Linking agriculture and tourism in Montenegro: Gap Analysis

FAO/EBRD Project “Montenegro: Promoting Sustainable Agrifood Value Chains through Linkages with Tourism”

Implemented with the Ministry of Agriculture and Rural Development (MARD), the Ministry of

Tourism and Sustainable Development (MTSD), In collaboration with Regional Development Agency for Bjelasica, Komovi and Prokletije

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Table of Contents Abbreviations ..........................................................................................................................3

Map of Montenegro ................................................................................................................5

Acknowledgement ..................................................................................................................6

Executive summary .................................................................................................................7

Introduction ............................................................................................................................9

Methodology ......................................................................................................................... 10

Background ........................................................................................................................... 11

Agriculture and Tourism - a rural perspective to achieve sustainable development ................ 13

Linking agriculture to tourism, what is foreseen? .................................................................. 14

Enabling environment and main players .................................................................................... 15

Ministry of Agriculture and Rural Development..................................................................... 15

Ministry of Tourism and Sustainable Development ............................................................... 17

Ministry of Economy ............................................................................................................... 18

Other institutions involved ..................................................................................................... 18

The current situation ............................................................................................................. 19

Rural tourism: an emerging sector ............................................................................................. 19

A lack of formalization ................................................................................................................ 20

Important assets for rural tourism with unmet potential .......................................................... 21

The mountain and the katuns ................................................................................................. 21

The little known Montenegrin gastronomy ............................................................................ 21

The key but discrete role of women ....................................................................................... 22

Local handicraft potential to be revitalized ............................................................................ 23

Promising market linkages and branding initiatives ................................................................... 24

Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis of linking agriculture and tourism ........................................................................................................................................ 26

Gaps in linking agriculture to tourism .................................................................................... 27

Producer’s capacities to connect to tourism markets ................................................................ 27

Constraints on the producers ................................................................................................. 27

Weak Capacity in Organization ............................................................................................... 30

Expectations and requirements from the tourism side .............................................................. 30

Montenegrin traditional food in HORECA .............................................................................. 30

The demand for Montenegrin gastronomy and agritourism ................................................. 32

Issues related to the enabling environment ............................................................................... 33

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Access to Finance .................................................................................................................... 33

Coordination with local authorities ........................................................................................ 34

Bridging the Gap .................................................................................................................... 38

Activating the tourism-related factors ....................................................................................... 38

Increasing producer’s connection to market .............................................................................. 39

Increasing coordination between regulations and levels of interventions ................................ 41

Proposed list of actions for a future roadmap ........................................................................ 42

Conclusions ........................................................................................................................... 47

References ............................................................................................................................ 49

Annex 1: List of Stakeholders Interviewed ............................................................................. 52

Annex 2: Procedure for registration as agricultural producer, and rural tourism household, and processor .............................................................................................................................. 57

Annex 3: Relevant Projects in Montenegro ............................................................................ 59

Annex 4: List of documents consulted .................................................................................... 60

Annex 5: Market linkages and branding initiatives ................................................................. 65

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Abbreviations BAS Business Advisory Services

B2B Business to business

B2C Business to consumer

CAP Common Agricultural Policy

COSME Competitiveness of Enterprises and Small and Medium-sized Enterprises

CTU Montenegrin Tourism Association

EBRD European Bank for Reconstruction and Development

EU European Union

FAO Food and Agriculture Organization of the United Nations

GAS2GO Gastronomy to Go

GI Geographical indication

GDP Gross domestic product

HACCP Hazard Analysis and Critical Control Points

HORECA Hotel, Restaurant and Catering

IDF Investment Development Fund

IFAD International Fund for Agricultural Development

IPARD Instrument for Pre-Accession Assistance in Rural Development

IT Information technology

MARD Ministry of Agriculture and Rural Development

MBA Montenegro Business Alliance

MEF Montenegrin Employees Foundation

MEK Ministry of Economy

MIDAS Montenegro Institutional Development and Agriculture Strengthening

MONSTAT Statistical Office of Montenegro

MTSD Ministry of Tourism and Sustainable Development

NGO Non-governmental organization

NPM National Parks of Montenegro

NTO National Tourism Organization

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SME Small and medium-sized enterprise

UNIDO United Nations Industrial Development Organization

UNDP United Nations Development Programme

VAT Value added tax

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Map of Montenegro

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Acknowledgement This gap analysis was carried out within the context of the FAO/EBRD project “Montenegro: Promoting Sustainable Agrifood Value Chains through Linkages with Tourism”, and was authored by Nina Coates, Agribusiness Project Officer at FAO Investment Centre, under supervision and with contributions of Emilie Vandecandelaere, Agricultural Economist, FAO Investment Centre, with contributions from Jelena Krivcevic, Director, Regional Development Agency for Bjelasica, Komovi, Proklitije and Aleksandra Martinovic, Professor, University of Donja Gorica. We extend our special thanks to Lisa Paglietti, Economist, FAO Investment Centre, Anka Kujovic, Ministry of Tourism and Sustainable Development, and both Milena Kotlica, Programming Advisor, and Enis Gjokaj, Head of IPARD Monitoring and Evaluation Directorate, Ministry of Agriculture and Rural Development, who found time to review earlier drafts of the review. Their constructive comments were very helpful during the finalization process. Finally, we are especially grateful to the many stakeholders in Montenegro from the Government, private sector, development partners, and civil society, who all willingly and openly shared their expertise, opinions, data and experience, without which this report would not have been possible.

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Executive summary With a combined contribution of over 30% to Montenegro’s Gross Domestic Product (GDP), the agriculture and tourism sectors are two strategic sectors for economy of Montenegro, having in mind that those two sectors are the income source for about 27% of the population. Linking the sectors is important for the development and preservation of rural areas through rural tourism, as well as enhancing the backward linkages to agriculture through local sourcing by hotel, restaurant and catering (HORECA) actors. Furthermore, stakeholders in agribusiness are increasingly demanding responsibly produced and sourced quality products, especially for the tourism sector. Having an untapped gastronomic culture and traditional food production that uses local resources in sustainable and practical ways, Montenegrin smallholders can exploit the high growth potential from linking the sectors through two avenues: rural hospitality activities and high-quality foods specific to Montenegro placed in hotels and restaurants. This report serves to identify the constraints in linking the sectors and build an action plan to better develop rural tourism and linkages of smallholders to tourism markets, as well as inform future activities. The current situation in linking agriculture (and especially smallholders) to tourism through HORECA and agritourism services, presents an important emerging sector with key assets (gastronomy, katun cultural heritage, a wide range of quality label and branding initiatives etc.) but some important weaknesses, in particular a lack of coordination among the initiatives from different stakeholders, and the fact that producers and rural households are acting mostly on informal markets. The key findings of the analysis have identified the main gaps in relation to the following categories:

Producers, especially smallholders capacities to link to market or provide agritourism services (supply-related):

o Some characteristics of the supply chain do not match HORECA requirements; o Different legal and administrative constraints on producers, besides their difficulty

to comply with technical and food safety regulations; and o Weak capacity in organization.

The tourism market expectations and requirements, in relation with both HORECA sector and the rural tourism (demand related):

o From the HORECA side, difficulty for large foreign hotels to change their current stable practices to link with fragmented and risky suppliers; and

o Existing tourism demand does not always match the offer in terms of seasonality and presentation.

The enabling environment for development: across all topics, the lack of coordinated measures hinder access to finance and the optimization of local support and rules.

In order to bridge these gaps, it is of importance to activate the factors of competitive advantage and ultimately use Montenegrin gastronomy as the vehicle to enhance the link between the sectors. The analysis has showed that most of the regulations and policies are in place, and the

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issues are mostly in ensuring their adequate implementation through increased synergies and building capacities. In this perspective, it is important to ensure a sound national framework for specific development (policy, strategy and regulations) and more importantly ensure their implementation by national and local territories, providing them with resources and margins for adaptation to the local situation. Recommendations to enhance the linkage revolve around (i) raising awareness in both the public and private sectors of existing gastronomy and food heritage to serve the development of a more complete tourism offer in the rural areas and on the coast. The sustainable valorization of cultural heritage assets like traditional cheese processing in the Katuns can efficiently serve both rural tourism and backward linkages; (ii) consider current HORECA supply practices and adapt the marketing strategy of traditional gastronomy to the specific type of HORECA actor (restaurant, boutique, intermediaries/wholesale distributor, rural hotel, major hotel); (iii) encourage and holistically promote origin-based voluntary quality schemes to improve food quality and safety; (iv) encourage innovation in associations to better absorb support measures and reach economies of scale, but only if based on capacities and similar vision; (v) increase processing, packaging and food safety compliance through investment and technology; (vi) increase the smallholders’ connection to market by formalization of activities and building capacity to view farming as a business i.e. a more entrepreneurial mindset; and (vii) more and better institutional coordination and engagement concerning national branding initiatives, extension services, flexibility measures, legislation, incentives and support measures. The limitations of this report are mainly due to the lack of official statistical data available. The conclusions given in this information product are considered appropriate at the time of its preparation. They may be modified in the light of further knowledge gained at subsequent stages of the project.

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Introduction After gaining independence in 2006, Montenegro is swiftly on track to join the European Union in only a few years, and the role of the agriculture and tourism sectors in spearheading this accession becomes increasingly important. Still, challenges are facing Montenegro to increase competitiveness, tip the balance of food imports by partially substituting domestic products, realize the potential of the rural areas by creating conditions for diversified livelihoods in the countryside, as well as develop more opportunities for profitable agribusiness. Significant regional differences have been exacerbated despite huge efforts by the government and donors to alleviate these inherited differences by building roads, providing electrical connectivity and access to water supply and sewage and other infrastructure. The declining agricultural sector is based in the northern region and the booming tourism sector on the coastal region, and with the demands of growth, the differences are unfortunately deepening.

Since 2018, the Food and Agriculture Organization of the United Nations (FAO) and the European Bank for Reconstruction and Development (EBRD) are implementing the project “Montenegro: Promoting sustainable agrifood value chains through linkages with tourism”. The specific objective of the project is to strengthen sustainable value chains by enhancing the linkages between agrifood production and the tourism industry in Montenegro in order to improve and diversify tourism offer linked to promotion of high quality food products. This gap analysis will serve to identify the constraints in linking the two sectors and build an action plan to bridge the priority gaps to better develop agritourism and linkages of smallholders to tourism markets, as well as inform future activities.

Building on the gap analysis methodology, the report is organized in the following parts: o a short presentation of methodology of the gap analysis; o the background to set the scene on the importance of linking agriculture and tourism in

Montenegro; o the description of the characteristics of the present situation which highlight the existing

modalities to link agriculture and tourism; o the definition of the future objectives; o the identification of the gaps that exist and need to be filled; and then o the proposal on the how to overcome them and the direction towards “bridging the gap”.

More specifically, the recommendations to bridge the gaps will serve as a basis for future discussion and activities aiming at increasing the mutual benefits to gain from agriculture and tourism linkages, in particular within the FAO-EBRD project and the definition of a roadmap for Montenegrin stakeholders to ensure synergies between the sectors.

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Methodology A gap analysis determines and documents what steps need to be taken to move from the present state to the desired future state by revealing areas that can be improved. For the case in point, the expected situation is provided by the goal of the project but more generally the objectives of the national stakeholders in better linking agriculture and agribusiness to tourism. A three-step approach was used to carry out this gap analysis. First, characteristic factors of the present situation were listed (referred to as "what is"). Second, a list of factors needed to achieve future objectives was made (referred to as "what should be"). Third, the gaps that exist and need to be filled were highlighted and subsequently analyzed. The data required for the analysis has been derived from multiple sources. To discover ‘What is’, several sources were tapped. These were: i) literature and documentation review (statistics, projects, proceedings…); ii) secondary data was complemented with information and data gathered during fieldwork, through extensive consultation (face-to-face and group discussions) with different stakeholders. To highlight ‘What should be’, the analysis includes i) objectives of the rural development strategy and tourism strategy; ii) data from the interviews with stakeholders and iii) feedback from stakeholders on the draft analysis feeding the final results. In practice and in relation to the timeframe, the study followed the below steps:

1. Review of studies, communications and reports of workshops and round table related to the topics. A complete list of the contemplated documents is presented in the references and table in Annex 4. The large amount of such documentation is remarkable, confirming the importance of the topic in Montenegro [April-June 2018];

2. Interviews with local stakeholders: see Annex 1 with the different types of stakeholders (key institutional actors involved in the agricultural and tourism sectors, notably representatives of Ministries of agriculture, tourism, Economy; producers, practitioners in agribusiness communities and private companies such as hotels representatives, intermediaries, experts as well as development partners and financial institutions – IFAD, UNIDO etc.);

3. Draft of the analysis in collaboration within FAO team and in interactions with Montenegrin experts [September-October 2018]; and

4. Incorporation of feedback from local partners [November-December 2018]. The sections of the report outlining the gaps highlight three areas: i) From the tourism market side, Hotel, Restaurant and Catering (HORECA expectations and

requirements (demand); ii) From the supply side: producer’s capacities to connect to market; and iii) Coordination within the enabling environment.

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Background With an area of 13,812km and a population of 620,029, Montenegro is one of the smallest countries in Europe. It is divided into three regions and twenty-three municipalities. The coastal region is the site of the booming tourism industry, the central region of plains and mountains, and the mountainous northern region dominated by agriculture and 70% being between 500 and 1500m altitude. One-third of the population lives in rural areas with the northern region being least urbanized with 60% living in rural areas.

The GDP has almost doubled since the country’s independence in 2006, from USD 2.72 billion to USD 4.77 billion in 20171, and tourism and agriculture are the two most important sectors in the Montenegrin economy. The basic macroeconomic indicators demonstrate the place and importance of agriculture in the economic structure of Montenegro. Agriculture contributes just over 8% to the GDP and employs almost 100,000 people, or 1/6th of the population. One of the structural characteristics of Montenegrin food production is the higher share of agriculture in gross domestic product than of the food-processing sector. This indicates low levels of finalization of agricultural products, a significant share of subsistence farming in the rural population, as well as the marketing of agricultural products through informal trade channels.

Tourism contributes just over 23% to the GDP, plays a large role in the foreign trade balance and is vital for employment creation and increased standards of living. In 2017, the total contribution of tourism to employment was 19.3% of total employment (36,500 jobs). This is expected to rise by 7.7% in 2018 to 39,000 jobs and rise by 1.3% per year to 45,000 jobs in 2028 (21.5% of total) In 2016, over 1.6 million tourists visited the country and generated almost EUR 760 million income, with 2018 expected to break EUR 1 billion. This growth however, is based mainly in the coastal region.2

While the official statistics tell one story, the presence of a “gray economy” acts both as cause and effect of stunted economic development and is perpetually present in most economic activities concerning smallholders. The informal economy came to the forefront in Montenegro during the nineties, as a result of transition processes such as the transformation from a planned economy model to the market economy, and transfer of social property into private property. The change of the structure of Montenegrin economy and a tendency of its transition to a service oriented economy, as well as migration from rural to urban environment, led to a drop in absorption capacity of the industrial sector, to a decrease in added value produced by the employee and reduced productivity, which are characteristics conducive to development of informal sector (MEF 2014). In the rural areas, this is most pronounced and anchored by social relations in the region. This informal economy also precludes individuals from commensurate social protection and achieving any economies of scale.

