Agricultural Kosovo Strategy Report

Final Deliverable

Kosovo Agricultural Opportunities Strategy

Pristina, Kosovo February 10, 2010

DISCLAIMER The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government

0 Table of Contents

Overview of Deliverable…...... 2

Baseline Analysis of Agriculture Sector……………………………..…………………..7 – Quantitative Baseline of Kosovo’s Agriculture Sector……...……………………8 – Overview of Constraints and Opportunities……..………………………………40 – International Best Practices Assessment………..…………………………….102

Recommendations to Improve Kosovo’s Agriculture Sector…...... ………………...142 – Overview…………………………………………...... ……………………………143 – Recommended Diversified Crop Mix for Kosovo…...... ………………………144 – Initiatives & Action Plan for Implementation………….....…………………….210 – Reaching Kosovo’s Overall Potential………………………….……………….268

1 Table of Contents

Overview of Deliverable

Baseline Analysis of Agriculture Sector

Recommendations to Improve Kosovo’s Agriculture Sector

2 The objective of this document is to present details of the Agricultural Opportunities Strategy, including findings from the analysis and recommendations for Kosovo’s agriculture sector Document Objectives

Over the course of nine weeks, the Booz Allen team, including an agronomist, analyzed in detail Kosovo’s agriculture sector. The team developed findings along three main areas, including a quantitative baseline of Kosovo’s agriculture sector, current constraints facing the sector and an assessment of best practices in agriculture around the world

Based on the analysis, the team developed recommendations in three main areas including: 1) a crop diversification initiative, including strategic crops of focus for Kosovo; 2) initiatives to address constraints in Kosovo’s agriculture sector; and 3) impact analysis showing the impact of the program on agricultural production and employment

The team has briefed the US Ambassador to Kosovo, members of the USAID Mission, “EU Plus” donor group and representatives of the Government of Kosovo on the findings of the analysis

3 The Agricultural Opportunities Strategy (AgStrat) comprised five steps that spanned a total of nine weeks Kosovo AgStrat Project Approach

Overall Project Duration: 9 weeks

2 CompleteComplete QuantitativeQuantitative BaselineBaseline andand ConstraintsConstraints AnalysisAnalysis Examine Kosovo’s export 1 performance according to 4 5 supply and demand DevelopDevelop ActionAction PlanPlan GaugeGauge StakeholderStakeholder RecommendRecommend CropCrop Study local and global trends && PrioritizePrioritize AspirationsAspirations && DiversificationDiversification forfor Examine current constraints InitiativesInitiatives forfor ConfirmConfirm ObjectivesObjectives and opportunities KosovoKosovo ImplementationImplementation Aggregate and review all Complete a study of the Recommend the actions GoK and USAID Kosovo 3 natural environment in and initiatives that will be reports, studies, Kosovo to determine what required to help Kosovo documentation ConductConduct can be grown in the reach its agricultural Reconfirm stakeholder InternationalInternational BestBest country potential objectives, guiding PracticePractice AssessmentAssessment Prioritize crops that can be Prioritize actions based on principles and priorities grown based on economic their impact in terms of Test initial hypotheses Examine successful attractiveness, economic value of production and concerning agricultural initiatives of other countries to feasibility and production employment strategy improve agricultural and marketing chain Recommend timeframes, Synthesize implications on performance considerations sequencing and key objectives and guiding Undertake analysis of the Recommend a short list of counterpart participation principles competition landscape high-value crops that should be introduced 1 week 3 weeks 2.5 weeks 2.5 weeks Source : BAH Analysis 4 We interviewed a number stakeholders, reviewed studies, documents and reports… List of Interviewees & Documents Reviewed IntervieweesInterviewees ReportsReports ExaminedExamined HEHE IdrizIdriz Vehapi, Vehapi, MinistryMinistry ofof AgricuAgriculture,lture, MinisterMinister ofof AgricultureAgriculture AgricultureAgriculture HouseholdHousehold Survey,Survey, 2007,2007, StatisticsStatistics OfficeOffice ofof KosovoKosovo RifatRifat Blaku, Blaku, MinistryMinistry ofof PublicPublic Administration,Administration, ViceVice MinisterMinister AgricultureAgriculture LandLand UtilizationUtilization ProjectProject Report,Report, 2008,2008, GFAGFA ConsultingConsulting GroupGroup HakileHakile Xhaferi, Xhaferi, MedihaMediha Halimi, Halimi, FetieFetie Muriqi, Muriqi, XhevatXhevat Lushi: Lushi: MinistryMinistry ofof GmbHGmbH // BVVGBVVG // DFFEDFFE // EuropeanEuropean UnionUnion Agriculture, Forestry and Rural Development Agriculture, Forestry and Rural Development TheThe KosovoKosovo GreenbookGreenbook – – A A StrategyStrategy forfor SustainableSustainable AgriculturalAgricultural andand IsufIsuf Cikaqi, Cikaqi, MinistryMinistry ofof Agriculture,Agriculture, DirectorDirector ofof PlantPlant ProtectionProtection Rural Development in Kosovo, 2003 Department Rural Development in Kosovo, 2003 Department Study on the State of Agriculture in Kosovo, 2006, ARCOTRASS SyleSyle Tahirsylaj, Tahirsylaj, MinistryMinistry ofof EnvironmentEnvironment andand SpatialSpatial Planning,Planning, DirectorDirector Study on the State of Agriculture in Kosovo, 2006, ARCOTRASS Consortium/European Commission Dr.Dr. ShukriShukri Fetahu, Fetahu, UniversityUniversity ofof Pristina,Pristina, FacultyFaculty Consortium/European Commission Dr.Dr. SkenderSkender Muji, Muji, UniversityUniversity ofof Pristina,Pristina, DeanDean KosovoKosovo PovertyPoverty Assessment,Assessment, 2007,2007, WorldWorld BankBank FlamurFlamur Kadriu, Kadriu, FoodFood andand VeterinaryVeterinary Agency,Agency, ChiefChief ofof VeterinaryVeterinary PublicPublic ReportReport onon PotentialPotential ofof GreenhouseGreenhouse IndustryIndustry inin Kosovo,Kosovo, 2008,2008, HealthHealth SectorSector IntercooperationIntercooperation BujarBujar Haxhidauti, Haxhidauti, Customs,Customs, ManagerManager ofof PerformancePerformance andand PlanningPlanning HorticultureHorticulture StrategyStrategy ofof Kosovo,Kosovo, 2009-20132009-2013 Department Department OutputOutput PricePrice IndexIndex andand PricesPrices inin Agriculture,Agriculture, 2008,2008, StatisticsStatistics OfficeOffice ofof Haki Kurti, Statistical Office of Kosovo, Chief of Agricultural and Haki Kurti, Statistical Office of Kosovo, Chief of Agricultural and KosovoKosovo EnvironmentalEnvironmental DivisionDivision TheThe RapidRapid RiseRise ofof SupermarketsSupermarkets inin CentralCentral andand EasternEastern Europe:Europe: IsmetIsmet Kastrati, Kastrati, PejaPeja Institute, Institute, DirectorDirector ofof AgricultureAgriculture ImplicationsImplications forfor thethe AgrifoodAgrifood Sector Sector andand RuralRural Development,Development, 20042004 BardhBardh Begolli, Begolli, PejaPeja Institute, Institute, HeadHead ofof LaboratoryLaboratory Audit of the Kosovo Fruit & Vegetable Sector (KPEP), 2009 AgranAgran Halimi, Halimi, AGROVETAGROVET Laboratory,Laboratory, MasterMaster ofof SoilSoil ScienceScience Audit of the Kosovo Fruit & Vegetable Sector (KPEP), 2009 DemeDeme Abazi, Abazi, Iber-Lepenc,Iber-Lepenc, DirectorDirector HorticulturalHorticultural strategystrategy ofof KosovoKosovo 20092009 –– 2013 2013 ArberorArberor Prekazi, Prekazi, Iber-Lepenc,Iber-Lepenc, DirectorDirector HorticulturalHorticultural PromotionPromotion inin Kosovo,Kosovo, 20082008 AvniAvni Kastrati, Kastrati, StatisticalStatistical SectorSector ofof Kosovo,Kosovo, DirectorDirector ProfileProfile ofof thethe MacedonianMacedonian FreshFresh VegetableVegetable ValueValue Chain,Chain, 20082008 Maliq Gjyshinca, Intereuropa Maliq Gjyshinca, Intereuropa ProfileProfile ofof thethe MacedonianMacedonian TableTable GrapesGrapes Industry,Industry, 20082008 Shefqet Kelmendi, Kelmendi Company Shefqet Kelmendi, Kelmendi Company VegetableVegetable ValueValue ChainChain Assessment,Assessment, 20082008 ArtanArtan Osmani, Osmani, EUEU CommissionCommission Training Interns in Milk Quality Field Work (KPEP), 2009 AntonAnton Selitaj,Selitaj, UNDP,UNDP, AssociateAssociate Training Interns in Milk Quality Field Work (KPEP), 2009 Audit of the Kosovo Fruit & Vegetable Sector, 2008 LuanLuan Hoti,Hoti, Intercooperation,Intercooperation, MarketingMarketing OfficerOfficer Audit of the Kosovo Fruit & Vegetable Sector, 2008 BetimBetim EmraEmra -- Manager Manager ofof CargoCargo Departament,Departament, PristinaPristina AirportAirport BusinessBusiness ConsultingConsulting inin AA GrowingGrowing KosovoKosovo WorkshopWorkshop Materials,Materials, 20092009 ArlindaArlinda Arenliu,Arenliu, PestovaPestova RespondingResponding toto SubsidizedSubsidized DairyDairy ImportsImports IntoInto KosovoKosovo (KPEP),(KPEP), 20092009 HabilHabil Zeqiui,Zeqiui, MinistryMinistry ofof AgricultureAgriculture StandardsStandards ofof IdentityIdentity forfor MilkMilk andand MilkMilk Products,Products, 20092009 Taulant Koshi, Eurofood Taulant Koshi, Eurofood VegcoVegco Business Business Model:Model: AA VegetableVegetable Packing,Packing, CoolingCooling && SalesSales Feim, Rexhepi, Perdrini Feim, Rexhepi, Perdrini Enterprise,Enterprise, 20092009 SelmonSelmon Shala, Shala, AgroqyshkuAgroqyshku Source : BAH Analysis 5 … and compiled a comprehensive agriculture data repository based on cross-reference from multiple sources to ensure data consistency Data Sources and Guiding Principles

DataData SourceSource InformationInformation ExtractedExtracted Production,Production, Yield,Yield, AreaArea HarvestedHarvested FAOSTATFAOSTAT ExportExport // ImportImport VaValueslues andand VolumesVolumes Consumption,Consumption, Feed,Feed, SeedSeed andand OtherOther usesuses CoreCore GuidingGuiding PrinciplesPrinciples UNUN ComtradeComtrade / / ITCITC BreakdownBreakdown ofof ExporteExported/d/ ImportedImported ValueValue byby Destination/Destination/ Rely as much as possible on one OriginOrigin Rely as much as possible on one datadata sourcesource toto provideprovide WDI PopulationPopulation DataData WDI consistentconsistent andand comparablecomparable Int’lInt’l FertilizerFertilizer FertilizerFertilizer ConsumptionConsumption exportexport figuresfigures IndustryIndustry Assoc.Assoc. StatisticsStatistics OfficeOffice ofof Production,Production, Yield,Yield, AreaArea HarvesteHarvested,d, FertilizerFertilizer Use,Use, Irrigation,Irrigation, Cross-checkCross-check trade,trade, price,price, andand KosovoKosovo LocalLocal MarketMarket PricesPrices productionproduction datadatawithwith alternativealternative datadata sourcessources MinistryMinistry ofof Production,Production, Yield,Yield, Exports/ImportsExports/Imports Agriculture, Agriculture, GISGIS IrrigationIrrigation MapsMaps PreferPrefer mirroredmirrored datadata setssetsoverover Forestry, Rural Forestry, Rural single-sourcesingle-source DevelopmentDevelopment CustomsCustoms OfficeOffice ofof ImportedImported andand ExExportedported VolumesVolumes andand ValValuesues overalloverall asas wellwell ComplementComplement missingmissing informationinformation KosovoKosovo asas forfor selectselect HSHS codescodes withwith expertexpert opinionopinion andand interpolationinterpolation PejaPeja Institute Institute SoilSoil typestypes andand AnalysisAnalysis Temperature Data and Rainfall Data for 7 Meteorological MinistryMinistry ofof Temperature Data and Rainfall Data for 7 Meteorological Stations EnvironmentEnvironment && Stations SpatialSpatial PlanningPlanning

Source : BAH Analysis 6 Table of Contents

Overview of Deliverable

Baseline Analysis of Agriculture Sector – Quantitative Baseline of Kosovo’s Agriculture Sector – Overview of Constraints and Opportunities – International Best Practices Assessment

Recommendations to Improve Kosovo’s Agriculture Sector

7 Quantitative Baseline of Kosovo’s Agriculture Sector

Market Definition and Methodology

Kosovo Agricultural Commodities Performance

Crop-specific Performance and Market Assessment

8 Market Definition and Methodology

We started our analysis by looking at the “universe” of agricultural commodities, which fall into twenty-four product chapters

Overview of Agricultural Commodities

HS Chapter Name HS Chapter Name 01 Live Animals 13 Lac, Gums, Resins, Etc. 02 Meat & Edible Meat Offal 14 Vegetable Plaiting Materials 03 Fish & Crustaceans 15 Animal or Vegetable Fats, Oils & Waxes 04 Dairy, Eggs, Honey, & Ed. Products 16 Ed. Prep. Of Meat, Fish, Crustaceans, Etc. 05 Products of Animal Origin 17 Sugars & Sugar Confectionery 06 Live Trees & Other Plants 18 Cocoa & Cocoa Preparations 07 Edible Vegetables 19 Preps. Of Cereals, Flour, Starch, Milk 08 Ed. Fruits & Nuts, Peel of Citrus/Melons 20 Preps of Vegs, Fruits, Nuts, Etc. 09 Coffee, Tea, Mate & Spices 21 Misc. Edible Preparations 10 Cereals 22 Beverages, Spirits & Vinegar 11 Milling Industry Products 23 Residues from Food Industries, Animal Feed 12 Oil Seeds/Misc. Grains/Med. Plants/Straw 24 Tobacco & Manuf. Tobacco Substitutes

Note : HS stands for the Harmonized System developed by the World Customs Organization for traded products 9 Market Definition and Methodology Over 61% of the total value for agriculture commodities exported by Kosovo in 2008 came from primary crops and related processed products Composition of Primary Crops and Processed Products in Total Export Basket

Total Agricultural Export Value Primary Crops and Related Processed Product Total Agricultural Export Value (2008) PrimaryExport Crops Value and Related Processed Product Export Value (2008) (2008) (2008) Prep of Cereal, Other Starch, Flour 3% 1% Oil crops Horticulture 2% 27% Milling Prep of Cereals Products vegetable, Coffee, Tea, 1% Spices 24% fruit, nuts 26% Beverages 1% Coffee, Tea, 29% Cereal 1% Spices Processed 2% Veg/Fruit Oil Seeds, Vegetables, 16% Misc. Grains Fruits, Nuts Other plants Processed 3% 11% 32% Cereals, Animals and Grain Animal 15% Products 6%

Note: Other includes the following HS chapters: 23,21,17,15,3,18,24 Note: HS Other codes includes for the followingthe followi cropsng HSare: chapters: Vegetables 23,21,17,15,3,18,24 and Other Plants (HS 6,7); Fruits, Nuts (HS 8); Oil Seeds, Misc. Grains (HS 12); Coffee, Tea, Spices (HS 9); Cereals(HS 10); Milling Products (HSNote: 11); HS Prep codes of Cereal, for the Starch, following Flour crops (HS 19);are: Prep Vegetables of vegetable, and fruit,Other nuts Plants (HS 20)(HS 6,7); Fruits, Nuts (HS 8); Oil Seeds, Misc. Grains (HS 12); Coffee, Tea, Spices (HS 9); Cereals Source: Customs(HS Office 10); Millingof Kosovo; Products BAH Analysis (HS 11); Prep of Cereal, Starch, Flour (HS 19); Prep of vegetable, fruit, nuts (HS 20) 10 Market Definition and Methodology We will focus our baseline analysis on these primary crops including horticulture, cereals, oil crops, and spices/stimulants as well as processed fruits, vegetables, and cereals

Primary Agricultural Commodities and Related Processed Products 1 Horticulture Strawberries,Strawberries, oranges,oranges, Onions,Onions, garlic,garlic, lettuce,lettuce, cauliflowers,cauliflowers, FruitsFruits tangerines,tangerines, citruscitrus fruit,fruit, bananas,bananas, VegetablesVegetables tomatoes,tomatoes, cabbages,cabbages, cucumbers,cucumbers, (HS(HS 08)08) dates,dates, guavas,guavas, mangoes,mangoes, (HS(HS 07)07) artichokes,artichokes, spinacspinach,h, greengreen pepperpepper avocados,avocados, kiwis,kiwis, grapes,grapes, etc.etc. etc.etc.

Beans, cassava, chick peas, Potatoes, sweet potatoes, cassava, Beans, cassava, chick peas, RootsRoots && Potatoes, sweet potatoes, cassava, PulsesPulses lentils,lentils, broadbroad beans,beans, lupins,lupins, yams,yams, etc.etc. TubersTubers (HS(HS 07)07) vetchesvetches (HS(HS 06*)06*)

2 5 Rice,Rice, barley,barley, oats,oats, rye,rye, milletmillet andand ProcessedProcessed Jams,Jams, juice,juice, frozenfrozen productsproducts CerealsCereals sorghum,sorghum, maizemaize andand wheatwheat FruitsFruits && (HS(HS 10)10) VegetablesVegetables (HS(HS 20)20) 3 6 Cottonseed,Cottonseed, groundnuts,groundnuts, ProcessedProcessed CerealCereal flourflour anandd otherother millingmilling OilOil CropsCrops sunflower,sunflower, sunflowersunflower seed,seed, CerealsCereals && products,products, bread,bread, pastapasta (HS(HS 12)12) sesamesesame seed,seed, almonds,almonds, etc.etc. GrainsGrains (HS(HS 11,11, 19)19) 4 Anise,Anise, saffron,saffron, basil,basil, coriander,coriander, Spices, Spices, fennel,fennel, cinnamon,cinnamon, pepper,pepper, cutcut StimulantsStimulants flowersflowers andand bulbs,bulbs, coffee,coffee, tea,tea, (HS(HS 09)09) etc.etc.

