#2 BFC Moldova Agriculture Finance Bulletin

07/2016

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2 M o l d ova Agriculture Finance Bulletin 43 Moldovan Companies Get Permission to Resume Fruit Exports to Russia Agricultural Subsidies Fund Set at MDL 900 Million Export Markets for Moldovan Fruits Looking to Expand Europeans are the Largest Consumers of Moldovan Wi

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Agriculture Finance Bulletin Edition #2, July 2016

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

Rehabilitated Water Systems Provide Agricultural Growth Opportunities..................................... 2 Additional Financing for MACP Project ........................................................................................... 2 43 Moldovan Companies Get Permission to Resume Fruit Exports to Russia ................................ 2 Agriculture Subsidy Law Endorsed by Ministry of Agriculture ........................................................ 3 MDL 9 Million in Agricultural Equipment Funded through Moldova FDD ...................................... 3 Moldovan Government Approves Updated Land Cadaster ............................................................ 3

Foreign Aid ................................................................................................................. 3 7) 8) 9) 10) 11)

Poland Suspends Aid Package for Moldovan Agricultural Sector ................................................... 3 Agricultural Subsidies Fund Set at MDL 900 Million........................................................................ 4 EU Project to Enhance Food Safety in Moldova to Begin in November .......................................... 4 Moldova Orchard Program Launched ............................................................................................. 4 Lithuania to Provide Technical Assistance on Animal Diseases ...................................................... 5

Private Sector.............................................................................................................. 5 12) 13) 14) 15) 16) 17)

Agricultural Production Up 4.1% ..................................................................................................... 5 Moldovan Wheat Prices Could be Increased................................................................................... 5 Dried Fruit Exports Decline in First 4 Months of 2016 .................................................................... 6 Export Markets for Moldovan Fruits Looking to Expand................................................................. 6 Europeans are the Largest Consumers of Moldovan Wine ............................................................. 6 France Tastes Moldovan Honey ...................................................................................................... 6

Note: The Agriculture Finance Bulletin presents a monthly roundup of headlines and news stories related to investments and financing flows 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.

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BFC Agriculture Finance Bulletin

State Initiatives 1)

Rehabilitated Water Systems Provide Agricultural Growth Opportunities

August 5th, 2016, http://www.basarabia.md/autoritatile-opteaza-pentru-implementarea-tehnologiilor-moderne-in-agricultura/

During a visit to the village of Roscani in the Anenii Noi region, Prime Minister Pavel Filip witnessed firsthand the results of irrigation and water supply projects in the agricultural sector of Moldova.

Minister Filip noted the great potential for investment that such projects have in Moldova as well as how past projects, such as the ones in Roscani, illustrate successful collaborations between Moldovans and development partners in modernizing and centralizing water supply systems, ultimately leading to growth opportunities for Moldovan farmers.

Through the Compact Program, implemented by the Millennium Challenge Corporation, two pumping stations and nine new water pumps have been installed in Roscani. In addition, a 3000 cubic meter water storage tank was rehabilitated, and 27.5 kilometers of water pipes were laid. Under the Compact Program, the United States government has rehabilitated 10 irrigation systems in Moldova at an estimated cost of USD 80 million.

2)

Additional Financing for MACP Project

July 28th, 2016, http://www.maia.gov.md/ro/comunicate-de-presa/finantare-aditionala-cadrul-proiectului-macp http://moldpres.md/en/news/2016/07/08/16005530

The government of Moldova has approved a draft law ratifying the Second Additional Financing Agreement with the International Development Association (IDA). The financing is for the Competitive Agriculture in Moldova (MACP) project and will provide for USD 10 million in loans to support the modernization of Moldova’s food safety management system, facilitation of market access, and integration of agro-environmental practices with sustainable land management practices as well as increasing employment opportunities in the country’s rural areas. Through the adoption of the agreement, actors in the beekeeping and milk production sectors will also be included as eligible to receive grants of up to USD 350,000.

The project launched in June 2013 and will be extended to June 30, 2019 under the new financing agreement.

