed relatively well compared to most countries of Eastern Europe, exhibiting growth in crop production, stagnation CHAPTER VII. CONCLUSIONS OF THE DIAGNOSTIC AND THEIR RELEVANCE FOR A MOUNTAIN DEVELOPMENT STRATEGY 91 in livestock production, a relative increase in the production of cereals and other field crops, and a relative decline in high value, labor intensive crops such as potatoes and vegetables. Production increases have been primarily a result of higher yields, though Romanian yields are still low except for sunflower seeds. However, in mountain areas crop production (using county-level data) has stagnated as crop production in lowlands has increased since 2001. Evidently, the fall in the value of high value household agricultural production in mountain areas has been so severe that it has offset much of the production gains made by larger farms. Considering that the transformation of agriculture in Romania has been a long process, this stagnation is likely to continue. As a sector development program, the CAP is not well suited as a policy regime for the subsistence farming sector in Romania. The subsistence sector in Romania merits its own program for sectoral transformation within a mountain development strategy. The transformation of agriculture that is eventually to result in less labor employed in the sector, land consolidated into larger farms, and increasing labor productivity is both incomplete and proceeding slowly. While there has in fact been a redistribution of land from very small to larger farms, nearly 90 percent of farms and 23 percent of land were still held in farms under 5 ha in 2020. This has created a poverty pocket within the country. Agricultural producers had a poverty rate of 51 percent in 2015, and twenty eight percent of the poorest 40 percent of the population worked in subsistence agriculture (WB, SCD, 2018). Moreover, Romania has the largest income and poverty differences between rural and urban areas in the EU. In 2021, the Romanian at-risk-of-poverty or social exclusion rate in urban areas was 12.2 percent and 32.8 percent in rural areas (Eurostat Statistics Explained, 2023). Reducing poverty requires reducing the large productivity gap in the agricultural sector. In 2021, agriculture accounted for about 11 percent of employment (not counting those working in subsistence farms) yet contributed only 4 percent to GDP. If we count household labor in subsistence farms, the share of employment reached 20 percent in 2020. Chapter IV also noted that Romania has underinvested in in instruments for small and medium-sized farm support. The first among these instruments is support for farmland registration and cadaster, but also support policy innovations that facilitate access to land by farmers. Other recommendations include support for extension and advisory services, investments in infrastructure, storage, transport, access to finance, and quality certification for organic and mountain foods and other forms of value addition. The CAP contains dedicated measures to address nearly all these topics, however, with several eligibility criteria that motivate small farmers to act collectively rather than individually, if they are to become beneficiaries of certain sub measures (SM). The CAP offers also opportunities for farmers to benefit from the range of incentives for the adoption of greening farming practices. However, these incentives need to be accompanied by strong knowledge, advisory and innovation systems. The analysis of the sector in Chapter IV also highlights that mountain agriculture has a key role to play to contribute to a diversified and vibrant agri-food sector in Romania, while preserving associated traditions and the biodiversity that mountain ecosystems provide. Unlocking the power of mountain agriculture to perform these vital functions will require a comprehensive and multi-faceted approach to improve the productivity and stimulate the expansion of high-value agriculture, remunerate traditional practices that preserve landscape features and culture, promote growth in nonfarm economic activities, and help people to move out of agriculture. 92 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS This will require strengthen enablers such as a proper land markets; access to financial services in combination with non-reimbursable funding; market access facilitation and connectivity; training, and skills development; and largely innovations at all levels. In the latter, Romania could inform local innovations through efforts taking abroad around piloting approaches to align biodiversity conservation and environmental sustainability with productive objectives at the landscape/ territorial level. At the international level, several pilot efforts have been undertaken around sustainable landscape approaches, supporting the adopting biodiversity-friendly practices for product differentiation and market access, facilitating producers’ collective action and promoting community biodiversity monitoring. These initiatives aim at incorporating sustainable productive practices that could arguably add value in adequate markets. These represent somehow examples of social innovations combining a set of mechanisms to identify and solve some problems and align conservation with productive approaches. Mountain tourism faces major challenges in Romania, including poor infrastructure, lack of food service operators, limited transportation options, and deficient IT infrastructure (Chapter V). To address these challenges, policy recommendations focus on high-value tourism segments, with seven priority intervention areas, which are demonstrated by examples from other countries with experience in these areas. The example of the “Swisstainable” label was used to raise sustainability awareness throughout the tourism value chain. The accreditation of rural tourism establishments by the Catalonian region government in northeastern Spain was used as an example of how local government can provide accreditation to encourage competition and raise the quality of rural tourism facilities. Examples of the development of innovative tourism products through tourism “product clubs,” were provided, as developed in Colombia and Spain. France provides an example of a more integrated effort to revitalize and diversify tourism in mountain areas. These examples illustrate that, though the challenges of developing mountain tourism are