#51 Serbia Agriculture Bulletin, BFC

12/2019

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51 S e r b i a Agriculture Bulletin RSD 28.5 billion in subsidies paid out to farmers so far this year Record year for the leasing of state-owned agricultural land Two new programs help make IPARD funds more accessible Digitizing the agricultural sector

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Agriculture Finance Bulletin Edition #51, December 2019

Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8)

Serbia suspends vaccination against African swine flu ................................................................... 2 RSD 28.5 billion in subsidies paid out to farmers so far this year ................................................... 2 Record year for the leasing of state-owned agricultural land ......................................................... 2 Digitized land consolidation to improve living conditions in rural areas ........................................ 2 New state tractor procurement program announced .................................................................... 3 Only 0.4% of arable land is used for organic production ................................................................ 3 Working group set up to improve rakia production, marketing ..................................................... 3 500 Cooperatives in 500 Villages project exceeds all expectations ................................................ 3

Foreign Aid ................................................................................................................. 4 9) 10) 11) 12) 13) 14) 15) 16) 17)

EBRD to invest EUR 15 million in irrigation infrastructure in Negotin and Svilajnac ...................... 4 EUR 50 million in EIB financing to support Serbian SMEs ............................................................... 4 Two new programs help make IPARD funds more accessible......................................................... 4 437 applications received for IPARD funds to purchase tractors .................................................... 4 USAID, Ministry of Agriculture launch loan guarantee program..................................................... 5 Closing ceremony for the Supporting the Use of EU IPARD Funds project held ............................. 5 Eur 20 million to finance climate mitigation and resilience projects .............................................. 5 Project to strengthening animal health and welfare systems......................................................... 5 World Bank approves USD 50 million loan program ....................................................................... 6

Private Sector.............................................................................................................. 6 18) 19) 20) 21) 22) 23) 24)

Sugar beet research center to open in Serbia ................................................................................. 6 Digitizing the agricultural sector...................................................................................................... 6 New lab opens to improve controls for frozen fruits and vegetables ............................................. 6 Small agricultural producers marginalized ...................................................................................... 7 Rebuilding Serbian pork production ................................................................................................ 7 Nedimovic working to expand agricultural trade with Belarus ....................................................... 7 Serbian wines having domestic and international success ............................................................. 7

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

This bulletin is prepared by Business & Finance Consulting—a Swiss-based development finance consulting company.

Currently, BFC is implementing “Development of Financial System in Rural Areas in Serbia” programme for KfW. Read more »

BFC Max-Högger-Strasse 6 CH-8048 Zurich, Switzerland

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BFC. Agriculture Finance Bulletin.

State Initiatives 1)

Serbia suspends vaccination against African swine flu

December 17th, 2019, http://www.politika.rs/scc/clanak/444194/Srbija-prekinula-vakcinaciju-protiv-klasicne-kuge-svinja

As of December 15, vaccination against African swine flu, which has been required for the last fifteen years, has been suspended as data and monitoring efforts have shown that the disease is no longer a risk in the country. This is an important step for pork producers wanting to export products to the European Union (EU), although controls must still be carried out before the country can be officially declared as free from the disease.

The last reported case of African swine flu in Serbia was in 2010.

2)

RSD 28.5 billion in subsidies paid out to farmers so far this year

December 17th, 2019, http://www.rtv.rs/sr_ci/ekonomija/aktuelno/ove-godine

The Ministry of Agriculture has processed 428,787 requests for subsidy payments from farmers this year, amounting to RSD 28.5 billion in payments. It is important to note that more applications are still being processed, meaning that these figures are likely to go up before the end of the year. The number of requested received this year is up approximately 20% over last year, meaning that efforts to improve processing speed and efficiency are necessary to ensure the Agrarian Payments Directorate can process all requests in a reasonable timeframe. To that end, the Directorate has already taken measures this year, resulting in a 60% faster application-to-decision time this year.