3)

43 Moldovan Companies Get Permission to Resume Fruit Exports to Russia

July 25th, 2016, http://www.realitatea.md/decizie--de-astazi-pot-fi-exportate-legume-si-pomusoare-moldovenesti-pe-piatarusa--rosselhoznadzor-a-dat-unda-verde-la-43-de-companii-din-moldova_42795.html

Russia’s Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhoznadzor) published a list of 43 Moldovan companies that can now export fruit to the Russian market. Rosselkhoznadzor said it made the decision after a monitoring visit by Russian experts to Chisinau and after receiving guarantees from Moldova’s National Agency for Food Safety. Shipments of a variety of fruit products resumed on an experimental basis on July 22. Rosselkhoznadzor temporarily banned fruit imports from Moldova in June 2014, claiming that Moldovan producers were infringing upon Russia’s phytosanitary requirements.

Prior to the ban, about 93 percent of Moldova’s apple exports (worth USD 43.7 million) and 80 percent of its plum exports (worth USD 21.1 million) were delivered to Russian markets.

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4)

Agriculture Subsidy Law Endorsed by Ministry of Agriculture

July 22nd, 2016, http://www.maia.gov.md/ro/comunicate-de-presa/legea-subventionarii-avizata-pozitiv-de-catre-executiv

The Ministry of Agriculture and Food Industry expressed its support for a draft law on subsidizing agriculture and rural development during a meeting of the Cabinet of Ministers. The Ministry aims to improve transparency in the funding process and establish clear criteria for allocating agricultural subsidies to farmers and to direct financial support toward small- and medium-sized enterprises and young farmers.

The Ministry also proposed amending the draft law to avoid ambiguity, equivocation or the establishment of rules that would affect the economic interests of farmers. The draft law aims to establish the basic principles for providing agricultural subsidies and stimulating rural development through sustained support for farmers.

5)

MDL 9 Million in Agricultural Equipment Funded through Moldova FDD

July 13th, 2016, http://agrobiznes.md/foto-tot-mai-multi-fermieri-beneficiaza-in-perioada-post-compact-de-echipamente-deirigare-si-masini-agricole.html

During the first half of 2016, the government, with the support of the Sustainable Development Fund of Moldova (Moldova FDD), approved and funded applications for the sale of irrigation and agricultural equipment worth MDL 9 million. Thus far, 12 farmers from around the country have successfully applied to the Implementation and Project Management to Increase Food Production Unit (2KR), which provides procurement of irrigation and agricultural equipment on credit. Of the 12 approved applications, nine have been used to purchase irrigation systems, with the remaining three going to purchase agricultural machinery and equipment.

Agricultural equipment sales with the credit are made with an advance payment of 25% of the equipment cost plus transaction expenses, with the remaining 75% payable in installments over three years. Additional collateral is not required for the procurement of equipment from certain manufacturers. The program is intended to benefit small- and medium-sized farmers and producers who have no access to credit due to insufficient collateral or lack of a credit history.

6)

Moldovan Government Approves Updated Land Cadaster

July 10th, 2016, http://www.noi.md/ru/news_id/87456

Moldova’s land cadaster has been updated and is current as of January 1, 2016. Agricultural land amounts to 2,028,300 hectares, including 228,300 hectares of irrigated land and 69,200 hectares of drained land. This is an increase of 1,800 hectares of agricultural land in the country and represents 59.9% of Moldova’s total land area in Moldova.

Foreign Aid 7)

Poland Suspends Aid Package for Moldovan Agricultural Sector

July 30th, 2016, http://jurnaltv.md/ro/news/2016/7/30/polonia-nu-mai-ofera-bani-pentru-fermieri-10233160/#2

Poland has stopped providing loans to Moldovan farmers at preferential rates, leaving Moldovan farmers as the ones missing out. Two years ago, the governments of Moldova and Poland signed an Page 3

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agreement worth EUR 100 million in financial assistance for Moldovan agricultural projects. In two years, only 2% of the total amount had been utilized, and Poland eventually suspended the aid after concerns that Moldova has not efficiently managed the money.

