#7 Moldova Agriculture Bulletin, BFC

12/2016

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7 M o l d ova Agriculture Bulletin Milk and Dairy Standards to be Strengthened 2017 IFAD Grants for Developing Agricultural Infrastructure EU Disburses EUR 45.3 Million to Moldova

Agricultural Land a Time Bomb

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Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7)

Ministry of Agriculture Plans for 2017 ............................................................................................ 2 Milk and Dairy Standards to be Strengthened ................................................................................ 2 MDL 232 Million in Subsidies Paid to Farmers ................................................................................ 2 PARE 1+1 Program Approves 38 More Projects .............................................................................. 3 Changes for Agricultural Subsidies in 2017 ..................................................................................... 3 Russia Ready to Resume Moldovan Produce Imports ..................................................................... 3 Food Safety Agreement with Hungary Signed................................................................................. 4

Foreign Aid ................................................................................................................. 4 8) 9) 10) 11) 12)

2017 IFAD Grants for Developing Agricultural Infrastructure ......................................................... 4 Polish EUR 100 Million Loan to be Halved ....................................................................................... 4 EU Disburses EUR 45.3 Million to Moldova ..................................................................................... 5 Moldova Orchard Project Presented at Conference ....................................................................... 5 Moldova and FAO Sign Support Agreement.................................................................................... 5

Private Sector .............................................................................................................. 6 13) Experts Predict a Good Year for Moldova in 2017 .......................................................................... 6 14) Agricultural Land a Time Bomb ....................................................................................................... 6 15) Exports to the EU are 30% Agricultural ........................................................................................... 6

Note: The Agriculture Bulletin presents a monthly roundup of headlines and news stories related to Moldova’s agricultural sector.

This bulletin is prepared by Business & Finance Consulting—a Swiss‐based development finance consulting company with a long history of working in Eastern Europe, Central, South and South East Asia and North Africa. Read more »

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BFC Agriculture Bulletin

State Initiatives 1)

Ministry of Agriculture Plans for 2017

December 30th, 2016, http://www.maia.gov.md/ro/comunicate‐de‐presa/interviu‐publika‐tv‐eduard‐grama‐2016‐fost‐un‐bun‐ pentru‐agricultura‐munca

In an interview with Publika TV, Agriculture Minister Eduard Grama spoke about his Ministry’s plans for 2017, which include changes to the subsidy program, reforms and helping Moldovan products reach new international markets. The Ministry plans to introduce new measures to the subsidy program which will increase motivations for exporters and also introduce new financial tools for the Agency for Interventions and Payments, including the possibility for farmers to take subsidy payments in advance.

The Ministry also plans to more deeply examine possible solutions for the issues in agricultural insurance, as the percentage of farmers protecting their harvest with insurance is very low at the moment. Obligatory insurance is an idea the Ministry is considering. Further, the Ministry will work to attract foreign investments in agriculture, particularly for increasing greenhouses in Moldova. In fact, the Ministry is currently working with groups from Japan and China in conducting a feasibility study on producing vegetables in large quantities in greenhouses in Moldova.

2)

Milk and Dairy Standards to be Strengthened

December 29th, 2016, http://infomarket.md/en/agriculture/Control_of_milk_and_dairy_quality_to_be_toughened_in_Moldova_

The Moldovan government has approved a measure that will strengthen the methodology for appraising the quality of milk and other dairy products. The measure will help bring Moldovan products into compliance with European Union (EU) standards and norms and will guarantee a high level of consumer protection, efficient work of the milk market, transparent operations of milk‐processing companies and efficient management of milk imports. Milk producers will have 24 months following its publication in the Official Monitor to meet new requirements. The National Food Safety Agency will be responsible for putting the methodology in place and ensuring compliance.

