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PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: 47914 Project Name Montenegro Institutional Development and Agriculture Strengthening (MIDAS) Region EUROPE AND CENTRAL ASIA Sector General agriculture, fishing and forestry sector (80%); Agricultural extension and research (20%) Project ID P107473 GEF Focal Area Land Degradation Global Supplemental ID P110602 Borrower(s) Republic of Montenegro Implementing Agency Ministry of Agriculture, Forestry, and Water Management of Montenegro Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared October 30, 2008 Date of Appraisal October 17, 2008 Authorization Date of Board Approval April 21, 2009
1. Country and Sector Issues
Overcoming the constraints to the development of the agriculture sector, and rural space more generally, calls for effective public sector actions to create an enabling environment for the private sector through policies, services, support programs and investments at the national and local levels. To achieve this, Montenegro should move away from a traditional system of subsidizing particular agricultural inputs and outputs, and instead develop a more holistic approach to supporting rural development. In particular, in line with recent developments in the EU Common Agricultural Policy (CAP), Montenegro’s agricultural support programs should be increasingly decoupled from production and focus more on support for measures to encourage rural development more broadly and enhance the competitiveness of the agricultural sector. Improvements in land use and the management of natural resources for environmental values are also necessary. The Government of Montenegro (GoM) has recognized the need to transform its agricultural support programs, but it requires assistance in filling the gaps in capacity and resources required to modernize its institutions and improve the services provided to rural households in a manner compatible with EU requirements.
Agriculture continues to be important for Montenegro’s rural economy, providing an important source of employment, income generation, and food security for some of the most vulnerable segments of society, particularly in the mountainous north where there are few other opportunities. Moreover, in light of the recent food price crisis, largely a result of growing demand and high energy prices, agriculture is becoming increasingly valuable for reasons of food security. In 2006, the sector accounted for an estimated 10% of GDP and 4.9% of total exports.1 Agriculture has been growing steadily at an average 2.4% annually from 2002 to 2006, with certain sub-sectors generating significantly higher growth, such as fruits at over 10%. As of
1 Source: MONSTAT July 2008, food price inflation was 10.5% year-on-year, up from 6.6% for 2007. Although according to Montenegro’s Statistical Office (MONSTAT) formal reported employment in agricultural enterprises represents only 1.7% of the total (2,607 out of 150,800), the actual percentage of the Montenegrin population active in agriculture, including the informal sector, is much higher. Surveys reveal an agricultural labor force of 11,902, while official estimates point to a total of around 55,000 rural households in Montenegro.2 The agriculture sector remains the most significant sector in the rural areas. About 32% of the total Montenegrin population of 620,000 still resides in rural areas, and for these people an estimated 70% of overall income is generated from agriculture.
Given its significance for the rural economy, agriculture is also highly important for poverty reduction in Montenegro, with 58% of the poorest quintile of the population living in rural areas. Related sectors including forestry and bee-keeping provide additional income-earning opportunities for the rural population, and forests constitute an important source of heat energy. Agriculture also often plays a role of social buffer for the most vulnerable segments of the population, particularly for the elderly and those who lost employment in the industrial sector during the transition. Further, Montenegro has a wealth of environmental resources, and agriculture has important implications for the management of these resources. Agricultural land covers 37.5 % (517,097 ha) of the country, of which approximately one third is arable land and two thirds are pasture.