Poverty levels have significantly decreased, and the most recent figure puts poverty at 9% of the population. However, inequality has increased with the Gini coefficient rising from 24.3 in 2010

1 https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2017&locations=ME&start=2006 2 https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2018/montenegro2018.pdf

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to 31.9 in 2014.34While the 60% richest households have increased their level of consumption during the last 7 years, the poorest 40% have seen negative growth5. The correlation between GDP growth and poverty reduction suggests that a different, more regionally balanced approach is needed, especially between the coast and the north, as the “low-hanging fruits” of promoting foreign and domestic investment in the booming coastal areas are no longer ensuring inclusive growth. The northern region accounts for 53% of the country’s territory, 67% of the country’s arable land, over 70% of livestock holding, and enormous potential for rural tourism development. Despite all of this, the region only accounts for 18% of the Montenegrin GDP6. The northern region lags behind the rest of the country both economically and technologically, and unemployment and poverty are on the rise, coupled with constant demographic departure7. Many Montenegrin farmers are struggling to make a living in a difficult economic context of high agricultural market volatility and falling prices in key agricultural commodities. A way to stabilize or increase their income is to branch out into other non-agricultural activities such as agritourism and gastrotourism, as the market access to the coastal regions seems impenetrable to some smallholders. There is also an increasing trend to “decommodify” agricultural food products through adding value with quality protection schemes.

3 The Gini index measures the area between the Lorenz curve and a hypothetical line of absolute equality, expressed as a percentage of the maximum area under the line. Thus, a Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality. 4 https://data.worldbank.org/indicator/SI.POV.GINI?locations=ME 5 World Bank: Montenegro - Country Diagnostic Study, 2016. 6 MONSTAT Statistical Yearbook 2014. 7 MONSTAT Statistical Yearbook 2014.

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Agriculture and Tourism - a rural perspective to achieve sustainable

development The agriculture and tourism sectors offer a lot of opportunities for inclusive economic growth in Europe (Bowen et al., 1991) and economic opportunities should exist based on the promotion of linkages between tourism and agriculture, including rural tourism (Owen et al., 1993; Torres and Momsen, 2004; Torres, 2002). These opportunities will strengthen rural communities, and enhance more sustainable development in both the agriculture and tourism sectors.

Food has a particularly important role in the development of tourism services. It is also a sustainable development mechanism for villages since it often comprises 30% or more of tourist expenditure and this money is regularly spent directly with local businesses. Successful integration of food experiences into sustainable tourism development in rural and outlying areas has shown to ease poverty and improve rural livelihoods. This is particularly true for countries with large rural populations dependent on small-scale farming, in both developed and developing countries. (Ashley et al., 2001; OECD 2012).

Tourists are increasingly seeking local, authentic and novel experiences linked intrinsically to the places they visit. Both at a regional and a national level, foods can become unique elements of the brand image of places and help to create distinctiveness. National culinary traditions remain strong, but as food becomes more “globalized”, the authenticity of experiences is threatened (OECD 2012).

Traditionally, local cuisine is viewed as a supporting component to tourism, acting as a complement to the tourism attractions in a destination (Hall & Mitchell, 2000, 2002). In fact, the gastronomic experiences are extraordinarily complex and linked inextricably with the consumer experience in a tourist destination. Quan and Wang (2004) found that the consumption of food, as an essential part of the travel experience, could lead tourists to unique experiences to produce a feeling of real enjoyment and genuine satisfaction. Gastrotourism is no longer an emerging niche market; the ability to motivate and attract visitors is documented and as such has become a critical feature in many tourism strategies.8 Examples of this discovered in the literature are the various thematic routes in the coastal and central regions of Montenegro related to honey9, wine, cheese, olive oil and ham. Gastrotourism, if designed and developed properly, can narrate the story and cultural heritage of the people. Montenegrin producers additionally benefit from diverse quality schemes for food and agricultural products that add value through characteristics such as the geographical indications (GI) that can strengthen the gastrotourism offer.

Strengthening the linkages between tourism and agriculture in Montenegro is one of the most significant income diversification strategies that promotes sustainable management of natural resources and viable economic development of rural areas. There is unrealized potential and numerous prospects for economic, cultural and natural resources to provide a basis for sustainable tourism throughout Montenegro. In particular, its rich natural and cultural heritage can create great potential for the development of tourism in rural areas, and develop linkages to tourism in the coastal region. Sustainably valorizing these assets can contribute to economic

8 https://go.montenegro.travel/en/montenegrin-cuisine 9 http://www.skkbuducnost.me/honey/en/

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opportunities for inhabitants, reduction in unemployment, the revival of villages and rural life, and a more balanced regional development. Moreover, sustainable tourism development linked with traditional gastronomy creates the conditions to meet the demand of a growing number of tourists/consumers who find utility and satisfaction in nature, healthy lifestyles, a break from urban life and the daily “rat race”, traditional home-style cuisine and hospitality from rural households as well as preserved cultural heritage, customs and traditions.

Linking the two sectors is a “hot topic” in Montenegro at present with many past and current roundtables, initiatives and projects focusing on this relationship, yet concrete impacts are elusive (see Annex 3). Seeking to understand why, a gap analysis was necessary to identify the key constraints in efficiently linking the two sectors and facilitate discussions to build a shared action plan.

Linking agriculture to tourism, what is foreseen? The desired state of sustainable value chain development through linking agriculture with tourism can be reached through two pathways:

1. Developing Montenegrin gastronomy that would reflect on increased commercialization

of local quality food to the HORECA sectors, in all regions.

2. Developing agritourism, which not only represents an opportunity for family farmers to

diversify their activities and income but also a direct link or channel to tourism value chains

(homemade cuisine, local farmers markets, direct selling, etc.). This is particularly

important for rural development in the northern region.

These two pathways could contribute to:

Increased numbers of tourists in the northern region;

Increased proportion of Montenegrin and typical food in the restaurants and hotels;

Increased number of farmers and food producers connected to HORECA markets;

Improved income for rural communities, by selling their products directly or through local

gastronomy (restaurants, hotel) and thanks to diversified activities;

Increased number of youth and women formally involved in related activities (youth and

women entrepreneurship); and

Clear identification of rural tourism and Montenegrin gastronomy as important assets for

the tourism sector.

The gaps analyzed in this study represent the issues to be addressed in achieving these objectives

starting from the existing situation, which is described in a following section.

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Enabling environment and main players Three ministries are in charge of agricultural, tourism and economy: the Ministry of Agriculture and Rural Development (MARD), the Ministry of Tourism and Sustainable Development (MTSD), and the Ministry of Economy (MEK). There are also some parastatal or non-governmental organizations (NGOs) that deal with either tourism or agriculture and linking the two.

Ministry of Agriculture and Rural Development

MARD is tasked with the competence of proposing and implementing agricultural policy, and specifically the responsibility of the Agrobudget support measures including direct payments and investments measures to farmers. In the MARD vision for Montenegrin agriculture and rural areas by 2020, produce safe food of high quality and develop rural areas and preserve rural communities are among important priorities.10 11

The Law on agriculture and rural development clearly outlines these desires by offering the following measures:

development of rural infrastructure, revitalization and development of rural communities;

support to supplemental activities in agriculture;

support to establishing and development of small enterprises in order to encourage entrepreneurship in rural areas;

support to development of tourism in rural areas; and support to preservation and protection of cultural heritage.12

Important support measures for rural development and agritourism

Source Amounts

National Agrobudget 2018 EUR 39.9 million 13

23 of 56 measures related to rural development (EUR 23.5 million)

Market price support (EUR 6.6 million)

Direct payments (EUR 6 million)

Measures for Food Safety Program and improvements in food controls and analyses (EUR 350,000)

EU IPARD 2014-2020 EUR 53 million14 First Public call for Investments in physical assets in agricultural holdings – 389 applications; First Public call for Investments in physical assets concerning on processing and marketing of agricultural and fishery products, 45 applications (15 wine, 14 meat, 8 fruit and vegetable, 7 dairy, 1 fishery)15

10 Government of Montenegro, National Strategy on Agriculture and Rural Development. 11 Government of Montenegro, Regional Development Strategy 2014-2020. 12 Law on agriculture and rural development (Official Gazette No. 56/09 and No 34/14). 13 http://www.minpolj.gov.me/organizacija/agrobudzet 14 http://www.minpolj.gov.me/ministarstvo 15https://www.total-montenegro-news.com/politics/1799-ipard-montenegro-new-development-step-in-agriculture.

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A wide range of official quality schemes to label products and promote gastronomy As a result of the small country size and the related size of its agricultural sector and in view of the EU accession, quality differentiation is the key to being competitive. In particular, by providing and promoting origin-linked products that benefit from Montenegro’s specific natural resources. Quality labels are an efficient way to signal to consumers and tourist about the product’s quality characteristics and can act as a tool to highlight products from the Montenegrin gastronomy. The Montenegrin laws provide for a number of voluntary standards as follows:

Organic production In December 2013, the Law on Organic Production came into force. This Law regulates the issues related to the general objectives and principles of organic production, production rules, on-farm production, labelling, control systems, inspection and penalty provisions. Despite the relevance of this certification in Montenegro, this label is not frequently used. According to the national certification body Monteorganica, the total number of organic registered producers is 172, of which 26 have received a certificate. This limited number of registered and certified organic producers can be interpreted that many producers are not yet convinced or aware of the market benefits, as most producers are already using relatively minor amounts of pesticides and some agroecological methods.

Geographical indications A geographical indication (GI) is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin. GI is an intellectual property right, that aims at protecting both producer and consumers against usurpation and misleading practices and is protected by Montenegrin law. In a previous project, “Upgrade of Meat Quality Standards in Montenegro and Exchange of Lessons Learned in the Western Balkans”, FAO and the EBRD have worked with MARD to support the country’s meat sector by improving safety compliance and developing quality labels to increase competitiveness. Since the successful registration of meat GIs supported by the project, Montenegro has made significant advances over the past two years in the area of producer organization, product protection product positioning, and quality improvement. The following chart is a summary of GI activities in the country, with 5 of the 7 products hailing from the northern region.

GI PROTECTED Type of protection No of producers in association

Area

1. Njeguški pršut PGI meat product 30 Central Montenegro- Njeguši

2. Pljevaljski sir PDO cheese 70 Pljevlja Municipality

3. Crnogorska Stelja PDO meat product 60 North of Montenegro

4. Crnogorska govedja prsuta PDO meat product 60 North of Montenegro

5. Crnogorski pršut PGI meat product 20 Cetinje municipality

GI CANDIDATES

1. Kolasinski sir PDO cheese 100 Kolašin municipality

2 Durmitorski skorup PDO dairy 20 Durmitor mountain

Higher quality, Mountain Product, From the Farm

While GI registration requires a producers association, the "Higher quality", "Mountain product" and "From the farm" can be applied to one manufacturer or a business entity. Particularly well adapted for smallholders, the simpler procedure for individual registration is an additional incentive to certify and label products that highlight the quality and specificity of the products and areas in which they produce, and become more competitive on the domestic market.

These quality schemes represent important opportunities especially for mountain farmers, being less exigent in terms of requirements than GI or organic labels. Particularly the mountain labels can complement tourist attractions, however raising awareness and building capacities of producers would be needed as mentioned by MARD.

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The Ministry is also able to support the establishment of collection and purchase centers, as well as provide support for investments in rural tourism through MIDAS II project, funded by the Government of Montenegro and the World Bank.

Through the national Agrobudget, funds are provided (EUR 350,000) for the implementation of the Measures for Food Safety Program and improvements in food controls and analyses at each stage of the supply chain16. The MIDAS II grants program, working in parallel with the IPARD measures, will provide support for small and large agro-processors to enable investments targeted at increasing compliance with EU requirements, mostly in respect to the area of food safety.

Following the successful completion of the IPARD accreditation process, Montenegro now has two additional EU measures to implement: Investments in physical assets in agricultural holdings17 and Investments in physical assets concerning processing and marketing of agricultural and fishery products18.

Of the support in place for smallholders, the Agrobudget is the least demanding, followed by MIDAS II, then IPARD being the most demanding in terms of preconditions.

Ministry of Tourism and Sustainable Development The Ministry of Sustainable Development and Tourism, in accordance with the guidelines defined by the Tourism Development Strategy until 2020, seeks to create preconditions and innovations for the sustainable development of rural areas in the northern region of Montenegro.

Only in recent years have the links between agriculture, tourism and rural development been given relevance. Earlier strategies on developing Montenegro’s tourism sector have focused on the infrastructure investments, and the development and marketing of the popular sun and sea coastal regions. The Montenegro Tourism Development Strategy to 2020 has placed emphasis on sustainable model of tourism, looking at the northern region to relieve pressure from the coast or winter hiking and skiing. However, different tourist profiles increasingly demand an authentic rural experience closely tied to the people and their livelihoods-- including traditional food production.

The MTSD sees the potential for the development and trend towards a more comprehensive tourist offer in rural areas. The Panoramic Routes project seeks to promote aspects of historical significance and culture, including gastronomy. The Ministry will work with the local municipalities to involve rural actors positioned around the routes, especially cheese, meat, honey and wine producers. “The Circuit around Korita” is the first fully completed and signposted route (65km). The other proposed routes are Durmitor, Montenegro Crown (2000km) and a coastal route.

16 For example, through targeted measures for small holders, the Food Safety Directorate is incentivizing dairy producers to comply with a subsidy of 0.6 cents per liter of milk, and this includes inspection of HACCP approved facilities even through derogation measures, quarterly microbiological analysis and ingredient declaration/ nutritional labelling of products. 17 These investments can range from EUR 10,000 to EUR 500,000 in aquaculture, bee-keeping, dairy, fruit and vegetable and livestock subsectors. Support will amount to 60% of the investment, with additional incentives in place for young farmers (65%) and agricultural holdings in mountainous areas (70%). 18 Support for investments in processing capacities can range from EUR 40,000 to EUR 150,000 in aquaculture, dairy, fruit and vegetable, meat, olive and wine subsectors. Non-refundable support for 50% will apply to construction, upgrade or reconstruction of facilities for processing, as well as the purchase of new equipment.

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In addition, the MTSD is crafting the Strategy for the Development of Rural Tourism until 2023, due in late 2018. The strategy will define the vision of the country in terms of rural tourism, the goals, products and measures enabling the development of rural tourism. It is meant to be an operational document including an action plan over the course of five years including implementation, capacity building and monitoring. Prepared in cooperation with the MARD, the tourism industry, municipalities and all relevant civil society stakeholders, the strategy will have a tourism perspective, and it is well-timed and highly complementary to the project “Roadmap” to link agriculture and tourism, which will be from the perspective of agriculture.

The National Tourism Organization The National Tourism Organization (NTO) is the government agency responsible for the promotion of Montenegro’s tourism sector through avenues such as the “Wild Beauty” branding strategy. NTO is promoting Montenegro as destination to variety of international fairs, but those fairs are almost never fairs for adventure tourism or gastronomy, and this type of promotion focuses mostly on coastal areas. The NTO has a five year plan in place that promotes 2-3 day stays in the northern region and also organizes familiarization trips for journalists and tour operators from abroad, and usually these trips include coastal destinations and the more developed ‘touristy’ northern zones such as Durmitor and Kolasin.

