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Income Levels

46. Rural poverty does not appear to be acute in the pilot project areas and people have found ways of coping with the problems of transition and privatization. The household survey found that even though food expenditures comprise an important portion of total household expenditures (about 40 percent, with regional variations) they are not excessively high (figure -- : household expenditures).¹⁴ Other important expenditure items include transport, heating, clothing and medical services. Households also have some savings in the form of privatization vouchers. In contrary to the belief that privatization vouchers are mostly spent as soon as they were distributed, the SA found otherwise, at least in the surveyed areas. More than 60 percent of the respondents keep their privatization vouchers. People indicate that they plan to use these vouchers to buy farm equipment, seeds and fertilizers in the future, when they form farmer groups. Some are keeping these vouchers as a guarantee for the future if they need cash. Those who spent their vouchers did this to prepare their lands for summer cultivation.

47. Households do not want to disclose their full incomes to outside interviewers, thinking that these interviewers may be tax agents. In addition, most households do not obtain cash income from their produce but consume it at home and family members take informal occasional jobs. Therefore, the reported income levels are highly underestimated. For analysis purposes, it is more appropriate to approximate real income levels through reported household expenditures. The following table illustrates the annual production value of each crop for households in each rayon. The second table presents total annual household expenditures approximated in place of income levels.

	Barda	Lenkeran	Salyan	Udjar	Khachmaz	Average
Produced	275	190	799	768	707	548
Sold	28	116	337	256	353	218
Consumed at home (in-kind)	247	74	462	512	354	330
Total annual household expenditures	2,524	1,252	3,064	1,803	1,895	2,110
N	180	179	181	179	181	900

48. The importance of self-production in household budgets is rayon-specific. Household income levels also show regional variability. Income levels are highest in Salyan, which is the closest rayon to Baku and therefore benefits most through informal business in the capital city. On the other hand, Lenkeran rayon, in which privatization is problematic and land is salinized due to the Caspian Sea rise, has lowest income levels. Focus groups in these rayons confirm that people have multiple income sources such as pensions, wages, and subsistence farming (figure --: many families rely on a mixture of crop and livestock production….). Since respondents do not want to reveal all of their income sources, the portions of income presented in the table below are only approximations.

Relative Wealth in Project Rayons

49. It is possible to create a wealth index to measure the relative wealth of households in each rayon using variables obtained from the household survey. The first factor included in the index is the small livestock ownership and vegetable cultivation. Small livestock ownership is important for people because these animals can reproduce rapidly, are easier to feed and can be converted into cash relatively easily. Vegetable raising is also important because vegetables take less time to grow and are easier to cultivate. Most households produce an important portion of the vegetables they consume. Fruit cultivation (horticulture) is the second factor in construction of this index. Even though it is an important agricultural activity, since fruits take more time to grow and are harder to cultivate, it is not as important as vegetables. The third factor is cattle ownership. The fourth factor in the index includes the education levels and professional background of household heads. This is important because most activities that households engage in to generate profits are directly related to the experience and education of the household head. The final factor in the index is the declared cash income of the household and family size. This cash income consists of pensions and salaries.

50. Results of the wealth index indicate that Lenkeran is the poorest rayon, followed by Khachmaz and Barda rayons (figure --: poverty index (created from survey variables) indicates Lenkeran is the poorest rayon – need to change poverty to wealth). Udjar rayon seems to be the wealthiest rayon while Salyan is the second wealthiest. Specific characteristics of each rayon contribute to its placement within the index.

51. Distribution of land and farming equipment has a positive correlation with the relative wealth of the rural villages. In Lenkeran, people have not received privatized land and farm machinery and equipment. Adverse effects of the Caspian Sea environmental crisis in Lenkeran are also felt both at household and rayon levels. Part of the agricultural land in the rayon is salinized and water sources are contaminated. Local markets do not exist in Lenkeran and transport is one of the most important problems in the rayon. In Udjar, on the other hand, everybody has received their land shares and most of the farm machinery and equipment is also distributed. In connection with these, agricultural production levels are highest in this rayon. Therefore, among the five rayons, it has the highest combined wealth (figure --: wealth in agricultural rayons depends on……..).

Agricultural Production

52. In villages where land is privatized, there is a larger variety of agricultural production but problems persist (figure --: agricultural production patterns are disrupted in rural Azerbaijan). The SA could not determine the relationship between conduct of privatization and agricultural efficiency gains/losses. Nonetheless, with respect to yields in agricultural production, it appears that the location of the village, its proximity to urban centers and the climate plays a more important role than the level of privatization. For instance, villages in Salyan, which is closer to Baku and whose residents are described as more “hard working,” produce more agricultural goods than the residents of other rayons which are located in more remote areas.

53. Notwithstanding the actual progress of privatization, there is a high willingness and activity level to experiment with different agricultural options to obtain an optimum product mix. Almost all the households included in the survey, regardless of their privatization status, have cultivated this year, however, a major portion of this production is used for subsistence (figure --: a major portion of agricultural production is used for subsistence). Next year, some of them are planning to cultivate different crops. The willingness to change is most visible in Barda and Salyan rayons in which 93 percent of the households want to switch products. Seventeen percent want a change in Lenkeran, 57 percent in Udjar and 46 percent in Khachmaz. People’s reasons for experimenting with these new products are higher demand levels for corn products, higher profits that can be obtained from cotton production and a desire to increase sales in local markets.

54. Varying levels of agricultural activity is observed in different rayons, according to factors such as climate, soil quality, existence of local markets, and technical know-how. Milk and meat production is important in all the rayons (Figure --, diamond), albeit at various levels. Agricultural production in Lenkeran is focused on citrus fruits while in Udjar both vegetable growing and large livestock raising are common. Udjar rayon also has the highest number and variety of agricultural products. In Khachmaz, wheat production, together with potato production and livestock activities are important. Livestock ownership, especially for small livestock, is easier and more common than land ownership¹⁶. Villagers are free to graze animals on the public land provided to them. They, however, explicitly express a need to have access to a larger number of inputs such as equipment, seeds, fertilizers and a better infrastructure to cultivate wheat. Small livestock produce such as milk, meat and wool is highest in Salyan rayon. The following table gives the agricultural products produced by the largest number of households in each rayon. The table after that presents the annual production levels of different staples and the percent of people producing each product.

55. The land distributed to families usually consists of less than 2 hectares for a family of 3-5 persons and is insufficient to sustain a family even if the major constraints to farming are removed.¹⁷ There is, therefore, need to focus on ways and means of intensifying the agricultural production process and ensuring that farmers have access to adequate advice. Production levels and the size of land owned by each household are available from the household survey. Therefore, it is possible to construct the average productivity of land for some of the products. However, the survey did not make inquiries about how much land is used to obtain that level of production, therefore, the numbers presented here are only approximations and are likely not to represent the absolute productivity levels.

56. Table 13 illustrates the estimated annual sales of households by the status of privatization in each surveyed village.