3)

Record year for the leasing of state-owned agricultural land

December 13th, 2019, http://www.agronews.rs/rekordan-zakup-drzavnog-poljoprivrednog-zemljista/

According to preliminary data from the Agricultural Land Administration, this has been a record year for the leasing of state-owned agricultural land, with more leases expected to be recorded in the near future.

For example, leases in Knic have been recorded this year on 14,787 hectares (as compared to only 6,275 hectares last year), and Pozega leases cover 51,189 hectares (as compared to no leases last year). The record leased areas are largely due to a detailed inventory and recording of state-owned agricultural land within a new, state-of-the-art geographic-information system implemented by the Agricultural Land Administration. The increase in farmers' interest was also due to the fact that the Agricultural Land Administration offers ten-year lease periods, allowing farmers to have certainty and be able to adequately plan their agricultural production in the long run.

4)

Digitized land consolidation to improve living conditions in rural areas

December 11th, 2019, http://www.rtv.rs/sr_ci/drustvo/digitalnom-komasacijom-do-boljih-uslova-zivota-na-selu_1075083.html

Agriculture Minister Branislav Nedimovic has formed a working group that, through digitized land consolidation, will improve living and working conditions in the rural areas. The working group, which is composed of representatives of the Agricultural Land Administration and the Republic Geodetic Authority, has been tasked with drafting a new land consolidation law that will leverage digital workflows, new IT solutions, procedures that rely on the latest technology and principles of efficiency and transparency, all with an eye toward more efficient use of agricultural land, increased food production and improved land management. The new law will also regulate property-legal relations, improve environmental protection and regulate construction in rural areas.

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5)

New state tractor procurement program announced

December 5th, 2019, https://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239

A new state program will support agricultural producers in procuring new tractors. The state support will subsidize up to 50% of the purchase price for new tractors assembled in Serbia, including the Belarusian MTZ model, the Indian Mahindra, Tafe, IMT and Solis models and the Chinese YTO model. Although all the program details are not yet known, there will likely be an upper limit on the approved subsidy amount, and tractors of up to 81 horsepower are expected to be included in the program.

The program is one of a recent number in the country to modernize the rather old state of mechanization in the country. Similar measures include IPARD funding for the procurement of tractors and an earlier state assistance program to provide young farmers with modern equipment.

6)

Only 0.4% of arable land is used for organic production

December 4th, 2019, https://www.danas.rs/ekonomija/a-od-drzave-vise-od-250-miliona-dinara-subvencija/

Organic production only accounts for 0.4% of arable land in Serbia (the European average is 5-6%), producing EUR 23.1 million in export value each year. This is somewhat surprising given Serbia’s 7,000 registered organic producers, but more understandable considering that only 500 of them are certified organic producers. Serbia has a great potential to develop organic production, especially given that Serbian organic producers are recognized in foreign markets for producing quality goods, as evidence by stable, double-digit growth in organic exports. Recognizing this opportunity, the government has announced that subsidies for organic agricultural production will be increased next year from RSD 108 million to RSD 250 million.

7)

Working group set up to improve rakia production, marketing

December 3rd, 2019, http://www.tanjug.rs/full-view_en.aspx?izb=523107

The Serbian government has set up an 18-member working group to improve rakia production and the rakia market. The working group is tasked with developing a strategic document assessing the situation concerning the production and marketing of rakia, with an ultimate aim of introducing appropriate measures to solve existing problems. This includes assessing the entire value chain – from raw fruit production to processing and delivery to the market.

8)

500 Cooperatives in 500 Villages project exceeds all expectations

December 1st, 2019, https://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239

According to Regional Development Minister Milan Krkobabic, the 500 Cooperatives in 500 Villages project has exceeded all expectations. Since 2017, RSD 1.7 billion has been invested under the project, helping to establish and/or reinvigorate 152 cooperatives in the country. Strong and competitive cooperatives are seen as the best way to promote rural development and ensure the survival of villages as they allow small producers to collectively become significant producers as well as provide small producers with access to knowledge and necessary funding to modernize production. Thus, the project has been instrumental in providing rural areas with economic, social and demographic support.