Note: (*)HS Code 6 also includes cut flowers Source: FAOSTAT; UN Comtrade; BAH Analysis 11 Market Definition and Methodology The baseline will analyze different aspects of production, consumption, imports, and exports to better understand Kosovo’s current agriculture performance

Kosovo Baseline Analysis Components

ExportsExports = ProductionProduction - ConsumptionConsumption + ImportsImports

– Kosovo export value by – Production volume from – Consumption volume from – Import volume from crop category from 2004- 2005-2008 2005-2008 2005 – 2008 2008 – Analyze production of top – Analyze consumption of – Analyze imports of top 5 – Kosovo exports to 5 crops top 5 crops crops destination markets – Production – Main products – Main imports – Export market analysis for concentration consumed – Import growth top crops – Production growth – Consumption – Kosovo export – Production Value = Total growth performance compared to Agriculture Land * % benchmark countries Cultivated * Average Crop – % exports to Yield * Unit Value production – Exports to area harvested

Source : BAH Analysis 12 Quantitative Baseline of Kosovo’s Agriculture Sector

Market Definition and Methodology

Kosovo Agricultural Commodities Performance

Crop-specific Performance and Market Assessment

13 Kosovo Agricultural Commodities Performance

Kosovo’s exports have grown from 2.5M to over 11M Euros over the past five years with horticulture making up the largest share

Breakdown of Kosovo Agricultural Commodities Exports Value by Commodity Type (2004–2008, in Million Euros) CAGR (2004-2008) 11.9M 11.2M Total 0.5M 3% Oil Crops 97.5% 2% Spices and Stimulants -1.0%

4.0M 2.9M 26% Cereals (includes processed cereals) 200.2%

6.6M 2.9M 3.1M 0.7M 26% Processed Fruits and Vegetables 68.2%

4.0M 2.2M 2.5M 1.2M 4.3M 4.9M 0.4M 3.1 M 43% Horticulture 26.9% 1.9M 2.1M

2004 2005 2006 2007 2008

Note: The HS chapters used to determine commodity exports include 6-12, 19, 20 Source: Customs Office of Kosovo; BAH Analysis 14 Kosovo Agricultural Commodities Performance Kosovo has experienced a 45.5% growth in agriculture exports, which is higher than its competitors because of its entry into new markets

Growth rate is higher because Kosovo is entering new markets Agriculture Commodities Export Growth while other countries have already (2004-2008, in Million Euros) established export markets

Kosovo Macedonia Serbia Croatia Italy Spain

11.2M 142M 622.9M 205.1M 12,221.7M 12,170M

8,773.9M 388.8M

65.9M 93.5M 10,803M

2.5M

2004 2008 2004 2008 2005 2008 2004 2008 2004 2008 2004 2008

CAGR 45.5% 21.2% 17%* 21.7% 8.6% 3%

Note: CAGR stands for compound annual growth rate calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period Note: (*) Serbia’s CAGR is from 2005-2008 Note: The HS codes used to determine commodities exports include 6-12, 19,20 Source: Customs Office of Kosovo, TradeMap; BAH Analysis 15 Kosovo Agricultural Commodities Performance Albania and Macedonia account for over 50% of Kosovo’s agriculture commodities destination markets, with the EU also representing a large portion of exports

Relative Share of Destination Markets* for Kosovo Agricultural Commodities Exports (2004-2008, in Million Euros) CAGR Exports Main Total Trade Commodity 11.7M (2004-2008) 11.2M 3% Other*** 88.4% 0.8M 6% Montenegro 0.5M 0.7M 145.5% Horticulture 0.8M 11% Bosnia and 1.2M 220.6% Horticulture 1.4M Herzegovina 1.4M 13% EU** 12.9% Horticulture 2.4M Processed Fruits and 6.4M 13% Serbia 1.5M 38.7% Vegetables, Horticulture 0.4M 1.1M Processed Fruits 2.4M 21% Macedonia 113.8% 2.3M and Vegetables 3.6M 1.9M

1.4M 0.6M 3.6M 32% Albania 107.8% Horticulture 1.3M 3.5M 0.5M 2.1M 0.9M 0.8M 2004 2005 2006 2007 2008

Note: * In 2004, Serbia and Montenegro were recorded as one country, whereas for the other years, the are recorded separately; **EU includes: Austria, Bulgaria, Germany, Italy, Sweden, Switzerland, UK; ***“Other” includes: Australia, Algeria, Jamaica, Turkey, Croatia, Slovenia, Romania Note: CAGR for Serbia and Montenegro is calculated from 2005-2008 Note: The HS chapters used to determine commodity exports include 6-12, 19, 20 Source: Customs Office of Kosovo; BAH Analysis 16 Kosovo Agricultural Commodities Performance

Export of Kosovo’s five major agricultural commodities are predominantly concentrated in a small number of countries Market Distribution of Selected Agricultural Commodities in Kosovo (2008)

HS070960 - Peppers HS071420/HS070190 HS081040 - HS080240 - Chestnuts HS070959- - Potatoes Blueberries Mushrooms

Other Montenegro Other 0.1% 2.7% 2.9% 3.7% 3.8% Other 0.8% 3.0% 10.2% 7.6% 15.6% 9.7% Other 9.3% Italy 6.0% Slovenia 15.8% 14.3% Macedonia 13.0% 17.0% Montenegro

27.3% Italy 15.5% 27.7% Montenegro 10.9% 20.7% Montenegro 40.5% 43.4% 52.1% Macedonia

83.3% 79.2% 70.5% 69.0% 62.6% 47 63.7% Serbia Serbia 62.1% Albania Serbia 49.3% 45.8% 27 37.8% Serbia 46 31

% Share % Volume % Share % Volume % Share % Volume % Share % Volume % Share % Volume

Note: (*)Exported value for primary crops is determined by looking at HS chapters 6-10,12 Note: Combined HS071420 (sweet potatoes) and HS 070190 (other potatoes) since assumed potatoes identified as sweet potatoes were misclassified given the significant volume Note: Numbers may not add to 100% due to rounding Source: Customs Office of Kosovo 17 Kosovo Agricultural Commodities Performance

The top five primary crops represented a larger share of exported value compared to benchmarks

Top 5 Exports Compared to Total Agriculture Exports (2008, in Million Euros)

5.5M 8.6M 420.2M 6055.0M 9,661.4M 105.3M Country Top 5 Crop Categories

Kosovo Peppers, potatoes, blueberries, chestnuts, mushrooms Macedonia Fresh mushrooms, dried mushrooms/truffles, cherries, poppy seeds, asparagus Serbia Raspberries/mulberries/ 94.9% blackberries/loganberries, maize, maize seed, fruits/nuts 72.1% Italy Coffee, grapes, apples, rice, live 65.1% plants 60.5% Spain Mandarins / clementines, 66.5% 94.9% 65.1%42.3% 42.3% 40.5% 40.5% 60.5% tomatoes, oranges, peppers, peaches Croatia Maize, mandarins/ clementines, sunflower seeds, maize seed, rape/colza seeds Kosovo Macedonia Serbia Italy Spain Croatia

Top 5 Exported Commodities Remaining Exported Commodities

Note: Exported value for primary crops is determined by looking at HS chapters 6-10,12 Source: Customs Office of Kosovo, TradeMap 18 Kosovo Agricultural Commodities Performance Kosovo’s imports have grown from 48M to over 155M Euros over the past five years with processed cereals making up the largest share

Breakdown of Kosovo Agricultural Commodities Import Value by Commodity Type (2004–2008, in Millions, Euro) CAGR Total (2004-2008) 155.8M 5.2M 3.3% Oil Crops 59.7% 13.3M 8.5% Spices & Stimulants 34.9% 129.3M Processed Fruits & 16.6M 10.6% Vegetables 28.4% 9.8M 110.0M 15.8M 8.6M 34.6M 22.2% Horticulture 30.2% 91.1M 11.9M 7.7M 28.7M 11.5M 27.4M 35.6M 22.9% Cereals 54.9% 26.0M 48.6M 26.2M 22.7M 6.1M 9.8M 12.1M 50.6M 32.5% Processed Cereals 6.2M 45.2M 26.9% 33.2M 36.9 M 19.5M

2004 2005 2006 2007 2008

Note: The HS chapters used to determine commodity exports include 6-12, 19, 20 Source: Customs Office of Kosovo 19 Kosovo Agricultural Commodities Performance

The agriculture commodities imported from the top ten importing countries account for over 73% of Kosovo’s total imported value

Relative Share of Importers of Agricultural Commodities into Kosovo (2004-2008, in Millions, Euro) Total CAGR 472.6M (2004-2008)

Other 13.4% 125.8M 26.6% 384.1M

319.2M 17.4M 3.7% Germany 36.7% 100.3M 18.8M 4.0% Austria 20.4% 285.5M 19.3M 4.1% Slovenia 28.3% 81.0M 14.0M 21.2M 4.5% Croatia 40.0% 16.1M 22.4M 4.7% Bulgaria 47.2% 17.9M 10.4M 27.8M 5.9% Hungary 43.2% 112.7M 14.1M 17.5M 14.5M Turkey 29.5% 11.8M 17.1M 31.0M 6.6% 13.4M 26.2M 157.4M 12.6M 42.4M 9.0% Brazil 33.1% 25.4M 29.4M 18.0M 76.2M 45.0M 57.0M 12.1% Macedonia 32.1% 25.0M 40.8M 16.0M 35.9M 77.4M 89.9M 89.3M 18.9% Serbia 46.9% 13.5M 18.7M 28.2M

2004 2005 2006 2007 2008

Note: 101 countries imported agriculture commodities into Kosovo in 2008; CAGR for Serbia is calculated from 2005-2008; The HS chapters used to determine commodity exports include 6-12, 19, 20; Total numbers may not add to sum of country totals due to rounding Source: Customs Office of Kosovo 20 Kosovo Agricultural Commodities Performance

For a representative basket of crops*, the rise in export value from 475K to 3,154K Euros was primarily driven by growth in price…

Component Marginal Analysis of Kosovo Agricultural Exports Value (2005- 2008, in Thousand Euros) 3,154.9K

The large increase in price is most likely driven by the increase in price of a few commodities, including wheat, rye and barley +336%

Cumulative Effect 563 %

+16.3K +227%

475.7K

Exported Value 2005 Increase in Exported Volume Increase in Price Exported Value 2008

Note: To determine respective impact of each component, the following mathematical approximation was used: EV / EV = V/V + Price/ Price; Since farm gate prices were not available, we calculated price from the change in export value and volume Note: Price increase was impacted by price spikes over 2006-2008 for products like: wheat (+125%),rye (+98%), and barley (64%) (TradeMap World Export Prices) Note: (*)A representative basket of products with production, import, and export volume were included for this calculation: wheat, rye, barley, oats, maize, potato starch/potatoes, tomatoes, eggplants, pepper, courgettes, mushroom, cucumbers, melons, cabbages, spinach, leeks, onions, garlic, beans, apples, pears, plums, apricots, peaches, cherries, chestnuts, strawberries, raspberries, blackberries Source: Customs Office of Kosovo 21 Kosovo Agricultural Commodities Performance

…while increased export volumes were largely the result of an increase in production, coupled with a decrease in consumption

Kosovo Agricultural Commodities Trade Balance (2005–2008, in Thousand Tons)

147.5 7.2 826.8

Year 686.5

2005 Production - Consumption, Feed, + Imports = Exports Seed, Other Use

+41.3 (6%) -39.2 (-5%) -64.2 (-44%) +16.3 (227%)

83.3 23.5

787.6 2008 727.8

Production - Consumption, Feed, + Imports = Exports Seed, Other Use

Note: A representative basket of products were included for this calculation: wheat, rye, barley, oats, maize, potato starch/potatoes, tomatoes, eggplants, pepper, courgettes, mushroom, cucumbers, melons, cabbages, spinach, leeks, onions, garlic, beans, apples, pears, plums, apricots, peaches, cherries, chestnuts, strawberries, raspberries, blackberries Note: Consumption volume data not available. Consumption, feed, seed, and other use numbers were calculated by Production + Imports – Exports = Consumption Source: Customs Office of Kosovo, Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study ) 22 Kosovo Agricultural Commodities Performance

Production increase was primarily driven by growth in wheat, potato and watermelon crops

Change in Agriculture Production Volumes for the Top Five Producer Crops (2005-2008, in Tons)

350,000 % of Total Production 300,000 CAGR Volume (2005-08) (2008) 250,000 Wheat 40.3% 2.3% 200,000 Potato 14.3% 6% 150,000 Maize 17.4% -3.7% 100,000 Pepper 7% -2.3%

50,000 Watermelon 3.4% 22.5%

2005 2006 2007 2008 Wheat Potato Maize Pepper Watermelon

Note: The top 5 crops of the representative basket of products were those with the largest production in tons in 2008; They represented over 82% of the total production volume in tons Note: The representative basket of products included: wheat, rye, barley, oats, maize, potato starch/potatoes, tomatoes, eggplants, pepper, courgettes, mushroom, cucumbers, melons, cabbages, spinach, leeks, onions, garlic, beans, apples, pears, plums, apricots, peaches, cherries, chestnuts, strawberries, raspberries, blackberries Source: Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study ) 23 Kosovo Agricultural Commodities Performance

Across the board, volumes for the most imported crops (tomatoes, apples, maize, melon and peppers) have decreased

Change in Agriculture Import Volumes for the Top Five Imported Crops (2005-2008, in Tons)

35,000 % of Total Import 30,000 CAGR Volume (2005-08) (2008) 25,000 Tomato 14.4% -8.6% 20,000 Apple 11.9% -5.5% 15,000 Maize 11.6% -24.9% 10,000 Melon 22.2% -7.1%

5,000 Pepper 8.2% -2.5%

2005 2006 2007 2008 Tomato Apples Maize Melons Pepper

Note: The top 5 imported crops of the representative basket were those with the largest imported volume in tons in 2008; They represented 68.4% of the total tons imported in 2008 Note: The representative basket of products included: wheat, rye, barley, oats, maize, potato starch/potatoes, tomatoes, eggplants, pepper, courgettes, mushroom, cucumbers, melons, cabbages, spinach, leeks, onions, garlic, beans, apples, pears, plums, apricots, peaches, cherries, chestnuts, strawberries, raspberries, blackberries Source: Statistics Office of Kosovo, Customs Office of Kosovo 24 Kosovo Agricultural Commodities Performance Export volume increased for all top five exported crops, resulting in a decrease in the quantity of domestic consumption, feed, and seed crops

Change in Agriculture Export Volumes for the Top Five Exporter Crops (2005-2008, in Tons)

18,000 2,500 % of Total Export CAGR 2,000 Volume 12,000 (2005-08) (2008)

Potato 80.1% 47.0% 1,500

6,000 Pepper 8.8% 185.3% 1,000 Onion/Shallot 3.1% 28.4%

Tomato 2.1% 267.2% 500 Chestnut 2.0% 187.5%

2005 2006 2007 2008 Potato Pepper Onions/Shallots Tomatoes Chestnuts

Note: The top 5 exported crops of the representative basket were those with the largest exported volume in tons in 2008 for the smaller representative basket of crops; They represented 96% of the total tons exported in 2008 for the smaller basket of crops Note: The representative basket of products included: wheat, rye, barley, oats, maize, potato starch/potatoes, tomatoes, eggplants, pepper, courgettes, mushroom, cucumbers, melons, cabbages, spinach, leeks, onions, garlic, beans, apples, pears, plums, apricots, peaches, cherries, chestnuts, strawberries, raspberries, blackberries Note: Consumption volume data is not available for this basket of crops; Potato (HS070190,071420) uses the 6000-18000 scale. All other crops use the 0-1000 scale Source: Statistics Office of Kosovo, Customs Office of Kosovo 25 Kosovo Agricultural Commodities Performance

Kosovo’s export performance remains well below its potential compared to benchmarks

11 Agricultural Commodities Export Value per Ton Produced* 22 Agriculture Commodities Export Share of GDP (2007) (2007)

Spain 169 Macedonia 2.6% Italy 163 Serbia 2.2%

Macedonia 70 Spain 1.7%

Serbia 44 Italy 0.9%

Croatia 41 Croatia 0.6%

Kosovo 15 Kosovo 0.4%

33 Agricultural Commodities Export Value per Area 44 Agricultural Commodities Export per Capita Harvested of Agricultural Land (2007, Euro per Area Harvested) (2007, Euro per Capita)

Italy 1199 Spain 272 Spain 737 Italy 184 Macedonia 348 Macedonia 67 Croatia 183 Serbia 66 Serbia 148 Croatia 49 Kosovo 25 Kosovo 6

Note: The HS chapters used to determine commodities exports include 6-12, 19, 20 Note: (*) The following categories in FAOSTAT were used to estimate total production per country: cereals, coarse grain, vegetables and melons, fruit excluding melons, roots and tubers, pulses, and oil crops Source: WDI; FAOSTAT; Population Reference Bureau; TradeMap 26 Kosovo Agricultural Commodities Performance

Agricultural production value is driven by total arable land, the portion of arable land cultivated, crop yield and value

Agriculture Commodities Production Drivers

TotalTotal ArableArable Available land for agricultural use (excludes urban and LandLand rural areas, desert, natural parks, etc.)