substantial, there are myriad of ways of improvement-based experiences of other countries, but also from Romania’s own innovations, such as the Via Transilvanica, what is required is convergence of efforts and investments to achieve an agreed vision of tourism development in Romanian mountains. Chapter VI recounted some of the fundamental difficulties faced by the Romanian efforts at natural resource protection. A striking fact about Romania is that one third of Romania’s forests and most of its grasslands and protected areas are privately owned. The peculiar tenure arrangement in Romania implies that implementation of conservation measures relies substantially on the acceptance and actions of private landowners, resource consumers and communities, so ensuring that those views are well understood to inform regulatory processes is key for an effective governance. Romania’s National Forest Strategy to 2030 may represent a new, more flexible approach to conservation and natural resource protections, identifying the need to strike more of a balance between enforcement of conservation regimes and self-regulation as a means of implementing protections. It has also prompted a reform of the Forest Code to address challenges related to monitoring systems, institutional arrangements, bureaucratic requirements, forest owners’ compensation, forest management plans and more, while taking greater account of the sustainability and effectiveness of preservation regimes through public consultation. In the context of increasing environmental ambitious and expanding protections, as mentioned earlier, the role of the massif committees and the CNM as consultative bodies for discussing issues and achieving consensus on environmental resource management is paramount. CHAPTER VII. CONCLUSIONS OF THE DIAGNOSTIC AND THEIR RELEVANCE FOR A MOUNTAIN DEVELOPMENT STRATEGY 93 As the discussed in the introduction to this Diagnostic, achievement of the goals of the Mountain Law is dependent upon the political will and commitment of the Romanian government to make mountain integrated development a priority for implementation. The discussions that are taking place around reforming environmental and conservation governance and their potential implications on mountain communities (discussed in Chapter VI on natural resources), represents an important testing ground for the political commitment for mountain policy. Furthermore, on the opportunity side, the richness of Romania’s natural resources provides opportunities to generate rural prosperity through strengthening circular bioeconomy approaches to preserve the environment services that these resources provide but at the same time generate income opportunities for mountain inhabitants. Conclusions for mountain specific policy and strategies Territorial development strategies utilize programs for specifically identified geographical areas to achieve their main goal of raising living standards. As previously noted, territorial development strategies tend to focus on cross-sectoral issues such as, for example, the development of entrepreneurship across sectors, facilitating structural change to increase overall economic productivity, and laying the institutional foundations for high value employment. Three aspects regarding the institutional arrangements for mountain development in the examples of France and the Appalachian region of the United States seem relevant to Romania. A first important consideration for a territorial development strategy is to identify the instruments available to it to fulfill its goals. In France and the US, mountain territorial development strategies are based on dedicated budgets divided into programs that address various issues of mountain territorial development. In both France and the US, there is a central authority with funds for the development of mountain areas. In France this is the French National Agency for Territorial Cohesion and in the US, the Appalachian Regional Commission. In Romania, the trajectory of developing strategies without budget estimates or insights on the sources of funding has translated into a very low likelihood for those strategies to ever being implemented. A second consideration is the political will to make a strategy a reality. The French parliament and the United States Congress, as the institutions that established the mandate for mountain development through law, have oversight authority to make sure the goals of the mountain development strategy are being fulfilled. For example, in France, the 1985 Mountain Law established a mandate that the specificities of mountain areas should be taken account in the application of French law. The 2016 Mountain Law reiterated this principle and established the precedent of Parliamentary oversight for its implementation. In the United States, the Appalachian Regional Commission is co-chaired by a federal government representative responsible to Congress. A third and final consideration for mountain policy is to identify the geographical areas for which policies are to be developed, in consultation with authorities and relevant stakeholders in the area. In France, the National Agency for Territorial Cohesion consults with the National Mountain Council (NMC) as well as with the seven massif committees who represent their regions and consult with their own municipal and community authorities, as well as other local stakeholders, to define area development strategies at a massif level. Given the alignment of funds to territorial planning, massif-specific operational programs have emerged, as well as more cross-cutting strategies 94 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS specific to the whole mountain region, for example, the recently released strategy for Mountain Tourism. In Romania, like in France, similar mountain institutional structures are established, but are yet to truly become consultative bodies for policies relevant to mountain areas across sectors. Furthermore, as in the case of France, Romania defined its mountain delimitation, under the concept of massifs, expanding the focus of policy action from areas of disadvantage (based on combination of altitude/slope) to align criteria of landscape connectivity, among others, to facilitate spatial/territorial planning; however, in Romania, the institutional framework supporting mountain policy is not strongly linked to territorial institutions, but rather