Comparative advantages of Montenegro’s agriculture include its moderate and diverse climate, relative abundance of labor and water resources, and market opportunities in nearby EU countries as well as the rapidly developing domestic market. Yet, Montenegro is a net importer of agricultural products. While the country is predominantly mountainous and production of field crops such as wheat and maize is limited to a few areas, the growing tourism industry demands significant volumes of fruit, vegetables, and meat which could be sourced locally. However, the quality and productivity of local farming are constrained by the dominance of small-scale farms producing only small amounts for the market, limited investment resources, inadequate advisory and extension services, a poor knowledge base, insufficiently developed food supply chains, low levels of technology, and limited capacity to meet increasingly important food safety, environmental, and animal and plant health standards. Meanwhile, a growing number of challenges make the external environment even more difficult for farmers. High energy prices put additional pressure on farmers and processors to improve productivity. At the same time, high food prices provide an opportunity for commercial agriculture. In addition, as with other countries in the region, increasing trade liberalization and modernization of Montenegro’s economy as a result of the country’s long-term development goal of EU and World Trade Organization (WTO) membership are transforming the agricultural sector. While trade opportunities are substantial, unless producers and agri-processors can become more productive they will have difficulty competing with low-cost, high-quality imports in both domestic and external markets.
To increase competitiveness, required measures include investments to help farms restructure and upgrade to EU standards and satisfy cross-compliance requirements on food safety,
2 The need for better identification of rural households is one of the main motivations for including support for an Agricultural Census in the project. The Population Census conducted in 1991 included an agricultural module, and recorded a total of 61,000 rural households. The last Agricultural Census was in 1960. environment, and animal and plant health; actions to improve the environment and the countryside; improvement and development of rural infrastructure and services; and diversification and development of rural economic activities. Extension services need to develop their capacity in order to reach more farmers and respond to needs for advice in areas such as business management skills and agri-environment, and need to become more demand-driven. Investment in the sanitary and phytosanitary (SPS) system is needed to improve food safety conditions and expand access to export markets. Finally, Montenegro needs to ensure that it uses public resources for agricultural development efficiently and effectively, including making full use of expected EU support when it becomes available under the Instrument for Pre-Accession Assistance for Rural Development (IPARD), which provides grant resources for investments in modernizing agricultural holdings, improving the rural environment, and development of the rural economy. The IPARD allocation for Montenegro is projected to be in the range of € 2.6 to € 6.7 million per year and will become available as soon as Montenegro obtains the official status of EU candidate country. This support could simultaneously help improve competitiveness of farmers and processors in Montenegro, promote the sustainable development of rural areas, and advance Montenegro’s EU pre-accession agenda. But accessing and making the most of these resources will require substantial development of institutional and administrative capacity in line with EU pre-accession requirements. A recent agricultural public expenditure review, while recognizing that improvements had been made, found significant scope for improving the composition and quality of Montenegro’s public spending for the sector.3
Accessing EU IPARD funds requires significant institutional investments and regulatory adjustments, including establishing a Management Authority within the Ministry of Agriculture, Forestry and Water Management (MAFWM) for the formulation and implementation of Agriculture and Rural Development Strategies and Plans; setting up an EU IPARD Paying Agency; co-financing of EU IPARD projects; establishing systems and databases needed for EU IPARD payments, such as an Integrated Administration and Control System (IACS) and an Agricultural Information System (AIS); and capacity to help potential beneficiaries meet cross- compliance requirements on food safety, environment, and animal and plant health. These investments will require a major increase in the absorption and training of staff members in MAFWM on the basis of a comprehensive Systematization Plan for the Ministry.