Portion of arable land cultivated PercentPercent ofof CultivatedCultivated LandLand ProductionProduction ValueValue Overall agriculture commodities harvested in ton per AverageAverage CropCrop hectare cultivated YieldYield Short-growing seasons allow use of same physical areas for multiple crop rotation

Price per ton (Euros/ton) UnitUnit ValueValue

Production Value = Agricultural Land X Land Cultivated X Average Crop Yield X Unit Value (Euro) (Hectare) (%) (Ton/Hectare) (Euro/Ton)

Source: FAOSTAT 27 Kosovo Agricultural Commodities Performance (Total Arable Land)

Approximately 76% of total land in Kosovo is arable, of that only 85% is cultivated

Proportion of Arable Land and Cultivation in Kosovo (2008) Proportion of Arable Land in Kosovo by Hectares Total Arable Land Cultivated in Kosovo (2008) (2008) Vineyard Orchards 0% 2% Greenhouse Meadow 0% 37%

Arable Land 76% Arable Land and Kitchen Non Arable Gardens Land 53% 24%

Total Cultivated Land Pasture Left Fallow 7% Total Uncultivated Land 1%

Note: Assume all crops in 2008 are grown in orchards, vineyards, greenhouses, and arable land and kitchen categories with the following exceptions: assume 100% of hay volume (tons) is grown in meadow, 50% of mixed grass (tons) is grown in meadow, and 75% of trefoil (tons) is grown in meadow; Thus 83% of meadows is being cultivated for hay, mixed grass, and trefoil and 6.5% (37.2%-(37%*83%)) of meadows is considered fallow Non Arable Land includes forestry (20%) and houseyard (4%) Source: Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study) 28 Kosovo Agricultural Commodities Performance (Percent of Cultivated Land) The primary use of cultivated land is to grow cereals, vegetables, fodder crops, and fruits; non-use of land is attributed to low profitability and lack of equipment

Crop Cultivation and Reasons for Fallow Land (2008)

Crop Cultivation Breakdown by Volume Reasons for Leaving Land Fallow (2008) (2006)

Low Economic Fruits 30.5% 4% Profitability Lack of Equipment 25.3% Lack of 14.7% Fodder Manpower Cereals crops 40% 31% Lack of Security 12.1%

Other 8.4%

Lack of Inputs Vegetables 5.1% 25% Crop Rotation 2.6%

Mines 1.1%

Source: “Determinants of the Fallowing Decision in Kosovo”, Johannes Sauer, Sophia Davidova, Laure Latruffe; Statistics Office of Kosovo 29 Kosovo Agricultural Commodities Performance (Average Crop Yield)

Compared to similar benchmarks, Kosovo ranks low in agricultural productivity although higher than some regional countries

Agricultural Productivity (2007, Tons/Ha)

45.1 46.4

40.5

36.1 36.7 33.4 30.6 31.3

25.6 21.9 19 20 16.6 14.6 Italy Spain Kenya Serbia Czech Croatia Albania Kosovo Bulgaria Slovenia Slovakia Morocco Republic Macedonia South Africa South

Note: In order to compare productivity across countries, measured overall productivity in cereals, fruit and vegetables commodities Source: FAOSTAT, Statistics Office of Kosovo 30 Kosovo Agricultural Commodities Performance (Average Crop Yield)

Agriculture yields for select crops have increased since 2005, but still rank lower than international benchmarks

Kosovo Yield (Ton per Hectare) Potato Yield Berries Yield* (2007, Ton per Hectare) (2007, Ton per Hectare) CAGR 4.7% Spain 28.2 Italy 9.6 23.1 Average 23.3 Italy 17.4 Yield 25.5 19.2 Kosovo 9.2 Kosovo 19.2 2005 2006 2007 2008 Spain 5.0 Croatia 17.0 23 23 19.2 21 Potato Macedonia 13.1 Serbia 4.3

2005 2006 2007 2008 Serbia 9.1 Croatia 2.0

26.7 Cabbage Yield Pepper Yield** 20.2 9.2 8.4 Berries (2007, Ton per Hectare) (2007, Ton per Hectare) 2005 2006 2007 2008 Spain 32.7 Spain 48.3 Macedonia 24.4 27.1 24.9 22.8 26.6 Italy 18.9 Cabbage Kosovo 24.9 Macedonia 16.8 2005 2006 2007 2008 Italy 19.4 Kosovo 16.1 21 23 21.7 Croatia 16.1 Peppers 18.3 Croatia 10.6 Serbia 13.2 2005 2006 2007 2008 Serbia 7.8

Note: (*) Berries yield not available for Macedonia for 2007; berries include blackberries, strawberries and raspberries (**)Peppers and chilies are grouped together for Croatia, Italy, Serbia, Spain and Macedonia, but not for Kosovo Source: FAOSTAT, Statistics Office of Kosovo 31 Kosovo Agricultural Commodities Performance (Average Crop Yield)

Kosovo has potential to improve yields by increasing cropping intensity and fertilizer consumption

Cropping Intensity (Area Harvested by Agricultural Land)* (2005) 1.2 1.2 1.2 1.1 0.9

0.6

Macedonia Kosovo Croatia Serbia and Italy Spain Macedonia 1809 Fertilizer Consumption** (2006, Kg/Ha) 1380

151 176 254 32

Macedonia Kosovo Serbia Croatia Italy Spain Note: (*) Area harvested refers to the area a crop is gathered, the area is counted as many times as the area is harvested; Agricultural lands (in hectares) refers to arable lands (under temporary crops, meadows), under permanent crops (such as cocoa, coffee planted for several years) and lands under permanent pastures (mainly forage planted for 5 years). Data from 2007 was used to calculate area harvested; however, the most recent data for agricultural land was only available from 2005. Agricultural land data combined Serbia and Montenegro whereas as area harvested data is only for Serbia. (**)Fertilizers products cover nitrogenous, potash and phosphate (NPK) fertilizers; the metric measures the quantity of plants nutrients used per unit of agricultural land Source: FAOSTAT for area harvested, WDI for agricultural land and International Fertilizer Industry Association data for fertilizer consumption 32 Kosovo Agricultural Commodities Performance (Total Agriculture Commodity Value)

Kosovo’s local prices for agricultural commodities are relatively low when compared against EU FOB origin prices

2.50 Kosovo Market Price Compared to FOB Origin Prices (2008, Euro/Kg*) 2.25 +1.66 Indicates differential in Kosovo’s price and highest price shown Because of the price differential, 2.00 opportunities exist to capture market share from competitors 1.7 5 +1.12 1.5 0 +0.40 1.2 5 +0.54 +0.07 1.0 0 +0.29 +0.33 0.75 +0.57 +0.15 0.50 +0.15 +0.16 +0.06 0.25

0.00 s r o s ar on on oes at ape nut Pe ppe nach Oni Gr Wheat mel Pot st Pe um ber Spi er omat Cabbage T Che Cuc Wat

Kosovo Market Price United Kingdom FOB Origin Price France FOB Origin Price Belgium FOB Origin Price Germany FOB Origin Price Netherlands FOB Origin Price Italy FOB Origin Price

Note: (*) Differential was calculated between Kosovo and the country with the largest Euro/Kg gap from Kosovo Note: Kosovo prices were collected in all seven regions (Peja, Pristina, Prizren, Ferizaj, Gjilan, Gjakova, Mitrovica ) on the 15th of each month and reflect prices farmers receive for the production that are sold outside the sector. The price collection was carried out at markets, farms and other places where prices on agriculture products are available. Note: Pepper (HS070960): Germany FOB Origin for Turkey, UK FOB Origin for Italy; Spinach (HS070970): UK and Netherlands FOB Origin for Italy; Cabbage (HS070490): Germany and UK FOB Origin for Italy; Pear (HS080820): Germany FOB Origin for Turkey, UK FOB Origin for Italy; Chestnuts (HS080240): France and Italy FOB Origin for Turkey; Cucumber (HS070700): Germany FOB Origin for Turkey, UK FOB Origin for Spain; Tomatoes (HS070200): Germany and UK FOB Origin for Turkey; Watermelon (HS080711): Germany and France FOB Origin for Italy; Wheat (HS100190): Italy FOB Origin for Greece, Germany FOB Origin for Italy; Onion (HS070310): UK FOB Origin for Italy, Germany FOB Origin for Turkey; Grape (HS080610): UK FOB Origin for Turkey, Netherlands FOB Origin for Spain; Potato (HS070190): Belgium and Netherlands FOB Origin for Italy; Statistics for Spain’s exports are 2007 Source: “Agriculture and Environment Statistics Output Price Index and Prices in Agriculture 2008”, Statistics Office of Kosovo; TradeMap; UN Comtrade 33 Quantitative Baseline of Kosovo’s Agriculture Sector

Market Definition and Methodology

Kosovo Agricultural Commodities Performance

Crop-specific Performance and Market Assessment

34 Crop-specific Performance and Market Assessment (Potatoes) Kosovo’s potato sector has competitive yields compared to benchmarks, with small differences in FOB origin prices compared to Belgium and Netherlands AgriculturalAgricultural CommodityCommodity ProductionProduction andand ExportExport VolumeVolume AgriculturalAgricultural YieldYield ComparisonComparison Ton/Ha K Ton 30 100 11% Produced 25 Volume 75 20 15 50 10 5 25 Exported 0 59% Volume 0 Italy Spain Serbia Croatia Kosovo Macedonia 2004 2005 2006 2007 2008

AgriculturalAgricultural CommodityCommodity PricePrice ComparisonComparison CAGR Agricultural Commodity Comments Euro per Kg (2004-2008) Agricultural Commodity Comments Netherlands PotatoesPotatoes areare growngrown inin allall municipalities*municipalities* acrossacross KosovoKosovo FOB Origin 7.6% In 2008, over 100K tons of potatoes were produced while over 0.40 In 2008, over 100K tons of potatoes were produced while over Belgium -0.1% 18K18K tonstons werewere exportedexported toto AlbaniaAlbania (62.1%),(62.1%), MontenegroMontenegro (20.7%),(20.7%), FOB Origin MacedoniaMacedonia (14.3%),(14.3%), SerbiaSerbia (2.5%)(2.5%) Kosovo -0.8% Kosovo’sKosovo’s yieldyield isis higherhigher thanthan regionalregional competitors,competitors, butbut lowerlower thanthan Price bestbest practicepractice producersproducers likelike ItalyItaly andand SpainSpain 0.15 Kosovo’sKosovo’s locallocal marketmarket priceprice hashas beenbeen similarsimilar toto thethe NetherlandsNetherlands andand BelgiumBelgium FOBFOB originorigin pricesprices forfor thethe pastpast 55 years,years, indicatingindicating thatthat

2004 2005 2006 2007 2008 therethere maymay bebe littlelittle opportunityopportunity toto capturecapture marketmarket shareshare inin thesethese Difference +0.02 +0.06 +0.11 +0.14 +0.02 Belgium countriescountries vs. Kosovo Note: Potato export data is for HS070190,071420; HS070190 used for price comparison; (*) Surveyed Agriculture Offices in 30 Municipalities listed in the 2007 Household survey; Netherlands FOB Origin from Italy; Belgium FOB Origin from Italy Source: FAO STAT, Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study); Customs Office of Kosovo; 35 Agriculture and Environment Statistics Output Price Index and Prices in Agriculture 2008, TradeMap; BAH Analysis Crop-specific Performance and Market Assessment (Peppers) Kosovo has higher pepper yields compared to benchmarks; FOB origin prices are lower than those of the United Kingdom and Germany AgriculturalAgricultural CommodityCommodity ProductionProduction andand ExportExport VolumeVolume AgriculturalAgricultural YieldYield Comparison*Comparison* Ton/Ha K Ton 60 50 Produced -2% 40 Volume 40 30 20 10 20 Exported 0 116% Volume 0 Italy Spain Serbia Croatia Kosovo Macedonia 2004 2005 2006 2007 2008

AgriculturalAgricultural CommodityCommodity PricePrice ComparisonComparison CAGR Agricultural Commodity Comments Euro per Kg (2004-2008) Agricultural Commodity Comments 2.50 United PeppersPeppers areare cultivatedcultivated inin 2626 ofof thethe 3030 municipalities**municipalities** listedlisted inin thethe 18% 2.00 Kingdom 20072007 HouseholdHousehold SurveySurvey FOB Origin 1.50 InIn 2008,2008, overover 51K51K tonstons ofof pepperspeppers werewere cultivatedcultivated whilewhile onlyonly 2K2K Germany tonstons werewere exportedexported primarilyprimarily toto SerbiaSerbia (62.6%)(62.6%) andand MontenegroMontenegro 1.00 3.7% FOB Origin (27.7%)(27.7%) withwith thethe remainingremaining volumevolume sentsent toto AlbaniaAlbania (5%),(5%), 0.50 Kosovo GermanyGermany (2%),(2%), MacedoniaMacedonia (1.2%),(1.2%), SwedenSweden (0.9%),(0.9%), RomaniaRomania 8.3% (0.6%), and Italy (0.005%) 0.00 Price (0.6%), and Italy (0.005%) Kosovo’sKosovo’s yieldyield isis competitivecompetitive withwith ItalyItaly

2004 2005 2006 2007 2008 UK’sUK’s FOBFOB originorigin priceprice isis significantlysignificantly higherhigher thanthan Kosovo’sKosovo’s locallocal Difference +0.71 +1.28 +0.93 +1.35 +1.66 UK vs. marketmarket priceprice Kosovo Note: (*)Peppers and chilies are grouped together for Croatia, Italy, Serbia, Spain and Macedonia, but not for Kosovo; (**) Surveyed Agriculture Offices in 30 Municipalities listed in the 2007 Household survey; United Kingdom FOB Origin from Turkey; Germany FOB Origin from Turkey Source: FAO STAT, Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study), Customs Office of Kosovo; HS070960 used for peppers Agriculture and Environment Statistics Output Price Index and Prices in Agriculture 2008, TradeMap; BAH Analysis 36 Crop-specific Performance and Market Assessment (Tomatoes) While tomato yields have been comparatively low, Kosovo’s FOB origin price is much lower than Germany’s, and marginally less than the United Kingdom AgriculturalAgricultural CommodityCommodity ProductionProduction andand ExportExport VolumeVolume AgriculturalAgricultural YieldYield ComparisonComparison Ton/Ha K Ton 25 70 Produced 60 20 11% Volume 50 40 15 30 20 10 10 5 Exported 0 267% Volume 0 Italy Spain Serbia Croatia Kosovo Macedonia 2004 2005 2006 2007 2008

2004 2005 2006 2007 2008 competitivecompetitive inin selectselect EUEU marketsmarkets Difference +0.32 +0.12 +0.47 +0.29 Germany vs. Kosovo Note: CAGR is calculated from 2005-2008; (*)Surveyed Agriculture Offices in 30 Municipalities listed in the 2007 Household survey; HS 070200 is used for tomato data; Germany FOB Origin from Turkey; United Kingdom FOB Origin from Turkey Source: FAO STAT, Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study), Customs Office of Kosovo, Agriculture and Environment Statistics Output Price Index and Prices in Agriculture 2008, TradeMap; BAH Analysis 37 Crop-specific Performance and Market Assessment (Onions) Kosovo’s onion sector has experienced lower yields compared to benchmarks and maintains a higher FOB origin price than Germany AgriculturalAgricultural CommodityCommodity ProductionProduction andand ExportExport VolumeVolume AgriculturalAgricultural YieldYield ComparisonComparison Ton/Ha K Ton 60 16 4% Produced 48 Volume 12 36 24 8 12 4 Exported 0 153% Volume 0 Italy Spain Serbia Croatia Kosovo Macedonia 2004 2005 2006 2007 2008

AgriculturalAgricultural CommodityCommodity PricePrice ComparisonComparison

CAGR Agricultural Commodity Comments Euro per Kg Agricultural Commodity Comments 0.75 (2004-2008) OnionsOnions areare growngrown inin allall municipalities*municipalities* acrossacross KosovoKosovo UK FOB 1.5% In 2008, almost 16K tons of onions were cultivated while 740 tons Origin In 2008, almost 16K tons of onions were cultivated while 740 tons 0.50 werewere exportedexported toto MontenegroMontenegro (67.4%),(67.4%), AlbaniaAlbania (31%),(31%), andand Kosovo -5% RomaniaRomania (1.5%)(1.5%) Price 0.25 KosovoKosovo hashas aa lowerlower yieldyield inin comparisoncomparison withwith otherother regionalregional andand Germany -12% bestbest practicepractice countriescountries FOB Origin 0.00 Kosovo’sKosovo’s marketmarket priceprice isis similarsimilar toto oror higherhigher thanthan UKUK andand GermanyGermany FOBFOB originorigin prices,prices, makingmaking KosovoKosovo uncompetitive;uncompetitive;

2004 2005 2006 2007 2008 ExportExport growthgrowth hashas beenbeen focusedfocused primarilyprimarily onon locallocal regionalregional Difference +0.01 +0.23 +0.14 +0.28 +0.15 UK vs. marketsmarkets Kosovo

Note: (*)Surveyed Agriculture Offices in 30 Municipalities listed in the 2007 Household survey; HS 070310 used for onion data; United Kingdom FOB Origin from Italy; Germany FOB Origin from Turkey Source: FAO STAT, Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study), Customs Office of Kosovo, Agriculture and Environment Statistics Output Price Index and Prices in Agriculture 2008, TradeMap 38 Crop-specific Performance and Market Assessment (Watermelons) While watermelon producers have lower yields in Kosovo, FOB origin price is significantly less than Germany and France AgriculturalAgricultural CommodityCommodity ProductionProduction andand ExportExport VolumeVolume AgriculturalAgricultural YieldYield ComparisonComparison Ton/Ha K Ton 25 45 Produced 36 20 18% Volume 27 15 18 10 9

