REPUBLIC OF SERBIAMINISTRY OF AGRICULTURE, FORESTRY AND WATER

MANAGEMENT

NATIONAL RURAL DEVELOPMENT PROGRAM 2011–2013

February, 2010.

Abbreviations

APV – The Autonomous province of Vojvodina

AŽS – Life standard survey

AŽS – Life standard survey

CEFTA – Central European Free Trade Agreement

EC – European Commission

ЕU – European Union

KiM - Kosovo and Metohija

LSMS - Living Standard Measurement Survey

MAFWM – Ministry of Agriculture, forestry and water management

NUTS – The Nomenclature of Territorial Units for Statistics

NGO – Non-governmental organization

OECD – Organisation for Economic Cooperation and Development

RZS – Republic Statistical Office

SWOT – strengths, weaknesses, opportunities, threats analysis

ЗПП – Заједничка пољопривредна политика

WTO – World Trade Organization

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Introduction

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PART I

Starting points

1. The Macroeconomic environment

After a period of economic stagnation and isolation, the industrial and economic recovery of Serbia had started with the political changes in 2000s. The 2001 - 2007 period was characterized by numerous reforms and the establishment of macroeconomic stability and sustainable and stable industrial development. In this period the process of privatization and restructuring of many large companies was carried out and the plans for involvement in international organizations (mainly the EU and the WTO) were intensified. Furthermore, the tax system and the labor market and social sector were reformed. The RSD currency exchange rate was stabilized and the country's foreign exchange reserves were steadily rising up to the year 2008. Deregulation and liberalization of prices and foreign trade bussines were widely carried out and relations with international financial institutions were established. Significant progress has been made in implementation of structural reforms, changes of organizational and ownership structure of enterprises was pursed. Serbia's external debt had reached 21,800.50 million Euros by 2008. (it was increased by about 7 billions in 2007 and 20081). Serbia's external debt in 2009 was 22.8 billions of euros (expected in 2010 is 23.9 billions of euros).At the same time, in addition to loans, foreign direct and portfolio investments were received as well. During the 2001–2009 period foreign direct investments had a net value of 12.3 billions of euros2. Foreign direct investments were mainly present in the financial, real estate and market sectors. The productive (Greenfield) investments into export oriented sectors and new technologies, which are necessary for industrial development, were a small part of the investments.

Reduction of the number of employees and the growth of unemployment (Annex I, Table 1) followed the changes in macroeconomic area. The reason lies in the fact that during the 2001 – 2007 period about 100 large industrial systems were restructured by successively conducting their social programs and relieving themselves of technological and structural workforce surplus.

Generally, high industrial growth rates were recorded, inflation was below the projected level, export levels grew, foreign direct investments and the budget surplus have increased. These are the most significant macroeconomic results up to the year 2009. By the end of 2008 the inner and outer balance was disrupted (the inflation and the market balance deficit have risen), a growth of net income faster than the work productivity has

1 National bank of Serbia „The external debt of the Republic of Serbia during the 2000. - 2008.period“.2 National bank of Serbia, „Foreign direct investments, net values by years and countries, 2000–2008“.

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been recorded and the public consumption levels had risen as well. These are largely the consequences of the World Economic Crisis.

The main indicators for the macroeconomic area and a stable industrial growth of Serbia in the following years are: a firm fiscal and monetary policy, quicker structural reforms (especially concerning the end of the privatization process), strengthening of the private sector and improving the business climate and establishing a competitive environment.

2. The significance of agriculture and food industry for the national economy

2.1 Agriculture

The systematic and structural reformation of Serbia’s agricultural sector started after the political changes in 2000s. The reform direction, dynamic and overall effects to date show a high compatibility with other European countries which started similar processes a decade earlier. Generally, the most important elements of Serbia’s agricultural reform process from the year 2000 until today were: market liberalization, changes in organizational and ownership structure of enterprises, the privatization of the processing industry, activating the agricultural financial market and the establishment of new institutional forms at all levels.

The importance of agriculture for the industry of Serbia, measured by the GDP participation and total employment, is very high. From 2000 onward, even though it’s been permanently declining, the participation of the agricultural production in the GDP is still high, and amounted to 10.62% in 2009. (Annex I, Table 2). The participation of the food industry and the beverage and tobacco industry in the GDP was 5.5% on average during the period 2001–2008, which also indicated a permanent decline. However, even with the relative reduction of their GDP participation, the agricultural and food sectors significantly contribute to the other industrial sectors which are dependant on agricultural raw materials, agricultural inputs and other accompanying service industries.

The participation of farmers in Serbia’s total employment structure (Annex I, Table 2) is still relatively high, even compared to other European transitional countries. According to the latest official data, (Workforce survey, October 2008), nearly 21.4% of the employed population works in the agricultural sector, which represents about 18% of the active population. The main reasons for the high dependence on agriculture are certainly the reduced employment capabilities and low investment activities, especially in rural areas.

Food, beverage and tobacco expenditures, even after the constant decline, are still prominent in the total family budget of Serbian families (Annex I, Table 2). The reason for such a high participation of these costs is the insufficiently liberalized market and the monopolistic relation of the traders and processors.

Since 2001, that is characterized by negative trade balance of 136.4 mil USD, for the first time in 2005 Serbia had a positive trade balance concerning the agricultural and food

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products in the value of 150 mil USD. Following the growing trend, there was a surplus of around 638 USD in 2009, with the export prevailing over import of around 148%. The agricultural and food export ration in total export is about 20% which is significantly higher than in the other transitional countries (around 10%). The dynamic export growth is largely a consequence of the CEFTA market liberalization according to Serbia’s preferential status (Autonomous Trade Preferences in 2000.), as well as the network of bilateral trade agreements with countries in the region, now compound into a single agreement among the CEFTA countries, with high degree of trade liberalization.

2.2 The food industry

The development of the food industry has been determined by the growth of the primary agricultural production. A long term growth of the primary agricultural production has made it possible to increase the ratio of the food industry in the total industry production from 10% in the 1980s to 35% by the year 2000. The decline of the primary production in recent years is directly reflected by the capacity usage of the food industry. It can be said that the development and the technological equipment level of Serbian industry is generally not a limiting factor of the agricultural production growth and its restructuring in terms of increased production of industrial crops, vegetables, fruits, meat, dairy products etc.

The development level and the technology degree of the food industry are very diverse. In recent years, most investments have been aimed at the edible oil, beer, milk, dessert and water processing industries. Less investments and a lack of advanced technology are notable in the sugar, meat, milk, fruit and vegetable processing industries.

The available data indicates that there is a permanently low utilization of the capacities of the food industry, ranging from 30%–50%. The capacities which are utilized the most are the mineral water processing facilities, edible oil processing facilities, mills, fruit and vegetable processing facilities, dessert processing facilities, breweries, milk and sugar processing facilities. The capacities which are utilized the least are animal feed processing plants and slaughterhouses. The dynamic growth in this period is certainly the result of significant investments in food industry.

The capacity surplus in the processing industry exists because those capacities are built for the market of 25 million people (ex Yugoslavia) where Serbia participated with more than 60%, and even up to 80% for certain industry branches. Signing the CEFTA agreement, as well as bilateral free trade agreements with Russia, Belarus and Turkey, we get closer to the market several times larger than the national market which offers a chance to utilize the capacities by more than 80%. At the same time, this will be a test of Serbia’s competitiveness with the EU food producers.

A low level of food industry capacity utilization of certain products has resulted in business inefficiency and low export competitiveness. A certain number of companies

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have advanced technical-technological equipment and a highly educated staff, while other companies lag behind modern technological and marketing demands.

The branches of the food industry which are dominant and provide food market diversity in the Republic of Serbia are:

- flour and flour products production - edible oil and its products production - sugar production- fruit and vegetable production and processing- milk production and processing- meat production and processing- dessert production - beverage and soft drinks production

The main limiting factors for efficient participation in the international market are:

- an insufficient assortment of food products compared to the modern markets offer;

- lack of market and product research for the better utilization of existing capacities by introducing production lines and products i.e. expanding the assortment of food products based on the existing raw materials and byproducts;

- the quality variation of market products either due to the lack of standards or the non compliance with existing standards;

- slow adaptation to market business criteria, i.e. slow introduction of modern management and marketing techniques;

- nonexistence of long term firm contracts between the food industry and raw material producers (farms, cooperatives, agribusiness companies);

- nonexistence of economic market relations between the primary agricultural industry and the industry which uses agricultural products.

The main potential of the food industry lies in the production of safe, high quality food, which is highly sought after on the foreign markets. This requires the introduction of new standards (ISO 9000 and ISO 14000), as well as implementing the HACCP quality system and global GAP.

Therefore, the food industry must remain in the focus of Serbia’s development policy as well as the foreign and domestic investors. The development policy must fit into the global world trends such as capacity concentration and highly sophisticated technology with the goal of improving productivity, production efficiency and competitiveness. The chances of the domestic food industry are objectively good, and it is to be expected that it will, in its privatized and restructured form, become a market leader in South-Eastern Europe.3. Rural areas in Serbia – current situation and future trends

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Serbia doesn’t have an official definition of rural areas, considering the fact that there is still no NUTS3 regionalization compliance. The criteria applied by the Republic Statistical Office do not include standard rural indicators which are common in international practices (population quantity and density, the percentage of agricultural workers in the population etc.). Instead, all areas which are not considered urban are treated as rural areas. The administrative division between city/urban and other areas is based on municipality level decisions which assign the town (urban) status to a community which has a general town plan. This approach makes it harder to make statistical analysis and interpret the indicators of rural areas. This Strategy envisions a change in the categorization methodology of the Republic Statistical Office until the NUTS regionalization is complete. By the altered categorization, rural areas are all populated areas except 24 cities that received that status in accordance to Serbia’s Law of territorial organization from 28 December 2007. These cities are: Belgrade, Valjevo, Vranje, Zaječar, Zrenjanin, Jagodina, Kragujevac, Kraljevo, Kruševac, Leskovac, Loznica, Niš, Novi Pazar, Novi Sad, Pančevo, Požarevac, Priština, Smederevo, Sombor, Sremska Mitrovica, Subotica, Užice, Čačak, Šabac. Considering that both Belgrade and Niš have municipalities with significant agricultural production, the OECD rural classification has been applied there4. According to this classification, the municipalities of Barajevo, Sopot and Surčin in Belgrade, as well as the Niška Banja municipality in Niš are treated as rural areas.

The territory of the Republic of Serbia encompasses 88,361 km2 (Annex I, Table 3). On the territory without Kosovo and Metohija5 there are 4,715 populated areas. The average population density in Serbia is 97 people/km2, and is significantly lower in rural areas (63 people/km2) compared to the urban areas (289 people/km2).

3.1 Demographic trends

The period from the 1950s to early 1990s was characterized by a strong trend of agricultural exodus and dynamic migration from villages to towns, both in Serbia and other socialistic countries. During the 1990s, the migrations were partially slowed compared to the earlier period, which can be explained by the reduction of employment possibilities in cities due to the industry recession. Even so, reduction of the number of village population remained common in hilly and mountainous areas and areas less suitable for intensive agricultural production. Furthermore, similarly to neighboring countries, (Romania and Bulgaria) counter migrations were recorded as well (i.e. a return from cities to villages). These processes were a consequence of the economic crisis in Serbia and the closure of industrial facilities, as well as the fact that a significant number of refugees from Ex-Yugoslavia were accommodated in rural areas. The increase of rural population during the 1991–2002 period was recorded only in suburban and rural areas

3 NUTS (short for Nomenclature of Territorial Units for Statistics) is a geo-code standard (Geospatial Entity Object Code) of the European Union which is used for statistical purposes and by which the division of Europe into administrative regions was made.4 OECD definition of rural areas: rural areas are those with a population density below150 people/km2.5 Kosovo and Metohija are not included in the analysis due to the lack of reliable data.

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around large industrial centers. External migrations in Serbia were characteristic for highly educated work force, and it has affected rural areas as well.

According to the Statistical office data, during the 1991 – 2002 period, the population in Serbia’s rural areas has reduced by 3.6% compared to the total reduction of 1% on the state level (Annex I, Table 3). These factors influenced the age category of the rural population which is higher (1.08) than the national average (1.05). In particular, the age group of the rural population in the south-eastern part of Serbia has obtained the value of 1.28. Negative growth trends of the rural population are influenced by the lower presence of women in reproductive age (Annex I, Table 3.), reduced offers of quality employment and unfavorable living conditions.

The unfavorable demographic trends cause unfavorable educational structure of the rural workforce, which cannot fulfill the labor market demands with its performance. Modest knowledge and nonexistence of additional skills in the rural population are generally confirmed by the data of the Life standard survey from 2007, which states that 97% of the rural population has never taken additional education courses, and a 54% doesn’t have special skills and knowledge (Annex I - Table 3).

The knowledge and skills of the rural workforce are not appropriate for modern technology demands and are unfavorably influencing the total workforce capacity in rural areas. The workforce quality is one of the limiting factors of economic development of rural areas, because investors “bypass” places where high quality, trained workforce is unavailable. On the other hand, it’s difficult to keep educated population in rural areas without attractive economic surroundings and workplaces appropriate for their knowledge and preferences.

3.2 Rural economy

The industry structure of Serbia’s rural areas, is highly dependant on the primary sector, especially from agriculture, and is still based on the consumption of natural resources. A high entail of agriculture, the food industry, mining and a low entail of the tertiary sector in the GDP are the main characteristics of the economic structure in Serbia’s rural areas. The obtained diversification level is similar to the neighboring countries by performance levels, and is limited by nearly identical factors: the unfavorable position of the agricultural sector and the rural areas in the development policies, an unfavorable finance market and an uncertain investment environment, limited market placement potential for products and services, inadequately educated human resources and a low level of private business etc.

In Serbia’s rural areas, the GDP amount per person is ¼ less than the national average and indicates a significant lag in development. The difference in the work productivity and industrial structure are clearly evident between rural and urban areas, as well as between certain regions i.e. rural area types.

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The participation of agriculture in the GDP of rural areas is about 30% (Annex I, Table 4), which is significantly higher than other transitional countries. A partial explanation can be found in Serbia’s rich natural resources for agricultural production. On the other hand, the productivity and the intensity of Serbia’s agriculture is significantly below the European average and are one of the causes of the unfavorable living conditions of the farmers.

Based on the Work force survey data from 2008, the entail of agriculture in Serbia’s total employment is still high and averages over 20%. Among the new EU member states, such a high ratio of agricultural employment is present in Romania, Poland, Lithuania, Bulgaria and other countries whose agriculture was slowly reformed, and whose agricultural structure is similar to Serbia’s. This indicator has a tendency of reduction, but not as dynamic as it was for other transitional countries. The reason for this is the slow reform of the industrial structure and the resulting lack of workforce demand, i.e. the low employment possibilities. Such a high entail of rural population in the agricultural industry makes Serbia into one of the most agriculturally oriented countries in Europe.

However, even with the nominally high entail of agriculture in total employment, it is expected that the existing production structure will be endangered, especially in certain parts of Serbia, due to a lack of workforce. The fact that around 50% of the employed rural population has some informal work arrangement indicated that there is a significant contingent of the working population which is only nominally treated as agricultural workforce and that they would eagerly take any opportunity to leave that sector for something more lucrative. The workforce deficit in the agriculturally developed regions was compensated in the last years by the refugee population or workers who lost their jobs in the main industry. Both of these workforce “sources” have „dried out“ in the meantime and that wasn’t compensated by the mechanization of manual labor and technological advancement. These reasons have caused the workforce deficit in certain parts of Serbia, and a change in the agricultural production structure by favoring products which don’t require manual labor.

The ratio of women in the workforce which is market oriented is extremely low (26.1%), and similar phenomena have been noticed in other transitional countries. The remaining 5% of the workforce does manual labor.

Table 3.1. Active agricultural population according to their work positions

Agricultural workers – market Agricultural workers – Agricultural workers – working

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oriented producing for their own needs only

on tasks which require manual labor

Men 79,377 208,475 17,73873.9% 53.1% 72.2%

Women 28,030 188,803 6,81326.1% 46.9% 27.8%

Total 107.407 397,278 24,551100% 100% 100%

Source: Population survey, 2002.

Besides the Workforce survey from 2008, other statistical sources (i.e. Life standard survey from 2007) show that up to 45%–50% of Serbia’s rural population is employed in the agricultural sector, which is a clear indicator of low activity diversification (and low income as well) of the rural population. Low activity diversification of the rural population indicates an underdeveloped employment market, inadequate availability of high quality, long term and stable jobs. The rural workforce is also employed in the processing industry (16.3%), small and large scale markets (9.5%) and construction (6%). The inadequate development of public services and sectors in rural areas represent one of the reasons for the low work availability from other areas, so a lower entail in the total employment is expected.

Unemployment is another significant problem of Serbian agriculture and rural economy. The unemployment rate in rural areas is high (21%) (Annex I, Table 4) and reflects lack of employment opportunities. The younger part of the population is in especially delicate position on the employment market. Compared to the total rural work force the unemployment rate for young people is much higher – the unemployment rate of people younger than 25 is three times higher compared to the average.

The most significant manifestations of rural labor market changes are high unemployment rate and especially high rate of permanent migrations of the younger women. These changes affect the change of the agricultural production structure, reduce vital parts of the rural population and negatively impact on the economic activity of such markets. All of the aforementioned facts indicate that there are „distress push“ factors in Serbia concerning the diversification of rural economy, which are characteristic for rural areas and imply that poor rural communities are forced to seek employment outside the farm as their survival strategy.

3.3 Land ownership structure and land market

During the transition period, the ownership structure of the agricultural land in Serbia has become very complex: it ranges from micro-farms owned by impoverished farmers, to inheritors of returned land, over small, mixed family farms, up to large land parcels either owned by families or the representative of the transitional elite. The 2002 survey confirms that the largest part of the farms produces goods for their own needs (75%), and that only 20% are market oriented. Private property was the dominant form of ownership structure in total agricultural land in the Republic of Serbia (5.1 mil. ha). Out of total arable agricultural land (4.2 mil. ha),

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86% has been used by private farms (3.6 mil. ha). Four forms of agricultural land ownership existed before the process of ownership restructure: private, cooperative, social and state owned. Small farms are dominant in ownership structure.A dual structure of farms exists in the northern part of Serbia (the Province of Vojvodina and the areas of Posavina and Podunavlje) where the land market, especially the land rent market, is much more active.

The main indicator of the changes in the agricultural structure of Serbia during the transitional period is that it changed mainly by turning state/socially owned land into privately owned land, while there were almost no land transactions between private land owners. The investors didn’t purchase small, privately owned farms but larger parcels with the accompanying infrastructure, mechanization and facilities. Privately owned farms were not a significant factor for large amounts of external capital which was accumulated outside of the agricultural sector. An analysis of the change in the ownership structure during the transitional period cannot be made due to the unreliable results of the agricultural survey in 2002. The Life standard surveys from 2002 and 2007 are a more reliable indicator, and are presented in Table 6. Although this data do not encompass the period where the most intensive changes in the ownership structure have occurred, after the return of the taken land and the privatization of socially/state owned farms, they offer enough data to indicate the basic trend of the changes – the strengthening of the dual structure of the farms. The changes in the structural characteristics of the farms in the past five years were:

1. The number of farms is reducing, which is followed by their polarization based on the land size

2. The structure of the farms according to the land size indicates a prevalence of small farms in Serbia with a low utilization of arable land. The Life standard survey from 2007 shows hat farms with a land size of less than 5 hectares represent 73% of the total number of farms in Serbia. This is lower than the value recorded by the Life standard survey from 2002 (80%) and the Population survey of 2002 (78%), which indicates that the ownership structure is becoming more polarized.

3. The average size of farms has been reduced to 4.34 ha (by 6% compared to 2002), but the utilized arable land per farm has been increased to nearly 5 ha, which indicates activity of the land market.

Table 3.2. Indicators of the land market in Serbia

2002. 2007. Index 2007/2002.

Farms which offer their land for rent (%) 9.2 6 65

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Farms which rent land from others (%) 6.7 11.7 175Average size of arable land per farm (are) 301 336 112Size of the land offered for rent (are) 220 299 136The size of rented land (in AR’s) 377 513 136The utilized arable land (in AR’s) 329 493 150

Source: Live standard survey (2007).

There is a tendency of transforming family farms into large, commercial farms and companies in the Province of Vojvodina, especially in areas with a low population density where the age category of the population is high. However, a significant portion of the land used by such farms comes from rented parcels. The investments of the farms (households) ,which rent land, into other inputs are not proportionally higher, which can be explained by the unfavorable economic conditions in agriculture and the inadequately structured market.

On the other hand, the areas in Serbia, which are dominated by extensive agriculture, and where certain farm types are dominant, show dual tendencies with regards to the ownership structure. These areas do not stand out from the national average by the size of their land, but it is widely known that about one third of the land is not used due to the low soil quality, remoteness, high maintenance costs etc. while the prices for renting quality land are fairly high. These areas have a higher agricultural density, and exhibit a larger “pressure” on the land, and have a largest percentage of mixed farm types as well as a greater need for extending the parcels which represents the most common form the their restructuring.

3.4 Vertical integration and food supply chain

Modern agriculture is characterized by a firm connectivity and a high dependency between all aspects of the agricultural complexes. The Yugoslavian model of the agricultural transformation was based on the cooperation as a connection between smaller farms and larger state/socially owned companies. The vertical integration system was most commonly structured on the local/regional level and encompassed the input market, primary agricultural production, processing market placement and other services. Large agricultural industrial systems had a significant impact on the local economy, a monopolistic position on the local market and were supported by republic and state funds. Parallel with the large agricultural industry systems there was a network of illegitimate traders whose business practices were borderline grey economy.

During the 1990s, due to the disintegration of the large agricultural industry companies, a ten year vacuum in the institutional and organizational market structuring was formed concerning agricultural inputs as well as buying up agricultural commodities. The condition for revitalizing the market of agricultural products was made primarily by privatizing the processing capacities, and later by strengthening the food market chains. Illegal business practices were still present, and in certain sectors (i.e. the sugar beet production) regional competitiveness started to work and to threaten the secure position of the national food industry.

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This segment of the structure was practically left to regulate itself through the market flow which literally resulted in chaos. By the beginning of the 1990s, during the first transitional years, the sale market represented a more delicate problem, especially with commodities or services that were strongly integrated with other Yugoslavian republics. The disintegration of this system demanded alternatives which were difficult to find in times of economic sanctions. The increasing grey economy in all aspects of food production unfavorably influenced the structuring of new forms and business connectivity.

The production and income chain in Serbia’s food production is rounded up relatively well in the parts of the system which were privatized first and where a stable domestic market as well a possibility of export exist – industrial crops, fruit and vegetable processing, milk, meat processing etc. The domestic market of grains and meat still haven’t reached this level of stability.

3.5 Farmer cooperatives

Official data concerning the number of registered farmer cooperatives vary due to the fact that some cooperatives are registered as purely agricultural cooperatives while others are registered for other industrial activities as well. From the total of 3,435 legally registered cooperatives, 3,067 or 89.3% are true cooperatives, 25 or 0,7% are cooperative alliances, and the remaining 343 or 10.0% are legal entities which merely use the term “cooperative” in their name. Many of these cooperatives exist only on paper (they are organized as farmer unions and are actually owned by one or more persons) and were established only for profit gains of individuals which practically makes them nonexistent.

According to their base characteristics, farmer cooperatives in Serbia can be divided into the following groups:

1. „Old“ farmer cooperatives. These cooperatives were established years ago and usually possess large quantities of equipment, infrastructure and land. Their main income source comes from their own land and from margins acquired for negotiation between farmers and large agricultural processors. They are usually run by management employees. These cooperatives are characterized by a large number of members who are not involved in the decision making processes within the cooperative. Some of these cooperatives are successful industrial subjects, but most of them are in a bad financial situation due to the large number of employees and inadequate management.

2. „Private“ cooperatives. A number of individuals have used the currently unclear state of the Cooperative Law and chose to form their own cooperatives, hoping to gain large amount of profit. These cooperatives have very few members (usually just the legal minimum of 10 founder members), and they often don’t accept new members. Members usually come from the founder’s family and they don’t adhere to the internationally established cooperative and union principles. This organization structure has enabled

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individuals to accumulate wealth, thereby lowering the perception and the reputation of cooperatives as a means to organize farmers.

3. „Donator“ cooperatives. From the year 2000 onwards, a large number of international organizations have started to work on the territory of Serbia. Some of them are oriented toward agriculture and rural development, and focused on educating farmers on the need and the importance of cooperatives. As a consequence, a large number of farmer cooperatives were formed, without the subjects really knowing the legal implications of that act. The “bait” for establishing such cooperatives were the donations, mostly in the form of equipment and mechanization. These cooperatives were usually abandoned after the end of the donation program and every further attempt at increasing the cooperative’s capacity has been discontinued. There are only a few of them who still do business today and increase the number of their members. Many of them have very little income and are only nominally functional.

4. „True“ cooperatives. They were created by desire of farmers, who have really found a mutual interest in forming a cooperative in order to have a common participation on the market. The number of their members and their profit is rising and many of them still do well. The main decisions are being made by the cooperative members, while directors and employees handle business in accordance to the strategic goals defined by the founders. These cooperatives are the shining example of true cooperative potential in Serbia.

The global problems which farmer cooperatives face in Serbia are:

1. Inadequate legal regulations. The Cooperative Law from 1996 is extremely outdated. The legally defined equality in the monetary capacity of the cooperative founders often represents a problem for starting larger investments. Cooperatives cannot form other business bodies in accordance to the interests of the founders and establish a larger scale economy. The monopoly on handling cooperative audit in the hands of the cooperative unions.

2. Nonexistence of fiscal monetary policy measures and other means of supporting cooperatives as a specific business mode. Due to ignorance toward the advantages which cooperatives bring, there is not tax benefits applied compared to regular companies. Such support measures are common in agriculturally developed European countries. The states have also recognized the social and economical aspects of the cooperatives and made various adjustments in accordance.

3. Small turnover and inability to apply for credits. Newly formed cooperatives usually have a small turnover, therefore acting a “servant” role for larger processors and providers. The trading conditions are usually unfavorable which makes farmers lose interest for further cooperative business. Due to very limited assets (i.e. the inability to apply for a mortgage) and the inability to receive bank guarantees (due to low returns) cooperatives are restricted from taking credit funds, making them unable to improve their infrastructure and form a common market approach.

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4. Non-familiarity with basic cooperative rules. Farmers are often unacquainted with basic cooperative rules and regulations which serve as an instrument for pursuing common interests. This and the historically bad connotation of cooperatives cause animosity and distrust in farmers.

5. Bad management capacities in cooperatives. Cooperatives often have a small number of members and low returns so they are unable to employ professional managers who could improve their business practices. Cooperative management is often handled by the farmers who are not sufficiently educated in the domain of modern financial and economic market aspects and therefore cannot adequately answer the challenges faced by the market. Due to the stagnation of the cooperative business, private companies are taking their market share by utilizing aggressive investment policies, modern marketing techniques and a large capital. This represents unfair competition to the cooperatives.

A large number of small farms with fragmented arable land represent one of the main problems for the development of a modern, competitive agricultural industry. The survival and market viability of small and medium farms is already questioned. Forming farmer cooperatives is one of the key aspects to overcome such problems. Rural development policies regard cooperatives as one of the most significant preconditions for the survival of small and medium farms in modern market conditions.

The support which the cooperative received from the MAFWM until now was mostly in the form of ad hoc support measures. Revitalizing cooperatives as the best model for overcoming the development limitations of small farms which are dominant in Serbian agriculture would contribute to the forming of a stable market and the reduction of the business risk for the producers.

3.6 Rural poverty

Rural poverty is one of the main characteristics of poverty in Serbia. The results of the Life standard survey from 2007 confirm that rural poverty is a significant part of overall poverty in Serbia (Table 3.3): the percentage of the impoverished who live in rural areas has increased to over 61% in 2007; poverty is still twice as present in rural than in urban areas (9.8% to 4.3%), and the difference between the poverty levels in rural and urban areas has increased from 1.6% to 2.3%, as a consequence of the reduction of urban poverty.

Table 3.3. Poverty indicators by community type according to the methodology of the Republic Statistical Office

Population structure Percentage of the impoverished

Structure of the impoverished

2002. 2007. 2002. 2007. 2002. 2007.

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Urban 56.4 58.5 11.2 4.3 45 38.6Rural 43.6 41.5 17.7 9.8 55 61.4Index Rural/Urban 1.6 2.3

The following parts of the rural population are particularly vulnerable to rural poverty: farmers whose only income comes from farming, older people and pensioners, women and young people as well as refugees. The data from the 2007 Life standard survey indicate the growth of rural poverty in the most developed agricultural areas (parts of Vojvodina province), which makes this problem non-specific to mountainous areas.

The poverty of Serbia’s rural areas is closely tied to the dependence of the rural economy on agriculture. Data indicate that people employed in the agricultural sector represent nearly one half of the impoverished (47%), and that a small percentage of the farmers (8.5%) are considered as rich. The main causes of farm poverty can be divided in two groups:

1. Unfavorable performance of the agricultural structure – unfavorable ownership structure, undeveloped capital market and modest human resource potential are the main causes of farm poverty;

2. Inadequate diversification of income and activities of farm hold members.

From the aspect of poverty, the mid sized farms (1–5ha) are the most endangered and the most numerous category. The quantile6 distribution of this category is extremely uneven. The presence of these farms among the impoverished category is increasing. These changes are a consequence of the strengthening of the dual agricultural structure as well as the unfavorable position of mid sized farms which are unable to reach the competitive productiveness level. Mid sized farms have the performances of half-natural agricultural production: they rent very little land, possess mechanization which they need to maintain, use hired workforce much less than others, their market product surpluses are not higher than small farms have. Apart of the farms of this size, especially those with a younger workforce, has managed to transform into commercial farms oriented toward more intensive production lines.

On a regional level, rural poverty is more present in eastern and south-eastern parts of Serbia, which stand out by their unfavorable demographic indicators, which leads to the conclusion that rural poverty is connected with an underdeveloped employment market.

Poverty reduction strategy has been adopted and put in force in 2003 and it represents the plan of Serbian government to fight against poverty, especially in transition period, during EU accession period. The main strategic directions of aforementioned goal (plan) which are to enable reduction by half the number of poor by 2010 are: Dynamic economic growth and development with special focus on employment possibilities within private sector, fight against new poverty appearance as a consequence of economy restructuring and rationalization of governmental body and efficient implementation of present and definition of new programmes, measures and activities targeting poor and socially vulnerable groups. (Source: Poverty reduction strategy Implementation Focal point)

6 A quantile is a mean to represent poverty and compare population groups by expenditures – a fifth on the total contingent of a category

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3.7 Communal infrastructureCommunal infrastructure in Serbia’s rural areas is neglected and underdeveloped. As such, it doesn’t contribute to the growth of their competitiveness and the investment attractively.

Table 3.4. Rural infrastructure

REPUBLIC OF SERBIA RURAL AREAS

InfrastructureNumber of doctors 20,303.28 8,129.44Number of telephone lines 2,485,232 1,180,690Number of telephone lines per 1000 people 331 284Number of people per doctor 369.30 511.92Source: Republic Statistical Office , various publications.

At the moment, 80% of all villages have access to basic services such as: a road network, electricity, phone lines (fixed and mobile telephony). Water supply systems, gas supply systems, sewage drain systems and landfills are less common in Serbian villages. The communal infrastructure of rural areas in Serbia is underdeveloped, and it doesn’t satisfy the needs of the rural population neither concerning quality nor by service. According to the results of this research, the rural population claims that the problems connected to the communal infrastructure are a priority, and are higher ranked than economical problems. Here we primarily refer to the water supply system, the sewage drain system, the electricity supply network and the road network. According to the same research, the investments into communal infrastructure from the year 2000 onward were largely directed into building new and extending existing capacities than toward the reparation of the existing state. The investment for building new systems or extending existing ones was largely done on the telecommunication systems, and the least investments flowed into gas network building and trash deposit establishment. New communal systems were mostly built in mountainous areas and usually repaired in flat land areas.

According to the Life standard survey of 2007, the water supply problems in rural areas vary according to the terrain configuration, the village location and the available water supply alternatives. Villages that are closer to urban areas are eventually connected to their water supply lines, if they manage to organize themselves and pay for the connection. Data indicate that villages that don’t have access to a central water supply rely on wells as their primary source of water.

Social capital

Social capital can be encouraged by the gradual introduction of local rural development strategies (the LEADER approach), stimulating the interest of the local population by their active participation, but also ensuring the public-private company partnerships are established in the form of local action groups (LAG).

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In order to rationally utilize the available funds for strengthening the social capital, it is necessary to intensify the cooperation of all potential rural development factors and build up the necessary capacities on the national, regional and local level. It is especially important to have a good cooperation with local municipalities and to consult its members on rural development queries. Furthermore, it is necessary to emphasize the importance of the active participation of the NGO sector during the joint implementation of various activities. The past integrative approaches in local development have proved very useful and have influenced the building of local capacities and helped Government agencies and the MAFWM in creating more adequate support measures, as well as offering a better evaluation of the effectiveness of the measures. Of course, these were only initial actions and not systematically organized activities. Therefore, the following actions need to be carried out in the next period:

1. Valorization of local human resources, especially the inclusion of individuals who did not participate until now (agricultural referents of each municipality, non-government organizations who are not currently members of the rural development support network).

2. Estimation of the capacities of local institutions and individuals which are concerned with some of the issues related to rural development.

3. Identifying the needs for capacity strengthening of individuals who have not been involved through innovative trainings yet.

4. Measures of direct and indirect support in the work of chosen individuals. 5. Stimulating the participation of the representatives of the rural development

support network in strengthening the ties between all identified individuals and implementing common activities.

3.8 Gender equality

Gender equality and the full participation of all social groups into the development activities on the local level are extremely important for the integrated approach of rural development in Serbia. Based on a gender structure analysis in rural areas, 48% of the population are women while 52% are men. Furthermore, it is estimated that from the total number of women in rural areas, 13% are leading the farms, mostly in the province of Vojvodina where that percentage is even higher (24%). Concerning the market oriented agricultural production, men make up 73.9% of the workforce and women 26.1%. Additionally, 46.9% of all women and 53.1% of all men create agricultural products for their own needs. Women make up 44% of the total number of the active rural population (Annex I, Table 5.).

3.9 Biodiversity and the environment

Serbia’s rural areas contain significant amount of natural resources (water resources, large arable land areas and forest areas) with a rich biodiversity. Of the total territory of Serbia (not including Kosovo and Metohija) agricultural arable land takes up 66.03%.

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Besides 40% of arable land, 21% of the land is covered by multi year crops and 28% of the remaining land is covered by forests.

Important preconditions for a high biological diversity in Serbia are: its geographic position, the open nature of its territory toward the surrounding regions and the plant and animal development conditions throughout history. Serbia’s territory encompasses five bio-geographical areas: the Mediterranean area, the middle-European area, the pontic area, the circum-boreal area and the middle-south-European mountain area. It is estimated that there are about 1,000 plant communities in Serbia. The animal life is also highly diverse. Further estimates indicate that the number of species in Serbia makes up 43% of the total species in Europe. About 500 of the animal species and 600 plant species are considered as endangered.

In the entire pan-European region, including Serbia, the various habitats have formed centuries old traditional systems of agricultural production. Many of these habitats have a special significance, although there is a tendency toward the reduction of the biodiversity which is a consequence of the decline of the traditional extensive agricultural systems. This is also caused by the intensification of the production or the total abandonment of farming practices in some marginal areas with specific handicaps: high altitude, poor soil quality, poor climate conditions as well as areas where extensive agriculture is necessary for proper soil management. The high biological diversity is directly connected to the low inputs in agricultural production concerning the use of fertilizers, pesticides and agricultural mechanization.Despite of the all aforementioned, it is considered that Serbia’s agriculture has significantly reduced the negative impact on the environment during the recent years. For example, chemical fertilizer use was reduced from 115kg/ha in 1991 to 36 kg/ha in 2002 and this trend is continuing due to the poor condition of agriculture. Consequently, the amount of pollution caused by agricultural production has reduced.

At the moment, the main negative impacts of agriculture on the environment are: soil pollution caused by inadequate and uncontrolled pesticide and fertilizer use and

using polluted water for irrigation; chemical (mainly nitrate) and bacterial pollution of water (eutrification), which are

connected to the uncontrolled flow of liquid manure from livestock farms and spraying water pollution sources;

soil erosion (about 80% of the arable land is affected). In central and hilly/mountainous regions water erosion is prevalent, while aeolian erosion dominates the province of Vojvodina;

low awareness level of the farmers, concerning the necessity of environment protection and applying “good agricultural practices” i.e. practicing sustainable agriculture which doesn’t threaten the environment– „High Nature Value farming“ (MAFWM, 2009).

3.10 Animal welfare

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Animal welfare is a factor which significantly impacts the rural development. It can be improved by developing competitive livestock production, improving food safety as well as the environment protection.

The slow adaptation of the animal welfare standards is a consequence of the low awareness level of their significance. The lack of development mechanisms and inadequate state subsidies are also negatively influencing animal welfare concerning the safety of food products of animal origin. It also inhibits the competitiveness development of these products on the domestic and the European markets and hinders the compliance of Serbia’s livestock production to European standards. This situation can cause problems for the application of GLOBAL GAP standards which set very high animal welfare demands. Not fulfilling these standards will slow down the process of exporting animal products into the EU countries. Furthermore, reaching high standards in the animal welfare area would positively influence the strengthening of the competitiveness of the animal commodities on the domestic and the EU market and promote sustainable rural development.

Adopting the Law of Animal Welfare marked the beginning of the creation of the animal welfare system in Serbia, which was determined as an important goal for the sustainable development of agriculture, as established by the National strategy of sustainable development (Official gazette of the Republic of Serbia no. 57/2008).

4. Rural regions in Serbia7

Serbia’s rural areas are characterized by a large degree of variety concerning the size and the morphology of its settlements, natural conditions and infrastructure. There are many differences in the agricultural production conditions and the development of other industrial activities, market connectivity and market placement. These variations are influencing social development, demographic trends, industrial development, life quality and ecological traits.

At the time of defining the Rural Development Program, during the “Support to rural development programming and payment system in Serbia and Montenegro” a cluster analysis was performed, using over 40 indicators which determined the homogenous rural regions of Serbia, which reflect the heterogeneous state of the Serbian rural areas. The base performances of these regions which are relevant for rural development are summarized in the following text (Annex I, Table 6).

According to these indicators, Serbia is divided into four regions (Annex II): the region of highly intensive agricultural production and integrated economy, the region of small, urban economies with intensive agriculture, the Mountainous region with an economy based on natural resource use and the region with a high potential for tourism and with a impoverished agricultural structure region. The aforementioned regions can be used as a starting point for creating local strategies.

5. Agriculture and rural development institutions in Serbia

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The establishment of sustainable institutions, rules and policies which guarantee a fair approach toward capital (mainly land, water and forests), technology, commodity market, financial market, and other services, which allow the rural population to participate in the decision making process are a precondition for an efficient and sustainable transformation of rural areas. Modern concepts of local and rural development management demand a change of the traditional organizational and management structures and ties, where the State shares its authority with a large number of partners (Annex I, Table 7). The special tasks for establishing this environment are:

1. Provide a legal basis for adequate interaction between all partners. Public participation demands an adequate legal basis. The State can create laws and programs which would establish such relationships;

2. Provide equal accessibility to resources and information for all key participants. This criteria must be adhered to by the central authority (the Ministries) as well as the vertically subjected institutions and other potential partners;

3. Provide a degree of trust between partners (as well as a degree of trust in the State and its institutions) and create a democratic atmosphere for interaction of various participants through transparent decision making and control systems. The state must take on the role of a mediator by establishing the interaction between new actors – partners, in order to achieve a fair environment during the decision making process and ensure equal benefits from rural development to all participants. The exclusion of certain groups and categories is most often the consequence of an imbalance of decision making power;

4. Provide horizontal and vertical delegation of responsibilities to other agencies, partners and decision making bodies. Their competence to participate in this process must be taken into account – the State cannot fully exclude itself from this process before helping the other parties to build up their capacities and take on the responsibility for the aspects previously controlled by the State.

The development of the institutional framework directly impacts the access of the rural population to the physical capital, financial and other benefits, technologies and markets, which justifies the benefits of the production which was established by the use of this capital and services. In this way, the public institutions and their “rules of play” practically determine the allocation of resources, define the regulative framework and the implementation mechanisms, by impacting the dynamics and the intensity of the adaptation of the rural population to the market economy and sustainable development.

The changes in the institutional structure of the agricultural sector in Serbia have been carried out slowly during the 2000–2008 period, without much continuity and weren’t accompanied by sufficient efforts to raise the capacity for caring out complex reform demands. The multi-annual mixture of State and Federation institutions has significantly slowed down the institutional changes in the sector. Transferring the responsibilities from the Federation to the State level was finalized in 2004. Until formation of the new state union between Serbia and Montenegro in 2003 the State (Serbia) and Federation (Yugoslavia) Ministries were functioning in parallel. By forming a new union between

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Serbia and Montenegro, the Federal MAFWM was disbanded, and parts of its responsibilities (sanitary control, export subsidies etc.) were split up between the Federal Ministry of Industry and internal trade (which continued to function) and the MAFWM of the Republic of Serbia. When Serbia and Montenegro separated, all of the duties were taken over by the MAFWM of the Republic of Serbia. Another reason for the slow institutional transformation can be found in the frequent changes of the governing structures within the MAFWM. The strategic and program courses of the reform governments have only partially changed due to objective changes of the macroeconomic environment. Furthermore, the uncertainty of the EU and WTO ascension had negatively influenced the adaptation to the required standards and procedures.

5.1. Rural development support network and the agricultural extension service

Rural development network

The MAFWM of the Republic of Serbia has formed a rural development support network, made up by 15 regional centers on the territory of Serbia. Through these offices, people living in rural areas can be informed about the regulation changes and other legal aspects of the agricultural reform which the MAFWM conducts. The end goal of these offices is the development and the improvement of agriculture, creating better living and working conditions in rural areas and the reduction of rural poverty. The rural development support network supports the development of rural areas, i.e. villages and their population through the following project goals and sub goals:

Project Goals:

1. Strengthening the existing and developing new rural development potentials;2. Organizing efficient and well-timed information gathering which is of key

importance for programming rural development measures and monitoring their effects;

3. Improving the vertical and horizontal flow of information;4. Identifying local actors and supporting local and regional rural development

initiatives;5. Improving the conditions for developing Serbia’s rural areas, improving the life

quality therein and establishing new preconditions for forming new jobs.

Objectives:

1. Providing access to information which are important for rural areas and concern the development policies of agriculture and villages, as well as other state and European level policies which are relevant to the population;

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2. Identifying and promoting good practices and successful initiatives throughout Serbia and Europe, in order to acquire knowledge and encourage creativity and new ideas for using and developing existing rural development potentials on the local level;

3. Ensuring full equality between all rural areas concerning the use of state budget funds;

4. Providing constant training of the members of the network and improving its functioning methods through various educations concerning the work methodology and carrying out projects of national and regional significance.

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Agricultural extension service

The agricultural extension service has a significant role in improving the global knowledge and adopting the proper technologies for plant growing and animal keeping, production management, the application of EU standards and regulative on the selected and other farms, educating farmers by giving expert advices and recommendations, organizing seminars, workshops and publishing expert material, as well as carrying out other activities which improve the agricultural production. Extension services in Serbia were traditionally provided by the Agricultural Extension Centers of the Republic of Serbia (organized in the form of institutes, agencies and extension offices). Until 2009 agricultural extension service were socially owned and coordinated by the Institute for Science Application in Agricultural (ISAA) and experts from agricultural cooperatives and the food and processing industries.

225 advisors are employed in 34 agricultural extension centers on the tasks defined by the MAFWM and the Province Secretariat of Agriculture, Water Management and Forestry.

In 2009 the agricultural extension centers have changed their legal status from being socially owned to organizations with limited responsibility founded by the State (Republic of Serbia).

Furthermore, extension services are also provided by private companies, but only a small number of farmers can afford these services as it requires monetary compensation. On the other hand, the State’s extension services are provided free of charge for everyone. The methodology of long term financing of agricultural extension services has not been clearly defined yet. In the future, the network of private extension workers could have a significant role on a competitive market of giving advices to farmers. However, at this time, most farmers simply do not have the financial means to pay for extension services.

The main postulates of the agricultural extension service are defined through goals and activities. The general work goals are to raise the general knowledge and the awareness of the farmers in order to:

improve the farm income train farmers to better manage their farms, help with resolving problems related to production, economics and

organization on the farm, focusing the rural development of the local communities, conserving natural resources and protecting the environment (sustainable

development), focusing and adapting the production to market demands and development of

the agricultural business practices encouraging the forming of farmer cooperatives

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The consolidation of the extension service is expected to come through the application of the Strategy for the Development of Agricultural Extension Service, the Law on Extension Service and the Rulebook for Conducting Agricultural Extension Work.

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5.2 Ministries and agencies of the Government of Serbia, regional institutions, agencies and funds

According to the Ministry Law, the Ministry of Agriculture, Forestry and Water Management (MAFWM) is responsible for rural development. The Department for Rural Development of the MAFWM is responsible for the rural development policies and the accompanying strategies and programs with the goal of easing the EU accession and improving the social and environment aspects of rural areas.

The Rural Development Department is in preparation to become the Managing Authority which will govern the IPARD funds. Furthermore, the EU regulations for managing IPARD funds require the forming of a Paying Agency and a Monitoring Committee. The system authorization should be finished as soon as possible because it is expected that Serbia will soon receive the EU candidate status, and thereby gain access to the pre-accession EU funds. The system for implementing IPARD funds also requires the forming of decentralized structure for working with local rural communities.

Ministry of Economy and Regional Development (MERD) has regional development programs which favor less developed municipalities, which could be characterized as primarily rural. Although the regional development programs could complement the rural development programs, there are enough conceptual differences between the two programs to ensure the need for their coexistence. Programs, goals and activities of various sectors of this ministry play a significant role in rural development.

Ministry of Finance is one of the first ministries which need to recognize the multi-sector dimension of the rural development concept and the necessity of coordinating funds and institutions between entities which implement rural development programs. Furthermore, this ministry plays a key role in acquiring international financial aid. From the rural development perspective, it is especially important to process the EU rural development funds within this ministry and adopt the platforms of cross-border regional cooperation.

Ministry of Environment and Spatial Planning From the rural development aspect, the tasks of this ministry concerning the environment protection system and the sustainable development of the natural resources (air, water, soil, mineral resources, forests, fish, wild animal and plant life) as well as the development of sustainable tourism. The available data indicate a need for further engagement of this ministry into future rural development activities.

Ministry of Youth and Sports The tasks of this ministry are important primarily due to the aforementioned demographic characteristics of rural areas: population aging, migration of young people, unemployment, unfavorable educational structure, etc. This ministry has recognized the need to act in rural areas. Therefore, in the “National plan for conducting the National Strategy of Youth during the 2009 – 2014 period” it lists goals, measures, activities and indicators which are specific for rural areas.

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Ministry of Telecommunication and Informatics Among the many responsibilities of this ministry, satellite communication is especially important for rural development , because such a network would be used for providing education and health services in rural areas. It could also be used to link rural areas with the telecommunication system of the rest of the country, as well as an early warning system for ecological disasters.Ministry of Work and Social Policies focuses some of its policies and strategies on rural areas and their population. This is mostly the case with population policies which concern the aging of the population, negative birth rate, the high concentration of refugees etc. Most notably, the activities of the Fund for Social Innovation should be taken into account, especially the development and the reforms of the social protection system and the adaptation of the PROGRESS program which is financed by the EU. This program contains components concerned with social inclusion and employment. The “Strategy of Social Protection Development” does not recognize the term “Rural Development” (nor similar terms like rural, agricultural) as one of its priorities nor does it make any indication that the strategy is applicable to rural areas. That strategy uses terms like “local” and “regional”. At the same time, due to the world economic crisis, this ministry has initiated the “Solidarity” action in order to identify people who need help the most. The results of this campaign could help to focus the ministry on rural development.

In the existing strategic documents of the Ministry of Education, the rural population is not mentioned as one of the priorities nor is the institutional significance of the ministry for rural development taken into account. Considering the educational level of the rural population, and the importance of education for general development, this ministry should become much more active in the rural development area. There is a similar situation in the Ministry of Health, which doesn’t perceive itself as institutionally relevant although health protection is greatly reduced in rural areas when compared to their urban counterparts.

Ministry of Culture intends to create a new cultural environment and create a balance between artistic development and the protecting the cultural heritage, and enhance the functioning of the public, private and NGO sectors. In accordance to its responsibilities, the Ministry of Culture supports the best artistic and cultural projects from the territory of Serbia, as well as the projects of all minorities and peoples who live in Serbia. At the same time, the ministry is very keen on international cooperation with the neighboring countries as well as worldwide. All of these activities can contribute to rural development, mainly through rural tourism.

Ministry of Infrastructure conducts administrative tasks concerning the railroad, road, waterway and air traffic. Considering the general state of Serbia’s infrastructure, and the particularly difficult situation in rural areas, the activities of this ministry are very important.

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Ministry of Science and Technological Development The investments in capital research equipment are particularly significant for rural development because they strengthen the agricultural research capacities, introduce technological innovation, and offer participation in the Seventh Framework Program and other international programs and projects.

