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Goran Zivkov

MINISTRY OF AGRICULTURE, FORESTRY AND WATER MANAGEMENT Republic of Serbia. Rural Development and Poverty Reduction. Goran Zivkov. Belgrade, Ju ly 2006. Contents of the Presentation. Serbian agriculture – in general Rural development and rural economy Poverty in rural areas Causes

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Goran Zivkov

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  1. MINISTRY OF AGRICULTURE, FORESTRY AND WATER MANAGEMENT Republic of Serbia Rural Development and Poverty Reduction Goran Zivkov Belgrade, July2006

  2. Contents of the Presentation • Serbian agriculture – in general • Rural development and rural economy • Poverty in rural areas • Causes • Consequences • Strategy for developing agriculture and addressing the problems • Measures of the agrarian policy for reducing rural poverty • Discussion and proposals

  3. Agriculture in Serbia

  4. Agriculture IndicatorsStill very important • Agricultural land: 5.7 million ha • Arable land: 4.2 million ha • 87% private ownership • Around 0.7 million farms • Average farm size: 3 ha (10.6) • Share of primary production is 14 percent inGDP

  5. Serbia’s wealth measured by the GNI is at the level of developing countries Share of agriculture in the GNI is at the level of African countries

  6. Farm Capacities Policy Challenge To encourage them to transfer to productions of a greater value or to become commercial farms Ensure for them further development and enlargement Create methods for them to develop a democratic decision-making structure and to transform them to serve producers Restructuring and privatization Important for providing food and food safety, so that they should have access to inputs, but are outside commercial flows

  7. Production Index2000 – 2005 (previous year = 100) Trend line

  8. Production Trends 2000 – 2005

  9. Trade in Agricultural Products (mill. USD)

  10. Trade with EU (mill USD)

  11. Rural Areas

  12. Despite the several-decade long trend of social and economic devastation, 44% of the inhabitants of Serbia live in the village Share of rural population in total population • Criteria for measuring the rural population • A lot or a little • Effects of the increase of the population in rural areas? • - Expense • + Real estate value • + Use of living space • + Balanced development • + ...

  13. Almost all village inhabitants are engaged in agriculture, and for a third this is their main activity Share of agricultural population in the total urban and rural population • Still a very high share of the agricultural population • Underdevelopment of other sectors • Short-lasting refuge • Economic growth / Development of the service sector in rural areas / Rural diversification

  14. Leaving villages Number of villages in Serbia

  15. Leaving villages Process of the population’s migration from villages to towns • Being engaged in agriculture is a difficult and painstaking process • Marginalization of the village (disparaging and belittling attitude to the village) • Entertainment and recreation practically do not exist in rural mountainous areas • Problem of finding a spouse • Petar Bjelica, Ph.D. Number of settlements where population growth has been registered (53-91) Number of settlements where population reduction has been registered (53-91) 1856 4087

  16. Tasks of the Rural Policy Drawing up a National Action Plan for the development of the village and support to the drawing up of regional and local action plans Creation ofspace for the affirmationanduse of territorial specificities Decentralization of support to rural developmentthrough the development of an interactive link between Government institutions and the local community Support to economically valuable projectscreated at the level of the local community and individuals in rural environments, as well as the promotion and exchange of examples and good practices with similar areas.

  17. Tasks of the Rural Policy Supportto the development of sustainable agriculture with autochthonous products that have a geographic origin, the development of processing and the local market through the promotion of rural, agro and ecological tourism Harmonizing economic interests in agriculture with interests of environmental protection and the reduction of agriculture-related contamination

  18. Rural Poverty

  19. Rural Poverty Large and considerably larger than among the urban population

  20. Rural Poverty Regional imbalance and critically large in certain areas

  21. What are the main causes of poverty increase/reduction in rural areas Annual variations and dependence on natural conditions • The still large impact of agricultural production on poverty • A considerable number around the poverty line • A larger impact on temporary, and not chronic poverty • The need to find a way to minimize the impact of an extremely bad year

  22. Price drop due to larger supply Price increase due to lower supply Quantity Supply Demand Price

  23. Price drop due to larger supply Price growth due to lower supply Quantity Supply How to minimize the impact of extremely bad years when we have a shortfall in all productions and a considerably reduced demand due to the high price which cannot compensate for the drop in production? Demand Price

  24. What are the main causes of poverty increase/reduction in rural areas Development of the infrastructure which is to offer the basic services • Link between education and poverty • Basic access to health institutions • Larger expenses due to inaccessibility (of green markets, the hospital) • ...

  25. What are the main causes of poverty increase/reduction in rural areas Agrarian policy and state policy • Industry/services - agriculturetransfer • Agricultural producers - consumerstransfer • Non-functioning of the farmers’ pension system • Policy resulting in refugee, IDPs… • ................

  26. ECONOMIC GROWTH AND DEVELOPMENT • ABSORBING THE TRANSITION SHOCK • SOCIAL WELFARE MEASURES

  27. Main strategic directions

  28. Agrarian budget 2000-2006 (million dinars) (25 bn dinars = 270 million euros in 2006)

  29. Modernization of Agricultural and Adjustment to theWTO & EU Budget Goal 2005 … +1…..______________n_______________….-1…..EU

  30. Support Structure

  31. 2. Alleviating transition shocks 1. Economic growth and development 2. Alleviating transition shocks 3. Social welfare measures Main Policy DirectionsPolicy Separation • MARKET SUPPORT: The abolition of support to prices and payments by hectare and replacement with subsidies for inputs (a reduction from 90% to 38%) • STRUCTURAL SUPPORT: Introduction of payments for rural development to support investments (25% of total support) • CREDIT SUPPORT: Introduction of credit support (22%) • INCOME SUPPORT: Considerable support for income(12%)

  32. 1. Economic Growth and Development

  33. PROPOSED STRATEGY, Novi Sad, 12 November, 2004

  34. Rural Development and Investment Support

  35. Rural Development and Investment Support

  36. Peć Istok Zubin Potok Zvečan Leposavić Kuršumlija Tutin Novi Pazar Raška Sjenica Prijepolje Nova Varoš Ivanjica Priboj Čajetina Užice Bajina Bašta Nova Crnja Žitište Sečanj Beočin Irig Alibunar Kovin Majdanpek Žagubica Bor Boljevac Soko Banja Knjaževac Svrljig Bela Palanka Gadžin Han Pirot Babušnica Dimitrovgrad Crna Trava Surdulica Bosilegrad Trgovište Preševo Kačanik Štrpce Prizren Opolje Gora Dečani Kladovo Kučevo Less favorable areas (Areas with poorer conditions for agricultural production) INCENTIVES OF THE MAFWM FOR 2006

  37. LFA • A marginal area is an area of a municipality on whose territory there exist • natural (high altitude, poor land quality, slanting terrain, floods and all types of erosions) and • legal (protection of nature and protection of water sources) restrictions for the development of intensive agricultural production on large areas. • Insufficiently developed areas (Law on Insufficiently Developed Areas of the Republic of Serbia for the period until 2005, Official Gazette of RS number 53/95 – settlements in the territories of the mentioned municipalities from articles 3 and 4 including the municipal center), • The altitude of the settlement, i.e. the area where the investment is being realized, above 600 m and • Protected areas – national parks and areas of exceptional natural value of special importance (Law on the Spatial Plan of the Republic of Serbia, Official Gazette of RS number13/96).

  38. Dependence on demand Grants for rural development

  39. Subsidies for introducing standards

  40. 2. Alleviating the Transition Shock

  41. Fuels Input subsidizing Fertilizers INCREASED CONSUMPTION 100 liters 16 dinars Registered Finding new markets Consumption growth on existing market Increased purchasing power Lowering of cost price 30% refund with a receipt Integration Better product marketing Introduction of new technologies

  42. Funds of the agrarian budget Bank funds Change in the payment system through the establishment of a register • The establishment of a credit history (acquired trust) • Changed structure Necessary funds 2004 2005 2006 2007 2008 2009 2010 … Credit support • To develop the financing of the agricultural sector from real sources, instead of burdening producers • Development of a credit history • Increased competitiveness by enabling producers to gain access to capital • 5 – 7 years • 700 million to 1 billion EUR • To support the credit market with money from the agrarian budget • To withdraw and leave financing to banks MAIN GOAL: DURATION: NECESSARY FUNDS: ACTIVITIES:

  43. Short-term Credits in 2005 • A total of over 23,341 short-term creditspaid • Average credit value 69,879 dinars

  44. Long-term credits in 2005 • A total of over 1,923 long-term credits paid • Average value 16,188 EUR

  45. 3. Social Welfare Measures

  46. Main goals • Support to non-commercial farms • 40,000 dinars per household member • People above 55 years of age • Farmer insured for a minimum of 10 years

  47. 4.000 dinars + 4.000 dinars 4.000 dinars Development of a Land Leasing Market • the development of a land leasing market implying that the land is cultivated by the one who is able to do so in a more successful manner; • the joining of cultivated land; • support to households whose members are no longer able to cultivate their land due to their age. Producer above the age of 60 Producer below the age of 40 NEW

  48. Message • Poverty requires the special attention of all the factors of society and its reduction must be a priority • Without understanding the essence of lasting and occasional poverty it is impossible to check it • Rural poverty is the result of the long-lasting neglect of a balanced development, which is why it is necessary to establish coordination among all those who can contribute to its reduction

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