Ministry of Economy In the context of linking agriculture to tourism, Ministry of Economy (MEK) holds the responsibility for fiscal registration, supporting cluster development, increasing competitiveness, encouraging entrepreneurship and promoting the consumption of domestic products. They offer business support through the Enterprise Europe Network and the EU programme for Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME) to support entrepreneurship and the business environment, as well as financial incentives. They also work with the Chamber of Economy, in making efforts to promote national products (see the “Buy Domestic” campaign).

Other institutions involved

Chamber of Economy Chamber of Economy is the publicly funded advocate for creating a favorable business environment. It promotes the interests of twelve sectors, including agriculture, tourism and SME development. Besides the “Buy Domestic” and “Homemade Flavors” campaigns, the GAS2GO project (closed 2017) marketed smartly packaged local gastronomic products to hotels and restaurants in the coastal region. The Chamber is proactive in organizing roundtables and dialogues between the sectors. To conclude on the enabling environment, it is worth noting that both the MTSD and the MARD are enthusiastically supportive of interventions to enhance sustainable rural development, including initiatives to promote cultural and culinary heritage nationwide. Strong coordination between the two ministries is paramount because of the overlap that occurs when promoting typical gastronomy and place-based traditional agricultural products through tourism.

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The Regional Development Agency for Bjelasica, Komovi and Prokletije19 The mission of RDA BKP is to promote the development of Bjelasica, Komovi and Prokletije area and the municipalities within the region. This is achieved through close cooperation with local stakeholders in public and private sectors, increased absorption of EU funds, and creation of employment and income generating opportunities through the development of tourism and agriculture sectors, in alignment with national and local strategic development plans. Co-operation has been established since 2004 with the regional municipalities and a broad range of private sector operators, notably in tourism and agriculture. The focus of the partnership has been that RDA continues to support municipal capacity development, national parks, relevant forms of tourism such as mountain, cultural and rural, along with helping local agricultural producers bring their produce to market using local branding.

The current situation The present situation in terms of tourism sees that the main tourist flows are directed towards the coastal towns and the most substantial part of the turnover is realized in the summer season, and tends to overlook the four-season activities that the northern region can contribute to the overall tourism offer. In 2014, the total number of tourists who visited the northern region represented 3.7% in tourist visits and 1.2% in overnight stays20 of total number of tourists who visited Montenegro (1.6 million). In 2017, the total number of tourist visits to the northern region increased to 5.6 %, while overnights increased to 2.8 % of the total number of nights. The Ministry of Agriculture and Rural Development (MARD) attributes some of the unrealized potential and insufficient demand in the northern region to an incomplete tourist offer and inadequate infrastructure (MARD 2015). This data shows that the participation in northern region tourism in the total turnover is very low, but steadily increasing.

Rural tourism: an emerging sector The issue of rural tourism is very recent as a specific topic and no national monitoring and statistics

are available, only estimation or localized data. This is accentuated by the mostly informal rural

tourism services provided by families and women in the countryside and mountains.

The preparation of the national strategy on rural tourism will certainly bring more data about the

existing and potential development of rural tourism, to complete the partial information collected

through this study. In any case, for a future action plan, a proper statistical system for rural tourism

across sectors and institutions is an important recommendation to consider.

According to information from tour operators offering rural tourism, there is a growing trend of interest in rural tourism and more and more actors are willing to support the development of related activities or ways to promote it, such as the panoramic roads to bring tourists from the

19 http://www.bjelasica-komovi.me/en/ 20 “Arrivals and overnight stays of tourists by municipalities, total 2017.” https://www.monstat.org/eng/page.php?id=1457&pageid=44

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coast to visit rural areas.

Rural household surveys indicate that half of household guests come by referral from other guests, showing that this sort of promotion is quite significant. The guests are a mix between adventure tourists, who want a rural experience, be close to the mountains and enjoy the local culture, and families and older people who want to be reconnected with rural areas, to eat local food and participate in rural activities. Tourism agencies that bring guests to north are scarce, but the ones that do have made a big difference in increasing the incomes of rural families. It is interesting that many agencies working in rural areas are foreign-owned Montenegrin agencies – Meanderbug owned by an American, Travel Point owned by German businessmen, and Montenegro Eco Adventures, owned by a Dutch-Australian couple. The local agencies are RAMS and Montenegro Adventures. All of them use their own channels of promotion, and their target groups are adventure and family travelers.

A lack of formalization As tourists visiting rural areas are not reliably monitored (there is no specific registry in many of the places they visit or they stay), it is difficult to precisely determine agritourism trends (who, how much and where). It can be observed that for as many rural families that are officially registered with the MTSD as providing services to tourists, there are just as many (and likely more) who work illegally (unregistered). Tour operators collaborate with a majority of registered households (some 30 families), but there is also a similar number of collaborations who are still not registered and carry a risk of being fined. Many informal activities take place in the katuns, which are temporary settlements used in summer by the farmers and their families in the high mountain altitude. Diversification in the katuns is a legislatively ambiguous area concerning land use and regulatory compliance in practice vs theory, but nonetheless represent a great potential for adding to the tourism offer in the coming period. 21 This lack of formalization has an effect on the promotion and marketing of a diverse rural tourism offer. Technically, a rural family cannot promote or market their tourism services and local gastronomy if not fully compliant with all of the registration and food safety laws. It cannot be promoted by local or national tourism organizations, or by any internet source, and are therefore excluded from the tourist offer. However, even the registered families do not get sufficient attention where promotion is concerned. Only one local tourism board (from Bijelo Polje) promotes one household on their website, while the others do nothing in this regard and this causes significant frustration among registered families. The reasons why they are not registered are various, mostly related to the fact that this is quite a new sector and the pathway is still not very clear – sometimes local governments are not clear with procedures and it takes a long time to get registered, sometimes the fees for registration are high, new laws on tourism and food safety also introduced certain changes and sometimes rural households simply do not see the benefits of registration.

21 Meeting notes upon request.

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Important assets for rural tourism with unmet potential EU integration will present new challenges for rural society and the mountain regions, but at the same time, it will provide many opportunities to keep the region alive and preserve its rural heritage. Montenegro has a wealth of (still) uncontaminated natural resources and a rich cultural heritage that call for being promoted while preserved.

The mountain and the katuns The transhumance in Montenegro is a dying tradition, but compared to developed countries, it is still practiced to higher extent, and there is still a significant number of smallholders moving with their cattle to the katuns. There are around 500 katuns in Montenegro and many of them are still used, but at a much lower scale (smaller number of households) than previous generations. 22 The katuns have several values and functions for society including high diversity in landscape, biodiversity, agriculture, and in areas of high natural value farmlands. They are an agricultural resource because cheese and other food products from katun are of high quality and produced in an old, traditional manner. The katuns are a resource for sustainable tourism owing to the beauty of the landscapes of katuns, specific and authentic architecture, cultural heritage and link to gastronomy.23 According to a local travel agent marketing katun experiences, only three katuns generated almost EUR 7 500 in revenue and 319 overnight stays in 2018, with the average rating of 4.97/5.0, which shows the unexploited potential. Not only will the sustainable valorization of the katuns improve the livelihoods of the farmers, but travelers to the katuns can bring additional economic benefits to the neighboring villages, towns and tourism draws in these areas as they stay, eat and enjoy activities in the area.24

The little known Montenegrin gastronomy25 Montenegrin cuisine reflects the regions, the country’s geography, history and culture. The pure water, clean air, traditional farming systems and pristine landscapes of the northern region contribute just as much to the flavor of the food as the years of traditional know how passed from previous generations. There are already 28 traditional food products/dishes identified as “national treasures” in the FAO developed Inventory of Traditional Montenegrin Products with GI potential, some of which have successfully registered as GI26. However, there is low awareness and recognition of this asset by the local stakeholders themselves.

22 “Valorising the Montenegrin Katuns through sustainable development of agriculture and tourism”, Markovic 2016 23 “ibid. 24 Brit Boone, Meanderbug, November 2018. 25 Based on a series of discussions and documents provided by RDA. 26 See in particular the GIs Crnogorska Goveđa pršuta (Montenegrin dried beef meat) and Crnogorska Stelja (Montenegrin dried

and smoked sheep meat) registered with the FAO-EBRD project Montenegro: Upgrading Meat Quality Standards

Photo 1 : Lamb in Milk; credit: Jovan Nikolic

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Hospitality sector and their offering Many HORECA actors in rural areas still do not include local dishes, traditional homestyle cuisine, but instead offer a variety of mostly international dishes. The local dishes sometimes found in menus are usually kacamak, cicvara, and priganice—excluding many other traditional specialties. While some restaurants do have traditional Montenegrin foods such as pepper-based ajvar, smoked meat, and dairy products such as kajmak and cheese, they are usually imported from neighboring countries and not produced locally in the northern region. Based on a survey, HORECA actors on the coast sourced less than 15% of processed agricultural products (meat, fruit and vegetable, dairy) from the northern region. 27

Eating in a restaurant in northern Montenegro is a completely different experience from eating at a rural tourism household. This indicates that the offered cuisine does not correspond to traditional cuisine of the area, and that tourism offer of the region is not diversified enough to include gastronomy.

Local gastronomy an asset for specific tourism product of mountainous areas. Gastronomy is one of the elements incorporated in a new concept of cultural heritage and cultural tourism, driven by growing trends of a well-being lifestyle, authenticity, environmental protection and the need to have a high-quality experience. Tourists increasingly want foods that emphasize the heritage and culture of a place, which in turn assist the preservation of traditional forms of agriculture and cultural heritage. Dairy production is a traditional and economically important activity in the northern region, and cheese a key product of mountainous Montenegro as practically every rural family produces cheese at home. This traditional product and others are not yet marketed in the local gastronomy offer because many of them do not comply with food safety regulations. Support to local gastronomy will serve two purposes-- it will enable traditional producers to offer traditional recipes with local products while complying with food safety standards.

The key but discrete role of women Women are driving forces of gastronomy and rural tourism provision, and the guardians of culinary tradition. The true contribution of women is not accurately measured, and the statistics tell a hard truth. Women make up one-third of total agricultural labor force in Montenegro, yet only 4% of women are formally employed in agriculture. Women have limited access to physical, capital and natural assets such as land, finance, houses, and cars. Women own their houses only in 15% of cases, they own cars only in 9% of cases, and agricultural land only in 3%. Most of the housework is the obligation of women, as well as raising children. Moreover, only 40% of women

27 “CEED Consulting, Assessment of Commercial Linkages between Northern Montenegro and Coastal Hotels, June 2008

Photo 2 : Continental menu at Hotel Berane; credit: authors

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have access to the household budget, 35% have limited access, and 26% no access and most of them do not own a bank account. Young women are leaving rural areas and consequently villages are dying out28. Montenegrin women comprised just 9.6% of business owners in 2014-2015, the lowest in the Balkan region. Gastronomy and rural tourism represent a way to employ and economically empower women by initially selling products directly in the household and diversifying their income, and there are many possibilities to scale up.

Local handicraft potential to be revitalized Also not food, local made handicraft is an important component of a “territorial basket of goods and services for tourism” and can be directly made from local agriculture products and farmers work. Handicrafts can fill a significant gap in the souvenir sector in Montenegro as souvenirs are of low quality and not locally produced. However, there are not many initiatives targeting this sector at all. In Petnjica municipality, local ćilim (hand woven carpets) have been protected as cultural heritage, but they are still working on the traditional modality, i.e. having local women of younger generation learn how to weave from older generation. One interesting on-going initiative is social enterprise Znuggle that produces handcrafted soft toys entirely handmade and from natural products. Znuggle is managed by a Dutch woman, who worked with the Regional Development Agency (RDA) to mobilize and support local, rural women to collect local wool, dye it with natural color, and then woven into toys or typical animals from northern region. More information can be found on www.znuggle.me. It is noted that there many people who make beautiful handicrafts of all kinds, but do need of assistance with appropriate designs for the tourism market, because they usually make products not tailored to what guests would find useful and attractive. In the coming period, the MARD will have a new call within the Montenegro Institutional Development and Agricultural Strengthening (MIDAS II) program on the diversification measure targeting such as handicrafts, so this might stir this sector forward, however the problem with poor design remains.

28 Data from the RDA. Note well that this data, like most data, is nearly impossible to get from statistical sources and only can be gathered in the field, (2018).

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Promising market linkages and branding initiatives One important demand-related factor influencing the linkage between agriculture/food and tourism, is consumer awareness, local brand or quality recognition and the promotion of regional foods (Jansen et al 2015; Momsen 1986; Telfer 2002). There are several initiatives in place to improve the competitiveness of agricultural products in Montenegro and increase marketability, with the capability to enhance the linkage between agriculture and tourism, in particular building on the official quality schemes under MARD (see the enabling environment section). These initiatives can be useful in encouraging short value chains and keeping value upstream with the producers through differentiation, building consumer trust and the quality implied through certifications and voluntary labelling. In addition, several private branding and organized networks also promote traditional and domestic production to tourists and nationals alike. Of these, only Buy Domestic is nationally owned as it is a joint initiative through the Chamber of Economy and Ministry of Economy. In late 2018, a new project has been launched by the Montenegro Business Alliance29 on "Domestic products as an incentive for the development of a tourism economy at the local level" with support of MARD. The objective is to link domestic products to the local and national tourism markets, through the holding of eight round tables in 10 municipalities in the north of Montenegro (Pljevlja, Bijelo Polje, Rožaje, Plav, Gusinje, Berane, Andrijevica, Mojkovac, Kolašin, Žabljak). You can find below short description of these initiatives and networks and more details in Annex 5.

Slow Food Network

The Slow Food30 Network with their internationally recognized red snail logo is present in the northern region with a convivium of about 30 members with varied production (honey, medicinal herbs, dairy, meat, flours, fruits and vegetables). Regulatory compliance is n ot a prerequisite for membership and the products are mostly sold at roadside stands and at local/national/regional fairs.

Good from Montenegro: Buy Domestic31 and Homemade Flavors

The Kupujmo domaće “Buy Domestic” and Domaći ukusi “Homemade Flavors” campaigns are organized by the Chamber of Economy with support from the Ministry of Economy, with the aim of linking domestic producers to supermarkets/retail chains and HORECA, especially in view of improving the trade balance. This is particularly adapted to larger Montenegrin players and brands that can offset imports.

29 http://www.visit-mba.me/ 30 Slow Food is an international NGO that envisions “a world in which all people can access and enjoy food that is good for them, good for those who grow it and good for the planet. The approach is based on a concept of food that is defined by three interconnected principles: good, clean and fair.” 31 http://www.privrednakomora.me/en/good-montenegro

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Try Domestic

Probaj Domaće (“Try Domestic”) is a formally registered cluster at MEK, which is based in Podgorica with members throughout Montenegro. The cluster was formed 10 years ago and currently has about 20 members, with some of th e more successful members of the Slow Food convivium on the roster.

Delicious Montenegro32

Delicious Montenegro is an interesting branding initiative and B2C platform that seeks to link producers t o consumers interested in local foods. Originally formed with the support of UNIDO/UNDP, it is now based at the University Donja Gorica, with funding received from Horizon 2020 and through activities at fairs.

iDEA Tastes of my region33

Supermarket chain IDEA Montenegro launched a new line of local products "Ukusi kraja moga" (Tastes of my region) prepared in cooperation with domestic producers according to traditional, Montenegrin recipes. The campaign aims to support traditional production and further strengthen the domestic economy. The product line includes 54 high quality, healthy products that are prepared from carefully selected ingredients, without artificial colors and aromas, that can be found at all IDEA stores throughout Montenegro.