Ministry of State and Municipality Administration is a key institution for decentralizing the administrative responsibilities and forming autonomous local governing bodies. Considering the fact that 85% of Serbia’s territory consists of rural areas, the responsibilities of this ministry are directly reflected on the rural areas and the rural population. The role of this ministry is not clearly defined in the context of rural development.

Ministry for the National Investment Plan is envisioned as the initiator of the industrial development of Serbia, a strengthening force of Serbia’s economy, enhancing the growth of the Gross Domestic Product, improving investments and export rates, reducing unemployment and improving the life standard. These priorities of the Government of Serbia can only be achieved through larger investments into the traffic and energy structure, health education, science and other areas which contribute to industrial development. The ministry for the National Investment Plan will, through adequate policy and program coordination, enable the increase in the competitiveness of the industry, more balanced regional development, reduction of poverty and a better living standard for all citizens. Although ambitiously envisioned, the National Investment Plan is primarily a financial mechanism for redistribution of funds. Due to the world economic crisis, the funds intended for the National Investment Plan have been greatly reduced.

The Republic Agency for the development of small and mid sized companies and businesses founded by the Law of the Republic Agency for the development of small and mid sized companies and businesses (Officiall Gazette of the Republic of Serbia, no. 65, from 23.11. 2001.). The agency was founded with the main goal to support (assist, advise, protect) the development and the interests of the small and medium business sector, which should bring balance to the industrial structures, make industrial development more dynamic and revitalize the economic flows in the country. Besides the republic agency, a network of 14 agencies which cover 85% of Serbia’s territory also exists. The new Regional Development Law envisions the transformation of these agencies into agencies for regional development. It remains to be seen how the connection between these agencies and the rural development support network will function.

Agency for foreign investments and export promotion (SIEPA) helps Serbian companies to export their products and services and become more competitive on the foreign markets. On the other hand, by promoting the investment possibilities and assisting foreign investors to start their business in Serbia, the agency actively works on forming new workplaces, mobilizing the domestic industry, transfer o technologies, knowledge and skills. The agency successfully functions as a separate organization of the

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Government of Serbia and all of its services are provided free of charge. In order to increase exports, the agency organizes the presence of Serbian companies on international fairs and helps in forming business contacts and recognizing new trends in various industries. Furthermore, the agency organizes visits of foreign companies which are interested in finding business partners in Serbia and cooperate with them. The agency actively provides financial help to domestic companies for realizing marketing activities aimed at foreign markets, the introduction of quality and general competitiveness improvements. By organizing seminars, trainings and courses the agency helps domestic export companies to prosper in order to better use the business opportunities on foreign markets and achieve the best results.

Table 5.1. Regional institutions, agencies and funds

Name of the institution Type of influence on State policies

Participation in strategic decision making

Regional levelAgricultural secretariat of the Autonomous Province of Vojvodina

partner of the central government; decision maker

(for own programs)

High

Province secretariat for local administration and inter municipal cooperation of the Autonomous Province of Vojvodina

partner of the central government

Medium

Province industrial secretariat of the Autonomous Province of Vojvodina

partner of the central government; decision maker

(for own programs)

High

Regional agencies and fundsVojvodina Development Fund implementer Low

Regional Union Alliances social partner LowRegional Chambers of Commerce

social partner with a high influence on State policies Low

5.3 Financial Institutions

The financial capital of rural areas is largely dependant on the development of the financial market and its availability to the rural population. Forming efficient financial institutions and credit mechanisms adapted to the specific needs of the rural population, and the agricultural production are a precondition for activating the development potential of rural areas. A significant step forward in the development of Serbia’s rural financial market was made in 2005 with the introduction of agricultural credits with interest rates, which are subsidized from the agricultural budget. In the recent years, some banks have started to provide specialized credit lines for agricultural production. Also, the programs of development funds are designed to encourage investments into

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undeveloped areas, small and medium enterprises, agricultural industry and similar purposes, which increases the possibilities of activating rural potentials.

The financing of regional and rural development fall under the authority of:

1) Fund for the development of the Republic of Serbia2) Special state budget funds (Office for sustainable development of

undeveloped areas, including the agricultural budget)3) Fund for the development of the Province of Vojvodina4) Fund for the development of agriculture in the Province of Vojvodina5) Guarantee fund6) The Republic Agency for the development of small and mid sized companies

and businesses7) Agency for the development of infrastructure8) National investment plan9) Local funds (municipal funds for the development of agriculture)

5.4 Non-governmental organizations

Generally, the role of NGOs in rural development varies greatly. In some countries the NGO network efficiently meets the needs of the rural population and articulates them in different forms of its activities. In other countries the influence and the recognition of NGOs is minimal due to their small capacities and poor connectivity. The NGO sector in transitional countries is usually involved in the rural development process as a partner of socially endangered population categories and in environment protection activities.

The activities of the NGO sector concerning the economic development of Serbia have started during the 1990s through humanitarian aid programs for refugees. These projects were consequently expanded on development aid and support for the poorest categories of the local population, which included the rural population. Although most NGOs are still solely dependant on foreign donations and funds which finance their activities, they now cooperate with the local government and State institutions. The State administration is increasingly treating NGOs as important partners, especially for the realization of social aid programs and the reduction of poverty.

As far as rural development is concerned, NGOs are active in the areas of environment protection, and promoting the cultural and historical heritage, educational activities and resolving social problems. Although many NGOs declare themselves as relevant for rural development, there are very few of them who have implemented actual projects from that area. The rural population doesn’t recognize them as their relevant partners because they are insufficiently familiar with their initiatives and projects.

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I SECTORAL ANALYSIS - DAIRY INDUSTRY

Significance and basic trends

In the past, milk production in Serbia was one of the most important agricultural branches and is still very important, so in the future it should be the backbone of agriculture and rural development of Serbia as a part of the Common Agricultural Policy of the EU. The importance of this sector is reflected in the fact that milk production is:

Is among the sectors with the highest value of primary production of over 500 million euros per year, which is additionally significantly increased by processing;

Includes more than 280 thousand producers and thus contributes significantly to the rural development of Serbia;

Is important, due to significant consumption in terms of quantity and nutrition, for the country's food security;

Is the most demanding sector regarding the standards that should be met during the EU accession and therefore it may be one of the greatest obstacles to the accession of Serbian agriculture to the CAP;

Has significant potential for further development of Serbia.

Supply chain of milk production

Despite the incentives in recent years through market and rural development measures, the situation in the sector of production, processing and marketing of milk and dairy products is still unsatisfactory.

Cash allocation from the agricultural budget for measures in dairy industry (RSD million)

Measures/ year 2004. 2005. 2006. 2007. 2008. 2009.

Market measures 3.078. 3.194 2.348 1.406 1.294 402

Rural development measures - 121 144.5 - 10,1 569

Market measures – milk premiums, export subsidies Rural development measures – support establishing of dairy farms, purchase of equipment (lactofreezers and milking machines)

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Providing of input

Competitiveness of milk production is largely dependent on the possibility of access to competitive, in terms of price and quality, inputs of fodder and quality diary cows as well as inputs related to hygiene in production and processing.

Improvement of dairy cows nutritionDairy cow nutrition in Serbia is predominantly based on feeding with

concentrated feed (4 %), silage and forage (72%) and pasture (24 %).Characteristic of milk production in Serbia is inadequate utilization of pasture and

production based on combined feeding or feeding with silage and forage.Although there is knowledge regarding the optimal feeding solutions that are

more profitable for producers, this knowledge and opportunities are often not used. Sometimes the reasons for this are in the lack of adequate mechanization and equipment or the lack of knowledge transfer.

Improvement of concentrated feed production

Production of concentrated feed in Serbia is characterised by:

Significant annual fluctuations in price and quality caused by:

- Large year-on-year variations in crop production quantities and crop production areas

- High tariff protection, which prevents price reduction in years with high prices;

Non-competitive market (production, import and sale) of soybean meal;

Increasing the quality of processing in recent years through significant investments by producers of concentrated feed;

Large number of small producers that do not meet the standards and have no continuity regarding quality.

Improvement of the breed genetic pool of dairy cattle

The breed genetic pool of dairy cattle has been noticeably improved in recent years, which is consequence of:

reducing the number of animals, while the selection of animals is better,

support producers to raise high quality breeding heads;

Import of in-calf heifers over past several years.

Trend of improvement of breed structure is occurring as response to market economy conditions where small producers reduce their herds leaving only high quality

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animals (primarily in Central Serbia), and large producers, who have investment means, in order to realize more profitable production have to improve the breed structure of their herd and this is often done by import (primarily in Vojvodina).

The ratio of number of cows and gravid heifers and average milk production per

animal

Geographical distribution and trend of decrease of number of cows and gravid

heifers in the period 2000-2009.

0

50.000

100.000

150.000

200.000

250.000

300.000

05001.0001.5002.0002.5003.0003.5004.0004.500

Number of heds Average yield

0

100

200

300

400

500

600

700

800

900

2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

Total Vojvodina Central Serbia

Milk production

Milk production-main problems

• Decreasing number of a milky cows

• Quality of row milk bellow EU standards specially microbiological quality (bacteria and somatic cell count)

• Inadequate conditions on the farm regarding management of feed for cattle, demands regarding animal health and welfare and manure management

• Low production of milk per cow and poor knowledge of modern technology and farm management

• Poor farm management

• Insufficient incomes and low investment possibilities of farmers

Main trends and characteristics of dairy production in Serbia: Production of milk in Republic of Serbia in the last six years has not significantly

changed, more accurately the quantity of produced milk has increased by 0.5% in 2009 compared to year 2000;

Decrease of milk production is noticeable in Central Serbia while in Vojvodina the production increases.

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Trend of milk production in Serbia and geographical distribution

0

200

400

600

800

1.000

1.200

1.400

2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

Milk production in Central Serbia Milk production in Vojvodina

Collection/purchase of milk by dairies has significantly increased (by 47% compared to year 2000)

The quantity of milk collected/purchased through dairies has stabilized at the level of 825 million litres; with the exception of 2006 year when due supplies to in previous years and inability to export, lower quantities of milk have been collected/purchased.

Total milk production and milk quantities collected/purchased by dairies in million of litres

553 601 699 710 761 813 740 815

1.014 975 881 867 818 789 847 734

0

200

400

600

800

1.000

1.200

1.400

1.600

2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008.

Milk purchased by dairys Home consumption

35,3% 38,1% 44,2% 45,0% 48,2% 50,7% 46,6% 52,6%

64,7% 64,7%64,7% 64,7%

64,7% 64,7%64,7%

64,7%

0%10%20%30%40%50%60%70%80%90%

100%

2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008.

Milk purchased by dairys Home consumption

37

Significantly higher quantities of milk are collected/purchased in low land region than in hilly-mountainous areas (87%/13%), but the index of increase of collection/purchasing by dairies is similar in both regions.

Even though the participation of milk consumed and processed outside the dairies is decreasing, this percentage is still very high and amounts slightly bellow the half of totally produced milk, which is impeding circumstance in regard to control of the safety and quality, but also in regard to CAP harmonization.

Collection/purchase of milk in low land and hilly-mountainous regions

0

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

2000 2001 2002 2003 2004 2005 2006 2007 2008

Collection/purchase of milk in low land Collection/purchase of milk in hilly-mountainous regions

Number of milk producers delivering milk to dairies was reduced by over 2.5 times compared to year 2000, even though the quantity of collected/purchased milk has increased, which means that size of delivering milk farms is considerably increasing as the consequence of market economy conditions and certain dairy policy not to collect milk from small farms.

Number of milk producers and average production per producer in the period 2000 - 2008Year 2000 2001 2002 2003 2004 2005 2006 2007 2008Number of producers 165.000 155.000 140.000 135.000 125.000 92.857 62.679 65.534 71.000Average milk production per farmer delivering milk to dairy plant

9.18 10.63 13.66 14.40 16.68 20.84 30.65 34.05 31.56

There is apparent seasonality in milk collection/purchasing during the year caused by transition to winter feeding (dry summer) and insufficient concentrate feed in nutrition which as consequence has uneven milk collection/purchasing in all months of the year, occurring due to fragmented production and lack of contracted production (significant decrease in purchase of milk is due to the fact that a great number of farmers do not deliver milk to dairies, but process it on the farm for their own needs or for the green market and since 80% of producers own 1 to 3 animals and sale milk to the dairy);

38

Building of modern facilities for keeping livestock, as well as for milk production, had effect on improvement of milk production, but still most of produced milk collected /purchased by dairies, and especially quantities of milk outside of the control system, are non-compliant not only to hygiene standards, but also profitability because of significant losses induced by inadequate housing conditions in which dairy animals are kept.

Increase of milk production

Increase of production can be achieved primarily by increasing competitiveness of milk and dairy products in regard to their price and quality, which will reduce the price, and at the same time comply with quality conditions for export and in this way enable increased domestic demand.

Domestic consumption depends on the purchasing power of the population and of milk and dairy products price. Export of milk produced in Serbia is limited to the region included in CEFTA agreement, due to:

Non-compliance to quality and food safety standards for export to other markets;

Absence of interest by dairies to export, because they can realize better price on domestic market;

Prices of dairy products are not competitive even though the price of milk collected/purchased is very competitive.

Improvement of safety and quality of milk on farms

Quality of produced milk is staying behind the quality of milk in EU and currently only about 40% of produced milk is milk of extra or I class/category that is allowed by EU regulations. Losses due to absence of improvement of milk quality include the following inconveniences:

Dairy industry is not capable to produce high quality products;

There is no protection against competition from import;

Inability to export.

Collection/purchase of milk per months in 2008

0100002000030000400005000060000700008000090000

39

Milk processing - main problems

• Majority are dairies with medium processing capacity

• High processing capacity level dairies are 10% of a total number and they make 90% of total processing capacities

• Inadequate implementation of standards at small and medium capacity dairies

• Inexistence of collection points which fulfils necessary hygienic and sanitary standardsThere are 201 dairies that currently operate in Serbia, although the number of

registered dairies is much higher. Most of them are medium dairies, whereas 10% of total number of dairies is large industrial facilities. However, although the share of small handicraft dairies is high, they cover only 4% of installed capacities, whereas medium dairy plants cover approximately 6% of installed processing capacities in milk processing. At the same time, industrial dairies make 90% of processing capacities.

Capacities and exploitation/utilization of dairy plant capacities

Share in number and capacity according to type of dairies

1.140.000

1.160.000

1.180.000

1.200.000

1.220.000

1.240.000

1.260.000

1.280.000

1.300.000

2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008.0

10

20

30

40

50

60

70

инс т алирани капацит ет и ис коришћенос т %

Utilization of capacities is approximately 60%, but decrease of number of dairy plants can be expected, and only those capable of realizing the profit either by increasing the production volume and/or product quality will survive, and profit will ensure sufficient means for them to be able to harmonize with EU standards, and in this way remain on the market.

In Serbia, only 270 facilities are registered for milk processing on the farm/household.Market share of certain dairy plants in SerbiaNo Dairy Share in collection of milk

1 DANUBE FOOD GROUPS (3 dairy plants) 47.40%Imlek, Impaz and Zemun 31.20%Dairy Novi Sad 8.20%Dairy Subotica 8.00%

40

2 Dairy Sabac 5.80%

3 Somboled 5.40%

4 Mlekoprodukt, Zrenjanin 3.90%

5-201

Other 35.7%

Prices

Analysis of milk prices in Serbia showed that failure of the market to provide regular distribution of income occurs due to following reasons:

Price of collected/purchased milk in Serbia is the lowest in the entire region;

Retail prices are the highest in the region. For instance, price of sterilized milk in Serbia is by several tens of percents higher than in the region, moreover, milk price of Serbian producers is lower in the region than in Serbia;

There is great difference between the lowest and the highest price of milk collected/purchased;

Trend of increase of retail milk price is considerably greater than the trend of increase of price of collected milk;

There is considerable non-market difference between prices of milk in different regions, types of retail facilities and different producers.

Trade and marketing

Significant amount of milk (about 49%) which is directly utilized is out of the distribution through retail chains. Such milk is cheaper than milk bought in retail stores and has higher amount of milk fat, but is usually less quality in terms of hygiene and its use in non-pasteurized condition often leads to diseases. It is necessary to reduce direct consumption of non-pasteurized milk, which can be achieved through:

Establishment of the dairy market which will reduce the cost of processing;

Intensified control in the implementation of the legislations related to food safety;

Education and raising of the level of awareness on the hazards of uncontrolled use of milk.

Trade in milk and dairy products is limited due to difficulties in transportation, especially of raw milk. This fact facilitates local dairies to conquer part of the market by collecting milk from local producers, pasteurizing it and selling to local retail stores, which usually don’t have necessary conditions for adequate storing of milk. Even though it is evident that dairies will operate in increasingly difficult conditions, currently it is significant that they are covering this part of the market, since large producers are not interested to organize sale, especially of pasteurized milk, on more distant markets.

Import and export values are in constant growth, but import grows faster than export. Signing of the Stabilisation and Association Agreement, these trends are likely to grow faster due to lowering tariffs on import of EU originating products. It is expected

41

that consumers will get cheaper products but trade balance will get worse since the for most of the import comes from EU countries.

Dynamics of trade liberalization of milk and dairy products within Agreement on Stabilization and Accession

Consumption

Even though the milk consumption has constantly been increasing since 2000, it is still at very low level. Total production and consumption of milk per capita in 2008 was 207 liters. This is exceptionally low compared to EU and surrounding countries. For instance, in Denmark, 897 litres of milk per capita is consumed, and in Bulgaria 283 liters.

In addition to consumption, specificity is share of sterilized-long lasting milk in total consumption. Whereas in other countries mainly pasteurized milk (shortly pasteurized milk) is used in consumption, share of sterilized-long lasting milk is higher in Serbia by several percents – it is 38% and constantly increasing. For instance, production of sterilized - long lasting milk has increased over last seven year from 53 million liters to 105 million liters, whereas the production of pasteurized milk has remained at the same level. Such consumption structure is result of the company’s business strategy whose share in milk collection is 47% and 85% in production of sterilized - long lasting milk to produce and promote long lasting milk.

Comparison of production of certain groups of dairy products in the period 2000/2007. in

litres

Size and trends in cheese production, according to their types in the period

2000/2007. in litres

42

II SECTOR ANALYSIS – CEREAL / GRAIN

Importance and main trends

Most of the agricultural land in Serbia is used for production of grain crops. This production (wheat, barley, rye, oats, corn, millet and sorghum) usually takes approximately 60% of total sown surfaces. Corn is the most present crop with over 1.2 million sowed hectares, whereas wheat takes the second place with approx. 500.000 hectares. Reasons for this are following:

Significant domestic demand for flour used in human consumption, as well as corn as input in production of milk and meat.

Low level of necessary investments in production, machines, labour, etc.

Developed market chains and ensured purchasing.

Low level of investments in case of storing of grains on own farms/holdings (storing of grain in barns) which enables high consumption in small agricultural producers who produce for self-subsistence or local demand.

Favourable climatic conditions for this production.

Grains are good as pre-crops.

Because of great surfaces under these crops, grains are considered as cultures of the highest value of primary production (about billion Euros annually), which is additionally increased through processing.

Market chain in grain production and trade Market chain in grain production is short and usually ends on the own holding, near by feed mill or feed factory. Over the period of last five years, of total produced quantities

43

approx. 17% of wheat and 10% of corn have been exported. There are few innovations in production and sale; price is very seasonal and depending on the balance needs, and competitiveness in regard to price and quality. Market chain is additionally burdened by barter exchange (in sense of giving commercial/mercantile goods in exchange for production inputs according to previously established parities), which introduces additional uncertainty into profit distribution because of non-transparent expression of prices in barter contracts. Large portion of consumption is done through informal trade channels, which is not fair to other producers on one hand and present tax voidance on the other.

Providing inputsProblems which are partially related to low yield is use of inadequate inputs (price and quality), but also producers who do not use market potential.. Domestic seed is used for almost all areas, since it is very difficult to find seed from foreign producers. Serbian market for seed retail is relatively small (only 250.000 ha are under declared seed). The other pat of the problem is the habit of producers to use non-declared wheat seed for sowing. Such seed is mainly used by small producers who are engaged in extensive production of wheat (low investments/low yield). In Serbia it is used 50% of non declared seed. Main reasons for this are:

1. High price of wheat seed.

2. Poor quality of additional treatment of wheat seed.

Additional problem is low use of mineral fertilizers and manure, which has lower yield as a result. Main reasons for insufficient use of fertilizers are:

1. growing price of the fertilizers, which is not followed by growing price of final product

2. weaker purchasing power of producers

3. doubts in quality of produced and distributed fertilizers

Production

Serbia is important producer of grains at the European level and the greatest producer in the region. In regard to agricultural areas under corn, Serbia is on the 6th place in Europe, and in regard to areas under wheat, on 12th place. Trends accompanying the grain production are in general stable with the exception of decrease of agricultural land under wheat as consequence of significant increase of areas under more profitable industrial crops (soy bean, sunflower, sugar beet), , as well as lack of government support which wheat traditionally enjoyed.

Corn is grown in Republic of Serbia in average on area of approx. 1.200.000 hectares, with average yield in the previous eight years of around 4,4 t/ha. In terms of corn production Serbia is takes 15th place in the World. Average yield of wheat in Serbia is 3,5 t/ha.

44

Area and average yields of major corn producers in EU

Area and average yields of major wheat producers in EU

However, in regard to average grain yields Serbia is among European countries with the lowest values. Especially disturbing is the fact that wheat yield trend has been in decline over period of 20 years, contrary to most of European countries where increase in yield has been registered.

Average yields and yield trend for wheat and corn in the period 1990-2009.

Average yields and yield trend for wheat and corn in the period 2000-2009.

2

3

4

5

6

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Wheat Corn Linear (Corn) Linear (Wheat)

2

3

4

5

6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Wheat Corn Linear (Corn) Linear (Wheat)

Reasons and causes for inadequate yields, besides present climatic and soil conditions of Serbia for production of grains, are the following:

45

Inability of domestic seed companies to respond to requirements relating to breeding for resistance (significant role in increase of corn yield in past few years can be attributed to possibility for producers to get hybrids of higher quality).

Lack of means and low level of investment into production which mainly reflects on:

Insufficient utilization of inputs (fertilizer and plant protection preparations),

Utilization of old and inadequate machines, Insufficient knowledge in agriculture.

Because of insufficiently developed land market and great number of land owners, and therefore small land properties, many apply the principle of “low investments” in growing of grains.

Due to sowing in so called “Balkan two-year rotation” pre-sowing treatment of soil is poor. Because of late harvesting of corn or sugar beet, wheat sowing is carried out late, quickly and often on poorly prepared soil (data on five year average show that in Serbia only 47% of areas under wheat are sown within agro technical optimal period).

Family agricultural farms/holdings are mainly engaged in production of grains (85% according to Register of agricultural holdings, or 82% according to Republic Bureau of Statistics). Wheat is sown on approximately same surfaces in Central Serbia and Autonomous Province of Vojvodina, but considering that average yields in Vojvodina are somewhat higher, distribution of production according to quantities is the following: 45% Central Serbia, and 55% Autonomous Province of Vojvodina. Sowed areas and average corn yields are higher in Vojvodina where corn is grown on area of 660.000 hectares, which is 56% of total sowed land. In 2007, on mentioned area, 68% of total corn production was realized, whereas in Central Serbia, on area of 542.000 ha, 32% of total production in Republic of Serbia was realized. Storing and processing

Grain storage capacities are approx. 3.65 million tones and this is certainly not a limiting factor in regard to receiving of market surpluses of wheat, corn and soybean. It can be concluded that every new harvested crops can be stored with average transitional supplies/stocks. Most of the storage capacities, approx. 71% of total, are located on the territory of Autonomous Province of Vojvodina. In Central Serbia, market chain is extremely short and usually ends on the farm, where grains are used for human consumption or as livestock feed, or delivered to nearby feed mill of low capacity.

46

According to types of storages, in Serbia mainly silos are present, whereas 10.5% are floor storages/warehouses.

Annually approximately 1.300.000 tones of wheat are stored, approx. 300.000 tons of soy bean, and the rest capacity is used for storing of corn. Storing of corn is done mainly on private farms/agricultural holdings in facilities where corn is subjected to natural drying. Even though the quantity of artificially dried and stored corn is increasing, these quantities are negligible/minor in relation to total quantity and often are equivalent to quantities being exported of purchased by some of the larger factories of concentrated livestock feed.

Price

Comparison of domestic grain prices and prices registered on grain stock market in Budapest, mutual dependence is noticeable which reflects in the fact that our grain prices in principle are following the prices on the Budapest grain stock market, with certain, small time difference. Market serves to pass the information about the consumers and their willingness to pay for certain types and qualities of product. Price is the key of this information. However, if there is no difference in price paid for different qualities at the farm level, then agricultural producers will have no incentive to offer market quality. Therefore it is important, besides basic analyses, to perform other quality analyses and to adjust the price to quality grades/groups. In this way producers will also be interested in production of higher quality of wheat. Increase of grain prices which occurred in year 2007 is the fist increase of that magnitude since year 1973. This increase has raised expectations of producers that this trend will continue or at least that prices will remain at the same level. Reasons for these higher prices can be divided into temporary/short term (bad weather, small stocks and panic) and long term (production of bio fuel and weak USD), and accordingly, predictions by FAO

Quantities of stored wheat in different years

1,098

1,182

1,256

1,346

1,000

1,200

1,400

1,600

2005 2006 2007 2008 2009

47

and OECD are that prices will continue to decrease since short term reasons have been eliminated, and long term are also going in the same direction.

Long term trend of real wheat prices and prediction until year 2017.

Long term trend of real corn prices and prediction until year 2017.

Sale and trade

Serbia has long tradition of grain sale chains, but they differ significantly in regard to crops (wheat and corn), and also geographically (Vojvodina and Central Serbia).

Vojvodina Central SerbiaWheat Almost total quantity is delivered to

feed mill after harvesting, either just for storing or it is sold.

Producers enter the barter arrangements through cooperatives and large share of production they give back for received inputs.

Producers by storing wheat at certain location decide to whom they will sell it, because the system is established in the way that wheat is only coming in and not going out.

Greater quantities of harvested wheat are stored on farms and gradually sold to feed mills.

Producers finance them selves the production and are not bound by contract.

Because they are not bound by contract and they usually store small quantities in their home storages, producers have the possibility to decide to whom and when they are going to sell the wheat.

Corn Significant increase of the quantities artificially dried and stored after harvesting.

Almost all quantities are stored on farms/holdings and rarely dried artificially or stored elsewhere.

48

There is no practice of barter arrangements, nor contracting of production before harvesting, but producers finance their production them selves.

Certain quantities (approx. 5% of total produced quantities) are bought by exporters and producers of livestock feed are traded through Commodity stock market in Novi Sad.

One of the main problems in wheat trade is non-transparent determination of price through barter arrangements. Parity ratios determined represent values (wheat seed and fertilizer for mercantile wheat) and not money value which would contain also price of capital/equity, but also enable that prices are determined post harvest. In such arrangements buyer is secured through high parity ratios, and often hidden/concealed interest rate amounts to several tens of percents. Serbia rarely imports wheat, except in years when production fails seriously in two consecutive years, and there are no transitional stocks (year 2004). Main export markets are member countries of CEFTA agreement, where annually minimum of approx. 100.000 tons of wheat are exported. Export to market of EU countries depends not only on price competitiveness of domestic wheat but also on demand, i.e. production in EU. For instance, during 2007 almost 250.000 tons was exported to EU market, since EU member countries had significant shortages, whereas in 2008 there was no export. Average planted area under wheat and export to countries members of CEFTA in 2006/07 fiscal year.

Country Areaкм2 Population

Average planted area

(ha)

Export of wheat in t

Import of wheat in t

Albania 28.748 3.581.655 132.000 200.000B and H 51.209 3.842.537 114.000 150.000Macedonia 25.713 2.071.210 115.000 150.000Moldavia 33.843 4.431.570 320.000Croatia 56.542 4.494.749 240.000 50.000Montenegro 13.812 620.145 15.000 50.000Serbia 78.449 8.158.398 614.000 250.000*UNMIK, Kosovo

10.912 1.989.000 78.000 100.000

Considering that Republic of Serbia takes significant place in production of corn, in years when corn production considerably exceeds domestic demand, export of corn in total export of agricultural products from Serbia takes the first place by the quantity exported, and second and third place by value realized. To CEFTA member countries mainly seed but also mercantile corn is exported. In EU countries mainly mercantile corn is exported.

Wheat export destinations in the period 2003 – 2009.

Corn export destinations in the period 2003 – 2009.

49

0%

20%

40%

60%

80%

100%

2003 2004 2005 2006 2007 2008 2009

ЕУ ЦЕФТА ОСТАЛИ

0%

20%

40%

60%

80%

100%

2003 2004 2005 2006 2007 2008 2009

ЕУ ЦЕФТА ОСТАЛИ

Agreement on Stabilization and Accession stipulates that upon enforcement of the Agreement, customs tariffs for certain commodities being imported from EU will be reduced to 0%: wheat seed and ordinary durum wheat, ordinary wheat, ordinary rye seed and ordinary rye, oats seed and ordinary oats and barley seed. Consumption

Grains consumption registers increase in global scale, as consequence of increased demand caused by changes in the nutrition of population and development of bio-fuel industry. Total consumption is 1.600.000 tons of wheat or 133.000 tons per month. In order for wheat market to function normally, i.e. to achieve balance between demand and supply, reserves of wheat are necessary in the quantity of at least three month consumption which is 400.000 tons. From presented data it can be concluded that Serbia need production of at least 2.000.000 tons of wheat. Contrary to production of wheat which is subject to oscillations from year to year, consumption of wheat is stable and consists of consumption for new sowing, livestock and human nutrition. Domestic consumption of corn varies between 4.5 and 5.3 million tons and demand is satisfied from national supply.

III SECTOR ANALYSIS – OIL CROPS

Importance and main trendsProduction of oil crop cultures is increasing in the world from year to year, which is

caused by their utilization in production of bio-renewable fuel, but also increased utilization of oils of plant origin in nutrition, to the detriment of fats of animal origin. In this way, production of oil, besides already existing multiple significance in nutrition gains importance as raw material for production of energy and means for protection of the environment.

- Edible oil is important nutritional factor of consumption, and at the same time food security of a country.

50

- Soybean and sunflower meal and cakes made from oil plants as high protein feeds represent important ingredient in livestock feed and basis for development of livestock production, production of milk and meat.

- Production of bio-fuel on basis of oil plants is important development opportunity of agriculture, processing industry, but, from the aspect of utilization, important factor in environment protection.

- Cold extracted oil of oil crops, especially oil pumpkin are used more and more as medicinal preparation because of the vitamin composition, which represents export opportunity for this sector considering that the demand for this product in Europe is increasing.

Market chain in production of oil crops Serbia is one of the largest producers of oil crops in Europe – soybean in the first

five, and sunflower in the first seven producers. The effect of the oil crops market in the region (Russian Federation, Ukraine, Romania, Bulgaria and Hungary) is noticeable in Serbia also in sense of reaching decisions about production and forming of the prices.

About 26.000 family farms/holdings are engaged in production of soybean in Serbia and about 220 legal entities, about 22.000 family farms/holdings are engaged in production of sunflower and about 190 legal entities, according to the Register of agricultural holdings. In regard to production of oil rape, interest of producers is still at very low level – approx. 660 family farms-holdings are engaged in production of this oil crop and about 70 legal entities. Production of oil pumpkin is at the beginning and according to the records of the Register of agricultural holdings about 600 physical entities are engaged in this production, and only eight legal entities.

Providing of the input Important role in production of all field crops is selection of adequate cultivar, i.e.

hybrid, use of declared seed for sowing/planting, use of mineral fertilizer and pesticides in recommended quantities. Producers of oil crops respect these recommendations considering that the realized yields and quality are at the European level.

In assortment, mostly dominated are hybrids of domestic selection companies, while in recent years more and more present are also the varieties and hybrids, whose production is organized by local processors, especially sunflower but also oilseed rape. Liberalization of import tariffs under the SAA on imports of sunflower seed decreased, from an initial 20% to 16% in 2009. year, ie 14% in 2010. year, and at the end of the transitional period (2014.godine) duty is reduced to 0%, which will lead to a strengthening of competition in this sector and raising the quality of seeds. The present production of soybean varieties are purely domestic and without genetic modification, in accordance with the Law on Genetically Modified Organisms. As in most countries and in Serbia, manufacturers do not buy seeds of inbred plants each year, but made the selection from their own mercantile production.

Like other crops, one of the limiting factors of production growth is utilized quantities of mineral fertilizer, time of application and the quality of fertilizer. Therefore it is necessary to improve the quality, and fertilizer and other production inputs should be made available to producers.

51

Production of oil crop culturesIn general, production trend and trend of planted areas is positive. Sunflower

takes the first position, but the most significant increase is recorded for production of soybean and rape. Interest for growing of sunflower is in slight decline because of unfavourable climatic conditions in the recent years, unpredictable prices and policies. Soybean has been more resistant to unfavourable climatic conditions, although soybean yield has been varying depending on the degree of drought during vegetation period. Rape is extremely demanding in regard to soil moisture degree during basic treatment and pre-sowing preparation. However, interest for this production in our country has increased with introduction of new cultivars and hybrids to our market which enable later sowing/planting, i.e. better resistance during winter.

Production of soybean in Serbia has been constantly increasing from the mid of previous decade (from 300.000 to 400.000 tons), so in period from 2001 to 2009 areas under this industrial plant have stabilized on over 130.000-150.000 hectares, with achieved yield of 1.20 to 2.80 t/ha and annual production of oil from 29.000 to 75.000 tons.

Since 2005, due to negative price trends on the global market and increase of the price of corn, trend in sunflower production turned negative, not only in Serbia but also in surrounding countries. In situation when the price of edible oil is depressed and competition in domestic and international supply of oil very strong, production of sunflower is struggling to find solution for increase of production. In recent years it varied within limits of 370.000 to 470.000 tons with the exception of year 2007 when only 250.000 tons were produced.

From year to year rape is planted on greater areas in Serbia. Reasons for this are increase of production of bio-fuel induced by increase of the oil prices on global market and goals set by EU pertaining to utilization of bio-fuel. Therefore the interest for export of seed and raw rape oil to EU countries is increasing. Production varied mainly from 3.000 to 8.000 tons, and in period from 2007 to 2009 it was 30.000 – 45.000 tons.

Area and trend of growth of area under soybean, sunflower and rape (in ha)

52

0

50,000

100,000

150,000

200,000

250,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 20090

4,000

8,000

12,000

16,000

20,000

Rap

esee

d ar

ea

Sunflower Soybean RapeseedLinear (Rapeseed) Linear (Sunflower) Linear (Soybean)

In production of oil crops several new trends can be observed: Stabilization and increase of production of soybean, contrary to eighties and

nineties when yields and land area under this crop varied from year to year; Increase of land area/surface on which rape was sowed/planted, however these are

still moderate areas compared to EU countries; Trend of increase of average yields, especially soybean; Trend of decrease of number of sunflower producers and increase of average

sowed/planted land areas per farm/holding.

Oil crop cultures, especially sunflower, are rare cultures where higher average yields are achieved in Serbia compared to EU countries, due to long tradition and good natural conditions for production. This fact however does not reflect on entire production/sale chain, so even though we have good yields with relatively a low investment, our price is not competitive in production of oil. Advantages gained in production of sunflower are lost in processing.

Trend of average yields of oil crops in Serbia in the period 2000 – 2009.

Average yields of oil crops compared to European countries and EU (three year average)

53

11.21.41.61.8

22.22.42.62.8

3

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Soybean SunflowerRapeseed Linear (Soybean)Linear (Sunflower) Linear (Rapeseed)

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50

Soybean

Sunflower

Rapeseed

Serbia Europe EU

Production of soybean and sunflower is predominantly carried out on family farms/holdings: 72% of land under soybean and 77% under sunflower are family farms/holdings. Situation is contrary in case of rape. Only 2.970 ha are cultivated by physical entities (25%) and 8.867 ha by legal entities (75%). Reason for this is in specific requirements of the mechanization.

The largest land areas under oil crops are located in Vojvodina (94%), because the climatic conditions and soil conditions are the best, processing facilities are located there also, and entire network of suppliers and buyers. Also, in Vojvodina the trend of enlargement of land properties is much faster than in Central Serbia, which reflects positively on field crop production.

Storing and processing

Nine industrial facilities are engaged in processing of oil crops, they are also engaged in organized primary production.

There are total of eight facilities for cold extraction of oils, which are also organizing the production. Besides these facilities there are numerous extruders operating within cooperatives and agricultural companies, used for production of livestock feed from soybean, and their capacities are not recorded by the agricultural inspection.

54

Participation of Family farms and companies in sowing/planting of oil crops

0%10%20%30%40%50%60%70%80%90%

100%

Soybean Sunflower Rapeseed

Householdings Companies

Considering that in recent years a growing interest in the production of soybeans, there are some market surpluses, which this year runs on the "Commodity exchange", Novi Sad.

Great industrial facilities are mainly located in Vojvodina- six oil plants, and in the Central Serbia there are three.

Processing facilities are used alternatively, i.e. seven oil plants have the possibility for processing of soybean, sunflower and rape during production year, alternating, and two process only soybean. Total installed processing capacities in Serbia, based on data obtained from the "Business Community industrial plant" is 918,000 tons of sunflower, soybeans and 745,000 tons, or 588,000 tons of rapeseed.

Installed capacities in different plants for production of oil (000 t/280 work days)

0 50,000 100,000 150,000 200,000 250,000 300,000

"Dijamant", Zrenjanin

"Soyaprotein", Becej

"Viсtoria oil", Sid

"Vital", Vrbas

"Sunce", Sombor

"Banat", Nova Crnja

"Dunavka", Veliko Gradiste

"Plima M", Krusevac

"Bioprotein", Obrenovac

Sunflower Soybean Rapeseed

Average utilization of installed processing capacities in recent years varies between 28.2% and 68.75%. Decline was recorded in year 2007 because of the drought, and significantly decreased land surfaces under sunflower.

Increase of production of soybean was accompanied by the increase of the processing capacities, especially on small farms/holdings and cooperatives which bought extruders and prepared them selves livestock feed. Unused processing capacities for processing of rape impose great problem in situation when there are no regulations referring to production and trade/circulation of bio-fuel, which will be regulated by the Law on energy. Until that time, capacities of the oil plant "Victoria oil", Šid will still be used for processing for export of raw oil.

55

Purchasing of raw material by companies is done in accordance to their capacities. So in year 2008, almost two third of the produced soybean was bought off/purchased by company „Sojaprotein“, Bečej, while the purchase of sunflower dominated the three companies - Invej Belgrade (comprising oil factory in Vrbas and Sombor), Victoria Oil, "Sid

and" Diamond ", Zrenjanin .Although there is a great potential to produce oil in Serbia and Serbia is very

competitive in the production of sunflower and soybean in relation to the EU countries, we failed to be competitive in the production of oil. The reasons should be sought in the oversized capacity of factories and the apparent lack of long-term vision of the new owners of the factory about operations in the oil sector, which should lead to reduced production.Quantities of soybean bought in 2008 by different plants

Quantities of sunflower bought in 2008 by plants

2%

0%

2%13%

4%13%

66%

"Dijamant", Zrenjanin

"Soyaprotein", Becej

"Invej", Vrbas, Sombor

"Banat", Nova Crnja

"Dunavka", VelikoGradisteOthers

"Bioprotein", Obrenovac

1% 4%

4%

12%

28%

24%

27%

"Dijamant", Zrenjanin

"Viktoria oil", Sid

"Invej", Vrbas, Sombor

"Banat", Nova Crnja

"Dunavka", VelikoGradisteOthers

"Plima M", Krusevac

Prices

Prices for oil crops are formed in relation to prices present in the region. Last years, during the contracting production between the oil mill, contractors and primary producers, there is no direct outstanding purchase price, only parity on the secured amount of inputs for production.

Prices are formed by taking into account the estimated price trend in the international market and in the environment, and often the Hungarian Futures for

56

Utilization of capacities in %

28,82%41,49% 44,64%

54,24%64,66% 61,52% 68,75%

46,27%57,36%

68,91%

0,00%10,00%20,00%30,00%40,00%50,00%60,00%70,00%80,00%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

sunflower and rapeseed and Chicago Futures for soybeans, as well as on the basis assessment of crop in the Black Sea region for soybean and sunflower (Russia, Ukraine, Romania, Bulgaria), and in the EU for rapeseed.

Ratio between buying price of sunflower and retail price of oil

Trend of oil prices in Serbia and in the World

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

2003 2004 2005 2006 2007 2008 20090.00%

50.00%

100.00%

150.00%

200.00%

250.00%

Averige annual prices for edible oilAverige annual purchase prices for sunflowerOil index 2003=100Sunflower index 2003=100

0500

1000150020002500300035004000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Edible oil (Serbia-retail)Sunflower oil (Roterdam)

In the course of redemption comes to purchase price adjustments in accordance with the domestic supply and demand. Domestic processing industry, because of production that is not profitable, are not able to respond by increasing the purchase price at the time of low bid, in so far as it would be suited for the primary producers. A large number of intermediaries between producer and consumer of edible oils leads to an increase in trade costs, and dissatisfaction with the price to end consumers.Trade and marketing

Production of oil crops in Serbia is mainly negotiated at the beginning of calendar year. Oil plants sign contracts with producers on joint production, and in these contracts producers are obligated to deliver the raw material, and in return they can receive from the oil plant, according to parity ratios, seed material, mineral fertilizer, plant protection preparations, even machinery. Contracts are in template form and conditions similar in all oil plants. However, in recent years, there is ongoing struggle for filling of capacities, i.e. purchasing/buying as much of the raw material as possible, therefore it can occur that some oil pant offers higher minimum price in the contract, as well as other advantages and privileges.

Contracted land surface depends on the capacity of the oil plant. For instance, the greatest surfaces are contracted by „Sojaprotein“, Bečej as the largest facility for soybean processing on the Balkan penisula, the greatest surfaces under sunflower are contracted by „Dijamant“, Zrenjanin, and the greatest surfaces under rape by „Victoria oil“, Šid, as single producer of bio-fuel.

57

Based on the export value, it can be concluded that the most important export products manufactured from oil crops are soybean oil and sunflower oil.

Foreign trade in soybean and soybean products during 2009 in mill. US$

Foreign trade in sunflower and sunflower products during 2009 in mill. US$

12.789.78

2.31

28.23

3.24

1.11

6.38

1.84

23.33

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

Exports Imports

Soybean

Soybean oil

Soybean flour and grits

Soybean texturates

Soymeal

13.709.16

8.90

72.72

7.55

7.03

19.71

0.560.00

20.00

40.00

60.00

80.00

100.00

120.00

Exports Imports

Sunflower

Sunflower oil

Margarine

Sunflower meal

In 2009, 33.177 tons of soybean oil was exported, in the value of 28.232.332$, which was 1.45% of total export of agricultural products. In the same period 75.742 tons of sunflower oil was exported, of which 32.445 tons of refined oil in the value of 72.715.113 $, and 38.321.938 $ for refined oil. Share of sunflower oil in the value of total export of agricultural products was 3.74%.

The most important import product made of oil crops is, without doubt, soybean meal. In year 2007, 33.303 tons were imported, in the value of 12.780.115 $, which is 0.98% of total import of agricultural products.

In recent years (2006 and 2007) also the import of sunflower oil was registered. This occurred as consequence of two things: firstly, the total produced quantities of sunflower decreased, which lead to reduced utilization of processing capacities (for raw oil), and customs-free import of refined oil by decision of the Government, and the second is change in the ownership of some of the big factories and poor quality of work of the raw material divisions/departments in factories which failed to secure and organize contracted production.

The high purchase price of soybean and sunflower in 2008 year in relation to the environment, and the prices of finished products in the international market, led to the import of soybeans in 2009 year with the South American continent in the unusual quantity of 48,119 tons, which led to a levelling of prices for raw materials processing.For the same reason there has been importing sunflower seeds in the quantity of 33,677 tons. So there was a significant decrease in imports of soybean meal (half) compared to 2008. year, when it amounted to 52,409 tons. At the same time the export of sunflower meal marked increase compared to 2008 year of up to 147.5%.

Foreign trade in rape products has no financial significance. However, it should be mentioned that export of oil manufactured from rape is decreasing with

58

announcements for opening of the facility for production of bio-fuel in our country, so the continuation of this trend is expected.

Soybean oil is product mainly exported to EU countries, mainly to Slovenia, whereas refined sunflower oil is mainly exported to CEFTA countries, primarily because these are traditional markets for export of our products, former SFRY republics. Conquering of new markets is still in the future, since our price is mostly non-competitive on EU market.

In regard to import of soybean meal, the largest quantities come from Brazil and Argentina, and it is genetically modified soybean, on license regime.Regulations Amending the Rules of the marketing of genetically modified organisms and products of genetically modified organisms, which was announced in late 2008. , entered into force on 06th 05.2009. The announcement of this measure, which provides for the prohibition of imports of soy shot with more than 0.9% impurity content originating from genetically modified soybeans, has led to a jump in imports of soy shot in late 2008. year.

Consumption

Sunflower oil is one of the strategic products in regard to nutritional security of the population. After constant increase of the consumption of sunflower oil, in 2005 a drop in consumption was recorded as consequence of the increase of the price of edible oil. With gradual improvement of standards, consumption is recovering until the phenomena of the world economic crisis (2008th), whose consequences suffer our economy and standard of the population.

In regard to consumption of soybean products, it has to be pointed out that importance of soybean is in the wide use of the products of its processing, the most important one being soybean meal, which represents very important protein source in livestock feeds. Besides soybean meal, also soybean oil is produced, with application in other sectors of food industry – oil industry, production of margarine, conditory industry, industry of ready-made food, and other sectors of industry (e.g. chemical industry). In stated sectors of food industry also soybean grits and flour are used, and soybean texturates are mainly used in meat industry.

Rape seed oil is not widely applied and used in Serbia in nutritional purposes, except as supplement to certain food products, mainly as alternative to sunflower oil.

59

V SECTOR ANALYSIS – PRODUCTION OF MEAT Importance and main trendsProduction of meat has long tradition in Serbia and some of the greatest successes of Serbia’s agriculture are associated with meat production. However, a lot has changed since the time of export of pigs before the Second World War or export of beef during the time of SFRY, in the structure and way of production, as well as functioning of the market in Serbia. Also, the map of world producers and consumers has changed. Production of meat in Serbia today is crowded with structural problems and constant negative trends have been recorded for several decades. Already non-competitive current production will face additional challenges due to forthcoming liberalization processes within the Agreement on stabilization and accession and WTO.

Market chain in meat production and sale Serbia is the largest producer, exporter and consumer of all types of meat within CEFTA countries. However, this production is moderate compared to EU production, so production of pig meat in Serbia is 7 times smaller than production in Denmark, and cattle production is by almost 5 times smaller compared to the Netherlands. In regard to productivity, livestock production in Serbia has been lagging behind majority of European countries, and this is manifested primarily in low number of animal units per ha of agricultural land. For instance, total number of animal units per 100 ha of agricultural area in Republic of Serbia in year 2009 was 30, in Italy 78, Austria 78, Switzerland 96, Denmark 172, Belgium 275 and the Netherlands 335. Even though production of pig meat is the largest in regard to quantities, cattle production has the highest share in total livestock production in Serbia, because of higher price of beef and higher value of animals, as well as the fact that many heads of cattle are also used for production of milk.

Share of certain productions in total value of livestock production

Share of quantities of meat produced per major meat types

Market chain in production of meat is largely unorganized and short, since great share of the production ends up on the farm or local markets – official or unofficial. Most of the production is bought through slaughterhouses, directly or through intermediaries, and in this way the chain is extended and additional value of the product is realized. Small quantities, either as carcass sides or processed products are being exported to CEFTA countries (mainly to Bosnia and Herzegovina, Macedonia and Montenegro). Main reason for short market chain is in the fact that significant share of the production is in the hands of small producers with predominantly extensive production but competitive in regard to the price (practically there is no cost of production of poultry wondering in the yards or pigs fed by food remains) and they take over significant share of consumption and take away the market from market producers. The greatest share of production of meat is realized on family farms – market producers with 10 cattle, about 100 pigs or 1000 chickens in fattening. There are also very well organized big producers with production of fattening animals on their own farms, and/or organized fattening on cooperative farms. In general, three groups of meat producers can be distinguished, as well as different production-sale market chains, and different policy priorities:

Small producers for self-subsistence Market producers Big company farms

They are not participating in official channels of meat sale, they use it in the purpose of self-subsistence or sell small quantities of live animals or meat “from their home”. They are important from the aspect of nutritional security dangerous in regard to food safety and spreading of diseases. With the implementation of more demanding standards and controls, this group of producers will have to decide either to remain in the production and enter official channels which guarantee food safety or abandon the production in this sector.

Group of producers who hold the greatest share of the production, they sell their products most often to registered slaughterhouses directly or through intermediaries. They prepare their own livestock food and are engaged in livestock and field crop production. They are the most important group and should be the priority of the agricultural policy in order to be allowed to develop and grow.

Companies engaged in production of livestock food, processing and sale of meat, tent to establish vertical associations in order to reduce the effect of market and price oscillations which are typical in production of meat. Also, some companies have recognized the opportunity to generate profit in production of meat and mainly through process of privatization have acquired production resources.

Medium market producers, even though they are behind big companies in regard to technology and size of farm, and behind small producers in regard to their total number, represent the most important group, from the point of view of agricultural policy, since most of the production of all types of meat takes place on these farms – beef, pork, poultry and sheep meat.

