Rural Regional Development in Transition Economies: The Case of Romania

Abstract

THE MAIN OBJECTIVE OF THE TRANSITION PROCESS is to restructure the centrally planned allocation of production factors into a market-orientated allocation process. The difference between the transformation process in transition countries and structural adjustment in other countries is the fundamental change of the entire system. In addition to the transformation of the economy, the political and cultural institutions must also be adapted. This implies a fundamental change of all institutions1 (Richter & Furubotn, 1996), i.e. restructuring of property rights and distribution, political and organisational framework, and the formal and informal rules regulating the relations between citizens, organisations and the government. This complex and far-reaching political, social and economic restructuring process affects all sectors of the society. Although the agricultural sector is still the dominant sector for income generation in rural regions, more and more attention is given to the non-farm sector and its role in rural economic development. The importance of the non-farm sector is largely due to its potential in absorbing excess labour from the agricultural sector and urban-rural migration especially in transition countries, in contributing to income growth and in promoting a more equitable distribution of income. Thus, agricultural and especially regional development policies (ADPs and RDPs) for the agricultural and the underdeveloped private non-farm sector2 appear to be of utmost importance for an effective transformation into a market economy. This article presents conclusions for ADPs and particularly RDPs based on empirical research in Romania in 1997 (counties of Timis, Brasov and Dolj). We present first the conceptual framework of the analysis, and then proceed to discuss the empirical findings within the agricultural, non-farm and rural financial sectors, as well as the rural enabling environment, finishing with our conclusions.