5 Exported 0 Volume 0 44% Italy Spain Serbia Croatia Kosovo Macedonia 2004 2005 2006 2007 2008

AgriculturalAgricultural CommodityCommodity PricePrice ComparisonComparison CAGR AgriculturalAgricultural CommodityCommodity CommentsComments Euro per Kg (2005-2008) 0.40 Germany 11.0% WatermelonsWatermelons areare cultivatedcultivated inin 2525 ofof thethe 3030 municipalities*municipalities* FOB Origin In 2008, almost 25K tons of watermelons were cultivated while France In 2008, almost 25K tons of watermelons were cultivated while 0.30 9.2% FOB Origin justjust underunder 4545 tonstons ofof watermelonswatermelons werewere exportedexported toto MontenegroMontenegro (84.2%),(84.2%), AlbaniaAlbania (15.7%),(15.7%), andand GermanyGermany (0.1%)(0.1%) 0.20 Kosovo -3.5% Kosovo has a lower yield in comparison with other regional and Price Kosovo has a lower yield in comparison with other regional and bestbest practicepractice countriescountries 0.10 GermanGerman andand FranceFrance FOBFOB originorigin pricesprices havehave consistentlyconsistently beenbeen higherhigher thanthan Kosovo’sKosovo’s locallocal priceprice 2004 2005 2006 2007 2008 Difference +0.05 +0.12 +0.10 -+0.16 Germany vs. Kosovo Note: CAGR for price is calculated from 2005-2008; (*)Surveyed Agriculture Offices in 30 Municipalities listed in the 2007 Household survey; HS080711 is used for watermelon data; Germany FOB Origin From Italy; France FOB Origin from Italy Source: FAO STAT, Statistics Office of Kosovo (2008 data from SoK is preliminary and was being finalized at the time of the study), Customs Office of Kosovo, 39 Agriculture and Environment Statistics Output Price Index and Prices in Agriculture 2008, TradeMap Table of Contents

Overview of Deliverable

Baseline Analysis of Agriculture Sector – Quantitative Baseline of Kosovo’s Agriculture Sector – Overview of Constraints and Opportunities – International Best Practices Assessment

Recommendations to Improve Kosovo’s Agriculture Sector

40 Constraints Methodology

Kosovo has a number of advantages that can be tapped to increase the total agricultural production in the country

Kosovo’s Agricultural Competitive Advantages

Proximity to EU and Regional Markets Opportunities to Improve Productivity Kosovo is within 1-2 days delivery time of all major Kosovo lags behind European benchmark countries fresh wholesale markets in Europe. in cropping intensity (0.9), yield per hectare (20), export value per harvested hectare (€25) and Agricultural production volumes and exports have percentage of arable land in production (66%), been growing, at 2.4% and 48.3% compound offering significant opportunities to improve annual growth rates, respectively. agricultural production and employment. The number of trading partners is expanding with There is sufficient workforce for expanded exports to 10 new countries since 2004 including agricultural production (only 15% of farmers cite Austria, Denmark, UAE and the United States. workforce as an issue). AgriculturalAgricultural CompetitiveCompetitive AdvantagesAdvantages Significant Donor Support Natural Environment Supports Diversification Government and donors are providing €15-18 Kosovo’s natural environment supports all crops that million per year in support to the agricultural can be grown in temperate climates. sector including programs in over 20 crops in every area of the country. Growing seasons support harvest 30 days earlier than in northern Europe allowing some seasonality With effective coordination, this funding can advantages. become a major source for improvements in ag- related infrastructure, input quality, productivity, Water and other resources are relatively plentiful crop diversity, quality and export promotion. and there are opportunities to expand both small- scale and formal irrigation systems.

Source : BAH Analysis 41 Constraints Methodology To effectively understand the challenges facing Kosovo’s agriculture sector, a constraints analysis has been completed along six dimensions Overview of Constraints 11 UntappedUntapped Coordination among Small Farmers: Proportion of active associations and activity levels Potential of Small Extension Services: Assessment of current extension services and potential to focus on high value crops Potential of Small Lack of Financing for Small Farmers: Financial products currently available to small farmers in Kosovo FarmersFarmers Mechanization: Mechanization rates by equipment, type and size of farms; degree of small farmer mechanization

22 Donor Coordination: Level of donor coordination among donors supporting Kosovo’s agriculture sector Lack of Demand- Market Intelligence: Types of market intelligence on end customer characteristics and requirements. Lack of Demand- Distribution: Collection centers and packhouses in Kosovo enabling reliability and flexibility of distribution DrivenDriven FocusFocus Promotion & Branding: Participation rate in trade shows; effectiveness of branding and promotion campaigns Pricing: Storage capacity in Kosovo allowing farmers to take advantage of seasonally high prices 33 Development of Irrigation Networks: Coverage of irrigation networks; working capacity levels of irrigated systems; pricing of InfrastructureInfrastructure irrigation systems. CapacityCapacity IssuesIssues Building greenhouse capacity: Size of greenhouse market in Kosovo; types and construction of greenhouses; return on investment of greenhouses in Kosovo

44 Land & Land-Sea Delivery: Land-sea routes and road networks in Kosovo and within the region; accompanying costs and travel TransportationTransportation time for deliveries Disadvantages Air Transport and Shipping: Level of dedicated air cargo freighters for perishables and experience of agriculture exporters with Disadvantages air delivery Export and Cold Chain: Types of cold chain for fresh, chilled and frozen products 55 InadequateInadequate Food Safety & Quality: Current organizational responsibility for food safety; effectiveness of private labs for food quality testing AgricultureAgriculture Regulation of Inputs: Types of regulation for seed, fertilizer and pesticide quality and usage. RegulationsRegulations Environment: Current issues facing arable land and quality and availability of natural resources

66 Enforcement of Trade Agreements: Types of implementation issues for Kosovo’s trade agreement; level of trade facilitation TradeTrade AccessAccess capacity within the Kosovo government IssuesIssues Responses to Subsidies: Current treaties enabling government supports; overview of current supports in other countries Recognition of Sovereignty: Overview of countries recognizing Kosovo’s sovereignty; recognition-related risks from other countries. Source : BAH Analysis 42 Untapped Potential of Small Farmers

In Kosovo, small farms account for 98% of all agricultural land with the smallest farms, under 1.5 ha, accounting for 38%

Arable Land by Farm Size and Type % of Area (2006)

1% 1% 1% 5% 1% 2% 1% Large & Specialized Farms (2%) 20% 22% 28% 30% 34% 33% 3+ ha. 42% 36%

25% 29% 30% 30% Small 28% 1.5-3 ha. 31% Farms 27% 27% (98%)

53% 48% 40% 39% 38% 0-1.5 ha. 31% 34% 32%

Prishtina Mitrovica Peja Gjakova Prizren Ferizaj Gjilan Kosovo Total

Sources : Statistical Agency of Kosovo (2006) 43 Untapped Potential of Small Farmers At 1.4 hectares, Kosovo’s average farm size is among the smallest in Europe although several other countries in SEE also have small farm size Average Farm Size By Country Hectares (2003 for Croatia, 2005 for EU, 2006 for Kosovo, 2007 for Serbia, Macedonia and Albania)

84.2

Kosovo’sKosovo’s averageaverage farmfarm sizesize isis smallersmaller thanthan thethe EuropeanEuropean averageaverage andand thanthan forfor largelarge BalkanBalkan countriescountries 55.6 52.7 52.4 suchsuch asas Bulgaria,Bulgaria, RomaniaRomania andand 48.6 SerbiaSerbia butbut inin lineline withwith thethe farmfarm sizesize 43.7 42.1 inin Albania,Albania, CroatiaCroatia andand MacedoniaMacedonia

32.1 31.8 29.9 27.4 26.9 23.9 23.0 21.4 19 . 1 13 . 2 11. 9 11. 4 11. 0 7.4 6.3 6.0 6.0 5.5 5.5 5.1 4.8 3.4 3.3 2.0 1.9 1. 7 1. 4 0.9 Italy Serbia EU12 EU27 EU15 Malta Malta Spain Spain Croatia Latvia Albania Ireland Ireland Poland France France Finland Estonia Cyprus Austria Greece Greece Belgium Kosovo Kosovo Bulgaria Portugal Slovakia Slovenia Slovenia Hungary Romania Sweden Denmark Lithuania Lithuania Germany Germany Macedonia Netherlands Luxembourg United Kingdom United Kingdom Czech Republic Czech Republic

Sources : Eurostat, Statistical Agency of Kosovo (2006), Ministry of Agriculture Albania, Central Bureau of Statistics Croatia, Ministry of Agriculture Serbia, Statistical Office of Macedonia, BAH Analysis 44 Untapped Potential of Small Farmers Although there is some indication that large and specialized farms make better use of the land, leaving only 1.7% fallow compared to 9.5% for all farms …

Cultivated Over Total Agricultural Land by Farm Size % Based on Area (2006)

0 - 1,5 ha 92.7% 7.3%

1,5 - 3 ha 88.8% 11.2%

3 + ha 88.9% 11.1% Large and Specialized Farms Leave Large and Specialized Only 1.7% of 98.3% 1.7% Farms Land Fallow Compared to 9.5% for All All Farms 90.5% 9.5% Farms

Cultivated Left Fallow

Sources : Statistical Agency of Kosovo (2006) Note : Cultivated area includes arable, meadows, orchards and greenhouses. Left fallow includes pastures. 45 Untapped Potential of Small Farmers

… there are several factors that would limit the feasibility and attractiveness of land consolidation Obstacles to Consolidation of Agricultural Land

LandLand isis traditionallytraditionally willedwilled toto allall survivingsurviving children.children. ThisThis hashas ledled toto thethe divisiondivision ofof landland intointo progressivelyprogressively SubdivisionSubdivision ofof smallersmaller plots,plots, oftenoften withwith oneone farmerfarmer owningowning severalseveral non-contiguousnon-contiguous plots.plots. ThisThis factfact compcomplicateslicates andand addsadds LandLand BetweenBetween costs to efforts to consolidate land. FamilyFamily MembersMembers costs to efforts to consolidate land.

AA significantsignificant amountamount ofof arablearable landland belongsbelongs toto socially-socially- or or publicly-ownedpublicly-owned enterprisesenterprises thatthat havehave notnot beenbeen definitively privatized. Much of this land is subject to claims by previous owners. In addition, much of the PrivatizationPrivatization ofof definitively privatized. Much of this land is subject to claims by previous owners. In addition, much of the land is being farmed by smallholders without formal or indisputable title. Because of this status, sale or SOEsSOEs and and POEsPOEs land is being farmed by smallholders without formal or indisputable title. Because of this status, sale or consolidationconsolidation ofof landland onon sociasocially-ownedlly-owned enterprisesenterprises (SOEs)(SOEs) willwill bebe complexcomplex andand time-consuming.time-consuming.

TitleTitle toto agriculturalagricultural landland heldheld byby IDPsIDPs creates creates significasignificantnt complicationscomplications toto changechange ofof ownership,ownership, salesale ofof Title Issues Title Issues landland andand consolidation.consolidation. ThereThere isis aa significantsignificant amountamount ofof arablearable landland thatthat isis notnot heldheld underunder clearclear titletitle Associated with Associated with becausebecause ofof disputesdisputes datingdating toto 19991999 andand fromfrom thethe YugoslavYugoslav period.period. This This includesincludes claimsclaims byby thethe OrthodoxOrthodox IDPs IDPs ChurchChurch inin PejaPeja and and Decani.Decani.

WhileWhile largerlarger farmfarm sizesize unequivocallyunequivocally correlatescorrelates withwith higherhigher yieldsyields anandd productivity,productivity, sourcessources includingincluding EmploymentEmployment andand EuroStatEuroStat indicate indicate thatthat smallersmaller farmsfarms maymay actuallyactually produceproduce moremore employmeemploymentnt perper hectare.hectare. ThisThis indicatesindicates RuralRural thatthat consolidationconsolidation couldcould exacerbateexacerbate rururalral unemployment.unemployment. InIn addition,addition, aa sensesense ofof foodfood insecurityinsecurity persistspersists LivelihoodsLivelihoods whichwhich leadlead familiesfamilies toto vavaluelue smallholdersmallholder farmsfarms asas anan importantimportant safetysafety netnet inin casecase ofof instability.instability.

Sources: Interviews 46 Untapped Potential of Small Farmers

Therefore, it is important for Kosovo’s agricultural development to address obstacles in leveraging smallholder farmers

Challenges in Leveraging Kosovo’s Small Growers Potential for Export

AA WhileWhile cooperativescooperatives andand associationsassociations existexist inin aa numbernumber ofof cropscrops andand areasareas ofof thethe country,country, therethere areare lessless thanthan 1515 Lack of Coordination Lack of Coordination associationsassociations inin operationoperation andand thesethese representrepresent onlyonly aa smallsmall percentagepercentage ofof farmers.farmers. amongamong SmallSmall The capacity of existing cooperatives is weak and few focus on the full value chain of activities (i.e. bargaining & Farmers The capacity of existing cooperatives is weak and few focus on the full value chain of activities (i.e. bargaining & Farmers services,services, assetasset sharing,sharing, laborlabor sharing,sharing, knowlknowledgeedge forfor value-addedvalue-added crops).crops). ServicesServices areare limited.limited.

B B NoNo effectiveeffective extensionextension serviceservice existsexists toto assistassist smallsmall farmersfarmers inin developing developing newnew cropscrops andand improvingimproving yieldsyields ofof existingexisting ones.ones. FoodFood processorsprocessors suchsuch asas PestovaPestova provi providede extension-likeextension-like servicesservices butbut areare impededimpeded byby lacklack ofof LackLack ofof EducationEducation enforceableenforceable contractscontracts withwith farmersfarmers thatthat wouldwould createcreate anan incentiveincentive toto invest.invest. andand TrainingTraining TheThe educationaleducational institutesinstitutes thatthat dodo existexist focusfocus onon aa smallsmall numbernumber of of traditionaltraditional cropscrops (peppers,(peppers, winterwinter wheat,wheat, tomatoes,tomatoes, potatoes).potatoes).

While the banking system is robust and access to hypothecated lines of credit does exist, farmers with minimal CC While the banking system is robust and access to hypothecated lines of credit does exist, farmers with minimal collateralcollateral dodo notnot havehave sufficientsufficient accessaccess toto investmentinvestment capital.capital. PoorPoor AccessAccess ToTo AlternativeAlternative financialfinancial productsproducts suchsuch asas cropcrop insurance,insurance, warehousewarehouse receipts receipts andand community-basedcommunity-based microfinancemicrofinance FinanceFinance areare notnot readilyreadily available.available. FoodFood processorsprocessors dodo provideprovide somesome accessaccess toto creditcredit forfor theirtheir supplyingsupplying farmersfarmers butbut investmentinvestment isis limitedlimited byby thethe lacklack ofof borrowingborrowing capacitycapacity ofof thethe processorsprocessors andand lacklack ofof enforceableenforceable contracts.contracts. DD AlthoughAlthough thethe raterate ofof tractortractor useuse isis quitequite high,high, therethere isis aa lowlow levellevel ofof mechanizationmechanization forfor harvesting,harvesting, gradinggrading andand packingpacking andand otherother stagesstages inin thethe productionproduction valuevalue chain.chain. UseUse ofof TechnologyTechnology TheThe lacklack ofof cooperativescooperatives toto poolpool equipmentequipment purchasespurchases andand thethe lacklack ofof certifiedcertified repairrepair technicianstechnicians inin countrycountry isis aa majormajor obstacleobstacle toto adoptionadoption

Sources: Interviews 47 Untapped Potential of Small Farmers (Lack of Coordination among Small Farmers)

Approximately 9.6% of all associations and cooperatives in Kosovo are considered active…

Summary of Major Agricultural Cooperatives and Associations in Kosovo

Proportion of Active Associations / Cooperatives Operative in Kosovo CommentsComments OnlyOnly 9.6%9.6% ofof associationsassociations andand cooperativescooperatives inin KosovoKosovo areare consideredconsidered activeactive ––Active Active associationsassociations andand cooperativescooperatives areare 13 Active defineddefined asas entitiesentities thatthat havehave shownshown aa Associations / commitmentcommitment toto theirtheir membersmembers inin marketingmarketing Non-active Associations / Cooperatives andand thatthat operateoperate asas businessesbusinesses Cooperatives, 90.4% Mamushe Historically,Historically, associationsassociations andand cooperativescooperatives havehave notnot Active Associations / Perdrini beenbeen popularpopular forfor threethree mainmain reasonsreasons Cooperatives, 9.6% Anadrini ––Dependence Dependence onon thethe extendedextended familyfamily forfor Agroqyshu productionproduction relationshipsrelationships andand supportsupport Krusha Madhe ––Lack Lack ofof trusttrust inin developingdeveloping businessbusiness venturesventures Tina Association withwith otherother associationassociation andand cooperativecooperative KOVRGA membersmembers FRUTI ––Producers Producers havehave notnot placedplaced asas muchmuch emphasisemphasis Women for on relationships with buyers; if the business Women (5) on relationships with buyers; if the business modelmodel isis drivendriven moremore byby attractingattracting buyerbuyer attention,attention, thenthen therethere isis greatergreater abilityability toto fosterfoster Total:Total: 135135 AssociationsAssociations trusttrust amongamong membersmembers

Source : BAH Analysis; KPEP 48 Untapped Potential of Small Farmers (Lack of Coordination among Small Farmers)

… the active associations / cooperatives have varying levels of membership and do not complete many critical activities Cooperatives in Kosovo By Function, Location and Crop

Number of Members in Active Associations / Types of Activities Completed by Active Cooperatives (1) in Kosovo Associations / Cooperatives in Kosovo 175 Crop Bargaining Labor Asset Expertise/ Collection/ for Inputs Sharing Sharing Extension Marketing Mamushe ✓

Perdrini ✓ ✓ ✓

100 100 Anadrini ✓ ✓

Agroqyshu ✓

Krusha ✓ ✓ 60 Madhe 50 Tina Association ✓ ✓

25 KOVRGA ✓

8 FRUTI ✓

Women for Agroqyshu Women Tina Krusha Perdrini Anadrini Mamushe ✓ ✓ ✓ ✓ for Madhe Women Women (2) Gap in Activities

Note (1) : Does not include membership figures for all active associations Note (2) : Average number of members per cooperative Source : BAH Analysis; KPEP 49 Untapped Potential of Small Farmers (Lack of Education and Training)

While a number of organizations are providing training and extension services in Kosovo, capacity is weak

Extension and Training Organizations in Kosovo

PublicPublic SectorSector Public-PrivatePublic-Private PartnershipPartnership PrivatePrivate SectorSector

Structure: The Ministry of Agriculture Structure: There are no true public- Structure: Food processors and operates Extension Departments in private partnerships involving the GoK associations offer extension-like each of the 33 municipalities, but and private parties for extension services to their supplying farmers. capacity is limited and activities are services. However, many of the donor For example, Pestova provides advice focused primarily on data collection for projects function essentially in this to farmers on quality, varieties and statistical purposes. The Peja Institute way. As an example, Intercooperation ways to maximize yields in potatoes, manages test plots and conducts has trained and certified 25 private Bylmeti works with dairy farmers to testing and limited production of seed agronomists and is subsidizing their improve raw milk quality and animal for winter wheat, potatoes, peppers cost to farmers. KPEP is supporting nutrition. and maize. However, there is no associations such as Perdrini which effective publicly-funded extension. provide extension services. Funding: Processing companies Funding: The Ministry of Agriculture Funding: Intercooperation is cost- typically provide extension services has access to a programmable budget sharing payments to agronomists at a and inputs free of charge in exchange of €5-6M per year, which is primarily rate of 75% in 2009 and 50% in 2010. for commitments of product. used for grants and price supports. In The cost is €50 per day. Clients Investment in these services is limited 2009, funds were allocated to include large farmers, associations by the informal nature of the purchases of apple rootstock, wheat and informal community organizations. relationships. Associations provide seed and rehabilitation of irrigation services for a nominal membership fee systems and to support a subsidy of (€10 per year) and for fees for €50 per cow for farmers who own at marketing and sale of crops. least five cows.