2

Number of registered producers according to the capacity for cattle fattening

Relation between number of registered producers and number of animals

according to the size of farm

Providing of inputs

Competitiveness in production of meat is greatly influenced by the possibility to have access to high quality livestock food and genetic material, as well as inputs related to hygiene and energy, closely associated to quality of facility where production takes place.

Breed structure/genetic pool

Problem in production of meat is in inadequate breed genetic pool of the main population and main flocks, due to:

Market closed for import (first because of economic sanctions, and afterwards because of numerous non-customs barriers imposed by our Government),

Inadequate selection activities, especially on family farms/holdings,

Structure of producers and difficulties relating to selection activity on small farm/holding,

Lack of outside competition, because of high customs tariffs/duties, to exhibit pressure on producers to realize production of better quality and price.

Production of beef is based mostly on domestic Spotted cattle of Simmental type (56,6%) and Simmental cattle (25,3%), and to some extent also on Holstein-Friesian cattle (6,5%) and other breeds and crosses (17,8%). Although the quality of domestic cattle of Simmental type represents strength and not weakness of our meat production, by import of Simmental cattle lately breed structure has been improved for both production purposes, however, this improvement is associated mainly with farms/holdings which imported high quality breeding material, and this is why we cannot speak of general trend of improvement of cattle breed structure in Republic of Serbia.

3

Breed structure of pigs used for breeding consists mainly (58%) of F1 and F2 generation crosses of pure breeds. There are also pigs of Swedish Landrace (30–34%), Large Yorkshire (3–5%), Hampshire, Duroc breeds, domestic meat pig and other landrace breeds (3%). In production of meat and fat predominant are pure breeds and crosses, whereas share of extraordinary meat breeds (Hampshire, Duroc and Pietrain) of only 3% are used as terminal breeds for crossing with F1 and F2 generation crosses for obtaining of material for meat production. Typical is presence of large number of crosses and unplanned crossing, as well as diversity of genetic material, but in average at the low level in regard to breed quality. Data that the percentage of artificial insemination in pig breeding is bellow 15% demonstrates the situation relating to planned selection.Poultry production is highly dependent on import of genetic material. Genetic potential of parent flocks in our country is use in a non-rational manner, parent flocks of light strain are used with less than 70% of the potential, and of heavy strain even less. In commercial purposes genetic potential of hybrids is used at the level of 80% for layers of table eggs, and in broiler production at the level of 63%. Existing breed structure in sheep production in Serbia represents serious obstacle in further development of sheep production. The majority of sheep population is Pramenka – 80%, and the rest are Tsigai sheep and crosses of Pramenka with more productive foreign breeds, primarily Württemberg and Il de France breeds. In regard to goats, they are mainly reared extensively in hilly-mountainous regions, although there are some tendencies towards intensifying of this production. Goat of Balkan type is the breed most present in the breed structure – 50%, followed by different types of crosses – approx. 30%, Domestic White goat breed – 15%, and the rest are goats of Saanen and Alpine breed. In Serbia there is no uniform program of genetic improvement in sheep and goat production in sense of improvement of autochthonous populations and creating of prerequisites for increase of production of meat, primarily, but also of milk and wool, in sheep breeding and milk and meat in goat breeding.

Nutrition

Serbia is to great extent competitive in production of grain and oil crops which are basis for livestock production and also has high quality natural pastures. However, pastures should be made available through completed infrastructure and enriched/improved through fertilization and under sowing, and production of concentrated livestock feed from grains and oil crops should be balanced and improved using high quality supplement mixtures. In this chain, from inputs to concentrated livestock feeds, price increases considerably, therefore many producers instead of buying ready prepared mixtures make them on their own farms – more or less successfully. Breeders are left to choose the most optimal solution. When choosing concentrated feeds breeders encounter following problems:

Declaration for the product (information on content of raw materials, on energy content),

Insufficient and inefficient control of feeds,

Lack of impartial, objective advice on planning of nutrition,

Problems in livestock food management, handling (storing, transport, precise feeding, etc.).

Unexploited potentials of grazing and production of fodder and silage, is characteristic of production in Serbia, especially in cattle production, but also in sheep production.

4

Beside intensive meat production, in Serbia there is also semi-intensive and extensive production of meat. In most cases it is production of poultry, but also pigs. In such conditions, animals are mainly reared in the backyards where they find most of the food and as supplement they receive different grains and small amounts of complete mixtures.

Facilities and equipment

Better use of energy, less labour intensive, easier hygiene maintenance, better utilization of feeds, less disease outbreaks, are only some of the advantages of the modern production facilities. However, even though they are aware of these advantages, many breeders, mainly because of the lack of investment capital, decide to fatten animals in facilities which don’t satisfy the basic standards, and in this way increase the risks, but minimize the costs. However, accession to EU and rate of adoption and acceptance of animal welfare standards and regulations relating to environment protection, as well as concern of the local authorities and citizens because of the organization of fattening of animals in populated settlements, will define the rate in which new fattening facilities will be erected. Government should be the catalyst of these processes in the way that it would timely issue legislative solution which relate to standards and support producers in their attempt to build new facilities. Municipalities/local authorities should also assist producers by establishing of agricultural zones, development of infrastructure, lowering of expenses for various fees and licenses and in no way become obstacle in this process.

Production of meat

Cyclic trait of the production, price which is not competitive in relation to other producers in EU (for almost all meat types and most of producers) and inability to export to EU markets (at least when price peaks are the lower level) are main problems of meat production in Serbia in the last two decades. One of the main characteristics is high price and production cyclic characteristic of this production, which occurs as consequence of not developed market chains based on long term contracts.

Production of meat per meat types in the period 1990 – 2007 according to Republic Bureau of Statistics *

0

100

200300

400

500

600

1991-1

995

1996-2

000

2001

2002

2003

2004

2005

2006

2007

2008

2009

beef sheep meat pork poultry meat total

5

Number of cattle, sheep and pigs (right) in the period 2000-2009.

Production of poultry meat and eggs in the period 1990-2009.

0

200

400

600

800

1000

1200

1400

1600

1800

2000 2001 2002 2003 2004 2005 2006 2007 2008 20092500

2700

2900

3100

3300

3500

3700

3900

4100

4300

cattle sheep pigs

0

20

40

60

80

100

120

00,20,40,60,811,21,41,61,82

poultry meat (000t) eggs (bil l)

Processing of meat

Republic of Serbia disposes with great processing capacities in livestock production. . However, level of their utilization is bellow projected capacities and most of them are not in compliance to standards mandatory for export of meat, and many of them are even not in compliance to domestic standards. Few of the facilities are registered for export to markets of EU countries as well as to the markets of third countries.

Number of facilities for slaughtering, cutting and processing of meat

Type of the facility Facilities (domestic market)

Facilities - export (EU)

Facilities - export (third

countries)Slaughterhouse (red meat) – ungulates 277 2 9Slaughterhouse (poultry) 31 - -Combined facilities (slaughtering, cutting, processing – red meat) 415 3 32

Combined facilities (slaughtering, cutting, processing – poultry) 19 1 9

Processing of meat and manufacturing of meat products 455 - -

Processing of meat – poultry/ meat products – poultry 3 - 2

Processing of meat – wild game 8 - 1

This number of slaughterhouses is certainly not exceeding the demand, and there is no doubt that in the future with more consistent implementation of domestic standards and adoption of EU standards the number of facilities will be reduced. Introduction of standards in the facilities engaged in production of food of animal origin is legal obligation.. System based on principles of HACCP (Hazard Analysis Critical Control

6

Point) according to Veterinary law (Article 82 and Article 170), legal entity/entrepreneur operating in the production of food of animal origin is obligated to introduce and implement issued/regulated standards starting from January 1st 2009. Every delay in implementation of this and other legislative regulations creates unfair situation to those which are consistently implementing said standards and puts them in inferior position, and at the other hand increases the risks and costs/expenses. Processors should be further encourage to increase technological level in production by implementation of necessary quality standards with the goal to increase export of livestock products as well as to increase consumers food safety. Slaughter waste disposal as well as disposal of waste waters present great problem for slaughter industry. Slaughter waste categorized in three categories according to content of risk material, are received by only three facilities/plants, and the second category (content of digestive tract) is not destroyed by any of the facilities/plants, and also none of them are taking the blood. Considering the number of slaughterhouses in Serbia, solving of the problem of slaughter waste should be priority, primarily because of the risk on human health and endangering of natural resources. Constant increase of slaughtering of animals and processing within official channels is positive and everything should be done to preserve continuation of this process and acceleration, since still great share of trade/circulation is done through unofficial channels, which is impeding circumstance in relation to control of the safety and quality, introduces instability and inefficiency into total production and processing of meat, but also harmonization and adapting to CAP.

Number of pigs slaughtered in slaughterhouses and their share in total number of slaughtered animals in 000

Number of lambs and other sheep types slaughtered in slaughterhouses in 000

14691690

19922188

1748 1643

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

2004 2005 2006 2007 2008 20090

500

1000

1500

2000

2500

Slaughtered in slaughterhouses % of total ly slaughtered

5 5 6 4 8 7 14 8 15 1019 18

27 32 3245

4164

6355

010

2030

4050

6070

8090

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

other lambs

Main problems which the processors of livestock products encounter reflect primarily in the following:

Very often extremely high price, and in general higher price of raw materials on domestic market compared to EU;

Technological lagging behind and non-compliance to international standards in production (HACCP, ISO and other standards);

7

Illegal competition in purchasing of raw material and sale of meat and meat products as consequence of:

(2) Illegal trade by buyers from Montenegro and Bosnia and Herzegovina,

(3) Import of meat produced in South America through the territory of Kosovo and Metohija, Bosnia and Herzegovina (source: Chamber of commerce of Serbia),

(4) Sale of meat and meat products from the farm/household, without expenses for taxes, control and introduction of standards

Slow adjustment to conditions of market economy and poor management capacity,

Non-compliance to requirements and conditions for export, which significantly reduces the market.

Prices

Price of live animals and meat reflect the demand and supply on these markets, total level of development and competition, structural problems on the market and purchasing power of the population. Production, prices for live pigs and pig meat in Serbia in the period 2003-2009. In 000

Year Production Consumption Retail price RSD/kg

Price of fattening pigs on the livestock market RSD/kg

Share of raw material in retail price

2003 258.000 255.266 190.00 68.31 36%2004 242.000 233.685 280.00 90.43 32%2005 253.343 258.004 320.00 146.00 46%2006 254.870 255.903 299.00 89.58 30%2007 289.373 290.669 282.00 81.88 29%2008 265.655 270.325 384,00 128,89 34%2009 252.188 257.148 420,00 140.83 34%

Main characteristics of the prices of live animals and meat are following: Cyclic prices, especially for live animals which is more distinct for some types of

animals (live pigs), and less in other types (poultry).

Relatively less cyclic retail prices of meat since the prices increase when the price of live animals increases, but they rarely decrease when the prices of live animals decrease.

Constant trend of increase of retail meat prices.

Presence of distinct peaks and lower and higher prices.

Average price is similar to the prices present in CEFTA region where supply of live animals derives mainly from Republic of Serbia.

Average annual price of live pigs in EU and Comparative prices of cattle and beef meat in

8

Serbia the period 2006-2009.

Trade and marketing Failure to comply to basic safety standards, unorganized buying, non-harmonized quality standards, in most years production which is not competitive in regard to the price, as well as quality (with the exception of certain specific products), no knowledge of foreign markets, are some of the reasons why potentials for export which exist in this sector have not been utilized. Possibility to place meat on foreign markets exists, but it is limited to certain countries, primarily because of non-harmonization of veterinary-sanitary regulations with regulations in the surrounding countries, but also insufficient motivation of producers in primary production to enter the commercial production. Meat is exported to markets of Bosnia and Herzegovina, Montenegro and Macedonia. Croatia has great demand for meat import, but this market is not accessible for our producers because of the non-harmonized regulations and its implementation in the field of veterinary-sanitary monitoring and supervision. Contrary to other meat types, Republic of Serbia was allowed annual quota for export of beef meat to markets of EU countries of 9.175 tones with preferential rate of 20% of total MFN (Most Favoured Nation) customs tariff/duty in EU. This quota was reduced from previous 9.975 tons, in 2000, because of failure to fulfil the allowed quota in previous period, as well as the fact that quota was approved for Serbia and Montenegro as joint state therefore it was necessary to divide the quota to member states. The most important reason for

Export of beef meat in tons

675 1.015 1.332 1.919 2.289 1779985

1.040 778882

6.2936.869

3.800

2.584

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

10.000

2003 2004 2005 2006 2007 2008 2009

EU (t) CEFTA (t) others (t)

9

failure to fulfil the quota was high price of young cattle on domestic market and in surrounding countries, as well as high price of beef placed on the market by our processors. Therefore, export of beef to countries of European Union in recent years was realized on the markets of Italy and Greece, where price of beef is high and where specific quality of beef meat is required. Export of beef to countries of European union increased in the period 2003–2007 by over three times, whereas to CEFTA countries it was increased by almost seven times at the end of observation period compared to its beginning. But in year 2008 and 2009 Export of meat decreased compared with year 2007 And in the same time export of live cattle increased primarily at the market of CEFTA countries. Also, in addition to said countries where Serbian processors and slaughterhouses export beef meat, meat is also exported in more moderate volume to African countries and countries of the Middle East.

Foreign trade balance in pig meat, tones Trade in pig meat according to categories in 000 tons during year 2009.

-6000

-4000

-2000

0

2000

4000

6000

2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

import export balance

In addition to export of beef meat, on markets of surrounding countries there is increasing export of live animals (young cattle and calves), which is important fact which influences the meat production volume in Republic of Serbia. According to data of the Republic Bureau of Statistics, export of live animals increased from 1.432 animals in year 2006 to 19.604 animals in 2007, in 2008 was 72.492 animals, while in 2009. was 65.232 animals.

ConsumptionConsumption of meat in our country compared to EU countries is small. Trend of meat consumption depends directly on purchasing power and price of meat. Population of Serbia consumes annually in average approx. 36 kilograms of meat, which is half of the consumption in EU, where average consumption of meat is 86,7 kilograms per capita and only Albania is behind our country in this regard.

V SECTOR ANALYSIS – VEGETABLE Importance and main trends

10

Serbia has very favourable conditions for growing of most of vegetable crops, especially medium early and medium late, but also early and late growing of certain vegetable crops. Because of that the following have developed: garden production, field production, intensive industrial production and production of vegetables in protected space. Vegetables participate with 9% in the structure of total planted agricultural land area in Serbia, with 11.31 % in total production value and with 9% in total export of agricultural products.

Trends of production growth in most of the vegetable crops indicate that this production is sufficiently profitable therefore many decide to become engaged in it or to expend. All this indicates that the production of vegetables is important in Serbia, as a tradition, a significant current production and prospects in the future.

Serbia is the largest regional producer of vegetables. Vegetable production in Serbia is approximately equal to the total production of vegetables in the countries of the region (CEFTA countries).

Index of production of certain vegetable crops in Serbia (average 2000–2003 =100)

70%

80%90%

100%110%

120%130%

140%150%

160%

Avg2000-03

2004 2005 2006 2007 2008 2009

Potato Bean Onion Peas

70%

90%

110%

130%

150%

170%

190%

Avg2000-03

2004 2005 2006 2007 2008 2009

Cabbage and Ka le TomatoPepper CarrotCucumber

Vegetable production is one of the most developed and economically most profitable branches of agriculture. The diversity of species and production methods are characteristic for vegetable production. Even though the vegetable production is still insufficient in relation to demand and potentials, vegetables take very important place in production, consumption and export of agricultural products.

Important characteristics of this sector are: Production of vegetables in the open field can provide five to eight times higher value

of production compared to filed crops, i.e. 200-250 time higher value of in-door production if vegetables;

Sector includes numerous individual producers and in this way it contributes significantly to rural development of the country;

Vegetable production enables intensive utilization of land, and cycles of two to three vegetable types during one year, with implementation of the irrigation system in the open field or in-door vegetable production;

11

In-door vegetable production enables growing of vegetables during whole year, especially during winter and early spring, when there is deficit of fresh vegetables. By this production way continuity in supply of the market with fresh vegetables is achieved, which has positive effect on adequate nutrition of population, as well as increase of the production value and profitability;

Vegetable production is sector that is closely associated with the market and processing industry. Most of the vegetable species has to be sold quickly, or consumed or processed;

Sector with exceptional potential for export of fresh and processed products, if strict regulations of the control quality are fulfilled.

Market chain in vegetable production

Adjustment of producers in a market economy and building market chains takes place slowly.

Production and trade of vegetables are mainly in the hands of small producers who are not market oriented. Production is mainly directed towards supplying of the demand on the domestic market. Most of the produced vegetables are sold on green markets or wholesale green markets, but also to processing industry. The sale and purchase of agricultural produce markets to participate with about 35%.

Consumers want greater supply and choice, better quality and fresh products during entire year, so retail supermarket chains are becoming more popular as places where fresh vegetables are bought.

In the last ten years, there has been a change in the sector of vegetables that are caused by privatization of the plant and processing capacity, enlargement of parcels in private farms, shutting down a large number of agricultural cooperatives and trading companies in public ownership and the opening of the supermarket chains. It has been established a new market chains that are largely based on products from private farms, market pricing, varying prices and a significant absence of security purchase.

Disproportion between the number of producers of fruit and vegetable market size, often causes instability and cycling in production and prices, and therefore the uncertainty for investment in the sector. It is also one of the reasons why the structure of farms is changing relatively slowly.

In order to secure its supply of raw material quality retail outlets with a relatively constant prices, large retail chains and processing facilities are often decide to produce their own vegetables. In this way, they control the market and the implementation of standards and prepare for new market conditions that made EU integration. This has negative consequences for small producers, who are thus exempt from the largest retail chains and main trade flows, which significantly slows the introduction of standards on small farms.

The market chain of fresh fruits and vegetables is not export oriented. Exports of fresh vegetables is low, because not able to provide consistent quality and sufficient quantity of vegetables for continuous delivery. In addition to these problems, there is a problem not knowing the way of functions fruit and vegetable market in the EU.

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Providing of inputs

Quality seeds, application of organic and mineral fertilizers, full protection against weeds, diseases and pests are the modern vegetable production. Competitiveness of production greatly depends on inputs, i.e. price and quality of seed and mineral fertilizer. In Serbia, within research institutes and in cooperation with faculties of agriculture, seed material is produced. However, it is not enough to satisfy the national demand, therefore considerable quantities of vegetable seed material are imported, primarily from the Netherlands, and also from Italy, Germany, Hungary, Israel and USA.

Value of export and import of vegetable seeds in 2009 (000 US$)

Value of the trade in potato seed

(000.000 US$)

25712022

1,5201125

5180

0

1000

2000

3000

4000

5000

6000

Seedpotato

Onion set Seed peas Seed beans Otherveg.seeds

Import Export

3.04

4.88

1.45

2.963.39

4.48

2.57

0.00

1.00

2.00

3.00

4.00

5.00

6.00

2003 2004 2005 2006 2007 2008 2009Import Export

Production of seed potato is small and insufficient to satisfy the demand on the domestic market, but nevertheless it is decreasing, since production costs, cost of examination and attesting are high, regulations on production and quality are very strict, and market unstable. Production was reduced from 1.500 ha to approx. 500 ha.

Vegetable production main problems:• Small percentage of in-door production which can provide two or three harvests per

year;• 95% of production is concentrated on small farms (can’t provide satisfying level of

quantities, quality and continuity of production);• Small number of vegetable producer groups;• Low technological level of production (traditional production, old varieties,

inexistence of irrigation systems, inadequate plant protection, old machinery and equipment for plant protection and harvesting);

• Lack of cold storage – distribution centers for delivering enough quantities of fresh vegetables both to domestic and foreign markets;

• Lack of modern packaging and sorting equipment for improvement of export possibilities;

13

• Lack of understanding and implementation of EU Standards (GLOBAL GAP, HACCP) as main preconditions for delivering vegetable products to domestic and international buyers;

• Poor utilization of biomass for heating green houses and low usage of thermal energy.

Vegetable production

Vegetable is grown on approx. 281.000 ha, which represents 9% of total agricultural plough land area. In production of vegetables mainly potato (41%), cabbage and kale (15%), melons and water melons (10%), tomato (9%), peppers (8%) and onion (6%) are present.

The biggest part of area belongs to small agriculture farms. Most of these farms are grown tomatoes, peppers, beans, cabbage, watermelon, melon, onions and garlic, peas etc. This production is for fresh consumption, household and industrial processing. Large farms vegetables grown on 10.000 ha. On these farms the most frequent is peas (30%), peppers (9%) and beans (7%). Production is primarily intended for industrial processing.

Land area under certain vegetable species (ha) in the last three years and production during 2009

46

131

39

326

189171

23

68 67

230

5,0007,0009,000

11,00013,00015,00017,00019,00021,00023,00025,000

Beans Onion Peas Cabbageand Kale

Tomato Pepper Garlic Carrot Cucumber Melonsand Water

melons

0

50

100

150

200

250

300

350200720082009Production 2009 у 000t

14

For most of vegetable crops characteristic is decrease of the land area where they are planted, but positive is that in spite of everything, production remained at the similar or even higher level. In the period 2000–2009 decrease of land area planted with vegetables by 9% is recorded, however, total yield shows tendency of increase. In-door vegetable production is still moderately present even though the value of production per unit of production area is high. Mainly tomato is grown (to 70% of produced quantities), and slightly less cucumbers (15 – 20%), peppers (10 – 15%) and lettuce.

Total production (left) and areas (right) under vegetables in period 2000 – 2009.

Presence of certain vegetable types in planting structure in 2009.

0

500

1000

1500

2000

2500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009230

240

250

260

270

280

290

300

Total production (000t) Areas under vegetables 2%2%

1%3%

3% 11%

8%

9%

15%6%

40%

Potato

Bean

Onion

Peas

Cabbage andKaleTomato

Pepper

Onion

Carrot

Cucumber

Malon andWatermalon

Total yield has tendency of increase, with the highest recorded yield in 2006. In 2003 and 2007 drop in production was recorded because of the drought which caused significantly lower yields compared to previous years. In 2007, drop in production of 20% was recorded which indicated still high dependence of this production on weather conditions.

Production of potato in Serbia has mainly elemental character. Low level of knowledge in certain production phases and lack of irrigation system leave the production to

15

the influences of climatic conditions. This is why this production is oscillating from year to year. Average land area under potato in Serbia is 86.000 ha, with tendency of decrease in average rate of 2% per year. Average yield of potato is 10 tons/ha, which is by 42% less than realized European average of 16.6 ton/ha. Potato in our country is mainly consumed in human nutrition, and only approx. 8% is processed. Annual consumption of potato per capita in Serbia is approx. 38 kilograms.

Average land area under beans in period from 2000 to 2009 was 23.700 ha with tendency of decrease in average rate of 1.8% annually. In the structure of total vegetable land area it participates with 9%. Average yield of beans in Serbia is 1.3 tons per ha which is insignificantly less compared to European average of 1.5 tons per hectare. In the structure of European production Serbia participates with 4% and is on sixth place. Annual consumption of beans in Serbia per capita is approx. 5 kilograms, and in this regard we are among the top European countries.

According to the demand and supply of tomato, this vegetable is one of the most important seasonal products in Serbia. Average land area under tomato in the period from 2000 to 2009 was 20.700 ha, with tendency of slight decrease in average rate of 0.4% annually. In the structure of total land area under vegetables it participates with 9%. Average yield per hectare is 8.5 tons which is by 75% less then realized European average of 34 tons. Compared to average yields in countries from which we import tomatoes this is very low yield. In the structure of European production Serbia participates with 0.8% and is on 14th

place. Ratio between average yield realized in our country and average yields in said countries demonstrates the situation in tomato production in our country. The greatest quantities of tomato in Serbia are still produced in the open field, where the yield is mainly influenced and conditioned by weather conditions. Also, production of tomato in improvised plastic green houses is expended, where yield cannot be substantially increased, but production is to some extent protected from weather conditions. In recent years in-door production has increased, which will have positive effect on increase of yield and increase of demand on domestic market.

Average land area under peppers in the period from 2000 to 2009 was 19.370 ha, with tendency of slight decrease in average rate of 0.3% annually. In the structure of total land area under vegetables it participates with 8%. Average yield of peppers is 7.8 tons per hectare, which is by three times less compared to European average. In the structure of European production Serbia participates with 4.4% and is on seventh place. Most of the production of peppers is realized through sale on green markets and wholesale green markets in Serbia. Very low percentage of production is exported or used in domestic processing industry. Low processing volume of peppers in the industry is result of traditional preparation of so called “ajvar” and preserved - “pickled” vegetables in households.

Average land are under green peas in the period from 2000 to 2009 was 13.200 ha, with tendency of slight decrease. In the structure of total land area under vegetables it participates with 6%. Yield of green peas in average is 2.5 tons per hectare, which is by 70% less compared to European average of 8.7 tons. In the structure of European production Serbia participates with 1.9% and is on 12th place. Domestic production fully satisfies the demand by the consumers in Serbia.

Average land area under onion in Serbia in period from 2000 to 2009 was 19.900 ha, with tendency of decrease in average rate of 2% annually. In the structure of total vegetable land area it participates with 8%. Average yield of onion is 6.4 tons per hectare, which is by

16

three times less than European average. In the structure of European production Serbia participates with 1.6%.

Average land area under cabbage in Serbia, in period from 2000 to 2009 was 21.600 hectares, with tendency of decrease in average rate of 1.2%. In the structure of total vegetable areas it participates with 9%. Average yield of cabbage is 12.9 tons per hectare, which is by 70% less than European average. In the structure of European production Serbia participates with 2.4% and is on the seventh place.

Water melons and melons botanically belong to vegetables, but because of the high sugar content and way of consumption they are considered to be fruits. Both vegetable crops are very popular and there is great demand for them on our market. Average land area under melons in the period 2000–2009 was 17.000 ha, with slight tendency of decrease. In the structure of vegetable land area it participates with 7%. Average yield of water melons is 15 tons per hectare. Although average yield per hectare of these crops in Serbia is only by 4% lower than average yields in European countries, it is still very low. Thanks to great demand for water melons and melons, investment in these productions in Serbia is satisfactory.

In Serbia, although in smaller quantities, also other types of vegetables are grown, but at the same time less consumed and mainly imported, such as: broccoli, artichokes, different types of lettuce, rocket salad, cocktail tomato, etc. Our climatic conditions are favourable for growing also of these vegetable crops. Considering that their consumption in the world is increasing, increased domestic production with lower prices would influence decrease of import, and at the same time increase the export.

Recent years there has been increased use of fresh vegetables in the diet, and so are the requirements for quality and safety of vegetables in particular expressed. Production of vegetable is very intensive branch plant, where is the large use of amounts of mineral fertilizers and pesticides, so there is a need for the introducing of quality standards. One of the main standards is a GLOBALGAP that covers the entire production process from action before planting to harvest.

One of the general characteristics of Serbian agriculture farm is fragmentation. Over 90% of households covers less than 10 ha. Carriers of this production in vegetable production are small producers (95%) who are mainly not market oriented and this is where the problem occurs because they are not able to produce and provide sufficient quantities, continuous delivery and equal quality of vegetables. Therefore, for development of vegetable production forming of associations is necessary.

A small representation of large farms engaged in production of vegetables, a consequence of the lack of modern machinery and equipment for mechanized production, particularly for harvesting fruit. It is still a big part of human labour, the production of various crops (peppers, tomatoes, cucumbers), it seems expensive and unprofitable. Uncertainty and limited product placement market are also the reason.

Production of vegetables has very distinct regional character and it is influenced by agro-ecological conditions, level of development of processing industry and market for fresh vegetables.

Processing and storing

Role of the processing industry is to process vegetables which cannot be stored in warehouses so that it can be transported, and in this way possibility for the use of vegetables

17

prolonged. In general, this can be achieved by freezing, drying or heat treatment of vegetables (sterilization and pasteurization).

Vegetable processing industry in the past has not recorded significant changes in the most cases, their technical and technological equipment is below the required standards for export, especially in the European Union market.

Quality of vegetables and vegetable products is uneven, and the range of products is modest. Grading and packing of fresh vegetables are still poorly represented, especially when it comes to small packages. Fresh vegetables, chopped and ready for a salad is almost no on the market, while in the world so prepared vegetables are more search.

Data on the number of enterprises engaged in agricultural production and processing differ depending on the source. Adoption of legislation on food safety in June 2009, foresees the obligation that entities in the business of food, i.e. facilities for the production and distribution of food must be stored in a central register of objects, which leads to Ministry of Agriculture, Forestry and Water management (MAFWM), so that in the following period of one year be established databases.

According to data from 2008., Serbia has 181 cold stores registered for storing of fruits and vegetables, with total capacity of 608.000 tons and total of 81 plants for heat treatments and drying of fruits and vegetables with installed capacity of 565.000 tons. Vegetables are freezing, processing and stores in 41 coolers and 61 factories for hot processing. Capacity utilization is about 50%. In period from 2005 to 2009 year, using incentive funds Ministry of Agriculture, Forestry and Water management (MAFWM), 116 coolers and factory for hot processing fruits and vegetables lead into HACCP and ISO 9001.

These capacities of cold storage and processing plants which are predominantly used for processing of vegetables can be divided into several groups:

Old factories for processing with considerable capacities, but obsolete, outdated technology,

Privatized factories with considerable capacity which have been made profitable in their operation/activity by the new management,

Newly constructed facilities with modern technology, Small produce capacity within the farms (family business).

Even though the highest growth in production is recorded for newly opened storing and processing facilities, most of the market is still in the hands of the second group, therefore it can be considered as the most important.

The most important vegetable crops which are processed in the industry are: potato, used for production of frozen French fries, chips, puree, tomato (tomato concentrate, puree, juice and ketchup), green peas (frozen and canned) and peppers (pasteurized, frozen, dried and “ajvar”). The second important product group in processing industry are pasteurized and dry mushrooms, pickles and frozen vegetables.

Significant growth in production value of vegetables will be difficult to achieve without the investment in manufacturing industry.

Prices

Vegetable prices are formed freely on the market, as a result of agreement between buyer and producer. Because of great influence of climatic factors on agricultural production,

18

produced quantities can vary significantly from year to year, which has direct impact on their purchasing price.

For majority of vegetable crops cyclic trait of supply is characteristic, since it is practice of our producers when planning the production to decide only on basis of price realized in the previous season, which can also be observed in trends of the buying price of vegetables from producers.

The prices may vary depending of place of sale. In Serbia there is a tradition of buying at the markets, but also between different markets there are huge variations in price, indicating the lack of development of market information. In supermarkets there is certain dependence. Suppliers’ price usually follows the price in the wholesale markets, while the sale price is approximate price at the supermarket on the green market.

On the prices in the sector of fruit and vegetables a large extent affected by the lack of parole storage and capacity of processing, which could withdraw a significant portion of products that can be saved for later sale or processing, and thus affect the equalization of prices during the year.

Other characteristic is related to the fact that because of small storing capacities and high level of customs protection there are distinct peaks of low prices as well as high prices, annually, but also during one year.

Trade and marketing

Total circulation/ trade in vegetables shows trend of increase, however from 2006-2007. value of the sale from production of the companies is decreasing whereas the value of vegetables bought from primary producers is increasing. Total value of vegetable sale from own production of the companies and cooperatives and buying from primary producers/individual farms in 2008 increased by 219% compared to 2004. Value of sale and vegetables bought from primary producers in 2008 compared to 2007 in current prices is higher by 8.3%.

World market for fresh fruits and vegetables is very demanding and well organized, with great competition, but high profitability. Common market for fruits and vegetables of the European Union was formed by the Council Regulation of EU in 1996, when standards for 35 products consumed in fresh state as well as rules on the quality control of fresh fruits and vegetables were issued. In order to be able to export fresh vegetables to this market it is necessary to start with integral production with in advance prepared plan, starting with healthy seeding material, control of the use of mineral fertilizers and pesticides and well organized logistics support and marketing.

Recent export data demonstrate that we have objective opportunity in export of vegetables, which are being exported from Serbia more and more. European Union is the biggest buyer of fresh, frozen, processed and unprocessed vegetables. 30% of vegetables produced are exported to neighbouring countries. In addition to potato, also peppers and mushrooms are exported. Serbia has positive balance of foreign trade exchange. Share of the export of vegetables in total export of agricultural products in approx. 9%. Share of import of vegetables in total import of agricultural products in approx. 6%.

The most vegetables are imported from CEFTA countries, 43% import from Macedonia. 31% of total import of vegetables derives from EU. Leading importers in Europe

19

are the Netherlands (because of numerous ports) and Germany (because of the size of the market). Main export markets for vegetables are EU 59%, CEFTA countries 30% and Russian Federation.

Vegetable trade during 2009 according to destinations (millions of US$)

Vegetable trade during 2009 according to categories (millions of US$)

27.9138.75

53.37 27.23

10.4123.15

0.0010.0020.0030.0040.0050.0060.0070.0080.0090.00

100.00

EXPORT IMPORT

CEFTA EU OTHERS

23.4241.65

27.08 1.57

25.5827.44

15.62 18.47

0.00

20.00

40.00

60.00

80.00

100.00

EXPORT IMPORTFresh vegetables Frozen vegetablesPreserved vegetables Dried vegetables

Serbia has a positive balance from its foreign market trade when dealing from frozen, dried and conserved vegetable. Fresh vegetable are imported more than it is exported which is an indicator that it is used as a raw material in the processing industry.

In export, the following products are competitive according to their quality: canned peas, pepper (frozen), canned kidney beans, other frozen vegetables, mixed frozen vegetables, onions, dried vegetables and grinded paprika. The following products competitive according to their price: frozen and canned peas, other frozen vegetables, edible potatoes, mixed vegetables, vegetable juice, mixed fruit and vegetable juices, grinded pepper and mixed dried vegetables.

The most significant products by import value in 2009.

The most significant products by export value in 2009.

0.73

0.82

0.88

1.82

1.86

3.23

5.03

18.48

0.00 5.00 10.00 15.00 20.00

Bean, green bean

Potato

Watermelon

Cabbage

Garlic

Pepper

Cucumber

Tomato

0.36

0.49

0.62

1.09

1.28

1.69

2.02

3.53

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00

Cabbage

Tomato

Carot

Onion

Cucumber

Potato

Watermelon

Pepper

20

The preconditions for the large export of fresh vegetables are the founding of producer unions and opening distributive centers, where the vegetables would be collected and prepared for marketing. Such centers should be equipped with cooling, washing, calibrating and packaging equipment. They should be trained to apply EU standards for packaging and transport and to offer continuity in providing the proper amount and the declared quality which requires modern production technology (balanced crop diversion, combination of open and closed environments etc.).

Consumption

The richness of nutritive and protective materials makes vegetables into a very significant factor in human nutrition. Vegetables contain a high degree of biologically valuable materials (vitamins, minerals...etc.).

The nutritive, agronomic and economic importance of vegetables demand that the development if the vegetable industry takes two courses:

vegetable cultivation for fresh consumption intended for green markets;

vegetable cultivation intended for processing

This will ensure the necessary daily nutritive need of 400 grams of vegetables for a grown up person as well as having significant amounts of vegetables available for processing and export.

According to the Republic Statistical Office data, in 2009 vegetables were mostly consumed fresh, at 135 kilogram per population unit (of which 36,2 kilograms consists of potatoes), while the consumption of frozen and processed vegetables is significantly lower.

VI SECTOR ANALYSIS – FRUIT

Significance and basic trends Fruit industry is one of the most productive agricultural industries. Owing to a large number of fruit crops, it is possible to use numerous locations and areas with very different soil and climatic conditions for fruit production, and even soils with poorer physical, chemical and other characteristics as well as soils with steeper slopes.Production of fruit and fruit products can be very profitable and a significant export industry. However, this implies the need for taking measures toward intensifying fruit production as well as modernizing and specializing processing capacities. A market-oriented fruit industry may only be highly profitable if the fruit growing technology is adjusted to the market requirements.The following are nowadays developing in the world and increasingly in our country as well:

21

Consumption of vegetable products per population unit per kilogram during 2009.

0 5 10 15 20 25 30 35 40

Potato

Other vegetables

Cabbage

Tomato

Pepper

Onion

Root vegetable

Bean

the production of fruit of controlled quality (from soil control to the application of all cropping practices);

integral production, where the rules of application of cropping practices for a specific region and crops are clearly prescribed;

organic fruit production.

The basis of any fruit production is the achievement of quality high yield and the product that is safe for human health.

The main planting material production in Serbia is based in Rasina District. Most frequently produced are the seedlings of grapevine, apple, plum, pear, peach and sour cherry, with other fruit crops being produced to a smaller extent.The standard planting material is most frequently produced in Serbia, while the tested and virus-free planting material is produced in small volumes. Currently, the variety structure of produced fruit and grape seedlings is inappropriate due to the difficulties in the procurement of modern varieties (which are mostly protected – patented). A big problem in the past period was the planting material of unacceptable health condition, which had a negative impact on intensification of fruit production. The poor condition of planting material caused the spreading of diseases such as stone fruit pox and pome fruit fire blight.Fruit production - main problems:

• Production is concentrated on small farms (mostly semi-natural production)• Low technological level of production (old and traditional orchards and vineyards, old

varieties, inexistence of irrigation systems, inadequate plant protection, inadequate protection from hale, old machinery and equipment for plant protection and harvesting)

• Producers can't achieve satisfying level of quantities and quality to reach demands of a big trade actors

• Unorganized farmers small number of producers groups and cooperatives (for common marketing of products)

• Inadequate post harvest management (small number of capacities for cold storing of fruit products and capacities with ULO as well as not modernized cellars and equipment for wine production)

Fruit productionThe total fruit production in Serbia, in 2009 was 1,418,000 tons.With its total fruit production of 1,356,000 tons in 2007, Serbia has a 1.11% share in the world fruit production or a 6.57% share in relation to fruit production in the European Union. The largest share in the production belongs to raspberries, accounting for 15.2% of the world production or 65% in relation to the production in the European Union.Areas under orchards cover 240,285 hectares in 2009, which accounts for 4.71% of total arable agricultural area or 5.69% of arable area in the Republic of Serbia. The highest percentage of this area under fruit plantations is traditionally under plums - 50%, then apples

22

- 18% and sour cherries – 7 % of the total number of trees7 of all fruit crops in the Republic of Serbia.

Production of major fruit crops in Serbia during 2009 (000 tons)

Trend in apple and plum production during

2000-2009 period (000 tones)

282

6815

663

29

105

3177

25 3687

0

100

200

300

400

500

600

700

0

100

200

300

400

500

600

700

800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Apples Plums

Apples / Pears / Quinces / Plums / Cherries / Sour cherries / Apricots / Peaches / Walnuts / Strawberries / Raspberries / Plums / Apples

This production takes place mostly on small parcels that belongs to farm producers and it makes about 95% of the production, while only 5% of the production is based withinlarge industrial complex. In Serbia there used to be large agrocombinants dealing with the production of fruits and vegetables such as PKB, PIK Becej, fruit plantations Boleč and others, but most of themare privatized through privatization process.The fruit production has a strong regional character due to the agroecological conditions, processing industry and market fresh fruits development, so accordingly the largest area under orchards are in Central Serbia, 6.65% of agricultural land, while in Vojvodina it only 1%. However, some areas in Serbia are well known, so the highest production of raspberries is in western Serbia, cherry in southern Serbia, while apples and plums are grown on the whole territory of Serbia.

AppleSerbia is a major producer of apples. According to 2009 statistical data, apples account for 20% of the total area under fruit, while they rank fifth by total value of production in Serbia. The apple production areas increase at an average rate of 1% per year. The average yield of apple in the last five years is 16 kg per tree. The plantation structure is relatively unfavorable because of large portion of old and amortized plantations and low planting density The apples yield is 11 kilograms per tree on average, or 6.6 t/ha, which is 74% below the European average (Slovenia has the highest average yield of apples in Europe - 49 t/ha).

7 Statistical records of the areas in Serbia are kept according to the number of trees, which is contrary to the logic as well as the standards for production monitoring in the EU

23

There is small number of new, intensive apple orchards, with the planting density of 2,000 to 2,500 seedlings per hectare, that produce from 32 to 40,000 t / ha of apples.Although these data should be taken with reservation, the fact is that a large part of the area is still covered by old production systems that are incapable of providing high yields, but also that the plantations (particularly in the traditional production regions) grown in the last fifteen years or so have been planted in a modern way. The predominant variety in the apple plantations in Serbia is Idared with 44%, followed by Golden Delicious with 14%, Red Delicious – 7.6% and Granny Smith – 7.2%, while the other varieties are present to a smaller degree. In the last few years there have been changes in the assortment, so Idared is slowly losing precedence and being replaced by some new varieties and clones belonging to the group of autumn varieties with earlier ripening period, whereby the apple-picking period is expanded. In the following period, it is necessary to change the apple assortment in favor of summer varieties, which ripen earlier, and thus realize higher profit in the market. Considering that it is the matter of a fruit crop that has a long consumption season, it can be preserved well, it has a relatively affordable price and that there are habits of its consumption, its production is expected to increase in the following period.

PlumIn Serbia, plums rank first by planted area and by production. The total number of productive trees in Serbia, in 2009 is 41.6 million (94% of that in Central Serbia) with a tendency of slight decrease at an average rate of 0.2% per year. The average yield of plums in our country in last five years is 14 kilograms per tree.In the last few years, there have been more modern intensive plum orchards with planting density of 800 to 1,200 seedlings per hectare, and respectively 14 t / ha. However, there has been a large number of old, traditionally built plantations with planting density of 400 trees / ha and old assortment which yield about 8 kg per seedlings, or 3.3 t/ha, which is 5.9 tons lower compared to the actual European average (Slovenia has the highest average yield in Europe, with over 20 t/ha, while the average in the EU is 9.2 t/ha).The production includes a large number of old (decrepit) trees as well as plum orchards grown on unsuitable soil, due to which they are of irregular yield and weak productivity. Current production could be achieved from smaller areas than it is currently the case, whereby the areas would be freed for other crops. Although there are no precise data on assortment in Serbia, it may be said that a large number of autochthonous varieties, with their typical representative being the Požegača plum, to the most refined varieties, are cultivated. Generally speaking, the assortment structure is quite unfavorable because it is estimated that the autochthonous brandy varieties account for one half, and they are of a markedly fluctuating yield and very different, and even poor, fruit quality. The production of brandy has a predominant share in the structure of plum processing, because 75% of the total plum production is processed into brandy. The average production of brandy is 44.8 million liters, with a tendency of increase at a rate of 2.9% per year. Of the total production, 3.4% is processed into prunes, which is limited by market potentials or demand in domestic as well as international markets. The average production of prunes is 4,300 tons with a tendency of increase at a rate of 2.3% per year. The remaining produced plums are processed into jam as well as other plum products - marmalade, preserves and other.

Sour cherry

24

Sour cherries present an economically significant and promising fruit, primarily from the viewpoint of exports to international market. This fruit species is in the third place in areas under fruits in Serbia, as well as the total value of fruit production. The average number of productive sour cherry trees in Serbia is 8.6 million with a tendency of slight increase at an average rate of 1.6% per year. The yield of sour cherries per tree in Serbia is relatively modest and is 10 kg per tree, i.e. 8-10 tons/ha, which is 60% lower compared to the realized European average (Greece has the highest average yield in Europe, with 12 tons/ha). In the last five years, the average production of sour cherries has been at a level of 88,000 tons. The share of sour cherries in the structure of fruit production is 13.8%. The assortment of sour cherries is mostly adapted to the varieties used for industrial processing, with the Oblačinska sour cherry predominant among the varieties. Sour cherries present a good raw material for our processing industry. The largest part is processed into frozen sour cherries with or without pit, preserved sour cherries, as well as into sour cherry juice.

RaspberrySerbia is one of the biggest world known raspberry producers. The largest production areas under this fruit are in the production regions of Western Serbia (Arilje, Požega, Užice, Ljubovija) where around 55% of the total production is produced, Northwest Serbia (Valjevo, Šabac, Osečina) with 35% of production and Southwest Serbia (Brus, Aleksandrovac and Kuršumlija). Although the investments in plantation growing are relatively high, the invested funds are recovered quickly, because raspberries quickly become productive, provide an abundant and regular yield and their fruit reaches high price in domestic and foreign market. One-third of the world production of top-quality raspberries is produced in Serbia. The total area under raspberries in Serbia, in 2009 was 15,000 ha and its share in the structure of areas under fruit is 6.2%. The raspberry yield is 5.3 tons per hectare on average, which is 6% more compared to the realized European average. The average European production of raspberries is 357,000 tons. Raspberry assortment is mostly adapted to the varieties that are used for industrial processing, and the predominant varieties are mostly Willamette and Meeker. In our country, raspberries present the most profitable export article. A very small part of the total quantity of raspberries produced in Serbia goes to the domestic market as fresh raspberries, while the largest part is processed into frozen raspberries (Rolend, Grits, Block, Bruh, Original) and exported as such. In addition to the problems burdening the fruit production, the trends of increase in area, yield and production are generally positive. By eliminating or reducing the problems such as: low level of applied technology, traditionalism in production preventing the application of new technologies, insufficient areas with irrigation systems, low share of integral and organic production, obsolete machinery, low percentage of insured crops, small area covered by anti-hail networks, poor organization of producers into associations and cooperatives, obsolete assortment – the trends would be even more positive, contributing to the better economic standing of the producers and processors.

Processing and storage-main problems:

25

Production of raspberries and sour cherries in the period 2000 – 2007

0

20

40

60

80

100

120

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

sour cherry raspberry

• Inadequate facilities in term of meeting necessary national and international standards• Inadequate waste management• Inadequate connections with producers and producers groups

Processing and storage

Fruit processing has large industrial prospects. According to data from 2008, in Serbia, fruit is frozen and stored in 11844 cold storages and together with vegetable in 20 cold storages more. The total installed capacity of cold processing is 303,315 tons, of which 218,368 tons are used. Currently, 49 cold storages have or are in the process of introducing the ISO 9001 and HACCP standards. There are 39 plants for hot processing of fruit and mixed fruit and vegetables, but less than 50% of the facilities are operational. In addition to that, 20 plants for the production of juices and concentrates also operate. A significant number of processors do not operate or have lower-quality equipment, while only few companies have high processing technology. Extension of the fresh fruit season is also limited by storage capabilities. The problem is that the existing facilities are unsuitable, with an obsolete manner of storage and with no air-conditioning, resulting in large losses. Only a few of the 180 cold stores existing in Serbia have modern storage conditions with ULO (ultra low oxygen) technology, with only around ten of such storages existing in Serbia while the number needed is significantly greater. Also, some processing facilities still have no quality systems implemented. There is still little fresh fruit sorting and packing, especially when it comes to small packages. The following should be done in processing and storing of fruit:

Introduce obligatory maintaining of a register of processors and storage keepers;

Investment support by budget funds of the Ministry of Agriculture and the IPARD Fund for the construction of ULO cold storages, construction of new and adaptation of existing storages, purchase of dryers and fruit cleaning, sorting, sizing and packing equipment.

Support the introduction of the HACCP and ISO standards

Adopt new and harmonize the existing standards and regulations regarding the quality of fresh fruit as well as products obtained by fruit processing with the EU standards.

Prices

The prices of fruit are formed freely in the market as a consequence of agreement between buyers and producers. However, in order to improve the relations along the supply chain, it is necessary to adopt the Regulation on Purchasing and Buying Centers.Due to a great impact of climatic factors on agricultural production, the produced fruit quantities can vary significantly from one year to another, which has a direct impact on the purchase price of fruit. The prices of fruit in Serbia record a constant increase as a result of increased exports, high protection and similar trends in the international market.

Index of average price increase in the 2004- Trend in prices of particular fruit varieties, in

26

2007 period compared to the 2000-2003 average

the 2000-2009 period (RSD)

020406080

100120140160180200

2000 2001 2002 2003 2005 2006 2007 2008 2009

apple plum strawberry sour cherry

a. raspberries / strawberries / walnuts / sour cherries / cherries / apricots / peaches / plums / quinces / pears / apples; b. apples / plums / sour cherries / raspberries

The average wholesale price for apple, plum, cherry and raspberry in the period 2005-2009 (RSD)

The average retail price for apple, plum, cherry and raspberry in the period 2005-2009 (RSD)

0

50

100

150

200

250

2005 2006 2007 2008 2009

apple plum raspberry sour cherry

0

50

100

150

200

250

300

350

2005 2006 2007 2008 2009

apple plum raspberry sour cherry

The basic characteristics of the fruit market in Serbia are: The largest part of the produced fruit is sold at wholesale markets and green markets.

A generally low level of preparation for sales (packing, sorting, promotion...)

A low level of contracted production for known buyer.

The production is mainly geared towards export rather than to the needs of domestic market.

Not taking care of the demands and needs of customers. Namely, the production is still insufficiently adapted to the demands of customers.

Poor organization of the producers, both in the field of production and marketing.

27

There is no willingness to adopt new ideas and technology. The traditional method of production is dominant, while the younger and educated producers easier adopt the new ideas and technology.

It is not defined what can be offer to the market. We have not harmonize and synchronize the regulations for standard and quality of products, as well as the appropriate procedure to adopt them.

Products on the market are not sorted by size or shape or packed in an appropriate manner.