to sectoral ones, such as the MARD. The massif concept brings stronger considerations of territorial functionality, going beyond a sectoral approach, therefore, a clear scoping of the geographical focus to be applied in the definition of mountain specific policies is key. In relation to mountain economy living standards, mountain territorial development policies should include programs aimed at retaining and developing a workforce in the long term to lay the institutional foundations for high value employment. A mountain development strategy should outline long-term programs aimed at halting the outflow of young and skilled workforce, develop the skills of its own workforce, establish viable career paths within mountain areas, and improve the workforce “ecosystem” of housing, utility connections, transportation connectivity, education, and health services. Instruments utilized in other countries for this purpose include investments in infrastructure, child and adult education, workforce development programs and incentives for young professionals to settle in mountain areas. While the “growth poles” of mountain areas are cities, employment intensive growth, the key to pro- poor growth, is characteristic of rural growth. To the extent possible, then, a mountain development strategy should focus on promoting growth outside of cities, but in regions connected to urban areas. One of the more effective strategies for achieving such “connectivity” growth is the establishment of well-connected regional hubs centered around the competitive advantage of the region and its workforce. The establishment of regional hubs can be a means to extend the connectedness of outlying districts, by bringing direct connections to cities closer. Mountain territorial development policies rely on consultations with local authorities and agencies to define programming within place-based strategies. The role of the NAAM/ANZM, the US Appalachian Development Commission or the French National Agency for Territorial Cohesion (ANTC) is to promote area-based growth and poverty alleviation by offering a menu of funded investment, training, education, and transportation programs that are the means for developing mountain areas. Identifying the specific development programs for a specific region requires stakeholder consultations with mountain area officials, community, and education leaders, as well as mountain businesses. The targeting and implementation of these programs is the task of local regional organizations (such as Mountain Group Committees), county and municipal governments. For large multi-region investments funded by cohesion funds, they should be negotiated with the Agency responsible for disbursing cohesion funds. Whereas sector strategies focus on growth of individual sectors, mountain development policies and its associated programs takes a whole of economy approach focusing on cross-sectoral issues such as the development of entrepreneurship. CHAPTER VII. CONCLUSIONS OF THE DIAGNOSTIC AND THEIR RELEVANCE FOR A MOUNTAIN DEVELOPMENT STRATEGY 95 The mountain environment is characterized predominantly by small and medium businesses (SME). A mountain development strategy can support SMEs through supporting entrepreneurship and start-ups and support for established businesses. Established business support within a mountain development strategy may include support for place based economic development and growth strategies that take advantage of regional assets. Such place-based strategies are local in nature, and thus should be developed by regional, municipal, and local government or stakeholder groups. Mountain policy should also aim at facilitating structural change to increase overall economic productivity. The small farm subsistence sector in Romania is a logical focus for a territorial development strategy, because it remains only partially addressed by the sector development strategy whose focus is on commercial agriculture and is highly associated with rural poverty. A special program for agricultural transformation modeled on the European Union special program for coping with the effects of the declining coal sector could be developed within a mountain development strategy in consultation with agriculture stakeholders, local government officials, the Ministry of Agriculture and Rural Development, and the Ministry of Labor and Social Protection. The program should aim to facilitate the movement of labor and land out of subsistence agriculture by providing better access to financial assistance for subsistence landowners, access to an improved land registration system, and the development of non-agricultural industry and services within high poverty areas to provide alternative opportunities for labor transfer. Tourism can be a development accelerator of mountain economic growth because of its ability to bring additional business and investment across a variety of sectors. Thus, a mountain integrated development strategy should incorporate tourism as a component in area development plans. Some examples of how cultural and sport tourism can be built into territorial development projects are: support for the renovation of village main streets to express a distinctive vision based on a region’s history and heritage to attract both visitors and business investment, renovation of cultural or historical heritage objects supported by plans for their integration into the vision of a particular region, support for cultural or gastronomic heritage events, as well as support for sporting events, such as cycling or running. Regional or local mountain tourism boards or associations can provide a voice for the tourism sector within the development planning process, help to build the sustainability profile of the tourism sector, establish certification standards to encourage higher quality accommodations, and provide information about local attractions. A useful role of the established mountain institutional framework would be to call for stakeholder thematic reviews of Romanian natural resource governance policies and other aspects of mountain policy to propose changes to better adapt them to mountain territories. As in the case of the French Mountain Law, this review process would be initiated by and enjoy the political support of the Romanian Parliament, the body that approved the 2018 Mountain Law. CHAPTER VIII. SWOT ANALYSIS 97 CHAPTER VIII. SWOT Analysis 1. An