#22 Serbia Agriculture Bulletin, BFC

07/2017

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22 S e r b i a Agriculture Bulletin Serbia to limit sale of agricultural land to foreigners

EFSE to provide 615 million RSD to rural Serbians Banks increasingly granting loans for land purchases Raspberry producers satisfied with negotiations

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

Work to begin on 11 irrigation sites in August ................................................................................ 2 European Commission auditors to visit Serbia in August................................................................ 2 50,000 EUR made available for new cooperatives .......................................................................... 2 The first Agricultural Club in Serbia opens ...................................................................................... 3 Serbia to limit sale of agricultural land to foreigners ...................................................................... 3 GMO law an obstacle to EU accession ............................................................................................ 3

Foreign Aid ................................................................................................................. 4 7)

EFSE to provide 615 million RSD to rural Serbians .......................................................................... 4

Private Sector.............................................................................................................. 4 8) 9) 10) 11) 12) 13)

Banks increasingly granting loans for land purchases ..................................................................... 4 Raspberry producers satisfied with negotiations ............................................................................ 4 Agrana interested in investing in Serbian food market................................................................... 5 Fruit exports on the increase........................................................................................................... 5 Maminger continues collaboration with Kikinda farms .................................................................. 5 Greater investment needed to increase exports ............................................................................ 5

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

This bulletin is prepared by Business & Finance Consulting—a Swiss-based development finance consulting company. Currently, BFC is implementing “Development of Financial System in Rural Areas in Serbia” programme for KfW. Read more »

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BFC Agriculture Bulletin

State Initiatives 1)

Work to begin on 11 irrigation sites in August

July 27th, 2017, http://www.politika.rs/sr/clanak/385713/U-avgustu-pocinju-radovi-na-11-gradilista-sistema-za-navodnjavanje

Agriculture Minister Branislav Nedimović has announced that work will begin on four construction sites of irrigation systems in Vojvodina and a further seven in the rest of Serbia by the end of August. Developing channels that had previously only been used for drainage, the works will allow almost 30,000 hectares of Serbian land to receive water from the Danube-Tisa-Danube canal and from surrounding rivers in times of drought. The project will be financed from Serbia’s USD 100 million Abu Dhabi Fund, which the nation took two-and-a-half years ago at an interest rate of 1% annually.

Nedimović also indicated that there would be further incentives for irrigation microsystems, such as a 50% subsidy for pumping supplies used in wells. Meanwhile, the first call for agricultural producers to apply for IPA (Instrument for Pre-Accession Assistance) grants from the EU would take place in November. Though the majority of the aid (175 million EUR) will be invested by the EU, the Serbian government is contributing a further EUR 50 million to the fund. Additionally, Nedimović said that the Ministry intends to set up a special department to deal with climate change in agriculture this autumn, as well as working with the Association of Experts to provide insurance against crop damage caused by premature frosts.

2)

European Commission auditors to visit Serbia in August

July 27th, 2017, http://www.blic.rs/vesti/ekonomija/srbija-ceka-novac-iz-brisela-pare

Representatives of the European Commission (EC) are expected to visit Serbia from August 15th to September 15th to verify whether the country now complies with all the conditions necessary to obtain the 175 million EUR aid provided by the Instrument for Pre-Accession Assistance for Rural Development (IPARD) fund. Until now, Serbia has failed to meet four criteria identified by officials from Brussels, including the creation of a building and a staff dedicated to the Administration for Agrarian Payments.

The first 15 million EUR of the fund must be spent by the end of this year, meaning that if the EC auditors find fault with anything this time, it’s unlikely that Serbia will be able to access that money. However, Agriculture Minister Branislav Nedimović has indicated that he is confident all obstacles have been removed and that Serbian farmers should be able to apply for and benefit from the funds by late November. The entire 175 million EUR fund must be exhausted by 2020.

3)

50,000 EUR made available for new cooperatives

July 20th, 2017, http://www.blic.rs/vesti/ekonomija/mladi-ostajte-na-selu-drzava-daje-50000-evra-da-zapocnete-biznis-alitreba-da/1zcnqpt

The Minister without portfolio for regional development Milan Krkobabić has announced state funds aimed at keeping young people in smaller towns and villages. Applicants have until October to register their interest in the scheme and will be eligible providing they a) own or rent a piece of land and b) invest the money into a new or existing cooperative. New cooperatives can receive individual grants of up to 50,000 EUR and can be created by pooling together the resources of five different entities (not necessarily in the same exact business). Meanwhile, existing cooperatives can receive up to 100,000 EUR a piece. It is part of a three-year plan by the government to regenerate agricultural cooperatives, over which time they have pledged to invest 25 million EUR in the industry.