Source: Interviews; BAH Analysis 50 Untapped Potential of Small Farmers (Lack of Education and Training) Without effective extension, a large area is dedicated to crops that are unprofitable, produced through poor methods or sold through poor channels

The Role of Extension in Helping Small Farmers Improve Choices and Techniques

Crop Profitability By Total Production

Attractive Crops Grown Very Little Attractive Crops Grown A lot

Beans (bush) CommentsComments (2106 ha) KosovoKosovo farmersfarmers growgrow largelarge quantitiesquantities ofof low-low- €1000) Peppers Sold to Processor profit crops (maize), make poor production

≥ profit crops (maize), make poor production Potato (504 ha) choiceschoices (maize(maize withoutwithout irrigation,irrigation, whitewhite beansbeans (3746 ha)

High ( High Beans (Pillar) onon pillar)pillar) andand choosechoose less-profitableless-profitable marketmarket (2106 ha) channelschannels (i.e.(i.e. sellingselling pepperspeppers inin thethe greengreen marketmarket ratherrather thanthan forfor processing)processing) Unattractive Crops Grown A lot ExtensionExtension servicesservices cancan helphelp farmersfarmers selectselect Tomatoes betterbetter crops,crops, adoptadopt betterbetter productionproduction (903 ha) techniquestechniques andand sellsell throughthrough moremore profitableprofitable Peppers Sold to Green Market

Farmer’s Profit Per Hectare Profit Farmer’s channelschannels (2018 ha) €1000)

(≤ Maize (Irrigated) (21671 ha) Low Maize (Unirrigated) (14447 ha) Low (≤2000 ha) High (≥ 2000 ha) Total Hectares of Kosovo Production in 2008

Source : KPEP, Predrini, Agroqyushu, Mamusha Association; Statistics Office of Kosovo (Note: 2008 data from SoK is preliminary and was being finalized at the time of the study) Notes : % of production include horticulture and cereals only; Maize includes maize and mixed maize and beans includes beans and mixed beans Assume: 60% of maize is irrigated while 40% is not irrigated; 80% of peppers are sold to green market while 20% is sold to processors 50% of beans are bush while 50% are pillar 51 Untapped Potential of Small Farmers (Poor Access To Finance)

There are a number of organizations providing finance to farmers and food processors, but the types of instruments are limited Financial Products Available to Farmers Suitability Agency Product Term Comments to Ag Line of credit or Term loans up to 5 years Products offered are acceptable for processor and farm working capital term loan Lines of Credit up to 12 needs. However, the revolving nature of loans requires clients to 12-14% with months revolving. mortgage long-term assets for short-term financing. Commercial preferential rates Collateral requirements at Because agriculture is not a target sector for the banks, loan officers do Banks as low as 9% 1.5 to 3+x loan value. not focus on nor understand clients in the sector. (including to some The $10M GDA was considered successful although only one bank ag processors) (Raiffeisen) participated; although all the loans have been made under GDA, Raiffeisen will continue to lend without GDA guarantee Generally priced With a few exceptions, Competition is high in urban and peri-urban areas, less so in villages, on a monthly under 12 months with with Kosinvest more focused on rural clients than others. declining basis some enterprise loans up Beginning in 2010, MFIs will be allowed to take deposits, possibly Microfinance with annual rates to 60 months. lowering cost of capital and interest rates. at 24%+ Collateral requirements vary - lending on references is common. Purchase order Less than a year. POF is Although not a good instrument for smallholders, it is well-suited for Purchase Order financing a working capital processors and exporters. Financing On par with bank instrument Initial CFF capital was only $1.5M and is fully committed. New loans interest rates. are based now on reflows. Lendable market estimated at $20M+. Variable rates and Around current lending Two companies are registered for leasing - Raiffeisen Leasing and CFF terms. Nascent rates High - but neither are active yet except in vehicle leasing. Leasing Potential There would appear to be a significant market in agriculture for leasing of tractors and motocultivators (close to 80k units).

Conclusions The financial sector must serve both the smallholder farmer directly as well as the processor or distributor to which he / she sells The current mix of financial products does not serve either segment well because of lack of focus on the sector, relatively short-terms and high collateral requirements. There is an opportunity for alternative products

Sources: Interviews with Raiffeisen, Crimson Capital, Kosinvest, ProCredt, FINCA, Bankers’ Association, AFK, others. 52 Untapped Potential of Small Farmers (Use of Technology)

The overall amount of mechanization is high although small farmers primarily use machinery for soil preparation

Mechanization by Type of Equipment and Size and Type of Farm % – 2006

Soil Preparation

32%

24% Other Operations in the Production Chain

20% 20% 19% 19% 17% 15% 16% 16% 16% 14% 14% 13% 11% 9% 9% 7% 4% 4% 2% 1% 1% 2% 2% 1% 1% 0%

r r e r k r n er ine e er hi d mp d ower c raye ch u racto rowe p yrac Bail P rea T ar M S y p e H Ma Harrower Sprea Ha ma ter S g tocultivator r r Ha r o th le a a o ing ze l W ure L Small TractorM o w Disk ili Mi n T o rt S e F Ma

Small Farms Large & Specialized Farms Sources: Statistical Agency of Kosovo (2006) Note: Data was provided in total numbers. We have estimated a total of 257k small farmers and 276 large and specialized farms based on other land use data in order to calculate percentages. Motocultivators include motocultivators and all categories of “related equipment. Large tractor is defined as over 40hp. 53 Untapped Potential of Small Farmers (Use of Technology) Although many of the production steps will not benefit from mechanization because of the low cost of labor, improvements in several area are critical Degree of Small Farmer Mechanization Across the Production Chain

Infrastructure Soil Post-Harvest Planting Harvesting Packaging Storage Development Preparation Handling

Degree of Mechanization

Additional High Planting of Harvesting is Although there For several There is a lack greenhouse mechanization cereals is highly primarily is some need processors of cold storage investment for cereals. mechanized, manual and, for additional bottling, capacity and would allow Low in but horticulture because of conveyers and packaging many farmers smallholders vegetable is primarily the low cost equipment for and steriliza- store to produce crops. manual. Some of labor, will sorting (e.g. for tion is a vegetable in Needed crops earlier in mechanization continue as apples), production barns. Investments the season exists for such. mechanization bottleneck Investment in for when high planting of Increased is not a which effects cold storage is Smallholders prices can be peppers (Las mechaniza- bottleneck. the volume necessary. obtained. Palmas). As tion is not Manual sorting they are able Small-scale long a labor economical. on tables is to buy from “blast costs are low, sufficient. smallholders irrigation” this is not a systems are bottleneck also needed.

Most Critical Areas

Sources: Interviews 54 Lack of Demand Driven Focus There are a number of obstacles to developing a demand-driven focus in agriculture that will maximize the value of production, employment and benefits to farmers Demand-Driven Strategy Obstacles

PoorPoor DonorDonor ThereThere isis aa significantsignificant amountamount ofof donordonor fundingfunding forfor agricultureagriculture focusedfocused onon CoordinationCoordination ToTo factorsfactors thatthat willwill influenceinfluence thethe valuevalue chainchain -- infrastructure, infrastructure, production,production, MeetMeet MarketMarket extension,extension, marketing.marketing. However,However, therethere isis poorpoor coordinationcoordination betweenbetween thethe DemandsDemands GoKGoK and and donorsdonors toto focusfocus onon constraints,constraints, cropscrops andand areasareas ofof thethe valuevalue chainchain

ProducersProducers havehave limitedlimited understandingunderstanding ofof customercustomer requirementsrequirements forfor variety,variety, LimitedLimited AbilityAbility toto shape,shape, grade,grade, sizesize andand packagingpackaging ofof products.products. MeetMeet CustomerCustomer InIn somesome cases,cases, associationsassociations oror foodfood processorsprocessors areare playingplaying thethe rolerole ofof RequirementsRequirements educatingeducating producersproducers onon productproduct requirements.requirements. However,However, therethere hashas beenbeen limitedlimited success.success. LackLack ofof Demand-Demand- DrivenDriven FocusFocus Well-developedWell-developed distributiondistribution andand marketingmarketing chainschains cancan provideprovide productproduct toto LimitedLimited DevelopmentDevelopment targettarget marketsmarkets inin aa flexibleflexible andand reliablereliable wayway basedbased onon thethe specializedspecialized rolesroles ofof DistributionDistribution andand ofof actorsactors inin thethe distributiondistribution andand marketingmarketing chain.chain. MarketingMarketing ChainChain InIn Kosovo,Kosovo, therethere isis littlelittle specializationspecialization andand keykey rolesroles inin thethe distributiondistribution chainchain areare notnot beingbeing filled.filled.

AlthoughAlthough KosovoKosovo producersproducers areare participatingparticipating inin aa largelarge numbernumber ofof promotional events in target markets, Kosovo is not recognized as a Limited Promotion promotional events in target markets, Kosovo is not recognized as a Limited Promotion producer of high quality “branded” agricultural products. It is a commodity Capabilities producer of high quality “branded” agricultural products. It is a commodity Capabilities supplier.supplier. LittleLittle focusfocus hashas beenbeen placedplaced onon promotionalpromotional eventsevents besidesbesides tradetrade fairs. fairs.

Source : BAH Analysis 55 Lack of Demand Driven Focus (Donor Coordination To Meet Market Demands)

Donor support for agriculture is €15-18M per year although coordination between donors and with the GoK is weak Selected Data on Donor Programs- Estimated Funding in € (Annualized - 2009) Donor Funding for Agriculture Current Focus Areas Planned Future Focus Areas Institutional Support for MAFRD (Austria, Establishing farm register value (€1M) €65M from 1999-2009 or c. Slovenia, Hungary) Land Use €1.5M €7M per year Meeting EU standards on Food Safety Forestry Value TBD European and Veterinary Services (Germany and Support for Disease Control €1.5M Commission Lithuania) Animal Registration €1.5 Million; Rural Grants in support of Dairy and Fruit & Vegetable Processing €5M Annual support estimated at Support for dairy, non-wood forest Development of strategy in progress c. €2-3M per year including products and fruit & vegetables through USAID KPEP (€2.9M Euros per year KPEP total value), DCA and other Develop Credit Authority (DCA) supporting access to finance (1) Annual support estimated at Cadastre Development Program Country Economic Memorandum (CEM) in €4-5M per year (loans and ($12M/4-year) development. Will allocate $10-15M from July TA) including the Cadastre Support for the MAFRD Grants Program 2010-July 2013. Areas of focus World Bank program and the WB-funded - $10M total; €3M dispensed in 2009 for – Improving Public Sector Extension MAFRD grants program producer supports, purchase of apple – Improving MAFRD Finance & Budgeting root stock, irrigation – Supporting Alignment with EU Standards IBRD support for irrigation possible Annual support estimated at Intercooperation (€1M p.a.) focused on Not known €2-3M fruit, veg, MAP GTZ (€300K) focused on medicinal and European aromatic plants Bilaterals Several Italian funded ag programs Turkish funding for cold storage capacity in Mamushe Note (1) : DCA program is fully subscribed and no longer lending Sources: Interviews 56 Lack of Demand Driven Focus (Limited Ability to Meet Customer Requirements)

In a well-developed agricultural system, both large and small producers fit within a marketing chain that brings goods to market

Well-Development Marketing Chain

Sorting, Export Logistics Distribution in Production and Collection Grading Transportation and Customs Export Harvesting Packing Procedures Markets

CollectionCollection WholesalersWholesalers andand SmallSmall FarmersFarmers SmallSmall MarketersMarketers TransportationTransportation agentsagents CentersCenters retailersretailers

LandLand transporttransport Customs,Customs, TaxesTaxes DistributionDistribution VerticallyVertically integratedintegrated producersproducers // marketersmarketers companiescompanies andand QuarantineQuarantine AgentsAgents

FarmingFarming cooperatives,cooperatives, farmersfarmers associationsassociations

LargeLarge MarketersMarketers SmallSmall MarketersMarketers LargeLarge marketersmarketers areare normallynormally verticallyvertically integratedintegrated alongalong SmallSmall marketersmarketers mainlymainly focusfocus onon sellingselling cropscrops producedproduced thethe wholewhole supplysupply chain,chain, andand havehave theirtheir ownown productionproduction byby thethe multitudemultitude ofof smallsmall prproducersoducers operatingoperating inin thethe lands,lands, packingpacking houseshouses anandd end-customerend-customer contractscontracts sector.sector. CooperativesCooperatives ccanan alsoalso playplay thisthis role.role. TheThe rationalerationale behindbehind theirtheir businessbusiness modelmodel isis to:to: SmallSmall marketersmarketers dependdepend onon dedealersalers andand packipackingng houseshouses ––Reduce Reduce supplysupply riskrisk andand dependencydependency onon thethe largelarge toto supplysupply themthem withwith theitheirr needsneeds ofof exportexport volumesvolumes numbernumber ofof smallsmall sizesize farmersfarmers TheThe levellevel ofof profitabilityprofitability forfor smallsmall exportersexporters isis muchmuch lowerlower ––Better Better controlcontrol costcost andand ququalityality ofof cropscrops producedproduced thanthan largelarge onesones sincesince theythey papayy forfor thethe mark-upsmark-ups ofof allall LargeLarge marketersmarketers basbasee theirtheir businessbusiness onon supplyingsupplying majormajor playerplayer upstreamupstream ofof thethe ssuupplypply chainchain (farmers(farmers andand internationalinternational retailretail chainschains packers)packers)

Source: Interviews 57 Lack of Demand Driven Focus (Limited Ability to Meet Customer Requirements)

The distribution system in Kosovo lacks specialized intermediaries in the value chain and non-Kosovo customers perform key roles Marketing Chain in Kosovo

Sorting, Export Logistics Distribution in Production and Collection Processing Transportation and Customs Export Harvesting Packing Procedures Markets

SmallSmall FarFarmmeerrss PerdrinPerdriniiAssociatiAssociatioonn PepperPepper ProcessingProcessing CCuustomestomerrss inin MaceMaceddonioniaa

ForeigForeignn SmallSmall FarFarmmeerrss PestovaPestova((PPrrocessor)ocessor) DistributorsDistributors

CollectorsCollectors HitHit FloresFlores SlovenianSlovenian ProcessorsProcessors

SmallSmall FarFarmmeerrss EtlingerEtlinger AustriaAustriann CCuustomerstomer

CommentsComments ForFor thethe mamajjoorityrity ofof exexppoortrt products,products, thethe exporterexporter wwoorksrks directlydirectlywithwith smalsmalll proproducerducerss andand ddoo nonott benefbenefiitt fromfrom verticallyvertically iinntegratedtegrated productiproductionon oorr frofromm aa coocooppeerraatitiveve oror iinntertermmedediaiaryry whwhoo cancan peperforformrm intermeintermeddiaiaryry Roles performed stepssteps inin thethe marketingmarketing chaichain.n. by foreign customer InIn additiaddition,on, mostmost expoexportersrters relyrely onon foreignforeign customerscustomers forfor criticcriticalal stepssteps iinn thethe markmarketingeting chaichainn iinncludingcluding finalfinal packaging,packaging, processing,processing, transportationtransportation andand salesale toto distridistributorsbutors andand retailretailerers.s. ThisThis bothboth reducesreduces thethe margimarginnss ofof exportersexporters andand makesmakes themthem dependantdependant onon customerscustomers withwith knowlknowleedgdgee ofof thethe endend market.market.