While agriculture presents important opportunities, the development of a diversified rural economy is also critical for Montenegro’s future. For rural livelihood sustainability, Montenegro should develop opportunities for providing additional products and services based on evolving market demand and Montenegro’s other comparative advantages. Montenegro benefits from a wealth of environmental amenities, including many relatively pristine wild habitats with spectacular landscapes, ecologically important mountain river basins and a rich biodiversity of flora and fauna. Montenegro is geographically diverse, with a narrow coastal strip and an interior comprised mainly of high mountain massifs intersected by picturesque deep river valleys and gorges. Although the coastal areas of the country have seen rapid development as a result of tourism, the northern mountainous regions are some of the least developed and economically depressed areas of the country. Parts of the north are still relatively intact ecologically and there is strong potential for expanding and diversifying tourism to these areas, which is one of the
3 Montenegro Agriculture Expenditure Review, Karin Fock, FAO Consultant, 2007. country’s top development priorities. There are five river basins in Montenegro that contribute to the Danube River watershed (Tara, Lim, Piva, Ibar and Cehotina). Two of these, the Tara and Lim River basins, encompass nearly 50 percent of the mountainous interior of the country. The entire basin of the Tara River, one of the last wild rivers in Europe, is a UNESCO Biosphere Reserve, and it contains the unique Tara River Canyon and the Durmitor National Park, designated as a World Heritage site. The Tara River is particularly known for its large populations of several Salmonid fish species. The Biogradska Gora National Park lies near the conjunction of the Tara and Lim River basins. On the western side of the country, the Cijevna, Moraca and Zeta Rivers flow into the Lake Skadar Basin, and on into the Adriatic Sea. The wetlands surrounding Lake Skadar are of international importance as designated under the Ramsar Convention. Furthermore, over 52% of Montenegro is covered with forests and woodlands, with the majority in the central and northern regions. These forests play an essential role in controlling flooding, reducing soil erosion and sedimentation, and conserving biodiversity. They are also economically important for local communities for collection of fuel wood and non-timber forest products and as an asset for tourism.
Nature-based tourism is often regarded as the best opportunity for sustainable rural livelihood diversification in Montenegro. However, forestry, fisheries, hunting, and beekeeping can also play a role. This is particularly true for poor mountainous areas in the north of Montenegro that have significant environmental value and limited scope for large-scale, intensive agricultural production. However, all of these activities are currently practiced at low levels of productivity and investment, and require significant modernization and improved coordination. In addition, natural and agricultural ecosystems and rural livelihoods are under increasing threat from several sources, including soil erosion, deforestation, increased intensity and impact of flooding, water pollution, uncontrolled dumping, and unregulated housing and tourism development. Lake Skadar is threatened by agricultural pollution. Though extensive deforestation has largely been avoided so far, many forest areas have been degraded through legal and illegal cutting, which contributes greatly to soil erosion and flooding problems. The uncontrolled exploitation of other economically valuable wild flora (edible and medicinal plants) and fauna has had a substantial impact on forest biodiversity.
GoM has made a strong commitment to environmentally sustainable development through its Declaration on Montenegro as an Ecological State (1991), and in its Constitution (October 2007) which begins by defining Montenegro as a “civic, democratic, ecological, and social justice state…” Its long-term sustainable development strategy (“The Directions for Developmental of Montenegro as an Ecological State”) calls for integrating environmental considerations into other policy areas.
2. Objectives
The Project Development Objective is to improve delivery of government assistance for sustainable agriculture and rural development in a manner consistent with the EU’s pre-accession requirements. Key outcome indicators are: (i) Ministry of Agriculture, Forestry and Water Management (MAFWM) capacity to disburse and track the use of rural development funds and to evaluate their impact in line with EU IPARD requirements; (ii) EU IPARD compatible rural development measures fully integrated in MAFWM support programs; and (iii) food safety system upgraded in EU compliant manner. Global Environment Objective
The Global Environment Objective is to mainstream sustainable land use and natural resource management into MAFWM’s policies, programs and investments. These efforts will be particularly critical for the north of Montenegro, where there are sensitive mountain ecosystems of global importance, and where poor rural residents are largely dependent on the natural resource base for their livelihoods. Key outcome indicators are: (i) agri-environmental measures integrated into MAFWM’s rural development program; and (ii) improved capacity of extension and advisory services to introduce agri-environment measures.