assessment of the goals of the 2018 Mountain Law The 2018 Mountain Law laid out the Romanian government’s goals for mountain areas as raising living standards, through sustainable and inclusive development in a process led and controlled by the population of the mountain area with the support of the Romanian state (art. 1). Thus, there are three main goals elaborated by the government for mountain development: • Raising living standards • Sustainable and inclusive development • A process of development led and controlled by the population of mountain areas with the support of the Romanian state. The 2018 Mountain Law is part of a set of efforts initiated since the early 1990s, to enhance mountain policy governance. As highlighted in this Diagnostic Report, Romanian mountain area continues to face challenges and although some progress has been made, and as discussed along this Diagnostic and summarized below, the ambitious stated by the 2018 Mountain Law (and previous law) are still elusive in many ways. Living standards According to county level statistics, in the year the 2018 Mountain Law was passed, living standards in both mountain and lowland areas had been rising since 1999 (Figure 4). However, economic growth outside of Bucharest grew at a much slower pace than in the capital region. Real GDP per capita in Bucharest grew by 5.1 percent per year between 1995 and 2020, while in mountain and lowland counties that rate was only 2.1 percent per year. Moreover, the level of GDP per capita in Bucharest was nearly 3 times the level in the rest of the country and the difference is growing. GDP per capita is not a perfect indicator of living standards, since it is based exclusively on income derived from the production of goods and services in the economy. It does not take account of some of the fundamental issues of importance in mountain areas that lower living standards, such as inadequate or deteriorating utility and internet connections, inadequate waste collection services, poor education services, lack of job training and lifelong learning opportunities, poor access to health care, and lack of road and rail infrastructure in mountain areas. GDP also does not take account of the loss of a feeling of vitality in rural communities through depopulation. 98 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS Sustainable and inclusive development The 2018 Mountain Law also called for development in mountain areas that would be sustainable and inclusive. A significant challenge to the implementation of the Mountain Law in a sustainable and inclusive way is that, according to the World Bank Development Systematic Country Diagnostic Update (2023), Romanian development has thus far been neither sustainable nor inclusive. Though progress has been achieved since 2018, the “tale of two Romanias”—one urban, dynamic, and integrated with the EU, the other rural, poor, and isolated” --is still an accurate description of the extent of unequal economic outcomes in the country. Though to a lesser extent, the “two Romanias” description may also be applied to a good deal of mountain areas as well. The primary reason for the lack of sustainability is that inclusive growth is usually attained through policies and institutions that (a) compensate for the natural tendency of markets to lead to an uneven distribution of income by providing an income safety net, assistance with job training, access to quality public goods such as education, health services, infrastructure, and others; (b) provide stable policies which are implemented fairly to support growth of business; and (c) implement active anti-poverty policies for sectors or persons displaced by the economic transition, such as subsistence agriculture, mining, and industries. According to the World Bank Country Diagnostic (2018), in contrast to the inclusive growth policies cited above, Romanian government institutions are characterized by weak commitments to policy implementation, which create a poor business environment and the misallocation of resources to politically connected firms. The 2023 Update of the Strategic Country Diagnostic acknowledged that there have been several key reforms in the public administration introduced in the past few years. However, the implementation of these reforms has been slow, and weak institutional capabilities and human resource management within public institutions has further hindered their completion. In mountain areas, the primary evidence of the lack of inclusive development has been the presence of extraordinary high poverty rates in rural compared to urban areas, although it is fair to say this gap between urban and rural areas is evident across Romania. Though dramatic progress has been made since 2012 in bringing down the poverty rate, Romania has the largest income and poverty differences between rural and urban areas in the EU. In 2021, the Romanian at-risk-of-poverty or social exclusion rate in urban areas was 12.2 percent, while in rural areas it was 32.8 percent (Eurostat Statistics Explained, 2023). The root of these differences is the large gap in productivity between agriculture and other sectors and the slow pace of agricultural transformation. Yet over 30 years after transition began, the institutional structures in agriculture which can facilitate the transformation of the sector, such as the land cadaster, are not in place. Development led and controlled by the population of mountain areas. It is also possible to make an interim assessment of the degree to which mountain development has been a “process of development led and controlled by the population of mountain areas.” This RAS project held several local stakeholder consultation meetings in mountain areas (World Bank, 2023). At these workshops stakeholders were asked to describe some of the threats to prosperous, connected, resilient development with strong communities (World Bank, 2023). Several of the answers given in these workshops seem to indicate an underlying belief that there has been little public involvement in the development and adaptation of programs in mountain areas, and there is weak involvement of authorities for support. The following are some of the beliefs expressed in stakeholder workshops: • Lack of a special program for the development of mountain areas with funding, specifically adapted to address the real issues of mountain development, as perceived by the mountain population. CHAPTER VIII. SWOT ANALYSIS 99 • Lack of community consultation prior to the delimitation of protected natural areas, and lack of such consultations on the restrictions imposed by protection. • Lack of attention to adaptation of existing funding opportunities to make them more accessible to mountain populations. • Poorly harmonized policies and legislation which do not take sufficient account of the realities in the mountain areas. • Difficult access to markets and high costs of production caused by poor infrastructure and IT connectivity. • Lack of real support for producers in mountainous areas. • Weak involvement of local, regional, and national authorities in supporting mountain areas. • Superior attitudes of the authorities’ representatives and lack of real interest of the authorities for the actual situation in the mountain areas. 