There was an attempt to revive the aid in June by transferring responsibility for its management to the Ministry of Finance; however, Finance Minister Octavian Armasu was worried that such a move might end up burdening the state with extra costs and, instead, has proposed that contracts for the on-lending of the aid be signed with commercial banks. Alexander Slusari, President of Uniagroprotect, believes that such a move would only serve to further bury farmers in additional debt, as interest rates could potentially rise from 8% to 10% on the Polish funds if serviced through a commercial bank.

The loans were granted to farmers for a period of 12 years with an annual interest rate of 2% and a grace period of three years. The financing was for the creation, modernization and restructuring of companies specialized in the production of crops and livestock, helping them to achieve EU standards.

8)

Agricultural Subsidies Fund Set at MDL 900 Million

July 20th, 2016, http://www.realitatea.md/guvernul-a-aprobat-regulamentul-de-repartizare-a-mijloacelor-fondului-desubventionare-a-producatorilor-agricoli-pentru-anul-2016_42594.html

Administration of Moldova’s fund for agricultural subsidies is carried out by the Agency for Payments and Intervention for Agriculture, which is part of the Ministry of Agriculture and Food. Funds disbursed by the Agency are used for increased competitiveness in the agribusiness sector through restructuring and modernization, investments in agricultural restructuring and harmonization with EU standards, investments in processing and marketing agricultural products, improving and developing rural infrastructure, and expanding consultancy services and training.

Entrepreneurs can receive grants worth up to MDL 50,000 per hectare, and grants worth up to MDL 100,000 per hectare for protection against hail. For this year, the budget of available funds has been set at MDL 900 million, including MDL 388 million from ENPARD Moldova.

9)

EU Project to Enhance Food Safety in Moldova to Begin in November

July 18th, 2016, http://mybusiness.md/novosti-biznesa/item/4898-kachestvo-moldavskih-produktov-budut-kontrolirovat-litvalatvija-i-shvecija

Lithuania’s State Food and Veterinary Service (SFVS) along with partners from Sweden and Latvia won a tender for the two-year EU project “Supporting the National Food Safety Agency of the Republic of Moldova.” Starting in November 2016, a team of experts from all three countries will help Moldova’s National Food Safety Agency implement EU legislation, food safety standards, and a unified food safety control system in all regions of the country. The project is intended to strengthen the export capacities of Moldova's agricultural producers.

This is the fifth project implemented by the SFVS in Moldova.

10) Moldova Orchard Program Launched July 13th, 2016, http://radiochisinau.md/a_fost_lansat_programul_livada_moldovei-35623

More than 300 horticultural businesses and over 52,000 farms will be eligible for credit under “Moldova Orchard”, a program for restructuring Moldova’s horticultural sector. Loans come in amounts of EUR Page 4

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5,000 or more and are to be used for the industrialization and mechanization of production processes, equipment, irrigation systems, and anti-hail systems as well as for diversifying Moldovan fruit markets.

The project is being implemented with the financial support of the European Investment Bank and has a total budget of EUR 120 million through 2021.

11) Lithuania to Provide Technical Assistance on Animal Diseases July 8th, 2016, http://www.agrotvmoldova.md/asistenta-tehnica-din-partea-lituaniei-pentru-moldova

The Lithuanian Embassy in Moldova and the organization of the State Food and Veterinary Service of Lithuania signed an agreement for developing cooperation and promoting democracy within the project “Strengthening the institutional capacity to monitor, control and eradicate contagious diseases in animals.”

Private Sector 12) Agricultural Production Up 4.1% July 28th, 2016, http://pan.md/ekonomika/proizvodstvo-selhozproduktsii-v-pervom-polugodii-uvelichilos-na-41-

The physical volume of agricultural production in Moldova increased by 4.1% in the first half of this year, as compared to the first half of 2015. The overall increase was caused by a spike of 21.5% in crop production, 13.3% in egg production, and 1.1% in livestock. In particular, the production of beef and poultry on commercial farms increased 6.5% to 36,200 tons. There was also a 0.1% decline registered in milk production in the country during the same period.