3. Rationale for Bank and GEF Involvement
In its recent strategy for the agri-food sector, MAFWM has highlighted the need to transform its approach from a traditional agricultural production orientation to a wider role in promoting balanced rural development that also includes the environmental, social, and cultural importance of agriculture, as well as diversification of rural livelihoods and alternative enterprise development.4 GoM has requested the World Bank’s assistance in addressing the challenges and constraints outlined above and transforming agricultural support into support for rural development. Specifically, GoM has requested assistance for reorganizing and strengthening the capacity of MAFWM to better support the rural population through agricultural and rural development. In addition, it seeks assistance in building the institutions necessary to meet EU accession requirements and to access and absorb pre-accession assistance for which it expects to become eligible. Further, GoM has requested Bank funds to strengthen key components of Montenegro’s food safety system. Lastly, it has requested GEF funds to promote the mainstreaming of sustainable land use and natural resource management into MAFWM’s support programs.
This ambitious reform agenda will place substantial financial and technical demands on GoM, and in particular MAFWM. Donors such as the EU, UNDP, USAID/USDA, and GTZ have targeted their support programs at helping MAFWM and farmers and processors modernize and adjust to EU pre-accession requirements. However, considering that these programs provide mainly technical assistance and overall have limited budget resources, substantial funding and knowledge gaps remain. By providing complementary investment support and technical assistance, the proposed project will not only support sustainable agricultural growth and rural development in Montenegro, it will also advance the country’s EU pre-accession agenda. In addition, it will leverage the impact of ongoing and planned EU and other donor support to the agriculture sector. The Bank team has maintained close coordination with the relevant EU agencies throughout the preparation process to ensure complementarity. Agreement was thus reached that technical assistance financed under the project will mostly serve as a bridge until EU Instrument for Pre-accession Assistance (IPA) 2008 funding for technical assistance is implemented beginning in late 2009. Project financing will instead be used primarily for
4 Montenegro’s Agriculture and European Union: Food Production and Rural Development Strategy, Ministry of Agriculture, Forestry and Water Management, the Republic of Montenegro, 2006. investments. The Bank has had successful recent experiences with similar projects in other Western Balkan countries.5
The GEF could play a major catalytic role in mainstreaming sustainable land use and natural resource management into Montenegro’s rural development policies. While GoM has made strong commitments to the environment through its declarations, Montenegro lacks the experience, tools and resources to make these commitments a reality. Neither MAFWM nor the extension services currently have any environmental programs, or staff dedicated to addressing environmental issues. There is no Code of Good Agricultural Practices (CGAP) to lay out an approach. While good environmental practices complement EU agricultural support programs, in practice previous EU candidate countries have allocated little or no resources to agri- environment measures. By supporting the development of environmental capacity in Montenegro’s Rural Development Unit and extension and advisory services, providing training for farmers in agri-environment, and providing grants for environmental investments, GEF can help ensure that sustainable land use and natural resource management is mainstreamed into these institutions from the beginning. That will significantly increase the chances of GoM investing more resources in agri-environmental programs in the future. It will do this through measures consistent with Strategic Program 1 of the GEF-4 Land Degradation Focal Area: by supporting sustainable agriculture and rangeland management. In particular, the project will promote the sustainable management of the ecologically important but vulnerable mountain ecosystems of Montenegro, with an emphasis on the north of Montenegro, where most of the rural, agricultural households and ecologically important mountain areas are found. Not only will the measures supported under the project improve the sustainability of land management, they will also likely have important benefits in terms of preserving biodiversity, improving the quality of water in rivers flowing into both the Black and Adriatic Seas, and increasing the resilience of rural livelihoods to the anticipated negative consequences of climate change.
4. Description
The project will have three components: (1) Strengthening MAFWM’s rural development program; (2) Strengthening MAFWM’s administrative and management capacity in accordance with EU pre-accession requirements; and (3) Project Management, Administration, and Monitoring.