Lack of wholesale distribution centers and other points of sale equipped with adequate storage capacity

Serbia is a net exporter of fruits. The share of fruit exports and its products in the total value of agricultural and processed food products is about 15.6%. Based on the statistics of the total fruit production and exports in the total amount of fruit obtained from the customs data (pivot table) in the last five years, average exported amount is 17.31% of produced fruit (fresh, frozen and dried), and the rest are mostly processed in extracts of fruit (juices, jams, marmalades, compotes, etc.), sold in the domestic market or consumed in households. In total value of fruit exported, frozen fruit occupies the largest share of 80%, while exports of fresh fruit amounted to 16.6%. Only 3.4% refers to the dried fruits and processed fruit products. The biggest share of export has a raspberry, which in total agriculture export participate with the share of 16.34%.

The total value of fruit exports in 2001-2009 period (in millions of USD)

The value of fruit export by fractions in percentages

80%

16,6%

3,4%

frozen fresh dried and preserved temporarily

In recent years there has been noted an increasing trend of exports of fresh fruit. The largest increase in exports of fresh fruit was recorded with the apple. The greatest export of our fruit is on the market of the European Union where primarily frozen fruit is exported, frozen raspberries, cherries and blackberries mostly. Also, there are CEFTA partners, Bosnia and Herzegovina, Macedonia, Croatia and Montenegro, as well as the Russian Federation to be more open to these products from our country (the biggest breakthrough in this market is made with fresh apples). Fresh, frozen and dried fruits are the most exported to the Russian Federation - 38%, Austria - 16%, Bosnia and Herzegovina - 14%, Germany - 6%, Netherlands - 4% and Romania - 3% of the total value of exports of fresh fruits, while for other countries it is 14% of the value of exports. According to data from 2009 the export of fresh fruit by fruit species and by country is as

28

follows: Apple - Russia 80.02%, Bosnia7.32%, Montenegro, 6,24%, Germany 4.52%, etc.; Pear - Russia 75.58%, Montenegro 10.03%, Hrvataska 7.07% etc.;

Peach - Russia 45.28% Montenegro 20.12%, Bosnia15.34%, Romania 10.34%, Turkey 2.56%, etc.; Apricot - Russia 39.81%, Croatia 17.62%, Bosnia 9,23%, Montenegro 8.46%, Romania, 6,34%, etc.,

Cherry - Russia 92.12%, Montenegro 6,94%, etc.;

Plum-Rusija 57.20%, Bosnia 15.35%, Bulgaria, 8.39%, Montenegro 41%, Switzerland 4.86%, etc.; Strawberry - Russia 86.68%, Montenegro 7.18%, Romania 5,94% etc.

Top five in export in 2009. (million USD) Top five in import in 2009. (million USD)

199

31 30 15 14

020406080

100120140160180200

raspberry plum sourcherry

apple blackberry

61

48

6 5 3

0

10

20

30

40

50

60

70

citrus banana hazelnut apple almond

a. raspberry/ plum/ sour charry/ apple/ blackbarry

b. citrus/ bananas/hazelnuts/ apple/ almond

Although Serbia is a large producer of fruits, it is also imported, especially in the winter, mostly tropical and subtropical fruits (bananas, citrus fruits) but continental as well (apple, hazelnut, almond, apricot, pear). In total import of agricultural products, fruit has a share of about 15%. The biggest share of fruit import comes from the CEFTA partners.

Foreign trade of fruit in the period 2001-2009 in millions of USD

Export trend of certain fruit species in 2001-2009 period in millions of USD

29

0

50

100

150

200

250

300

350

2001 2002 2003 2004 2005 2006 2007 2008 2009Inport Export Balance

0

50

100

150

200

250

2001 2002 2003 2004 2005 2006 2007 2008 2009

apple raspberry sour cherry plum

Consumption

The average annual fruit consumption per capita is small in comparison with the European countries. It is encouraging that there is a trend of consumption increase of fresh fruit per capita, but also per household. According to Statistical Office data, fruit consumption per household amounts to 167.9 kg, of which 33.9 kg of apples, bananas 24.3 kg, 22.2 kg of citrus fruit, 7.6 kg of table grapes and other fruits, 79.9 kg. However, in comparison with countries in the region the consumption is still small, and the World Health Organization's recommendation is that the daily intake should be about 400 grams, which annually amounts to about 146 kg. Serbia is a major consumer of apples and according to the data of the Statistical Office data, apple is in the first place by consumption in the households, which in 2008. year amounts to 33.9 kilograms. The biggest stone fruit consumption belongs to peaches, nectarines and cherries, while the other fruits consumed is significantly less. Consumption of certain fruit species is seasonal, so the apples and pears are mostly consumed during the winter months, while the consumption of stone fruit is related to the summer period (Cherry - May, June - peaches, apricots and nectarines - June, July, August). Most of the produced fruit is processed. Stone fruit is processed most, pome fruit and berries significantly less, while nuts are processed to an insignificant extent and used as ripe fruits in unprocessed state. In recent years, a significant trend of increase has been noted in the consumption for processing industry, of over ten times for apples or several times in the case of plums. Apple is usually processed into juice, while more than 85% produced goes to plum brandy, and the rest is processed into dry plum, jam and other products - jam, marmalade, sweets and all. In addition to these listed species an excellent base for our manufacturing industry presents cherry which is frozen or processed into juice, as well as raspberry which is mostly frozen, but in recent years an increase of raspberry juice has been noted.

Consumption of fresh fruit per household in 2008 (in kilograms)

Consumption of apples and plums for industrial processing use in the 2000-2008 period (in

tons)

30

0 20 40 60 80 100

others

apples

bananas

citrus

stone grape

0

20,000

40,000

60,000

80,000

100,000

120,000

2000 2001 2002 2003 2004 2005 2006 2007 2008

apples plums

Stone grape / citrus / bananas / apple / other

VII SECTORAL ANALYSIS – GRAPE AND WINE PRO-DUCTION Importance and tendencies of the sector Grape and wine sector in the Republic of Serbia has long tradition and present unutilized potential i.e. grape growing on less fertile soils in hilly terrain areas. Indirectly, it gives opportunity to intensify rural development in those areas. On the other hand, wine is not only the agricultural and processed good with high nutritive and medicinal value; it also represents the indicator of cultural development of one country.Grape production is maintained on private family parcels within agriculture households with exception of 10 big wine producers (in the past state owned) which have their own vineyards. On the territory of the Republic of Serbia, based on statistical data from 1955, approximately 135 thousand hectares of vineyards were present. In 2009 this area was reduced on 58 thousand hectares. It is evaluated that at present the surfaces under vineyards are significantly less than the figure from 2009.

The long tendency of reduction of grape production and wine has evolved because of: Unfavourable market conditions,

Deterioration of big wine factories which have been purchasing the grape from producers,

Inadequate/bed assortment of vine grape and multi annual production of low quality wine,

Absence of clear legislation in the previous period,

Absence of wine quality categorization and lack of clear mark identification of those wines in the previous period,

Lack of modern processing units,

Bed image of Serbian wines and lack of media promotion,

Increase of cheap wine import as well as grapes from FYROM,

Lost of customers’ trust regarding quality and control of wine.

31

The wine consumption has been decreasing for long period. However, with the new state support measures and with private family winery of smaller capacity that produce high quality wine, the situation has been slightly improved. The increase of vine production with geographical denomination is detected and also the increase of high quality vines consumption.

Market chain of grape and wine production

Grape and wine production has very negative trend in the past few decades, mainly due to removing of vineyards, as well as collapsing of large state owned former winery. On the other hand there is a permanent increase in bulk wine imports from Macedonia, which is filled and packed in Serbia. Subsidies in this sector, implemented through the market and structural measures in the previous period was negligible compared to the necessary support needed to start the revitalization and development of grape and wine production.Providing inputs Certain problems in vine production and exploitation of the vineyard is often a result of poor quality planting material, inadequate application of fertilizers, land preparation, inadequate irrigation of vineyards with a table grape varieties, lack of clones of local and autohtonous species, as well as some other reasons which has a negative effect on the success of this production.Establishing new vineyards

From 2005 - 2009 most of the vineyards with support post have been raised in Srem and Zapadnomoravski region. Although Nisavsko-South Morava region is large area with big potential, in the past very small number of vineyards had been established. A similar situation is in the Timok region, area with huge potential for the production of red wine. Since Serbia imports huge amount of red wine, mostly from Macedonia and Montenegro, special attention needs to be paid in policy making process in respect to these regions.Grape productionGrape production in Serbia is characterized by: • inadequate assortment and neglected vineyards, • High costs of production, • fragmentation of parcels under the vineyards and the impossibility of raising large scale vineyards due to fragmentation of plots, • high price competitiveness of grapes from Macedonia, • lack of manpower, especially for pruning and harvesting as well as unfavorable age structure of grape producers.Although the data of the Statistical Office of Republic of Serbia from the 2009 show that there are approximately 58 000 hectares under viticulture and over 300 million grape-vines, in reality the surface under the culture is much smaller, estimated at about 20,000 hectares.Distribution of grape production is based primarily on the large wineries such as AD "Vino Zupa, AD "Rubin" and AD "Vrsac vineyards”, who buy grapes of varying quality. Other wineries buy generally smaller amounts of higher-quality grapes, and wine production is based mainly on their own production of grapes.Grape production largely depends on climatic conditions and varies from year to year around an average value of 380 000 tons of grapes (statistical data from 2001 - 2009). Since the production of grapes in Macedonia, far cheaper because of better production conditions which contribute to lower the price of grapes, some wineries import grapes for further processing, which have a negative impact on domestic producers of grape and wine production in Serbia.

32

Processing of grapes and wine productionWine production in Serbia depends primarily on annual climatic-meteorological conditions, and based on statistical data (2001-2009) is 172,253,556 liters. Considering that the usual grape/wine ratio is 65 percent, around 265,000 tons of grapes is processed. Based on the evidence of wine producers, it is estimated that the data concerning processing of grapes and wine production are lower than the statistical data.World and regional productionThe largest producer of grapes and wines in the world, the European Union, has certain problems with excess of wine, which has resulted in radical reform of regulation of the sector in 2008.In the last two decades, it is noted extraordinary expansion of production of grapes and wines in the so-called "New World" countries, such as Argentina, Chile, United States (California), Australia, South Africa, New Zealand and etc.After the establishment of free trade, these countries achieved a permanent increase in wine exports to the EU, where the consumption of non-European wines is on the rise. For this reason, the new European Union reform encourages the removal of the vineyard with uncompetitive wine, and the allocation of funds is done individually towards member states.For Serbia, the largest competitor in terms of wine production in the region is Macedonia, which has a comparative advantage in production of grapes and wine in terms of favorable agro climatic conditions, cheaper labor, more competitive prices of grapes and wine, etc.Although Montenegro has a relatively small area under viticulture, wine from this country is competitive on the Serbian market.

Winery types

Due to big diversity in size and level of production specialization, producers are divided into few categories (big, medium size and small wineries). The Ministry will support them all. There are very few big wineries in Serbia, even though their share in total production is big. Mid size wineries present the most active group of grape producers, since growing number of family wineries increase their production volume, thus shifting from small size to mid size category. Small wineries are the most numerous categories, even though their ratio in total production is not the biggest. Measures of the Ministry will have main aim to shift producers in higher category.

Production of wines with geographic indication

Rising production of wines with geographic indication resulted in higher number of producers who are in the procedure of control of grapes and wine production. From 7 in 2008/2009 the number increased to 40 in 2009/2010 and 49 in 2010/2011.

Processing capacity and the main problems

After the collapse of a number of former state owned wineries, a number of processing facilities are not in use anymore. Long non-use of facilities or equipment, caused it to become useless. General problems in the production of wine are: • outdated technology and equipment, • lack of technology for the controlled fermentation and cold stabilization of wine • insufficient training of some manufacturers.

33

Import of grape for further processing (kg)Import of grape for further processing , share per country (period 2005-2009)

1.742.4553.154.605 2.219.314 1.983.32216.837.837

0

2.000.000

4.000.000

6.000.000

8.000.000

10.000.000

12.000.000

14.000.000

16.000.000

18.000.000

2005. 2006. 2007. 2008. 2009.

ЦЕФТА ЕУ Остале

94

6

Македонија Остали

Critical situation in terms of equipment is at the manufacturers who still use traditional equipment for the production of wine, which causes inadequate quality of the wine. A common problem is sanitary-hygienic conditions in which wine production is undertaken.

Prices

We distinguish the prices of table and wine grapes. Due to price seasonality, domestic table grapes is the most expensive in July, after arriving early varieties such as Cardinal, Karmen, Prima, Ora et al. Higher price of grapes is also affected by the import of grapes out of season, especially from Greece, Italy and Macedonia. In this regard, it should stimulate the raising plantations of very early table grape varieties.Consumption and price of table grape varieties in Serbia 2000-2008

0

5000000

10000000

15000000

20000000

25000000

2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008.

Кило

грам

а, k

g

0

10

20

30

40

50

60

70

80

90Д

инар

а/kg

Потрошња грожђа у Србији Грожђе за јело, откуп (ВП цена)

Грожђе за јело, продаја (ВП цена) Грожђе за јело (МП цена)

Price of the wine production varieties varies depending on the color and purpose, but generally the average is around one RSD per percentage of sugar in the pomace, but that the

34

price of red wine grape varieties is higher than whites. Due to lack of sufficient quantities of grapes for high quality wine, the price of grapes varieties that are deficient in the market (Cabernet Sauvignon, Merlot, Sauvignon Blanc, Chardonnay) are moving up to 2 RSD/percent of sugar in the pomace. In accordance with the new trends of the production of autochthonous wine grape varieties, an increase in the demand of the grape varieties (Prokupac, Tamjanika, Skadarka) is noted, and the price of these varieties of grapes a bit higher than usual. Due to increased demand, continued price growth is expected of autochthonous grape varieties. Retail price of bottled wine mostly depends on the type of wine. In the period 2003-2009 red wine achieved higher price (an average of 135.0 RSD) than white wine (an average of 97.6 RSD). This cost relates primarily to lower-quality wines that are dominant in the market. Price of high quality wines produced by small wine producers is an average 400- 2,000 RSD. These wines are scarce in the market and can be found mainly in the special retail stores and restaurants. Lowest price and the lowest income is achieved through primary production of grapes, a bit better prices and higher income is achieved through secondary activity, ie. processing of grapes and wine production, while the tertiary category achieves the highest price and highest profit from the sale of wine, the final consumer. The growth of prices and profits is not proportional, due to individual presence and a relatively weak organization of producers of grapes and wine in relation to trade and catering sector. Price shift along the market chain has certain specificites when it comes to wine, and especially the Serbian high-quality wine produced by medium-sized manufacturers. Namely, since the Serbian wine is scarce product, this wine achieving a high final price, especially in restaurants, which often exceeds the price of international and regional wine of the same quality. However, due to the multiple margins that retailers and caterers charge for the sale of this deficit product, it can be concluded that the greatest profit from the sale of wine gets the last link, ie. final retail or caterer. Trade and marketingIn terms of wine exports in the previous period there was the biggest export rate of still wine exports in the original packaging, and smaller exports of semi sparkling and sparkling wines, wines in bulk, pomace and other special wine (vermouth, sherry, etc.) both in quantity and in value of exported wine

Export of different wine types (liters) Import of different wine types (liters)

35

0

2.000.000

4.000.000

6.000.000

8.000.000

10.000.000

12.000.000

2004 2005 2006 2007 2008. 2009.

Остали типови вина

Шира

Вино у ринфузу

Мирна вина

Пенушава и

полупенушава вина0

5.000.000

10.000.000

15.000.000

20.000.000

25.000.000

30.000.000

35.000.000

2004 2005 2006 2007 2008. 2009.

Остали типови вина

Шира

Вино у ринфузу

Мирна вина

Пенушава и

полупенушава вина

In terms of import, in the previous period Serbia has imported mostly wines in bulk and still wine, followed by sparkling and semi sparkling wine, pomace and other special wine (vermouth, sherry, etc.).. Although in the last two years import of wine in bulk present significant share of imported wines, in 2008 and 2009 this trend was reduced. In the period 2004 - 2009 the value of total exports is recorded a mild and constant growth (of 8.5 million dollars in 2004 up to 14 million in 2009). At the same time, the value of total imports of wine grew, but much higher than the growth in exports (from 11 million in the 2004 year to $ 39 million in 2008). Imports in 2009 year remained at the level of the previous year to $ 39 million dollars. Generally speaking, Serbia achieved a negative balance in foreign trade both for the value of wine as well as the quantity.

Foreign trade balance 2004 – 2009 (liters)

Import Export Deficit

In recent years the largest volume of trade with wine, Serbia has had within the region of Southeast Europe and the Western Balkans (so-called market multilateral free trade agreements or CEFTA market).

-30.000.000

-20.000.000

-10.000.000

0

10.000.000

20.000.000

30.000.000

40.000.000

2004 2005 2006 2007 2008 2009

Увоз Извоз Дефицит

36

In the previous period, over 50 percent of the wine that was exported from Serbia is exported to CEFTA market. It is also significant trend of growing exports to this market. In 2004, 53% of the total exported wine was at the CEFTA market, while in 2009, the share was 71%. In the same period, as regards the import of wine, 88% of wine was imported from CEFTA markets.A significant wine market for Serbia is European Union market, where Serbia exported 42% in 2004. In recent years there is declining trend of export in the EU whereas there is increase in wine exports to the CEFTA market and market of the Russian Federation. In 2009 export to the EU amounted to 4.5 percent of total exported wine. In that period since 2004 - 2009 the total import of wines from the EU market was in the range of 3-11% of the total quantity of imported, mostly high quality wine. Part of the wine trade takes place with other countries, with exports of wine on the market ranges from 4% of total exported quantities of wine in 2004 year, up 25% of the total quantity of wine exported in 2009 year. Serbian import from this market is about 1% of total imported volumes, mostly of high quality wines. Export of wine in 2009 years has been mostly oriented towards Bosnia and Herzegovina, the Russian Federation, Montenegro, following by Germany, Austria, and others.In 2009, wine was mainly imported from Macedonia, Montenegro, Bosnia and Herzegovina, Italy, France, Slovenia, Spain and other countries.

Consumption of grape and wineConsumption of fresh grapes and wine in Serbia is low compared with other countries and is only 2.27 kg per capita (2000-2008) of fresh grapes, or 3.17 liters of wine per capita (2000-2008). According to the FAO study, wine consumption per capita is between 8.8 and 10.9 liters.Distribution to the final wine consumers are conducted through wholesale and retail trade chains for consumer goods, specialized shops (wine cellar) and catering facilities (restaurants, hotels, motels, rural tourism facilities, etc.).. Apart from these, conventional distribution channels, consumption of wine is occurring in households themselves, farms that are engaged in amateur or semi-professional production of wine for their own consumption. In regard to this, in regular shops consumer can find mainly imported wines of different quality and local wines of low or medium quality. High-quality Serbian wines are distributed mainly through specialist shops or restaurants. Low consumption of grapes and wine is primarily affected by: • weak assortment of fresh grapes, ie small number of table grape varieties in the production, which are dominant at the domestic market, which results in a short season of consumption of grapes, • lack of adequate capacity to store fresh grapes, and therefore there is expensive imported grapes (Italy, Macedonia, Greece) off season

• aggressive campaign of breweries and a tradition of consuming brandy• weak purchasing power,

Trend of grape and wine consumption in Serbia 2000-2008

0,00

0,50

1,00

1,50

2,00

2,50

3,00

3,50

4,00

2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008.

Потрошња вина по глави становника, l

Потрошња грожђа по глави становника, kg

37

• insufficient production of grapes, both table, and wine grape varieties, due to the removal of the vineyard and viticulture in the previous period,• low supply of local wine retailers and consumer goods, but mainly in specialty stores and restaurants,• low level of awareness of domestic consumers about nutritional and health characteristics, as well as quality of wines and a frequent habit of using wine in combination with other drinks (wine with soda, "" wine with coca-cola "), and• Insufficient promotion of wine.

6. Strategic and institutional framework of Serbia’s agricultural policy

6.1 Strategic framework

In the beginning of the year 2000, Serbia’s agricultural policy was focused toward solving urgent problems and repairing the existing state after the crisis of the 1990s. The main focus of the agricultural policy was to support farms by subsidies for changing the production structure. Opening of the foreign market and the autonomous trade preferences of the EU (contained in the Resolution 2007/2000 EC and Regulative 2563/2000 EC), together with the privatization of industrial companies (mainly sugar plants and edible oil refineries) have had a positive influence on export possibilities. The subsidies which the MAFWM offered for the production of industrial crops have influenced a change in the production structure and the provision of raw materials for food products. During this period (2000–2003) system solutions for the authority of certain institutions were changes as well and the control system was strengthened in the areas where criminal trade activities were strong in the 1990s. Relatively modest budget funds for agriculture prevented the implementation of more radical changes in the support mechanisms.

From 2004 onward, a significant change in Serbia’s agricultural policy was made. The strategic goals and the implementation mechanisms were drastically changed compared to the past period. The reformed agricultural policy was supposed to contribute increase the competitiveness of commercial family farms, with a change in the implementation mechanisms from encouraging profits to encouraging investments. The Agricultural Development Strategy was approved by the Government of Serbia in 2005 (Official gazette of the Republic of Serbia no. 78/2005). The Strategy defines the main strategic goals:

- Build a sustainable and efficient agricultural sector that can compete on the world market and improve the GDP

- Provide food supplies, which satisfy the consumer demands in terms of quality and safety

- Retain support for the living standard of people who are dependent on agriculture and cannot follow economic reforms

- Ensure the support for sustainable rural development- Protect the environment from the hazardous effects of agricultural production- Prepare the agriculture of Serbia for the EU integration- Prepare the domestic agricultural policy and trade support for the WTO rules

Besides the Agricultural Development Strategy, many other strategic documents were adopted during the 2001 – 2007 period, which concern (wither directly or indirectly) certain

38

aspects of agriculture and rural development. The strategies adopted by the beginning of the transitional period do not explicitly mention rural areas, their potentials and limitations and structural problems, but these issues were elaborated in several characteristic terms: agriculture, undeveloped areas/regions; population migration and aging; environment protection; development of small and medium sized enterprises; rural tourism etc. The following strategic documents are explained in more detail in the Annex section:

1. Poverty reduction strategy2. National strategy for Serbia and Montenegro EU accession3. Sustainable development strategy 4. The national industry development strategy5. Serbia's regional development strategy for the 2007-2012 period6. National environment protection program7. Strategy for the development of Serbia’s tourism for the 2005–2010 period8. Strategy for the development of small and medium enterprises9. National employment strategy

*Even though the strategic documents and operational plans of other ministries envision measures intended for rural areas and their specific development environments, the inter-ministry cooperation in the area of rural development is not officially supported and there is no governing body which would coordinate and follow the activities of the Government at the highest level. The nonexistence of this body makes horizontal communication and coordination more difficult and certainly decreases the efficiency of state policies.

Connectivity with other strategies

Storong, direct focus on the topic

Human potential and migrations

Life quality Economic structure and performance

Environment and rural ambient

There is correlation with the topic, indirect connection

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Com

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rura

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onom

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No contact at all

Poverty reduction strategy

39

National strategy for Serbia's and Montenegro's EU ascensionStrategy and action plan of regional developmentNational economy development strategySustainable development strategyStrategy for small and medium enterprise developmentNational strategy on health careAgricultural development strategyForestry development strategyStrategy for the education of grown upsFood safety strategyWater management basis of SerbiaForestry policy of SerbiaNational waste management strategySerbian tourism strategyNational program of environmental protectionSerbia’s energy development strategy

6.2 International framework and demands (EU, WTO and CEFTA)

In accordance with the determination of market conditions for the Serbian economy and its strong involvement in international economic integration - the process of accession to the WTO and accession to the European Union has been initiated, the intensification of economic cooperation in the region and improvement of trade and overall economic relations with other countries.

The Republic of Serbia has successfully finalized the negotiations concerning the signing of the EU Stabilization and Association Agreement. The agreement was signed on April 29th

2008 in Luxemburg. At the very same day, the Transitional Trade Agreement between Serbia and the EU was signed. However, although the application of the Transitional Trade Agreement was supposed to start on the 1st of June 2008, the application was suspended due to Serbia’s inadequate cooperation with the ICTY in the Hague. The Republic of Serbia began to apply the Transitional Trade Agreement on January 30 th 2009, which initiated the deadlines of the Agreement (the transitional period for certain agricultural product groups is six years). In order to accelerate Serbia’s integration into the EU, the Government of Serbia has adopted the National Program for Serbia’s integration into the EU on October 9 th 2008. This document determines the transposition dynamics of the EU regulations into the national regulation register until December 31st 2012 when the national legislative structure should become fully compliant with the EU legislation. In order to accelerate the transposition process, all European legislations have been divided into 35 chapters which correspond to the structure of chapters which are opened during the EU accession negotiations. The MAFWM is responsible for the chapters which are related to agriculture and rural development, veterinary, phyto-sanitary, as well as food safety and fishing policies.

40

The agreement on free trade in South Eastern Europe - CEFTA 2006 was signed in Bucharest on 19 December 2006. years between Albania, Bosnia and Herzegovina, Croatia, Macedonia, Moldova, Serbia and Montenegro and UNMIK / Kosovo. By this, the network of bilateral agreements was replaced by multilateral regional agreement on free trade that included Montenegro, which has become an independent state, and UNMIK / Kosovo as a separate customs territory within the Republic of Serbia. For agricultural products, approved tariff concessions in the bilateral FTA were transferred. Annex III of the Agreement include agricultural concessions. At the same time, the provisions of Article 10 of the Agreement stipulates that by 1 May 2009 the CEFTA members should consider approving additional concessions in agriculture in order to, not later than 31 December 2010, established the free trade zone between all parties, signatory of this Agreement. In accordance with the provisions of Article 10, Paragraph 3 of CEFTA Agreement, in 2009 further liberalization of agricultural products exchange was harmonized. The obligation of the Republic of Serbia for approval of further agricultural concessions related to the exchange with Albania, Croatia and Moldova, as with other signing parties already has established a complete liberalization of trade in agricultural products. Serbia, Moldava and Albania have agreed on full liberalization of mutual trade of agricultural products, and with Croatia a significant improvement of the existing concessions for agricultural products. In accordance with the conclusions of the meetings of the Joint Committee held in Podgorica, 29 October 2009, it is expected that the signing and ratification of the Additional Protocol and implement of the negotiation results on liberalization of agricultural trade, begin not later than the 1 July 2010. Free Trade Agreement between Serbia and the Member States of the European Free Trade Association (EFTA), was signed on 17 December 2009, and will enter into force as soon as the agreement is ratified by the Republic of Serbia and at least one party of the EFTA states. By this Agreement the Republic of Serbia will institutionalize the economic cooperation with EFTA states, which is another step towards to the better position of Serbia in the regime of free trade. Given that the European Union, firsty by bilateral agreements with the EFTA countries, and then by conclusion of the EEA (European Economic Co-operation), has expanded internal market to EFTA countries, the conclusion of agreements on free trade with EFTA countries have economic and political importance for the Republic of Serbia as well.

Bilateral agreements

The Agreement with the Russian Federation was signed on 28 August 2000 and ratified on 9 May 2001 year. It was applied on the day of signing. Agricultural concessions are asymmetrical in favor of the Russian side. On the lists of agricultural products that are not in the regime of free trade, in import from the Russian Federation, on the Serbian side there are no agricultural products, while the list of agricultural products that are not in the regime of free trade, with imports from the Republic of Serbia in the Russian Federation, there are seven groups of products.On several occasions, since April 2005 until now, there has been considerations with Russia on reduction of exceptions to free trade, but asymmetry in favor of the Russian side continues to exist in mutual trade of agricultural products, although the situation in production, the economic effect of market conditions in the domestic market and in foreign trade of these products, in both parties, particularly in the Republic of Serbia, has changed dramatically

41

over time in which a free trade agreement with the Russian Federation was concluded (the Agreement was harmonized in conditions of economic blockade and the deficit of goods on the Serbian market). Agreement on further liberalization has been achieved at the beginning of 2009. and applies from 3 April 2009. year.

Serbia and Belarus on 30 March 2009, in Minsk, signed the Free Trade Agreement. It was applied on the day of signature, and Assembly of the Republic of Serbia has ratified the same in December 2009 (Official Gazette RS, No. 105/09). Agricultural concessions approved by parties under this Agreement are fully symmetrical. Agreement is followed by the "negative list", which means that the total trade is liberalized except of those that are under the tariff lines listed in the appropriate annexes, and except for the tariff lines that are excluded from free trade regime. Concerning the agricultural concessions in the Free Trade Agreement between Serbia and Belarus from the regime of free trade, three groups of products are exepted: sugar, alcohol and cigarettes. Observed under applicable Customs Tariff of the Republic of Serbia, in relation to the total number of tariff related to agriculture,it amounts about 7%. Free Trade Agreement between Serbia and the Republic of Turkey was signed in Instambulu on 1 June 2009, and shall enter into force on the first day of the second month after receipt of the last written notification through diplomatic channels, where Parties should notify each other that they met all required conditions laid down in their national legislation for the entry into force of the Agreement. Trade liberalization of agricultural products (opposite to industrial products) is not comprehensive. Narrowed scope of liberalization in the framework of preferential quotas was agreed. All products and product groups for which the agreed liberalization of trade refers are the products of plant origin, as well as for the fish. Products of animal origin are fully excluded from liberalization.

The economic advantages of these agreements are reflected in the free flow of commodities, services, people, capital and ideas. Furthermore, this will result in an increase of trade, the harmonization of industrial development, forming a significantly larger market, improving the industrial cooperation on a higher level, and a larger income of foreign investments. For agricultural business companies the trade liberalization process includes market business conditions and a strong competition, which demands a further increase in the technological production, efficiency and productivity levels and the application of modern management and marketing techniques. Consumers are provided with a higher standard through a more varied supply of high quality and cheep commodities.

Negotiation areas concerning Serbia’s international integration processes

The aforementioned integration processes are mostly being carried out simultaneously. The timeframe of these negotiations which coincides with the next round of the multilateral WTO negotiations and the dynamic reformation process within the EU CAP makes this process very complex and demanding.

7. SWOT ANALYSISStrengths and weaknesses encompass the internal sector analysis; opportunities and threats refer to the tendencies and possible development of the events in the external (European and Worldwide ) environment.

AGRICULTURE: STRENGTHS AND WEAKNESSESStrengths Weaknesses

Physical / climate

42

Physical / climate Favorable climate conditions for crop cultivation

and livestock keeping Good conditions (arable land of good quality, and

ratio of arable land per population unit are above average)

Geographical variety Water abundance Potentials for developing high quality products

(organic, integral etc.) Large amount of biomass in agriculture Unpolluted soil and water due to low fertilizer

and pesticide use

Trade / commercial Strategic geographic position Production of quality raw materials and good

processing capacities Traditional export of food products into

neighboring countries (good market connections for Serbian products in neighboring countries)

Comparative advantages in berry fruit production Large potential for exporting agricultural products The possibility to export agricultural commodities

to Russia (free trade) and CEFTA counties

Structural / social A strong tradition of agricultural production Low workforce costs Lower prices of arable land compared to the EU

countries

Regulatory / political Increased support from the state budget during the

recent years Understanding the key role of agriculture in the

industrial and rural development

Aging population and quick depopulation in rural areas Unresolved ownership and legal issues with farms (lack

of records) Extreme climate conditions during the recent years

(draught, floods, hail)

Trade / commercial Weak connections with consumers and market signals Poor organization of farmers and trade cooperatives Insufficient resources for agricultural credits Lack of standards in agriculture (product branding etc.) Lack of food control and safety standards Insufficient capacities of inspection and control services Technologically outdated processing capabilities

Structural / social Lower productivity due to the age structure and low

degree of farmer education Outdated and inefficient use of agricultural

mechanization Low level of using production resources on farms Insufficient use of extension and advisory services Lack of competitiveness of small and medium sized

farms Inadequate management of agricultural waste Small product assortment (week production

diversification) Lack of business culture Barriers for starting agricultural business and lack of

land trade (including trade and leasing) Too many links in the livestock production chain Low awareness concerning environment protection

issues Lack of dedication toward quality and the consumer

demands Low awareness concerning the use of biomass inadequate animal welfare on farms Low availability of farm insurance

Regulatory / political Lack of advanced trainings and support services which

would attract young farmers and lack of interest for training

Lack of policy coherency due to opposite demands

43

AGRICULTURE: OPPORTUNITIES AND THREATSOpportunities Threats

Production / supply The development of fruit, vegetable and vinery

production The development of beef, baby beef and pig

meat, especially for traditional foreign markets The development of high quality products

(organic, integral production)Trade / commercial A higher demand for food products worldwide is

anticipated Improving the productivity by using new

technologies Improving the continual supply of good quality

products Increase of demands for organic and integral

products Increased use of agricultural products as

renewable energy sources (bio-diesel, bio-ethanol or as fuel for heating)

Increased demand for brand marked products Protected Designation of Origin (PDO) and Protected Geographical Indication (PGI)

Structural / social More opportunities for employment outside the

farms in order to increase income Development of non-agricultural activities in rural

areas

Regulatory / political More stable political environment by obtaining the

EU candidate status New initiatives and cooperatives in rural

development Development of rural infrastructure with the

support of State budget and EU funds Liberalization of international markets for certain

agricultural sectors

Production / supply Drastic climate fluctuations (draughts, floods,

hail)

Trade / commercial Monopoly of the agricultural product by big retail

chains Large oscillations in production scope, product

quality and market prices of agricultural products Increasing dependence on imported production

materials Increase of competitiveness and production

diversification in the region Liberalization of international markets for certain

agricultural sectors

Structural / social Lack of expert knowledge and a reduction in

productivity of a large number of farmers for whom farming is an additional income source

Improved conditions for employment outside the farms and low income levels, poor image of agricultural work which reduces the chances of young people remaining on farms

Influence of transitional processes, especially in the privatization sectors and a rising pressure on employing surplus workers in agriculture

Regulatory / political Lagging behind with the EU accession Difficulties caused by animal disease problems Stricter regulations in terms of food safety,

environment protection and animal welfare and the ability of the farmers to adapt. This could turn into an opportunity if Serbia adopts and enforces the standards

Public and political reaction due to pollution caused by extensive agriculture

FOOD INDUSTRY: STRENGTHS AND WEAKNESSESStrengths Weaknesses

Trade / commercial Raw materials obtained from domestic production Traditional export of food products into

neighboring countries (good market connections for Serbian products in neighboring countries)

CEFTA membership

Structural / social Strong foreign direct investments into the food

industry

Regulatory / political Low tax rates on company profit Product brand marking for certain commodities

Trade / commercial Dependence on a small product assortment Lack of direction of farms toward exporting Lack of investments into dynamic industry

branches (beverages, additives, instant food) Lack of experience in working with large retailer

chains Variable quality of raw materials High dependence on a large number of individual

producers Dependence on variable markets of third worked

countries Weak research and development field in many

companies Small capacity of the domestic market

Structural / social Low level of foreign investments in certain

industry branches Outdated technology which needs to be

modernized Inadequate production scope compared to world

ranking competitors, especially concerning instant food

Weaknesses and shortcomings in the management field

Organizational weakness of micro, small and medium sized enterprises

Regulatory / political Complex and long lasting production processes Limited capacities for monitoring the safety of

food products

FOOD INDUSTRY: OPPORTUNITIES AND THREATSOpportunities Threats

Trade / commercial An ever growing international market of food

products, beverages, additives etc. Variable consumer tastes and trends create new

market policies i.e. an increasing demand for organic and quality food products, but it is necessary to have a strong research field which is identified as a weakness

Improvement of productivity and the development of new technologies – biotechnology can create new opportunities, but the reaction of consumers is clearly the key point

WTO membership

Structural / social Further economic connection of companies which

creates opportunities for a greater economy scope

Regulatory / political Free world markets, which open up the

possibilities of export, but also represent a threat unless the food industry of the Republic of Serbia isn’t competitive

EU membership candidate status of Serbia should improve the standing on European markets

Trade / commercial Quick changes in consumer demands and trends Increasing competition on international markets Nationalization of European food product markets

as a consequence of the care for product safety Pressure on the company margins and the

rationalization of product acquisition methods caused by a large concentration of retailer chains

Centralized distribution creates certain difficulties for some small companies – but it can present an advantage for Serbia on the export markets

Changes in the Dinar / Euro exchange rate Increasing costs and difficulties for establishing

new companies The appearance of strong international brands in an

increasingly integrated European market WTO membership can represent a serious threat

for some agricultural sectors Increasing international competition

Regulatory / political Costs of an increasing number of regulations (and

consumer demands) concerning food safety, environment protection and animal welfare

Consumer demands concerning quality brands Lags in the development of infrastructure

RURAL ECONOMY: STRENGTHS AND WEAKNESSESStrengths Weaknesses

Natural / climate Serbia is one of the 5 European biodiversity

centers Serbia borders with 3 EU member states Areas of exceptional natural characteristics A large number of spas and thermal springs Forests, rivers, lakes which offer hunting

possibilities

Trade / commercial Focus of certain farms toward export A large part of the raw materials comes from

domestic production

Structural / social Certain very strong domestic companies Potential for rural tourism and other specialized

tourism forms Production increase of highly competitive

commodities Preserved local tradition and village areas Unpolluted soil and water

Regulatory / political Some products have brand marks Status of potential EU candidate country which

dictates the obligation to fulfill EU standards Traditional hospitality of the Serbian people

Natural / climate Inadequate waste disposal Uncontrolled use of fertilizer and pesticides

Trade / commercial Underdeveloped business enterprise in rural areas Weak research and development field Small domestic market Low diversification of economic activities High inflation rate, compared to the EU

Structural / social Lack of production scope compared to the

competitors on the world market Lack of new spatial plan of the Republic of Serbia Inadequate infrastructure Low degree of education and special skills High unemployment rate Low income per population unit Lack of employment possibilities in rural areas High index of rural poverty Unsustainable use of natural resources Organizational weaknesses of small and medium

sized enterprises in rural areas Very weak cooperation between various ministries

concerning the rural development policy Inadequately developed public awareness about the

concept and the significance of rural development Limited capacities for quality and safety standard

monitoring of food products Nonexistence of a national laboratory for food

safety

Regulatory / political Slow legislative harmonization with the EU

regulative

RURAL ECONOMY: OPPORTUNITIES AND THREATSOpportunities Threats

Natural / climate Conservation of the biodiversity and good soil

and water quality Subsidies for farmers aimed at environment

protection and sustainable use of natural resources

Trade / commercial An increasing international market for rural

tourism etc. Competitive advantage, which comes from

consumer demands for food safety, environment protection and animal welfare

The development of small and medium sized enterprises and businesses

Structural / social Cooperative unions of companies creates

opportunities for an increase in the production scope, processing and market placement

Diversification of rural economical activities IPARD EU funds Cross-border cooperation and projects

Regulatory / political Free world markets open new export opportunities

but also represent a threat if Serbian companies do not become competitive

EU membership candidate status of Serbia should improve the standing on European markets

Increasing restrictions concerning environment protection

Natural / climate Unsustainable use of natural resources Negative consequences of climate changes

Trade / commercial Fast changes in consumer demands and

consumption trends Increasing competition on the international market Lack of qualified workforce in certain specialized

rural enterprises (i.e. tourism) Expenses and difficulties with establishing new

companies The appearance of strong international brands on

the more integrated European market can be a threat to Serbian service enterprises

Regulatory / political

Increasing lag in infrastructure development Increasing restrictions concerning environment

protection Problems with accessing certain markets due to not

fulfilling the required food safety and quality standards

Difficulties with obtaining the necessary documentation in accordance to the Law of Planning and Building

Lack of financial funds for supporting the implementation of agricultural ecologic measures

PART II

Introduction

An in-depth baseline analysis of the current state of agriculture, the food industry and rural economy along with the SWOT analysis, where all stakeholders participated via workshops and public discussions, are indicators of the current state i.e. the represent the starting point of this strategy. Base of the current baseline analysis, in cooperation with the stakeholders, the basic directions which the strategy needs to focus on have been determined.

Firstly, the strategy should focus on improving the competitiveness of the registered agricultural holdings for which agriculture is the primary business. Bilateral negotiations between Serbia and the WTO, the CEFTA agreement and the EU integrations will eventually lead to the reduction of the protective measures and a liberalization of the agricultural and food product markets. The family farms will especially be threatened by the foreign competition, so an increase in competition of those farms will be a key factor, which will help the continued survival of that part of the population in rural areas. However, increasing the competitiveness of Serbian farms cannot be in conflict with the environment protection policies. Sustainable rural development is crucial for the Republic of Serbia. Sectors, in which the need for an improvement of competitiveness and the application of EU standards and regulations is the greatest, are: grain and industrial crop production, milk production, meat production, fruit and grape production and vegetable production and processing in all afore mentioned sectors.

Nowadays, product distribution and marketing has become critical issue for family farms, comparing to the past when the only focus was production. There are many factors which can improve the agricultural product sale: a sufficient amount of quality products needs to be available and value adding (washing, polishing, cleaning, packaging, classifying, storage and processing) for current primary products needs to be considered. One of the solutions is forming farmer cooperatives and raising the capacity for product acceptance, storage, packaging and sale on the agricultural market. The other important solution is support to processing industry. The processing industry needs to offer a solution which will prepare products in accordance to consumer demands for the demanding foreign and domestic markets. The main problem of Serbia’s processing industry is the insufficiency of quality raw materials, which can be solved through either farmer cooperatives or improved connection between the farmers and the processors and the latter two groups with the market i.e. establish "value chain" approach. The other problem is nonexistence of certain management and quality standards within the processing business and further marketing. The solution lies in modernizing the technology and implementing the necessary standards.

Besides farms, which will be able to manage their existence through the aforementioned agricultural measures, a large number of medium and small farms remains, which need to find other sources of income if they want to continue living in rural areas. These farms need to be offered other employment possibilities through activity diversification on the farm or by offering employment outside the farm but in the local area. Special care needs to be taken of young people and women because those groups are the basis of the survival of the rural population. Relevant Ministries should assist local authorities in improving living conditions in rural areas in terms of education, health care, infrastructure etc.

8. The vision of Serbia’s rural development for the 2011–2013 period

In cooperation with all stakeholders a “Vision for rural Serbia” until 2013 was created and represents a grouping of three “sub-visions”: the vision for the agricultural sector, the vision for the food industry and the marketing and vision for Serbia’s rural economy as a whole.

8.1. The vision for the agricultural sector The vision for the agricultural sector encompasses development of a dynamic and competitive agriculture which: is composed of commercial farms and family farms that exclusively work in the

agricultural business and/or use agriculture as an additional source of income, produces quality products using Good Agricultural Practices, provides sufficient income for family farms, focuses its production industry on fulfilling consumer demands and preferences, closely cooperates with the food and processing industries, uses natural resources in a sustainable way, is cohesively integrated into the rest of the rural economy and society, and positively and significantly influences the environment protection.

8.2. The vision for the food industry The vision for the food industry encompasses the development of an industry that is: focused on fulfilling the needs and wishes of the consumers, focused on innovation, quality, high degree of food hygiene and safety standards, based on strong, aggressive marketing on the individual and collective level based on the development of strong cooperation relationships with farmers and their

cooperatives able to guarantee high food quality and safety standards conceived in such a way which optimally use production capacities able to provide sufficient profitability for the necessary investments and hiring of

capable management staff able to encourage the development of small and medium sized enterprises which brand

mark their products (PDO-Protected Designation of Origin) and (PGI-Protected Geographical Indication), as well as produce commodities based on traditional recipes.

8.3. The vision for rural economy and the rural community The vision for rural Serbia encompasses the development of rural economy and society where: exist strong and sustainable village communities with a balanced demographic, sufficient

income and good employment possibilities, where the population can easily adapt to economic, social, political and ecologic changes („a living village“)

the largest part of the population remains in the villages equal possibilities for all rural population categories exist in terms of education, studying

and life long learning (a socially equitable village) special care is taken of endangered population categories rural communities actively participate in the work of relevant decision making bodies, in

accordance with the equality principles, the cultural identity of rural communities as well as their principles, customs, tradition

and community are retained and strengthened (a village with a cultural identity) the environment is treated as the most valuable resource for the rural population and is

protected and respected as much as possible, the growth of rural economy is based on the sustainability principles (sustainable village) strong social connectivity and special policy measures contribute to the reduction of

poverty and social exclusion (social component of the village).

Organizational Units - SectorsDepartments

Sector for analytic and agricultural

policies

Rural Development

Sector

Sector for legal, general

and normative

tasks

Sector for international projects and

financial management

General Inspectorate

Department of Forests

Department of Plant

Protection

Department of Veterinary

tasksDepartment for Water Resources

National reference laboratory

Department for

Agricultural Payments

Department for Soil

Management

CabinetPublic Relations

Secretaries of State

Internal ControlMinister

Ministry of Agriculture, Forestry and Water Management

BASELINE INDICATORS

Objective related baseline indicators

Axis Indicator Measurement Data/RS Source

Horizontal

Economic development GDP / per capita 4.002 eur (2007 y.) NSO*

Employment rate

Employed persons, aged 15-64 years, as a percentage of the pop-ulation of the same age group 53,7% (2008 y.) NSO

UnemploymentThe unemployment rate as a per-centage of the active population 14,4% (2008 y.) NSO

Axis 1 Competi-tiveness

Training and education in agriculture

% of agricultural producers with the basic and full education at-tained

primary education 32,9%, secondary education 15,2% (Census 2002 y.) NSO

Age structure in agricultureRatio: farmers <35 /> = 55 years of age

members of agricultural holdings ac-cording to the age structure (Census 2002 y.): up to 14 y.-14,8%, 15-27 y.-14,5%, 28-49 y.-26,3%, 50-64 y.-22,6%, 65 and over-21,8% NSO

Labor productivity in agri-culture

Gross added value per annual work unit 2.948 eur (2008 y.) NSO

Employment development of primary sector

Employment in the primary sec-tor

546.000 (2008 y.)NSO

Economic development in the primary sector

Gross added value in the primary sector

1.609 mil.eur (2008 y.)NSO

Labour productivity in food industry

GVA / people employed in food industry 15.158 eur (2008 y.) NSO

Employment development in food industry Employment in food industry

84.081 (2008 y.)NSO

Economic development of food industry GVA in food industry 1.275 mil.eur (2008 y.) NSO

Competitiveness of agricul-tural products Export/Import value

Export 1.945.320.341 USD, Import 1.308.430.133 USD, Trade surplus 636.890.208 USD (2009. y.) NSO

Labor productivity in forestry

GVA / people employed in forestry 11.488 eur (2008 y.) NSO

Axis 2 Environ-ment

Biodiversity: High Nature Value farmland and forestry

UAA of High Nature Value Farmland

Project: Support to Agri-environ-ment Policies and Programming in Serbia (one of expected outputs: A ty-pology of HNV farming systems in Ser-bia and associated map of HNV farm-land), financed by the Dutch Ministries of Agriculture, Nature and Food Qual-ity, BBI-MATRA programme, Partner organisations: IEEP (UK), IUCN-SEE (Serbia) and Natura Balkanika NGO (Serbia), project duration 2008-2010

IUCN-SEE (Serbia)**

Biodiversity: tree species composition

Distribution of species group by area of FOWL (%coniferous/% broadleaved/ %mixed)

Broadleaved 88,3%, Conifers 9,3%, Mixed 2,4% (2007 y.) NSO

Soil: Organic farming UAA under organic farming

Total area used for organic agricultural production 595,81 hа, certified area 330,36 ha, agricultural area in the con-version period 265,45 ha (2008 y.)