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Foreign Aid 9)

EBRD to invest EUR 15 million in irrigation infrastructure in Negotin and Svilajnac

December 24th, 2019, https://agrosmart.net/2019/12/24/ebrd-ulaze-15-mil-eur-u-navodnjavanje-u-negotinu-i-svilajncu/

The European Bank for Reconstruction and Development (EBRD) has announced that it will finance the construction and rehabilitation of primary irrigation infrastructure in Negotin and Svilajnac. In addition to the EUR 15 million for the construction and rehabilitation efforts, EBRD will also provide EUR 1.2 million in technical assistance grants, including for the development of Serbia’s first-ever irrigation plan (which will be developed with the assistance of the Food and Agriculture Organization of the United Nations (FAO)).

The construction of primary irrigation infrastructure will enable efficient irrigation technology, such sprinklers and drip irrigation systems, as well as measures to increase the resilience of irrigation infrastructure to weather-related disorders. Overall, it will also strengthen the agricultural sector’s climate change resilience and provide greater opportunities for people in less-developed regions.

10) EUR 50 million in EIB financing to support Serbian SMEs December 23rd, 2019, https://www.eib.org/en/press/all/2019-379-eur-50-million-from

The European Investment Bank (EIB) has signed finance contracts totaling EUR 30 million with Credit Agricole Serbia to the projects of small- and medium-sized enterprises (SMEs) as well as mid-cap companies in Serbia. The ultimate goal of the loan is to support the country’s efforts to integrate into the European Union (EU). The first loan tranche of EUR 50 million has already been approved. The main target beneficiaries of EIB financed loans will be those engaged in manufacturing, agriculture and tourism activities, especially young entrepreneurs. In total, the EIB financing is expected to support the activity of approximately 300 Serbian companies and sustain 10,000 jobs in the country.

11) Two new programs help make IPARD funds more accessible December 20th, 2019, http://www.tanjug.rs/full-view_en.aspx?izb=526591

Starting in January, Serbia will ensure easier access to IPARD funds for farmers interested in investing in processing. Specifically, two new programs will launch that will make getting loans easier – a United States Agency for International Development (USAID) loan guarantee program and a World Bank financing program. Both programs are expected to lead to more favorable lending terms and longer repayment periods, thereby helping processors obtain the co-funding necessary to access IPARD funds.

12) 437 applications received for IPARD funds to purchase tractors December 19th, 2019, http://www.stips.minpolj.gov.rs/srl/vest/do-kraja-nedelje-prijave-za-novac-iz-ipard-fonda

A record 437 applications for the purchase of tractors using IPARD funds were received as part of the second call for such applications. This volume of applications means that there will likely be no more funding left for a third call. Under IPARD, accepted applications will return up to 65% of the cost of tractor purchases, with the rest being provided from farmers’ own funds or via loans. IPARD funds are considered important for developing the country’s agriculture, especially as companies that have invested in updated production means have demonstrated the fastest growth over the past 20 years.

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13) USAID, Ministry of Agriculture launch loan guarantee program December 12th, 2019, https://www.danas.rs/ekonomija/usaid-i-ministarstvo-poljoprivrede

The United States Agency for International Development (USAID) and the Ministry of Agriculture launched a USD 90 million loan guarantee program for the food industry. The overall objective of the 12-year program is to support business development and generate new investments in the agricultural sector, with a specific focus on food production and processing. A part of the funds have also been earmarked for start-up companies (those in business for three years or less), women-owned businesses and companies operating in underdeveloped areas.

Qualifying loans under the program can be used for the purchase of land, buildings or necessary equipment. USAID will also provide free technical assistance to loan beneficiaries. The program will provide a 60% guarantee on qualifying loans.

