RT 4

Investing across borders: The way forward for agriculture and rural

development in the Balkan countries

Moderator: Kaj Mortensen

Purpose• To exchange views on the main

challenges facing agriculture and rural areas

– particularly in cross border areas

• In the Western Balkans, but maybe the same applies elsewhere

• Explore ways to address these challenges

– With a view to develop recommendations to policy makers, donors and investors

Focus – enhance understanding of:• In what form and to what extent

agriculture can:– contribute to employment generation in

rural areas– at the same time – be competitive

• How to enhance capacity of the rural economy to absorb surplus agricultural labour through investments in alternative economic activities

History of the issue / development

• Paris - theoretical aspects• exchange of ideas in-between,

FAO/SWG work• EC study started on facilitating area-

based development approach• EC+FAO work on exploring potential for

diversification in Albania and Montenegro

Trade in border areas

• CEFTA is here but (1) not used to its full extent and (2) not very useful for "our" purposes

• Very little could be expected from free trade agreements, when it comes to facilitating developments in cross-border areas

Trade in border areas

• Situation will change significantly after the accession of some members. Border crossing will become even more difficult.

• Overall conclusion - Border will remain a big constraint

Non-tariff trade barriers

• AGROKOR – Best of the best• focuses only on the most efficient part of

the sector. How would this relate marginalised areas? Will they go there?

• if they go into an area - they will provide an added value, most likely

• very efficient system – to the extent that there is no people working – fully mechanised milk farm? – but where will people go?

Bringing finance/money to people – access to credit in rural areas

• Scheme under the Macedonian Bank for Development Promotion

• work with the most "complicated" clients (high delivery costs, poor transport and communication, no or low value collateral, etc.) – high lending risk

• Difficult to access normal financial services unless there is a mechanisms sharing transaction costs

• Optimistic - Financial institutions seem to be interested in expanding their client base. In fact – the "rural clients" are not so bad afterall – repayment rate 96%

• Solutions - reduce lender's transaction costs, facilitate "grass level financial institutions"- micro-financing, expand the list of items to be used for collateral

Where theory and practice meets – area-based approach as a tool to facilitate economic diversification?

• EC/SWG/FAO study on facilitating area-based development approach

• The ABD approach should:– Identify the needs– Propose interventions (an "action plan")– Hope that this will be picked up by the

endorsed by the governments, IFIs, etc.

• There have to be opportunities in a declining area – establish thresholds – beyond a certain point it might be difficult to "rescue" the area.

• Make strategic planning– Capacity of local governments is very

important – they should be the main drivers, but

– We need good combination of local capacities in administration and the strategic (regional) approach

Some general points

• If we cannot bring products from those areas to the market – we should try bringing market to those products!

• To have a dual policy – for competitive farming and a policy with more social aspects tailor-made for rural areas

• Has to be a strong commitment of national governments

• Just start "moving"