3)

MDL 232 Million in Subsidies Paid to Farmers

December 29th, 2016, http://www.trm.md/en/economic/maia‐circa‐1600‐de‐dosare‐depuse‐pentru‐subven‐tionare‐in‐2016‐au‐ fost‐platite/

Farmers who applied for subsidies in 2016 and were within the limit of the subsidy fund have received their funds. In total, MDL 232 million were released to farmers. Farmers who applied but not received their subsidies this year, will receive their funds in 2017. In total, an estimated MDL 700 million in subsidies were paid out in 2016.

New applications for 2017 are expected to start being accepted shortly.

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BFC Agriculture Bulletin

4)

PARE 1+1 Program Approves 38 More Projects

December 20th, 2016, http://www.basarabia.md/inca‐38‐de‐proiecte‐vor‐beneficia

The supervisory committee of the PARE 1+1 program has approved financial support for an additional 38 projects, attracting financing from 11 countries. In total, the financial support will amount to MDL 7.58 million and will help bring MDL 22.41 million into Moldova’s economy in addition to creating 128 jobs.

Of the 38 approved applications, 11 are startup businesses and 27 are existing companies undergoing expansion and/or development, with 6 operating in Chisinau and the rest in rural areas. 20 of the applications were for businesses in various agricultural endeavors such as grain growing, grape production, livestock, and apiculture.

5)

Changes for Agricultural Subsidies in 2017

December 16th, 2016, http://www.maia.gov.md/ro/comunicate‐de‐presa/incepand‐cu‐2017

The Law on Subsidy Principles for Agriculture and Rural Development, a priority for the Ministry of Agriculture, was approved following its second reading in Parliament and takes affect at the beginning of 2017. The law will ensure the continuity of state financial support and confirms the importance of such support for the long‐term development of both the agri‐food sector and rural areas.

With the implementation of the law, state financial support, including subsidies, for agriculture will be based on clearly defined principles, calculations and economic analysis, including those which evaluate and predict outcomes in the medium term.

Subsidy planning and support measures will now conform with the National Strategy for Agriculture and Rural Development for at least the next five years, thereby ensuring greater continuity than the previous system of annual approval by government decision.

As part of the law’s passage, the subsidy support program is expected to undergo a few changes that will help it better serve its purpose. These changes include: better monitoring, measures to incentivize domestically produced agricultural equipment, direct payments per hectare of land worked, support for young and women farmers and the revival of business climates in disadvantaged areas.

6)

Russia Ready to Resume Moldovan Produce Imports

December 11th, 2016, http://www.timpul.md/articol/rusia‐dispusa‐sa‐reia‐importul‐de‐fructe‐si‐legume‐din‐moldova‐ 101531.html

At a meeting at the end of November, the Russian Federation announced that it was prepared to cancel the ban on the import of phytosanitary products from Moldova, and Russia has now taken steps to permit the import of domestically produced fruits and vegetables from Moldova following the measures taken by Moldovan producers to increase the quality and safety of exported food products.

Russian authorities previously banned fruit imports from Moldova in June 2014, citing phytosanitary concerns; however, many Moldovan authorities believed the move to be a response to Moldova’s signing a European Union (EU) Association Agreement. In 2015, exports were resumed in a limited fashion and have gradually increased since then, although nowhere near previous levels.

Prior to the ban, 93% of Moldovan apple exports (USD 43.7 million) and 80% of Moldovan plum exports (USD 21.1 million) were sent to the Russian Federation.

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BFC Agriculture Bulletin

7)

Food Safety Agreement with Hungary Signed

December 7th, 2016, http://radiochisinau.md/republica‐moldova‐si‐ungaria‐vor‐coopera‐in‐domeniul‐sigurantei‐alimentelor‐‐‐ 42372.html

At a meeting between Agriculture Minister Eduard Grama and his Hungarian counterpart in Budapest, issues related to relaunching bilateral cooperation in priority areas such as wine, trade, food safety, organic production and the marketing of agricultural machinery were discussed. The parties agreed to create a working group to examine harmonizing legislation, cooperating in regards to animal health and organizing business delegation visitations and agricultural fairs. At the conclusion of the meeting, the two signed a memorandum of cooperation on food safety.