14) Closing ceremony for the Supporting the Use of EU IPARD Funds project held December 9th, 2019, http://uap.gov.rs/zavrsna-svecanost-povodom-zatvaranja-projekta

A closing ceremony for the Supporting the Use of EU IPARD Funds project was held in Belgrade earlier this month. The project, which leveraged the expertise of 16 specialists, supported efforts to prepare accreditation packages under IPARD II measures 1, 3, 7 and 9. The project also organized two study visits for 28 participants on the implementation of IPARD II measures 7 and 9 as well as the implementation of the Communication and Visibility Plan, which was designed to better inform the general public about support opportunities provided by the IPARD Fund.

15) Eur 20 million to finance climate mitigation and resilience projects December 9th, 2019, https://www.ebrd.com/news/2019/ebrd-and-gcf-boost-climate-finance-for-serbian-smes.html

The European Bank for Reconstruction and Development (EBRD), the Green Climate Fund (GCF) and the government of Luxembourg are providing EUR 20 million in financing for climate mitigation and resilience projects. Funding will be made available (through UniCredit Leasing) to small- and medium-sized enterprises interested in investing in high-performing technologies that improve the use of energy, water and land resources in Serbia. Specifically, leases will be made available for investments in technologies such as energy-efficient agricultural, commercial, drip irrigation and rainwater harvesting equipment.

16) Project to strengthening animal health and welfare systems December 6th, 2019, https://agrosmart.net/2019/12/06/jacanjem-zdravlja-i-dobrobiti

The European Union (EU)-funded Strengthening the Animal Health and Welfare System project works to support the Veterinary Directorate of the Ministry of Agriculture in aligning Serbian legislation with EU legislation and standards in the field of animal health and welfare and biosecurity. Currently, the project is helping the Veterinary Directorate develop an animal disease control strategy as well as carry out targeted campaigns, monitoring and surveillance programs. The project is also supporting the development of an animal emergency plan.

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17) World Bank approves USD 50 million loan program December 3rd, 2019, https://www.worldbank.org/en/news/press-release/

The World Bank has approved a USD 50 million loan program to support government efforts to improve the agri-food market linkages of small- and medium-sized Serbian farms. The program aims to increase sector competitiveness and provide economic opportunities in rural areas of Serbia as the country moves toward European Union (EU) membership. The program will promote the use of agricultural advisory and business development services for producers interested in and eligible for matching rural development in order to support improved efficiency, smoother market entry, easier access to commercial loans and greater resilience to risks. The program will also support the Ministry of Agriculture in streamlining its open data capabilities by modernizing its information systems and integrating them into an open data platform that will provide Serbian agricultural producers with access to important agroclimatic and market information.

Private Sector 18) Sugar beet research center to open in Serbia December 18th, 2019, http://www.tanjug.rs/full-view_en.aspx?izb=526226

Sunoko, Serbia’s top sugar producer, will invest EUR 1 million next year to set up a sugar beet cultivation research center. The center will conduct research on sugar beet cultivation technology and techniques to improve sugar yield and quality. The company plans on sharing the knowledge gained from the center with its partners and other parties interested in boosting sugar beet yields.

19) Digitizing the agricultural sector December 17th, 2019, https://www.danas.rs/ekonomija/brnabic-poslednje-dve-godine-dobre-u-poljoprivredi/

2018 proved to be a better-than-average year for agriculture, and 2019 is expected to be an even stronger year. Much of this success is thanks to digitalization in agriculture, which is occurring in the country in two different directions. First, information systems and administrative procedures are being digitalized, making access to information easier and procedures run more efficiently. At the same time, digitizing is starting to enter the actual sector itself as well, giving farmers access to more exact data to reduce costs and improve production. With continuing gains, it seems likely that Serbia’s agricultural sector will continue to be strong in 2020.