2. Views of mountain stakeholders on mountain development As part of the local stakeholder consultation meetings in mountain areas stakeholders were consulted on the strengths, opportunities, weaknesses, and threats for development. A sample of the most significant responses are reproduced below. Strengths and opportunities of mountain areas for development Mountain areas possess development strengths which may be capitalized on for economic growth. The following is a selection of strengths and opportunities offered by mountain areas, as perceived by local stakeholders (World Bank, 2023). • The natural assets of the mountain areas, such as the healthy environment, local traditions, and good and healthy food. • Local food products and recipes have not been forgotten. Existing quality schemes for food products and the added value of the mountain products are being promoted. • Stakeholders noticed a positive recent trend towards more sustainable tourism, though there is much more potential for such tourism to be explored. • In most areas, road accessibility and quality are adequate, enabling the connection with the outside world. • Collaboration (in LAGs, inter-community development associations) with other mountain areas in Europe, between existing associations of local producers of ecological and traditional products, and between tourist associations in the area) ensure an intense and consistent connection with other communities (at national and European level). • Access to the internet and new technologies constitute a huge opportunity for keeping up with the progress and enhancing collaboration between local stakeholders. • The well-preserved sense of community, based on the traditional culture and traditions, is an important value in mountain areas. • There are some specific funds available for mountain development and for adopting new technologies and for innovation. • Threats and weaknesses in mountain areas for development. 100 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS In terms of threats, perhaps the most prominent one perceived by communities is depopulation of mountain areas, which is seen as inevitable in many regions. According to stakeholders, mountain areas are not sufficiently attractive for youth, and the aging of the population is partly a consequence of youth outmigration. Traditional activities, such as agriculture, mean rough, hard work with very little return for the products made. Thus, abandonment of pastures and agriculture, as well as depopulation, are inevitable. Moreover, it is recognized that mono-industrial and mining areas require special programs for reconversion and job retraining, because of the high rates of poverty there. Local stakeholders also recognize weaknesses of mountain areas for development, such as remoteness, the climate, and an aging population (World Bank, 2023). Mountain stakeholders also note several key weaknesses, such as the poor quality of education, poor utility connections, a lack of doctors, a lack of management and administrative professionals in all fields, poorly adapted and unclear legislation on forestry, environmental protection, veterinary issues, etc. Moreover, bureaucratic procedures tend to take a long time and the requirements for subsidy applications are often ill-adapted to mountain conditions and rigid. Mountain stakeholders also commented on the poor infrastructure in mountain areas. There is a lack of investment in basic utility connections in mountain areas, waste disposal services are inadequate, pollution from neighboring areas often negatively impacts on landscapes and livelihoods, and there is a lack of communication technology and equipment for local police and emergency services. Several of these issues were demonstrated throughout the present report, confirming the views of stakeholders. Priorities actions for mountain development Finally, when asked to provide priority actions for mountain development, local stakeholders focused on four main themes: • Supporting youth to remain in mountain areas, by supporting them more directly to improve their livelihoods, improving education, and offering opportunities for professional development. Priority actions in this category include organization of courses for lifelong education, training of local producers, vocational training for traditional food products, and improvements in school education. • Simplifying funding schemes and improving mountain population’s accessibility to funding. Under this rubric, stakeholders included reduction of CAP co-funding requirements for mountain producers, improving access to financing for cooperatives and pilot producer organizations, extension of the LEADER model to mountain areas, funding LAGs from public institutions, simplification of legislation on labeling for small producers, and others. • Ensuring conservation and sustainable use of the natural resources, as well as the adaptation and resilience to climate change. In this respect, stakeholders mentioned shelter belts, multiple rows of trees or shrubs established to protect farmsteads, livestock areas, and wildlife habitats. • Supporting economic sectors which can build on the strengths of mountain areas, such as tourism, and gastronomy based on local products. CHAPTER VIII. SWOT ANALYSIS 101 3. SWOT analysis of mountain development STRENGTHS WEAKNESSES OPPORTUNITIES THREATS SOCIO – ECONOMIC • The depopulation of mountain areas has been more severe than from lowlands. • High rates of poverty in • The employment rates • Depopulation of mountain rural areas, a result of