Foreign Aid 8)

2017 IFAD Grants for Developing Agricultural Infrastructure

January 2nd, 2017, http://agrobiznes.md/ifad‐ofera‐granturi‐pentru‐dezvoltarea‐infrastructurii‐economice‐pentru‐producatorii‐ agricoli.html

The Inclusive Rural Economic and Climate Resilience program (IRECR), financed by the International Fund for Agricultural Development (IFAD), is providing grants for development projects in 2018. Grants will be awarded to projects that seek to develop public, economic infrastructure such as: construction/repair of local roads and bridges that enhance the production, processing and/or marketing of agricultural products and construction of water supply networks for agricultural purposes.

Grants will be awarded to local public authorities working in partnership with farmers, small and medium enterprises and rural homesteads practicing agricultural activities. The period for submitting applications will be open from January 2, 2017 until April 28, 2017.

9)

Polish EUR 100 Million Loan to be Halved

December 27th, 2016, http://radiochisinau.md/creditul‐polonez‐destinat‐fermierilor‐va‐fi‐redus‐la‐jumatate‐din‐cauza‐ interesului‐scazut‐‐‐43333.html

Poland is proposing to reduce a EUR 100 million loan to EUR 50 million due to lack of interest. The loan agreement, originally signed and ratified in 2014, was planned for a two‐year implementation period and sought to allow Moldova to equip farmers with modern technology, learn from the experience of Polish farmers and introduce European standards in agriculture. It was hoped that this would help Moldova meet the high standards of the European Union in terms of food safety and quality.

To date, however, the Polish Ministry of Finance has approved only 5 applications for EUR 8.6 million, and the Moldovan Ministry of Finance has approved and forwarded for Polish approval 6 applications for EUR 10 million. An additional 23 applications, representing EUR 26.6 million, have been approved by the supervisory board of the implementation project and forwarded to the Polish Ministry of Finance for approval.

An extension of the implementation period of the loan until August 8, 2017 is planned and representatives of the two countries will meet to discuss modifying the terms of the agreement, including the amount of the loan. Following the completion of negotiations, the text of the agreement will need to be approved, signed and then ratified by the Parliament of Moldova.

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BFC Agriculture Bulletin

10) EU Disburses EUR 45.3 Million to Moldova December 21st, 2016, http://moldpres.md/en/news/2016/12/21/16010148

The Ministry of Finance has received EUR 45.3 million from the European Union (EU) as part of a financing agreement signed between Moldova and the EU. Disbursements were made for four programs which met the necessary conditions for the funds to be released: vocational education reform (EUR 10.5 million), rural sector economic stimulation (EUR 12 million), public money policy reforms (EUR 5.8 million) and the European Neighborhood Program for Agriculture and Rural Development (ENPARD) (EUR 17 million).

11) Moldova Orchard Project Presented at Conference December 8th, 2016, http://agrobiznes.md/proiectul‐livada‐moldovei‐a‐participat‐la‐conferinta‐businessul‐fructelor‐in‐ republica‐moldova.html

The Moldova Orchard project participated at the Fruit Business Conference in Moldova and informed participants and members of the Moldovan Fruit Association about the conditions of the Moldova Orchard project. The project aims to facilitate and create favorable conditions for restructuring agricultural value chains in Moldova. Under the project, EUR 120 million are being invested for the industrialization and mechanization of production processes, the provision of irrigation and anti‐hail systems, the modernization of processing, and the diversification of Moldovan fruit markets.

The Ministry of Agriculture will implement the project and will invest the EUR 120 million, a loan from the European Investment Bank (EIB). Loan amounts can range from EUR 5 thousand to EUR 5 million.

The loan term is up to 10 years with a grace period of up to 4 years. Loans from the program also have a 5‐6% interest rate and allow borrowers to take advantage of tax breaks from import duties. In total, more than 300 businesses and 52 thousand farmers could potentially benefit from the project as well as educational and research institutions engaged in the agricultural sector.