20) New lab opens to improve controls for frozen fruits and vegetables December 16th, 2019, https://www.danas.rs/ekonomija/unapredjen-sistem-nadzora-kvaliteta-zamrznutog-voca-i-povrca/

The company Sirogojno has invested EUR 200,000 to construct and open a new lab to perform microbiological, chemical and virological analyses on frozen fruits and vegetables. The company, which is one of Serbia's largest exporters and producers of frozen fruits and vegetables, also plans to use the lab to control for pesticide and heavy metal concentrations in fruits and vegetables. Once fully-operational, the lab will be capable of performing all the analyzes of other accredited laboratories in Serbia. Sirogojno made the decision to build the lab in order to ensure that it complies with increasingly stringent regulations and market requirements as well as continuously improve the quality and safety of its products.

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21) Small agricultural producers marginalized December 8th, 2019, https://www.danas.rs/ekonomija/mali-proizvodjaci-hrane-su-marginalizovani/

Smaller agricultural producers are being increasingly marginalized, especially with the increased impact of climate change and extreme weather events on production. While these events also impact larger producers, smaller ones are more greatly impacted as they are typically not extended the same eventmitigating resources (including insurance opportunities) as their larger counterparts. While the issue is a complex one for which there is no single solution, smaller farmers do have some solutions at their disposal, including joining forces in cooperatives and associations as well as acquiring geographical indications in order to access niche markets concerned with higher quality products. The government can also help smaller producers by adopting European Union (EU) legislation and regulations in the field of food safety, specifically those aimed at supporting smaller producers. There are also a number of significant projects yet to be launched in Serbia, including those related to developing modern irrigation systems and fighting diseases.

Smaller agricultural producers in Serbia has great potential to boost Serbia’s economy, but they must take appropriate steps to ensure their survival as well as received adequate support from state and international players.

22) Rebuilding Serbian pork production December 5th, 2019, https://www.danas.rs/ekonomija/uvoz-proizvoda-od-mesa-skocio-200-odsto/

African swine flu has negatively impacted pork production in Serbia, causing the sector to suffer setbacks that it is only now starting to bounce back from. Last year, Serbia produced 2 million pigs, far less than domestic demand. To meet demand, nearly USD 76 million of pork was imported this year, causing pork prices to rise by nearly 200%. There is, however, hope for the sector as vaccines for pigs have been ceased, a move which will (eventually) open up European markets to Serbian pork exporters. At the same, Serbia has been actively intensifying negotiations to increase exports to Russia and Belarus and is also examining opportunities in the huge market of China.

23) Nedimovic working to expand agricultural trade with Belarus December 3rd, 2019, http://rs.n1info.com/Biznis/a549258/Nedimovic-od-Belorusije-zatrazio

Agriculture Minister Branislav Nedimovic met with Belarusian representatives at the Serbia-Belarus Business Forum to advocate for increased agricultural trade between the two countries. In particular, the Minister urged representatives to examine possibilities for increasing the export of meat and meat products from Serbia to Belarus. The Minister also discussed the possibility of allowing duty-free imports of powdered milk and butter from Belarus.

The two countries currently engage in about USD 20 million worth of agricultural trade each year. Minister Nedimovic believes that there is much more untapped potential for both sides to benefit from that could double or even triple current levels of agricultural trade.

24) Serbian wines having domestic and international success December 3rd, 2019, http://www.agronews.rs/srpska-vina-hit-na-svetskom-trzistu/

2018 was one of the most successful years for Serbian winemakers as the year saw the country produce more than 29 million liters of wine and reach an export value of EUR 17 million. Moreover, Serbian wines are increasing in popularity worldwide, largely thanks to demand for autochthonous wines and those with protected geographical origin. Serbian wines have also made strides domestically and now make up 70% of the domestic market (as opposed to only 30% just five years ago).

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Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com Articles are taken directly from local sources without any fact-checking; they are provided as a convenience and for informational purposes only. Business & Finance Consulting (BFC)’s editing is limited to providing a short summary in English of the texts, highlighting the main points of the original articles.

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