MESP***, MAFWM****

Climate change: production of renewable energy from agriculture and forestry

Production of renewable energy from agriculture (kToe)

The overall biomass energy potential in the Republic of Serbia is estimated at 2,58 Mtoe/y (of wich: agricultural biomass - 1,56 Mtoe/y and wood biomass - 1,02 Mtoe/y) MME*****

Production of renewable energy from forestry (kToe)

Axis 3 Diversi-fication

Farmers with other gainful activity

% holders with other gainful ac-tivity 73% (2002 y.) NSO

Employment development of non-agricultural sector

Employment in secondary and tertiary sector tertiary sector: 844.039 (2005 y.) NSO

Economic development of non-agricultural sector

GVA in secondary and tertiary sector 82,9% (2006 y.) NSO

Self-employment develop-ment Self-employed persons

700.211 (25% of total number of em-ployed), 2008 y. NSO

Tourism infrastructure in rural areas

Number of bedplaces (in hotels, campings, holidaydwellings, etc)

total number of beds (spas, mountain re-sorts and other touristic resorts - without main administrative centres): hotels and similar establishments - 44.963, sup-plementary accomodation - 52.689, total - 97.652; 2008 y. NSO

Internet take-up in rural ar-eas

% population having subscribed to DSL internet

22% rural households having sub-scrided to DSL internet (33,6% rural households having computer) - 2009. y. NSO

Development of services sec-tor GVA in services 61% (2007 y.) NSO

* National Statistic Office** International Union for Conservation of Nature-South East Europe (Serbia)*** Ministry of Environment and Spatial Planning**** Ministry of Agriculture, Forestry and Water Management***** Ministry of Mining and Energy

1.5.2. Context related baseline indicators

AXIS Indicator Measurement Data/RS Source

Horizontal

Designation of rural areasDesignation of rural areas with OECD methodology

Rural areas in Serbia defined according OECD criteria of rurality: 1. Urban ar-eas, 2. Region I High productivity agriculture and integrated economy, 3. Region II Small urban economies with intensive agricultural labour, 4. Re-gion III Natural resources, economics oriented, mostly mountainous, 5. Re-gion IV High tourism capacity and poor agricultural structures

MAFWM* (“Se-lection of rural ar-eas in Serbia for ru-ral development programming pur-poses” by Sophia Efstratoglou, Natal-ija Bogdanov, David Meredith, EU Project SRDPPS Publica-tion No 06)

Importance of rural areas % territory in rural areas 85% (2004 y.) NSO**

% population in rural areas 55,5% (2002 y.) NSO% employment in rural areas 42,2% (2002 y.) NSO

AXIS 1, Competi-tiveness

Agricultural land use% arable area / permanent grass / permanent crops

Arable fields and gardens 64,8% / pas-tures 16,4% / meadows 12,2% / or-chards 4,7% / vineyards 1,1% NSO

Farm structure

Number of farms 778.891 NSOUtilized Agricultural Area 2.869.001 ha NSOAverage area farm size and distri-bution 3.94 ha NSO

Forestry structure

Area of forest available for wood supply (FAWS)

2.012.000 ha (of which: 1.200.000 ha of forest is in private ownership and other 812.000 ha in public ownership) NSO, FD***

Ownership (% area of FAWS under "eligible" ownership) Private 52,2% / State 39,8% / Other 8% NSO, FDAverage size of private holding (FOWL) 2,4 ha NSO, FD

AXIS 2, Environ-ment

Land cover% area in agricultural / forest / nat-ural / artificial classes

57,6% area in agricultural / 25,5% area in forest / 16,9% area in other classes NSO

Areas of extensive agricul-ture

% UAA for extensive arable crops 64,8% (2008 y.) NSO% UAA for extensive grazing 16,4% (2008 y.) NSO

Natura 2000 area

% territory under Natura 2000

Twining Project: Strengthening Ad-ministrative Capacities for Protected Areas in Serbia (Natura 2000), finance: IPA of the EU, beneficiary institution: MESP, project duration: jan 2010-dec 2011 MESP****

% UAA under Natura 2000% forest area under Natura 2000

Biodiversity: Protected forest

% FOWL protected to conserve biodiversity, landscapes and spe-cific natural elements (MCPFE 4.9, classes 1.1, 1.2, 1.3 & 2) 437.900 ha (aprox. 25%) NSO, MESP, FD

Development of forest areaAverage annual increase of forest and other wooded land areas 2.500 ha NSO, MESP, FD

Forest ecosystem health% trees / conifers / broadleaved in defoliation classes 2-4 27% of forest is concerned as diluted NSO, MESP, FD

Protective forests concern-ing primarily soil and wa-ter

FOWL area managed primarily for soil & water protection (MCPFE 5.1 class 3.1)

18,54% of public forest land managed for soil protection from erosion and 1,96% for water source protection NSO, MESP

ž

AXIS 3, Wider ru-ral development

Population density Population density 96,74 NSO

Age structure% people aged (0-14) y.o. / (15-64) y.o. / >=65 y.o. In total population

% 19,2% (0-14) y.o. / 68,1% (15-64) y.o. / 12,7% >=65 y.o. NSO

Structure of the Economy% GVA by branch (Primary / Sec-ondary / Tertiary sector)

11,3% Agriculture&Fishing / 29,1% In-dustry&Construction / 59,6% Services NSO

Structure of Employment% employment by branch (Pri-mary / Secondary / Tertiary sector)

23,4% Primary / 30,1% Secondary / 24,8% Tertiary / 21,7% Other sector NSO

Long-term unemployment% long-term unemployment (as a share of active population) 24,2% (2007 y.) NSO

Educational attainment% adults (25-64) with Medium & High educational attainment

% of population aged >=15 with Medium education 41,1% / High education 11% / Other education attainment 49,9 % (2002 y.) NSO

* Ministry of Agriculture, Forestry and Water Management** National Statistic Office*** Forest Directorate**** Ministry of Environment and Spatial Planning

CHAPTER 3STRATEGY AND GOALS OF THE NATIONAL RURAL

DEVELOPMENT PROGRAM, JUSTIFICATION OF THE PRIORITIES

Chapter I established the internal advantages and weaknesses as well as external opportunities and threats for the development of rural areas in Serbia, which led us to the SWOT analysis, and

accordingly, to drafting a new vision for rural Serbia, combined with indicators that have emerged from the policy framework which was analyzed in Chapter II. All of these parameters, in close consultation with the interested parties from rural areas, helped to define strategies and priorities for the 2011-2013 National Rural Development Program.

3.1 THE JUSTIFICATION OF THE CHOSEN STRATEGY

Rationale for the strategy and the strategic priorities

Strategic objectives within the 2011-2013 National Rural Development Program:

1. Contribute to sustainable improvement of agricultural and food sector through targeted investments in order to improve and increase their competitiveness;

2. Encourage the improvement of food safety, veterinary and phyto-sanitary, environmental and other standards in line with EU Acquis Communautaire;

3. Encourage the sustainable development of rural economy and rural areas in general by encouraging diversification.

For interventions within axis 1:

Generally, agricultural production results are satisfactory (although the productivity is at a lower level than the EU average) and indicate significant export potential. However, one must accept the fact that only subsistence farms, which produce only for their own needs, will never be part of the competitive and commercial agricultural production sector. There are a large number of small semi-subsistence farms whose products are not adjusted to the requirements of the modern market, where the rate of productivity is low, and the income is insufficient;

The process of urbanization and economic growth over the last few years represented a limiting factor for the agriculture and rural economy sectors, pulling away work force from rural areas, thereby endangering the sustainability of traditional (labor-intensive) agricultural production systems, with high labor force participation in some rural areas;

The transition process and a clear political will to join the EU appeared at the time when the need to modernize agricultural production and the food industry became apparent. Currently, although a part of the farms are adjusted to the EU market demands, the rest are still in a transitional stage and trying to adapt, while a portion of the farms is still holding to the traditional forms of agricultural production;

The food sector also reflects the situation with the farms that are integrated in modern food chains and place their products on domestic and foreign markets. On the other hand, we have a large number of small companies which complement the system of semi-subsistence farms which are located near the market, are economically inefficient and, without some investments, cannot improve their market position;

It is expected that intensive work on the diversification of economic activities will play a significant role in providing alternative sources of employment and income for a large part of the rural population, and thus in some way reduce the need for migration and mitigate the trend of depopulation in rural areas;

The above mentioned requirements has influenced the selection of priorities in terms of selecting the sectors which will be supported, as well as activities, support will be focused on;

The existing National Strategic Policy framework, which was presented in the Rural Development Strategy of the Republic of Serbia, as well as special orientations within its framework represent the basis for the priorities selected for intervention. Explanations for the selection of priority sectors and priority activities that support will be focused on are explained in detail within the next section;

In terms of agricultural production, Serbia, and specifically the province of Vojvodina (rural area A), are large and efficient producers of cereals, with no major problems regarding food safety standards imposed by EU legislation (Acquis communuataire), but they have some weaknesses in the form of outdated, low-productivity machinery, soil cultivation efficiency, sowing, crop treatments and harvesting. Also, there is a notable need for improving the storage facilities for grain products owned by farms or agricultural cooperatives, which bring farmers together;

Milk, meat as well as the fruit and vegetable sectors are defined as sectors with major deficiencies in the production chain, with significant implications in terms of standard compliance and overcoming existing shortcomings;

In milk and meat sectors problems occur in both the overall need for modernization and restructuring of the entire food chain, as well as in extreme fragmentation of a significant part of the production base, with very small herds and health and hygiene problems with raw milk. An inadequate compliance with the required food production standards was noted in certain dairy products produced by small and handcraft dairy plants. The same situation was observed for small and poorly equipped slaughterhouses and other meat processing facilities. The most notable deficiency in the milk production and processing chain can be observed at the farm level. Poor hygiene standards at smaller processing facilities are a significant problem as well;

Selection of the fruit and vegetable sectors is justified by the process of structural adjustment this sector is going through at the moment, as a result of economic growth. The production and processing of fruits, grape and vegetables represents a business with high labor force participation. Lack of manpower is an important limiting factor for increasing the volume of production in above mentioned sectors. Farms in this sector are facing changes in terms of location based demand, as a result of rapid market concentration in large urban centers i.e. transfer of demand from green markets towards big supermarket chains. Such farms are characterized by very low bargaining power (the power to influence pricing).

During the production phase of fruit and vegetables, it is necessary to improve the technological production process for the purpose of increasing productivity and reducing the production costs;

During the postharvest phase of fruit and vegetables, sufficient storage capacities are needed to prevent the producers to sell their products at much lower price.

For interventions within Axis 2, in the case of selecting preparation activities for implementing agro-ecological measures, the argumentation for the selection of priorities is as follows:

Measure 2.1 “Activities aiming to improve the environment and rural landscapes/countryside” Interventions will be based on existing measures which have already been implemented in some form within the rural development sector, for example:

Support to establishing and promotion of organic agricultural production

Support to preservation of the genetic resources of domestic animals

The preservation of biodiversity and landscape (through specific pilot project financed by international organizations, for example the component III of the World Bank STAR Project, which refers to the pilot area of Stara Planina mountain) and that are not the part of NRDP.

It is important to emphasize that these measures are already being implemented in some form and that they cannot be considered a “pilot” activities for possible co-financing from the IPARD funds. Regardless, they should be harmonized with EU requirements and the support for these activities from the state budget should continue as a preparatory activity that contributes to building the necessary institutional capacities.

Justification for targeted interventions within Axis 3 is based on:

Results of the general socio-economic analysis, based on quantitative data regarding the structural situation as well as the key trends that are affecting rural areas in Serbia indicate that, in the period after the conflicts in this region, the percentage of population living in rural areas has increased considerably mainly due to migration of refugees. These trends and large differences in wages between urban and rural regions require special policies for creating opportunities for alternative employment and the creation of additional sources of income through diversification. Other limiting factors include: low educational and expertise level of the rural population, low employment and productivity rate, high rates of youth unemployment, very low diversification level of economic activities, both in terms of activities on farms, and concerning the activities outside the farms.

The aforementioned shortcomings in the socio-economic structure of rural areas are noted within the framework of the 2011-2013 Rural Development Strategy,

Interventions aimed at solving the problem of expanding economic activities on the farms, and the diversification of activities outside the farms, are specified as strategic priorities.

3.1.1. The rational for the selection of the aforementioned measures and criteria upon planning investments concerning gender and multi-sectoral issues

As indicated in the previous section, the selected rural development measures for the 2011-2013 programming period sufficiently meet the needs of women and other sensitive/vulnerable groups in rural areas. This will be presented in more detail in the following paragraphs.

(1) Measures within Axis 1, aimed at improving market efficiency and the implementation of high national quality standards

Investments in the restructuring and modernization of farms and processing of products within certain sub-sectors - cereals and industrial crops, milk, meat, fruit, grape and vegetables represent the activities which aim to improve the role of women, as well as to provide recognition of their participation in the rural development activities. In this regard, the selected measures include all segments of gender issues and assign equal importance and provide equal opportunities for both sexes. Also, as it can be seen in the technical description of each measure (see Chapter IV) equal opportunities are given to young men and women in rural areas, as well as to men and women in rural areas who live and work in marginal areas.

(2) Measures within Axis 2 and Axis 3 aimed at the development of rural economy and preparation activities for implementing agro-ecological measures

Starting with the understanding that sustainable development is not possible without the active participation of men and women and providing equal opportunities to both, the diversification of rural economy in rural development offers a more flexible context. The diversification of rural economy offers a better solution for the needs and potentials of men and women, promoting and offering greater opportunities for their active, lucrative/useful participation in the economy and life within rural areas. In one such form, the traditional understanding of concepts and roles of men and women can be analyzed and restructured to better blend with the economy that is constantly changing.

Within this viewpoint, and in accordance with the EU experience, it seems that rural development has more potential than just the development of agriculture. It has the potential to change the form of inequality. In fact, rural development is a new conceptual and practical framework in which gender roles can be redefined in accordance with the strategic interests through the gender transformation strategy with the aim of introducing policies and measures of equality into the main planning concepts and providing sustainable living in rural areas. Rural development can also be successful in introducing socially vulnerable groups into the economic mainstream through a strategy of integration/inclusion and activities dedicated to strengthening the economic power of impoverished people, thereby enforcing the eradication of poverty.

Experience based on lessons learned and best practices from neighboring countries and EU member states shows that women in rural areas have supported and affected the progress and encouraged economic diversification in rural areas through private enterprises and cooperatives. Women in small rural households in Serbia have already started an informal process of individual diversification of rural economy, mainly in the food-processing industry and the production of souvenirs and handicrafts. Such attempts must be systematized and empowered in terms of entrepreneurship and need to be transferred to the formal mechanisms of sustainable living. The form which foresees the creation, promotion and strengthening of the (social) association model is in accordance with the recommendations of Women Rights NGOs and the institutional mechanisms for gender equality in the Republic of Serbia, which are harmonized in propagating economic independence of women as a priority. This will discontinue the practice of unequal treatment and improve the position of women in the society.

3.1.2. Selected measures/submeasures within priority axes

A. Measures within axes related to the EC (European commission) regulationsWithin the regulation of European Commission (EC No 718/2007) there are three priority axes defined as well as measures within those axes related to the implementation of the fifth component of the EU preaccession assistance – IPARD as follows:

Axis 1 – Improving market efficiency and application of the EU standards

Measure 1.1. Farm investments aimed at restructuring and improving the farms and allowing them to reach standards

Measure 1.2. Improving and establishing producer’s groups

Measure 1.3. Investments into the processing industry in order to modernize and reach quality standards

Axis 2 - Preparatory activities for the implementation the agro-ecological measures and local rural development strategies (LEADER)

Measure 2.1. Activities aimed at improving the environment protection and landscape from negative impact of intensive agricultural production

Measure 2.2. Activities for the preparation and implementation of local rural development strategies

Axis 3 – Development of rural economy

Measure 3.1 Support for the investments in improving rural infrastructure

Measure 3.2 Support of diversification and development of economic activities in rural areas

Measure 3.3. Support of training activities

B. Measures within NRDP Considering the SWOT analysis and the “Vision for Rural Serbia” which were both made in cooperation with the stakeholders from rural areas, the available sources, the national strategic guidelines and the EU strategic guidelines for rural development as well as the need to focus on support measures which will directly impact key problems and which will guarantee visible results in certain rural areas and sectors, the National Rural Development Program 2011-2013 envisions the following measures:

Within Axis 1, with the purpose of improving market efficiency and the application of high quality standards:

Measure 1.1: Farm investments aimed at restructuring and improving the farms and allowing them to reach high quality standards;

Measure 1.3: Investments into the processing and marketing of agricultural products in order to restructure and improve these industries, as well as to help them reach high (EU) quality standards

Within Axis 2, the preparatory activities for the implementation the agro-ecological measures and local rural development strategies (LEADER):

Measure 2.1: Activities aimed at improving the environment (including the biodiversity) and rural landscapes

Within Axis 3, with aimed at developing and diversification of rural economy:

Measure 3.2: The diversification and the development of rural economic activities

For measures within Axis 1 (investments into farms and marketing), four sectors have been approved:

Grain and industrial crops ;

Milk and dairy products;

Meat and meat products;

Fruit, grape and vegetables.

It was noted that the selected measures and sub-measures included the needs of many sensitive social and minority groups, which is further confirmed by a special study on gender issues and other multi-sectoral issues, conducted for the specific needs of the 2011-2013 National Rural Development Program.8

C. The Rationale behind the measures within Axis 1

The key problems in the ownership structure of Serbian farms are their small size and fragmentation, the significant role that these farms play in securing livelihoods, as well as a fairly informal nature of the economy in which the agriculture participates. The rationale (reasoning) of farms investments and for investments in processing and marketing of agricultural products is in accordance with the needs and plans for these sectors. Therefore, the rationale for selecting to support each of these four sub-sectors is given here.

The consideration of all sector interventions took into account the needs to improve existing production and processing system of food products in the Republic of Serbia, and harmonize it with the EU standards. Thus manly concerns animal and human health protection as well environmental management and its results. Many small companies do not meet the national standards due to outdated equipment.

Cereals and industrial crops sector

This sector was chosen because it was found that the land cultivation, sowing, crop care and harvesting machinery is outdated and does not provide a sufficient level of productivity. Modernization of the machinery, replacing obsolete machinery with new machinery will significantly contribute to improving the competitiveness of the farms. Despite the large number of grain storage facilities, one of the significant problems presents a large portion of the produced goods that are still stored in barns. Furthermore, due to the inability to store the grain after the harvest, a large portion of it immediately ends up on the market. In this way, farms cannot provide a sufficient level of quality for grain products, and are also unable to store their produce and sell it at a more favorable time. Investments in this sector will raise the competitiveness of Serbian

8 „ACTION PLAN FOR THE INTRODUCTION OF GENDER AND MINORITY ISSUES INTO THE MAINSTREAM RURAL DEVELOPMENT PLANNING“, JUNE 2007, PUBLICATION NO. 22, EU PROJECT: SRDPPS.

farms, as well as raise the quality of grain products (i.e. corn) which are important export items for Serbia.

Milk and dairy products sector

The dairy sector was chosen because of its characteristic problems which are specific to the production and marketing processes. These problems are related to the fact that this sector provides the means for living for a large number of agricultural producers and processors. This sector is dominated by smaller units, subsistence and semi-subsistence farms are highly represented and the productivity rate is low.

Of particular importance is the fact that this sector has major shortcomings in terms of product quality and animal health care standards. Majority of small farms (up to 5 cows) sell their products on fresh markets while other producers (5+ cows) are selling to milk processing industry.

Major problem is low quality level of produced milk and low level of production per cow which leads to nonprofitable small scale operations.

On the other hand bigger farms (10-50 cows) face poor feeding technology, lack of advanced genetic breeding and poor livestock keeping conditions

Small scale farms with the existing problems are major constraint toward restructuring the sector in row milk production. Investments in improving milk quality, quantity as well as restructuring the size of the farms will improve quality, competitiveness and sustainability of operations on farm level.

Due to the above mentioned problems there is not consistent milk supply of certain quality to processors. The products are very often of lower quality or those products are not competitive on the market. Further improvements in milk storage, cooling and value added products development will enhance competitiveness and product quality. This can lead toward increasing demand for dairy products both for domestic and export markets.

Meat and meat products sector

This sector was selected for similar reasons as the previous one: a very fragmented production system where subsistence farms with a small number of animals still compose the majority of the production. These farms are characterized by mixed production capabilities and low productivity. The observed trends indicate a decline in livestock production (cattle, sheep and goats), which results in overall decrease in production of red meat, mainly due to the small number of farms which handle mixed livestock farming. Those farms are not specialized and are not utilizing pastures properly (low pasture quality) and quality of the used feed is not on proper level. Another key problem is the quantity and quality of animal feed and livestock keeping facilities. Consumption of poultry and pork has significantly increased which partially compensates the fall of red meat production. This sector is characterized by the dual structure – fragmentation on one hand (usually small farms) and big fattening farms in Vojvodina on the other hand.

Small farms need to improve productivity and consistency of piglets production in order to improve results in fattening as well as in meat quality. Problems which arise during the processing of red meat are also related to slaughterhouse facilities of different potential and varying compliance with the national and the EU standards. Some slaughterhouses are characteristic of the informal local rural economy, while other, larger slaughterhouses possess more efficient and modern facilities, which are already in accordance with the national and the EU standards. Problems are in treatment and handling of slaughterhouse waste which is priority in order to comply with environmental standards. It seems that most facilities have sufficient

processing capacity. Since Serbia has export quote for beef, above mentioned problems with slaughterhouses need to be addressed and improved in order to have impact in all value chain.

Fruit and vegetables sector

There are several problems in the production of fruits and vegetables related to the small size of the farms, even though these farms may have a more specialized fruit and/or vegetable production. Small scale producers do not create enough profit due to high production costs and very small possibilities to influence pricing in the food chain. As a consequence, they cannot invest enough and increase their competitiveness. Another problem is that young farmers in this sector want to leave the farm and obtain other, more profitable jobs in nearby towns, leaving other family members, old members and/or women to take care of production, which results in a decrease of the quality and creates processing problems. This often causes serious problems when it comes to the dilemma what to do with the products after harvest. It is obvious that there is a need to improve the sorting, packing and storage facilities. A rather low level of education and vocational training creates difficulties in terms of the proper use of modern equipment for production and harvesting purposes and for ensuring the proper use of inputs. The establishment and proper functioning of associations of agricultural producers could positively contribute to adequate standardization of production and marketing of products at the most favorable conditions for the producers. Also, it is necessary to prevent losses caused by early frost, and increase productivity by improving the irrigation methods. The problem in the processing chain of fruit, grape and vegetables is that factories do not receive sufficient quantities of high quality products. The potentials for product placement have greatly increased both on the domestic market and in neighboring countries, as well as further to the east (Russia, Ukraine, etc.).

D. Axis II

Activities aimed at improving the environment (including the biodiversity) and rural landscapes: National Rural Development Program will provide assistance for preparing the rural population for the implementation of agro-ecological measures, and for supporting pilot projects under Articles 39 and 40 of the EU Council Regulation (EC no. 1698/2005), with the aim to develop practical knowledge about the implementation of activities related to improving the environment and rural landscapes, at the administrative as well as at the farm level. These measures provide payments from the budget of the Ministry of Agriculture, Forestry and Water Management in the form of compensatory payments to farmers who voluntarily undertake the fulfillment of these obligations, which exceed the required standards and statutory requirements. Interventions will be further studied and prepared during the next two years in order to prepare the pilot projects for the implementation in selected areas from 2011 onward.

E. The Rationale behind the measures within Axis 3

The rationale for diversification and development of rural economic activities is based on a detailed SWOT analysis and the “Vision for rural Serbia”, which have already been presented in other chapters of this program. The basis of this reasoning includes the existence of small farms and the fragmentation of the land ownership structure, the importance of subsistence and/or semi-subsistence production on small farms, the dominance of the informal economy in rural areas, especially in the agricultural sector, lack of opportunities for alternative employment and spontaneous (endogenous) entrepreneurship due to lack of diversification, low income and high rates of rural depopulation in recent years. All of the aforementioned problems can be resolved

through a combination of measures, as well as through small-scale on-farm activities and by encouraging new activities in rural areas which are undertaken outside of the farms.

Diversification of activities outside the farms could provide alternative employment possibilities and create additional sources of income for the rural population, which, apparently, cannot obtain sustainable economic justification in agricultural activities. The potential for the diversification of activities in rural areas lies in the core of modern trends towards specialized products and markets outside the conventional food chain, in various forms of tourism and recreation, local crafts, traditional recipes and restaurants, and other forms of goods and services that reflect the desires of the modern consumer for actual changes in the products and services, as well as in tourist destinations. In that sense, there are opportunities for micro and/or small businesses to provide services in rural areas, engage in craft production, traditional cuisine (small-scale production) and new business ventures such as organic production. The selection of specific activities which will be encouraged, largely depends on the degree of innovation of the local communities, individuals, as well as factors such as: the provision of sufficient additional cash inflow, the question whether these activities are part of the traditional knowledge and expertise of the local population and the requirements for a fairly modest amount of inputs in terms of training, their compatibility with seasonal agricultural activities and ensuring exchange and contacts between the rural population and the rest of society.

Within the diversification measure, two activity groups have been selected for implementation:

Activities related to the creation of additional sources of income on farms through small-scale processing of agricultural products, the protection of product name and origin, production of traditional products, collecting natural (wild) fruit, as well as some alternative means of production (beekeeping, mushroom cultivation, venison breeding, fishing, cultivation of spices, medical and aromatic herbs etc.).

Activities related to the provision of additional sources of income through non-agricultural activities on and off the farm: the development of rural tourism with the accompanying activities, the restoration and preservation of old crafts and skills, entrepreneurship development in rural areas related to the provision of necessary services for the rural population etc.

3.2 THE HIERARCHY OF THE SELECTED RURAL DEVELOPMENT MEASURES AND THE FINANCIAL DISTRIBUTION BY EACH AXIS AND MEASURES

Financial distribution of different axes and measures (2011-2013)

The indicative financial distribution per each rural development axis which have been selected for the next programming period is shown in the following table:

Axis No. Measures Fund allocation per axis and per measure

Axis 1 1.1 Farm investments 60%

1.3 Investments into processing and marketing 20%

Axis 2 2.1 Activities aimed at improving the environment 3%

and rural landscapes

Axis 3 3.2 Diversification and the development of rural economic activities 17%

The rationale for the allocation of funds based on the SWOT analysis

The allocation of funds per specific measures is analogous to the SWOT analysis which was presented in the previous chapters of this program.

Assigning 80% of the available funds to Axis 1 is in full compliance with the relevant needs for modernization and improvement of farm competitiveness, marketing and processing within the four listed sectors in the Republic of Serbia. The current transition process aims to develop the national economy, and is mainly focused on the development of the secondary and especially the tertiary sector.

These processes draw resources from agriculture and rural areas. The informal nature of agricultural and labor markets in rural areas and the prevalent use of low-tech approaches need to be revised. The implementation of high standards of quality in all sectors of the economy, including rural areas, would be a good start. This approach would help to reduce differences and prevent emigration as well as contribute to the protection and improvement of the rural environment. It is necessary to improve farms, processing facilities and the marketing of agricultural products in order to help them reach the EU standards and become competitive, with the prospect of Serbia’s future accession to the EU and the increasing liberalization and opening of the Serbian economy to world markets in mind.

Assigning 3% of the available funds to activities aimed at improving the environment and rural landscapes is in accordance with the policy of implementing very limited measures to strengthen the protection of the environment from harmful effects of intensive agriculture and to protect genetic resources of the old breeds and strains of domestic animals.

Assigning 17% of the available funds to diversification indicate the relative importance which Serbia attributes to the improvement of the rural economy utilizing a series of different instruments which are adapted to the custom conditions in rural areas. As the analysis of the existing situation showed, the main weaknesses are the comparatively low income, small farms, lack of diversification and alternative forms of employment in rural areas, low level of expertise, poor educational system and vocational training and a rather informal work system. Small and non-competitive farms have no available funds for investment in the future growth and development of their farms. Diversification of activities in rural areas can therefore offer the rural population alternatives based on the provision of additional forms of employment and opportunities for generating revenue in areas where they currently live and work and thus avoid the unnecessary and unwanted migration process.

Chapter 4Description of measures

Legal basis for the below elaborated measures is Law on Agriculture and Rural Development (Official Gazette 41/09).

All the beneficiaries receiving support for the investments included in the measures fiches and sub-measures must comply with the relevant national standards after the realization of investments.

Technical description of measuresTechnical description of measure No. 1.1

Measure 1.1: Investments in farms in order to restructure and improve them and achieve the EU standards

(1) Measure rationale

The sector analysis in Chapter 1 has shown that the key problems of ownership structures in Serbia are the following:

Small (3.6 ha) and fragmented farms (an average of 4 parcels per farm), that are directed toward subsistence production, and not entrepreneurship, make up about 50% of total farms (about 400.000 compared to 380.000 „registered units “, which are mostly directed toward professional agriculture;

The informal nature of the agricultural economy, especially concerning natural agricultural production;

Insufficient competitiveness and the non-compliance with the EU quality standards in agricultural production which both decrease the export potential.

The sectors prioritized for obtaining support through Rural Development program are:

- Cereals and industrial crops

- Milk (dairy)

- Meat

- Fruit, grapevine and vegetables.

These four sectors currently contain various farms types:

- Limited number of modern, intensive farms which are already competitive and fairly compliant with the EU standards (some farms were created as a result of the privatization and/or transformation of former socially owned enterprises and Agro-combinats).

- A large number of small, natural farms. Many of these farms are too small to be viable in the future, and the rural population uses them to secure a livelihood, in combination with (or without) additional sources of employment and income.

- Some of these farms have the potential to develop into economically viable units through diversification or association.

- Small and medium-sized farms that are trying to generate revenue primarily via agricultural activities. These farms have the potential to improve their production techniques and become economically viable in the future.

The rural development measures will support the small and medium farms in order to:

- Improve production tools and processes to achieve greater economic efficiency, better market orientation and long-term sustainability.

- Meet the standards of Good Agricultural Practices and relevant national standards in order to increase their market adaptation and export potential.

(2) Goals which will be achieved by implementing measure 1.1.

To increase the efficiency, competitiveness and sustainability of the production in the agricultural and food sectors,

To increase the professionalism in the production and the orientation towards market demands,

Encouraging the adoption of Good Agricultural Practices and relevant national quality standards, ,

To open new market opportunities for agricultural products and to develop the agricultural economy, and thereby achieve an increase in the number of new job position openings and the overall dynamics of the rural areas development.

Goal ranking of the 2011-2013 National Rural Development Program concerning this measure:

General goals within the National Rural Development Program:

- To contribute to the modernization of agricultural and food sector,

- To encourage sustainable development of rural areas by protecting the environment, improving the life quality, implementing the diversification of activities, and promoting the participatory approach as well as the local initiatives

The general goal of Axis 1:

Modernization and improvement of market efficiency in the agricultural and food - processing sectors and implementation of national standards (in preparation for the introduction of EU standards).

Measure 1.1. A specific goal

Farm investments (aimed at farms that produce cereals, industrial crops, milk, meat, fruit and vegetable sectors) that have the potential to increase their competitiveness and sustainability and to steer them toward implementing national standards (in preparation for the introduction of the EU standards).

Operational goals:

Measure 1.1.1. farms that produce cereals and industrial crops

Measure 1.1.2. farms that produce milk

Measure 1.1.3. farms that produce meat

Measure 1.1.4. farms that produce fruits, grapevine and vegetables

(3) Connection with other priorities/measures within the 2011-2013 National Rural Development Program

- Investments in primary agricultural production will support the provision of sufficient quantities of quality products for the food processing industry (Measure 1.3).

- Represents the basis for further development of high-quality agricultural production (such as organic agriculture) contained in the measures 2.1, which are related to payments for organic agriculture and agro-ecological payments, modernization of farms and meeting national standards, represents the basis for further development of high-quality production (such as organic agriculture).

- Investments in primary agricultural production and processing allow farms to begin other activities that are mainly based on the production and sale of local commodities (measures within Axis 3).

(4) FinancingYear Total expenditures Public (national) expenditures Private contribution

RSD RSD RSD

1 4=2+3 2 3

2011 3,600,000,000.00 1,800,000,000.00 1,800,000,000.00

2012 4,200,000,000.00 2,100,000,000.00 2,100,000,000.00

2013 4,800,000,000.00 2,400,000,000.00 2,400,000,000.00

Total 12,600,000,000.00 6,300,000,000.00 6,300,000,000.00

Distribution of public expenditures by sub-measures

Sub-measure Share (%) Total 2011 – 2013 (RSD)1.1.1 25 2.625.000.000,001.1.2 5 525.000.000,001.1.3 5 525.000.000,001.1.4 25 2.625.000.000,00Total 60% 6.300.000.000,00

(5) Monitoring and evaluation indicators

Monitoring and evaluation indicatorsIndicator type Indicator

Baseline Labor productivity in agricultureEconomic development in agricultureEmployment in primary sector

Input Amount of public expenditure realized Output Number of farm holdings that received investment support (division according to gender, legal

status, age category, type of investment, and the type of agricultural branch)Total volume of investment (division according to the type of investment and type of agricul-tural branch)

Result Number of farm holdings introducing new products and/or techniquesIncrease in gross value added in supported farm holdings

Impact Economic growth (net additional value added expressed in PPS)Labour productivity (Change in Gross Value Added per full-time equivalent- GVA/FTE)

Technical description of measure No. 1.1.1

Measure 1.1: Farm investments

Sub-measure 1.1.1: Farms that produce cereals and industrial crops

(1) Sub-measure rationale This sector was chosen because it was found that tractors and machinery for soil

cultivation, planting and plant protection, are outdated and don’t provide a sufficient level of productivity.

Replacement of outdated machinery with new wide-scope machinery will significantly contribute to improving the competitiveness of farms that produce cereals and industrial crops.

Despite the large number of cereal and industrial crop storage facilities, a large portion of the produced goods is still stored in barns or gets sold immediately after harvest due to the inability to store the goods. This way, farms cannot provide a sufficient level of quality grain products, and also, are unable to store their products and sell them at the most favorable moment.

Support of the investments in this sector will enable raising the competitiveness of Serbian farms and raising the quality of grain products (i.e. corn) which represent important export items for Serbia.

(2) Goals

Support the procurement of new, more efficient machinery and equipment, will significantly increase the productivity of cereal and industrial crop production.

Purchase of new tractors for crop production, and new machinery for soil cultivation will significantly improve productivity. New wide-scope machinery will further reduce production costs.

The procurement of high quality sowing machinery will improve the sowing accuracy which is one of the important factors for improving the production of cereals and industrial plants.

The procurement of machines for plant protection will improve system and the quality of plant protection, rationalize the use of pesticides and decrease the production costs.

Building and equipping grain storage silos will enable the storage of grain products and ensure that the farms can place them on the market at the most favorable time.

(3) Connection with other measures included into the National Rural Development ProgramInvestments into the modernization of cereal and industrial crop production need to ensure

sufficient quantities of these products for food preparation and quality concentrated animal feed (measures 1.1.2 and 1.1.3).

(4) Eligibility criteria

a. Qualified rural areasAll rural areas in the Republic of Serbia

b. Eligible beneficiariesBeneficiaries of this measure are natural persons, legal entities and farmer’s cooperatives

c. General eligibility criteria

Beneficiaries of incentives: Have to be registered in the national Register of agricultural holdings and are in active status, Are able to prove that he does not have liability related to tax payments for the year prior to

application process In case that beneficiary is not owner of the holding, must have contract on lease of the

property with stipulated contract duration at least eight years after the date of submitting of the application.

Business plan has to prove the economic viability of the beneficiary at the end of the investment period

In case of financing of multiple projects, beneficiary should have completed given investments and final report about the preceding project financed from the NRDP prior to initiating of the new investment.

d. specific eligibility criteria

natural persons have to:- be ensured in the Pension and Invalidity Security Fund for agricultural producers; - be younger than 60 at the moment of application submission (applicants younger than 40 will

be higher ranked); - have the residence in the municipality where the investment takes place or in the municipality

neighboring to the one where the investment takes place.

legal entities or cooperative have to:- be registered in the Serbian Business Registers Agency - be categorized as small enterprises according to the Law on Accounting and Auditing- have less than 25% of public share are eligible beneficiaries.

(5) Types of eligible investments:

Purchase of new tractors for crop productionprocurement of tractors for crop production where minimum is 20 kW of strength. Both imported and tractors produced in the Republic of Serbia are eligible;

Purchase of new machines for soil cultivationplows, cultivators, disc harrows, cultivators for deep cultivation of soil;

Purchase of new machines for seedingpneumatic seed drills and seed drills for planting cereals and seed drills for direct seeds sowing within the soil conservation tillage systems;

Purchase of new sprinklers (only pulled) for plant protection from diseases, pests and weeds Purchase of equipment for determination of the storage conditions and determination of the

grain products qualitysilo thermometers, sensors and equipment for determination of the grain products quality;

Construction and equipping of the storages for grain products storage capacity and drying facilitates for storing/additional drying of grain products.

(5.1.) Specific eligibility criteria depending on the type of eligible investment

Purchase of new tractors for crop production

Eligible beneficiaries are those who either do not have a tractor of the same category13 or have a tractor of the same category but older than 10 years

Purchase of equipment for determination of the storage conditions and determination of

the grain products qualityEligible beneficiaries are legal persons registered in the National Register of public storages, not necessary to be registered in the Register of agricultural holdings and categorized as small legal entities according to the Law on Accounting and Auditing;

Construction and equipping of the storages for grain products Minimum of storage capacity is 500T

(6) The size of eligible/acceptable investments: Bottom and top limit for eligible investments for support/incentives are: Minimum amount of the investment is 50.000.00 RSDMaximum public support for: - purchase of new tractors, purchase of equipment for determination of the storage conditions

and determination of the grain products quality) is 2.500.000,00 RSD - purchase of new machines for seeding, purchase of new machines for soil cultivation,

purchase of new sprinklers for plant protection from diseases, pests and weeds is 500.000,00 RSD

- construction and equipping of the storages for grain products is 10.000.000,00 RSD

(7) Ranking criteria

Ranking criteria Difficulty degree

Natural personsMarginal areas yes/no 20/0Applicant is a person younger then 40 years yes/no 20/0

Applicant is a woman yes/no 20/0Applicant has appropriate expertise (formal education or trainings in crop production) or at least 3 years of experience in the field crop production

yes/no 20/0

Applicant is a member of farmer’s cooperative yes/no 20/0

Legal entities and farmers cooperativesMarginal areas yes/no 25/0Investment leads toward preserving the product quality and reducing post harvest losses (investments in storage capacities)

yes/no 25/0

Legal entity operating with a positive balance yes/no 25/0

Legal entity is a farmer’s yes/no 25/0

cooperative

13Tractors and machines of the same range power or working range category or performance

(8) Participation in financing of the determined expenses

The highest amount of public expenses within established total acceptable project expenses is :- 30% for . purchase of new tractors, purchase of new machines for seeding, purchase of

new machines for soil cultivation, purchase of new sprinklers for plant protection from diseases, pests and weeds

- 40% for all other eligible investments

(9) Indicative financing table:

Year Total expenditures Public (national) expenditures Private contribution

RSD RSD RSD1 4=2+3 2 3

2011 1,500,000,000.00 750,000,000.00 750,000,000.00

2012 1,750,000,000.00 875,000,000.00 875,000,000.00

2013 2,000,000,000.00 1,000,000,000.00 1,000,000,000.00

Total 5250,000,000.00 2,625,000,000.00 2,625,000,000.00

(10) Coherence and compatibility

Since there are no other measures or programmes foreseen, supporting investments in grains production, there is no need of demarcation. All the investments in grains production will be supported only from this measure.

(11) Monitoring and evaluation indicators

Indicator type Indicator Objective Output Number of farm holdings that received investment support 420

Total volume of investment 5.250.000.000 RSD

Result Increase in gross value added in supported farm holdings 10%Percent young farmers supported 25%Share of investments in LFA 30%

Impact Economic growth to be estimatedLabour productivity to be estimated

Technical description of measure No. 1.1.2

Measure 1.1: Investments in agricultural holdings

Sub-measure 1.1.2: Investments in agricultural holdings for milk production

(1) Sub-measure rationale

The current situation in milk production and processing sector in the Republic of Serbia has been described within the dairy sector analysis, that is shown in details in the National Program of Serbian Agriculture.

One of the main issues in the process of developing dairy sector intervention plan is the milk quality and food safety at the farm level, as the main precondition for developing dairy sector overall.

Like other agricultural sectors, this sector consists of different types of units for milk production:

- Non-specialized natural and semi-natural farms that produce milk for their own consumption (less than 5 cows).

- Small, non-specialized natural and semi- natural farms that produce and sell milk to dairies (5-20 dairy cows). These farms do not fully meet the quality and hygiene standards, but can be specialized to produce milk for the market.

- Medium farms with intensive milk production (20 to 100 dairy cows), which produce and sell milk in accordance with national quality and hygiene standards.

- Farms with intensive milk production (more than 100 dairy cows), which produce and sell milk in accordance with national quality and hygiene standards.

This measure will be aimed at the modernization and professionalization of the sector and will encourage the development of the sustainable delivery contracts for high quality raw milk between modern dairy farms and dairy processors which are compliant with the national. This will contribute to promoting an integrated approach to improving the quality and hygiene in whole “value chain” from the production stage, toward milk collection and processing, trade on domestic market and export of dairy products. Farms with capacity 10 - 50 dairy cows have significant potential for expansion.

(2) Goals

- Increase the efficiency, competitiveness and sustainability of milk production on private dairy farms in Serbia, through targeted investments on the farm: purchase of high quality breeding heifers of dairy breeds or combined breeds (Simmental Cattle), as well as the development/expansion/modernization of keeping facilities and relevant equipment and investing in equipment for animal feed preparation (equipment and machinery for silage and for the preparation, processing and distribution of animal feed on the farm);

- Increase the milk quality especially microbiology of milk (reducing the number of bacteria and somatic cells) by improving the storage and keeping conditions through targeted investments in modernized milking facilities and milk cooling and storage equipment on

farms, as well as by adopting good agricultural practices in order to comply with national quality standards of raw milk;

- Improve animal health and welfare, hygiene and environmental protection by promoting investments in proper handling, disposal and application of manure in order to prevent milk contamination, diseases and controlled manure storage and proper distribution on field;

- Improve household incomes and increase employment in rural areas in Serbia. With the implementation of proposed measures, rural households will have opportunity to improve competitiveness and utilize all resources toward increased incomes and quality of life in rural areas.

(3) Connection with other measures within the National Rural Development Program

- Investments in modernization of milk production will provide sufficient milk for the food -processing industry (measure 1.3).

- Improved milk production (quantity and quality) will contribute to the development of the rural economy and market placement of local products (diversification - Measure 3.2.).

(4) Eligibility criteria

а. Qualified rural areas (geographical distribution)

All rural areas in Serbia.

b. Eligibility of agricultural holdings

Beneficiaries of this measure are natural persons, legal entities and farmer’s cooperatives..

There are three groups of beneficiaries:

1. farms with 5 - 20 dairy cows at the and of the investment are entitled to the following investments:

- purchase of transportable and line-milking equipment as well as cooling equipment

- purchase of high quality breeding heifers

- equipment and mechanisation for the handling and distribution of feed and fodder (hay, silage, haylage, etc.) on the farm;

2. farms with more than 20 dairy cows at the and of the investment are entitled to the following investments:

- building and/or renovation of cattle keeping facilities including related barn, milking and cooling equipment

- purchase of high quality breeding heifers

- purchase of new mechanisation /equipment and construction/reconstruction of facilities for the handling, distribution and storage of feed and fodder (hay, silage, haylage, etc.) on the farm;

- purchase of new mechanisation /equipment and construction/reconstruction of facilities for handling, storage and processing of manure on the farm;

3. farms with more than 100 dairy cows at the submission of the application are entitled only to the following investments:

- purchase of new mechanisation /equipment and construction and/or renovation facilities for handling, disposal and distribution of manure

c. General eligibility:

beneficiaries of incentives:

- have to be registered in the national Register of agricultural holdings and are in active status,

- have animals that are marked and registered in a central database and the data has to be updated

- Are able to prove that he does not have liability related to tax payments for the year prior to application process

- In case that beneficiary is not owner of the holding, must have contract on lease of the property with stipulated contract duration at least eight years after the date of submission of the application.

- Business plan has to prove the economic viability of the beneficiary at the end of the investment

- In case of financing of multiple projects, beneficiary should have completed given investments and final report about the preceding project financed from the NRDP prior to initiating of the new investment.

d. Specific eligibility:

natural persons have to:

- be ensured in the Pension and Invalidity Security Fund for agricultural producers;

- be younger than 60 at the moment of application submission (applicants younger than 40 will be higher ranked);

- have the residence in the municipality where the investment takes place or in the municipality neighbouring to the one where the investment takes place.

legal entities and cooperative have to:

- be registered in the Serbian Business Registers Agency

- be categorized as small and medium enterprises according to the Law on Accounting and Auditing

- have less than 25% of public share are eligible beneficiaries.

(5) Types of eligible investments:

1. Purchase of up to 30 high quality heifers (dairy breeds or Simmental breed)

2. Building/expansion/modernization of keeping facilities including barn equipment

3. Building and/or renovation of other agricultural facilities, limited to facilities for storing of livestock feed

4. Building and/or renovation of other agricultural facilities, limited to facilities for collecting/storing of raw milk

5. Building and/or renovation facilities for handling, storing and treatment of manure

6. Equipment and mechanization for preparation, handling, distribution and storage of feed and fodder (hay, silage, haylage, etc.) on the farm/holding

7. Mechanization/equipment for handling, disposal and distribution of manure

8. Facilities/premises and equipment for milking or closed system of milking in tight and free stall barns

9. Movable/Transportable milking equipment

10. Milk cooling and storing equipment

(6) Amount of eligible/acceptable investments:

Bottom and top limit for eligible investments for support/incentives are:

- Minimum amount of the investment is 50.000 RSD

- Maximum amount of public support is 15.000.000 RSD

(7) Ranking criteria

Ranking criteria Difficulty degree

Natural personsMarginal areas yes/no 20/0Applicant is a person younger then 40 years yes/no 20/0

Applicant is a woman yes/no 20/0Applicant has appropriate expertise (formal education or trainings in animal production) or at least 3 years of experience in the animal production

yes/no 20/0

Investments are related to positive effect on the environment (investments in handling and storage of manure)

yes/no 20/0

Legal entities and farmer’s cooperativesMarginal areas yes/no 25/0Animals are registered in the Herd Book Register (have a pedigree)

yes/no 25/0

Legal entity operating with a positive balance yes/no 25/0

Legal entity is a cooperative yes/no 25/0

(8) Participation in financing of the determined expenses

The highest amount of public expenses within established total acceptable project expenses is:

- 75% for investments related to manure handling, disposal, treatment and distribution

- 50% for all other eligible investments

(9) Indicative financing table:

Year Total expenses Public expenses (national) Private/individual contribution

RSD RSD RSD

1 4=2+3 2 3

2011 300.000.000,00 150.000.000,00 150.000.000,00

2012 350.000.000,00 175.000.000,00 175.000.000,00

2013 400.000.000,00 200.000.000,00 200.000.000,00

Total 1.050.000.000,00 525.000.000,00 525.000.000,00

(10) Coherence and compatibility

Production of goat and sheep milk will be supported through measures within axis 3. In the case of combined farms/holdings (which are engaged in production of milk and meat) it is necessary to distinguish within the application form for specific project.

(11) Monitoring and evaluation indicators

Indicator type Indicator Objective Output Number of farm holdings that received investment support 90

Total volume of investment 1.050.000.000 RSD

Result Number of holdings introducing animal feed facilities improvement 20%Increase in gross value added in supported farm holdings 10%Number of farm holdings introducing milk quality improvement 45%Number of holdings introducing milk cooling facilities and cooling chain improve-ment

10%

Number of farm holdings introducing the environmental control (manure han-dling)

5%

Percent of supported farms that have delivery contracts with milk processing plants

80%

Percent of young farmers supported 25%Share of investments in LFA 30%

Impact Economic growth to be estimatedLabour productivity to be estimated

TECHNICAL DESCRIPTION OF THE MEASURE NO. 1.1.3

Measure 1.1: Investments in agricultural holdings

Sub-measure 1.1.3: Investments in agricultural holdings for meat production

(1) Sub-measure rationale:

The current situation in the sector of meat production in the Republic of Serbia is described within the analysis of the meat production sector presented in the National Program of Serbian Agriculture (production of beef, pork and sheep meat). Similar to other agricultural sectors, this sector consists of different types of production units:

- Natural agricultural farms/holdings (producing for own-subsistence) with small number of animals,

- Combined agricultural holdings for meat production at the local level with low rate of productivity, with mostly combined production characteristics (as Simmental cattle) with not utilizing natural pasture resources toward specialized meat production.

- Specialized agricultural holdings with high rate of productivity (mainly in production of poultry meat).

- Combined agricultural holdings of pig breeders with small number of sows and low quality of piglets produced as well as sheep breeders with very extensive production and poor genetic quality.

Improvement of the competitiveness of this sector is the highest priority with objective to increase the quality of meat.

Since the objective is to increase productivity and indirectly export, one of the major priorities which will be applied in the entire chain of meat production is to provide consistent quality and quantity of high quality meat for slaughterhouse industry in harmonization/compliance to veterinary regulations and national quality standards.

(2) Goals

Objectives of this measure are:

- Increase efficiency, competitiveness and sustainability of the meat production on private farms (beef, sheep and sow/piglets production) in Serbia by targeted investments in building and/or renovation of existing agricultural facilities/premises, such as facilities for production and storage of feed, fodder and silage, as well as by improving technology and equipment for proper feed production, storage and proper equipment for pasture management.

- Improve quality of beef production through relevant porcine and sheep meat production systems in accordance with veterinary national standards, and in this way facilitate future export growth,

- Support the investments in breeding technology of cattle, sheep and porcine in order to meet the conditions of animal welfare by promoting investments in manure handling, disposal and application in order to reduce the harmful effect on the environment of the holding

- Improve the quality and consistency of porcine meat production by investments into pig farrowing and nurseries on the pig farms (equipment and facilities).

(3) Association to other measures within NRDP

- Investments into modernization of meat production will ensure sufficient quantity of high quality meat for food-processing industry (measure 1.3).

- Specialized meat products will contribute to marketing of local products and development of rural economy supported within axis 3 (diversification, rural tourism).