of women and youth in areas have been a high number of low mountain areas is low by disproportionately among productivity subsistence EU standards, indicating the young and educated. • Forty-eight (48) percent smallholders. significant potential labor of the population of • Poverty and living • Undeveloped reserves. mountain ATUs are standard differences urban. Mountain areas entrepreneurial culture • As an EU member between urban and rural contain such large cities (low number of SMEs in country, Romania has areas are the highest in as Brasov, Baia Mare, the rural/mountain area) access to significant the EU. Resita, Hunedoara, and • Infrastructure gap (basic investment resources • Income per capita in Floresti Commune. These and transport) and under the EU cohesion rural mountain areas are and many others have limited access to quality funds and the CAP. extraordinarily low, 33 comparatively good public services. Romania has one of the percent of the country infrastructure and are highest investment rates • Limited access to without Bucharest. engines of growth. in the EU (25 percent of specialized vocational and GDP, 2012-2021). • Low efficiency of public • Despite population losses, professional education in spending if investments industry and service the mountain area. • Growth in rural areas in infrastructure are sector employment tends to be considerably • Very low income of made in areas at risk of in mountain areas is more employment- population in rural areas. depopulation, with limited growing. intensive than in urban development potential • Relatively high areas. Thus, a strategy • Unique cultural heritage and are not coupled employment in aimed at providing and traditional knowledge with other development agriculture (20 percent jobs for underemployed that is closely tied to the incentives. of employment in 2020, agricultural workers natural environment. including subsistence should include special • Labor shortages, farmers). measures to spread particularly of growth from urban to skilled workers and • Young people are rural areas. professionals. motivated to leave mountain areas, both rural and urban, for higher living standards in the lowlands or abroad. 102 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS STRENGTHS WEAKNESSES OPPORTUNITIES THREATS AGRICULTURE • The share of land in farms of uneconomic size is high. In 2020, 34% of land in mountain counties was in farms under 5 ha. • Shifting climate - reduced • Limited processing precipitation, lowers and storing capacity suitability/productivity – farmers resort to for mountain specific selling commodities to crops (e.g., potatoes, fruit intermediaries. trees); need for irrigation systems to combat • Low levels of collective droughts; increase in • Yields for the main field action and market frequency of natural crops have increased linkages. disasters. rapidly in the past 11 • Mountain product label & • With the expansion of years (based on county • Strict regulation on the other certifications does land under large farms data, probably masking use fertilizers in certain not bring considerable and the continued differences at the ATU subsectors (e.g., potatoes) added value – low level of increase in yields, level) leads to lower yields consumer awareness on eventually agricultural • As an EU member growth will increase. and makes it difficult to the benefits. compete with imported country, Romanian • Decreasing quality of • Potential to convert farmers have access to goods. pastures due to intensive to organic practices significant funds under • Risk of disappearance of grazing, surface water – without significant the CAP. traditional practices (e.g., pollution and increasing impact on yield and • Traditional farming operations – mountain transhumance) due to the use of fertilizers. young generations’ low practices are still used farmers already use eco- in the mountain area • Low level of friendly practices. interest in learning and – can yield to higher mechanization, using them. particularly for small • High potential to diversify quality produce and • Domestic breeds are at farms. mountain crops and are environmentally risk of disappearance. livestock with non- friendly and can support • High vulnerability of traditional, high-added • Further restrictions in differentiation efforts. mountain agricultural value crops and livestock, the use of lands and • High agro-tourism areas to natural risks such as: quince, walnuts, pastures, limit production potential of the mountain (hail, frost, drought, berries, high quality beef opportunities. region. flood). cattle (Black Angus, • Weak enablers limit the • Perceived high quality • Low interest to preserve Simmental), domestic capacity of farmers to products, due to and rejuvenate certain swine breeds (Mangalița, leverage EU funds for widespread use of natural assets (e.g., fruit Bazna), shifting climate investments in productive extensive farming orchards – a large share is increases suitability for infrastructure (e.g., system and eco-friendly aging and/or abandoned, grains and oilseeds (e.g., incomplete cadaster, practices. pastures). rape seed). tedious building • Mechanism for • Low productivity gains • Potential to capitalize authorization process, differentiating products in livestock (sheep and on a range of renewable lack of adaptation of from the mountain area bovines), key to the energy sources from legislation to agri-food – e.g., Mountain Product economy of mountain agriculture and forestry. sector specific). certification. areas. • Lack of a marketing • Low productivity due to strategy for mountain extensive practices, pedo- products diminishes the climatic conditions, land capacity to differentiate fragmentation, farm size, on the market. but also poor technology • Increasing competition adoption. on both domestic and • Additional costs international market, or administrative from imported goods. complexities of compliance with environmental regulations. CHAPTER VIII. SWOT ANALYSIS 103 STRENGTHS WEAKNESSES OPPORTUNITIES THREATS MOUNTAIN TOURISM • Seasonally sensitive - lack of activities to engage. • Low quality of accommodations and limited availability of food service operators, • Growth of sustainable • Natural and cultural particularly in rural consumers looking for (traditions and customs) areas. niche and unexplored tourism assets make • Low connectivity destinations, with Romania an attractive