Component 1: Strengthening MAFWM’s rural development program (Total Cost: EUR 5.51 million to be financed by IBRD; GEF EUR 2.41 million; and GoM EUR 0.59 million)
Sub-component 1.1. Increasing rural development funds for target measures and areas
This sub-component will finance, on a cost-sharing basis, rural development sub-projects through the provision of grants to private farmers, processors, other rural enterprises, farmer organizations, and community groups to support targeted rural development measures that are compatible with the three priority Axes of the EU IPARD program. The implementation experience of these measures will inform, and could be incorporated into, the EU IPARD compliant rural development program, which MAFWM will develop with EU support under IPA
5 Including Croatia, Serbia, Macedonia, and Bosnia and Herzegovina. 2008. In particular, the project will support investments in agricultural holdings, and the processing and marketing of agricultural and fishery products to strengthen the overall competitiveness of commercially-oriented producers and processors in Montenegro (EU IPARD priority Axis 1). In addition, the project will support the development of the rural economy in Montenegro by financing investments in income diversification activities in rural areas (EU IPARD priority Axis 3). Furthermore, GEF grant resources will be fully blended in the rural development grants program and used to finance sub-projects, on a cost-sharing basis, through the provision of grants to support agri-environmental measures that are compatible with priority Axis 2, as well as the GEF Land Degradation window. These include: (i) on-farm investments to protect water resources, prevent soil erosion, and regenerate pasture; and (ii) community- based agri-environment initiatives. Private individual farmers and rural enterprises, as well as producer organizations, NGOs, tourist associations, and community groups, will be eligible to apply for GEF-financed grants under Sub-component 1.1 to support environmental investments.
Sub-component 1.2. Strengthening extension and advisory services
This sub-component will strengthen the extension and advisory services' ability to: (i) provide potential beneficiaries of rural development grants with support and guidance on meeting cross- compliance requirements and EU standards, developing business plans, and preparing grant applications; and (ii) obtain information required for the further development of the existing Market Information System (MIS) involving collection and dissemination of price information, and development of a Farm Management and Record-Keeping Program. The project will finance technical assistance, training, study tours, Information Technology (IT) and office equipment for the staff of the 12 regional centers and headquarters, refurbishment of facilities, and logistical support for the extension and advisory services as well as workshops and training for potential grant beneficiaries. In addition, GEF grant resources will be used to strengthen the extension and advisory services’ capacity in relation to agri-environment, to build the capacity of farmers in agri-environment, and to develop and implement a Code of Good Agricultural Practices (CGAP) that will mainstream sustainability into agricultural practices. GEF resources will also finance technical assistance, training and study tours for extension and advisory officers as well as workshops and training for farmers and rural communities on the CGAP.
Component 2: Strengthening MAFWM’s administrative and management capacity in accordance with EU pre-accession requirements (Total Cost: EUR 5.07 million to be financed by IBRD; GEF EUR 0.21 million; and GoM EUR 2.36 million)
Sub-component 2.1: Administering EU compatible agriculture and rural development support programs
This sub-component will support the establishment of an EU IPARD-compatible Rural Development Unit/Management Authority responsible for planning, programming, and organizing the rural development program within MAFWM, as well as evaluating the results. It will also support the establishment of a financially independent and EU IPARD-compatible agriculture and rural development payment system to manage the grant funds provided by the project and GEF as well as by national support programs. This system, consisting of the Rural Development Unit and the Proto-Paying Agency, will administer support for agriculture and rural development measures and gradually move towards EU IPARD compliance. Furthermore, this sub-component will support the development and implementation of MAFWM’s broader Systematization Plan. The project activities will complement EU support under IPA 2008 for the establishment of an EU IPARD programming and implementation system. The project will finance renovation or construction of appropriate facilities; IT and office equipment; office refurbishment; logistical support; technical assistance and training; and workshops and other information activities to inform stakeholders about MAFWM’s rural development programs. The technical assistance and training provided by the project for these activities will serve as a bridge until EU IPA 2008 funding for technical assistance is implemented in late 2009. In addition, GEF grant resources will finance technical assistance and training in agri-environment for the Rural Development Unit.