Emerging IT platforms and websites

Besides the branding and web platforms Probaj Domaće and Delicious Montenegro mentioned above, a new platform is gaining momentum in linking producers to the market, as well as technical advice. A young entrepreneur has developed the “Seljak” IT platform in 2018 with 20,000 members at the time of writing. Seljak 34 is the first Montenegrin digital village that provides a simple market entry for all agricultural entities, either in the category of buying or selling business to business (B2B) and business to consumers (B2C), as well as links to technical assistance and services. Pilot episodes of Seljak.tv agricultural program are being prepared to help and promote farmers and their products, pay attention to their problems and popularize the villages for the return of young people to the world of agriculture. There was also the promising yet unsuccessful initiative by the Montenegrin Tourism Association (CTU) to link HORECA to farmers through a proposed B2B site. It was never launched, but the CTU realized the need early on to link producers to hotels with online purchasing and real time stock levels through mobile phones.

32 http://deliciousmontenegro.me/ 33 https://www.idea.co.me/Ukusi-kraja-moga 34 https://seljak.me/

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Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis of

linking agriculture and tourism Before going into the definition of the desired state in linking agriculture and tourism what are the pathways, the analysis of all information collected has been summarized into a global Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis of linking agriculture and tourism and is presented below.

Strengths Rich and diverse landscape with preserved natural

environment (lakes, mountains, protected areas),

Diversity in culture, customs and tradition,

Natural resources for the production of niche food products

Large number of traditional houses and architecture as tourism assets exist (but not renovated)

Traditional agricultural systems, pastoralism (katun) linked to high quality food production

Traditional food and recipes

Demand for quality products exists - high number of foreign tourists as buyers

Acknowledgement of traditional skills and products

Characteristics of human resources and typical hospitality in culture

Weaknesses High rates of informality: farmers and rural households

are not officially registered

High share of areas with natural constraints while poor rural infrastructure (rural roads, water supply, electrification, sewage, telephone, internet, waste disposal, etc.)

Lack of alternative income opportunities

Low level of rehabilitation of existing rural tourism assets

Lack of awareness from consumers and tourists (local and neighboring countries i.e. Serbia, international)

No market linkages, lack of business skills and training for rural households and producers

Accessing available funds

Limited dissemination of information in rules, regulations and legal framework relevant for farmers Farmers are quite passive in learning about rules and regulations

Opportunities • Increased government's awareness of disparities

between rural and urban areas and among regions • Growing demand for well-established tourist

destinations, including rural tourism destinations, and “Slow Food Travel”-like experiences

• Increased interest for production and sale of traditional and typical products of high quality,

• Creation of new entrepreneurs, family businesses and additional jobs in rural areas

• Good economic relation and exchange with neighboring-region markets

• Untapped resources of gastronomy and rural tourism in katuns and rural households

• Coordination between existing hiking paths, katun roads and panoramic roads

• Infrastructure under construction (cross-country highway)

• Availability of national and donor funding • Global trends showing that tourists are more and more

interested in rural, cultural experiences and active vacation

Threats Rural depopulation and ageing trends in predominantly

rural areas (out-migration of young, women and economically active population)

High unemployment rates

Increasing disparity between northern region and the rest of country

Concentration of coastal tourism, promotion and investment

Uncontrolled destruction of agricultural land and deforestation

Hydro plants being constructed on almost all rural rivers, which cause huge ecological problems and changes the landscape of rural communities

Relentless proliferation of gray economy

Very little enforcement of existing laws

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Gaps in linking agriculture to tourism Mostly due to the current unintegrated approach by different institutions to link the agricultural and tourism sector, the main gaps have been identified in relation with the following categories:

1. Producers, especially smallholders capacities to link to market or provide agritourism services (supply-related);

2. The tourism market expectations and requirements, in relation with both HORECA sector and the rural tourism (demand related); and

3. The enabling environment for development.

Producer’s capacities to connect to tourism markets

Constraints on the producers In the literature, studies show numerous supply or production-related factors that may constrain the development of tourism and agriculture linkages. These factors include issues such as the nature of local farming systems: the quality, quantity, reliability, seasonality, and the higher costs and prices of local production. Indeed, according to interviews, most often producers don’t meet the requirements expected by tourism markets, identified by the Montenegrin Tourist Association (CTU), the industry association for HORECA:

The producers must be officially registered with MARD as a producer at the minimum, or processor, which infers that the food safety is guaranteed (HACCP certified)

The transport of perishable products (cheeses, fruits, vegetables, meat) must be in refrigerated vehicles. Most wholesalers pick up the products from the farmgate with their own refrigerated trucks while the producer uses a private vehicle (not refrigerated) for the transport.

The food products must be properly packaged and this practice is not generally followed

There must be a reliable availability of adequate quantities of the product at any moment, especially in high season.

The physical barrier in Montenegro cannot be ignored: the distance to deliver from the mountainous north to the coastal region, the less than ideal connectivity of rural roads and highways, and the fact that roads are often impassable during the winter months in some parts of the north clearly impact negatively on the frequency of delivery and the price of products at destinations. Then, investment is clearly needed for appropriate packaging and presentation of the products, and to equip adequately for the production, processing and transport (i.e. cold chain infrastructure like cold storage and refrigerated transport of perishable products required by HACCP35).

35 Vehicle purchase is excluded from the support measures, therefore the producers would have to buy refrigerated trucks with

their own funds or through associations, or an enterprising individual/group could fill this void with a leasing or rental service.

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However the study has found that the absence or inadequate legal status is the primary category of gaps that has been first formulated and emphasized by all stakeholders, i.e. registration and legal basis, technical and hygiene compliance, fiscal compliance. This relates directly with the informal “gray” economy that comes from recent history and is linked to the consequent mindset.

The informal market Even though there are no official statistics on the informal economy in Montenegro and on its percentage share in GDP, some surveys show that this percentage ranges from 26 to 31 %, depending on which definition of “gray economy” was used in the different surveys (MEF 2014). The informal market is indeed well-anchored with a large volume of non-registered producers and processors, and promotion of green markets and roadside sales. Producers (agricultural holding, entrepreneur or rural households) have little incentive to formalize and realize their entrepreneurial capacities, and are involved in a path dependence which is sometimes reinforced by non-locally owned, project-based initiatives that do not address the situation. Producers have the perception that legal compliance is burdensome and/or imposing excessive costs, and that the additional benefits that compliance may provide are not necessary, “business-as-usual” is sufficient.

Food safety compliance With the newly introduced regulations in the food safety sector as part of the EU accession process, farmers lack the knowledge and complete information, as well as their own financial resources to upgrade and comply. In view of protecting the large number of small scale producers, specific sets of regulations/derogations and flexibility guidelines have been developed, along with standards of quality.36 These regulations are of utmost importance for the farmers to adopt, as a precondition for their products to be accepted in the formal market. Many unregistered smallholders are unaware of their existence and what are the precise registration requirements, including frequency of analysis and declaration/labelling of the product.

Registration The official registration of the economic activity (farmer, food business operator, rural household) and the registration of the facilities are the first step to sell on the market, and this is linked to food safety compliance and decision of legal basis. The legal required actions for registration of agricultural holding and processing can be found in Annex 2. The lack of registration is common for most of the smallholders who still operate in the informal market. For example, out of 48,000 farming households, only 7,000 are registered, and less than 100 officially involved in tourism. At the last agricultural census, only 46 were registered as business entities37. Not being registered makes households ineligible to access support from the Agrobudget and IPARD (see section on access to finance), limits market access of their traditional products and the provision of services to tourists. Moreover, it weakens the position of the country as a whole in the face of EU accession.

36 See for example, the flexibility guidelines for agricultural processing on the holding in the meat sector developed under a previous FAO/EBRD cooperation. 37 MONSTAT, Census of Agriculture 2010.

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Legal basis A main issue around the registration of the activity and facilities relates to the legal basis of the “natural person” which makes it difficult for smallholders to process and sell their products on the market (see details in the box below) and also leaves the registration process up to the interpretation of the particular public authority—which is not ideal. Statistical information was challenging to gather, but it is estimated38 that 90-95% of smallholders registered as agricultural producers have the legal basis as “natural person”. It can be said that this overwhelming number of producers still prefer to be registered as “natural person” for two reasons: (i) partly because farmers think that the green and informal markets still provide a sufficient market outlet and (ii) partly because farming is not viewed as a business due to mindset and/or administrative and financial burden to appropriately register.

Land titling As a precondition for registration, the inadequate land registry must be addressed. The current system for managing land lacks information and statistical data, monitoring systems and adequate coordination, human and technical capacity. This becomes a significant limitation given that a large share of agricultural land is owned by the state and is problematic concerning the land title/collateral requirements for registration and finance. A large proportion of the katuns are on state land and cannot meet the land title requirements to register for rural tourism activities, or are they eligible for IPARD support. Of more than 70 katun households in the Bjelasica, Komovi and Prokletije, only 3 are registered for rural tourism activities, as they are on private land. Land is usually inherited and a low level of legal knowledge results in a skeptical attitude of landlords, so rentals are not registered either.

Fiscal Requirements Montenegro has a value-added tax (VAT) burden of 21%, but primary agricultural products are most often eligible for a lower tax rate of 7%. The lower VAT rate for primary agricultural products has been in force for some time, having positive economic effects on producers and consumers and the overall competitiveness of Montenegrin agricultural products. According to the law39, if the turnover is less than EUR 18,000 in the last 12 months, an entrepreneur (which also includes a smallholder) is not obliged to register as a VAT payer—but the smallholder cannot exercise the right to deduct the input VAT, making them less competitive. As an advantage the farmer does

38 Interviews, MARD, RDA November 2018. 39 A farmer who performs an agricultural activity, and if the taxable turnover exceeds the limit of EUR 18,000 for the last 12 months or shorter period, is obliged to register for VAT regardless of the type of organization he has opted for, as a company or as an entrepreneur, or a natural person. If in the business the turnover is less than EUR 18,000 in the last 12 months, he is not obliged to register as a VAT payer. See https://montenegro.eregulations.org/menu/17?l=en

Box: The “natural person” status Registration of facilities in which production, processing and distribution activities are performed is carried out based on the request of the food business operator, which can be a legal person or an entrepreneur, without indicating that natural persons could participate. This affects the activities subject to the registration including: wholesale sale, retail sale of food to the end consumer (retail shops, pharmacies and other specialized stores, catering facilities and markets), wholesale B2B and distribution centers; as well as facilities for the production and / or processing and / or packaging of small quantities of primary products of animal and / or non-animal origin on family farms- mainly affecting smallholders.

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not have the obligation of bookkeeping in accordance with the VAT Act, but some large retail chains or HORECA actors do not want to do business with individuals who are not in the VAT system, having an impact on smallholder linkages to HORECA. Being VAT compliant is perceived as an additional cost, most of the time unaffordable to them (the VAT register machine alone costs 250EUR).

Weak Capacity in Organization The low level of organization of smallholders is partly due to negative experiences and historical context with socialist cooperatives and long-standing mistrust of others. The absence of promoting accessible and context appropriate forms of collective organization has a direct negative effect on the level of competitiveness and market positioning. Formal associations (producers’ organizations in EU terminology) are highly encouraged by the government, as a group can benefit most from a higher share and scale of IPARD measures because of the pre-financing that most individuals cannot bear. There is an existing Union of Farmers, but because it is not representative of all smallholders, it weakens its position of power and influence. The number of formal associations is slowly increasing and the organization of producers is improving due to the enabling environment, however interviews with some stakeholders created doubts that this approach will work in the Montenegrin context. Although there are lines in the Agrobudget and IPARD for support to organize, and eligibility for some support measures require “associations” or “cooperatives”, the incentive is not sufficiently strong in the minds of many smallholders…the benefits of joining together are not clear or tangible. Based on research and interviews, formal classification as a “cluster” had little effect on the strength of organization, economies of scale or bargaining power and only served as a vehicle for individuals with some agricultural activity and a thin common thread to receive Ministry of Economy support.

Expectations and requirements from the tourism side A survey conducted among restaurants in the coastal region of Montenegro40 indicates an interest in traditional local products and a demand for traditional cheeses, meats and dishes. They all usually indicate two well-known local food items on the menu to satisfy some demand, usually with only Njeguški pršut and cheese. In practice, the reality is a far more complex. The analysis of all interviews and meetings results revealed two sets of constraints linked to the demand side: the HORECA current practices and the tourists’ expectations.

Montenegrin traditional food in HORECA Drawing from the literature review, one main demand-related factor influencing the linkage is the nature of tourism development and different types of ventures. This is especially relevant on the coast of Montenegro and the foreign brands throughout the country such as Hilton, Ramada and Sheraton. Foreign-owned or managed enterprises tend to depend heavily on imports and therefore develop weak links to local producers. In linking HORECA to retailers or processors, most of the commodities being processed are imported. One major supermarket indicated that 76% of

40 CEED consulting, Consumer perception 2016

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horticultural products are imported, and that figure is indicative of a high volume of agricultural imports used for processing by companies. Oftentimes most hotel chains have their own internal procurement policies to ensure food safety and consistency across their brands. This is also amplified with the larger sizes and higher star ratings of these establishments, all leading to a preference for a steady supply of imports than locally-grown products. This conclusion has also been confirmed through interviews with representatives of foreign-owned hotels and extrapolating from a survey conducted by a parallel FAO/EBRD project on the fruit and vegetable sector41. From another side, the surveys conducted from hotels in the northern region indicate that many types of HORECA actors in Montenegro, offer room to develop link with local and traditional quality products. The case of the Franca Company is interesting as the company adopted an integrated approach: they have their own production and use their satellite farms, both supplying to Franca hotels (4 in total) with traditional domestic products. Another example is the Dvor Hotel in Bijelo Polje where the manager has been supporting one of the traditional producers providing financial support (pre-harvest finance). This is a win-win situation, since the producer gained the opportunity to improve his production process, while the hotel has a constant supply of high quality and safe products (cheese and kajmak). There are a number of barriers preventing changes in HORECA current supply practice. According to various surveys42, and discussions with hotels, the main barriers are:

- The difficulty to change from reliable practices to new, riskier and complex ones. HORECA have already established supply channels, often through retailers, and changing a global supply arrangement (covering all types of food products) for a higher number of different contractual arrangements with producers is obviously not attractive.

- The lack of flexibility of hotels/restaurants concerning internal procurement rules or centralized procurement. The convenience of contracts with larger retailers is undeniable, especially for big hotels, even if this means providing mostly imported food. For example, the Hilton purchases daily from one of the main retailers (Voli), with a list of products and prices sent in the morning, order before close of business and delivery the next day. Customer service is guaranteed, with substandard products returned and credited the following order.

- The lack of intermediaries who can connect to local producers: most small distributors are fragmented, or concentrated in larger players such as Mesopromet/Franca, Goranovic or Voli. Some B2B/B2C systems, clusters and IT platforms (Seljak, Try Domestic, Delicious Montenegro) are emerging but they are still not well-known or they do not target wholesale buyers.