12) Moldova and FAO Sign Support Agreement December 8th, 2016, http://www.maia.gov.md/ro/comunicate‐de‐presa/moldova‐semnat‐un‐acord‐de‐colaborare‐cu‐fao‐ pentru‐urmatorii‐patru‐ani

The Ministry of Agriculture and the Food and Agriculture Organization (FAO) of the United Nations (UN) have signed an agreement for FAO support in Moldova for 2016‐2019. The agreement is seen as a priority for developing the agri‐food sector in Moldova and will help open new opportunities for supporting and collaborating with international organizations in the agriculture sector.

The program has three main priorities: increasing the competiveness of the Moldovan agri‐food sector, developing sustainable agriculture, and developing the sustainable management of natural resources.

The program will include technical assistance such as advanced methods of land irrigation as well as financing for modern agricultural equipment and stimulating farm activities.

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BFC Agriculture Bulletin

Private Sector 13) Experts Predict a Good Year for Moldova in 2017 January 4th, 2017, http://www.timpul.md/articol/experi‐agricultura‐comerul‐i‐investiiile‐vor‐fi‐pe‐puls‐in‐2017‐102547.html

Experts are predicting that agriculture will be one of the leading sectors in 2017, helping Moldova have a better overall economic year than it did in 2016. Better benefits for farmers and increased support from the government and foreign entities are expected to continue to drive the developing sector. Despite the optimism of experts, government reform and increased transparency remains a factor that could hinder economic and agricultural growth. Authorities must work to make real reforms while at the same time trying not to disturb the work of development partners. If Moldova succeeds in this balancing act, experts hold that 2017 will be a good year for Moldova agriculturally, and overall.

14) Agricultural Land a Time Bomb December 7th, 2016, http://www.ziarulnational.md/video‐bonitatea‐redusa‐si‐arendarea‐terenurilor‐bomba‐cu‐ceas‐pentru‐ fondul‐funciar‐ce‐solutii‐propun‐expertii/

Experts are concerned that agricultural land in Moldova is a time bomb waiting to go off. They point that current practices and uses of agricultural land have led to excessive fragmentation and degraded the quality of the land. For example, hundreds of companies lease agricultural land from owners for short‐ term periods of up to three years, meaning that operators have no incentive to invest in the land or manage it in a more sustainable way.

There are solutions for these problems, they argue, such as crop rotation and measures to increase soil fertility; however, there are not enough available financial resources to spread these solutions. More fundamentally, there needs to be greater transparency in the land sector in general, with effective state polices developed for valuating land and providing information on those who purchase it in order to ensure the protection of a vital Moldovan resource from its misuse and degradation.

15) Exports to the EU are 30% Agricultural December 7th, 2016, http://agora.md/stiri/25662/exporturile‐moldovenesti‐in‐ue‐productia‐agricola‐doar‐30‐‐iar‐cea‐ industriala‐70

During 2016, the European Union (EU) was the largest trading partner of Moldova, accounting for 63.8% of Moldovan exports through the first nine months of the year. This was followed by the Russian Federation who accounted for 12% of exports during the same period. Moldovan exports to the EU were 70% industrial products and 30% agricultural. The value of trade exports to the EU decreased 5% by value while increasing in terms of overall volume.

Of the agricultural exports to the EU, growth was recording among wine exports (up 16%), cereals (up 20%) and processed cereals (up 744%). In addition, 42,000 tons of sugar were exported, exceeding the rate provided by Moldova’s Free Trade Agreement with the EU. A decrease in exports of nuts, corn and sunflower seeds was also observed. In addition, through the first six months of the year, table grapes filled 48% of the quota of the Free Trade Agreement while prunes only filled 16% and apples only 1%.

It is clear that, although work remains to be done, the Free Trade Agreement is showing a positive dynamic and a great potential for the growth of Moldovan exports to EU markets after only two years.

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