13) Moldovan Wheat Prices Could be Increased July 25th, 2016, http://www.realitatea.md/video-pre-ul-la-grau-ar-putea-cre-te-cu-10prc-la-sfar-itul-verii-sus-ine-pre-edinteleuniagroprotect_42794.html http://moldpres.md/en/news/2016/07/25/16005998

The President of UniAgroProtect, Alexandru Slusari, stressed that farmers should continue to increase wheat prices. Wheat prices in Moldova are lower than in other countries and often don’t cover the cost of production. He also said that wheat prices could increase by 10% by late summer. He also asked the government to support prices by purchasing wheat.

According to Eduard Grama, the Agriculture and Food Industry Minister, wheat prices are declining worldwide, making it difficult for the government to enact any effective agricultural intervention measures. In addition, Moldova has little capacity to export due to its small ports at Giurgiulesti and Reni.

Wheat prices do not exceed MDL 2.2 per kilogram in most of the country.

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14) Dried Fruit Exports Decline in First 4 Months of 2016 July 25th, 2016, http://curentul.md/business/afacerile-cu-fructe-uscate-aduc-milioan

During the first four months of 2016, Moldova’s export of dried fruit was worth USD 2.7 million, an 11.4% decrease from the same time period in 2015. Total dried fruit exports in 2015 exceeded 6,300 tons and were worth an estimated USD 7.5 million. The Ministry of Agriculture and Food Industry reported that the largest export volumes for dried fruits were plums, apricots and apples.

Approximately 80% of Moldova’s dried fruit exports go to EU markets despite more stringent food safety and pesticide requirements. Moldova is the EU’s fifth-largest source for dried fruit imports.

15) Export Markets for Moldovan Fruits Looking to Expand July 13th, 2016, http://curentul.md/business/merele-moldovenesti-pe-mesele-consumato

The bulk of apples produced by the Moldova Fruit Association are exported to markets in the Commonwealth of Independent States (CIS). However, exports to Mongolia, Kazakhstan, Belarus, Bangladesh, and the United Arab Emirates were also significant in 2015. The Moldova Fruit Association also noted that most of Moldova’s plum exports are bound for the EU markets of Romania, Poland and Germany.

The association takes pride in its efforts to determine the most advantageous markets for Moldovan fruits and is careful in balancing a market’s potential and price points as well as the importance of maintaining current market relationships when determining the best export opportunities.

16) Europeans are the Largest Consumers of Moldovan Wine July 12th, 2016, http://curentul.md/business/europenii-cei-mai-mari-consumatori-de-vinuri-moldovenesti-cum-mergexporturile-in-2016.html

According to the Ministry of Agriculture and Food Industry (MAFI), Moldovan winemakers exported roughly 4 million deciliters of wine from January 2016 to April 2016, worth more than USD 31 million and an 11.5% increase over the same time period in 2015. The majority of exports were bound for the EU, where exports increased by 13%, year-on-year. In September 2013, Russia banned the import of Moldovan wine, labeling it as of “poor quality.” MAFI is in regular contact with the Russian government in hopes of reaching an agreement to lift the ban.

17) France Tastes Moldovan Honey July 9th, 2016, http://radiochisinau.md/francezii_gusta_din_mierea_moldoveneasca-35485

France consumes 35,000 tons of honey annually, nearly 24,000 tons of which is imported, and a new market study is suggesting that France is a key target market for Moldovan honey. The study has been presented to Moldovan beekeepers by the Organization for Investment Promotion and Export Promotion (MIEPO) and also recommends that Moldovan apiarists develop a national brand in order garner higher prices.

Honey exports increased between 2010 and 2014 by 60%; additionally, 2014 saw Moldova’s honey exports grow to a value of USD 9.5 million, with roughly 30% of exports going to France and 23% to Germany. Honey is Moldova’s only animal product that is exported in large quantities to the EU as well as the only product of animal origin to meet EU sanitary standards.

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Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com In this bulletin, BFC provides extracts from articles that have been published by others and as a result cannot be held responsible for such content.

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