- Domestic products are not attractive as prices are often too expensive (imports are much cheaper) compared to imported food (ex. cheese 12-15% higher in MNE than trading partner Serbia according to price indices.

- Lastly, there is a lack of awareness of the gastronomic potentialities of Montenegro products and in particular the way to prepare or present them.

41 FAO/EBRD Survey of retailers in Montenegro, 2018. 42 CEED Consulting, Assessment of Commercial Linkages between Northern Montenegro and Coastal Hotels 2006.

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The demand for Montenegrin gastronomy and agritourism In general, the interviews converge in the identification of the following gaps regarding tourist expectations as a whole. Generally, tourists are not well targeted when it comes to local and traditional gastronomy, usually due to the seasonality of the main demand (short tourism season on the coast), and the high volume unsynchronized with agricultural production cycles. The customer preferences and types of tourist that determine the preference of consuming local or imported food are not considered. For example, according to the food and beverage manager of the Hilton, the tourists prefer to buy local food in the actual place of production and experience the food and the territory. It is also observed that an organized offer does not exist between different yet converging tourism offers i.e. rural, agritourism, and mountain. Lastly, family travelers are not sufficiently targeted, as they positively impact the length of stay and consumption in the rural regions. Standards developed for the tourism, especially in relation with the coastal development, are not suited for agritourism, especially in relation to rural household tourist accommodations Compliance with the 2018 law on tourism is particularly challenging for households, as they must now adapt their structures to also permit the safe and sanitary preparation of food for up to 50 people. Montenegrin gastronomy needs to be better defined and promoted. Generally, food eaten locally in households, is not the same as food in the restaurants. Gastronomy is not prominently featured in the assortment of promoted tourism offers and there is a fragmented or complete lack of information and visibility of local food heritage. The tourism offer could be expanded with an additional feature such as cooking classes that can be arranged in rural households. For tourists, packaging and presentation of a products is equally important as the quality of the food product. In Montenegro there is a lack of packaging standards and presentation of a “nice memory from Montenegro”. Many products are packaged in large glass containers, or plastic containers that are not well sealed, not having in mind the fact that tourists will need to pack liquids in checked bags and will not buy anything that adds considerable weight or threat of leakage and damage to their belongings.

Photo 3 : Njeguski cheese and prsut; credit: Jovan Nikolic

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Overall, more professionalism is needed in hospitality standards to cater to international guests (not luxury, but minimum things to change like warm, authentic and welcoming aesthetic touches), and to eliminate the language barriers.

Issues related to the enabling environment

Access to Finance As previously described, finance is available from both the national and EU level, but availability and access are two different dimensions. In Montenegro, there is a very low absorption rate especially concerning smaller producers in the northern region, and the incentives to foster investment and eventually narrow the gap in living standards between the northern and central /coastal regions are quite limited. Reliable and disaggregated statistics on disbursement were difficult to obtain and the Agrobudget support absorption statistics were unable to be collected. Through a series of interviews with stakeholders, however, it was ascertained that 200 producers applied for IPARD like funds in 2017 and only 30-40 of the proposals were implemented. The reasons for this are varied—but the most common one was because of non-adherence to initial proposal or lack of pre-financing. Pre-financing for both the Agrobudget and IPARD is a constraint for many households that cannot financially justify an investment without a reimbursement guarantee, and for many it is a simple absence of liquidity. Credit for pre-financing is theoretically available, but in practice, it is difficult to obtain. Many smallholders are ineligible for IPARD measures and legal persons (i.e. companies) and larger companies are typical of the applicant pool. With the exception of GI processors, very little value-added is realized by smallholder agricultural production and traditional food producers through IPARD. There is a measure being prepared through MIDAS II for natural persons and entrepreneurs that will include diversification and support for handicrafts (mentioned previously), rural tourism and processing, and these additional calls should have an impact on smallholders. Regarding women’s access to finance, traditional gender roles discourage women from starting businesses or registering their activities and many women are expected to stay home and care for the household and family. Even though current laws provide for equal role

Box: Absorption of Agrobudget funds The Diversification measure has been introduced in Montenegro Agrobudget in 2013, and each year since 2013 there was a call for proposals for farmers to apply. According to information obtained from the families in the field, it was only in 2017 that most of the allocated funds was disbursed, otherwise each year there was a significant under disbursement. For example, in 2013, first year of this call, only one application has been approved, and in the next year only 4 applications. The Ministry maximum support to be provided could be EUR 5,000 per agricultural holdings, with a 50% own contribution from the applicant. Moreover, the applicant needs to invest the whole amount upfront. Only after the approval to the smallest detail, the applicant receives 50% reimbursement from the Ministry. This has been an enormous obstacle as it is unaffordable for most farmers who usually do not have this much savings in cash to invest. Many agricultural holdings did not apply, and some approved applications have been withdrawn. It is important to note that in 2017 diversification measure also included small investments to upgrade a few Katuns, though there is no data available on absorption.

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of women in society, certain mindsets often prevent women from achieving their maximum potential in many areas, especially economically. Household assets are usually owned by male members of the household partly due to the traditional gender roles, and consequently female entrepreneurs have less flexibility in offering collateral to obtain credit. It is noted that the attitudes of the younger generation are changing for the better concerning female entrepreneurship-- which also challenges the delicate balance to sustain cultural heritage and rural tradition. Many young women (and men) are leaving farm life behind for less demanding opportunities. Besides support measures such as the national Agrobudget or IPARD, other opportunities are available for financial support in Montenegro. This includes credit and warranty support offered by the Investment Development Fund43and commercial banks, though the lending through commercial banks is characterized by high interest rates and unfavorable conditions for farmers, thus limiting access. IDF can directly finance up to 50% of the total investment, and the working capital share of the loan can be up to 20% of the total loan amount. Collateral is a precondition, and like the registration and support requirements, so is title or permission to the land as security when approving loans. This is quite difficult to obtain for many households. In many cases, the value of agricultural land has depreciated due to the underdevelopment of the agricultural land market. Exceptions to this rule are the coastal region and any other particularly well-located urban land-parcels that can be utilized for housing construction (MARD 2015b).

Coordination with local authorities Municipalities play a crucial role in the development and management of rural tourism, as they are tasked with the implementation national agriculture policies and national regulations on tourism. For example, municipalities are in charge of registering rural household and classify them according to level of quality. Even though this regulation and guidelines are in place, its implementation is a challenge. It is noted that there is no coordination nor harmonization between the rules decided and applied between different municipalities, creating some huge discrepancies among household owners, from one place to the next. Complex procedures are in place that require a multitude of documentation to start an activity. Moreover, incompleteness of some regulations create unclear differences between legal bases (natural person, entrepreneur and company), and certain types of instruments of taxes and fees, which increases the initial costs

43 Law on Investment Development Fund, Official Gazette of Montenegro, No 88/09. The Investment Development Fund of Montenegro was founded by the adoption of the Law on Investment and Development Fund of Montenegro and amongst other things, provides support for the small and medium-sized enterprises (credit and warranty support). Credit is available for micro, small and medium size enterprises and entrepreneurs, in all forms of organization in accordance with the Companies Law, as well as persons who work in the manner defined by the rules of the activity they are engaged (artisans, natural person agricultural producers, etc.).

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for the rural households. This has lead in many cases to having to hire experts for interpretation and application of those regulations44. Issues relate also to inspections. Inspections in food safety and rural tourism are under separate administrations, without liaison with relevant Ministry in charge of the regulations, which makes it difficult to follow-up on policies. The inspections are not standardized, and one municipality differs highly from another, leading to accusations of subjectivity and frustration and the end-consumer ultimately at risk. When regulations have changed substantially in a relatively short period of time i.e. the new law on tourism, on-farm processing and flexibility, etc., the inspection should have a much more educational rather than punitive role, to ensure that rural population is first well informed on rules and their obligations as well as the sanctions for non-compliance. Registration and Legal Basis – a summary

Registration as Agricultural holding

Registration as Processor

Registration as Rural Tourism provider (farmstay)

Recognized by Agrobudget

Recognized by IPARD

Recognized by VAT

Natural Person (majority of small holders)

X x In theory yes, but some municipalities do not recognize this.

x x Exempt under 18k annual turnover, cannot deduct input VAT

Entrepreneur x x x x x x

Company x x x x x x

Producers Organization

x x x

Cooperative (registered as company)

x x x

Source: Authors’ elaboration

Both the MARD and MTSD also reiterated the concern of registration and the need to harmonize and better communicate definitions and standards to minimize the coordination and communication gap between national and local actors.

44 For instance, a “natural person” trying to register as rural tourism provider is often not recognized at municipal level nor in the

VAT system (valid for “natural person” agricultural producer as well), and therefore cannot sell to wholesale or to HORECA without excessive burden.

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Finally, more synergies could be developed in areas bordering and within national parks. National Parks of Montenegro (NPM) are responsible for the protection and management of the five national parks covering ten percent of Montenegrin territory. NPM emphasizes the cultural significance of the parks, the need for conservation and sustainable development that preserves and protects nature and the physical environment. The National Parks represent an important segment in the overall tourist offer of Montenegro. More than 326,000 visitors were recorded last year, but the actual number is much higher because the entrances are not well monitored. NPM considers the lands foremost as a natural heritage to protect, and underestimate the potential to consider it a tourism asset and as support for rural livelihoods. The administration has limited human resources creating difficulties to manage access to parks and the inability to enforce laws against unregulated garbage dumping, illegal bird hunting, deforestation etc. Moreover, the parks are centrally managed collectively from Podgorica, which logically makes them less aware of what happens on the ground, and unable to interact with local people. As a concrete consequence, they market the same products at their various points of sale in all of Montenegro while tourists expect to find traditional products from the place they visit.

Photo 4 : Bijelasica; credit: Jovan Nikolic

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Box: illustration of the interconnected legal issues: the katun situation To put these gaps in practical terms and to demonstrate the effect of a sectoral, uncoordinated approach, we can look at the jeopardization of the katun. Ingrained as a part cultural heritage, katuns are temporary, farmer’s settlements in the higher altitudes of the mountains where herders move their livestock to graze in the summer. The transhumance tradition of herders moving high into the mountains is a long one, and the nomadic way of life has throughout history developed a special culture and customs unique only to the katuns. Many katuns are on state property in national parks or through informal land tenure throughout generations, so it is very difficult to meet the preconditions for support because of the land titling. Most employment and economic activities including agritourism, milk production, traditional cheese production etc. in the katun squarely fall in the gray economy. In fact, with the exception of one project financed initiative, the Katun roads, the many constraints have left them unincorporated into the rural tourist offer or unable to market the high quality milks and cheeses to HORECA. Continuing our example, the high quality milk for traditional cheese production such as Lisnati Sir produced in Kolašin comes predominantly from the summer tradition in the katuns. These producers (mostly women) in katuns are ineligible under law for accommodation and preparation of food without major investments due to the authentic rustic nature (no plumbing, no electric, etc.) of the structure and resulting lack of hygiene compliance in production, processing and storage. The MTSD has introduced the categorization of the katuns into the new Law on Tourism and Hospitality, but it is incomplete because does not address- the special nature of the katun and groups them together with eco-villages and rural households. A variety of regulations and serious coordination with National Parks Department, MARD, and the food safety directorate needs to be developed to reflect this. In Austria, producers of typical meat products in a protected nature zone met a similar fate, but they were able to organize and overcome it. The Nockfleisch Association is thriving even 20 years after accession. Nestled within the Biosphere natural preserve and with EU hygiene requirements as the impetus, eight meat farmers in Nockberge joined forces thirteen years ago and began to process their products together to place them on the market under the common brand “Nockfleisch”. Today with fourteen members and the additional cooperation of eleven livestock farms, the association has become one of the most important meat producers in Carinthia. The other side of the lesson learned from the Austrian experience, traditional canton cheese production in a similar mountain and cultural heritage context (katuns) was destroyed because the smallholders could not collectively join and overcome the obstacles to hygiene and EU harmonization and replaced by factories. Not supporting these structures could hasten the end of this tradition in Montenegro, as the age structure and demographics are also not favoring continuation. Young people need a reason to continue, they need support and investment - otherwise this centuries old tradition faces extinction.

Photo 5 : Katun in Sinjajevia; credit: Jovan Nikolic

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Bridging the Gap Looking at the factors between the existing situation and the foreseen situation towards linking agriculture and tourism, we have recognized a number of options to be discussed with public and private stakeholders to “bridge the gap” and promote the Montenegrin food heritage to bring benefits to producers and their rural communities. These options are built around the three categories previously described, the tourism expectations side, the suppliers’ capacities, and the enabling environment.

Activating the tourism-related factors As we saw, the gap factors from the tourism side are twofold, relating to the existing HORECA practices that are difficult to change and to the existing tourist demand. Regarding the HORECA stakeholders, the first element starts with a lack of general knowledge about the existing food heritage and not realizing the significant potential benefits from linking with local traditional producers and developing a local gastronomy offer. This is true for not only the foreign owned hotel/restaurants but also from local HORECA actors located in the countryside. From this point of view, it is of foremost importance to 1) identify the traditional food and recipes, 2) raise awareness on their potentialities, and 3) build capacity of chefs to prepare these specialties and integrate them into their offer. These are some of the key objectives of the FAO-EBRD project pilot and further activities could be organized to scaling up in collaborations with the National Chefs’ Association. Other actions will aim at increasing the awareness and values on Montenegrin food, for example by disseminating the national inventory of GI potential products. Second, even if HORECA actors are interested in sourcing local foods, they are reluctant to change their current practices, i.e. to source all their food through larger retailers, because these provide not only guarantees on quality and consistency but also facilitate the procurement arrangements (one intermediary instead of a multiplicity of small suppliers). Here, the strategy must be adapted to the type of HORECA actor. Montenegrin retailers could play a major role as an intermediary between HORECA and local producers to promote traditional food in hotel and restaurants, especially for big and foreign-owned hotels that would face too many difficulties on their own in procuring big volumes of traditional foods from a multiplicity of networks. A discussion could also be developed with retailers to develop a specific segment of Montenegrin products. Concerning hotels in the rural areas, direct linkages with producers and associations could be facilitated. In both cases, the development of (a national) IT platform(s) could represent a useful tool to be supported. In any case, actions should aim at raising awareness and building trust between HORECA, retailers, and registered producers and their associations (e.g. dissemination of information to improve image of certified quality and capacities of smallholders; branding of Montenegrin food with certification). In addition, developing specific IT platforms linking local registered producers to HORECA (and tourists).

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From the point of view of the tourists’ characteristics and expectations, the previously identified gaps can be addressed this way: - To address the problem of seasonality between the supply and the tourism, which is linked to

the low variety of products while tourism is essentially present in summer, the actions should be focused on producers’ capacities to invest in their production to diversify fresh and processed products (see enabling environment pillar), while for the tourism side, by promoting mountain and rural tourism all over the year.

- Regarding the prices of local products which are often higher than imported, it is important to differentiate these non-specific Montenegrin products from traditional Montenegrin products that can be found elsewhere, including neighboring countries. The strategy is therefore to differentiate products based on origin which can justify a higher price and a willingness to pay more by tourists.

