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Grants for farm business development are not fulfilling the objectives set - Document no. 3:5 (2007-2008)

Central government grant schemes for farm business development are not fulfilling the objectives set by the Norwegian Parliament (the Storting). The grants have a limited effect in areas such as profitability, settlement patterns and employment. “The management of the funds should be more in line with the objectives set for these central government financial policy instruments,” says Jørgen Kosmo, Auditor General.
Published 4/28/2008 3:21 PM

The Office of the Auditor General’s investigation of business development in the agriculture sector, Document no. 3:5 (2007–2008), was submitted to the Storting on 15 January 2008.

The objective of the investigation has been to assess whether the results of both the value creation programme for food and the funds for regional development administered by the state-owned Innovation Norway are in line with the objectives set by the Storting. The grants are intended to promote the further development of existing agriculture and to create new business activity. NOK 2.3 billion was allocated to these grants in the period 2001–2006.

The investigation shows that the funds for regional development are increasing profitability to varying degrees and are having a limited effect on settlement patterns and employment. The best results have been achieved by farmers who have received grants for the development of new business activity, which includes attracting tourists to farms and producing local food specialities. However, an increasingly low proportion of the grants are being allocated to the development of new businesses.

The investigation also shows that there is a correlation between the size of the grants and the effect they generate. However, in practice the grants are in general low, which is one of the causes of the lack of goal achievement.
In almost half the projects receiving support the funds do not contribute to the development of new businesses and new products. There is no overview to show that the value creation programme for food is resulting in more profitability for companies and the agricultural sector. Regional development funds have had greater significance for profitability, employment and settlement patterns in programmes targeted at women.

The investigation also reveals that it is not necessarily the projects with the greatest need for funds that are given support. One-third of the projects that have been allocated grants or venture capital loans earmarked for agriculture could have been financed by private banks, and half the projects would have been initiated without grants. It is viewed as positive that Innovation Norway cooperates with private banks on the joint financing of projects, but the enterprise could to a greater extent contribute funds that supplement the private loan market.

The Ministry of Agriculture and Food has the ultimate responsibility for ensuring that policy instruments contribute to the attainment of the objectives set by the Storting. The investigation reveals that the Ministry has not taken the steps required to facilitate adequate management, and there is no proper overview of the results and effects of funds allocated to business development in the agriculture sector.

“The management and monitoring of the Ministry of Agriculture and Food must be improved to enable objectives to be attained – for instance by strengthening policy instruments such as goal-oriented grants,” says Jørgen Kosmo, Auditor General.

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