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"