- To address the lack of knowledge (consequently interest) about Montenegrin gastronomy, a certain demand needs to be created and/or strengthened through promotion and visibility of traditional food, here quality labeling and branding strategies have a strong role to play. GIs are particularly powerful tools to increase the reputation of products: (i) Njeguški pršut, Stelja and Govedja are on menus at some hotels and national restaurants; and (ii) an inventory of traditional products with GI potential already is in existence, and can be used to begin targeted promotion of traditional gastronomy. The government can also raise awareness about traditional Montenegrin products and specialties through the visibility of serving them in public events and through government procurement. However, the brands/labels must continue to be targeted for the promotion of smallholders and/or smallholder organizations, or signaling to consumers the higher quality of smallholder production. A caveat is that too many labels can cause confusion for the consumer and dilute the value of the product. Therefore, it is better to concentrate primary on public schemes and on what is really making a difference in matching the objectives of the producers to market their products to consumer demand.

- As for agritourism, it is important to target the activities in relation with the type of tourists; e.g. the five-star hotel type of tourist may look for a travel package to the countryside with high quality transport and wine degustation etc., while hikers and adventurous tourist types may enjoy accommodations in a katun with no electricity. Consequently, specific types of related labeling and standard for the tourist activities could be developed (see enabling environment).

In general, and liaising with producers ‘connection to market (see below) to facilitate demand and offer matching, IT platform/ mobile device “app” could be developed to link directly tourists to local offers while traveling in countryside.

Increasing producer’s connection to market The gap review clearly highlights a mix of factors (legal, administrative, cultural) as the main barrier for producers to link to the HORECA market, or any other formal market and hindering entrepreneurship. This can be address by a series of combined actions:

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- Regarding compliance to food safety, the legal framework is already in place to provide flexibility measures of smallholders and for traditional practices.45 Further work that should be done is disseminating the relevant information (e.g. booklet that could be disseminated by extension services who work with smallholders on agritourism and market linkages), develop the necessary guidelines and build capacity (inspectors, producers).

- Regarding the legal basis and VAT issues, this review has shown the different issues that would need to be discussed between public authorities and producers’ representatives to identify the best options for smallholders wishing to become entrepreneurs and related improvements in the regulations. A cross-ministerial working group(s) consultation would be important to tackle one issue through the different angles.

- Regarding quality presentation and packaging, this refers to the topic of investment and better access to existing funds (enabling environment). Actions on dissemination of quality labels would be relevant in helping producers to better differentiate and promote their products, and get a better price through a better market access. National quality schemes are a valuable tool to promote entrepreneurship and rural development, preserve tradition and improve food safety (see again the topic of existing GIs).

- Regarding the topic of volume and consistency, this can be achieved through producers’ organizations. Various options can be considered such as associations, clusters, or linking to one intermediary who can develop (IT) platform. The actions should facilitate sharing information and exchanges between the business partners e.g. facilitation of fairs) and capacity building for producers organizations. Trust could possibly be a barrier to the development of efficient associations, it is good to disseminate existing best practices from existing and successful groups of producers.

- Lastly, it is important to support evolving strategies depending the level of maturity and size of producers and producers associations. Smallholders on their own should focus on linking to nearby rural restaurants and hotels and creating regional networks. Proximity with small hotels/restaurants can help facilitate trust over time, while frequent arrangements can be made depending on the availability of quality products. In the process, they will also strengthen their capacity and overall production in terms of both quality and quantity, and build their entrepreneurial skills. This would overcome the limitation of quantity at first, as the quantity demanded is far less than the coastal region. Marketing constraints to supply bigger and farther places could be overcome through private sector led aggregation models, through the establishment or strengthening of producers associations and organizations and eventual regional network. Eventually learning from this approach, but still facing not constant volumes, they should link to small boutiques or hotel shops in bigger cities, capital or on the coasts, where there is not the need for a consistent supply all over, but rather the focus is on typicality to provide a memorable experience from Montenegro. An important aspect to highlight is the importance for producers to focus either on supplying HORECA or to use or sell their products on the farms, in order not to jeopardize one channel or the other.

45 Decree on conditions for deviation in terms of the construction, arrangement and equipping of facilities with a small volume of production, processing and processing of food ("Official Gazette of Montenegro", No. 21/2016) and Decree on the requirements of hygiene for buildings and premises in small quantities produces small quantities of primary products for human consumption. ("Official Gazette of Montenegro, No. 6/2018) - with amendments.

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Increasing coordination between regulations and levels of interventions From the policies and regulation point of view, most (if not all) is in place in terms of economic activities, food safety and quality, and tourism (strategy of rural tourism and amended law on tourism in 2019). Learning from the gap analysis, coordination is a topic that can be improved in terms of the implementation. MARD extension services carry out excellent work in the field in supporting rural development – while the MTSD does not benefit from decentralized services in the field, and municipalities cannot refer to national criteria. There is scope to organize resources in a way to create synergies among the sectors and levels of inter-ministerial interventions. In particular, the Ministry of Tourism should emphasize support measures and rural tourism extension services, in close coordination with the Rural Development and Food Safety Directorates of MARD. The implementation coordination support could include the emergence and growth of cottage industries as part of microenterprise development. The upcoming tourism strategy could promote the Katuns as major elements of a system of sustainable natural resource management and climate change adaptation and as ‘custodians of biodiversity and cultural preservation’, in coordination with the Ministry of Culture’s policies of cultural preservation and promotion as well as with the National Parks. The latter could take responsibilities for sustainable rural tourism and rural development, in collaboration with local communities. More concretely, the following activities could be considered: - Establish national criteria to register/classify rural tourism activities as reference for

municipalities and related capacity building, development of multidisciplinary group for tourism extension services;

- Adapt standards of tourism for rural/agritourism (new law) in particular for the katun situation- a specific policy for katun, integrating agriculture, tourism, culture and environmental policies – link to specific support and studies (example: EBRD advisory for small business service (ASB) funded study for architecture and renewable energy);

- Promote women entrepreneurship and stem rural exodus through mainstreaming gender and youth issues in the different regulations;

- Identify the role of National Parks in supporting environmental-friendly agritourism activities; - Coordinate branding strategies for Montenegrin gastronomy and agritourism: national

consultation and coordination among existing initiatives including private sector; and - Establish and support a National association of rural tourism, composed by stakeholders

involved in rural tourism (households, travel agencies, associations…) that will advise government, develop standards, develop a web portal/booking mechanism and consult with new families.

Regarding the SMEs enabling environment and access to finance, despite the availability of funds and opportunities, synergies could be created to enhance their access. Some activities can include: - Coordinate the call for incentives between tourism and agriculture; - Disseminate information through different networks, especially municipalities, about access

to available funds, including IDF, MIDAS, IPARD, Agrobudget, Ministry of Tourism; and

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- Ensure that the calls consider pre-financing for business plans and management, or more favorable and flexible payment schedules such as payment in tranches rather one final payment.

Lastly, a central element is building capacity of all types of stakeholders and raising awareness. Pilot experiences (including rural households and women entrepreneurship) are a highly effective way to disseminate best practices and share concrete knowledge in many topics. For example, in the municipality of Kolašin, 350 households make Lisnati sir (cheese), with households having four or more cows (35 households) belonging to an association. The traditional production is done entirely by women and the together produce 400 tonnes annually of this typical Montenegrin product. If sustainably valorized, this product could bring enhanced economic and social benefits to the region. Already recognized as a product with GI potential, and by strengthening the household producers and association to grow and improving hygiene/ quality compliance through a capacity building approach, as well as increase access to finance, investment and business support, the result would be a shorter value chain that would keep more benefits in the territory and link these small producers to the rural tourism and HORECA markets from the ground up.

Proposed list of actions for a future roadmap Building on the analysis of the issues in each of the three defined categories, we now list different actions that can be recommended to bridge the gaps. These recommendations will serve as a basis for discussion between stakeholders, especially but not exclusively in the framework of the FAO-EBRD project, in order to eventually define a roadmap linking agriculture to tourism in terms of smallholder production and gastronomy.

Topic Gap between current and future

Recommended actions

From the supply side

Producers capacities

Lack of Supply chain organization Production fragmented, lack of quantity and consistency

- Rural extension for rural tourism providers - Develop and disseminate support measures for

association/ cluster - Mapping of traditional quality producers to

provide contacts to buyers - Identify and strengthen, extend

association/cluster - IT solutions including rural tourism platform,

b2c

Market requirements and standards

Quality of products (hygiene, cold chain…) and presentation (packaging)

- Capacity building, e .g. through mentorship and collaboration between more experienced producers (such as GI users) and those with potential

- Facilitate investments and associations

Food safety compliance - flexibility measures: implementation

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- Raising awareness - Dissemination of guidelines

Guarantees on specific quality - GI and other official quality schemes: support to implementation (adoption, certification)

- Encourage digital traceability and compliance to HACCP system to reassure HORECA buyers

Administrative and legal issues

Tackling informal sector: Registration of activities Registration of processing facilities

- Offer registration drives, clear guidelines and procedures including costs

- Flexibility guidelines for food safety + guidelines on hygiene for different categories of products (especially under quality labels), + dissemination

Complex administrative and legal basis VAT system and food business Registration of activities Registration of facilities

- Offer clear guidelines for VAT registration, production and processing

- Encourage entrepreneurship through the Ministry of Economy initiatives

Food safety and flexibility measures: communication and implementation

- Raising awareness of what is required at producer level

- Develop and dissemination of guidelines for each sector, including labelling requirements

- Communicate through web portals such as Seljak.me, Rural Tourism Association or other NGOs

- Peer mentorships

Land tenure - Encourage improvement of land registry and lease of government land

- Resolve land title issues through coordination with Ministry of Finance/ Real Estate Directorate and derogation in requirements for registering and taxation

From the demand side HORECA characteristics

Complex procurement modalities

- Pilots to explore and promote new channels with local producers. Target actions according to the tourism nature:

o Five stars hotels and big venture: target small boutique and memory shops for handicraft and long conservation food products

o Small and close-proximity hotels : direct linkages with groups of producers, direct connections

- IT platforms: discussions between interested HORECA actors and producers associations to develop one national platform (B2B and/or B2C)

- Incentives to improve quality of smaller producers linking domestic and/or traditional products to HORECA rather than the current

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situation where the incentive is given to the hotel that is purchasing.

- Link producers to distributors (Voli, idea, Franca, Goranovic etc.), for de-commodized products through quality labels, promoted higher quality of food and guarantees (quality seals)

Prices - Labelled products with premium price (GI, mountain etc.) to enhance better return by offering local quality products (compared to non- specific imported products)

Lack of professionalism - Hospitality training, language courses traditional recipes course

Tourist characteristics and expectations

Not synchronized tourist demand and fresh food supply

- Diversification of the typical food promoted along the year through development of processing and conservative methods;

- Work with NTO, tourism offices, travel agencies, to identify and create rural tourism package

See investment

Incomplete rural tourism offer; no organized offer between different yet converging tourism offers i.e. rural, agritourism, mountain.

- Target families as they positively impact length of stay

- Facilitate access to tourism offer including adaptation of standards for farmers to register as tourism provider/partner

Customer knowledge (HORECA and tourists)

Lack of knowledge and information (signal) HORECA, tourist and consumers not aware of food heritage

- Identification of local recipes and dishes, training of chef (dissemination of lessons learned from the FAO-EBRD with RDA pilot), collaborations with National Cook association (Liaise with Slow Food Chefs Alliance experience)

- National branding strategy – a reflection is needed on a coordinated public/private approach for the use of a national term such as “Montenegro”

- Support dissemination of Quality schemes and labelling, including GIs, mountain label (capacity bundling)

- National campaign, degustation, food fairs - Converging modalities to deal with the different

components (rural, agri, wild, mountain, bike…. - Points of sale (hotels, markets etc.) with

material noting the use of local products/national quality schemes

- Stronger promotion of gastronomy by government/private sector on websites

- Publication and dissemination of GI inventory

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- QR codes on menus or leaflets highlighting where the food came from, who produced it, the history (in different languages)

Agritourism

Low access to local fairs, farm direct selling and agritourism services

- Mapping of producers and services, available through an IT B2B platforms (with an App)

Unregistered households offering tourist services

- More support, financial and technical assistance, from the Ministry and Rural Tourism Network and Association

- Adapt standards for rural tourism

No rural tourism extension service

- Support to the Rural Tourism Association to ensure knowledge transfer and mentorships by its members

- Coordination between ministries (see below)

Enabling environment

Human resources, Capacities Knowledge

Smallholder’s mind-set? (Perception, future vision…)

- Acknowledge, respect and work within capabilities, with the opportunity to build capacity

- Information, sensitization and awareness on actual benefits of entrepreneurial behavior (not only economics but also social and psychological), would be an important step in supporting smallholders to connect to the formal market.

- Organize sharing knowledge and dissemination of best practices (knowledge exchange)

- Raise awareness of the pros/cons of both legal bases

- Encourage through national strategy on rural tourism or entrepreneurial private actor

Women entrepreneurship - Pilots for women cheese producers as a way to demonstrate results

Unfavorable age and gender structure of the rural population and urban migration

- Involve the younger generation through ICT and the creative sector

- Support hubs of entrepreneurship and business planning

Low level of education of rural population

- Capacity building for the short term - Long term education program - Include topic on agritourism and local

gastronomy in tourism school

Weak capacity of local authorities on agritourism

- Build capacities in local planning, raising new ideas and projects for support and cooperation and public-private partnership

Institutional framework

Existing standards for agritourism are not adequate/ no flexibility measures in tourism standard

- Strengthen rural development in Ministry of Tourism , centralize registration

- Flexibility measures for rural tourism households, including katuns for technical

46

requirements and hygiene for maximum number of guests.

- A specific policy for all katuns, integrating agriculture, tourism, culture and environmental policies – link to specific support and studies (example EBRD BAS for architecture and renewable energy)

Lack of statistics and values on tourism assets

- Value chain studies on tourism and the linked agricultural production and processing

Lack of coordination between levels and sectors

- Launch an inter-ministerial consultation on rural tourism and Montenegrin gastronomy to develop coordinated measures (agriculture, tourism and environment, culture, economy, education and research)

- Strengthen rural development linkage between MARD and MTSD;

- Establish multidisciplinary Rural tourism extension services

- Set up harmonized rules and enforcement between territories

- Build capacities on the roles of municipalities and National Parks on rural tourism

- Encourage registration of all processors (on-farm) that are using support from Agrobudget, because the requirements concerning electricity, water supply and toilets to satisfy hygiene compliance also satisfy the three basic requirements of licensing for rural tourism

- Coordination between donors and between initiatives in particular recent initiatives and platforms (MBA, CTU, etc.)