and poor transport customized options. destination for infrastructure. international tourists. • Short breaks for • Difficult accessibility domestic travelers • Network of protected • Increasing competition at many tourist and explorers point to areas adds value to the from nearby countries attractions. the need to educate tourism sector. with longer experience in and motivate the • Degradation of the tourism. • There are regions with right domestic market tourist infrastructure defined specialization segments within the • Low attractiveness of (markings, signs) and strategies that strategic segment. mountain tourism due of the network of emphasize developing to low awareness of mountain huts and • International short tourism niches. sustainable tourism refuges. break travelers and practices, low quality • Presence of adventure explorers from market • Demographic decline accommodations, tourism-related sports niches of countries that and aging population. limited availability of events with global can easily travel three to food services. accreditations. • Shortage of specialized four hours (e.g., Central human resources. Europe and UK). • Low domestic • The existence of a appreciation of national strategy for • Insufficient promotion • Possibility to link cultural mountain culture, often ecotourism. of the opportunity to assets and locally- viewed as archaic and take advantage of more sourced agriculture • Presence of mineral backward. tourist destinations products to enhance the springs of different that are regionally product development • Climate change categories. concentrated. portfolio. negative impact into the • The existence of a environment (modifying • No distinctive presence • Preservation and national strategy for existing fauna and in the specialized promotion of traditions spa tourism promoting changes in road markets. related to mountain- the development of a connectivity). specific agricultural balneoturistic cluster at • Reliance on inefficient products and ethno- national level, supporting marketing and folkloric areas. the creation of a DMO monitoring and for health tourism and dissemination of • Sustainability through of the new green spa information. the value chain (club and tourism. public goods and private • Absence of initiatives). management plans for protected areas. • Lack of early-stage growth support for institutions relevant to tourism initiatives (e.g., incubators). 104 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS STRENGTHS WEAKNESSES OPPORTUNITIES THREATS NATURAL RESOURCES • Degradation of certain ecosystems, including • Commitment of protected ones (forests, Mountain communities grasslands, rivers) to sustainable resource • Unsustainable forest management harvesting practices, • Good standing of • Rising level illegal logging, low forest Mountain natural environmental ambition • Climate change and and timber productivity resources and at the EU and national increased exposure due to technologically ecosystem services levels to natural hazards outdated equipment, (including forest fires, • Provision of key and low energy • Creation of the national drought, strong wind, ecosystem services efficiency of biomass Mountain Council floods); and historic including freshwater, heating installations • National Forest Strategy erosion of Mountain land rich biodiversity, soil • Sanitation to 2030 health and stabilization, • Demographic shifts, infrastructure not to carbon sequestration, • Availability of supportive including urbanization EU-standards and climate regulation EU and national leading to the nitrate pollution among others resources, notably under abandonment of • Durable pollution of the CAP and the PNRR, agricultural activities, • Mountain tradition of historic and active to support and motivate notably, managed agro-ecological farming mining sites implementation of grasslands and forestry practices resource protections • Incomplete • Intensification of • Mountain area has local (including the adoption implementation of farming activities in tree, crops, and animal of updated knowledge, natural resources parts of the Mountain breeds varieties adapted best practices, and management Area to local environmental technology) protections and climate conditions. • Conflicting policy goals, • Opportunities exist • Faltering compliance notably, achieving local • Protection policies for assisted natural motivation, due to energy security and in place for resource regeneration of onerous administrative national renewable protection relating to abandoned farmland requirements relating energy targets biodiversity, climate, to resource protections; • Potential to develop forests, water, energy, • Overlap between at times, onerous, the bioeconomy is mining, and more economically valuable poorly coordinated an opportunity to resource (e.g. mining, • Legal framework and planned, or create new and more hydroelectric) and in place to enable poorly understood sustainable livelihoods protected areas compensation and restrictions on resource (wood, salt, medicinal incentivization of use; at times, a lack herbs, specialty food, • Legacy of siloed and landowners for resource of incentives and mineral springs, tourism, prescriptive regulatory protection efforts compensation for and renewable energy) approaches to natural the implementation resource protection • Potential for integrated of costly resource digital information protections; and limited systems and analytics participation of local to enhance planning, communities in the coordination, and design of resource decision making protections policies and programs ANNEXES 105 ANNEX. Mountain Area Key Facts 1. Mountain area delimitation Criteria for defining the ATU in the mountain area are according to MADR joint orders no. 97/2019 and MDRAP no. 1332/2019. TABLE 46. Criterion applied for the delimitation of Romania mountain area, 2019. No. Crt Criterion Used Places General physical delimitation criteria a. Average altitude higher than or equal to 500m 1 785 b. Average altitude between 350 andd 500 m and average slope greater than or equal to 15% c. Altitude below 350 m and average slope greater than or equal to 20% 2 Criterion of belonging to the Carpathian Convention -at least 50% of the ATU area- 71 Combined scorig criterion a. Altitude score: average altitude/ 500 m (30% weight) 3 b. Slope score: average slope/ 15% (30% weight) 47 c. Meadow scoring: pastures + hayfields/ agricultural total (eight 25%) d. Forest score: forest area/ total administrative-teritorial unit area (weight 15%) 4 Territorial Development Strategy of Romania membership 35 5 The criterion of the continuity of the mountain area 10 MAP 8. Mountain area delimitation and population No. Crt 947+1 29,77% 4,79 million Population 21,97% inhabitants Total MA 91,36,94 km2 38,31% surface Source: Romania National Mountain Agency/ICDM Strategie 2021. http://icdm.ro/wp-content/uploads/2021/03/ICDM-STRATEGIE-2021.pdf 106 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS 2. Massif Facts • The Nordic (MG1), Central (MG2), South (MG3), and Apuseni Mountain (MG9) groups make up about 66.3 percent of the mountain area. • The Central (MG2) has the largest area comprising 21 percent of the mountain area. • The Bucegi group (MG4) has the smallest area covering 2.3 percent of the mountain area. TABLE 47. Romanian mountain area and massif key fact figures Place National proportion Mountain area Name Area (ha) No.ATU code (percent) proportion (percent) Ro Romania 23,815,895 100 - 3186 MA Mountain Area 9,126,578 38.32 100 947 MG1 Nordic Group 1,215,132 5.1 13.31 126 MG2 Central Group 1,920,894 8.07 21.05 174 MG3 South Group 1,256,352 5.28 13.77 162 MG4 Bucegi Group 209,153 0.88 2.29 40 MG5 Făgărași Group 777,505 3.26 8.52 86 MG6 Parâng Group 604,833 2.54 6.63 50 MG7 Retezat-Godeanu Group 757,056 3.18 8.3 59 Banatului and Poiana Ruscă MG8 724,051 3.0 7.93 69 Mountain Group MG9 Apuseni Mountains 1,661,598 6.98 18.21 181 Source: calculations based on publicly available data. MAP 9. Romania Mountain Massif Source: Romania MARD via the National Mountain Agency 2019. ANNEXES 107 3. The Mountain area and urbanization/rurality • 4.79 million people live in Romania mountain area (as of 2021). • 52 percent of mountain population (2.5 M live in rural areas (833 “rural” mountain ATUs) . • 2.3 million mountain residents live in 112 “urban” ATUs, with 30 percent living in cities (municipalities) and 17 percent living in towns. • The Mountain Groups (MG) with the highest population is the South MG (approximately 1.031 million people) closely followed by the Central MG (approximately 1.0 million people).  • Apuseni Mountain Group has the highest rural population (75%) and the Retezat Godeanu (23%) has the lowest.  • Nordic, Central and South Groups combined account for more than 58.5 percent of mountain urban population. The mountain area has five economically important urban agglomerations: (i) Brașov and its periphery; (ii) Cluj, Turda and Floresti; (iii) the cities of Sibiu and Alba Lulia; iv) Prahova Valley and (v) Baia mare and its periphery. All mapped in RED Circle. These urban agglomerations are vital engines of economic development, propelling growth, innovation and prosperity. MAP 10. Per capita profitability and Urban Agglomerations in Mountain Areas Source: The Authors • Brașov is the largest city classified as mountain city in Romania and its strategic location has attracted industries (space and aeronautical defense) and business (logistics parks) with important spillover effects on nearby ATUs. • Although only Floresti lies within the mountain area, Cluj and Turda border the mountains and exert important economic importance in the mountain area. Cluj is the most important information technology hub in Romania (Bucharest excluded) and a booming city which had positive effects on Floresti commune attracting population growth.  108 ROMANIA MOUNTAIN AREA DEVELOPMENT SUPPORT ROMANIAN MOUNTAIN AREA DIAGNOSTIC REPORT SYNOPSIS • Sibiu, Alba Iulia and the highway connecting the region create enabling conditions to stimulate economic development in the localities along its corridor. • The Prahova Valley is a renowned touristic mountain area in the country with significant cultural and historical heritage and its proximity to Bucharest consumers is strategic. Expansion of industrial parks is also attracting new economic development. • Local authorities in Baia mare and its periphery have supported the development of industrial park, including infrastructure investment and local facilities, which has resulted in threefold surge in sales and a twofold rise in the number of employees. 4. Most mountain people live in rural areas with close proximity to cities. TABLE 48. Mountain area connectivity facts Number of Average Connectivity (%) of rural Category Population rural ATUs Index population Less than 30 minutes from a large city 278 0.50 977,809 39% Between 30 and 90 minutes from a large city 513 0.38 1,441,362 58% More than 90 minutes from a large city 42 0.23 87,247 3% Source: The Authors. MAP 11. Mountain area in Romania: Distance to main city Source: The Authors. ANNEXES 109 • Approx. 39 percent of the rural mountain population are located less than 30 minutes from a large city (<30,000 inhabitants). • Approx. 58 percent of the rural mountain people live in localities more than 30 minutes but less than 90 mins from a large city.  • Only 3 percent of the mountain population live in very isolated rural areas (more than 90 minutes).  5. Mountain land, main features Romania mountain area is dominated by forest (Approximately 60 %) intertwined with natural and semi-natural grasslands (Approximately 6 %) and pastures and mosaic farmland (Approximately 20 %) • Forest represents about 60 percent of total national forestland (4.1 million hectares). • The largest mountain forest cover is found in the Central MG (1.2 million hectares), Apuseni (0.904 million hectares) and the Nordic MG (0.723 million hectares). • Bucegi MG (12 %), Parâng (10 %) and Retezat-Godeanu (9 %) have the largest proportion of natural grasslands. • The largest proportion of Pastureland and Mosaic farmland are found in Făgăraș and Nordic groups (each having 25 %). • Over 60 percent of the arable land is concentrated in three MG: the Apuseni (22%), Central (21%) and South (19%). FIGURE 21. Land use area by Mountain Massif Source: The Authors REFERENCES 111 References Introduction World Bank (2023b). 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Proiect selectat în cadrul Programului Operațional Capacitate Administrativă cofinanțat de Uniunea Europeană, din Fondul Social European Competence makes a difference! Project selected under the Administrative Capacity Operational Program, co-financed by European Union from the European Social Fund Ministerul Agriculturii și dezvoltării Rurale