Source: Interviews 58 Lack of Demand Driven Focus (Limited Ability to Meet Customer Requirements)

Improvements in demand chains have floundered on lack of trust, a “transactional mentality” and a lack of incentives

An Example of Compliance with Customer Requirements

SaleSale ofof PeppersPeppers toto MacedonianMacedonian ProcessorsProcessors GeneralGeneral IssuesIssues

1 Lack of trust. Because farmers do not value Customer Requirements: Macedonian 1 the relationship with the customer, they are processors in Bitola have been purchasing prepared to game the system to increase peppers from Kosovo since 2008. There are volume in the short-term at the expense of the specific requirements for variety, size (over long-term relationship. 30cm), shape (straight) and color (red). 22 Lack of knowledge of customer Intermediaries: Perdrini has participated as an requirements. Unless an intermediary (such intermediary working with farmers to collect as Perdrini) educates farmers on requirements, produce that meets the customer specifics. there is limited knowledge and ability to meet Perdrini has also helped farmers grow the these requirements. correct varieties. 33 Lack of enforceable contracts. In most cases, there is no contract between the Problems: Farmers intentionally try to “game” intermediary (or buyer) and the farmer such the system by packing peppers that do not that investments in inputs and training cannot comply with requirements on the bottoms of always be recouped. This limits the willingness boxes. Perdrini does not receive a fee for of intermediaries and buyers to invest in services to incent continued investment and helping smallholders understand and meet there is no contractual relationship between the requirements. farmer and Perdrini or Perdrini and the 4 Lack of incentives. In Kosovo, virtually all processor. However, as the third year of the 4 intermediaries are associations rather than relationship begins, farmer responsiveness to cooperatives. Associations are not able to buy customer requirements is improving. and sell products and, therefore, have no material incentive in expending volumes. Source: Interviews 59 Lack of Demand Driven Focus (Limited Development of Distribution and Marketing Chain)

There are a limited number of packhouses and storage businesses in Kosovo although more are in the planning stage Selected Packhouses and Cold Storage Facilities in Operating and in Planning

Leshak Podjeve Dren In operation. Istog Albanik In operation. Socanice 100m2 cooling for 100m2 cooling for cabbage, carrots apples Banjske Comments Podjeve Comments Zubin Potok Zvecan Mitrovice Llapshtice Gllamik CollectionCollection andand packingpacking operationsoperations Batllave Orllan Rakosh Runik Vushttri highlightedhighlighted onon thethe mapmap areare onesones thatthat areare VrelleIstog Kilodernice Skenderaj integralintegral toto thethe productionproduction valuevalue chain,chain, Fshat I Ri Prapashtice Gjurakc LiaushePolac Cirez Vitomirice Dobrushe i.e.i.e. facilitatingfacilitating thethe movementmovement ofof Kastriot Prishtina Marec Peje Siceve Dobroshevc Fushe Kosove Hogosht agricultureagriculture goodsgoods fromfrom producersproducers toto thethe Raushiq Baran Kline Drenas Bardh I Madh Strellc Artane marketsmarkets Jabllanice Komoran Dardane Decan Drenoc Liapushnik Janjeve Irznic Lipjan Bresalc Mamushe Miresh Approximately 50 storage units exist Kralan Krojmir Approximately 50 storage units exist In planning Malisheve Krajishte Junik Gjilan aroundaround Pristina;Pristina; however,however, thethe facilitiesfacilities 100m2 cooling for Ratkoc Rahovec Shtime Ferizaj Zheger Gjakove Therande Pozharan areare usedused forfor wholesalerswholesalers andand traderstraders toto tomatoes Xerxe Pleshine Rogove Krushe e MMushtisht Greme Gjylekare storestore goodsgoods thatthat havehave alreadyalready beenbeen Gacke Viti Damjan Pirane VerbeshticeBrod purchased.purchased. TheyThey areare notnot partpart ofof thethe Krusha Korishe Kacanik In planning, Prizren Sherpce productionproduction valuevalue chainchain Zhur Hoce e Qytetit Ham Elezit 180m2 cooling for Vushttri Mushnikove In operation. tomato, Brodosafc cucumber, 150m2 cooling for Dragash potatoes cabbage, pepper, Brod melon Restelica

Source : BAH Analysis 60 Lack of Demand Driven Focus (Limited Development of Distribution and Marketing Chain)

Despite this, packhouses can be profitable and should be attractive for private investment

Data from the Business Plan for a Proposed Packhouse Business in Peja Called “Vegco" Annual Purchases by Commodity Metric Ton Cash Flow Per Year Thousands of € Cumulative Cash Flow Melon - 410 MT € 465 € 385 € 423 Cucumber - € 330 € 350 980 MT

Peppers - Investment Year 1 Year 2 Year 3 Year 4 Year 5 1880 MT

Cabbage - 3-Year Return of 1900 MT Investment

Tomato - 980 MT Based on business plan assumptions, Vegco has an -€ 1,143 IRR of over 35% making it TotalTotal == 61506150 MTMT potentially a very attractive ProcessedProcessed AnnuallyAnnually investment

Sources : KPEP, BAH Analysis Notes : IRR = Internal Rate of Return, which is a calculation of the overall return of the investment. 61 Lack of Demand Driven Focus (Limited Development of Distribution and Marketing Chain)

Improvements in this area will be necessary to satisfy customer demands for quality and predictable, flexible and reliable delivery

Product and Service Requirements of Agriculture Commodities Importers

RetailersRetailers areare increasinglyincreasingly requirinrequiringg highhigh qualityquality productsproducts byby imposingimposing certaincertain certificationcertification standardsstandards (e.g.,(e.g., GlobalGAP,GlobalGAP, BRC,BRC, HAACP,HAACP, IFSIFS standards)standards) HighHigh QualityQuality KosovoKosovo isis handicappedhandicapped byby thethe lalackck ofof standardsstandards compliancecompliance ofof prodproducersucers andand privateprivate labslabs andand byby ProductProduct lacklack ofof compliancecompliance ofof GoKGoK ins institutionstitutions withwith EUEU standards.standards.

Predictability:Predictability: WhereasWhereas thethe demanddemand isis variable,variable, irregular,irregular, andand changeschanges fromfrom ononee dayday toto another,another, retailersretailers expectexpect thatthat theirtheir cchanginghanging requirementsrequirements wouldwould bebe predictedpredicted byby theirtheir supplierssuppliers Predictable,Predictable, Flexibility: The retailers prefer not to commit to purchase specific quantities. Retailers such as FlexibleFlexible andand Flexibility: The retailers prefer not to commit to purchase specific quantities. Retailers such as CarrefourCarrefour trytry toto orderorder thethe agricultureagriculture crcropsops thatthat theythey needneed fewfew daysdays inin advanceadvance ReliableReliable Reliability: On-shelf availability is one of the top priority fore retailers. Retailers are very sensitive ServiceService Reliability: On-shelf availability is one of the top priority fore retailers. Retailers are very sensitive about time. They want to track the status of their crop order, and to make sure that delivery would be Delivery about time. They want to track the status of their crop order, and to make sure that delivery would be Delivery on-timeon-time

Source : BAH Analysis 62 Lack of Demand Driven Focus (Limited Development of Distribution and Marketing Chain) As an example, food produce retailers in the UK are reducing their inventory stock levels and as such require more flexible and frequent deliveries from their suppliers

Retail Logistics Trends

E (2006) LLE MPMP XAA E X K E Average Retailer Stock Level Average Delivery Frequency from Distribution Center UUK (in Day) per Category per Week 30 Non Foods 3.6

Slower Moving 25 4.6 Grocery CAGR (1996-2005) Frozen 5.1 20 Beers, Wines BWS -0.7% 5.1 and Spirits Category 15 Chilled / Fresh Non 7.5 Stock Level (Days) Foods -6.3% Meats SMG -1.8% Fast Moving 9 10 FMG -1.2% Grocery Frozen -3.4% Produce 9.8 5 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 024681012

Year Delivery Frequency

Sources: IGD Research, Retail Logistics 2006 63 Lack of Demand Driven Focus (Limited Promotion Capabilities)

In 2009, Kosovo producers were represented at approximately eight trade events, primarily as visitors

Kosovo’s Trade Show Participation Around the World (2009)

BioFach, Nuremberg, Germany, February, 6 visitors Fruit Logistica, Berlin, Germany, GroTech, Antalya, February, 1 exhibitor, 6 visitors Turkey, December, 4 visitors

Albania Agricultural Germany Novi Sad Agricultural Trade Show, October, Turkey Fair, Serbia, May, ~ 2 exhibitors, ~ 5 Albania USA Serbia 30-40 visitors visitors Macedonia Bulgaria International Trade Fair of FoodTech, Plovdiv, New York Fancy Consumer Goods, Macedonia, Bulgaria, May, 8 Food Show, October, 2 exhibitors, visitors June, 4 visitors Approximately 25-30 visitors

Conclusion Kosovo producers participated in approximately eight trade shows around the world in 2009. Participants attended the fairs either as visitors to learn about the market, competition and commodities, and / or as producers to display their goods The major constraint in the attendance rate is that food processors need to be HACCP certified as a minimum to do business in countries abroad

Source : BAH Analysis; KPEP Interviews 64 Lack of Demand Driven Focus (Limited Promotion Capabilities) With few exceptions, Kosovo producers have not managed to promote their products, which are perceived as commodities with poor quality

Promotion Issues Impacting Kosovo Agriculture Production

KosovoKosovo agricultureagriculture exportersexporters areare positioningpositioning theirtheir productsproducts onon thethe lolowestwest rungrung ofof thethe susupplypply chainchain andand areare usedused primarilyprimarily toto fillfill seasonalseasonal demademandnd inin neighboringneighboring markmarketetss whenwhen domesticdomestic producproductsts areare unavunavailable.ailable. WithWith thethe exceptionexception ofof PestovaPestova and and aa fewfew otherother processors,processors, nono exportersexporters havehave recognizedrecognized brandsbrands and, and, inin fact,fact, productsproducts areare oftenoften relabeledrelabeled oror re-pacre-packakagedged beforebefore beingbeing shippedshipped toto thethe retailer.retailer. WeakWeak AgricultureAgriculture producersproducers dodo notnot brandbrand freshfresh oror processedprocessed prodproductsucts asas “Made“Made inin KoKosovo”sovo” even even inin marketsmarkets BrandingBranding (e.g..(e.g.. US,US, UK,UK, Albania,Albania, Germany)Germany) wherewhere suchsuch brandingbranding wouldwould bebe well-received.well-received. AgricultureAgriculture producersproducers areare notnot leveraleveragingging FairFair TradeTrade trends.trends. TheyThey are are notnot asassociatingsociating theirtheir productsproducts toto thethe naturalnatural heritageheritage ofof specificspecific regions,regions, andand notnot emphasizingemphasizing thethe rolerole ofof smallsmall farmersfarmers inin producingproducing thethe crop.crop. InIn addition,addition, fewfew producersproducers areare takingtaking advantageadvantage ofof orgaorgannic,ic, halalhalal or or otherother value-addedvalue-added branding.branding.

ThereThere areare aa relativelyrelatively largelarge numbernumber ofof exportexport promotionpromotion eveneventsts organizedorganized annuallyannually toto promotepromote exportsexports ofof fieldfield andand horticulturalhorticultural crops,crops, mainlymainly handledhandled byby donordonor agencies.agencies. Howev Howeverer,, thesethese eventsevents areare notnot executedexecuted LimitedLimited asas partpart ofof aa clearclear multi-yearmulti-year campcampaignaign toto developdevelop specificspecific marketsmarkets forfor specificspecific KosovoKosovo productsproducts andand overall measurement of results from trade programs is weak. PromotionPromotion overall measurement of results from trade programs is weak. CampaignsCampaigns ThereThere isis veryvery littlelittle focusfocus onon otherother typestypes ofof marketingmarketing programsprograms thatthat cancan bebe bothboth low-costlow-cost andand highlyhighly effectiveeffective suchsuch asas “earned“earned media”,media”, advertisingadvertising andand directdirect mamarketingrketing toto retailersretailers anandd buyersbuyers inin targettarget markets.markets.

Sources: Interviews 65 Infrastructure Capacity Issues

Overall 17.4% of agricultural land is irrigated with significant differences by municipality Percent of Irrigated Land by Region (% of Arable Land - 2007)

Leposaviqi

Zvecani Mitrovica Zubin Potoku Podujeva CommentsComments Vushtrria Istogu Skenderaj MunicipalitiesMunicipalities likelike ShtërpcaShtërpca F. Kosova Prishtina and Zveçani show a high Peja and Zveçani show a high Kamenica percentagepercentage ofof irrigationirrigation Klina Drenas Obiliqi Novoberda becausebecause ofof thethe relativelyrelatively Decani smallsmall amountamount ofof arablearable landland Malisheva Lipjani Gjilani (1168(1168 andand 801801 haha Shtimja respectively)respectively) andand thethe useuse ofof Gjakova Rahoveci Ferizaji informalinformal pump-basedpump-based Suhareka Vitia systems.systems. Gjilani,Gjilani, FerizaiFerizai and and VitiaVitia are are Shterpca Prizreni Kacaniku alsoalso servedserved primarilyprimarily byby informalinformal systemssystems

Dragashi

Source : Statistics Office of Kosovo (2007) 66 Infrastructure Capacity Issues

Three formal irrigation systems cover most of Dukagjini and northern Kosovo-Plains but leave the southeast uncovered Areas Covered by Formal Irrigation Systems (2009)

CommentsComments Ibër-Lepenc Ibër-LepenIbër-Lepenccisis aa sprinklersprinkler systemsystem supplsuppliedied byby tthehe Drini i Bardhë GazivodeGazivodereservoirreservoir ((IIberberRiRiver)ver) viavia tthehe 5454 kmkm PridPridvorica-Obilvorica-Obiliiqqccanal.anal. AlthoughAlthough itit hhadad anan originaloriginal designeddesigned capacitycapacity ooff 3030,,000ha,000ha, lessless thanthan 1200ha1200ha areare currencurrenttlyly irrigatedirrigated.. AtAt ththee timetime ooff ititss design,design, aa phphasease twotwo coveringcovering 4343,000,000 haha inin southesouthernrn KosovoKosovo PlaPlaiinsns andand thethe VitinaVitinaPlPlainain waswas planplannedned bubutt notnot completed.completed. RaRadodoniqi-Dukadjininiqi-Dukadjinicoconsistsnsists ooff twotwo systems.systems. TThehe RaRadoniqdoniqiisystemsystem (Gjako(Gjakova)va) isis aa sprinklersprinkler systesystemm builtbuilt inin 19861986 withwith aa designeddesigned capacitycapacity ooff 10,25010,250 haha aandnd aa currencurrentt irirrigatedrigated areaarea ooff 50005000 ha.ha. TThehe DukadjDukadjininii systemsystem (Prizren)(Prizren) isis anan opopenen channelchannel systemsystem builtbuilt inin 1963.1963. AlthoughAlthough 3500ha3500ha waswas originaoriginallllyy coveredcovered bbyy sprinklers,sprinklers, almostalmost 7575%% hhaass beenbeen lostlost toto creepingcreeping urbanization.urbanization. DriniDriniii BardhëBardhëwaswas foformrmeded fromfrom thethe 20032003 Radoniqi- consolidatioconsolidationn ooff thethe threthreee irrigairrigationtion companiescompanies ofof Peja,Peja, Dukadjini Area DeçanDeçaniiandand IstogIstogmmunicipalunicipalities.ities. IItt isis anan openopen chchannelannel system built in the 1950s. It is considered inefficient Uncovered by system built in the 1950s. It is considered inefficient and poorly maintained and suffers shortages in July Formal and poorly maintained and suffers shortages in July andand AugustAugust.. Irrigation System

Source : MESP Irrigation Strategy (2009), Kosovo Trust Agency website, World Bank (2009), Interviews. 67 Infrastructure Capacity Issues

All of the formal systems are operating below installed capacity due to deferred maintenance and lack of demand

Capacity of Formal Irrigation Systems (2009 with some 2004 data)

37,190 Design Capacity Equipped Area

30,000 Present Irrigable Area Area Actually Irrigated

23,500

18,000 14,500 15,250 13,600

7,500 7,500 4,000 1,200 2,100

Drini i Bardhë Ibër-Lepenc Radoniqi-Dukadjini

Sources: MESP Irrigation Strategy (2009), World Bank, Interviews Notes : Ibër-Lepenc Irrigable area requires rehabilitation of the pump network. Area actually irrigated is 2004 for Drini i Bardhë and Radoniqi-Dukadjini and 2009 for Ibër-Lepenc. 68 Infrastructure Capacity Issues

In 2006, none of the systems were operating on a financially sustainable basis

Financial Results for Public Irrigation Systems Thousands of € –2006

Ibër-LepencIbër-Lepenc Radoniqi-DukadjiniRadoniqi-Dukadjini DriniDrini i i BardhëBardhë

Loss = €5,073 Loss = €1,895 Loss = €496 KTA (€44) Donors (€269) Reduction In-kind KCB (€80) in Equity Grant €353 (Other) Previous €212 (Other) €30 (Other) (€63) Grants (€133) (€189) €193 €1,650 Staff Cost KCB(€40) Reduction Reserves in Equity €442 Depreciation Reduction for Bad (€1,638) in Equity Debt (€5010)

€6,090 Depreciation €1,045 Staff Cost €118 Staff Cost

Sales €3,020 €101 €583 Depreciation Other Inc Other Inc €29 Irrigation Inc €455 €418 Supplies Irrigation Inc €65

Operating Operating Operating Operating Op Income Operating Income Expense Income Expense Expense

Sources: Audited Financial Statements from KTA website. Notes : P&Ls show grants as a source of income. For purposes of this analysis, grants have been removed from Income. 2006 is the last year for which financial statements are available. 69 Infrastructure Capacity Issues

Fees are charged on a flat per hectare basis and the price is significantly less than the true cost of irrigation

End-user Irrigation Tariff (Price) and Shadow Price (Cost) € per Ha per Year (2009)

The Ibër Lepenc system loses approximately €280 for every hectare irrigated € 120 CommentsComments

Iber Lepenc Ibër-LepencIbër-Lepenc charges charges aa flatflat feefee ofof €120€120 perper hectarehectare € 400 perper yearyear andand losesloses apapproximatelyproximately €280€280 perper irrigatedirrigated hectare.hectare. ItIt compensatescompensates forfor thesethese losseslosses inin partpart throughthrough salesale ofof technicaltechnical waterwater toto thethe KosovoKosovo ee ResRes powerpower statiostation,n, salesale ofof electricityelectricity fromfrom thethe ZubenZuben Potok Potok hydr hydroo stationstation andand provisionprovision ofof municipalmunicipal drinkingdrinking water.water. € 100 TheThe otherother systemssystems chargecharge €100€100 perper hectarehectare perper Other Systems year.year. AlthoughAlthough costscosts areare less,less, becausebecause thethe systemssystems requirerequire lessless pumpingpumping thanthan forfor IbërIbër Lepenc,Lepenc, thethe shadowshadow priceprice isis likelylikely significantlysignificantly Shadow Price Not Known higherhigher thanthan thethe cost.cost.