Investment Lack of investment in

processing and technology to

increase productivity,

processing and packaging at

the household level with not

much technology

Low access to funds for processing, market linkages or agritourism development

- Coordination of the call for incentives between tourism, agriculture and diversification

- Dissemination of information about access to available funds

- Link to IDF - Treat farming as a business, enterprise

management and business plan support - Pre-financing or payments in installments rather

than upon passing one final inspection - Support business plan proposals for production,

processing and rural tourism

Infrastructure Access roads to many households

- Investments in infrastructure, public and private - Liaise with existing projects/investments,

specifically IFAD and cross-country highway

47

Conclusions All stakeholders met are eager to support the development of linkages between agriculture (especially smallholder production) and tourism through gastronomy, HORECA linkages and agritourism activities. The importance has grown significantly in recent years as a number of activities have been launched in this regards. It is therefore mainly a matter of coordinating the initiatives on one side, and then from the other, agreeing on the main bottlenecks and addressing them while designing the best interventions and options for roadmap of the way forward. The gap review has showed that most of the regulations and policies are in place (or are about to be), and mostly the issues are in ensuring their adequate implementation through increased synergies and building capacities. In this perspective, it is important to ensure sound national framework for such a development (policy, strategy and regulations) and more importantly ensure their implementation by national and local territories, providing them with a common framework, margins for adaptation to the local situation, and sufficient resources. A solid foundation of regulatory compliance must be sought before any possibility of full engagement of small-scale agricultural producers in the tourism formal market. In both perspectives, rural tourism linked to gastronomy and the linkage to HORECA, the producers and households are in dire need of support for technical and hygiene compliance as well as access to finance to invest in equipment and packaging. Hygiene, registration and product presentation are the real deal breakers for these small-scale agricultural producers. In the face of EU accession, it is relevant to learn from other countries experience where many other rural areas without interventions lost their culinary heritage and traditional agricultural production. From this point of view, use of flexibility measures should be encouraged in all sectors, to avoid leaving the traditional production in the gray market until the last generation of this knowledge disappears, leaving only standardized agricultural products. If the production is not commercializable, profitable and sustainable, then there is even less chance that the younger generation will continue. From the perspective of linking to HORECA, a special offering of a typical menu of local food would represent a win for the hotels and restaurants in differentiating their offerings as well as ensuring increased competitiveness in the tourism/food and beverage market. The special offering would come with a narrative menu to show the story of what the guest is eating, who made it, and where it came from. In moving towards that, it is important to consider different segments and strategies evolving over time and capacity building. These include direct selling to tourists in local fairs; selling to shop/boutiques; specific linkages with specialized shops/boutiques; direct arrangements with small hotels; IT B2B platform; and arrangements with retailers to feed a specific line of traditional products for big hotels. From the perspective of rural tourism, which includes direct selling from producers to tourists, concerted efforts should be placed on providing infrastructure and information to facilitate “tourists meeting producers” notably gastronomy routes, IT B2C platform so consumers/tourists can find producers and direct selling, agritourism activities and traditional food fairs.

48

In developing the roadmap, building capacities for all types of stakeholders has to be a central element of all the approaches to be developed. Pilot experiences (including households and women entrepreneurship) are powerful to disseminate best practices and share concrete knowledge in many topics. A good pilot program provides a platform for the households and small-scale producers to test logistics, prove value and reveal deficiencies, all while building capacity and transferring knowledge with all stakeholders involved. The list of possible actions to address each gap identified is a tentative pool of interventions to be discussed further among the stakeholders, in particular at the occasion of the national workshops within the FAO-EBRD project. The objective is to develop a roadmap for public and private stakeholders in increasing synergies between agriculture and tourism in Montenegro. Some of the actions are already considered in the implementation of the project or could be in further stages.

49

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Organization.

Annex 1: List of Stakeholders Interviewed

DATE NAME SURNAME LOCATION POSITION ORGANIZATION/ PRODUCTION

CONTEXT

September 2018 Jasmin AJANOVIC Pljevlja Producer GI meat Slow Food/discussion March 2018 Danica BANJEVIC Podgorica Assistant Director NTO Meeting

April 2018 Ernisa BEGOVIC Bijelo Polje F&B Manager Franca Hotel/Tivat Meeting August 2018 Nada BLAZEVIC Bijelo Polje Producer and Processor lettuce and vegetables;

pickled peppers; ajvar Field visit

September 2018 Nada BLAZEVIC Bijelo Polje Producer and Processor lettuce and vegetables; pickled peppers; ajvar

Slow Food/discussion

July 2018 Biljana BLECIC Podgorica Head of Inspections, Food Safety Directorate

MARD Meeting

March 2018 Household BRANOVIC Bijelo Polje Producer and Processor Herbs and Honey Field visit

April 2018 Milan BUKARICA Budva President National Chefs Association

GI Inventory

August 2018 Milijana CABARKAPA Bijelo Polje Producer honey; herbs Field Visit October 2018 Merisa CEKIC Podgorica Head of Quality Schemes

Unit MARD Meeting

April 2018

Merisa CEKIC Podgorica Head of Quality Schemes Unit

MARD GI Inventory

August 2018 Igor CIROVIC Andrijevica Producer; rural tourism F&V; cheese; Action plans August 2018 Nevenka CIROVIC Andrijevica Producer; rural tourism F&V; cheese; Action plans

June 2018 Nevenka CIROVIC Andrijevica Producer; rural tourism F&V; cheese; Austria Study tour/discussion

August 2018 Balsa CVETKOVIC Kolasin Coordinator Kolasin Municipality Meeting

August 2018 Mileta DACEVIC Niksic Producer 25 varieties of cheese Field visit

July 2018 Vesna DAKOVIC Podgorica Director, Food Safety Directorate

MARD Correspondence

October 2018 Vesna DAKOVIC Podgorica Director, Food Safety Directorate

MARD Meeting

October 2018 Radana DAMJANOVIĆ Podgorica Director General, Agriculture Directorate

MARD Meeting

March 2018 Damir DAVIDOVIC Podgorica State Secretary Ministry of Tourism Meeting

September 2018 Velimir DJOKOVIC Podgorica Manager, Probaj Domace Klaster

Probaj Domace Klaster Meeting

March 2018 Milan DRAGIC Podgorica Manager Montenegro Business Alliance

Meeting

53

March 2018 Gordana DULOVIC Kolasin Producer; rural tourism Lisnati sir; cheese; kajmak Field visit August 2018 Gordana DULOVIC Kolasin Producer; rural tourism Lisnati sir; cheese; kajmak Field visit

June 2018 Gordana DULOVIC Kolasin Producer; rural tourism Lisnati sir; cheese; kajmak Austria Study tour/discussion

March 2018 Ljiljana FILIPOVIC Podgorica Vice President Chamber of Economy Meeting

November 2018 Enis GJOKAJ Berane IPARD/ Rural Development Directorate

MARD Katun Workshop

September 2018 Refik HADZIBEGOVIC Bijelo Polje Producer flour Slow Food/discussion

March 2018 Cazim HODZIC Podgorica General Director Ministry of Tourism Meeting August 2018 Oskar HUTER Cetinje Director, Tourist

Organization of Cetinje Tourist Organization of Cetinje

Meeting

August 2018 Merseda IDRIZOVIC Bijelo Polje Processor pickled peppers; ajvar Field visit

September 2018 Nikola ILIC Podgorica Advisor Ministry of Tourism Slow Food/discussion

June 2018 Nikola ILIC Podgorica Advisor Ministry of Tourism Austria Study tour/discussion

April 2018 Nikola ILIC Podgorica Advisor Ministry of Tourism GI Inventory October 2018 Nikola ILIC Podgorica Advisor Ministry of Tourism Meeting

April 2018 Nedjeljko JEREMIC Bijelo Polje Manager Hotel Dvor Meeting

March 2018 Dusan JOKSIMOVIC Bijelo Polje Producer Herbs Meeting March 2018 Vivek JOSHI Podgorica Political/Economic Affairs

Deputy Chief US Embassy to Montenegro

Meeting

August 2018 Jovan JOVANOVIC Cetinje President Cetinje Beekeepers Association

Field visit

March 2018 Igor JOVANOVIC Podgorica Coordinator RCTP IFAD Meeting October 2018 Igor JOVANOVIC Podgorica Coordinator RCTP IFAD Meeting

March 2018 Bojana KALEZIC Podgorica Manager Montenegro Business Alliance

Meeting

June 2018 Nebojsa KALJEVIC Pljevlja Producer Stelja Govedja prosciutto Austria Study tour/discussion

August 2018 Marijana KJAJIC Berane Producer; rural tourism F&V; honey; Action plans

August 2018 Milan KLJAJIC Berane Producer;rural tourism F&V; honey; Action plans

June 2018 Milena KOTLICA Podgorica Focal Point Ministry of Agriculture and Rural Development

Austria Study tour/discussion

October 2018 Milena KOTLICA Podgorica Focal Point Ministry of Agriculture and Rural Development

Meeting

April 2018 Milena KOTLICA Podgorica Focal Point Ministry of Agriculture and Rural Development

GI Inventory

March-October 2018

Jelena KRIVCEVIC Berane Director Regional Development Agency

Many meetings and discussions

August 2018 Draginja KUJOVIC Kolasin Kolasin Culture Center Kolasin Tourism Association

Meeting

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August 2018 Anka KUJOVIC Podgorica Senior Advisor Ministry of Tourism Meeting September 2018 Anka KUJOVIC Podgorica Senior Advisor Ministry of Tourism Slow Food/discussion

March 2018 Anka KUJOVIC Podgorica Senior Advisor Ministry of Tourism Meeting

June 2018 Anka KUJOVIC Podgorica Senior Advisor Ministry of Tourism Austria Study tour/discussion

April 2018 Anka KUJOVIC Podgorica Senior Advisor Ministry of Tourism GI Inventory March 2018 Emil KUKALJ Podgorica PR Comm National Tourism

Organization Meeting

March 2018 Ivan LAKOVIC Podgorica Professor, cultural heritage expert

University of Montenegro Meeting

August 2018 Milija MADZGALI Mojkovac Producer honey; raspberries Field visit September 2018 Milija MADZGALJ Mojkovac Producer honey Slow Food/discussion

April 2018 Ivan MALISIC Berane Expert on Rural Tourism Regional Development Agency

GI Inventory

March 2018 Sanja MARKOVIC Podgorica Secretary of the Board of Tourism and Catering Association

Chamber of Economy Meeting

March 2018 Milan MARKOVIC Podgorica Professor, Katuns and Dairy expert

University of Montenegro Meeting

March-October 2018

Aleksandra MARTINOVIC Podgorica Professor, Food Safety Expert

University Donja Gorica Many meetings, emails, skype

August 2018 Ivan MIJUSKOVIC Cetinje President Montenegrin Prosciutto Association

Field Visit

March 2018 Zlatibor MILIC Budva President Montengro Tourism Association / CTU

Meeting

August 2018 Ivana MILICEVIC Bijelo Polje Manager RAMS Travel, Slow Food Convivium

Slow Food/discussion

August 2018 Svjetlana MILOSEVIC Kolasin Producer Lisnati sir ; cheese ; kajmak

Field visit

September 2018 Svjetlana MILOSEVIC Kolasin Producer Lisnati sir ; cheese ; kajmak

Slow Food/discussion

September 2018 Dragica MIRJACIC Niksic Producer Cornelian cherry juice Slow Food/discussion

September 2018 Ilija MORIC Lustica Producer; rural tourism olives Slow Food/discussion

March 2018 Ilija MORIC Lustica Professor, Expert on Rural Tourism

University of Montenegro Meeting

August 2018 Ilija MUGOSA Podgorica Manager Delicious Montenegro Meeting August 2018 Ivica NIKOLIC Podgorica Food and Beverage

Manager Hemera Hotel Interview

April 2018 Ratko PEJIC Kolasin President Kolasin Cheese Producers Association

Field visit

55

August 2018 Ratko PEJIC Kolasin President Kolasin Cheese Producers Association

Field visit

March 2018 Darko PEKIC Podgorica Consultant Montenegro Business Alliance

Meeting

August 2018 Vucko PESIC Bijelo Polje Producer milk; cheese; meat Action plans, field visit

June 2018 Vucko PESIC Bijelo Polje Producer milk; cheese; meat Austria Study tour/discussion

August 2018 Marko RADONJIC Njegusi President and restaurant owner,

GI Njeguska Prosciutto Association; Konoba "Kod Radonjica

field visit

June 2018 Djordjije RADONJIC Njegusi Producer GI Njeguska prosciutto Austria Study tour/discussion

August 2018 Djordjije RADONJIC Njegusi Producer GI Njeguska prosciutto Field visit June 2018 Rade RAJKOVIC Podgorica Producer; rural tourism Wine Austria Study

tour/discussion

March 2018 Nenad RAKOCEVIC Podgorica Deputy Country Director GIZ Meeting September 2018 Sabina RAMOVIC Bijelo Polje Owner/Director RAMS Travel, Slow Food

Convivium Slow Food/discussion

September 2018 Musa RAMOVIC Bijelo Polje Owner RAMS Travel, Slow Food Convivium

Slow Food/discussion

August 2018 Kenan RASTODER Petnijica Producer milk; cheese; meat Field visit June 2018 Ermina REDZEMATOVIC Plav Producer; rural tourism Dairy Austria Study

tour/discussion October 2018 Philippe REMY Podgorica Country Programme

Manager IFAD Meeting

March 2018 Lidija RMUS Podgorica Secretary of the Committee on Agriculture and Food Industry

Chamber of Economy Meeting

April 2018 Lidija RMUS Podgorica Secretary of the Committee on Agriculture and Food Industry

Chamber of Economy GI Inventory

August 2018 Dragica ROVCANIN Pljevlja Producer honey products Field visit

August 2018 Besim SALKOVIC Bijelo Polje Producer honey; f&v Field visit March 2018 Fadil SALKOVIC Bijelo Polje Producer corn, buckwheat and rye

flour; peppers; ajvar Field visit

August 2018 Fadil SALKOVIC Bijelo Polje Producer corn, buckwheat and rye flour; peppers; ajvar

Field visit

September 2018 Fabien SANTINI Brussels Economic Advisor European Commission, DG AGRI

Informal discussion

56

August 2018 Danka SEKULARAC Berane Producer; rural tourism milk and cheese; f&v Field visit, Action Plans June 2018 Danka SEKULARAC Berane Producer; rural tourism unemployed, various

production (cheese, potatoes, fruits and vegetables, mushrooms collection

Austria Study tour/discussion

March 2018 Maja SLJIVANCANIN Podgorica Programme Manager for Agriculture and Rural Development

EU Delegation Meeting

September 2018 Bojana STANISIC Niksic Senior Advisor III Ministry of Agriculture and Rural Development

Slow Food/discussion

March 2018 Danijela STOLICA Podgorica Director General, Agricultural Directorate

Ministry of Agriculture and Rural Development

Meeting

June 2018 Ljubo VUKADINOVIC Mojkovac Producer; rural tourism Organic fruit Austria Study tour/discussion

March 2018 Zoran VULEVIC Podgorica Executive Director Montenegro Business Alliance

Meeting

March 2018 Thomas WOEHRSTEIN Podgorica CIM Expert National Parks of Montenegro

Meeting

August 2018 Snezana ZECEVIC Berane Associate Regional Development Agency

Action plans

Annex 2: Procedure for registration as agricultural producer, and rural tourism household, and processor Requirements to register as agricultural producer46

Application at the regional office of advisory services with data ad identification of natural person of company, information on land parcels and the certificate of land rights, and a certificate from veterinary advisory on number of animals.

Social security contribution is paid half by Ministry, half by producer. Requirements to register as rural tourism household (maximum 20 beds) including Katuns47

Precondition to register as agricultural holding

Apply at municipality as natural person, entrepreneur or company with a fee of EUR 150 to municipality instead of the EUR 5 fee paid by hotels of a different category at the Ministry. Rural families are not obliged to register as entrepreneur or company, some municipalities do not understand that.

Inspection of facilities by municipal commission including strict technical requirements (plumbing/electricity etc.) and food preparation areas to accommodate the max number of guests. There are no flexibility measures for this process.