Sub-component 2.2: Modernizing agriculture information management systems
This sub-component will support the preparation and implementation of the main Agricultural Census and the publication of the results. This is necessary in order to accurately identify the number and size of agricultural households, farm types, assets and production levels, and is a fundamental requirement for the preparation of rural development policies and for designing effective rural development support programs. In addition, it will help build key elements of an Integrated Administration and Control System (IACS) through: (i) the development of an integrated Farm Register on the basis of a unique farm code; and (ii) the preparation of associated cadastre maps for vineyards, and olive and/or fruit orchards. The project activities will complement EU technical assistance under IPA 2008 for an EU IPARD programming and implementation system. The existing Animal Identification and Registration System for bovines, which was established and will be further developed by MAFWM with EU support under IPA 2008, will be fully integrated into the Farm Register. The project will finance technical assistance, training, operational, and publication costs for the preparation and implementation of the main Agricultural Census; farm register software development; IT and office equipment; office refurbishment; workshops for local stakeholders; and logistical support. GoM financed a pilot census that was carried out recently to test the methodology for the main Agricultural Census.
Sub-component 2.3: Creating a modern food safety system
This sub-component will support a series of investments in food safety infrastructure in Montenegro that will complement EU technical assistance under IPA 2008 for the development of food safety services. It will help upgrade National Reference Laboratories (NRLs) in the area of veterinary and seafood diagnostic testing in accordance with international standards.6 In addition, it will help upgrade the phytosanitary and veterinary Border Inspection Posts (BIPs) in the Port of Bar and establish a system for the safe disposal of animal by-products. The project will finance technical assistance for the preparation of feasibility studies and business plans; laboratory equipment; IT and office equipment; logistical support; and civil works.
The project will also support a preliminary screening of private food processing establishments in Montenegro. Further, the project will provide technical assistance to: (i) carry out and
6 Specifically, ISO standard 17025. evaluate the feedback from the preliminary screening; (ii) classify establishments; (iii) identify priorities and targeted interventions; (iv) elaborate the modalities of a work plan for on-site supervision and verification inspections; (v) define the job description of staff involved in the inspections; and (vi) devise reporting and evaluation arrangements. The technical assistance financed by the project will be accompanied by targeted investments supported by the project through the EU IPARD compatible rural develop grants program (EU IPARD Priority axis 1) under Sub-component 1.1. Investments will generally aim to improve food processing facilities, infrastructure, equipment and procedures – particularly by introducing GHP/GMP pre-requisite programs and Hazard Analysis and Critical Control Point (HACCP)-based procedures.
Component 3: Project Management, Administration and Monitoring (Total Cost: EUR 0.42 million to be financed by IBRD; and GEF EUR 0.17 million)
This component will build capacity within MAFWM to manage the day-to-day implementation of the project as well as monitor and evaluate its impact. It will support the establishment of a minimal Project Management Team (PMT) under the direction of the Deputy Minister of MAFWM and comprised of a Project Manager, a Monitoring & Evaluation (M&E) Specialist, and a part-time Environment Specialist. The IBRD loan will finance the consultant services of the part time Environment Specialist. It will also finance all PMT (i) training expenditures, (ii) IT and office equipment, (iii) financial audits, and (iv) incremental operating costs. In addition the loan will finance, on a pro rata basis with other World Bank-financed projects in Montenegro: (i) consultant services of the Technical Service Unit (TSU) under the Ministry of Finance (MoF), and (ii) project-related communication and office supplies costs for the TSU. GEF grant resources will finance consultant services for the Project Manager and the M&E Specialist.