(4) Eligibility criteria

а. Eligible rural regions (geographical distribution)

All rural areas in Serbia.

b. Eligibility of agricultural farms/holdings

Beneficiaries of this sub-measure are natural persons and legal entities (including the Agricultural Cooperatives)

There are two groups of beneficiaries:

I. Farms with 10-100 beef breeding (dual purpose) cows,20-200 fattening steers, 50-500 sheep and 20-100 sows at the date of submission of application are eligible for:

1. Building/expansion/renovation of barn facilities including related barn equipment2. Building/expansion/ renovation of other agricultural facilities, limited to facilities for

storing of livestock feed and fodder (hay,haylage,silage,etc).; 3. Purchase of high quality sheep and guilts (max. 50 heads)4. Equipment and mechanisation for preparation, handling distribution and storage of feed

and fodder on the farm (hay, haylage, silage,etc.) including electric fences and thermo waterers;

5. Building/expansion/renovation of the facilities and equipment/mechanization for handling, storage and distribution of the manure on the farm

6. Facilities, equipment, mechanization for the facilities for sow/piglets production;

II Farms with more than 100 beef cows, 200 fattening steers, 500 sheep, 100 sows at the date of submission of application are eligible for:

1. Equipment and mechanization for handling, storage and distribution of manure;2. Building/expansion/renovation of the facilities for handling, storage and distribution of

manure

c. general eligibility:

beneficiaries of incentives:

- have to be registered in the national Register of agricultural holdings and are in active status,

- have animals that are marked and registered in a central database and the data has to be updated

- Are able to prove that he does not have liability related to tax payments for the year prior to application process

- In case that beneficiary is not owner of the holding, must have contract on lease of the property with stipulated contract duration at least eight years after the date of submission of the application.

- Business plan has to prove the economic viability of the beneficiary at the end of the investment

- In case of financing of multiple projects, beneficiary should have completed given investments and final report about the preceding project financed from the NRDP prior to initiating of the new investment.

d. specific eligibility:

natural persons have to:

- be ensured in the Pension and Invalidity Security Fund for agricultural producers;

- be younger than 60 at the moment of application submission (applicants younger than 40 will be higher ranked);

- have the residence in the municipality where the investment takes place or in the municipality neighbouring to the one where the investment takes place.

and legal entities have to:

- be registered in the Serbian Business Registers Agency

- be categorized as small and medium enterprises according to the Law on Accounting and Auditing and registered as independent legal entities

- have less than 25% of public share are eligible beneficiaries.

(5) Types of eligible investments:

- Building of new and/or renovation of existing agricultural facilities/premises, such as facilities for keeping animals, storing of feed, fodder and silage,

- Purchase of high quality sheep and guilts (max. 50 heads)

- Equipment and mechanisation for preparation, management, handling, distribution of feed, fodder and silage on the farm/holding, electric fences, thermo-waterers

- Investment into facilities and mechanization for handling, storage and distribution of manure in case of indoor keeping and at farms,

- Investments into sow boxes, pig farrowing and nurseries (equipment and facilities) with proper premises and equipment for manure handling, storage and distribution in line with relevant national standards.

(6) Amount of eligible/acceptable investments:

Bottom and top limit for eligible investments for support/incentives are:

- Minimum amount of the investment is 50.000 RSD

- Maximum amount of public support is 15.000.000 RSD

(7) Ranking criteria

Ranking criteria Difficulty degree

Natural personsMarginal areas yes/no 20/0Applicant is a person younger then 40 years yes/no 20/0

Applicant is a woman yes/no 20/0Applicant has appropriate expertise (formal education or trainings in animal production) or at least 3 years of experience in the animal production

yes/no 20/0

Investments are oriented toward reducing the negative impact on the environment (investments in handling and proper disposal of manure)

yes/no 20/0

Legal entities and farmer’s cooperativesMarginal areas yes/no 25/0Investments are oriented toward reducing the negative impact on the environment (investments in handling and proper disposal of manure)

yes/no 25/0

Legal entity operating with a positive balance for at least three years

yes/no 25/0

Legal entity is a cooperative yes/no 25/0

(8) Participation in the financing of the determined expenses

The highest amount of public expenses within established total acceptable project expenses is:

- 75% for investments related to manure handling, disposal, treatment and distribution

- 50% for all other eligible investments

(9) Financing

Year Total expenses Public expenses (national) Private/individual contribution

RSD RSD RSD

1 4=2+3 2 3

2011 300.000.000,00 150.000.000,00 150.000.000,00

2012 350.000.000,00 175.000.000,00 175.000.000,00

2013 400.000.000,00 200.000.000,00 200.000.000,00

Total 1.050.000.000,00 525.000.000,00 525.000.000,00

(10) Coherence and compatibility

Since no other measures or programs which would support investments in meat production have been established, there is no need for distinguishing. All investments in meat production will be supported only within this sub-measure.

In case of combined holdings (engaged in production of milk and meat) it is necessary to make this distinction within the application form for certain project.

(11) Monitoring and evaluation indicators

Indicator type Indicator Objective Output Number of farm holdings that received investment support 90

Total volume of investment 1.050.000.000 RSD

Results Increase in gross value added in supported farm holdings 10%

Number of holdings introducing animal feed facilities improvement 40%Number of holdings introducing meat quality improvement 45%

Number of farm holdings introducing the environmental control (manure han-dling)

20%

Percent young farmers supported 25%Share of investments in LFA 40%

Impact Economic growth to be estimatedLabour productivity to be estimated

Technical description of the measure No. 1.1.4

Measure 1.1: Investment into agricultural farms/holdings

Sub-measure 1.1.4: Agricultural holdings engaged in production of fruit, grape and vegetable

(1) Sub-measure rationale

Fruits and vegetables sectors are very important because they are the source of income for many agricultural holdings. Their importance, as sectors with high production profitability and as labour intensive production is in the fact that they will present the way of diversification of production from other less profitable productions.

The main problems in this sector are the outdated assortment and technology of production which together with no irrigation lead to fluctuations in quality and quantity, consequently reducing the farmer's competitiveness on the market.

Old orchards or vineyards are with low density of plants in most cases with plant diseases so establishing new plantations is very important step toward modernization of fruit and vegetable production.

Modernization of production technology will provide stabile yields with high quality of products and that is one of the most important factors in increasing competitiveness in fruit and vegetable production.

In-door vegetable production is important because it's production with high profitability and it is excellent possibility for diversification of production on the farm. Importance of this kind of production is because we have great number of small holdings in which this production can be very important for sustainability of the farm. In-door production provides fresh products for the market through whole year.

Building new facilities for post harvest storage of those products and for preparation and packaging for the market is the most important thing in increasing competitiveness of our producers and decreasing post harvest losses. Facilities for collecting, storage, grading and packaging of fruit and vegetable products will provide enough products for fresh consumption for domestic and foreign market.

(2) Goals

The main objective of the sub measure: Increase the competitiveness of agricultural holdings in fruits, grape vine and veget-

ables production through improvement of production, storage and adding value by im-proving of techniques for preparation of these products for the market.

The specific objectives of the sub measure: Improve of grape vine production trough planting new or recultivation of an old vine-

yards with noble or autochthonic varieties; Improve of berries production through planting new or recultivation of an old planta-

tions with modern varieties;

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Improve of fruit production through planting new or recultivation of an old orchards with modern or autochthonic varieties;

Increase level of vegetable production through improving sowing, planting and har-vesting techniques;

Increase level of protection in production of fruit, grape vine and vegetable through improving protection techniques from diseases, weeds, pests, frost and hail;

Improve irrigation techniques in fruit, grape vine and vegetable production; Decrease post harvest losses and provide possibilities for collecting and long term

storage of fruits and vegetable products that can be stored for a longer time period; Increase quality and quantity of fruit and vegetable products for fresh consumption

through building capacities for collecting and short term storage for those varieties that can be stored for a short period of time;

Increase market value of products through improving grading, cleaning, washing, packaging and labelling techniques.

(3) Connection with other measures within the National Rural Development Program

Implementation of this sub measure will provide stabile quantities of goods with high quality as a precondition for processing plants (Measure 1.3.3.).

As well, raising the quantity and quality of vegetable and fruit products will increase the opportunities for development of rural tourism in domain of improving the offer for tourists (measure 3.2.2.).

(4) Eligibility criteria

а. Qualified rural areas (geographical distribution)

All rural areas in Serbia.

b. Eligibility of agricultural holdings

Beneficiaries of this measure are natural persons and legal entities.

c. General eligibility:

beneficiaries of incentives:

- have to be registered in the national Register of agricultural holdings and are in active status,

- Are able to prove that no criminal charges in relation to public debt have been brought against them, and,

- In case that beneficiary is not owner of the holding, must have contract on lease of the property with stipulated contract duration at least five years after the date of completion of the investment that is specified in the Approval of application.

- Business plan has to prove the economic viability of the beneficiary at the end of the investment.

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- In case of financing of multiple projects, beneficiary should have completed given investments and final report about the preceding project financed from the NRDP prior to initiating of the new investment.

d. Specific eligibility:

natural persons have to:

- be ensured in the Pension and Invalidity Security Fund for agricultural producers;

- be younger than 60 at the moment of application submission (applicants younger than 40 will be higher ranked);

- have the residence in the municipality where the investment takes place or in the municipality neighbouring to the one where the investment takes place.

and legal entities have to:

- be registered in the Serbian Business Registers Agency

- be categorized as small enterprises according to the Law on Accounting and Auditing

- have less than 25% of public share are eligible beneficiaries.

(5) Types of eligible investments:

1. Establishing new or renovation of existing vineyards with noble or au-tochthonic varieties of grape vine (purchasing of certified and standard seed-ling of grape vine; deep tillage of soil before planting; building columns for high density plantation, purchasing of columns for establishment the net against the hail);

2. Establishing new or renovation of existing orchards of berries with modern varieties (purchasing of certified and standard seedling of berries; deep tillage of soil before planting; building columns for high density plantation, purchasing of columns for establishment the net against the hail);

3. Establishing new or renovation of existing orchards of fruits with modern or autochthonic varieties (purchasing of certified seedling of apple fruits, pur-chasing of certified and standard seedling of other kinds of fruits, deep tillage of soil before planting, building columns for high density plantation, purchasing of columns for establishment the net against the hail);

4. Purchasing machinery and equipment for sowing, planting, plant protec-tion and irrigation for an open field vegetable production (purchasing of precise sowing machines for vegetable, purchasing of planters for seedlings of vegetable plants, purchasing of high quality sprayers or atomizers for protection from diseases, weeds and pests; purchasing of agro-textile materials for cover-ing of vegetable crops; purchasing of systems for micro-spraying in order to protect fruit from frost; purchasing of net against the hail; purchasing of drip and spray irrigation systems and artificial rain systems);

5. Purchasing equipment and materials for in-door vegetable production (purchasing of greenhouse constructions, high quality cover film for covering

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of greenhouses, systems for greenhouse heating, and systems for artificial light-ing and tables for seedling growing);

6. Building capacities for collecting, storing and purchasing equipment for preparing fruit and vegetable products for market and packaging equip-ment (building of cold storage and ULO cold storage of larger capacity for long term storage of those products that can be stored for a long period of time (ULO capacities for storage of apple fruits only); building the centres for collecting and preparing fruits for the market with a smaller capacities for cooling and short time storing of those products that can't be stored for a long period of time; purchasing of machines for washing, polishing, cleaning, calibration, clas-sifying and packaging of products; purchasing of box pallets for long term products storage).

5.1. Specific eligibility criteria according to the type of the eligible investment

I. Establishing new or renovation of existing vineyards with noble or autochthonic varieties of grape vine

Eligible beneficiaries can have a maximum of 10 ha of vineyard ; Beneficiaries need to plant minimum 0,5 ha of vineyard; Beneficiary can establish new vineyards up to 5 ha or renovate old vineyards

up to 10 ha; Vineyards can be established only in the vine-production regions or grape vine

production oasis (Vine production regions and oases are listed in annex IV); In order to establish vineyard, the deep soil cultivation must be done timely,

not earlier then two years ago and no later than in the fall before planting; In order to establish vineyard, beneficiary must provide soil analyses max-

imum one year before planting and provide positive opinion of an agricultural experts for establishing new vineyard on that soil;

Planting density must be within the recommended values (recommended dens-ities are listed in annex V);

Only noble and autochthonic varieties are eligible for planting.

II. Establishing new or renovation of existing orchards of berries with modern vari-eties

Eligible beneficiaries can have a maximum of 15 ha of berry fruit plantation; Beneficiaries need to plant minimum 0,5 ha of berries; Beneficiary can establish new berries plantation up to 5 ha or renovate old ber-

ries plantation up to 10 ha; In order to establish berries plantation, the deep soil cultivation must be done

timely, not earlier then two years ago and no later than in the fall before plant-ing;

In order to establish berries plantation, beneficiary must provide soil analyses maximum one year before planting and provide positive opinion of an agricul-tural experts for establishing new berries plantation on that soil;

Planting density must be within the recommended values (recommended dens-ities are listed in annexes V);

Only modern varieties are eligible for planting.III. Establishing new or renovation of existing orchards of berries with modern vari-

eties

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Eligible beneficiaries can have a maximum of 15 ha of fruit plantation; Beneficiaries need to plant minimum 1 ha of fruits; Beneficiary can establish new orchard up to 10 ha or renovate old orchard up

to 15 ha; In order to establish an orchard, the deep soil cultivation must be done timely,

not earlier then two years ago and no later than in the fall before planting; In order to establish new orchard, beneficiary must provide soil analyses max-

imum one year before planting and provide positive opinion of an agricultural experts for establishing new berries plantation on that soil;

Planting density must be within the recommended values (recommended dens-ities are listed in annex V);

For planting apple fruits and stone fruits, only certified seedlings are eligible; Only modern and autochthonic varieties are eligible for planting.

IV. Purchasing machinery and equipment for sowing, planting, plant protection and irrigation for an open field vegetable production

Eligible beneficiaries for these investments are natural and legal persons who can have a maximum of 50 ha of an open field vegetable production, as well as agricultural cooperatives;

Beneficiary needs to have minimum 5 ha of an open field vegetable produc-tion for buying equipment for sowing, planting and plant protection with ex-ception of cooperatives (for establish machinery rings);

Beneficiary needs to have minimum 0,5 ha of an open field vegetable produc-tion for buying equipment for irrigation;

V. Purchasing equipment and materials for in-door vegetable production Only object covered with plastic materials are eligible; Plastic materials for covering of these objects needs to be multi annual with

validity of at least 5 years; Minimum surface covered by new object is 250m2; Maximum surface covered by all object for in-door production at the end of

the investments is up to 1 ha; Only heating systems which use biomass or natural/propane-butane gas as a

fuel are eligible.VI. Building capacities for collecting, storing and purchasing equipment for preparing

fruit and vegetable products for market and packaging equipment Only agricultural cooperatives are eligible for those investments; Cooperative must have at least 90% of the members, registered in National

Farm Register as a producers of fruit or vegetable on open field production and they must be in active status;

Cooperative must have at least 10 members registered in National Farm Re-gister as a producers of fruit or vegetable on open field production;

Capacity of an objects for storing fruit and vegetable on a long period of time from 1000t up to 5000t, for building these kind of object cooperative need to provide contracts with agricultural producers which produce storable fruit and vegetable verities minimum for 80% of a capacity of an object;

Storage capacities with ultra low oxygen (ULO) conditions are eligible only for storing of pomme fruits;

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(6) Amount of eligible/acceptable investments:

Bottom and top limit for eligible investments for support/incentives are:

- Minimum 50.000 RSD

- Maximum 15.000.000 RSD, with the exception for the storage capacity for which the maximum is 50,000,000 RSD

(7) Ranking criteria

Ranking criteria Difficulty degree

Natural persons

Marginal areas yes/no 20/0

Applicant is a person younger then 40 years yes/no 20/0

Applicant is a woman yes/no 20/0

Applicant produces fruits, vine grape or vegetables and is certified for organic production or proved that production is under control of an extension service (both state or private)

yes/no 20/0

Applicant is a member of cooperative gathering fruit and vegetable producers

yes/no 20/0

Legal entities

Marginal areas yes/no 25/0Investment leads toward decreasing postharvest losses and adding value to a products (investments in storage capacities and equipment for post harvest handling od products)

yes/no 25/0

Legal entity is a cooperative yes/no 25/0

Legal entity has contract on production control with

yes/no 25/0

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extension services (both state or private) or institutes

(8) Participation in financing of the determined expenses

The highest amount of public expenses within established total project expenses is 50%.

(9) Financing

Year Total expenses Public expenses (national) Private/individual contribution

RSD RSD RSD

1 4=2+3 2 3

2011 1.500.000.000,00 750.000.000,00 750.000.000,00

2012 1.750.000.000,00 875.000.000,00 875.000.000,00

2013 2.000.000.000,00 1.000.000.000,00 1.000.000.000,00

Total 5.250.000.000,00 2.625.000.000,00 2.625.000.000,00

(10) Coherency and compatibility

Since there are no other measures or programmes foreseen, supporting investments in fruit and vegetable production, there is no need of demarcation. All the investments in fruit and vegetable production will be supported only from this measure.

(11) Monitoring and evaluation indicators

Indicator type Indicator Objective Output Number of farm holdings that received investment support 135

Total volume of investment 5.250.000.000 RSD

Result Increase in gross value added in supported farm holdings 10%

Number of holdings improving greenhouses and other protected cultivation tech-niques

40%

Number of farm holdings improving irrigation techniques 40%Number of farms holdings improving post-harvest storing practice 30%Number of holdings introducing cold storage and cold chain equipments 55%Number of farm holdings improving fruits and vegetables quality 80%Percent young farmers supported 30%Share of investments in LFA 30%

Impact Economic growth to be estimatedLabour productivity to be estimated

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TECHNICAL DESCRIPTION OF THE MEASURE NO. 1.3

MEASURE 1.3: Investments into processing and marketing of agricultural products in order to restructure these businesses, improve and achieve standards of European Union

(1) Justification

In the review of the processing and marketing sector presented in previous chapters, key problems in the processing industry and marketing in Serbia are pointed out:

- High percentage of old/obsolete technology in food-processing industry is not able to fulfil all market requirements and demands – especially most of the small food-processing enterprises which are usually not in compliance with EU standards, therefore modernization is necessary;

- Poor assortment of the products of food industry which are not satisfying the demand and desires of modern consumers;

- Insufficient experience with large modern marketing chains;

- Variable quality of raw materials preventing the improvement of production;

- Insufficient investments into dynamic branches of food-processing industry (beverages, ready to go dishes, food additives);

However, there are also many advantages of the food-processing industry of the Republic of Serbia, on which future development will be based on:

- Sufficient quantities of domestic raw materials (meat, fruits);

- Strong specialized production in certain sectors (dry meat products, berry fruits);

- Existing markets to which Serbia has long tradition of export of food products.

Sectors defined as priority for investments into processing and marketing are the following:

- Milk

- Meat

- Fruits, and vegetables (especially berry fruits)

(2) Objectives

Increase of efficiency, competitiveness and sustainability of the sector of food-processing activity/operation in sub-sectors of processing of dairy, meat, fruit and vegetable products;

To provide assistance to food-processing industry to harmonize to international quality standards (EU standards) which relate to quality, food safety and hygiene, animal welfare and environment protection through modernization of equipment, installations and technological processes;

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To give incentives for development of new products in order to be able to satisfy with more success demands of the modern markets.

General objectives of the NRDP:

- to contribute to modernization of the food-processing industry sectors,

- to support sustainable development of rural areas through preservation of the environment, improvement of the quality of life and diversification of activities, as well as promotion of the participatory approach and local initiatives.

Axis 1- objective:

Modernization and improvement of the market efficiency of the agricultural and food processing sectors, as well as following the direction towards implementation of EU standards.

Measure 1.3. Specific objective:

investment into food-processing branches of industry (dairy sector, meat sector and fruit and vegetable sector) in order to increase their efficiency, competitiveness and adjustment to market and to provide assistance to them in order to be able to comply to EU standards in regard to food safety and human health, animal welfare and protection of environment.

Operational objectives:

- Measure 1.3.1. Dairy processing industry

- Measure 1.3.2. Meat processing industry

- Measure 1.3.3. Fruit and vegetable processing industry

(3) Association to other priorities/measures of the NRDP 2010–2013.

- Investments in processing and marketing of food and non wood forest products will provide/ensure collection/buying of high quality products from primary producers, agricultural farms/holdings supported within measure 1.1.

- In regard to measure 2.1 which relates to organic agricultural production and agro-ecological payments, investments in processing and marketing of organic and ecological products are basis for future development at the level of high quality production (which is the essence of organic production).

- Finally, investments in processing and marketing of food products open possibilities for agricultural farms/holdings and small enterprises to be engaged in other operations/activities (diversification), mainly based on processing and sale of local products (measures within axis 3).

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(4) Financing Year Total expenses Public expenses (national) Private contribution

RSD RSD RSD

1 4=2+3 2 3

2011 1.200.000.000,00 600.000.000,00 600.000.000,00

2012 1.400.000.000,00 700.000.000,00 700.000.000,00

2013 1.600.000.000,00 800.000.000,00 800.000.000,00

Total 4.200.000.000,00 2.100.000.000,00 2.100.000.000,00

а. Distribution of public means according to sub-measures

Sub-measure Share in total means for RD РР (%) Total 2011 – 2013(RSD)

1.3.1 6 630.000.000,001.3.2 6 630.000.000,001.3.3 8 840.000.000,00Total 20 2.100.000.000,00

(5) Monitoring and evaluation indicators Type of indi-

catorIndicator

Baseline Labour productivity in food industry Economic development in food industry Employment in food industry

Input Amount of public realized expenditureOutput Number of enterprises supported (division according

to the type of enterprise –micro, small…-, sector andtype of activity –marketing and processing ordevelopment)

Total volume of investment (division according to thesize of the company, type of sector and type ofactivity)

Result Number of enterprises introducing new products and /or techniques Increase in gross value added in supported enterprises

Impact Economic growth (net additional value added expressed in PPS)Labour productivity (Change in Gross Value Added per full-time equivalent- GVA/FTE)

TECHNICAL DESCRIPTION OF THE MEASURE NO. 1.3.1

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MEASURE 1.3: Investments into processing and marketing of agricultural products in order to restructure and improve these businesses and achieve standards of European Union

Sub-measure 1.3.1: Investments in processing and marketing of milk and dairy products

(1) Sub-measure rationale:

Market for dairy products is increasing and becoming more demanding. However, majority of dairy plants in Serbia process low quality raw milk using old/obsolete technology. Only few big dairy plants are modernized.

Raw quality milk in Serbia on average is far bellow EU standards due to the various reasons: improper milking practices, milk storage and transport as well as inconsistent milk supply to processors.

Inconsistent milk quantity and quality of delivered milk to processors is the major obstacle in improving quality of the dairy products and competitiveness.

Cooling and storing equipment are not sufficient and not efficient due to the lot of small producers located and good creation of “cold chain” is hard to achieve. There should be more cooling and storing equipment placed on the farm and collection centres.

With the high level of milk production and potential for export in CEFTA countries Serbia can strengthen its role on domestic and international market of dairy products. However, in order to be able to compete with other suppliers, also dairy-processing industry must be modernized and quality of milk adjusted and improved to EU standards.

Quality of raw milk can be improved by better organization of milk collection and better equipped facilities for collection and storing of milk, by using specialized transport vehicles for milk as well as establishing of organizations of milk producers with implementation of common dairy practices and procedures.

Also, in order to be competitive on domestic and export markets processing plants should invest in marketing and modern processing equipment in order to increase competitiveness and profitability as well as to increase incomes.

(2) Goals

Increasing the quality and microbiology of raw milk through investments in milk collection centres/equipment and specialized milk delivery trucks.

Support to small and medium milk processing plants to improve their milk processing technology, marketing and introduction of new technologies, products and processes in order to improve sales and export of dairy products.

Improvement/modernization of milk processing plants in order to be able to comply with national or EU standards relating to quality, safety and hygiene of food products, and environment protection,

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(3) Connection with other measures within the National Rural Development Program

Investments in processing and marketing of milk and dairy products will provide collection/buying of high quality milk from primary producers/agricultural holdings supported within measure 1.1.2.

For measure 2.1 which relates to payments allocated to organic agricultural production and agro-ecological payments, investments in processing and marketing of organic and ecologically produced milk represent basis for further development to achieve level of high quality production (which is the organic production in the essence).

(4) Eligibility criteria

а. Eligible rural areas (geographical distribution)

All rural areas of Serbia.

b. Eligible legal entities and entrepreneurs

Beneficiaries of this sub-measure are entrepreneurs and legal entities .

c. general eligibility

beneficiaries of incentives:

- have to be registered within the Serbian Business Registers Agency in the Register of entrepreneurs for processing and marketing of milk and dairy products,

- have to be registered in the Processing facilities Register (according to the Veterinary Law)

- have the minimum capacity of dairy plant is at least 10 000 L milk per day on average in the fiscal year prior to application process

- are categorized as small or medium legal enterprise (according to the Law on Accounting and Auditing)

- Are able to prove that he does not have liability related to tax payments for the year prior to application process and able to prove that no criminal charges in relation to public debt have been brought against them,

- In the case that beneficiary is not owner of the land or facility, must have contract on lease of the property with stipulated contract duration at least eight years after the date of submitting of the application.

- In case of financing of multiple projects, beneficiary should have completed given investments and final report about the preceding project financed from the NRDP prior to initiating of the new investment,

- Business plan has to prove the economic viability of the beneficiary at the end of the investment.

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Ranking criteria

d. Specific eligibility

- In case of cooperatives they should be constituted of at least 10 members registered in National Register of agricultural holdings with at least 90% of members having active status in the National Register.

(5) Type of eligible investment:

Restoration/reconstruction of already existing milk processing facilities in order to comply sanitary and veterinary regulations;

Purchasing of new mechanization and equipment for modernization of existing processing plants and new production lines for expanding the assortment of products with aim of establishing the systems for food safety (HACCP, GMP and GHP);

Purchasing of the laboratory equipment for the purpose of improvement of product quality and hygiene control;

Purchasing of equipment for handling, storing and treatment of waste products of milk processing

Purchasing of equipment for establishing milk collection centres with capacity at least 1000 L

Purchasing of specialized vehicles for milk cooling and transportation

(6) Amount of eligible/acceptable investments:

Bottom and top limits of eligible investments for support/incentives are the following:

- Minimum 200.000 RSD

- Maximum 20.000.000 RSD

(7) Ranking criteria

Characteristics of the applicant (legal entities and entrepreneurs)

Marginal area yes/no 25/0

Environment protection - investments oriented towards waste management yes/no 25/0

Legal entity operating with a positive balance for at least three years yes/no 25/0

Based on contract with primary agricultural producers project includes raw material supply

<50%50-75%>75%

0/010/025/0

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(8) Participation in financing of determined expenses

- The highest amount of public expenses within total project expenses is 50%.

(9) Financing

Year Total expenses Public expenses (national) Private/individual contribution

RSD RSD RSD

1 4=2+3 2 32011 360.000.000,00 180.000.000,00 180.000.000,00

2012 420.000.000,00 210.000.000,00 210.000.000,00

2013 480.000.000,00 240.000.000,00 240.000.000,00Total 1.260.000.000,00 630.000.000,00 630.000.000,00

(10) Coherence and compatibility

Other measures have been anticipated to support modernization of milk products placement on the market and related marketing activities within axis 3.

For the equipment for milk collection and cooling, as a part of investments on the farm, within the measure 1.1.1 it's necessary to make a distinction at the project level.

(11) Monitoring and evaluation indicators

Indicator type Indicator Objective Output Number of supported enterprises 80

Total value of the investment 1.260.000.000 RSD

Result Number of enterprises introducing hygiene, food safety, occupational safety stan-dards (levels of improvement)

50%

Number of projects improving collection network/transportation facilities 30%Number of projects introducing cool chain management 30%Number of enterprises introducing new products and/or techniques 50%Increase in gross value added in supported enterprises 15%Share of investments in LFA 50%

Impact Economic growth to be estimatedLabour productivity to be estimated

TECHNICAL DESCRIPTION OF THE MEASURE NO. 1.3.2

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MEASURE 1.3: Investments in processing and marketing of agricultural products in order to restructure and improve these businesses and achieve standards of European

Union

Sub-measure 1.3.2: Investments in meat processing

(1) Sub-measure rationale:

Market for meat products is expanding in our country and in the region.

Considering the high rate of potential in production of red meat and export potentials, Serbia can strengthen its role on the market for meat products. However, in order to be able to compete with other suppliers, meat processing industry needs to get improved quality of meat and to adjust to EU standards.

Many small slaughterhouses and plants for meat cutting, processing and fat melting are still using old/obsolete technology and they need modernization. Network of slaughterhouses needs to be modernized in order to be in compliance with regulations related to hygiene and food safety, as well as regulations relating to human health and environment protection.

Although meat processing sector requires large scale investments, NRDP focuses on the most critical investments bearing in mind the limited budget i.e. investments in the first stages of meat processing - slaughterhouses.

Since the objective is to increase the export, one of the major priorities which will be applied in the entire chain of meat production and processing – slaughtering and processing is harmonization/compliance to veterinary regulations and regulations related to quality in EU.

(2) Goal

Support to modernization of the network of slaughterhouses of certain capacities in order to reach/acquire EU standards relating to hygiene and quality of meat and meat products, as well as regulations related to animal welfare and environmental protection (waste water management) and with goal of obtaining export licences.

(3) Connection with other measures within the National Rural Development Program

Investments in modernization of the network of slaughterhouses will provide the opportunity for primary producers i.e. agricultural holdings, supported within measure 1.1.3 to offer fattened beef, pigs and small ruminants (goats and sheep) for the primary stage of processing;

For measure 2.1 which relates to payments allocated to organic agricultural production and agro-ecological payments, investments in slaughtering of organically kept animals represent a solid basis for achieving the high quality production of organically produces meat;

Investments in modernization of the network of slaughterhouses will facilitate production of specialized meat products and local products thus contributing to development of rural economy supported within axis 3 (diversification, rural tourism).

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(4) Eligibility criteria

а. Eligible rural areas (geographical distribution)

All rural areas of Serbia.

b. Eligible legal entities and entrepreneurs

Beneficiaries of this sub-measure are entrepreneurs and legal entities that are involved in slaughterhouse industry:

c. general eligibility

beneficiaries of incentives:

- have to be registered within the Serbian Business Registers Agency in the Register of entrepreneurs for processing and marketing of meat and meat products,

- have to be registered in the Processing facilities Register, (according to the Veterinary Law)

- are categorized as small or medium legal enterprise (according to the Law on Accounting and Auditing)

- In the case that beneficiary is not owner of the land or facility, must have contract on lease of the property with stipulated contract duration at least eight years after the date of submitting of the application.

- Are able to prove that he does not have liability related to tax payments for the year prior to application process and able to prove that no criminal charges in relation to public debt have been brought against themowning installed processing capacities;

- In case of financing of multiple projects, beneficiary should have completed given investments and final report about the preceding project financed from the NRDP prior to initiating of the new investment,

- Business plan has to prove the economic viability of the beneficiary at the end of the investment

- Have less than 25% of public share are eligible beneficiaries

d. specific eligibility:

- In case of cooperatives they should be constituted of at least 10 members registered in National Register of agricultural farms/holdings with at least 90% of members having active status in the National Register.

(5) Type of eligible investment:

Restoration/reconstruction and equipment of slaughter facilities, including animal reception areas and carcass cold storage facilities.

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Building of facilities and purchase of equipment for treatment of by products and waste which can be processed; treatment and disposal of waste in line with national regulations;

Investments in waste water systems in slaughterhouses and fat collectors in meat processing plants in line with national standards;

Purchasing of the laboratory equipment for the purpose of improvement of product quality and hygiene control;

Investments in facilities which provide conditions complying to animal welfare regulations with regard to slaughtering the animals;

(6) Amount of eligible/acceptable investments:

Bottom and top limits of eligible investments for support/incentives are the following:

- Minimum 200.000 RSD

- Maximum 20.000.000 RSD

(7) Ranking criteria

Characteristics of the applicant (legal entities and entrepreneurs)

Marginal area yes/no 20/0

Environment protection - investments oriented towards waste management yes/no 20/0

Legal entity operating with a positive balance for at least three years yes/no 20/0

Project is oriented towards reaching the EU standards in order to gain export licences for EU and other markets

yes/no 20/0

Based on contract with primary agricultural producers project includes raw material supply

<50%50-75%>75%

0/010/020/0

(8) Participation in financing of determined expenses

- The highest amount of public expenses within recognized total project expenses is 50%.

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(9) Financing

Year Total expenses Public expenses (national) Private/individual contribution

RSD RSD RSD

1 4=2+3 2 32011 360.000.000,00 180.000.000,00 180.000.000,002012 420.000.000,00 210.000.000,00 210.000.000,002013 480.000.000,00 240.000.000,00 240.000.000,00Total 1.260.000.000,00 630.000.000,00 630.000.000,00

(10) Coherence and compatibility

Other measure are anticipated to support modernization of processing and placement on the market (marketing) of meat within axis 3, therefore it is necessary to distinguish (make distinction) at the level of project.

(11) Monitoring and evaluation indicators

Indicator type Indicator Objective Output Number of enterprises supported 80

Total volume of investments 1.260.000.000 RSD

Results Number of enterprises introducing hygiene, food safety, occupational safety stan-dards (levels of improvement)

65%

Number of enterprises introducing new products and /or techniques 25%Increase in gross value added in supported enterprises 15%Share of investments in LFA 40%

Impact Economic growth to be estimatedLabour productivity to be estimated

TECHNICAL DESCRIPTION OF THE MEASURE NO. 1.3.3

MEASURE 1.3: Investments into processing and marketing of agricultural products in order to restructure these businesses, improve and achieve standards of European

Union

Sub-measure 1.3.3: Processing and placement on the market of fruits and vegetables

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(1) Sub-measure rationale

Fruit market (especially berry fruits) and vegetables is expanding. Serbia has developed its own market of berry fruits in the recent several years, but there is still space for expansion. On the other hand, processing of fruit products and vegetables (into beverages, canned fruits, frozen products, etc.); can be at higher level of development than present situation. Processing industry is very important as a buyer of fresh products from producers, especially for some varieties designed for processing and for second class of products which don’t have place on the market of products for fresh consumption.

In order to be able to compete with other suppliers, fruit and vegetable processing and marketing industry must modernize and quality of raw materials must be adjusted and harmonized with existing national and in future with EU standards.

There are many facilities for processing of fruit and vegetable but many of them still don’t fulfil even national standards. Investments in reconstruction of a buildings and purchasing new equipment for the purpose of fulfilling national standards will increase competitiveness of our processing industry on domestic and especially on foreign market.

(2) Goals

Support to small and medium enterprises for fruit and vegetable processing for the pur-pose of improvement of their technology for processing and marketing of products, i.e. support to small and medium fruit and vegetable processors so that they could introduce new technologies, products and processes for the purpose of better placement on the mar-ket/marketing of fruit and vegetable products;

Support to small and medium enterprises engaged in fruit and vegetable processing for the purpose of achieving compliance with national or even EU standards relating to qual-ity and safety of food products, hygiene and environment protection.

(3) Connection with other measures within the National Rural Development Program

Investments in processing and marketing of fruit and vegetables will provide market for high quality fruits and vegetables products from agricultural holdings, (supported within measure 1.1.3);

Investments in processing and marketing of fruits and vegetables and production of high quality products open possibilities for agricultural holdings to initiate other activ-ities (diversification) mainly related to a rural tourism (measures within axis 3).

(4) Eligibility criteria

а. Qualified rural areas (geographical distribution)

All rural areas in Serbia.

b. Eligibility of agricultural holdings

Beneficiaries of this sub-measure are enterprises and entrepreneurs.

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c. General eligibility:

beneficiaries of incentives:

- have to be registered in the Serbian Business Registers Agency for processing fruit and vegetable

- have to be registered in the Register of food producers- are categorized as small or medium enterprises (according to the Law on accounting and

auditing);- Are able to prove that he does not have liability related to tax payments for the year prior

to application process and able to prove that no criminal charges in relation to public debt have been brought against them,

- In the case that beneficiary is not owner of the land or facility, must have contract on lease of the property with stipulated contract duration at least eight years after the date of submitting of the application.

- In case of financing of multiple projects, beneficiary should have completed given investments and final report about the preceding project financed from the NRDP prior to initiating of the new investment;

- Business plan has to prove the economic viability of the beneficiary at the end of the investment

- Have less than 25% of public share are eligible beneficiaries

d. specific eligibility:

- In case of cooperatives they should be constituted of at least 10 members registered in National Register of agricultural farms/holdings with at least 90% of members having active status in the National Register.

(5) Type of eligible/acceptable investment:

Adaptation/restoration/reconstruction of already existing processing plants or in order to meet new national standards ( in domain of hygiene and food safety);

Purchasing of equipment in order to meet new national standards (in domain of hy-giene and food safety);

investments for the collection and cold storage of fruit and vegetable products; investments for sorting, cleaning, grading and packing of fruit and vegetable products; Purchasing of equipment for producing fresh cut products; Investments in waste and/or water waste management; Investments in laboratories and equipment for the purpose of improvement of quality

control and hygiene.

(6). Amount of eligible/acceptable investments:

Bottom and top limits of eligible investments for support/incentives are the following:- Minimum 200.000,00 RSD- Maximum 20.000.000,00 RSD

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(7) Ranking criteria

Project targets full meeting of EU Quality standards yes/no 20Environment protection - investments oriented towards waste management yes/no 20

Based on contract with primary agricultural producers project includes raw material supply

<50%50-75%>75%

01020

Applicant is agricultural cooperative or business society whose founders are physical entities / owners of registered agricultural farms/holdings

yes/no 20

Marginal areas yes/no 20

(8) Participation in financing of determined expenses

The highest amount of public expenses within established total project expenses is 50%.

(9) Financing

Year Total expenses Public expenses (national) Private/individual contribution

RSD RSD RSD

1 4=2+3 2 3

2011 480.000.000,00 240.000.000,00 240.000.000,002012 560.000.000,00 280.000.000,00 280.000.000,002013 640.000.000,00 320.000.000,00 320.000.000,00Total 1.680.000.000,00 840.000.000,00 840.000.000,00

(10) Coherency and compatibility

Other measure are anticipated to support modernization of processing and placement on the market (marketing) of fruits and vegetables within axis 3, therefore it is necessary to distinguish (make distinction) at the level of project.

(11) Monitoring and evaluation indicators

Indicator type Indicator Objective Output Number of enterprises supported 45

Total volume of investments 1.680.000.000

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RSDResult Number of enterprises introducing hygiene, food safety, occupational safety stan-

dards (levels of improvement)35%

Number of projects improving quality of products 35%Number of enterprises introducing new products and/or techniques 25%Increase in gross value added in supported enterprises 20%Share of investments in LFA 40%

Impact Economic growth to be estimatedLabour productivity to be estimated

TECHNICAL DESCRIPTION OF THE MEASURE NO. 2.1

MEASURE 2.1: Activities aiming to improve the environment and rural landscapes/countryside

(1) Justification

One of the key challenges in restructuring and revitalization of the rural economy of the Republic of Serbia will be establishing of balance between economical growth and preservation of sustainable environment management in rural areas, including natural resources, traditional landscapes/countryside and biodiversity which represent part of the national treasure of the Republic of Serbia.

EU member countries are obligated to provide/offer agro-ecological payments to agricultural producers as a support to sustainable development of rural areas, as well as response to increasingly complex requirements/demands of the society relating to rising of the awareness on importance of the services which natural environment is providing to the society on the whole. Agro-ecological payments must provide incentives for agricultural producers and other users of agricultural land to contribute to the society on whole by introducing or continuing the implementation of methods of agricultural production which are in compliance to protection and improvement of the environment, preservation of landscapes/countryside and its characteristics/features, preservation of soil, genetic diversity and other natural resources.

Agro ecological payments can be awarded to agricultural producers and other beneficiaries of agricultural land which are obligated on a voluntary basis to meet clearly defined management requirements for the period of 5 to 7 years, as defined in EU. These obligations foresee meeting of regulations related to environment protection for agricultural producers which are established by national legislation, and in case of EU member countries regulations relating to cross compliance established by Regulation (EC) No. 1782/2003 as well as

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minimum requirements relating to utilization of artificial fertilizer and plant protection preparation.

In Serbia not enough has been done in regard to agro-ecological payments. Some forms of assistance are available from the national budget for support of organic agricultural production and for preservation/conservation of autochthonous breeds of domestic animals. However, this measure will be used as incentive for further development of existing support schemes in accordance to EU requirements. These activities can be considered as preparatory pilot measures which contribute to development and building of necessary practical experience (at the level of administration, as well as agricultural holdings/farms) and institutional capacities for execution of comprehensive and efficient agro-ecological schemes which will be co-financed in future by EU. Sub-measures of support to organic agricultural production and preservation/conservation of autochthonous breeds of domestic animals will be implemented as single agro-ecological measure, financed from the national budget for rural development. Sub-measures which will relate to preservation of bio-diversity, diversity of landscape/countryside and other agro-ecological activities will be implemented through pilot projects until next programme period starting in 2014.

(2) Objectives

Special objective of this measure is to execute and study agro-ecological approaches of EU providing incentives for agricultural producers and other carriers of land management to introduce or continue with implementation of methods of agricultural production in accordance to standards of environment protection and improvement.

Hierarchy of objectives of the NRDP 2011–2013 pertaining to this measure is presented in the following text:

NRDP 2011–2013 General objectives - to contribute to modernization of agriculture and food sector - to promote sustainable development of rural areas through preservation of the environment, improvement of the quality of life and diversification of activities, as well as promotion of the participatory approach and local initiativesAxis 2 - objective: Execution of preparation activities for building/development of management capacities: 1) through measures relating to improvement of environment and rural countryside, and 2) preparation and execution of local strategies of rural development (LEADER)

Measure 2.1. Specific objective: Execution and study of the agro-ecological approach of EU providing incentives for agricultural producers and other carriers of land management to introduce or continue with implementation of methods of agricultural production in accordance to regulations of environment protection and its improvement.

Operational objectives:

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- Measure 2.1.1 Payment for transition to organic agricultural production - Measure 2.1.2 Support for traditional (autochthonous) breeds of domestic animals

(3) Association to other priorities and measure of the NRDP 2011–2013

Agro-ecological payments are to great extent compatible to support to diversification of activities on the agricultural farm/holding within the measure 3.1 „Diversification and development of rural economical activities“. Other specific elements of association are also established within certain individual sub-measures.

(4) Form and amount of assistance

According to usual practice within the program of agro-ecological measures in EU, agricultural producers participating in this program conclude/sign contract (“contract on voluntary land management”) with relevant competent authority for period of at least five years during which time certain activities or “obligations” with aim to preserve and protect the environment will be executed, and for which compensatory payment will be made at multi-annual level.

Agricultural producers in EU who participate in these programs are paid annual lump sum in the period of duration of five year contract on land management as form of compensation for lost income, realized additional expenses and transaction expenses which pertain to participation in selected sub-measure/sub-measures. Payment rate will be established based on hectare of land or heads of livestock, in the way presented in the following text of the presented sub-measure.

(5) Financing

Year Total expenses Public expenses (national) Private/individual contribution

RSD RSD RSD

1 4=2+3 2 3

2011 90.000.000,00 90.000.000,00 02012 105.000.000,00 105.000.000,00 02013 120.000.000,00 120.000.000,00 0Total 315.000.000,00 315.000.000,00 0

Distribution of public expenses according to sub-measures

Sub-measure Participation in total means for rural

development (%)

Total 2011-2013 (EUR)

2.1.1 2 210.000.000,00

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2.1.2 1 105.000.000,00

Total 3 315.000.000,00

6) Monitoring and evaluation indicators

Type of indicator Indicator Baseline Biodiversity: population of farmland birds, high

nature value farmland and forestryWater quality (pollution by pesticides and nitrates, gross nutrient bal-ance)Climate change/air quality: production of renewable energy from agri-culture, gas emissions from agricultureSoil : areas at risk of soil erosion, organic farming

Input Amount of public expenditure realisedOutput Number of farm holdings and holdings of other land managers receiv-

ing support (division according to the beneficiary and the age of the commitment)Number of actions related to genetic resources (division according to the type of action)

Result Areas under successful land management contributing to:

Improvement of bio-diversity Improvement of the water qualityMitigating climate change Improvement of soil qualityAvoidance of marginalization and land abandonment

Impact Reversal in biodiversity declineMaintenance of High Nature Value farmland and forestryImprovement in water qualityContribution to combating climate change

TECHNICAL DESCRIPTION OF THE MEASURE NO 2.1.1

MEASURE 2.1: Activities aiming to improve the environment and rural landscapes/countryside

Sub-measure 2.1.1: Payments for transition to organic agricultural production

(1) Justification of the sub-measure

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Support to organic agricultural production is the most common agro-ecological measure in EU member countries and widely implemental because of:

a) comprehensive, total welfare which is generated through organic agricultural production in regard to protection of natural resources and preservation of bio-diversity, and

b) increasing economic potentials of the organic food products sector.

Payments for transition to organic production are especially important in regard to providing assistance to agricultural producers to gain access to market of organic products through compensatory payments for income lost and additional expenses associated with transition to methods of organic production.

Development of organic production in Serbia so far has been relatively slow, but Serbia certainly has potential for accelerated increase provided that there is adequate support and incentives. Republic of Serbia has favourable edaphic and climatic conditions for organic agriculture, and there are also good opportunities for development of domestic as well as foreign markets for organic products, including fresh and processed fruits and vegetables. Typical organic products presently include various berry fruits (fresh and frozen); sour cherry, apples and other fruits (fresh, dry and in form of concentrate for juices); vegetables; wheat; barley; sunflower and pumpkin seed.

There are also great potentials for integration of organic production (including production in mountain regions and protected areas with potentials for tourism) in other forms of diversification of rural economy, including food-processing facilities of smaller capacity and agro-tourism.

National legislation regulating and executing certification of organic production and processing was first introduced in year 2000. Existing legislation was amended in July 2006 with the adoption of the Law on organic production and organic products (Official Gazette RS, No.62/06), which was prepared in accordance to Council Regulation (EEC) No 2092/91. The Law with series of by-laws defines in more details rules of organic production (e.g. packing, storing, transportation, marketing, labelling of organic products etc).

New Law on Organic Production (Official Gazette RS, No. 30/2010) was adopted in May 2010, by the national parliament. This Law was prepared in accordance to Council Regulation No. 834/07 and Commission Regulation No.889/08. Implementation of the Law was postponed until January 1st, 2010 as the Law on Organic Production provides that authorization of the Ministry of Agriculture, Forestry and Water Management for the control and certification of organic products may get controlling organizations accredited by the ATS (Accrediting Body of Serbia) in accordance to relevant international standards ATS.

Accrediting Body of Serbia presently has not been accredited by International accrediting standards, but it is expected to be obtained in 2010 year.

By the end of 2007 year, total agricultural land area under certified organic production was 830 hectares (grains, fruits and vegetables) but there are still problems in collection of data pertaining to organic production and land area used for this type of production, yields and number of farms/holdings. Significant amount of collected forest fruits and herbs have also been certified with total land area where collection took place in 2007 of 1. 340 800 hectares.

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In 2008, according to Ministry’s data supplied by the four authorized organizations (certification organizations), the total agricultural area under organic production was 595.81 ha. Out of that:

Authorized certification organizations pursued the certification of 330.36 ha area under organic production

In the conversion period was 265.45 ha

In 2009, according to Ministry’s data supplied by the four authorized organizations, the total agricultural area in which methods of organic production were applied amounted to 2876.49 ha. Out of that:

Certified 488.22ha organic production area by accredited certification organization

In the period of conversion was 2388.27ha

The number of farms and areas in which organic production methods are applied in Serbia are higher. However, MAFWM does not have data on agricultural producers whose organic production is certified by the certification organizations that have not been authorized by MAFWM.

Financial assistance was offered to agricultural producers of organic products for the first time in 2004 - 40% of participation in the cost certification expenses. This percentage was increased in 2006 to 50% and payments for transition to organic production were introduced for organic plant production and livestock production in the amount of 100 EUR/ha for arable crops; 148 EUR/ha for vegetable and fruit crops; 100 EUR/head of livestock cattle; 30 EUR/sheep, goat or pig and 2 EUR/poultry. However this form of support wasn’t sufficiently utilized.

Payments in 2008 were directed towards the organic produces in a period of conversion. For organic crop production, in 2009 it was 210 EUR/ha for arable crops, 310 EUR/ha for fruit, wine and vegetable production, 150 EUR/head of livestock cattle, 50 EUR/sheep, goat or pig, 5 EUR/poultry and 15 EUR/bee hive. Payments in 2009 were dedicated to the producers in conversion period, but for producers who have certified their production as well.

Also, during 2009 was encouraged and provided the funding to support the production of seeds, seedlings and planting materials produced by organic production methods.

Series of other support measures for organic agriculture, including non-returnable assistance for support/promotion of organic products and building of capacities (training, agricultural farms/holdings as examples for organic production, etc.) was also available within National Rural Development Program for 2006 for organic agriculture, but execution of these measures and absorbing of funds was minor (see chapter 2.4.1).

Since payments for transition on organic agriculture are being implemented in some form already, it is possible that they will not be considered as pilot-activities financed from the IPARD fund. However, this conclusion cannot be made since utilization of these measures was minimal and there is still need for preparation activities aiming to

a) harmonize existing support for transition to organic production in compliance to EU requirements (including improvement of the certification system of organic products) and

b) development of necessary institutional capacities including indispensable management and control procedures.

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(2) GoalsSub-measure 2.1.1 will provide support to agricultural producers in transition to organic production of grain crops, fruits and vegetables, with following objective:

Increase of agricultural production area and number of agricultural farms/holdings in Serbia which are managed in accordance to accredited standards of organic agricultural production.

Support and improvement of the competitiveness of organic agricultural production in Serbia by providing incentives for those organic crops with higher economical potential on domestic/foreign markets.

Building/development of institutional capacities and acquisition of skills in execution of support schemes to organic agriculture in compliance to EU standards.

(3) Connection with other measures within the National Rural Development Program

Support to transition to organic production of grains, vegetables and fruits is not directly associated with any other measure included in this program, but it is coherent and compatible to other components of NRDP – see in the following text.