Once approved, municipality facilitates entrance to Central Tourism Register.

Guest book required and report of overnight stays to Ministry through an internet program like 5 star hotels (not very useful in mountain regions without connectivity).

To serve prepare and sell food is also under covered by Law on Tourism and Hospitality, but many are unclear if the Laws on Food Safety and derogations apply.

Requirements to register as agricultural processor4849

Once the facilities are registered, they need to be approved by inspector.

After reviewing the facility and determining the compliance of the prescribed requirements with respect to the infrastructure, equipment and appropriate documentation on the required control the commission shall, after a minimum of one completed direct inspection of the facility, draw up a report with a proposal for the issue of a conditional approval for a period of three months.

Administration, on the basis of the proposal of the commission, issues a conditional approval and writes the object to the Register.

After issuing an approval to the animal food business, a veterinary control number is assigned. Only after the issuance of a conditional approval and obtaining a veterinary

46 Law on agriculture and rural development (Official Gazette No. 56/09 and No 34/14) 47 Law on Tourism and Hospitality (Official Gazette No. 2/18, 04/18 and 3/18) 48 Law on Plant Health Protection (“Official Gazette of MNE”, No 28/06 and 28/11 ) 49 Law on agriculture and rural development (Official Gazette No. 56/09 and No 34/14

58

control number can a subject begin to perform the activity for which he / she received an authorization.

Before expiration of the conditional approval period, the commission performs a review of the facility at the time of performing the approved activity, in order to determine and check the fulfillment and other requirements established by the food safety Decrees.

If a re-examination establishes that all the requirements established by the food safety Decrees have been met, the Administration, issues an approval to the facility for performing the activity. The costs, or the amount of the administrative fee for issuing a solution for the facilities that are approved, is from 50,00 € to 300,00 € depending on the size of the building.

To carry out sales of processed food the facility should be examined 4 times per year and the product analyzed monthly.

To sell to HORECA, HACCP certification and the procedure of found in the Decree on changes in regulation on hygiene requirements for facilities and spaces in which small quantities of primary products for human consumption are produced must be followed.50 This includes separate work areas and appropriate preparation, processing, storage and transportation.

Primary products during delivery and / or sale to the final consumer or retail establishments shall be accompanied by the following information: 1) the name and surname of the small producer; 2) the name of the product; 3) the address of the agricultural holding; 4) number of decisions on entry in the register of agricultural holdings; 5) number of decisions on registration in the register of registered food establishments; 6) date of manufacture.51

50 Law on Food Safety ("Official Gazette of Montenegro", No. 31/18) 51 Law on Food Safety ("Official Gazette of Montenegro", No. 57/15)

Annex 3: Relevant Projects in Montenegro Projects Commitment

(USD) Main objective Project end date Type of financing

WB/ GEF/ Govt of Montenegro

Montenegro Institutional Development and Agricultural Strengthening (MIDAS II) project

34.9 million Assisting GoM in by preparing Montenegrin agriculture and its institutions for future EU membership- and includes the environmental, social, and cultural importance of agriculture, as well as diversification of rural livelihoods and alternative enterprise development

2019 loan/grant

IFAD Rural Clustering and Transformation Project (RCTP)

14 million Targeting cluster development and infrastructure development covering 7 municipalities in the northern region (Berane, Bijelo Polje, Mojkovac, Nikšić, Petnjica, Šavnik and Žabljak) and four commodities (sheep, goats, seed potatoes and raspberries).

2023 loan

USAID-funded

“Authentic Montenegrin products”/ Regional Economic Growth (REG)

TBC As part of the REG project to improve competitiveness and by promoting economic integration within the region and building economic linkages to the EU and other markets, this particular component is geared to marketing in hotels and restaurants that includes branding, packaging and promotion for the marketing of local Montenegrin products.

TBC grant

EU//IPA/ Chamber of Economy

GAS2GO project 27,760 To enhance close and frequent cooperation between business and scientific-research sector, to identify new gastro products which would be offered on the market and improve the branding of the tourist destination and the market-oriented placement of a tourist product.

2017 grant

EU/IPA Local cuisine as tourism offer of cross-border region (Albania and Montenegro)

455,000 The project will target three groups (HORECA actors, rural families, tourism operators) in the Berane, Andrijevica, Plav, Gusinje, Petnjica and Rožaje municipalities. to enhance the competitiveness of the tourism sector by including local gastronomy in the tourism offer. This will include research on traditional local recipes, thematic gastronomic routes and the marketing and promotion of local food products.

2020 grant

Annex 4: List of documents consulted

Analysis of Primary Sources

Document Title Author

Assessment of Commercial Linkages Between Northern Montenegro and Coastal Hotels (survey results)

CEED Consulting/ USAID/ CHF International

Consumer Perception Survey in Montenegro and neighboring countries CEED Consulting

E-platform application Zlatibor Milic

OBRAZLOŽENJE ZA MJERU DIVERZIFIKACIJA NA GAZDINSTVU I RAZVOJ POSLOVANJA/ Rural Diversification Measures Absorption

Jelena Krivcevic

Rural Tourism Applications Jelena Krivcevic

Government Documents and Legislation

Document Title Author

Agricultural Census 2010 MONSTAT

Agrobudget 2018 GoM MARD

Feasibility Study: ECOTOURISM FOR LOCAL DEVELOPMENT IN BOKA KOTORSKA (MONTENEGRO) GoM MTSD/ UNEP

Law on Agriculture and Rural Development (Official Gazette of Montenegro, No 56/09, No. 34/14, No 1/15)

GoM

Law on Investment Development Fund (Official Gazette of Montenegro, No 88/09) GoM

Law on Organic Production (Official Gazette of Montenegro, No 56/13) GoM

Law on Tourism and Hospitality (Official Gazette of Montenegro 2/18, 04/18 and 13/18) GoM

MONTENEGRO TOURISM DEVELOPMENT STRATEGY TO 2020 GoM MTSD

National Strategy for Sustainable Development by 2030 GoM MTSD

Programme for the Development of Agriculture and Rural Areas under IPARD II 2014-2020. GoM MARD

61

Statistical Yearbook 2014 and 2017 MONSTAT

Strategy for the Development of Agriculture and Rural Areas 2015-2020. GoM MARD

Terms of Reference- Strategy for the Development of Rural Tourism GoM MTSD

Project Documents and Reports

Document Title Author

2014 Montenegro Country Report Montenegrin Investment Promotion Agency (MIPA)

Analysis of the agricultural and rural development policies of the Western Balkan countries European Commission

COMMISSION STAFF WORKING DOCUMENT : Montenegro 2016 Report European Commission

Conference Presentation: Rethinking sustainable marketing in Montenegro: Branding eco-tourism and traditional rural life in katuns

Jovana Vukcevic

Conference Presentation: Sustainable agriculture in mountain areas, promotion and protection of the traditional products in Slovenia

Marija Klopcic

Conference Presentation: The entrepreneurial activities: Insights from Montenegrin agro-tourism sector

Sanja Pekovic

Conference Presentation: TRADITIONAL LIVESTOCK PRODUCTION AT THE MONTENEGRIN KATUNS Milan Markovic

Conference Presentation: VISITOR MANAGEMENT STRATEGIES: BALANCING INTEGRATION OF TOURISM AND PROTECTION

Izidora Marković Vukadin

Conference Report: Konferencija “Turizam u funkciji razvoja proizvodnje hrane” Tourism and developing local production

Chamber of Economy

MIDAS Project Appraisal Document (MONTENEGRO INSTITUTIONAL DEVELOPMENT AND AGRICULTURE STRENGTHENING)

World Bank

Montenegro: Assessment of financing needs of SMEs in the Western Balkans countries European Investment Bank

62

Montenegro: Agricultural Policy Development and Assessment European Commission/SWG

Montenegro: Country Programming Framework for Inclusive and Sustainable Industrial Development 2017-2021

UNIDO

Montenegro: The impact of travel & tourism on jobs and the economy 2004 WTTC

Regional Economic Growth Project Action Plan/ Authentic Montenegrin Foods Initiative USAID/ REG

Report: The International Conference SUSTAINABLE DEVELOPMENT OF MOUNTAIN AREAS - Experiences, challenges and perspectives

KATUN Project

Roundtable Report: Domestic Products in Tourist Offer of the Summer Season Montenegro Business Alliance

Roundtable Report: How to improve the conditions for the purchase of domestic agricultural products

Montenegro Business Alliance

Rural Clustering and Transformation Project (RCTP) /Final project design report IFAD

Survey to assess and prioritize technical needs in leading Ag sub-sectors and identify new export opportunities

USAID/REG

Travel and Tourism Economic Impact: Montenegro 2018 WTTC

Women Entrepreneurship in Montenegro EU/UNDP

World Bank: Montenegro - Country Diagnostic Study, 2016 World Bank

Literature and Technical Papers

Document Title Author

A mountain food label for Europe? The role of food labelling and certification in delivering sustainable development in European mountain regions

Rob McMorran, Fabien Santini, et al.

Clusters as a Factor of Rural Tourism Competitiveness: Montenegro Experiences. Ilija Moric

Food and the Tourism Experience OECD Studies on Tourism

Food and the Tourism Experience. OECD Studies on Tourism OECD

INCLUSIVE TOURISM : Linking Agriculture to Tourism Markets International Trade Center

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Informal Economy in Montenegro – The Enabling Environment for Sustainable Enterprises in Montenegro

Montenegrin Employers Foundation

Montenegrin Agriculture: Diagnosis and Policy Recommendations Nikola Fabris, Igor Pejovi

PROJECT DEVELOPMENT FOR SUSTAINABLE TOURISM: A STEP BY STEP APPROACH USAID

Rural Tourism in Europe: Experiences, Development and Perspectives UNWTO

Slow Food Travel: Handbook and Guidelines Slow Food International

The Role and Challenges of Rural Tourism Development in Transition Countries: Montenegro Experiences

Ilija Moric

THE ROLE OF MARKETING PHILOSOPHY IN RURAL TOURISM DEVELOPMENT Ilija Moric

Tourism Planning in Development Cooperation: A Handbook GIZ

Websites

Address/URL Author

http://ctu-montenegro.org/en Montengro Tourism Association

https://montenegro.eregulations.org/procedure/27/25?l=en E-regulations Montenegro/ Ministry of Finance

http://www.ramstravel.co.me/page.php?id=246 RAMS Travel

https://meanderbug.com/ Meanderbug

https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2017&locations=ME&start=2006 World Bank

https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2018/montenegro2018.pdf

World Travel and Tourism Council

https://data.worldbank.org/indicator/SI.POV.GINI?locations=ME World Bank

https://go.montenegro.travel/en/montenegrin-cuisine National Tourism Organizaiton

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http://www.skkbuducnost.me/honey/en/ Honey Trail

https://www.monstat.org/eng/page.php?id=1457&pageid=44 MONSTAT

http://www.privrednakomora.me/en/good-montenegro Chamber of Economy- Good from Montenegro/ Buy Domestic

http://deliciousmontenegro.me/ Delicious Montenegro

https://seljak.me/ Seljak B2B B2C

www.slowfood.it Slow Food

http://www.minpolj.gov.me/organizacija/agrobudzet GoM Agrobudget 2018

Annex 5: Market linkages and branding initiatives Slow Food Network The international brand of “good, clean and fair” food is well known to tourists and raises awareness of sustaining and protecting traditional food production. There are already eight products specific to Montenegro on the Slow Food Ark of Taste, including Lisnati raw milk cheese (Lisnati sir). The Ark was created by Slow Food to point out the existence of these products, draw attention to the risk of their extinction within a few generations, and raise awareness about their preservation.52 Slow Food Travel, the engagement of the Chefs Alliance and a Presidium53 for Lisnati sir are possible future activities that can benefit producers and enhance the linkage to tourism.

Good from Montenegro: Buy Domestic54 and Homemade Flavors The Kupujmo domaće “Buy Domestic” campaign organized by the Chamber of Economy with support from the Ministry of Economy, aims at linking domestic producers to supermarkets/retail chains, especially in view of improving the trade balance. This is particularly adapted to larger Montenegrin players and brands that can offset imports. Similarly targeted to larger players, a new continuation within Buy Domestic is Domaći ukusi “Homemade Flavors” targeting the HORECA sector. It benefits from the involvement of the Investment Development Fund in giving incentives to HORECA operators buying from domestic enterprises. Nevertheless, no specification of traditional nature or size are requested, and this may benefit essentially to big players or intermediaries such as retailers, and not directly to small-scale producers, except if intermediaries and retailers have an incentive to supply from them.

Try Domestic Probaj Domaće (“Try Domestic”) is formally registered cluster with MEK and is based in Podgorica with members throughout Montenegro. The cluster was formed 10 years ago and currently has about 20 members, with some of the more successful members of the Slow Food convivium on the roster. The focus of the cluster is strengthening producers, raising awareness of the cluster brand and marketing through fairs. The cluster has been successful in funding through Ministry of Economy cluster support measure, totaling EUR 62,000 so far. Most, if not all, agricultural producer members are in full compliance with regulations.

52 “The Ark of Taste travels the world collecting small-scale quality productions that belong to the cultures, history and traditions of the entire planet: an extraordinary heritage of fruits, vegetables, animal breeds, cheeses, breads, sweets and cured meats.” https://www.fondazioneslowfood.com/en/what-we-do/the-ark-of-taste/ 53 Absence of an enforcement mechanism withstanding, a Slow Food Presidium can protect: “a traditional product at risk of extinction (an Ark of Taste Product); traditional processing method at risk of extinction (in fishing, animal husbandry, food processing and farming); and/or a rural landscape or ecosystem at risk of extinction.” https://www.fondazioneslowfood.com/en/what-we-do/slow-food-presidia/what-does-a-slow-food-presidium-protect/ 54 http://www.privrednakomora.me/en/good-montenegro

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Delicious Montenegro55 Another interesting branding initiative and B2C platform that seeks to link producers to demand through promotion of local production is Delicious Montenegro. Originally developed through a UNIDO/UNDP clusters project, the Delicious Montenegro is an initiative now based at the University Donja Gorica, with funding received from Horizon 2020 and through activities at fairs. It is not registered as a cluster, and has no desire to be- as it designed to be an umbrella branding for small scale producers to better market high quality products to tourists. No regulatory compliance necessary for producers to be marketed on their website.

iDEA Tastes of my region56 The campaign aims to support traditional production and further strengthen the domestic economy. As stated on IDEA website , the product line includes 54 high quality, healthy products that are prepared from carefully selected ingredients, without artificial colors and aromas, that can be found at all IDEA stores throughout Montenegro. Traditional, homemade recipes are used. The product line includes: homemade prosciutto, roast, dry neck, pljevaljski sir, marinated carp and trout, Bar's olive oil, Crmničko white and red wine, bread under sač, corn bread, homemade jams and honey, goat cheese, homemade vanilica cake, baklava, tulumba, blueberry syrup and juice from drenjine (cornelian cherry). According to the IDEA website, through the support of domestic producers, IDEA wants to help and strengthen the Montenegrin economy, and with the new line of local products "Ukusi kraja moga" IDEA is cultivating tradition and local recipes, and in cooperation with domestic and local producers, IDEA will improve our domestic production.

55 http://deliciousmontenegro.me/ 56 https://www.idea.co.me/Ukusi-kraja-moga