5. Financing Source: EUR (million) BORROWER/RECIPIENT 2.95 International Bank for Reconstruction and Development 11 Global Environment Facility (GEF) 2.8 Total 16.75
6. Implementation
MAFWM will be the lead Implementing Agency for the project responsible for project management. A Project Steering Committee (PSC), chaired by the Minister of Agriculture, Forestry and Water Management, will be maintained by MAFWM to ensure inter-institutional coordination and provide overall project oversight.7 It will also recommend, as required, changes to the Project Operational Manual and the Grants Operational Manual and submit these to the World Bank for approval. The composition will resemble the structure of the Rural Development Monitoring Committee required under the EU IPARD program, which could help
7 In addition to the Minister of Agriculture, members of the PSC will include representatives of the Ministry of Finance (MoF), the Biotechnical Institute, the Marine Biology Institute, MONSTAT, the Port of Bar Border Inspection Post, the Veterinary Directorate, and the Diagnostic Veterinary Laboratory. The PSC will also include representatives of beneficiaries (civil society, local institutions, private sector) such that the PSC resembles the structure of a Rural Development Monitoring Committee as required under the EU IPARD program. maintain this inter-institutional coordination mechanism beyond the life of the project. The Deputy Minister for Agriculture will be the Project Coordinator. Two additional full-time personnel, namely a Project Manager and a staff member responsible for M&E, will be engaged in the Project Management Team (PMT) under the direction of the Project Coordinator. A part- time Environment Specialist will also be engaged in the PMT. Fiduciary responsibilities, including procurement and financial management and disbursement will be carried out by the existing central Technical Service Unit under the Ministry of Finance.
Relevant units within MAFWM and entities including the Biotechnical Institute, MONSTAT, the Marine Biology Institute, the Port of Bar Border Inspection Post, and the Diagnostic Veterinary Laboratory, will be responsible for the technical implementation (i.e. preparing terms of reference and technical specifications, preparing training programs, supervising consultants and advisors, participating in procurement evaluation committees, etc.) of project activities. Project Activity Coordinators (civil servants) who will be responsible for coordinating and facilitating the technical inputs for the Project Management Team have already been appointed by MAFWM.
7. Sustainability
Sustainability of the project activities beyond the implementation period will be high as the project will be embedded in the broader framework of Montenegro’s pre-accession agenda with the EU. The institutional capacity building activities supported under the project will ensure that MAFWM has improved institutional and human resources to deliver agricultural and rural development services and assistance to farmers and processors as well as access future rural development assistance under the EU IPARD program, when it becomes available to Montenegro. Moreover, the project will ensure that rural communities, farmers and processors have improved awareness and capacity to effectively leverage future EU IPARD assistance. Lastly, the use of MAFWM staff to implement the project will ensure sustainability as experience developed during the project will be retained within the government.
8. Lessons Learned from Past Operations in the Country/Sector
The preparation of this project has benefited significantly from recent World Bank and GEF- financed projects and analytical work in the agriculture sector in countries of the Western Balkans with similar objectives associated with EU pre-accession requirements, including Croatia, Serbia, Macedonia, and Bosnia and Herzegovina.8 The principal lessons from these operations and studies are closely reflected in the project design, including the need for improved management of public expenditures; the need for timely investments in an EU IPARD Paying Agency and mechanisms to assist potential EU IPARD beneficiaries; the need for mainstreaming agri-environmental measures in agricultural support programs; the need for investment support
8 World Bank operations include: Croatia Agricultural Pollution Control Project (GEF); Croatia Agricultural Acquis Cohesion Project (IBRD); Serbia Transitional Agriculture Reform Project (IBRD/GEF); Macedonia Agriculture Strengthening and Accession Project (IBRD); Bosnia and Herzegovina Agriculture and Rural Development Project (IDA). World Bank publications include: World Bank (2008/Forthcoming), The Future of the Agriculture Sector in the Western Balkans, 110pp; World Bank (2007), Albania: Strategic Policies for a More Competitive Agriculture Sector, 149pp; World Bank (2006), Agriculture and EU Accession: Achieving FYR Macedonia’s Agricultural Potential, 147pp.; World Bank (2006), Supporting Serbia’s Agriculture Strategy, 58pp. to farmers and processors in upgrading their activities in line with EU food safety, environmental and animal and plant health standards and cross-compliance requirements; and the need for an effective and efficient food safety system.