(4) Eligibility criteria a. Qualified rural areasAll rural areas in Serbia

b. Eligible beneficiariesBeneficiaries of this measure are natural persons and legal entities.

c. General eligibility criteria Registered in the national Register of agricultural holdings and are in active status; Are able to prove that no criminal charges in relation to public debt have been brought

against them,

Registered in the Serbian Business Register Agency

In case that beneficiary is not owner of the land or holding, must have contract on lease of the property with stipulated contract duration at least five years after the completion of the investment,

Legal entities with less than 25% of public share are eligible beneficiaries.

The beneficiaries have signed contract with an authorized organization that performs professional control on organic production and certification of organic products;

Apply methods of organic agriculture on the plots that must be away from possible pollution sources or harmful content bellow the prescribed maximum allowed quantities.

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Have organized organic production at least 0.2 ha of industrial and vegetable crop production or 0.3 ha of fruit and grape/wine production;

Agree to keep production in accordance to Law and by-laws

agree to keep entire indispensable records on activities within agricultural production (records on land areas, financial records, etc.) relating to this sub-measure.

d. Specific eligibility criteria

Natural persons must be younger than 60 at the moment of application submission.

(5) Payment rates

Payments will be organized as annual per hectare or per livestock head support accorting to certified organic production in the following amounts:

25.000,00 RSD/ha for arable crops (cereals, industrial crops, medicinal and aromatic plants)

35.000,00 RSD/ha for vegetable crops

45.000,00 RSD/ha for fruit and grape production

15.000,00 RSD/head livestock cattle, at least 4 heads

5.000,00 RSD/head of sheep, goat, pig, at least 10 heads

500.00 RSD/head of poultry, at least 50 heads

2.000,00 RSD per bee hive, at least 30 hives

If the producer, provided by supporting means, in the following five years does not apply organic production methods prescribed by Law and related by-laws, is obliged to return the supporting funds paid together with interest rate calculated.

(6) Coherency and compatibility Target support to transition to organic production of fruits and vegetables is still in accordance to decision of supporting to the sector of fruit and vegetable production with series of measures within NRDP 2011–2013, because of the strategic importance for generating of income of great number of small agricultural farms/holdings in Serbia. Therefore, support for transition to organic production of fruits and vegetables is to the greatest extent in accordance to following sub-measures within NRDP:

1.1.3 – providing investments to enterprises engaged in production of fruits and vegetables so that the production could be restructured, improved and in compliance to EC standards;

1.2.3 – providing investments to enterprises engaged in processing and marketing of fruits and vegetables so that the processing and marketing could be restructured, improved and in compliance to EC standards;

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3.1.1 – support for diversification and development of alternative economic activities in rural areas.

(7) Financing

Year Total expenses Public expenses (national)

Private/individual contribution

RSD RSD RSD

1 4=2+3 2 3

2011 60.000.000,00 60.000.000,00 0

2012 70.000.000,00 70.000.000,00 0

2013 80.000.000,00 80.000.000,00 0

Total 210.000.000,00 210.000.000,00 0

(8) Monitoring and evaluation indicators Type of indicator Indicator Objective

Output Number of farm holdings and holdings of other land managersreceiving support under this sub-measure

Total number of contracts Physical area (ha) receiving agri-environmental support under thissub-measure

Result Area (ha) under successful land management under this sub-measure Impact Improvement in water quality (Changes in gross nutrient balance) To be estimated

TECHNICAL DESCRIPTION OF THE MEASURE NO. 2.1.2

MEASURE 2.1: Activities aiming to improve the environment and rural landscapes/countryside

Sub-measure 2.1.2: Support for autochthonous breeds of domestic animals

(1) Sub-measure rationale Breeding of domestic animals has always been one of the major branches of

agricultural production in Serbia, and traditional method of growing of animals expending through several centuries has brought great diversity of domestic, local animal breeds. Autochthonous breeds are closely associated with geographical and cultural diversity of the Serbian village.

Unfortunately, number of local/autochthonous breeds traditionally bred has decreased significantly over the last 50 to 60 years due to collectivization and intensifying of agricultural production. Recently, economic status of the agricultural sector after privatization

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and land restitution is reflecting indirectly on breeding of autochthonous breeds. Disappearance of local/autochthonous breeds of domestic animals poses significant threat in regard to potential decline or even loss of agro-biodiversity of Serbia because of following reasons: a) Loss of important traits such as general resistance and resistance to disease as

consequence of loss of one part of genetic diversity typical for autochthonous breeds, and can be of great importance for selection within breed and improvement of the quality, i.e. traits of other breeds;

b) local/autochthonous breeds of domestic animals (cattle, sheep and goats) are very well adapted to poor/low growing conditions in mountainous regions and at the same time are very important for preservation of general biodiversity of the agro-ecosystem through traditional grazing on mountain pastures of high natural value.

All stated is in accordance with various agreements and official documents such as Convention on biological diversity, global plan of activities for genetic animal resources of the Food and Agriculture Organization within UN – FAO, Network for plant genetic resources in South-East Europe (Genetic Resources in Plant Production – SEEDNET), European cooperation program for networks of plant genetic resources, etc.

In average, there are 400-500 individual agricultural farms/holdings in Serbia engaged in breeding of rare, i.e. endangered autochthonous breeds of domestic animals. For their management and breeding presently financial aid is provided (according to special criteria) from the budget for the support for rural development. This assistance is key factor in preservation of breeding heads of livestock, and without this aid the number of livestock would drop significantly. Additional support (in the form of projects) is also provided for registration and identification of animals, forming of new herds of endangered breeds and for infrastructure (reconstruction of facilities, etc.).

Since payment for preservation of autochthonous breeds have been executed for long time, it is possible that in the programming of utilization of pre-accession funds of EU this will not be considered as pilot activity for co-financing from the IPARD fund. However, it is too early to make such conclusion because in any case it is necessary to carry out preparation activities with aim to a) harmonize of existing support to requirements of EU, and b) building/development of indispensable institutional capacities for expansion of this system of support, including improvement of existing administration/management procedures and control procedures.

(2) Goals

Sub-measure 2.1.2 will provide support to agricultural producers – keepers of autochthonous breeds of domestic animals with objective to: preserve animal genetic resources and cultural heritage through increase of number of

breeding livestock of local/autochthonous breeds whose number is in constant decline; support certain local breeds of domestic animals that are well adapted to poor conditions

in traditional agricultural production in mountainous regions and have potential to play significant role in preservation of traditional systems of grazing (utilization/exploitation of pastures) in mountainous and hilly-mountainous regions; and

building/development of institutional capacities and acquisition of practical experience in execution of support schemes for autochthonous breeds of domestic animals according to EU standards.

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(3) Connection with other measures within the National Rural Development Program Support to breeding of autochthonous breeds of domestic animals is directly

associated to sub-measure 2.1.3: Preservation of bio-diversity and landscape/countryside, and combination of these two sub-measures will be supported where necessary, i.e. feasible, through pilot projects financed by international organizations.

(4) Eligibility criteria

а. Qualified rural areas (geographical distribution)

All rural areas in Serbia.

b. Eligibility of agricultural holdings

Beneficiaries of this sub-measure are natural and legal persons - the owners of endangered breeds of domestic animals.

c. General eligibility:

beneficiaries of incentives:

- have to be registered in the national Register of agricultural holdings and are in active status,

- have animals that are marked and registered in a central database and the data has to be updated.

- keep on their farm the minimum number of animals (eligible for this sub measure) that can ensure sustainable breeding - the number of animals will be listed in the table (Program for preservation of the number of animals, i.e. individual animals of endangered breeds/strains of domestic animals)

- are able to prove that no criminal charges in relation to public debt have been brought against them;

- agree to produce in accordance with law and bylaws;

- have to keep all the animals that they have received support for, during entire five-year period of the contract duration concerning the keeping of animals. If any animal for which the beneficiary receives the support dies, the Directorate for agrarian payments and veterinary service has to be immediately notified. The beneficiary can replace a dead animal with other animal of the same breed (animal must be eligible for this sub measure) without losing the support.

- the animals for which the beneficiary receives the support can't be cross fertilize - only certified pure breeds animals are eligible

- must allow to the competent services for selection and research institutions to keep record / monitor the quality of production;

- need to keep records of the sale and purchase of the farm animals and it must be available to inspection;

- must notify Directorate for agrarian payments and get the written permission before slaughter or sale of any animal for which receive the support. The beneficiary can replace

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the slaughtered or sold animal with other animal of the same breed (animal must be eligible for this sub measure) without losing the support;

- guidelines and advices provided by relevant authorities in terms of animal health and welfare must be strictly applied.

c. Specific eligibility

legal entities have to:

- be registered in the Serbian Business Registers Agency

- have less than 25% of public share

Endangered autochthonous breeds of domestic animals eligible/acceptable for utilization of means within this sub-measure are the following (in accordance to their status of endangerment on the List of world endangered species of domestic animals of the UN FAO and limits for “loss due to agricultural production” established in the Article 27(4) and Annex IV of the Commission Regulation No. 1974/2006): Podol cattle, Busha, domestic buffalo, Nonius, domestic hill horse, Balkan donkey, Mangalitsa pig, Moravka pig, Resavka pig, Pramenka sheep – Pirot, Krivovir, Bardoka, Liplje, Vlasko Vitoroga and Karakachan sheep, Chokan Tsigai, Balkan goat, Svrljig hen, Sombor Kaporka and Naked neck hen.

Program for preservation of the number of animals, i.e. individual animals of endangered breeds/strains of domestic animals

Number of animals according to program of preservation

No. Types of autochthonous breeds 2010. 2011. 2012. 2013.

1. Podol cattle 150 165 180 2002. Busha 150 165 180 2003. Domestic buffalo 50 60 70 804. Domestic hill horse 50 60 70 805. Nonius 50 60 70 806. Balkan donkey 50 60 70 80

7. Mangalitsa (black, white and red strain) 150 200 250 3008. Moravka 50 70 100 1209. Resavka 30 50 75 90

10.Pramenka – Krivovir, Bardoka, Liplje, Vlasko Vitoroga and Karakachan and Tchokan Tsigai

1000 1200 1500 2000

11. Balkan goat 150 180 210 250

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12. Poultry– Kaporka, Svrljig hen and Banat Naked neck hen 500 600 750 900

(5) Payment rates

Adequate payments as a support for each of the endangered breeds will be made annually, as a lump sum per head of livestock in the period of duration of the contract on animal keeping provided that the beneficiary continues to meet the specific requirements of this sub-measure. Ministry of Agriculture, Forestry and Water Management will calculate the value of incentives per head/animal based on the budget and number of animals listed in the program.

This payment rate will provide to beneficiaries compensation/reimbursement for lost income and/or additional expenses generated due to execution of special requirements in animal keeping.

If it is discovered that payments have been granted based on false information and that the beneficiary has violated in his/her conduct the conditions of the contract on animal keeping, Ministry of Agriculture, Forestry and Water Management is entitled to issue request for return of the awarded payments/means.

(6) Coherency and compatibility

Support to preservation of autochthonous breeds of domestic animals is in accordance to Strategic objective No. 2 of the NRDP which relates to preservation and improvement of the environment and sustainable use of natural resources, as well as in following sub-measures within the NRDP: 2.1.3 – preservation of biodiversity and landscape/countryside of mountain pastures and

meadows of high natural value through pilot project financed by foreign donors; 3.1.1 – support of diversification and development of alternative economic activities in

rural areas.

(7) Financing

Year Total expenses Public expenses (national)

Private/individual contribution

RSD RSD RSD1 4=2+3 2 3

2011 30.000.000,00 30.000.000,00 02012 35.000.000,00 35.000.000,00 02013 40.000.000,00 40.000.000,00 0Total 105.000.000,00 105.000.000,00 0

(11) Monitoring and evaluation indicators

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Type of indicator Indicator Objective Output Number of farm holdings and holdings of other land managers receiv-

ing support under this sub-measure500 farm holdings

Total number of contracts 500Result Number of actions related to genetic resources under this sub-measure 2.000-5.000 animals

supported under this sub-measure

Impact Reversal in biodiversity decline To be estimated

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TECHNICAL DESCRIPTION OF THE MEASURE NO. 3.2

MEASURE 3.2: Investments in diversification and development of rural economic activities

DIVERSIFICATION AND DEVELOPMENT OF RURAL ECONOMIC ACTIVITIES

(1) Rationale

In analysis of the situation in rural areas carried out in previous chapters, the following was established:

Over 60% natural or semi-natural agricultural farms/holdings with low income: Absence of diversification of activities/operations in rural areas; Absence of economic activities/operations specifically for women which would

improve the level of generated income and standard of living in rural areas High migration rare of population from rural to urban areas High poverty rate

NRDP 2010–2013 will target meeting the need for diversification of the sources of income in rural areas, ensuring the following:

Local development of typically local and/or traditional products (agricultural and food products, traditional crafts, etc.);

Diversification and development of rural activities through development of micro enterprises;

Development of rural tourism.

(2) Objectives

The overall objective of this measure is to contribute to the creation of new jobs and to the maintaining of existing jobs through the development of business activities, thus raising the economic activity level of rural areas and stemming rural depopulation.

Among all IPARD measures, “Diversification” is the most focused on assisting the development of job creation activities. While rationalisation (normally promoted via "processing and marketing" or "investments in holding") may lead to reduction of employment, “Diversification” is the measure that can help compensate eventual negative effects of rationalisation.

Objectives of this measure are:

Increase of the level of diversification and development of economic activities in rural areas with possibility for opening of new employments and decline of depopulation of rural areas;

Contribution to rectifying of regional differences/absence of balance in rural development.

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Hierarchy of objectives of NRDP 2010–2013, associated with this measure:

– NRDP 2010–2013 - General objective - to contribute to modernization of agricultural and food sector;- to support sustainable development of rural areas through preservation of the environment, improvement of the quality of life and diversification of activities, as well as promotion of the participatory approach and local initiatives

Axis 3- Objective: Investments in diversification and development of economic activities in rural regions in order to improve the degree of economic operations, develop employment and prevent depopulation of rural areas. Measure 3.2. SPECIFIC OBJECTIVE:Invest in development and diversification of economic activities in rural areas by providing support to local products and development of micro-enterprises and rural tourism.

Operational objectives: - Measure 3.2.1 Diversification of economic activities in the rural settlements/villages

relating to creation of added value of agricultural products or introduction of new alternative productions.

- Measure 3.2.2 Diversification of economic activities in rural settlements/villages by providing support to non-agricultural activities.

(3) Connection with other priorities/measures within NRDP 2010–2013 - Investments in diversification and development of rural economic activities will partially

be based on local agricultural production and local products, supported within measures relating to investments in agricultural farms/holdings (measure 1.1 including sub-measures), as well as measures relating to investments in processing industry (measure 1.3 including sub-measures).

(4) Financing

Year Total expenses Public expenses (national)

Private/individual contribution

(contribution of the beneficiary)

RSD RSD RSD1 4=2+3 2 3

2011 1.020.000.000,00 510.000.000,00 510.000.000,002012 1.190.000.000,00 595.000.000,00 595.000.000,002013 1.360.000.000,00 680.000.000,00 680.000.000,00Total 3.570.000.000,00 1.785.000.000,00 1.785.000.000,00

а. Distribution of public expenses according to sub-measures Sub-measure Share in total

means for rural Total 2010 – 2013 (RSD)

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development (%)3.1.1 12 1.260.000.000,003.1.2 5 525.000.000,00

Total

17 1.785.000.000,00

(5) Monitoring and evaluation indicators

Type of indicator

Indicator

Baseline Farmers with other gainful activitiesEmployment development in the non-agricultural sector Tourism infrastructure in rural areasSelf-employment developmentEconomic development of the non-agricultural sector (GVA in secondary and tertiary sector)

Input Amount of public expenditure realisedOutput Number of beneficiaries (division according to gender, age category and type of non-

agricultural activity)Total volume of investments (division according to gender, age category and type of non-agricultural activity)

Result Increase in non-agricultural GVA in supported businesses

Gross number of jobs created (division according to on-farm/off-farm jobs, gender and age category)

Impact Economic growth (net additional value added expressed in PPS)

Income level that derives from off-farm activitiesEmployment creation (division according to on-farm/off-farm jobs, gender and age category)

TECHNICAL DESCRIPTION OF MEASURE NO. 3.2.1

MEASURE 3.2: Investments in the diversification and development of rural economic activities

Sub-measure 3.2.1: Diversification of economic activities in villages by adding value to agricultural products or by introducing new alternative production

(1) Sub-measure rationale

Agricultural activities alone very often cannot achieve a sufficient level of income for agricultural holdings, especially in areas with restrictions, either natural, or legal, for intensive agricultural production. As a consequence, population, particularly young population, is moving to cities, where job opportunities are much bigger, while income per capita is higher. This measure creates opportunities for employment and self-employment, as

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well as adding value of the primary products through processing, packaging, labelling or the introduction of PDO and PGI, both on farm and off farm.

Supporting investments in the aforementioned activities would improve the competitiveness of farms on the market. Increasing the income of households would improve their economic position and thus provide a better quality of life in rural areas and reduce the rate of depopulation. By strengthening entrepreneurship and developing micro-enterprises would create employment conditions for the rural population.

Introduction of new forms of production on farms may also be an important factor in diversification. Production of goat and sheep milk, fish, growing spices, aromatic and medicinal herbs, growing mushrooms can create be an additional source of income for the farms, and in cases of full diversification, it can even become the main source of income.

(2) Goals

The main objectives of this measure are: Improving the quality of life in rural areas and increasing the income of the rural

population; Decreasing depopulation rate; Introducing new economic activities in rural areas and promoting entrepreneurship in

these areas; Creating opportunities for self-employment and / or employment of the population in

rural areas; Providing better conditions for rural tourism development; Increasing the range and improving the sales of agricultural products.

(3) Connection with other measures within the National Rural development Program

- Measure 1.1 supports the improvement of production and storage of raw agricultural products, thus creating main precondition for quality processed product.

- Local products and other diversification activities will contribute to improved offer in rural tourism (measure 3.2.2).

- Areas of high natural values supported by agro-ecological payments (measure under axes 2-payments for autochthonous breeds) may themselves be a “local product” and based on that may be involved in the marketing process.

(4) Eligibility criteria

a. Eligible rural regions (geographical distribution)All rural regions in Serbia.

c. Eligibility of agricultural holdings:

Beneficiaries of this measure are:

natural persons

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legal entities

entrepreneurs

General eligibility:

- Beneficiaries to have residence where the investment is, or in bordering municipality

- in case of investment in processing capacities beneficiaries must produce sufficient amount of raw material to use at least 80% of processing capacities or to have long-term contractual relations (at least annual contracts) with local producers of raw materials in order to ensure minimum 80% processing capacity use.

- Which are in compliance to minimum of existing national regulations and standards at the end of investment

- In case that beneficiary is not owner of the holding, must have contract on lease of the property with stipulated contract duration at least 5 years after the date of completion of the investment that is specified in Approval of application.

- Are able to prove that no criminal charges in relation to public debt have been brought against them.

- The applicant has to demonstrate in the business (operational) plan that the holding/enterprise will be economically viable at the end of the realisation of the project.

- In case of financing of multiple projects, beneficiary should have completed given investments and final report about the preceding project financed from the NRDP prior to initiating of the new investment.

Specific eligibility:

Natural persons:

- registered in the National Register of Agricultural Holdings

- animals to be registered in Animal Identification Register

- younger than 60 at the moment of application submission

Legal entities:

- registered in the national Register of agricultural farms/holdings

- registered in the Serbian Business Registers Agency

- Has less than 10 employees and has maximum annual turnover of 2 million €

- has less than 25% of public share .

Cooperatives:

- registered in the Serbian Business Registers Agency

- has at least 10 members who are registered in the national Register of agricultural farms/holdings and at least 90% of members has active status in the Register;

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Entrepreneurs:

- registered in the national Register of agricultural farms/holdings

- registered in the Serbian Business Registers Agency

(5) Types of eligible investments and specific eligibility criteria per type of activity

1) RECONSTRUCTION OF BUILDINGS AND PROCUREMENT OF EQUIPMENT FOR STORING, PROCESSING AND PACKAGING PRIMARY AGRICULTURAL PRODUCTS EXCEPT MEAT PROVIDING THAT APPLICANT:

in case of fruit and vegetable processing, he/she:

a) owns or rents minimum 1 ha fruit or vegetable plantation, in case of greenhouse 0,3 ha;b) produces traditional products, which will be defined by decree;c) type of investment: new equipment for fruit and vegetable processing, costs associated

to reconstruction of buildings and storage capacitiesd) beneficiary: natural person, legal entity, entrepreneur

in case of milk processing, he/she:

a) owns at least 3 dairy cows or 40 ewes or 40 goatsb) produces traditional/specific products which will be defined by decree;c) animals to be registered in Animal Identification Registerd) type of investment: new equipment for milk processing, costs associated to

reconstruction of buildings and storage capacities e) beneficiary: natural person, legal entity, entrepreneur

in case of honey processing, storing and packaging, he/she;

a) owns at least 30 bee hivesb) is already beekeeperc) type of investment: new equipment for honey processing and packaging, costs associated to reconstruction of objects for honey processing in order to meet national standards and regulationsd) beneficiary: natural person, legal entity, entrepreneur

in case of processing, storing and packaging of medicinal/oil plants and spices, he/she

a) owns or rents minimum 0,5 ha of area planted with cultivated medicinal/oil plants and spices

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b) type of investment: new equipment for processing (and drying) the plants, new machinery for harvesting the plants, costs associated to reconstruction of collecting points

c) beneficiary: natural person, legal entity, entrepreneur

in case of processing, storing and packaging of mushrooms, he/she:

a) owns minimum 30 sq. meters of mushroom cultivation;b) type of investment: packaging and processing equipmentc) beneficiary: natural person, legal entity, entrepreneur

2) RECONSTRUCTION OF BUILDINGS AND/OR PROCUREMENT OF EQUIPMENT FOR STORING, PROCESSING AND PACKAGING OF BERRIES AND MEDICAL HERBS GATHERED FROM NATURE

In case of storing, processing and packaging of berries and medical herbs gathered from nature , he/she:a) Must have a License for collection wild mushrooms, medical/oil herbs and spices,

berries according issued by designated authority, in case that the beneficiary collects herbs

b) Type of investment: equipment for processing, costs associated to reconstuction of storage facilities

c) beneficiary: natural person, legal entity, entrepreneur

3) PROCUREMENT OF EQUIPMENT FOR THE ON FARM PRODUCTION OF RAKIJA AND WINE

In case of wine production, he/she:a) must be registered in wine producer registerb) must produce traditional wine products which will be defined by decreec) type of investment: New equipment for wine productiond) beneficiary: legal entity, entrepreneur

In case of rakija production, he/she:a) must be entrepreneur/legal entityb) must be registered in rakija producer Registerc) type of investment: New equipment for rakija productiond) beneficiary: legal entity, entrepreneur

4) INVESTMENTS IN CONVERSION OF PRODUCTION TOWARDS: BREEDING GOATS AND SHEEP FOR MILK PRODUCTION, GROWING MUSHROOMS, OR INVESTMENT IN THE CULTIVATION OF BEES; GROWING SPICES, MEDICINAL AND AROMATIC PLANTS

In case of breeding goats and sheep, he/she:a) must buy 40 ewes or 40 goats

126

b) type of investment: purchase of cooling and transportable milking equipment, costs associated to construction and/or reconstruction of keeping facilities including barn equipment,

In case of growing mushrooms, he/she:a) must built minimum capacity of 30 sq. meters of mushroom cultivation;b) type of investment: costs associated to construction of capacity for mushroom cultivation.

In case of beekeeping, he/she:a) must buy at least 30 bee hivesb) type of investment: costs associated to construction of objects and equipment for honey processing

In case of growing spices, medicinal or aromatic plants, he/she:a) must own or rent minimum 0,5 ha of area for cultivation of medicinal/oil plants and spicesb) type of investment: specialised machinery for production/harvest of the herbs

(6) Amount of eligible/acceptable investments:

Upper and lower limit for the investments eligible for support/incentives (without VAT): At least 100,000.00 RSD At most 5,000,000.00 RSD

(7)Ranking criteria

Ranking criteria Weight

The applicant is not older then 40 when submitting an application 20

Marginal areas 20The applicant is a women / legal entity employs at least 20% of women / at least 20% of members of cooperative are women. 20

The applicant holds PGI/PDO licence 20The applicant is located within region with negative migration rate(Annex, List of munucipalities, regions 3 and 4 are with negative migration rate) 20

(8) Participation in financing of the determined expenses (max 50%)

The highest amount of public expenses within total project expenses is 50%.

(9) Financing

Year Total expenses Public (national) expenses Private contribution

RSD RSD RSD

127

2011 720,000,000.00 360,000,000.00 360,000,000.002012 840,000,000.00 420,000,000.00 420,000,000.00

2013 960,000,000.00 480,000,000.00 480,000,000.00Total 2,520,000,000.00 1,260,000.000,00 1,260,000.000,00

(10) Coherence and compatibility. Criteria and administrative rules for ensuring that operations supported under this measure are not also supported by other IPA componen.

No other measures or programs for supporting the development and marketing of local products have been envisioned.

(11) Quantified targets for EU common indicators:

Indicator type Indicator Objective Output Number of supported projects/businesses (division

according to status, age category and type of micro-enterprise)

325

Total volume of investment 2.520.000.000 RSDResult Gross number of jobs created (division according to

gender, age, and on-farm/off-farm jobs)10% increase

Increase in non-agricultural GVA in supported businesses

10%

Share of investments in LFA 40%Impact Economic growth to be estimated

Employment creation (division according to age / gender / on-off farm)

to be estimated

Programme specific indicators:

Number of micro and small enterprises created in rural areas

Number of newly set up micro and small enterprises set up by women/young people

TECHNICAL DESCRIPTION OF MEASURE NO. 3.2.2

MEASURE 3.2: Investments in diversification and the development of rural economic activities

Sub-measure 3.2.2: Diversification of economic activities in villages through supporting non-agricultural enterprises in villages

(1) Sub-measure rationale:

Rural development, in addition to agricultural activities, also includes non-farm activities related to improving the life in the villages. This measure promotes activities such as:

128

improvement of rural tourism, local handicrafts, traditional crafts9 etc. The essence of these sub measure is diversification of activities and improvement of non-agricultural activities and related agricultural activities.

The effect of this sub measure should be manifested in enhancement of employment opportunities, and consequently rural income in the local area. Following the effect of the aforementioned sub measure would be lower depopulation of younger population in rural areas.

(2) Goals

The objectives of this measure are: Increasing household income; Support the development of tourist facilities and thereby expand economic activities

in villages in the area of rural tourism. Support the development of tourism related recreational activities, through service

providers in rural tourism. Development of entrepreneurial activities related to preserving old crafts. Development activities related to providing services to the rural population

(3) Connection with other measures within the National Rural Development Program

- Local agricultural and food products for the needs of rural tourism will most likely come from the farms supported under measure 1.1.

- Rural tourism, together with diversification of activities will contribute to increased recognition of certain rural areas (measure 3.2.1).

- Areas with high natural value, accompanied, with autochthonous animal breeds supported through measure 2.2 represent strong potential for rrual tourism

(4) Eligibility criteria

a. Eligible rural regions (geographical distribution)All rural regions in Serbia .

b. Eligibility of agricultural holdings:

Beneficiaries of this measure are:

natural persons

legal entities

entrepreneurs

General eligibility:

9 List of old traditional crafts is in annex

129

- Beneficiaries are located/registered in the municipality within eligible areas, and bordering municipalities

- In case that beneficiary is not owner of the holding, must have contract on lease of the property with stipulated contract duration at least 5 years after the date of completion of the investment that is specified in Approval of application.

- Must comply with existing national rules and minimum standards at the end of investment,

- Can prove that they are not prosecuted because of public debt if the principal amount secured by bank loan can prove that the applicant wasn’t denied by the scoring system;

- Can prove that at the time of applying they adhere to the mandatory minimum of national standards;

- In case of financing of several projects, the user should finish with the previous investments and submit the final report on the previous project which was funded from NRDP before the start of the current approved investment project.

- The applicant has to demonstrate in the business (operational) plan that the holding/enterprise will be economically viable at the end of the realisation of the project.

- In case of construction, through project proposal must prove that construction of buildings will be undertaken in accordance with traditional architecture.

Specific eligibility:

Natural persons:

- registered in the National Register of Agricultural Holdings, and has an active status

- Must have a contract with local tourist organization, tourist agency or legal entity for providing services within rural tourism and to be in local authority register as tourist services provider

- Capacity of the premises cannot exceed 30 beds and/or 50 restaurant places- younger than 60 at the moment of application submission residence in the municipality

where the investment takes place

Legal entities (Entrepreneur and Cooperative):

- legal entity to be registered with the Agency for Business Registers for conducting the required activity

- has no tax liabilities from previous years - Cooperative to be established for the purpose of performing old crafts

(5) Types of eligible investments and specific eligibility criteria per type of investment

1. CONSTRUCTION RECONSTRUCTION AND ADAPTATION OF AUTHENTIC TRADITIONAL BUILDINGS (accomodation capacities, catering facilities, mills, wine cellar)

in the case of wine cellar restoration he/she: - must be located within vineyard geographic production areas (regions) - must be registered as a wine producer- must produce wine from his own vineyards, minimum area of 1 hectare

130

Type of investment: new equipment , costs related to construction, reconstruction or adaptation of buildingsBeneficiary: natural person, enterpreneur

2. DEVELOPING RECREATIONAL AREAS FOR THE PURPOSE OF TOURIST ACTIVITIES

Type of investment: costs associated to creation of sport/recreation content, courtyard decoration and furniture Beneficiary: natural person, enterpreneur

3. OLD CRAFT PRESERVATIONIn case of old craft preservation, he/she:- must obtain certificate (proof) from competent authority (MERD) that the product is traditional, artisticType of investment-new equipment for performing old traditional crafts(annex)Beneficiary: entrepreneur, cooperative

(6) Amount of eligible/acceptable investments:

Upper and lower limit for the investments eligible for support/incentives (without VAT): At least 100,000.00 RSD At most 5,000,000.00 RSD

(7) Ranking Criteria

Ranking criteria WeightThe applicant is not older then 40 when submitting an application 25

Beneficiary is woman/ minimum 5 women in cooperative 25The applicant is located within region with negative migration rate(Annex, List of munucipalities, regions 3 and 4 are with negative migration rate)

25

Marginal areas 25

(8) Participation in financing of the determined expenses (max 50%).

- The highest amount of public expenses within established total project expenses is 50%.

(9) Financing

131

Year Total expenses Public (national) expenses Private contribution

RSD RSD RSD2011 300,000,000.00 150,000,000.00 150,000,000.002012 350,000,000.00 175,000,000.00 175,000,000.00

2013 400,000,000.00 200,000,000.00 200,000,000.00Total 1,050,000,000.00 525,000,000.00 525,000,000.00

(10) Coherence and compatibility. Criteria and administrative rules for ensuring that operations supported under this measure are not also supported by other IPA component.

The MAFWM does not envision other measures or programs for supporting the diversification of non-agricultural activities.

(11) Monitoring and evaluation indicators

Type of indicator

IndicatorObjective

Output Number of tourism actions supported (division according to the type of action) 550

Total volume of investment 1.050.000.000 RSDResult Gross number of jobs created (division according to age / gender /

on-off farm) 15% increase

Increase in additional number of tourist visits (division according to the number of overnight stays and the number of day visitors) 25%

Increase of income from non-agricultural activities 15%

Share of investments in LFA 50%Impact Economic growth to be estimated

Labor productivity to be estimated

Programme specific indicators:

Number of youth household member that started off farm activities Number of female household member that started off farm activities Number of tourism activities supported involving an increased use of ICT

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CHAPTER 5

INDICATIVE FINANCIAL TABLES

5.1 INDICATIVE FINANCIAL TABLES

1.1. The financial “weight” of different axes and measures

As presented in the third chapter, the indicative financial resources intended for the individual measures of rural development that are selected for the next programming period 2011-2013, are shown in the table.

Financial tables that were prepared for 2011, 2012 and 2013 are only indicative.

Indicative distribution of rural development measures which will be applied during the 2011-2013 period according to the National Rural Development program:

Axis No. Measures

Distribution percentage

of expenditures per axis

Distribution

percentage of

expenditures per

measure

Distribution percentage of expenditures

per sub measure

Axis 1

1.1.1. Supporting investments in farms producing cereals and industrial crops

80%

60%

25%

1.1.2. Supporting investments in farms producing milk 5%

1.1.3. Supporting investments in farms producing meat

5%

25%1.1.4. Supporting investments in farms producing fruit and vegetables

1.3.1. Supporting investments in the processing and market placement of

20%

6%6%

1.3.2. Supporting investments in the processing and market placement of meat and meat products 8%

1.3.3 Supporting investments in the processing and market placement of

Axis 2

2.1.1. Supporting organic agricultural production 3% 3% 2%

2.1.2. Supporting the conservation of the genetic resources of domestic animals 1%

Axis 3

3.2.1 Diversification of farm activities in the agricultural domain such as small

17% 17%

10%

3.2.2.

Diversification of farm activities in the non-agricultural domain such rural tourism, old crafts, providing services for the rural population etc.

5%

Indicative financial table for 2011

Axis Percentile amount

Amount in dinars (RSD)

Measure Percentile amount

Amount in dinars (RSD)

Sub-measure

Percentile amount

Amount in dinars (RSD)

AXIS 1 80% 2.400.000.000,00

1.1 Supporting

farm investments

60% 1,800,000,000.00

1.1.1. Supporting investments in farms producing

25% 750,000,000.00

1.1.2. Supporting investments in farms producing milk

5% 150,000,000.00

1.1.3. Supporting investments in farms producing meat

5% 150,000,000.00

1.1.4. Supporting investments in farms producing fruit

25% 750,000,000.00

1.3 Supporting investments

aimed at improving processing and market

placement of agricultural products

20% 600,000,000.00

1.3.2. Supporting investments in the processing and market

6% 180,000,000.00

1.3.3. Supporting investments in the processing and market placement of

6% 180,000,000.00

1.3.4. Supporting investments in the processing and market placement of fruit and vegetables

8% 240,000,000.00

AXIS 2 3% 90.000.000,00

2.1 Agro-ecological measures,

measures for improving organic

production and

conserving the

biodiversity

3% 90,000,000.00

2.1.1. Supporting organic agricultural production

2% 60,000,000.00

2.1.2. Supporting the conservation of the genetic resources of domestic animals

1% 30,000,000.00

AXIS 3 17% 510.000.000,00

3.2. Diversification

of rural economy

17% 510,000,000.00

3.2.1 Diversification of activities aimed at adding value to agricultural products or

12% 360,000,000.00

3.2.2. Diversification of farm activities in the non-agricultural domain such rural tourism, old crafts, providing services for the rural population etc.

5% 150,000,000.00

TOTAL 100% 3.000.000.000,00 100% 3,000,000,0

00.00 100% 3,000,000,000.00

Indicative financial table for 2012

Axis Percentile amount

Amount in dinars (RSD)

Measure Percentile amount

Amount in dinars (RSD)

Sub-measure

Percentile amount

Amount in dinars (RSD)

AXIS 1 80% 2,800,000,000.00

1.1 Supporting

farm investments

60% 2,100,000,000.00

1.1.1. Supporting investments in farms producing

25% 875,000,000.00

1.1.2. Supporting investments in farms producing milk

5% 175,000,000.00

1.1.3. Supporting investments in farms producing meat

5% 175,000,000.00

1.1.4. Supporting investments in farms producing fruit

25% 875,000,000.00

1.3 Supporting investments

aimed at improving processing and market

placement of agricultural products

20% 700,000,000.00

1.3.2. Supporting investments in the processing and market placement of

6% 210,000,000.00

1.3.3. Supporting investments in the processing and market placement of

6% 210,000,000.00

1.3.4. Supporting investments in the processing and market placement of fruit and vegetables

8% 280,000,000.00

AXIS 2 3% 105,000,000.00

2.1 Agro-ecological measures,

measures for improving organic

production and

conserving the

biodiversity

3% 105,000,000.00

2.1.1. Supporting organic agricultural production

2% 70,000,000.00

2.1.2. Supporting the conservation of the genetic resources of domestic animals

1% 35,000,000.00

AXIS 3 17% 595,000,000.00

3.2. Diversification

of rural economy

17% 595,000,000.00

3.2.1 Diversification of activities aimed at adding value to agricultural products or introducing new

12% 420,000,000.00

3.2.2. Diversification of farm activities in the non-agricultural domain such rural tourism, old crafts, providing services for the rural population etc.

5% 175,000,000.00

TOTAL 100% 3,500,000,000.00 100% 3,500,000,000.

00

1.1.1. Supporting investments in farms producing cereals and industrial crops

100% 3,500,000,000.00

Indicative financial table for 2013

Axis Percentile amount

Amount in dinars (RSD)

Measure Percentile amount

Amount in dinars (RSD)

Sub-measure

Percentile amount

Amount in dinars (RSD)

AXIS 1 80% 3,200,000,000.00

1.1 Supporting

farm investments

60% 2,400,000,000.00

1.1.1. Supporting investments in farms producing

25% 1,000,000,000.00

1.1.2. Supporting investments in farms producing milk

5% 200,000,000.00

1.1.3. Supporting investments in farms producing meat

5% 200,000,000.00

1.1.4. Supporting investments in farms producing fruit

25% 1,000,000,000.00

1.3 Supporting investments

aimed at improving processing and market

placement of agricultural products

20% 800,000,000.00

1.3.2. Supporting investments in the processing and market placement of

6% 240,000,000.00

1.3.3. Supporting investments in the processing and market placement of

6% 240,000,000.00

1.3.4. Supporting investments in the processing and market placement of fruit and vegetables

8% 320,000,000.00

AXIS 2 3% 120,000,000.00

2.1 Agro-ecological measures,

measures for improving organic

production and

conserving the

biodiversity

3% 120,000,000.00

2.1.1. Supporting organic agricultural production

2% 80,000,000.00

2.1.2. Supporting the conservation of the genetic resources of domestic animals

1% 40,000,000.00

AXIS 3 17% 680,000,000.00

3.2. Diversification

of rural economy

17% 680,000,000.00

3.2.1 Diversification of activities aimed at adding value to agricultural products or introducing new

12% 480,000,000.00

3.2.2. Diversification of farm activities in the non-agricultural domain such rural tourism, old crafts, providing services for the rural population etc.

5% 200,000,000.00

TOTAL 100% 4,000,000,000.00 100% 4,000,000,000.

00 100% 4,000,000,000.00

5.1.2. The Share of public funds attributed to the various beneficiary categories

Rural Development measures include support for activities that contribute to the improvement of production and organizational structure in the primary agricultural and food production, with the aim of improving market efficiency, competitiveness and implementation of high standards.

This kind of measures are favored within the EU agricultural policy, so that Serbia will go towards improving and expanding application of these measures. This includes targeted investments to increase the competitiveness of farms and companies for processing agricultural products. They are implemented in the form of state co-financing of certain investments in agricultural production in the amount of 50% of the total investment value.

CHAPTER 6DESCRIPTION OF THE PROGRAM IMPLEMENTATION OPERATING STRUCTURE

6.1. Introduction

The goals of the 2011-2013 Serbian National Rural Development Program are:

to guide and influence the allocation of resources to specific strategic objectives and priority axes for the restructuring of Serbian agriculture, the improvement of its competitiveness and for the development of its rural areas and

to adjust and gradually harmonize its institutional and administrative framework to the EU, in the prospect of acquiring a candidate country status and full membership.

Within the MAFWM, the Rural Development Sector has the responsibility of implementing the current rural development policy. Within this Sector, the Department for Rural Development Planning and Monitoring carries out the main programming functions for the rural development policy.

As it was explained in the Introduction, the EU has established the Instrument for Pre-Accession Assistance (IPA) by Council Regulation (EC) 1085/2005. According to the IPA implementing Regulation (EC) 718/2007, the beneficiary country should ensure the management, monitoring and control system of the multi-annual program, with a clear allocation of functions and should establish the authorities and bodies foreseen for its efficient and effective implementation.

If Serbia accomplish the status of a candidate country, implementation of the 2011-2013 Serbian National Rural Development Program would require the establishment of the Operating Structure for the implementation of NRDP (IPARD program to be financed from IPA and national funds). The Operating Structure would consist of : Managing Authority and Paying Agency.

6.2. The structure of the Rural Development Sector

Rural Development SectorAssistant Minister

Department for the Planning and monitoring of Rural Development

Group for institutional support of Rural Development

Higher Advisor of the Assistant Minister for Rural Development Projects and Promotion

Head of Department – Higher Advisor

Rural Development ProgrammingIndependent Advisor

Preparing Rural Development Programming elementsJunior Advisor

Monitoring the program implementation and evaluating the impact of the measures

Advisor

Rural Development technical support, coordinating tasks with the MC

Independent Advisor

Group LeaderIndependent Advisor

Monitoring and coordination of the agricultural extension service work

Advisor

Monitoring and coordination of the Rural Development Support Network

Advisor

6.2.1. Functions of the parts/units within the Rural Development Sector

Assistant Minister

Job description: manages, plans, directs and supervises the work of the Sector; provides expert guidance for civil servants in the sector allocates tasks to internal units and civil servants; performs the most complex tasks within the purview of the Sector; gives opinions regarding the application of laws and regulations within the purview of the Sector , submitted reports on the work of the Sector; participates in the tasks of the Government working bodies and the National Assembly; cooperates within the purview of Department with other bodies, and performs other duties determined by the Minister.

Department for the Planning and monitoring of Rural Development

Head of DepartmentJob description: manages and coordinates the work of the Department (plans, directs and supervises the Group Leaders) participates in the planning and design elements and measures for the Rural Development Program, prepares strategic documents, the Rural Development Program and regulations in the field of rural development; proposes elements and measures for defining and implementing annual and perennial Rural Development Programs, creates a program of measures for the improvement of the advisory service, participates in developing local plans for rural development and the development of action plans aimed at realizing the Rural Development Program; participates in negotiations with the EU authorities in order to establish the necessary bodies for the implementation of the pre-accession EU funds in order to improve Rural Development in Serbia, prepares the acts and decisions necessary for the accreditation for using the EU pre-accession funds; performs other tasks by order of the Assistant Minister.

Independent Advisor for Rural Development ProgrammingJob Description: prepares and proposes elements for the creation of measures related to the use of incentive funds aimed at supporting rural development by improving the competitiveness of the primary agricultural production and supporting the diversification of rural economy; proposes measures for defining programs for rural development, participates in the development of expert specifications for the preparation of regulations and programs aimed at improving the competitiveness of the primary agricultural production and supporting the diversification of rural economy; supervises the analysis of measures and programs for supporting rural development and proposes necessary changes and adjustments with the aim of increasing the efficiency and effectiveness of rural development; prepares and proposes elements for the negotiations platform with the EU authorities concerning improving the competitiveness of the primary agricultural production and supporting the diversification of rural economy in order to use pre-accession EU funds; performs other tasks as ordered by the Head of Department.

Independent Advisor for providing Technical Support to Rural DevelopmentJob description: prepares, plans and coordinates project activities in accordance with the defined plan; prepares progress reports and proposes corrective measures for the effective implementation programs, activities and projects in the field of rural development and rural development stakeholder association process; coordinates cooperation with project teams from other Ministries, embassies, NGOs, local governments and the agribusiness sector in order to harmonize and coordinate the implementation of programs and projects in the field of rural development and association interest; proposes projects in the field of rural development for donor assistance to international organizations and institutions on the basis the internal unit proposals within the Sector and tenders; organizes the submission of project proposals for grants in order to prepare documents for the donor conference; participates in the preparation and implementation of promotional activities in the field of rural development with the goal of successfully implementing and promoting project activities and networking with similar activities and programs in the country and abroad; performs other tasks as ordered by the Head of Department.

Junior Advisor for preparing Rural Development Programming elementsJob description: participates in the preparation of elements for the creation of measures to supporting rural development in the area of improving the competitiveness of the primary agricultural production and the diversification of rural economy; collects data on the situation in rural areas for analysis and proposing elements for the compilation of the Rural Area Development Strategy preserving rural heritage, improvement of organic and integrated production and promotion of agricultural / genetic resources and agricultural biodiversity; collects elements for making expert specifications for the preparation of regulations and programs in the field of rural development; keeps track of the non-agricultural activities in rural areas; perform other tasks by order of the Group Leader.

Advisor for the monitoring of the program implementation and evaluating the impact of the measuresJob description: proposes elements for monitoring the implementation of rural development programs; analyzes the effectiveness and efficiency of the implementation of rural development programs and compiles reports; proposes indicators and procedures for monitoring the effectiveness and efficiency of the implementation of rural development programs; prepares and proposes elements for the development of expert specifications for the preparation of regulations, programs and information related to monitoring and evaluating of the effects of the rural development measures; performs other tasks by order of the Group Leader.

Rural Development institutional support group

Group Leader

Job description: manages and coordinates the work of the Group (plans, directs and supervises the work of civil servants in the group); supervises the implementation of measures for rural development; operates the rural development support network; develops annual and multi-year work programs of the advisory services; coordinates the work advisory services; organizes and participates in the work of the commissions for establishing criteria for evaluating the proposed special programs in agricultural extension; prepares expert specifications for the development of regulations, programs and information from the advisory area; promotes the active role of advisors in the transfer of scientific and technical achievements; follows EU regulations in the field of rural development in order to harmonize and define the criteria and indicators for measuring the success of the rural development program with the EU regulations, performs other tasks as ordered by the Head of Department.

Advisor for the monitoring and coordination of the agricultural extension service workJob description: prepares annual and multi-year work programs of the extension service; monitors the implementation of the advisory service program on a quarterly and annual basis and prepares quarterly and annual reports on the work of the advisors; proposes measures to improve the quality and the work of the agricultural extension stations; prepares contracts for the implementation of tasks according to the work program; proposes models for the distribution of funds for financing the agricultural extension stations; participates in the development of expert specifications for the preparation of regulations, programs and information from the advisory area; performs other tasks by order of the Group Leader.

Advisor for monitoring and coordination of the Rural Development Support NetworkJob description: monitors the implementation of the rural development network support program; monitors the reports on the work of the members of the rural development support network; proposes measures for improving the quality and work of the rural development support network; prepares elements of Regulations and participates in the work of the commission for the selection of the members of the rural development support network; proposes models for the distribution of funds for financing the rural development support network; participates in the development of expert specifications for the preparation of regulations, programs and information in the field of rural development; cooperates with local municipalities and associations in the field of rural development at the local level; perform other tasks by order of the Group Leader.

Former Advisor for Extension Tasks in the area of Rural DevelopmentJob description: coordinates the cooperation of the Rural Development Sector with international organizations, institutions and other Ministries with the aim of implementation of donor assistance and performing joint activities in support of rural development and the establishment of partnerships between all stakeholders; proposes activities and measures for creating and implementing projects to support rural development in accordance with the EU requirements; monitors the EU regulations in the field of rural development and local initiatives; performs other tasks by order of the Assistant Minister.

6.3. Monitoring and Evaluation of the National Rural Development Program 2011- 2013

Conforming to the EU programming provisions, the monitoring function has been institutionalized by the establishment of a Monitoring and Steering Committee. This Committee, under the chairmanship of the head of the Managing Authority or a high ranking official (Deputy Minister, Secretary of State), will aim to ensure that the relevant public institutions, natural and legal persons, non-governmental and other interested parties and stakeholders attend and contribute to the process of monitoring and evaluation of this rural development program. The Committee will be attended also by the European Commission and representatives of other relevant institutions at consultative level when the candidate status is acquired by Serbia.

In order to coherently implement the rural development program, in accordance with the national policy and strategies, with consistency and efficiency, the Committee will advise on the application conditions of projects, the conformity of selection and evaluation criteria to the rural development goals. The Committee shall also examine evaluation reports, recommend improvements regarding administration, implementation, accomplishments of targets and the financial administration.

The progress of program implementation, as well as its efficiency and effectiveness in relation to its objectives, will be measured by indicators related to the baseline situation, as well as to the financial execution, outputs, results and impact of the program. Input, output and impact indicators are built into each of the technical measure fiches setting the base for monitoring and evaluation activities.

The IPA-RD Agency and the Monitoring and Steering Committee will regularly monitor and evaluate the delivery of program outputs to be achieved through the provision of program inputs. This is a continuous process aimed to correct any deviation from the operational objectives and improve program performance.

An annual report on the NRDP implementation progress should be prepared, according to article 193 of the IPARD implementation regulation. This report will assess the implementation progress covering the attainment of set objectives, the problems encountered in managing the program and the measures taken, the financial execution as well as monitoring and evaluation activities carried out.

The overall evaluation will examine particular results and impacts at certain stages in the life cycle of the program. This evaluation is important for any adjustments of the program, considered necessary, and for the general assessment of its impact, for eventual follow-up and/or for public information.

CHAPTER 7: AUTHORITIES INVOLVED IN THE PROGRAM

The authorities and bodies directly responsible for carrying out the National Rural Development Program in the Republic of Serbia1.

Rural Development SectorRural Development planning and monitoring sectorMinistry of Agriculture, Forestry and Water Management (MAFWM)Obilićev venac 9–11, 11000 BelgradePhone: 011/3348-054Fax: 011/3348-424

2.Department of agricultural paymentsMinistry of Agriculture, Forestry and Water Management (MAFWM)Hajduk Veljkova 4–6, 15000 ŠabacPhone: 015/367-581

Fax: 015/ 367-592

PART III

APPENDICES

ANNEX I

Table 1. Serbia’s Macroeconomic indicators

Measurement

units 2000 2001 2002 2003 2004 2005 2006 2007 2008

Territory without Kosovo and Metohija km2 88,361 88,361 88,361 88,361 88,361 88,361 88,361 88,361 88,361Territory with Kosovo and Metohija km2 77,474 77,474 77,474 77,474 77,474 77,474 77,474 77,474 77,474Population 000 7,747 7.,27 7,504 7,481 7,463 7,441 7,411 7,366 7,365GDP (in current prices) mil.€ 13,186,2 16,811.8 18,008.7 19,723.5 21,077.2 24,254.8 29,543 Structure of new values: 100 99.95 100 100 99.95 100 99.95 0

Agriculture, forestry and fishery % 19.7 19,7 14.8 13.1 13.7 11.9 11.1 Industry % 25.9 24.4 23.7 22.5 23.5 23.2 24.1 Construction work % 3.6 3.2 3.4 4.2 4.7 4.5 4.7 Services % 50.8 52.65 58.1 60.2 58.05 60.4 60.05

GDP/capita € 1,757.4 2,241.6 2,407.4 2,642.8 2,832.7 3,272.6 4,002 Economic growth (GDP changes) % 4.5 5.4 3.6 2.8 8.2 6.0 5.6 7.1 Unemployment rate % 12.09 12.23 13.28 14.63 18.5 20.8 20.9 18.10 14.0Inflation (yearly average) % 124.1 20.8 5.2 5.9 11.3 14.5 5.9 5.4 Participation of food, tobacco and beverage costs in family budgets % 54.0 58.4 49.0 47.7 45.0 41.7 43.4 45.1 45.8Average yearly exchange rate Din/€ 58.7 59.7 61.51 68.3 78.9 85.5 84.0 80.1 81.9

Source: Republic Statistical Agency– various publications, the National Bank of Serbia

Table 2. Macroeconomic indicators of Serbia’s agricultureunit. 2000 2001 2002 2003 2004 2005 2006 2007 2008

Participation of agriculture, forestry and fisherywithin the GDP % 18.7 18.0 13.3 11.4 11.9 10.3 9.6 8.7in employment (ARS) % 23.9 23.2 20.5 20.8 21.4Participation of the food, beverage and tobacco industry in the GDP 6.2 5.7 5.3 4,9 4.7 4.4 4.7 4.4

Total 87 119 97 93 120 95 100 92 108Crop production 73 150 96 83 144 94 97 82 123Livestock 95 99 102 98 100 101 97 100 97Participation of food, tobacco and beverage in family budgets % 54.0 58.4 49.0 47.7 45.0 41.7 43.4 45.1 45.8Food product trade mil. € 631.0 854.1 1,133.3 1,086.2 1,316.2 1,353.7 1,713.1 2,035.5 2,327.1Export mil. € 319.7 347.4 554.9 509.4 628.7 731.7 991.9 1,217.9 1,327.3Import mil. € 311.3 506.8 578.3 576.7 687.5 622.0 721.1 817.6 999.8Foreign trade balance mil. € 8.3 -159.4 -23.4 -67.3 -58.8 109.7 270.8 400.2 327.5Participation of food products in:Total export % 19.0 18.3 25.3 20.9 22.2 20.3 19.4 18.9 31.3Total import % 8.6 10.7 9.8 8.8 8.0 7.4 6.9 6.1 6.4

Source: Republic Statistical Agency– various publications

Table 3. Geographic and demographic indicators of Serbia’s rural areas without Kosovo and Metohija

Republic of Serbia Rural areasGeographic indicatorsSurface, km2 (2004) 77.508 65.952Number of settlements (2004) 4.715 3.904Population density 96,74 63,10Population and human capitalPopulation survey 1991 7.576.837 4.319.463Population survey 2002 7.498.001 4.161.660Change in population 1991–2002 (u %) 99,0 96,3In-out migration rare 1,48 -0,14Participation of population younger than 15 years (%) 15,69 16,17Participation of population older than 65 years (%) 16,54 17,49Ageing rate 1,05 1,08Educational structure of the population younger than 15 years% without formal education 21,84 28,19% grade school 23,88 26,69% high school 41,07 36,09% faculties and colleges 11,03 6,95% unknown 2,18 2,07

Source: Republic Statistical Agency– various publications

Table 4. Industrial structure of Serbia’s rural areas without Kosovo and MetohijaRepublic of Serbia Rural areas10

Industrial structureDP/capita 137 375DP/capita (Serbia = 100%) 100 273,04Structure DP% primary sector 19,33 32,48% secondary sector 39,48 41,12% tertiary sector 40,79 26,06% public sector 0,40 0,34% Agriculture, hunting, forestry and water management 16,33 29,81

Productivity in the primary sector (Serbia = 100%) 100 87,38Productivity in the secondary sector (Serbia = 100%) 100 74,93Productivity in the tertiary sector (Serbia = 100%) 100 62,48EmploymentEmployment structure by sectors% primary sector 23,36 32,98% secondary sector 30,08 30,69% tertiary sector 24,82 18,60% public sector 18,94 14,84% unknown 2,80 2,89Activity rate 53,76 53,61Employment rate 41,81 42,18Unemployment rate 22,22 21,32Unemployment rate for women 24,22 23,44Source: Republic Statistical Agency– various publications

Table 5. Population structure by gender

10 According to the methodology of the Republic Statistical Agency

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Women (%) Men (%)Active population 44 56Employed 41.7 58.3Unemployed 54.4 45.6Inactive population 61.8 38.2Receiving social aid 52.3 47.7Housewives 98.1 1.9Students 54.8 45.2Disabled persons 67.7 32.3Others 51.0 49.0People younger than 15 years 48.4 51.6

Source: Montelatici, 2008.

Table 6. Regional characteristics of Serbia’s rural areas

Indicators Rural areas

Region

Highly intensive agricultural

production and integrated economy

Small urban economy with

intensive agriculture

Economy oriented toward natural

resources mostly in

mountainous areas

high tourist capacities and poor

agricultural structures

Geographic indicatorsSurface, km2,2004. 65,952 20,229 12,642 22,278 10,803Number of settlements, 2004 3,904 471 993 1,569 871Population density (citizens per km2) 63.10 76.83 85.93 43.40 51.32Population and human capitalPopulation survey - 1991. 4,319,463 1,554,188 1,115,987 1,065,978 583,310Population survey - 2002. 4,161,660 1,554,209 1,086,278 966,770 554,403Change in population 1991–2002 (u %) 96.3 100.0 97.3 90.7 95.0

Rate of in-out migrations -0.14 5.81 0.43 -5.43 -7.43Participation of people younger than 15 years (%) 16.17 15.91 15.70 15.91 18.30

Participation of people older than 65 years 17.49 16.29 18.33 20.33 14.28

Aging rate 1.08 1.02 1.17 1.28 0.78Educational structure of population older than 15 years% without formal education 28.19 24.16 28.67 34.74 27.14% grade school 26.69 26.41 25.42 27.51 28.62% high school 36.09 41.10 36.69 27.35 36.11% faculties and colleges 6.95 7.53 7.29 5.87 6.55% unknown 2.07 0.80 1.94 4.53 1.59

Industrial structureDP/capita 375 133 97 71 75DP/capita (Serbia = 100%) 273.04 96.72 70.32 51.43 54.57Structure DP% primary sector 32.48 33.24 30.25 38.63 24.24% secondary sector 41.12 42.36 39.71 38.16 43.36

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% tertiary sector 26.06 24.14 29.67 22.64 32.08% public sector 0.34 0.27 0.36 0.57 0.32% Agriculture, hunting, forestry and water management

29.81 29.93 28.19 36.48 22.35

Productivity in the primary sector (Serbia = 100%)

87.38 128.42 74.00 69.00 47.00

Productivity in the secondary sector (Serbia = 100%)

74.93 102.00 65.00 53.00 57.00

Productivity in the tertiary sector (Serbia = 100%)

62.48 71.00 61.00 48.00 60.00

Employment

Employment structure by sectors% primary sector 32.98 30.75 32.68 36.30 34.20% secondary sector 30.69 31.20 30.79 29.11 31.72% tertiary sector 18.60 20.28 19.41 15.35 17.80% public sector 14.84 15.57 14.09 15.08 13.94% unknown 2.89 2.20 3.03 4.17 2.34Activity rate 53.61 53.14 55.43 50.78 56.35Employment rate 42.18 41.23 44.51 40.46 43.26Unemployment rate 21.32 22.40 19.69 20.33 23.22Unemployment rate for women 23.44 24.46 22.27 21.68 25.86AgriculturePercentage of arable land in total territory 65.30 83.29 64.34 55.03 53.95

% areas under forests 25.83 5.09 27.09 36.74 40.67Arable land structure% Plowed arable land 62.78 87.79 60.48 47.52 25.79% Orchards and vineyards 5.59 1.77 11.05 6.51 7.10% Meadows and pastures 30.88 8.64 28.34 45.93 67.11% Fish ponds, swamps and bogs 0.74 1.81 0.13 0.04 0.00LivestockCattle/100ha arable land 25 15 37 24 47Pigs/100ha plowed land 91 80 131 84 96Sheep/100 ha agricultural land 32 13 58 26 62Average farm size 3.94 3.53 3.72 4.25 4.76Social and economic farm structure% Agricultural farms 19.50 21.57 19.59 15.42 23.04% Non-agricultural farms 59.60 62.51 56.33 62.15 53.79% Mixed farms 17.20 13.03 19.99 18.33 19.23% Without income 3.68 2.85 4.10 4.10 3.94Serbia’s land productivity = 100% 88.62 111.48 110.52 61.77 48.44Serbia’s agriculture productivity = 100% 93.58 131.22 80.13 79.34 49.46

InfrastructureNumber of doctors 8,129 2,744 2,376 2,059 950Number of phone lines 1,180,690 453,065 317,522 265,271 144,832Number of phone lines per 1,000 people 284 292 292 274 261

Number of people per doctor 512 566 457 470 584Source: Republic Statistical Agency– Bogdanov (2007).

Table 7. Subjects influencing the state policy

Name of the institution Type of influence on state policy Participation in strategic decision making

MinistriesMAFWM Rural development sector Decision maker HighMERR Regional development sector Decision maker MediumMERR Tourism sector Decision maker Medium

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MF Donation and development help sector Decision maker Low

Ministry of work and social policies Decision maker LowMDUiLS Sector for local administration Decision maker Low

National agencies and institutionsMSE Agency Implementer MediumAgency for the development of infrastructure Implementer Low

Fund for the development of Serbia Implementer LowNational investment program Financing LowTim for implementing the SS strategy Implementer HighScientific institutionsInstitute for agricultural economy Agricultural Faculty, University of in Belgrade

Social partner, single expert participation High

Department for AE and rural sociology, Agricultural Faculty of Novi Sad

Social partner, single expert participation Medium

Institute for Science Application in Agriculture Social partner Low

Institute for agricultural economy, Belgrade Social partner Low

Others (national level)

Industry chamber Social partner with a high degree of influence on state policy Low

Cooperative union of Serbia Social partner LowSerbia’s tourism agency Social partner, Implementer MediumSource: Bogdanov N. (2007): „Small rural households in Serbia and unfavorable rural economy“ UNDP, Beograd

ANNEX II

Serbia’s rural regions:

1. The region of highly intensive agricultural production and integrated economy

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The region of highly intensive agricultural production and integrated economy is located in the northern part of Serbia. It spreads over the territory of the Autonomous Province of Vojvodina and the north western part of Central Serbia (Mačva). The main natural characteristics of this region are flat, high quality land and rich water potential. Large rivers Danube, Sava and Tisa flow through this region. For removing the surplus of water large irrigation systems were created, which through a network of canals and water management facilities, cover the surface of 21,000 square kilometers. The irrigation canal Danube-Tisa-Danube is a multipurpose infrastructure object. The total length of the canal network is 930 km, from which 590 km can be used for ship travel. The DTD hydro-system ensures the removal of excess water from over a million hectares and at the same tame enables irrigation for nearly half a million hectares. The effects of the DTD system are two harvests per year and an increase in yield of over 15%.

Concerning the demographic characteristics, and the development level, the differences between the western and the eastern part are notable. The western part has more favorable structural performances due to the higher population concentration, increasing investments and more dynamic industrial growth.

The analysis of the main coherent population groups and demographic structure in the context of the region’s development potential shows certain advantages of this area compared to the national average and other rural regions, but also some large inter-regional differences. The population count remained the same during the 1991–2002 period. The percentage of the in-out migration during the 1991–2002 period was 5.81%, which is significantly above average (1.48%). Within the region, differences are notable and indicate that in the eastern part (Banat) most municipalities have a negative in-out migration rate. On the other hand, in the southwestern parts of the region the in-out migration rate was between 9 and 19%. The population growth in the northern and southwestern municipalities of the region is partially caused by settling refugees from Croatia and the large investment potential due to the favorable geographical position (road Novi Sad – Belgrade).

The region of highly intensive agricultural production forms 20% of Serbia’s GDP, which is 50% of the GDP from all rural areas. The most common sector in the GDP structure is the secondary sector (42.36% of the total GDP of the region). Within this sector, the main industry is the processing industry, especially its food industry subcomponent. The largest part of the food industry of Serbia is located in this region. The capacities of the food industry are privatized and partially technologically innovated. They are adapted toward the raw material basis by structure and over dimensioned by scope. The region contains capacities in all branches of the food industry.

The region of highly intensive agricultural production is characterized by the exceptionally rich soil potential. The availability of arable land per citizen is 1.08 ha, and per farmer 10.37 ha. The favorable ratio of workforce and basic capital (land) enables high work productivity in this area. Agricultural productivity of this region is 31% above Serbia’s average. The intra-regional differences between the available arable land areas and the farmers are notable. The eastern part of the region has a lesser population density and unfavorable demographic indicators, but also a better ratio of land and workforce which is 15–20 ha per farmer in some municipalities (Novi Bečej, Sečanj, Kikinda, Plandište, Vršac).

The largest part of arable land (65%) in this area is used for grain production. About 85% of the total area under industrial crops in Serbia is located in this region. Considering the high grain production, the region is also the largest producer of pigs (37%) and poultry (33%) in Serbia.

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There are regional differences in the presence of livestock farming and its production structure. The western part of the region, especially the Srem and Mačva areas have a more favorable livestock to land ratio which is considerably worse in Banat.

The ownership stricture indicated that 7.5% of all farms have over 10 ha of arable land and take up about 30% of the total agricultural area in the region. On the other hand, the smallest farms (up to 1 ha) are common as well and take up 33% of the total farm count. The common presence of small farms can be explained by a higher population density, relatively favorable infrastructure and a satisfactory level of social services in this region. For a certain number of people, farms only provide residential functions. A large number of non-agricultural farms (62.5%) in the region, confirm this. The number of mixed farms (13% of the total farms) is significantly lower than in other rural regions and is certainly a consequence of the farm polarization by income.

The characteristic flat landscapes, large rivers, canals and lakes, the National Park “Fruška gora“ and the “Deliblatska” sand area, rich and organized hunting grounds are the main tourist attractions in this region. There are about 200 natural goods under special protection which take up about 5.5% of the region’s area. The number of available hotel beds compared to the number of citizens in this area is significantly lower than in the other rural regions. On the other hand, their utilization is much greater (80%).

2. The region of small, urban economies with intensive agriculture

Geographically, this region encompasses the northern parts of Central Serbia, Šumadija, parts of Mačva and Stig. The territory of this region is surrounded by large urban centers, which is reflected by the economic structures and the social demographic parameters of the region. The territory of this region takes up 16.31% of the total territory of Serbia. The region is relatively homogenous according to the natural and geographical conditions: hilly terrain dominates, with some mountains on the western and eastern ridges.

The average population density in this region is 86 people/km2, which is higher than in the other rural areas in Serbia. During the 1991–2002 period the population count has reduced by 2.5%.

The main industry branches are: chemical industry, food industry, and machine production. Parts of the region, especially those which are at the crossroads of the main highways, have a better educated and younger workforce, are more attractive for investments and record acceptable economic growth rates. One of the characteristics of the economic structure of this region is the larger involvement of the tertiary sector in the GDP.

The main characteristic of this region is a large number of farms with a size smaller than the national average (less than 3 ha). The presence of farms with more than 10 ha is significantly lower than in other regions, and the highest concentration of the farms (60% of the total count) between 3–10 ha in size. This region is also characterized by a high presence of mixed farms and a lower number of non-agricultural farms. A high presence of mixed farms (which creates an unfavorable ratio of arable land and the number of farmers), is a consequence of the close proximity of large cities. The farms in this region have fragmented by divisions, but there was no extra diversification of family income and the farms weren’t split into non-agricultural and agricultural as in Vojvodina. Considering that the income from non-agricultural areas is inadequate for survival, there were no city migrations so the agricultural presence is still high.

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The available agricultural areas per person are 0.75 ha, and 6.39 ha per farmer which is significantly less than in other rural areas of Serbia. Furthermore, the GDP per hectare ratio is very high in this region. Such a high productivity is the result of the production structure which is dominated by fruit, vineyard and livestock production. This region contains 30% of the total orchard and vineyard areas of Serbia. Furthermore, it contains 30% of the total cattle and sheep in all rural areas, and 1.31 pigs per hectare which is the highest ration in Serbia. The regional differences concerning the livestock production structure are notable. The northern parts of the region Mačva, part of the Kolubara and Braničevski district, are especially notable for livestock presence.

The infrastructure of this region is more developed that in the other rural regions of Central Serbia. Since the region is located near large urban centers, this rural area has a more favorable infrastructure and easier public service access. Availability of modern roads is at the national average (61%), and the road network is equally present in the entire area of the region. The ratio of citizens per doctor and citizens per phone lines are also more favorable.

3. Mountainous region with an economy based on natural resource use

This region takes up the largest amount of space and covers 29% of Serbia’s territory. A large part of this area encompasses parts of Serbia which lie high above sea level (above 500 meters), so it can be described as mountainous – hilly area. The flatlands are located near the large rivers (Danube, South Morava and Timok). The diversity of the landscape in these areas and the heterogeneous structure of natural resources have resulted in a fairly diversified industrial and agricultural structure.

Compared to the other rural areas, this region has the lowest population density (43 people per km2). The population density varies from 8.21 people /km2 in the eastern part up to 132.21 people/km2 in municipalities where people of Albanian ethnicity are dominant. From 1991 to 2002 the population in the region has decreased significantly, so it now has the highest population aging rate of all rural areas in Serbia. Every third person older than 15 years has not finished elementary school, while the percentage of those who have finished high school or a faculty lags significantly compared to other rural areas. The unfavorable education structure is clearly a consequence of the unfavorable age structure.

The activity and employment rates in this region are the most unfavorable compared to the other rural areas. The reduction of the employment possibilities and inefficient work market are the main characteristics of this region. More than 36% of the population is employed in the primary sector. Besides agriculture, high employment in the primary sector is caused by the mining and energy industries. The sector structure within the GDP shows an extremely high participation of the primary sector (38.63% of the total GDP in the region). The differences within the region concerning the productivity of the primary sector are fairly notable, and are mainly caused by the heterogeneous state of the resources and the structure of agricultural production.

Arable land takes up 55.36% while forests take up almost 37% of the total area of this region. The available arable land is 1.26 ha per person, and 11.32 ha per farmer which is above the values in most other rural areas. Although the ration between the workforce and the arable land is favorable, the region still has a fairly low agricultural productivity, compared to other rural areas.

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Relatively favorable conditions in this region result in a high production of fruit and grapes. This production type is typical for the Negotinska krajina, Braničevo and Toplički district. The eastern Serbia region covers two vineyard areas Timok and Nišavsko-Južnomoravski areas with 5 vinery sub-areas: Aleksinac, Toplica, Niš, Leskovac and Nišava. Considering the favorable ecological conditions, unpolluted environment and a long tradition of selling fruit, this region has many advantages for organic production, as well as other types of sustainable development. All of those advantages have not been fully utilized. Due to the lack of workforce, the medical herb production and the wild berry/herb gathering are underdeveloped.

This area holds a large percentage of cattle (20%) and sheep (20.5%) from the total amount in Serbia. The degree of sheep breeding varies and is not particularly concentrated in any part of the region. Although all conditions for sheep breeding are very favorable and there is a long tradition in sheep herding, the lack of work force and the bad market organization make it less present.

The neglected soil potential, the lack of work force, the unorganized market and the lack of adequate rural infrastructure are the main limitations for the development of agriculture in this region. This region has the least developed infrastructure in Serbia. The entail of modern roads in the road network is only 57% which is less than in other rural areas. The road quality varies within the region itself as well. Municipalities which are near the Belgrade - Nis highway have a well developed road network. In the part of the region which lies near the administrative border with Kosovo and the state border with Macedonia there are less than 30% of modern roads.

In certain municipalities within the region (Dimitrovgrad, Crna Trava, Bosilegrad) only a few elementary schools work. The number of high schools in the entire region is small and provides insufficient diversity of education. The weak economic state of refugees and minorities as well as a high percentage of rural poverty make this region exceptionally undeveloped.

4. The region with a high potential for tourism and with an impoverished agricultural structure

The region takes up 14% of Serbia’s territory. Its geographical conditions are relatively homogenous.

A part of the region’s GDP comes from mining as it contains energy and mineral resources (the areas of Mali Zvornik, Raška and Ljubovija). The industrial sector in this region is partially connected with its natural potentials (water supplies, wood production and processing, meat, vegetable and fruit processing). Existing industrial branches in this region are: motor production and the metal and textile industry. Several companies from this region have a specific position and influence the structure of local agriculture in municipalities where they are located – cement production (Kosjerić) and hydro electricity plant (Mali Zvornik). Forests cover almost 41% of this region.

The productivity rate of the primary sector is lower than in other rural areas. Only certain municipalities (Mali Zvornik, Užice and Raška) have the productivity rate which is close to the national average, thanks to the favorable structure of agriculture, mostly due to fruit and livestock production.

One of the characteristics of the economic structure of this region is the significant participation of the tertiary sector in the GDP (32.08%) which is larger than all other rural areas. Tourism makes up about 11% of the GDP of this sector.

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The industry of this region has all marks of mountainous industries. The hydro-energetic potential of this region, the tourist capacities and the agricultural structure based on a small number of commodities are the traits of this region.

Natural supplies of animal feed (meadows and pastures) cover over 2/3 of the arable land. Therefore, this region has a more favorable ration between livestock and the appropriate land category from other rural areas and the national average, and can therefore be considered a livestock oriented region. The northern part of the region and the municipalities near Zlatibor (Osečina, Bajina Bašta, Ljubovija, Kosjerić) are the largest sheep producers in the country. Zlatibor and the Raška district also have a large entail of the livestock production, considering the arable lands available to them.

Zlatibor district also produces one third of the total raspberry production. Favorable agricultural conditions in parts of this region enable traditionally high grape production which is cultivated in the Rasina area. Vinery is most present in Aleksandrovac area.

This region currently has the largest tourism potential in Serbia. The famous mountain resorts are located there: Tara, parts of Divčibare and Kopaonik. The advantage of this region is that it spreads along the main road toward Montenegro which gives rural areas some tourism advantages. The western part of the region is located near the E-761 road (toward Sarajevo) and E-763 (new road toward Montenegro). The main tourism potential of the region are Užice, Pribojska and Ovčar spas, Ovčarsko-kablarska riverbed, Pešterska high plain, Bajina Bašta, Priboj, Sjenica and Ovčarsko-kablarski monasteries, ethnic villages in Čajetina, Nova Varoš, Prijepolje and the Mileševa monastery as well as numerous monasteries along the Lim valley. The south western part of the region contains Kopaonik – a tourism center with the same named National Park, the Golija, Novi Pazar and Bogutovac spas, the Studenica, Sopoćani, and Stari Ras monasteries. All of those locations are UNESCO world protected areas listed.

South western Serbia is one of the potentially strongest tourism resorts in Serbia due to the combination of history, tradition and natural beauty. The establishment of the Ibar highway gives possibilities to establish a traffic network toward rich tourist attractions. The important driving force for long-term success is the rehabilitation of cities and increasing the income if its population (the towns of Valjevo, Užice, Čačak, Kraljevo, Kruševac and Kragujevac).

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List of municipalities in the rural region

Region 1 Region 2 Region 3 Region 41 Суботица Лозница Велико Градиште Мали Зворник2 Бачка Топола Коцељева Голубац Крупањ3 Мали Иђош Уб Мало Црниће Осечина4 Сомбор Ваљево Кучево Љубовија5 Кула Лајковац Петровац Бајина Башта6 Апатин Мионица Жагубица Косјерић7 Оџаци Љиг Деспотовац Ужице8 Бечеј Пожега Кладово Чајетина9 Србобран Ариље Мајданпек Прибој10 Врбас Лучани Неготин Нова Варош11 Бачки Петровац Горњи Милановац Бор Пријепоље

12 Бачка Паланка Аранђеловац Бољевац Сјеница13 Бач Топола Зајечар Ивањица14 Беочин Кнић Соко Бања Тутин15 Жабаљ Смедеревска

ПаланкаКњажевац Нови Пазар

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16 Тител Велика Плана Ражањ Рашка17 Кањижа Жабари Алексинац Брус18 Нови Кнежевац Рача Мерошина Александровац19 Сента Лапово Дољевац20 Чока Баточина Сврљиг21 Ада Свилајнац Бела Црква22 Кикинда Ћуприја Пирот23 Нови Бечеј Параћин Димитровград24 Нова Црња Рековац Бабушница25 Житиште Трстеник Гаџин Хан26 Зрењанин Варварин Власотинце27 Сечањ Ћићевац Црна Трава28 Опово Краљево Сурдулица29 Ковачица Врњачка Бања Босилеград30 Алибунар Врање Владичин Хан31 Пландиште Бујановац32 Вршац Прешево33 Бела Црква Трговиште34 Ковин Житорађа35 Шид Блаце36 Сремска

МитровицаПрокупље

37 Богатић Коршумлија38 Ириг Бојник39 Инђија Лебане40 Рума Медвеђа 41 Пећинци42 Владимирци

Regions 3 and 4 have negative rate of in out migration

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ANNEX IIIStrategic documents of the Republic of Serbia

The poverty reduction strategy was adopted by the Government of Serbia in 2003. It states the depth of the rural poverty problem as a phenomenon specific to Serbia and the difference in severity of rural poverty compared to urban poverty is stressed. The reasons for these differences is the fact that most rural population do not have a secure income in transition periods. According to the Strategy, the reasons for the underdevelopment of the rural areas are: population decrease, inter-region demographic differences, community fragmentation and unfavorable demographic and educational structures of the workforce.

The poverty reduction strategy includes both special as well as strategic goals. These goals are not only related to poverty but also represent a call toward a coordinated effort in other industrial sectors and areas – stimulation employment and improving the life standard of the rural population. The aforementioned goals will be accomplished through: an improvement of the agricultural production, improvements in the rural structure, workforce training and education, improving the life quality in rural areas and educating the rural population.

Serbia’s poverty reduction strategy is one of the goals (strategic directions for poverty reduction) in Chapters 1. “Increasing the employment possibilities” and 6. “Regional, rural and urban aspects of poverty reduction”. The Strategy stresses the importance of social development as a means of poverty reduction. A “sustainable development of the private agricultural sector” is seen as the primary means aimed at their education, forming the “new role of agriculture in rural economy”, less people employed in the primary agricultural production whereas more people employed in the food processing industry and a more diverse rural economy. Rural development is also connected with the ecologic aspects of the poverty reduction: improving water supplies and sewage facilities, sustainable soil use, managing forest resources and conserving the biodiversity. As this strategy is adopted at the beginning of the transition, it has greatly influenced the content of later national and local strategies.

National strategy for Serbia’s and Montenegro’s EU accession This strategy completely relies on the Strategy of Agricultural Development in defining the main strategic goals in the areas agricultural and rural development. It further develops the phases of integrating the Serbian agriculture into the EU, as defined in the Strategy of Agricultural Development. Three phases are defined: preparation, implementation and integration. The goal of the first phase is to raise the capacity of agriculture and to set the basis for the following two phases through privatization, institution building and market development, as well as the ratification of the EU agreements. The second phase marks the beginning of the integration of Serbia’s agriculture into the EU with the focus on the quick restructuring of the rural sector and improving the competitiveness of the agricultural industry, as well as in the application of EU agreements which have been ratified (the WTO membership application and the EU Stabilization and Association Agreement). The third phase envisions the finalization of the integration processes. Serbia is preparing to take up all of the rights and responsibilities which come with the EU membership, especially the harmonization of regulations with the EU and forming structures which are necessary for the implementation of the CAP. In all phases, the importance of the MAFWM is stressed, as well as the need to build up the capacities of this institution.

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Sustainable development strategy (the fourth draft of the strategy adopted in 2007), is relying on all the previously adopted strategies, especially on the National strategy for Serbia’s and Montenegro’s EU accession, the Poverty reduction strategy and the National program of environment protection and many other sector strategies. This strategy defines five national priorities for Serbia’s sustainable development: 1. EU membership, 2. development of a competitive market-oriented industry and a balanced economic growth, 3. development and education of human resources, increasing employment possibilities and social inclusion, 4. infrastructure development and balanced regional development and 5. protection and improvement of the environment and the rational use of natural resources. Rural development is mentioned as one of the means for obtaining the fourth priority. In this strategy, rural development is considered from the aspect of regional inequality and the need for decentralization and the strengthening of local administrations; from the agricultural development aspects, harmonizing national regulations with their EU counterparts, reduction of agricultural pollution, developing organic agriculture and raising farmer awareness about the environmental protection issues. As the strategy defines, the “main goal of sustainable development is the establishment of an economically rentable and ecologically acceptable agricultural industry which would be the basis of rural development and provide the existence for rural population which would create the potential to reach the European markets“. Environment protection takes up a special place in the strategy and refers to various sectors which are important for rural development: sustainable use of water, soil, forest, biodiversity protection and nature protection, using renewable energy sources protection from natural disasters such as floods, land slides, fires and earthquakes.

The national industry development strategy Agriculture and its accompanying industry branches are treated as the primary advantages of Serbia’s industry. The processing industry is treated as one of the main generators of industrial activity (due to the food and beverage production). Concerning agriculture, the strategy relies on the goals defined by the Agriculture Development Strategy and envisions the following program measures during the 2007 – 2009 period: 1. A change in the structure of commercial farms, 2. Developing the land market, 3. Improving farmer cooperatives, 4. Improving water resource management, 5. Sustainable forest use, 6. Food safety – human health protection and environment protection from pesticides, veterinary medication and food related diseases, 7. The development of institutions which negotiate with the EU and other trade partners, 8. The development of the research and the transfer of knowledge, 9. Sustainable rural development – improving social and economic conditions in rural areas, and 10. the establishment of trade mechanisms and the infrastructure of agricultural credits. Besides the agricultural and the processing industry, the Strategy is concerned with rural development in other branches as well: traffic, water management, tourism etc. The problems of the farmers and the rural population in general are mentioned in the parts concerning employment, social issues and regional development. The strategy is also concerned with environment protection in terms of monitoring and control, waste management, reduction of soil and water pollution.

Serbia’s regional development strategy for the 2007–2012 period was adopted in January 2007. The regional development strategy is based on three pillars: defining the development level; defining the development for supporting the regional development of Serbia11; the strategy of institutional development. Special attention was paid to underdeveloped areas, mainly municipalities with rural areas. The action plan envisions the following measures for such areas:

11 The importance of regional development and removing the differences between regions are pointed out in these strategies: the National strategy for economic development, Sustainable Development strategy, Poverty reduction strategy, national strategy for aged people and employment etc.

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an increase in the subsidized credit funds, use of state aid and EU funds intended for regional development, strengthening of institutional capacities, directing donator funds toward these areas and establishing a favorable investment environment. Rural areas are also mentioned in the employment policy where special attention is focuses on the migration of young people from villages to towns. The problems of the future agricultural development are mostly addressed in the agricultural policy part where the basic goals of the action plan are: regulation the land market and the possibility of renting, improving the food quality, enhancing the agricultural credit market, establishing an institutional framework and rural development support. The strategy touch upon the regional infrastructure problems (communal infrastructure, the expansion of water ways to village areas) and the possibility of resolving those problems by allowing local municipalities to enter arrangements.

The national program for environmental protection. The issues covered by this strategy concerning rural areas are: water quality (agricultural pollution, using inadequate sewage dumps in villages), air quality (uncontrolled waste and post harvest burning), soil quality (erosion due to abandonment of arable land, uncontrolled fertilizer and pesticide), wild waste deposit problems (there is no waste collecting system in villages). The strategy recommended certain measures for resolving these problems. Some of them are short term (2007–2011) while others are long term (2012–2016). Among the proposed measures are: developing systems for improving the drinking water quality, building facilities for processing waste waters, improving the sewage network and collecting communal waste and increasing the use of renewable energy. The negative effects on agriculture on the environment are noted. Besides the aforementioned issues, the low level of ecological awareness among farmers is also a problem. The strategy deals with the problem of biodiversity conservation, dangers of uncontrolled hunting and fishing as well as undeveloped monitoring.

Serbia’s tourism development strategy (2005–2010) was adopted in 2006 and represents another collection of short and midterm economic measures planned by the state and the local administration. These measures are based on the existing state, the predicted influence of the current policy on Serbia’s tourism, as well as on the movements on the world tourism market. The Strategy puts rural tourism among its mid term and long-term development goals. Rural tourism is viewed as an important aid to the industry that will improve and ensure the sustainable development of rural communities. The main goal of rural tourism is to generate additional income for the rural population, unifying a line of tourist attractions, services and secondary activities that the rural population and private households can provide. The strategy supports the promotion and development of rural tourism and directly contributes to the balancing of the entire economic development of the country, as well as a reduction of inequality and resource sharing between urban and rural areas.

However, rural tourism is rated poorly in terms of attractiveness and competitiveness, so that it doesn’t fit into the top four products which have gained the highest priority ranks. Rural tourism is rated as inadequately structured and organized. Within the competitiveness program and no action plans which would directly handle rural areas have been proposed. From seven project categories which should be stimulated through subsidies, rural tourism encompasses single objects and rural tourism complexes (i.e. an ethnic village), however, these projects are not covered in much detail.

The strategy for the development of small and medium sized enterprises. Although this strategy doesn’t mention rural development, the processing of agricultural products has been rated into one of the industry sectors with a significant strategic importance for Serbia due to the

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possibility to significantly stimulate economic development, increase the employment rate and the flow of foreign currencies into the country. Besides agricultural processing, it includes: industrial production, tourism and e-business. As the strategy states: „Agriculture has a special significance for the Republic of Serbia because it creates around 20% of the GDP. There are real possibilities for increasing the scope of agricultural product processing with the assumption that the necessary investments into quality and marketing are carried out“.

National employment strategy (2005–2010) was adopted in 2005 and in accordance to the goals of the Lisbon declaration, it is aimed at forming and efficient workplace market, capable of fulfilling the development needs of the country. Although the Strategy is compatible with the poverty reduction strategy which puts a strong highlight on rural areas, the National employment strategy doesn’t concern itself with the rural workforce nor the rural workplace market per se. The reduced employment and education capabilities, low mobility of the rural workforce, unfavorable educational structure and similar problems are not considered in depth within this document. Namely, the strategy states that it is necessary to develop a special set of measures for promoting enterprises in certain sectors which have been determined as most important from the economic development impact (i.e. agriculture and food production), but specific measures are not elaborated. Furthermore, employment measures concerning the rural population and the prevention of the migration of young people are not covered in detail. Only the following two measures within the national action plan cover this: encouraging agricultural development with the goal of creating employment possibilities (credits for agricultural improvement and measures for increasing the village capacities) and formation of conditions for self-employment in agriculture for refugees.

ANNEX IV

List of geographic vineyard areas of the Republic of Serbia

1. ТИМОЧКИ РЕЈОН

1.1.1. КЉУЧКО ВИНОГОРЈЕ1.1.2. БРЗОПАЛАНАЧКО ВИНОГОРЈЕ1.1.3. МИХАЈЛОВАЧКО ВИНОГОРЈЕ1.1.4. НЕГОТИНСКО ВИНОГОРЈЕ1.1.5. РАЈАЧКО ВИНОГОРЈЕ

1.2.1. БОРСКО ВИНОГОРЈЕ1.2.2. БОЉЕВАЧКО ВИНОГОРЈЕ1.2.3. ЗАЈЕЧАРСКО ВИНОГОРЈЕ1.2.4. ВРБИЧКО ВИНОГОРЈЕ 1.2.5. ЏЕРВИНСКО ВИНОГОРЈЕ

2. НИШАВСКО – ЈУЖНОМОРАВСКИ РЕЈОН

4. ШУМАДИЈСКО – ВЕЛИКОМОРАВСКИ РЕЈОН

4.1.1. БРАНИЧЕВСКО ВИНОГОРЈЕ4.1.2. ОРЕОВАЧКО ВИНОГОРЈЕ4.1.3. РЕСАВСКО ВИНОГОРЈЕ

4.2.1. ЛЕВАЧКО ВИНОГОРЈЕ4.2.2. ЈОВАЧКО ВИНОГОРЈЕ4.2.3. ПАРАЋИНСКО ВИНОГОРЈЕ4.2.4. ЈАГОДИНСКО ВИНОГОРЈЕ

4.3.1. ГРОЧАНСКО ВИНОГОРЈЕ4.3.2. СМЕДЕРЕВСКО ВИНОГОРЈЕ

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2.1.1. РАЖАЊСКО ВИНОГОРЈЕ2.1.2. СОКОБАЊСКО ВИНОГОРЈЕ2.1.3. ЖИТКОВАЧКО ВИНОГОРЈЕ

2.2.1. ПРОКУПАЧКО ВИНОГОРЈЕ2.2.2. ДОБРИЧКО ВИНОГОРЈЕ

2.3.1. МАТЕЈЕВАЧКО ВИНОГОРЈЕ2.3.2. СИЋЕВАЧКО ВИНОГОРЈЕ2.3.3. КУТИНСКО ВИНОГОРЈЕ

2.4.1. БЕЛОПАЛАНАЧКО ВИНОГОРЈЕ2.4.2. ПИРОТСКО ВИНОГОРЈЕ 2.4.3. БАБУШНИЧКО ВИНОГОРЈЕ

2.5.1. БАБИЧКО ВИНОГОРЈЕ2.5.2. ПУСТОРЕЧКО ВИНОГОРЈЕ2.5.3. ВИНАРАЧКО ВИНОГОРЈЕ2.5.4. ВЛАСОТИНАЧКО ВИНОГОРЈЕ

4.3.3. ДУБОНСКО ВИНОГОРЈЕ4.3.4. КРЊЕВАЧКО ВИНОГОРЈЕ

4.4.1. КОСМАЈСКО ВИНОГОРЈЕ4.4.2. ВЕНЧАЧКО ВИНОГОРЈЕ4.4.3. РАЧАНСКО ВИНОГОРЈЕ4.4.4. КРАГУЈЕВАЧКО ВИНОГОРЈЕ

5. ПОЦЕРСКИ РЕЈОН

5.1.1. ТАМНАВСКО ВИНОГОРЈЕ5.1.2. ПОДГОРСКО ВИНОГОРЈЕ

6. СРЕМСКИ РЕЈОН

6.1.1. ФРУШКОГОРСКО ВИНОГОРЈЕ

7. БАНАТСКИ РЕЈОН

7.1.1. ВРШАЧКО ВИНОГОРЈЕ7.1.2. БЕЛОЦРКВАНСКО ВИНОГОРЈЕ7.1.3. ВИНОГОРЈЕ ДЕЛИБЛАТСКЕ ПЕШЧАРЕ

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ANNEX V

Recommended planting density of fruit, grapevine and plantations of indigenous varieties of grape vines

1) јабуке на вегетативној подлози потребно је да број примљених садница буде од 1.600 до 4.500 садница по хектару;

2) јабуке на генеративној подлози потребно је да број примљених садница буде од 400 до 1.000 садница по хектару;

3) крушке на вегетативној подлози без посредника потребно је да број примљених садница буде од 1.250 до 4.500 садница по хектару;

4) крушке на вегетативној подлози са посредником потребно је да број примљених садница буде од 1.250 до 4.500 садница по хектару;

5) крушке на генеративној подлози потребно је да број примљених садница буде од 800 до 1.600 садница по хектару;

6) дуње потребно је да број примљених садница буде од 600 до 1.200 садница по хектару;

7) мушмуле потребно је да број примљених садница буде од 600 до 1.200 садница по хектару;

8) шљиве на вегетативној подлози потребно је да број примљених садница буде од 1.200 до 2.500 садница по хектару;

9) шљиве на генеративној подлози потребно је да број примљених садница буде од 400 до 1.200 садница по хектару;

10) брескве потребно је да број примљених садница буде од 800 до 1.600 садница по хектару;

11) нектарине потребно је да број примљених садница буде од 800 до 1.600 садница по хектару;

12) кајсије без посредника потребно је да број примљених садница буде од 400 до 800 садница по хектару;

13) кајсије са посредником потребно је да број примљених садница буде од 400 до 800 садница по хектару;

14) трешње на вегетативној подлози потребно је да број примљених садница буде од 800 до 2.500 садница по хектару;

15) трешње на генеративној подлози потребно је да број примљених садница буде од 400 до 1.000 садница по хектару;

16) вишње на вегетативној подлози потребно је да број примљених садница буде од 800 до 2.500 садница по хектару;

17) облачинске вишње потребно је да број примљених садница буде од 800 до 2.500 садница по хектару;

18) вишње на генеративној подлози потребно је да број примљених садница буде од 600 до 1.100 садница по хектару;

19) ораха на генеративној подлози потребно је да број примљених садница буде од 90 до 160 садница по хектару;

20) леске на генеративној подлози потребно је да број примљених садница буде од 400 до 1.250 садница по хектару;

21) изданачке леске на сопственој подлози потребно је да број примљених садница буде од 400 до 1.250 садница по хектару;

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22) бадема потребно је да број примљених садница буде од 800 до 1.600 садница по хектару;

23) осталих дрвенастих врста воћака потребно је да број примљених садница буде од 400 до 1.000 садница по хектару;

24) винове лозе потребно је да број примљених садница буде од 3.000 до 4.500 садница по хектару за стоне сорте, односно од 4.000 до 5.500 садница по хектару за винске сорте;

25) винове лозе са сортом Прокупац са традиционаланим начином гајења потребно је да број примљених садница буде од 7.000 до 10.000 садница,;

26) хмеља потребно је да број примљених садница буде од 5.000 до 7.000 садница;27) малине са ремонтантним сортама потребно је да густина садње буде од 6.500 до

8.000 садница по хектару; 28) малине са једнородним сортама потребно је да густина садње буде од 10.000 до

18.000 садница по хектару; 29) купине потребно је да густина садње буде од 2.000 до 3.500 садница по хектару; 30) рибизле потребно је да густина садње буде од 1.600 до 3.500 садница по хектару; 31) огрозда потребно је да густина садње буде од 1.600 до 3.500 садница по

хектару,; 32) боровнице потребно је да густина садње буде од 2.000 до 3.500 садница по

хектару; 33) бруснице потребно је да густина садње буде од 20.000 до 30.000 садница по

хектару; 34) осталих јагодастих врста воћака потребно је да густина садње буде од 1.600 до

3.500 садница по хектару.

Српске аутохтоне и регионалне сорте винове лозе: Прокупац, Вранац, Црна Тамјаника, Франковка, Португизер, Скадарка, Багрина, Смедеревка, Тамјаника, Креаца, Сланкаманка и Ружица.

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ANNEX VIСписак старих и уметничких заната као и домаће радиности дефинисаних правилником о старим и уметничким занатима и домаћој радиности (СГ 21/2005 и 1/2010), без припрема појединих производа од меса и млека и биљних производа на традиционалан начин.

Стари занати1 лончарски (грнчарски),

црепуљарски33 печење креча, ћумура и прављење катрана

2 коларски 34 израда фењера (ферала)3 казанџијски (котларски) 35 израда гребена за гребање вуне и кучине4 бачварски, пинтерски и

качарски36 израда гребена и брда за ткање

5 ручна израда сатова и часовника и делова за исте (сајџијски)

37 поправка, калаисање, емајлирање и цинковање посуда

6 терзијско-абаџијски 38 израда каљева за пећи и ватросталне опеке7 јорганџијски 39 израда и рестаурација народних музичких

инструмената на традиционалан начин (гусле, фруле, двојнице, гајде, окарине, виолине и сл.)

8 оштрачки (брусачки) 40 ваљање (ступање) сукна9 ковачко-поткивачки 41 ткање тепиха, платна, свиле и др.10 израда звона свих врста

(звоноливачки) и прапорака

42 производња свиле на традиционалан начин

11 опанчарски 43 израда четки, метли и других сличних производа (од длаке, сирка, прућа, џилица и сл.)

12 кожарски (табачки) 44 копање бунара13 кожухарски (ћурчијски) 45 израда млинских каменова и брусева14 ременарски-седларски

(ручни дуборез у кожи, пресовање у кожи и сл.)

46 препарирање и пуњење птица и животиња

15 дрводељски 47 пречишћавање перја16 кломпарски и израда

нанула48 ручно испирање злата на традиционалан

начин17 асурџијски 49 ручно плетење рибарских мрежа18 папуџијски 50 превоз фијакером (фијакериста)19 мутавџијски 51 бомбонџијски20 дрндарски (вуновлачарски) 52 медичарски21 ужарски 53 содаџијски22 каменорезачки 54 бозаџијски23 корпарско-плетарски и

израда предмета од лике, рогоза, комушине, рафије, сламе, трске, сите и сл.

55 цреварски

24 воскарско-лицидерски 56 млевење житарица преко воденица -

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поточара25 калдрмџијски 57 припрема хлеба под сачем и у црепуљи26 гајтанџијски 58 градња и/или реконструкција у техници

сухозида27 стаклодувачки 59 градња и/или реконструкција у техници

набоја, набијача28 бојаџијски 60 градња и/или реконструкција техником

бондрука29 сапунџијски 61 израда шиндре (за покривање кућа,

привредних зграда и цркава брвнара)30 сапунџијски 62 производња ћерпича и зидање ћерпичем31 власуљарски 63

32 ситарски и решетарски

Уметнички занати Домаћа радиност1 израда ћилима, таписерија и других

уметничких ткањаплетење

2 уметничка обрада дрвета, камена, стакла, глине, гипса и сличних материјала

ткање

3 уметничка обрада племенитих метала (кујунџијско-филигрански; златарско-јувелирски и сл.)

кукичање-хеклање и нецовање (израда чипке, столњака, украсних детаља, одевних предмета и сл.)

4 брушење драгог и полудрагог камена вез разних текстилних производа

5 ручна израда уметничких гравура и печата

премотавање и упредање (цвирновање) конца и вуне

6 калиграфија (калиграфско писање) израда сувенира7 уметничка израда предмета од кованог

гвожђа, бакра и других металаизрада народних ношњи

8 сликање на текстилу и текстилним влакнима

израда предмета са народним везом

9 уметнички вез израда производа дрвне домаће галантерије (вретена, преслице, оклагије, дрвена корита, калице и сл.)

10 уметничко штоповање ручна израда предмета од ситних отпадака од коже, текстила, клирита и сличних материјала

11 израда у дрвету уметничких предмета, интарзија и дубореза

12 израда и рестаурација стилског намештаја

13 рестаурација старих и раритетних књига, слика и сл.

14 уметничка обрада повеза: књига, албума и сл. (уметнички књиговезачки занат)

15 израда и рестаурација уметничких фотографија

170

16 конзервација, рестаурација и реконструкција покретних и непокретних културних добара

17 препарација и конзервирање папира, текстила, коже, дрвета, керамике, стакла, камена, метала, зидних и штафелајних слика

18 сликање на стаклу, керамици, дрвету, камену, јајима, тиквама и сличним предметима и материјалима

19 израда собних и других светиљки и сенила

20 ручна израда украсних и уметнички обликованих предмета од папира и картона

21 уметничка израда, односно дорада сакралних и других украсних и употребних предмета и иконописа, позлаћивањем – ручним обликовањем и наношењем златних листића (позлатарство)

22 уметничка израда накита од метала (осим племенитих), клирита, стакла, штраса и сличног материјала

23 уметничка израда витража24 модистеријски занат (уметничка-

претежно ручна израда шешира и других врста капа са пратећим детаљима и израда рукавица)

25 кројење и шивење сценског костима26 ручна израда уметнички обликованих

макета (брод, крст и сл.) у стакленим флашама и сличним амбалаџама и других уметнички обликованих сувенира

27 оружарски занат за израду копија нефункционалног оружја према постојећим музејским узорцима ватреног и хладног оружја, као и пратеће опреме за то "оружје"

ANNEX VII

Literature

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ekonomija“ UNDP, Beograd9. Ševarlić M., (2009): Anketa„ Stavovi direktora poljoprivrednih zadruga o članstvu i radu

zadružnih saveza u Srbiji“10. Montelatici G. (2007): „ Plan of actions for gender mainstreaming and minoritz inclusion in

rural development planning”11. Koen De Rijck & Erg Boris, (2006): „High Nature Value farming in the Western Balkans:

Final report of Workshop on High Nature Value farming in the Western Balkans 2-3 February 2006, Belgrade“.

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