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BFC Agriculture Bulletin

4)

The first Agricultural Club in Serbia opens

July 19th, 2017, http://uap.gov.rs/vesti/vesti-2017/otvoren-prvi-poljoprivredni-klub-u-srbiji/

The first Agricultural Club in Serbia opened its doors this month. Housed inside in the Administration for Agricultural Payments in Belgrade, the club will be a place for agricultural producers, processors and other stakeholders to exchange experiences and establish cooperation, both within Serbia and with the Russian Federation and the United Nations. The opening was attended by the Minister of Agriculture Branislav Nedimović, the Ambassador of the Russian Federation to Serbia Aleksandar Čepurin and the manager of the United Nations Development Program fund, Alexander Averchenkov.

Nedimović said that this is just the first of many clubs which will be opening throughout Serbia, which he hopes will continue the growth of the agricultural industry. Over the past 10 years, Serbia has exported 15 times more fruit to the Russian Federation than it did in 2006. In particular, Russia is keen to import organic produce, apples, raspberries and wine from Serbia, and is discussing the possibility of collaborating with Serbia in seed production and machinery construction. Averchenkov indicated that the club comprised part of a three-year project to tackle rural development projects and climate change control, with a total budget of USD 1.5 million.

5)

Serbia to limit sale of agricultural land to foreigners

July 13th, 2017, https://inserbia.info/today/2017/07/serbia-to-limit-sale-of-agricultural-land-to-foreigners/

The Ministry of Agriculture is set to unveil amendments and supplements to the Law on Agricultural Land, aimed at limiting the sale of arable land to foreigners. The amendments will be announced before September 1st, upon which date the market is to be liberalized allowing foreign investors to purchase Serbian real estate, including agricultural land. Serbia is the only country which has liberalized its land market prior to joining the EU, with Croatia enjoying a transition period of seven years and Poland as many as 12 years. With the deadline drawing near, unofficial sources indicate that the drafts will stipulate a foreigner must have resided within Serbia for seven years before purchasing the land, whereas legal entities and companies must be registered within Serbia for five years before the purchase.

6)

GMO law an obstacle to EU accession

July 5th, 2017, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:674131-GMO-nas-koci-na-putu-ka-Evropi

Serbia’s general ban on genetically modified organisms (GMOs) may pose a threat to its accession to the EU, experts have warned. The World Trade Organization (WTO) demands that all members allow the traffic of GMOs inside their country, meaning that Serbia has effectively been frozen out due to its 2009 ban. Since membership of the WTO is a prerequisite for accession to the EU, the law may prove to be a stumbling block on the road to Europe. Aleksej Tarasjev from the Institute of Biological Research said that the previous legislation was better than the existing laws, since it allowed licensing of all types of GMO products and would not pose a problem to the WTO. He also pointed out that many EU members do have restrictive legislation surrounding GMO trade in place, but none have an outright ban like Serbia. In order to comply with the WTO, a special regime allowing the traffic of GMOs (but perhaps banning production) must be implemented.

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BFC Agriculture Bulletin

Foreign Aid 7)

EFSE to provide 615 million RSD to rural Serbians

July 27th, 2017, http://www.ekapija.com/financing/1832558/efse-i-opportunity-obezbedili-615-miliona-dinara-kredita-zamikro-i-mala-preduzeca-podrska-razvoju-ruralnih-sredina

The European Fund for Southeast Europe (EFSE) has become the first international creditor to secure financing in the Serbian currency. Working in conjunction with the European Bank for Reconstruction and Development (EBRD), EFSE will provide a loan of 615 million RSD to Opportunity Bank, designated specifically to support micro and small businesses in rural parts of the country. Opportunity Bank have made a concerted effort to help clients who have suffered from limited access to loans up until now and currently counts 65% of its clients in rural areas of Serbia. The announcement comes in the wake of EBRD’s issuing of 2.5 billion RSD bonds in December last year, which were the first domestic currency bonds issued by an international institution in Serbia.

Private Sector 8)

Banks increasingly granting loans for land purchases

July 30th, 2017, http://www.rts.rs/page/stories/sr/story/13/ekonomija/2821866/banke-sve-vise-odobravaju-kredite-zakupovinu-zemljista.html

With around 70% of Serbia’s 8.84 million hectares being agricultural land, land is becoming a valuable resource in the country. More and more, banks are beginning to recognize this and are providing credit for the purchase of land. Clients are also more interested in taking credit to purchase land as interest rates have dropped from around 10% just three years ago to 3-4% now. Moreover, it is thought that land will become more valuable over time as Serbia moves closer to membership in the European Union (EU).

Despite these positive signs, there are still certain complications with purchasing land in Serbia. One of these complications is the additional costs clients must bear to secure the loans, costs such as registering a mortgage, assessing the land’s value and certifying contracts. Another major complication comes with property being fragmented, making it difficult to invest in modern production techniques. Perhaps the most complicating issue is mistakes in the land cadaster that have led to multiple owners being recorded for each plot, meaning that all of them must be registered as land owners going forward.

9)

Raspberry producers satisfied with negotiations

July 23rd, 2017, http://www.novosti.rs/vesti/naslovna/ekonomija/aktuelno.239.html:677162-Malinari-odustali-od-protestanakon-sastanka-sa-Nedimovicem-ali-ostaju-pri-ceni-od-183-evra

After meeting with the Agriculture Minister Branislav Nedimović, raspberry producers have declared themselves satisfied with negotiations and canceled a protest scheduled to be held last month. However, they have maintained their request that the purchase price of raspberries should be 1.83 EUR across the whole country. The dispute over raspberry prices has been going on for almost 20 years now, but Nedimović pledged to establish a National Council to monitor the market and penalize any unscrupulous purchasers who might try to circumvent the rules. He also said that the price had risen from 110 RSD to as much as 170 RSD in just the space of a month, though the producers are demanding that it be 180 RSD throughout Serbia.

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10) Agrana interested in investing in Serbian food market July 17th, 2017, http://www.mpzzs.gov.rs/austrijska-kompanija-agrana-zainteresovana-da-ulozi-60-miliona-evra-uprehrambenu-industriju-srbije/

Austrian company Agrana, one of the largest fruit, grain and potato processing companies in the EU, is very interested in investing about 60 million euros in the Serbian food industry. The news comes as a result of a meeting between the company and Agriculture Minister Branislav Nedimović, with a second round of talks scheduled for August.

11) Fruit exports on the increase July 16th, 2017, http://www.novosti.rs/vesti/srbija.73.html:675870-Zarada-po-hektaru-i-do-30000-evra

Raspberries have long been the most highly sought-after Serbian fruit abroad, but its position at the head of Serbian fruit exports may be in jeopardy. That is not because exports are in decline, but rather because the popularity of other fruits such as apples, cherries, blueberries and strawberries is on the increase. For example, apple exports have almost reached 120,000 tons and can earn up to 30,000 EUR per hectare, while blueberries also have a strong yield (15 tons per hectare) and earn a profit of 4 EUR per kilogram. Moreover, the country also garnered USD 10 million from its cherry exports alone. The success has come as a result of heavy investment in the fruit growing industry as far back as 15 years ago, which is now beginning to pay off.

Despite this, Serbia’s most prevalent and popular domestic fruit is still lagging behind with regards to exports. Between 550,000 and 600,000 tons of plums are produced annually, but 80% of those are processed to make brandy. As a result, plum exports have fallen sharply since their inception in the 19th century, when a total of 4,000 tons were sold for 84,000 ducats to the United States in the first recorded business transaction between the two nations. By the late 1990s, a mere 1,000 tons were being exported, and experts say that the standardizing of the drying technology and the continued education of Serbian farmers is key to bringing plum exports into line with the other fruit markets.

12) Maminger continues collaboration with Kikinda farms July 13th, 2017, http://agrovizija.rs/Index.php?id=3096

German company Maminger has signed a contract with vegetable producers from Kikinda for the fourth year running, leading to an increase in the production of cucumbers in the north of Banat. Initially, Kikinda farmers were forced to transport their produce to Gospojinski, a necessity which entailed high transportation costs. However, the growth of the industry allowed them to open a processing unit closer to home in Senta, and there is hope that a Kikinda plant may be opened in the future, which would greatly reduce overheads. Meanwhile, Kikinda producers are also capable of growing peppers and tomatoes and expect to conclude a deal with Maminger for the purchase of such vegetables going forwards as well.

13) Greater investment needed to increase exports July 3rd, 2017, http://www.danas.rs/ekonomija.4.html?news_id=350045

Industry experts disagree with Agriculture Minister Branislav Nedimović over his stance on the future of Serbian apple exports to Russia. Nedimović had said that since Russia was planning to plant its own orchards, there will soon be no place for Serbian imports in the country, and that Serbia should focus on the production of early fruits and vegetables in order to enhance performance in the sector. However, Page 5

BFC Agriculture Bulletin

Miladin sevarlić (professor of the Faculty of Agriculture in Belgrade) and agricultural economist Vojislav Stanković have said that it will take many years for Russia to meet its own domestic needs with regards to apple production, meaning that there will still be a market for Serbian produce for the foreseeable future. Having said that, Stanković believes that the country should still look to expand exportation of its produce in other countries, both in and out of the EU. While the experts agreed that production of early fruits and vegetables is a key area, they said that there is currently too little investment in the industry for it to truly flourish. For example, sevarlić points out that the 200 million RSD allocated for the development of cooperatives is sufficient to create only 20 new ones, despite the fact that the Ministry pledged to create 500. Similarly, 120 million RSD have been earmarked for supporting young rural farmers, which is only enough for 97 farms. In order to achieve its full potential, the agricultural industry must be supported with the construction of greenhouses and thermal heating pipes to regulate their temperature, which would require significant investment. However, Stanković believes that if the funds were forthcoming, Serbia could far surpass the 1.5 billion USD received from fruit, vegetable and grain exports this year, aiming for a target of 10 billion USD in the next eight to ten years.

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