Countries that have recently joined the EU have also provided useful lessons in meeting EU requirements in agriculture. Foremost is the need to prepare to receive EU IPARD payments in order to reap the maximum benefits from these funds. In some countries it took longer than expected to accredit the EU Special Assistance Program for Agriculture and Rural Development (SAPARD) Paying Agency, resulting in delays in access to EU SAPARD funds to which they were entitled.9 In Romania, access to allocated EU SAPARD funds for the period 2000-2006 (EUR 1.1 billion) suffered a delay of 2 years due to delays in obtaining EU accreditation for the SAPARD Paying Agency and selected rural development measures. In addition, initial disbursement rates were low as farmers found it difficult to apply for funds because application procedures were overly complicated and advisory services were inadequate, and because many potential applicants were unable to identify sources of mandatory pre-financing and co- financing. To disburse all the available funds in a timely way, the government eventually resorted to measures such as subsidization of rural credit, which created credit market distortions and resulted in sub-optimal use of funds. In Bulgaria, EU SAPARD funds to an estimated amount of EUR 140 million were frozen by the European Commission in March 2008 due to the Paying Agency’s inability to select projects and disburse funds in accordance with the established EU procedures. These experiences have informed the design of Components 1 and 2 of the project as demonstrated by their focus on supporting the establishment of an EU IPARD compatible Paying Agency, application support to beneficiaries and helping beneficiaries identify sources of pre- and co-financing.
Regarding food safety, the project design is intended to (i) support National Reference Laboratories in their routine work linked with official policies and structured programs for disease surveillance and control, and (ii) to make it easier for producers to achieve EU standards and receive EU-compliant certification, and take advantage of growing opportunities in external and domestic markets. Lessons learned from past experience highlight the need for efforts to: (i) raise awareness of producers, processors, and consumers regarding food safety risks and management responsibilities (being covered under Component 2.3); and (ii) facilitate the adoption of improved, safer, more environmentally sound production and management practices by farmers and processors (facilitated by the rural development grants program and advisory services included under Component 1).
Lastly, experience has demonstrated that environmental activities are more appealing to farmers and rural communities when accompanied by income-generating activities, while income- generating activities are more sustainable when accompanied by environmental measures. In view of this, the project has blended GEF grant resources into the rural development grants program under Component 1 with a view to increasing the overall effectiveness of both the rural development and GEF grants.
9. Safeguard Policies (including public consultation)
9 EU SAPARD is the predecessor to EU IPARD, and was implemented along similar lines, making the EU SAPARD experience relevant to EU IPARD. Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [X] [ ] Natural Habitats (OP/BP 4.04) [X] [ ] Pest Management (OP 4.09) [X] [ ] Physical Cultural Resources (OP/BP 4.11) [X] [ ] Involuntary Resettlement (OP/BP 4.12) [X] [ ] Indigenous Peoples (OP/BP 4.10) [ ] [X] Forests (OP/BP 4.36) [X] [ ] Safety of Dams (OP/BP 4.37) [ ] [X] Projects in Disputed Areas (OP/BP 7.60)* [ ] [X] Projects on International Waterways (OP/BP 7.50) [X] [ ]
10. List of Factual Technical Documents
. Ministry of Agriculture, Forestry, and Rural Development (2006), Montenegro Agriculture and Rural Development Strategy, 167pp. . Montenegro Statistical Office (2007), Statistical Yearbook 2007, 347pp. . World Bank (2007), Montenegro: Agriculture Expenditure Review, 44pp. . World Bank (2007), Montenegro: Poverty Note, 37pp.
11. Contact point
William R. Sutton Title: Sr. Agricultural Economist Tel: (202) 473-1102 Fax: (202) 614-0174 Email: [email protected]
12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: [email protected] Web: http://www.worldbank.org/infoshop
* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas