Central Eastern Europe and the Newly Independent States

Promoting farmers’ access to marketsin transitional economies

IFAD operates in 8 CEN Countries

•Albania•Armenia•Azerbaijan•Bosnia and Herzegovina•Georgia•Macedonia•Moldova•Romania

Common Features Related to Agricultural Markets

• Countries are all former centrally-planned economies.

• Transition process, including market development, is still on-going.

• All have open trade regimes.

• 6 are WTO members and 2 are applying for membership (Azerbaijan and Bosnia and Herzegovina).

• All share an increasing interest in fostering market development & engaging in international trade.

Common Challenges in Accessing International Markets

• Poor and uneven quality standards.

• Poor knowledge and targeting of consumer demand/tastes.

• Difficulty in meeting OECD countries’ sanitary and phyto-sanitary rules and other non-tariff-barriers to trade.

• Poor development of international marketing channels.

• Political and security issues.

Common Challenges in Local Market Development

• Poor infrastructure and high transport costs.

• Old and inefficient processing units.

• Lack of market information.

• Vertical linkages poorly developed.

1

• Difficulties in accessing financial services.

• Institutional problems: – Under-developed property markets– Contracts are not well enforced – Lack of official grades & standards – Poor regulatory framework

Common Challenges in Local Market Development

2

• Poor access to inputs and extension services to increase productivity.

• Poor management know-how in new market environment.

Market Access Challenges Faced by Small Farmers

1

• Difficulties in organizing small producers in order to have more bargaining power and reduce transaction costs.

• Old and degraded production & market infrastructure (e.g: irrigation, processing units, storage, rural roads).

Market Access Challenges Faced by Small Farmers

2

Creating vertical market linkages in Albania, Bosnia and Herzegovina, and Macedonia via investment projects

– Organizing producers into associations

– Supporting contract farming

– Assisting traders/processors

What is IFAD doing?

Fostering delivery of rural financial services to smallholders, farmers and rural businesspeople, and assisting in the creation of new financial institutions focused on agricultural credit in several countries.

– ACBA in Armenia

– MAFF in Albania

– ACDF in Macedonia

– Credit Unions in Georgia and Moldova

What is IFAD doing?

Mobilizing supplementary funds in support of marketing initiatives

– Facility for Farmers’ Access to Markets in the Balkans – supported by the Italian Govt

– Swedish Bilateral Assistance to ACDF in Macedonia

– DFID Assistance to Albania’s MAFF and MADP

What is IFAD doing?

Funding a study to analyze the comparative advantage and marketing of agricultural products in the CEN region.

What is IFAD doing?

PHASE I – Comparative Advantage Analysis

• Focus on underlying costs and profitability.• Identify most profitable investments.

PHASE II – Market Chain Analysis

• Market Chain Analysis of 1-2 Commodity Groups per Country (Albania, Georgia, and Moldova).

• Opportunities for strategic intervention.

Thematic Study on Comparative Advantage and Agricultural Marketing in CEN

• Smallholder farmers are often lower cost and more profitable than large-scale producers.– Contradicts the popular notion that land reform was

inefficient.– Supposedly “more advanced” systems

not necessarily the best choice.

• Perennial crops are more profitable than annual crops (e.g. fruit trees).

Results from Phase 1

• Vegetables are also profitable (but could be more difficult to market).

• Switch from low value annual crops is essential for poverty reduction.

• Livestock is an important sector (especially in mountain areas).

Results from Phase 1

• Given the profitability and the potential role of smallholder agriculture in reducing poverty, how can we support it?

– How do we support the shift from low to higher value production?

• What type of institutional reforms are needed (grades and standards, quality control, contract law and regulations, public versus private responsibilities)?

• What should be the focus of future IFAD investment projects?

Key Discussion Questions