Sources: Interviews 70 Infrastructure Capacity Issues

Continued investment in the formal systems should be carefully examined for engineering and economic feasibility

Summary of Estimated Investments in Formal Irrigation Systems

Estimated Irrigation Investment Description of Issues Provider (2007-2013) Ibër-Lepenc is suffering from low market demand and is currently irrigating only 3% of its installed capacity. Reconstruction of pump stations is being considered. However, improvements must be Ibër-Lepenc I €6.4M made in the context of bringing the system back up to a break-even level of demand and considering non-irrigation demands on the reservoir. The Lepenc system (Ibër Lepenc II) was originally designed in the 1960s to irrigate land in Southern €298.5-677.6M Kosovo-Plains and in Macedonia. It was intended to transfer water from the Lepenc catchment and Ibër-Lepenc II (Pending New from two smaller catchments on the Drenica and Gracanka rivers. Although a system in southeast Study) Kosovo is required, plans for the Lepenc system must be thoroughly updated to account for political, economic and technical changes over the past 40 years. Dukadjini has lost almost 75% of the area in its original planned capacity due to unregulated urbanization in Prizren municipality. Of the remaining area, 1500 hectares consists of open Dukadjini NA channels which are now in poor condition and used in part for urban waste. Continued investment in the system needs to be based on a new plan reflecting current conditions.

Planned investment for the Radoniqi system including rehabilitation of two pumping stations to Radoniqi €9.6M increase the irrigable area by 3,600 hectares. Of all the systems, Radoniqi is considered the best candidate for expansion based on demand and the current maintenance state of the system. Drini I Bardhë is an open channel system that has been poorly maintained and suffers from low water efficiency. True water use is hard to gauge because of the large number of private channels Drini i Bardhë €9.6M drawing water directly from the rivers. Careful analysis is needed before additional investment can be made with the most likely candidate for investment on the Peja system.

Sources: MESP Irrigation Strategy (2009), World Bank Notes : Estimated investment (2007-2013) is drawn directly from the Irrigation Strategy. Investment estimates for Iber-Lepenc 71 Infrastructure Capacity Issues

Overall the are a number of inter-related problems that must be addressed to put the formal irrigation system on a stable basis

Problems Identified in Formal Irrigation Principles of a Strategy to Improve Formal Irrigation WaterWater PermitPermit IssuesIssues ProcessesProcesses Cost Effectiveness. The cost effectiveness of any investments in irrigation must be assessed. Cost- LowLow WaterWater UseUse EfficiencyEfficiency effectiveness depends greatly on the value and types of crops that are and will be cultivated in the irrigated LowLow CollectionCollection RateRate forfor WaterWater UseUse PaymentsPayments area. For this reason, investment in the IPs must be considered together with development of the sector as SignificantSignificant DeferredDeferred MaintenanceMaintenance a whole. Demand. All of the systems, and especially Ibër- Lepenc, irrigate such a small portion of the irrigable LackLack ofof Inter-basinInter-basin TransferTransfer SystemSystem area that almost no cost structure could achieve financial sustainability. The key to survival and UnregulatedUnregulated UrbanizationUrbanization development of these systems is to improve marketing and pricing and re-build demand to break-even levels. InsufficientlyInsufficiently QualifiedQualified IPIP StaffStaff Integrated View of Water Needs. Most of the IPs serve other water needs besides irrigation – technical InabilityInability toto AttractAttract StaffStaff onon PublicPublic water for industry, potable water, power generation, ServiceService SalariesSalaries etc. The evolution of the irrigation system must happen within the context of an integrated water LowLow LevelLevel ofof MarketMarket DemandDemand management strategy for Kosovo that considers all uses of the resource. LackLack ofof Volume-basedVolume-based PricingPricing

Sources: MESP Irrigation Strategy (2009), World Bank 72 Infrastructure Capacity Issues

Starting from a low base, total area under greenhouse almost doubled from 2004-2008 Growth in Greenhouse Area Ha - 2004-2008

154

+28% 133

CommentsComments

Greenhouses are used primarily 93 Greenhouses are used primarily productionproduction ofof tomatoestomatoes andand aa smallsmall amountamount ofof cucumbers.cucumbers. SomeSome 73 lettucelettuce isis producedproduced asas aa secondsecond cropcrop inin winter.winter. MostMost otherother majormajor cropscrops includingincluding peppers,peppers, whitewhite beans,beans, auberginauberginee and and melonsmelons andand producedproduced inin openopen field.field.

2005 2006 2007 2008

Sources: Intercooperation Report (2008) 73 Infrastructure Capacity Issues

However, the area will need to double again even to meet import substitution goals and by much more to support export crops New Greenhouse Area Required for Import Substitution Ha - 2008

130 284 Tomatoes CommentsComments Peppers 60 Cucumbers AnalysisAnalysis concludesconcludes thatthat 130130 hectareshectares ofof greenhousegreenhouse areare neededneeded toto substitutesubstitute importsimports ofof onlyonly threethree cropscrops -- t tomatoes,omatoes, pepperspeppers andand 50 cucumberscucumbers -- during during thethe latelate SpringSpring andand SummerSummer whichwhich isis thethe peakpeak timetime forfor imports.imports. 154 20 ByBy improvingimproving thethe qualqualityity ofof greenhouses,greenhouses, tomatotomato harvestsharvests couldcould bebe movedmoved fromfrom thethe lastlast decadedecade ofof JuneJune toto thethe beginningbeginning ofof JuneJune andand importsimports couldcould bebe subssubstitutedtituted fromfrom JuneJune toto November.November. PepperPepper harvestsharvests couldcould bebe movedmoved fromfrom latelate JulyJuly (open(open field)field) toto thethe secondsecond halfhalf ofof May,May, etc.etc. GreenhousesGreenhouses couldcould alsoalso significantlysignificantly improveimprove thethe priceprice andand volumevolume ofof exportexport cropscrops destineddestined forfor EuropeEurope andand thethe region.region.

2008 Area Additional Area Total Area Needed Needed For Import For Import Substitution Substitution

Sources: Intercooperation Report (2008) 74 Infrastructure Capacity Issues Almost all greenhouse area is in Dukagjini and 87% is of the simple tunnel variety, which is cheap to build but has relatively low yields

Location and Types of Greenhouses Ha - 2008

Block Type 154 Medium Technology 3 Block Type 2% 16 Medium Technology 11%

93 4 2

134 Simple Tunnels 87% 87 29 2 1 11 11 Simple Tunnel 1 6 4 26 10 7 1 1 4 4 2 1 Conclusion Tunnel greenhouses are much cheaper to build at €2-4 per square meter MamushaSuhareka Rahovec Prizren Gjakova Other Total as opposed to €15-20 for more advanced technology. However, tunnels cannot vent heat in Summer allowing only one planting; they have lower yields and do not allow vine plants like tomatoes to grow to heights required for retail quality. Sources: Intercooperation Report (2008) 75 Infrastructure Capacity Issues

Greenhouse cultivation improves yields and incomes, but the payback is long Return on Investment for Greenhouse Grown Crops € per 1000 square meters planted

6-Year Return of Cumulative Investment Cash Flow

€709 €709 €709 €709 €705 €705 €709 €709 €705 Investment €705 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Tomato Produced in Tunnel Greenhouse (Single Planting) 9-Year Return of (€4,000) Investment Cumulative €1817 €1819 €1817 €1011 €1817 €1811 €1017 €1817 €1817 €1811 Cash Flow Investment

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Tomato + Cucumber Produced in Block Greenhouse (Two Plantings) (€ 15,000) 9-Year Return of Investment Cumulative €1795 €1795 €1795 €1795 €1795 €995 €1795 €1789Cash Flow Investment €989 €1789

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Peppers + Lettuce Produced in Block Greenhouse (Two Plantings) (€ 15,000)

Sources: Intercooperation Report (2008) 76 Infrastructure Capacity Issues

Greenhousing enables farmers to take advantage of seasonality to achieve higher prices Monthly Price of the Example Ag Commodities EU Import Prices (2008-2009) (in €; Series Beginning = 1)

1.6 Kosovo Open Tomato 1.4 Kosovo Open Field Harvest Field Harvest 1.2

0.8 Cucumber 0.6

0.4 Peppers Kosovo Open Kosovo Open 0.2 Field Harvest Field Harvest 0

8 8 8 8 8 9 9 9 9 9 0 0 8 0 - -0 l-0 -0 g-08 v-0 n r-09 r u t Jul-08 u ep-0 a eb-0 a J Jan-0 Feb-0 Mar- Apr-08May-08Jun- A S Oct-08No Dec-08J F M Ap May-09Jun-09 Aug-09Sep-09Oc

Sources: ITC Comtrade, Terminal Market Data; Intercooperation for Some Harvest Dates; Interviews 77 Infrastructure Capacity Issues However, there are a number of technical and economic constraints that must be overcome to significantly expand greenhousing, with access to finance the most critical issue Constraints to Expansion of Greenhousing 11 QualityQuality ofof TheThe tunneltunnel stylestyle greenhousesgreenhouses currentcurrentlyly inin useuse dodo notnot ventvent SummerSummer heat heat wellwell leadingleading toto earlyearly senescencesenescence GreenhouseGreenhouse ofof cropscrops andand reducedreduced yields.yields. ThereThere areare currentlycurrently aa fewfew smallsmall companiescompanies inin KosovoKosovo buildingbuilding betterbetter qualityquality ConstructionConstruction greenhousesgreenhouses thatthat enableenable bebettertter micro-climatemicro-climate control.control.

22 TheThe valuevalue ofof climateclimate controcontrolledlled productionproduction isis thethe abilityability toto taketake advantageadvantage ofof seasonaseasonalitylity andand toto improveimprove Post-harvestPost-harvest thethe qualityquality ofof thethe produce.produce. InIn orderorder toto taketake advantadvantageage ofof this,this, thethe marketinmarketingg chainchain mustmust bebe improvedimproved ProcessingProcessing andand includingincluding betterbetter marketmarket intelligencintelligence,e, investmentinvestment inin packingpacking andand sosortingrting houses,houses, andand coldcold storagestorage andand MarketingMarketing transport.transport. 33 Only tomatoes and a small amount of cucumbers are currently grown in greenhouses in Kosovo. Crops ImprovedImproved CropCrop Only tomatoes and a small amount of cucumbers are currently grown in greenhouses in Kosovo. Crops such as peppers, aubergine, melon and white beans are good candidates for diversification. Farmers’ DiversityDiversity such as peppers, aubergine, melon and white beans are good candidates for diversification. Farmers’ decisionsdecisions onon choicechoice ofof cropcrop andand vavarietyriety areare notnot basedbased onon qualifiedqualified adadvicevice oror appropriateappropriate farmfarm trials.trials. 4 4 Most farmers plant only once per year or use lettuce as a second crop during the winter, primarily PlantingPlanting andand Most farmers plant only once per year or use lettuce as a second crop during the winter, primarily because poor aeration does not allow a second crop during the Summer. Improved greenhouse HarvestingHarvesting because poor aeration does not allow a second crop during the Summer. Improved greenhouse aeration, improved knowledge of planting and harvesting schedules, and better availability of seedlings ScheduleSchedule aeration, improved knowledge of planting and harvesting schedules, and better availability of seedlings willwill improveimprove thethe growinggrowing seasseasonon andand returnreturn onon investminvestmentent fromfrom greenhouses.greenhouses. 55 Although drip irrigation and mulching are in use, farmers require technical assistance on growing CropCrop ManagementManagement Although drip irrigation and mulching are in use, farmers require technical assistance on growing practices (plant density, plant spacing, fruit setting, use of fertilizer, etc.). In addition, farmers tend to TechniquesTechniques practices (plant density, plant spacing, fruit setting, use of fertilizer, etc.). In addition, farmers tend to over-useover-use chemicalchemical fertilizers,fertilizers, whicwhichh reducesreduces yieldsyields andand cancan impactimpact thethe qualityquality andand safetysafety ofof thethe crop.crop.

66 EvenEven withwith properproper cropcrop managementmanagement andand plantingplanting schedulesschedules,, thethe paybackpayback periodperiod foforr greenhousesgreenhouses cancan bebe AccessAccess ToTo FinanceFinance relativelyrelatively long.long. ProgramsPrograms areare necnecessaryessary toto ensureensure thatthat smallholdesmallholderr farmersfarmers havehave thethe necessarynecessary accessaccess

Most to finance to invest in this area. Critical to finance to invest in this area.

Sources: Intercooperation Report (2008), BAH Analysis 78 Transportation Disadvantages

85% of Kosovo’s agricultural exports travel over land to their final destination through four primary land border crossings

Primary Exit Points for Kosovo’s Agricultural Exports (2008)

KullaKulla (To (To Montenegro,Montenegro, WestWest 0.07% 0.01% Air EuropeEurope andand PortPort ofof Bar)Bar) AgAg ExportsExports == €2.7M€2.7M // 9.7MT9.7MT MerdareMerdare (To (To Serbia,Serbia, E-80E-80 andand NorthernNorthern Europe)Europe) 14.7% 17.6% Land-Sea AgAg ExportsExports == €4.9M€4.9M // 10.8MT10.8MT Mitrovice

Prishtina Peje

PristinaPristina Airport Airport Land 85.2% 82.4% AgAg ExportsExports == €13k/8kT€13k/8kT

Prizren

HaniHani ii ElezitElezit (To (To Macedonia,Macedonia, VermicaVermica (To (To Albania,Albania, West/SouthWest/South SouthernSouthern EuropeEurope andand PortPort ofof EuropeEurope andand PortPort ofof Durres)Durres) ValueCategory (€) 1 Category 2 Thessaloniki;Thessaloniki; E-75E-75 throughthrough Serbia)Serbia) Weight (T) AgAg ExportsExports == €5.1M€5.1M // 23.6MT23.6MT AgAg ExportsExports == €4.3M€4.3M // 14.2MT14.2MT

Sources: Kosovo Customs, Interviews with Transport Companies Note: The five border crossings pictured represented 94.25% of agricultural exports in 2008 79 Transportation Disadvantages

The unavailability of transiting Serbia makes road transportation 9- 17% more costly and disadvantages Kosovo within the region

Comparison of Transport Costs for Shipping a 23 Ton Load by Road to Hamburg, Germany (in € per Truckload) (2009)

Distance ThisThis routeroute isis thethe mostmost in KM directdirect butbut isis currentlycurrently unavailableunavailable becausebecause itit Belgrade 1,397 1552 requiresrequires transittransit ofof Serbia.Serbia. 1896 Pristina (Merdare) 1,706

1956 Podgorica 1,760

1980 Skopje 1,782 TheseThese routesroutes areare currentlycurrently mostmost usedused andand Pristina (Hani) 1,859 2065 areare 9%9% andand 17%17% moremore costlycostly thanthan thethe MerdareMerdare route. 2135 Tirana 1,922 route.

2217 Pristina (Kulla) 1,995

Because imports greatly exceed exports, deadhead rates for exports from Pristina are discounted by 12% when a round-trip is provided.

Sources: Interviews with Transport Companies 80 Transportation Disadvantages

High value perishables and processed goods can overcome the cost of shipping while commodities cannot

Commodity Values and Transport Costs as a Percentage of Value (€ per 23 Ton Truckload to Hamburg - 2009)

7% Transport Cost as % of Goods Value

9% 10% 11%

Transport Costs Exceed 20% of Value of Goods 26,251 15% 18% 20,000 18,783 20% 21% 16,000 28% 30% 11,092 8,907 7,969 7,590 53% 5,146 4,600 1,778

Berries (fresh) Dried Herbs Fresh Pickled Potato Apple Tomato Carrots Cabbage White Bean Courgette (Hit Flores) Peppers (1st Peppers Sort) (Etlinger)1

Sources: Kosovo Customs, Interviews with Transport Companies Note: 1) Etlinger price assumes highest value products in retail packaging. Product in wholesale packaging (2kg) is valued at €8000 per truckload. 81 Transportation Disadvantages

Land-sea routes use three ports – Thessaloniki in Greece, Bar in Montenegro and Durres in Albania

Primary Handling Ports for Goods from Kosovo

SLOVENIA CROATIA

Bar,Bar, MontenegroMontenegro BOSNIA SERBIA 5M5M tons/yeartons/year perper yearyear cargocargo workedworked ITALY KOSOVO 120k120k m2m2 coveredcovered storagestorage MONTENEGRO BarBar isis notnot usedused asas frequentlyfrequently inin recentrecent yearsyears byby KosovoKosovo MACEDONIA ALBANIA companiescompanies

Thessaloniki,Thessaloniki, GreeceGreece Durres,Durres, AlbaniaAlbania GREECE 15.95M15.95M tons/yeartons/year (366k(366k TEUs)TEUs) 2.28M tons/year cargo worked 2.28M tons/year cargo worked 85k85k m2m2 coveredcovered storagestorage 23.5k m2 covered storage 23.5k m2 covered storage UsedUsed byby KosovoKosovo companiescompanies forfor PrimarilyPrimarily usedused byby KosovoKosovo trialtrial exportsexports toto thethe UAEUAE andand companiescompanies forfor importsimports ofof graingrain SaudiSaudi ArabiaArabia (Abi(Abi Foods) Foods) andand perishablesperishables fromfrom ItalyItaly (Port(Port ofof Bari)Bari)

Source: Lloyd’s (2007); Interviews 82 Transportation Disadvantages

After completion of the Tirana Highway, the land route will remain the most economical compared to other routes

Comparison of Transport Costs for Shipping a 23 Ton Truckload to Rotterdam (2009)

Most Economical Route €2300 / ~35 hours Pristina (through Kulla) Podgorica(through BiH/Croatia Highway)Rotterdam CurrentCurrent SituationSituation Most Economical Land-Sea Route

€2900 / ~55 hours Pristina Durres Ancona Rotterdam €850 / ~ 12 hours €785 / ~ 12 hours €1265 / ~ 26 hours (through Skopje-Ohrid) (Ro-Ro on ferry) (Ro-Ro on ferry)

UponUpon Most Economical Land-Sea Route CompletionCompletion ofof €2600 / ~45 hours Pristina-TiranaPristina-Tirana Pristina Durres Ancona Rotterdam HighwayHighway €550 / ~ 5 hours €785 / ~ 12 hours €1265 / ~ 26 hours (through Vermica) (Ro-Ro on ferry) (Ro-Ro on ferry)

IFIF TransitTransit ofof Most Economical Route SerbiaSerbia BecomesBecomes €1900 / ~25 hours Pristina E-80 Rotterdam NormalizedNormalized (through Merdare) (Croatia, Slovenia, Austria) Conclusion Upon completion of the Tirana Road, some traffic will shift to the Port of Durres or to land routes through Albania to compensate for bad weather conditions, to take advantage of warehousing capacity there, or for goods originating in the Prizren area However, the land route through Kulla will remain the most economical overall. If relations are normalized with Serbia, the Merdare route will have significant advantages over all other routes to destinations throughout Europe. Sources: Interviews with Transport Companies and Ports; BAH Analysis 83 Transportation Disadvantages

There is currently no dedicated air cargo services to Pristina airport with all cargo travelling on scheduled passenger rates Air Cargo Operators at Pristina Airport (in € per kg of effective weight assuming 100kg shipment - 2009)

ApproximateApproximate PricePrice perper KgKg toto AirAir CarrierCarrier DescriptionDescription FrankfurtFrankfurt (FRA)(FRA) AdriaAdria Airlines Airlines OperatesOperates bellybelly cargocargo onon dailydaily flightsflights €2.58€2.58 perper kgkg effectiveeffective weightweight (Intereuropa)(Intereuropa) fromfrom PristinaPristina to to LjubljanaLjubljana MaximumMaximum shipmentshipment sizesize ofof 22 tonstons CurrentlyCurrently handleshandles c.c. 500500 kg/daykg/day

AustrianAustrian AirlinesAirlines OperatesOperates bellybelly cargocargo 66 days/wkdays/wk fromfrom €1.40€1.40 perper kgkg effectiveeffective weightweight (MCM)(MCM) PristinaPristina to to ViennaVienna NoNo dedicateddedicated cargocargo flightsflights oror charters.charters. MaximumMaximum weightweight ofof shipmentshipment 100100 kgkg TurkishTurkish AirlinesAirlines OperatesOperates bellybelly cacargorgo onon passengerpassenger €1.70€1.70 perper kgkg effectiveeffective weightweight planesplanes 55 timestimes perper weekweek AA freighterfreighter operatesoperates 11 timetime perper weekweek IST-PRN-IST-PRN- MXP(Milano)-IST MXP(Milano)-IST butbut isis onlyonly usedused forfor inboundinbound cargocargo toto PRNPRN

Use of the Turkish freighter to carry outbound cargo from Pristina to Milan (MXP) is an opportunity for Kosovo exporters. Re-routed freighter rates are typically 30-50% of full rates. Turkish Airlines requires a license from ICAO to offer this service.

Sources: Interviews 84 Inadequate Agricultural Regulation The structure for food safety regulation in Kosovo is disjointed with several different organizations responsible for parts of the issue… Agencies with Responsibility for Food Safety

MinistryMinistry ofof AgricultAgriculture,ure, ForestryForestry andand OfficeOffice ofof PrimePrime MinisterMinister MinistryMinistry ofof HealthHealth RuralRural DevelopmentDevelopment (MAFRD)(MAFRD)

MinistryMinistry ofof MAFRDMAFRD OPMOPM HealthHealth

DepartmentDepartment ofof Plant Peja Institute Plant Peja Institute SanitarySanitary Protection KFVA Protection KFVA InspectorateInspectorate

Department of Plant Protection: Kosovo Food & Veterinary Agency Sanitary Inspectorate Issues export certificates for all fresh and Issues Export Certificates for all animal Inspects and certifies processing facilities processed foods based on lab tests for products processed and visual inspection for fresh Issues import certificates for veterinary drugs, Issues import certificates for seeds semen, live animals, etc. Responsible for all phyto-sanitary inspectors Peja Institute at border posts Acts as the only government lab for safety testing of plant products Issues export certificates for wine and grapes

Conclusions According to Food Law of April 9, 2009, similar functions from the Peja Institute and the Plant Protection Department will be consolidated into KFVA. However, at present, this has not occurred and there is duplication of effort between the various organizations. KFVA has a plan in place to achieve EU compliance in animal products with a target date of 2011. It is currently in the process of answering the questionnaire and has invited the EU to set up the Food & Veterinary Office (FVO) in Kosovo. Plans at MAFRD are less advanced. The labs at Peja Institute and KFVA do not have any international certification (e.g. ISO, EurepGAP) which has caused recognition issues.

Source: Interviews 85 Inadequate Agricultural Regulation

… there are also two private labs, whose scope are limited by lack of certification Private Food Safety and Quality Labs in Kosovo 11 22 SaraSara && MetiMeti AgrovetAgrovet

YearYear OpenedOpened 2008 2005

LocationLocation Pristina Fushe Kosovo (suburb of Pristina)

Chemical and microbiological analysis in plants, Soil analysis but also capable of heavy metal AreaArea ofof FocusFocus food, fertilizers detection in food products

2009 turnover €80,000 2009 turnover €100,000 SizeSize

Conclusions The Peja Institute is the primary body for testing agricultural goods. However, the Institute will use the private labs to complete secondary testing when exporters or producers contest findings that goods have not passed certification standards Neither of the private labs are internationally recognized or have bilateral agreements with governments in other countries

Sources: Interviews 86 Inadequate Agricultural Regulation

The regulation and use of inputs is perceived to be ineffective for a number of reasons

Issues Related to Regulation of Inputs

Farmers are not trained in the use of fertilizers and pesticides and tend to over-apply relative to the amounts needed for specific crops Over-ApplicationOver-Application Over-use is exacerbated by the common availability of poor quality inputs which require application ofof FertilizersFertilizers andand at a rate above what is indicated by the instructions PesticidesPesticides Over-use has been found on a number of occasions to effect the safety of horticultural products, and consignments have been denied export certificates because of contamination by pesticides and fertilizers

There is a significant amount of seed and other inputs that are imported and sold illegally and are of poor quality, effecting yields and crop quality. The main entry points are believe to be the open gates in the north. Poor Quality of Poor Quality of The Peja Institute tests and registers seed varieties, but testing is limited to only four crops Seed and Other Seed and Other (peppers, tomatoes, potatoes, winter wheat) and much seed is sold that has not been registered. InputsInputs No input retailer has developed branding that justifies higher input prices based on input quality. Despite this, several of the larger processors have begun to import higher quality seed and other imports directly.

Input distributors report very infrequent inspections of their products and complain that lack of InsufficientInsufficient enforcement makes it difficult to compete with illegal or counterfeit imports. InspectionInspection ofof InputInput MAFRD admits that their inspection force is insufficient to properly regulate the sale of agricultural DistributorsDistributors inputs at retail and wholesale distribution points.

Sources: Interviews 87 Inadequate Agricultural Regulation Pilot studies have shown farmer over reliance on pesticides, which could create serious environmental consequences given the increase use of counterfeit pesticides in the region

Pesticide Consumption & Use of Counterfeit Pesticides

Pesticide Consumption (Kg/Ha, 2001) (1) CommentsComments PesticidePesticide consumptionconsumption perper hectarehectare isis higherhigher inin countriescountries 23.7 withwith moremore developeddeveloped agricultureagriculture sectorssectors 20.9 ––With With BalkanBalkan countriescountries enteringentering moremore exportexport markets,markets, pesticidepesticide consumptionconsumption hashas increasedincreased AccordingAccording toto aa recentrecent WorldWorld BankBank report,report, pesticidepesticide useuse hashas notnot beenbeen monitoredmonitored inin Kosovo.Kosovo. ImportedImported fertilizersfertilizers andand pesticides started being controlled and licensed in 2007, but 5.1 6.2 pesticides started being controlled and licensed in 2007, but there are no data on the intensity and extent of pollution 1.3 there are no data on the intensity and extent of pollution AnAn IntercooperationIntercooperation pilot pilot studystudy inin DugagjjiniDugagjjini showed showed thatthat surveyed farmers are heavily dependant on pesticides. Kenya Czech Slovakia Slovenia Italy surveyed farmers are heavily dependant on pesticides. FarmersFarmers areare notnot awareaware thatthat largelarge useuse isis notnot alwaysalways Republic necessary,necessary, andand cancan leadlead toto environmentalenvironmental problemsproblems

Portion of Counterfeit Pesticides in Total Market (%, 2007) (2) CommentsComments StudiesStudies havehave shownshown aa rapidrapid growthgrowth inin counterfeitcounterfeit pesticidepesticide useuse inin EasternEastern Europe.Europe. ManyMany ofof thesethese pesticidespesticides comecome fromfrom 10% Asia,Asia, especiallyespecially ChinaChina 8.5% TypesTypes ofof counterfeitcounterfeit andand illegalillegal pesticidespesticides includeinclude fakes,fakes, counterfeitscounterfeits andand illegalillegal parallelparallel importsimports 4.5% TheThe effectseffects ofof counterfeitcounterfeit pesticidepesticide useuse include:include: ––Harm Harm toto thethe environment,environment, whichwhich couldcould bebe detrimentaldetrimental 2% 2% toto subsequentsubsequent cropscrops ––Farmers’ Farmers’ economic economic andand reputationreputation damagedamage Czech Hungary Italy Bulgaria Slovenia ––Economic Economic andand reputationreputation damagedamage forfor thethe foodfood valuevalue Republic chainchain

(1) Commodities include cereals, fruits and vegetables; (2) Averages taken for Bulgaria & Italy; Source: FAOSTAT; World Bank; EU- Counterfeit Pesticides Across Europe; Intercooperation- Integrated Pest Management Intervention; BAH Analysis 88 Trade Access Issues

Trade access issues effect Kosovo’s agricultural exports in three fundamental ways

Trade Access Issues

KosovoKosovo enjoysenjoys membershipmembership inin CEFTACEFTA andand benefitsbenefits fromfrom GeneralizedGeneralized SystemSystem ofof PreferencesPreferences (GSP)(GSP) statusstatus withwith bothboth thethe EuropeanEuropean UnionUnion andand Incomplete Incomplete UnitedUnited States.States. TheseThese regimesregimes confconferer advantagesadvantages onon KosovoKosovo forfor somesome Enforcement of Enforcement of agriculturalagricultural productsproducts visvis a a visvis regional regional competitors.competitors. Trade Agreements Trade Agreements However,However, therethere havehave beenbeen implementationimplementation issuesissues withwith eacheach ofof thesethese agreementsagreements thatthat havehave hinderhindereded growthgrowth inin trade.trade.

AA numbernumber ofof Kosovo’sKosovo’s tradingtrading partnerspartners subsidizesubsidize agriculturalagricultural production,production, especiallyespecially inin animalanimal productsproducts andand cerecereals.als. TheseThese subsidiessubsidies inin somesome casescases Insufficient TradeTrade AccessAccess Insufficient disadvantagedisadvantage KosovoKosovo produceproducersrs bothboth inin thethe domesticdomestic marketmarket andand inin exports. exports. Response to Trade IssuesIssues Response to Trade However,However, subsidysubsidy levelslevels onon horticulturehorticulture andand processedprocessed foodfood areare fairlyfairly low.low. Partner Subsidies Partner Subsidies KosovoKosovo hashas lackedlacked ththee abilityability toto respondrespond toto subssubsidiesidies onon aa comprehensive,comprehensive, economy-wideeconomy-wide levellevel thatthat compcomplieslies withwith tradetrade agreements.agreements.

Kosovo’sKosovo’s sovereigntysovereignty hashas beenbeen recognrecognizedized byby 3636 countriescountries includingincluding manymany ofof thethe world’sworld’s larglargestest foodfood importers.importers. RecognitionRecognition ofof SpecificSpecific sovereignty-relasovereignty-relatteded tradetrade issuesissues havehave beenbeen experiencedexperienced onlyonly withwith SovereigntySovereignty twotwo countriescountries -- Serbia Serbia andand BiH.BiH. HoweveHowever,r, althoughalthough notnot tested,tested, therethere areare 1212 otherother countriescountries (including(including RussiaRussia andand RoRomania)mania) wherewhere thertheree isis riskrisk thatthat recognitionrecognition issuesissues maymay impedeimpede trade.trade.

Source : BAH Analysis 89 Trade Access Issues (Incomplete Enforcement of Trade Agreements)

Despite preferential trade regimes, Kosovo’s trade deficit with CEFTA, EU and the US has widened over the past five years

Trade Deficit Over Time Agricultural Products Only (Chapters 1-24), 2004-2009, €

2005 2009 (E) CAGR* € 500,000,000 € 450,000,000 Total - All Countries €278M €393M 12.3% € 400,000,000 € 350,000,000 Other Countries €53M €108M 24.5% € 300,000,000 € 250,000,000 United States €12M €17M 11% € 200,000,000 CEFTA € 150,000,000 €111M €151M 11% € 100,000,000 € 50,000,000 European Union €99M €116M 5.7% € 0 2004 (6 2005 2006 2007 2008 2009 months) (extrapolated from 9 months)

Sources: Kosovo Customs Notes: Trade deficit is represented as a positive number for illustrative purposes. 2009 total is extrapolated on a straight line basis from data through September. CAGR = Compounded Annual Growth Rate 90 Trade Access Issues (Incomplete Enforcement of Trade Agreements)

The preferential trade regimes do confer some benefits on Kosovo for major agricultural products

Kosovo’s Relative Advantages on Selected Ag Products (2009)

When Kosovo has a For the CommentsComments exporting benefit over: Following to: Products: Tomatoes Cucumbers Peppers Mushrooms Strawberries Kosovo’sKosovo’s preferentialpreferential tradetrade Albania Other CEFTA 10% 0% 10% (2) 10% 10% regimesregimes givegive itit somesome Members advantagesadvantages inin exports.exports. EU Members 0% 0% 6% 0% 10% TheThe biggestbiggest advantagesadvantages areare withwith CroatiaCroatia andand MFNs (1) 10% 0% 10% 10% 10% AlbaniaAlbania whichwhich havehave highhigh tariffstariffs eveneven onon otherother Croatia Other CEFTA 38.5% 35.27% (3) 20% (4) 15% (4) 28.05% Members CEFTACEFTA membersmembers andand generallygenerally givegive KosovoKosovo dutyduty EU Members 0% 35.27% 20% 15% 20% freefree access.access. Kosovo also has some MFNs (1) 15% 35.27% 20% 15% 28.05% Kosovo also has some advantagesadvantages inin thethe EUEU visvis a a European Other CEFTA 0% 0% 0% 0% 0% visvis MFN MFN exporters.exporters. Union Members However,However, thethe EU’sEU’s tradetrade EU Members 0% 0% 0% 0% 0% policypolicy ofof non-discriminationnon-discrimination inin thethe BalkansBalkans meansmeans thatthat (1) (5) (5) MFNs 15% 16% 16% 12.8% 7.2% mostmost countriescountries inin thethe regionregion are on a level playing field. United Other CEFTA 0% 0% 0% 0% 0% are on a level playing field. States Members KosovoKosovo qualifiesqualifies forfor privilegesprivileges underunder USUS GSP.GSP. EU Members 2.58% 0% 1.96% 0% 0.22% However,However, littlelittle benefitsbenefits cancan MFNs (1) 2.58% -3.85% (6) 1.96% 0% 0.22% bebe reapedreaped asas thethe USUS hashas suchsuch lowlow tariffstariffs

Sources: ITC Comtrade Notes: (1) Most favored nation, one which has no special trade regime. (2) The full rate is applied only to Serbia. Macedonia has a rate of 6%. (3) Full rate applied only Kosovo has a tariff- to Serbia. Macedonia has a rate of 15.87%. (4) Applies only to Serbia. Several countries have preferential rates. (5) The largest exporters, Morocco and related advantage Turkey, have free trade agreements with the EU and lower rates. (6) The largest exports have duty free access putting Kosovo at a disadvantage. 91 Trade Access Issues (Incomplete Enforcement of Trade Agreements)

However, implementation issues have arisen which have made it difficult to take advantage of these trade regimes

Implementation Issues with FTAs and Preferential Trade Regimes

Agreement Country Description of Issues

Serbia and BiH do not recognize Kosovo and do not allow entry or transit of Kosovo registered goods or vehicles Serbia and – Serbia. Despite the restrictions, significant trade volume exists and a significant amount of trade BiH travels to and from Kosovo via Merdare aboard Serbian registered vehicles. Central – BiH. Restrictions on transiting BiH are significant primarily because it is required to reach the European Free Croatian coastal highway from Albanian or Montenegro Trade All other countries in the Western Balkans provide Kosovo duty-free access under CEFTA. However, Agreement trade disputes have arisen over several issues including: (CEFTA) Other – Phyto-sanitary Inspection. Montenegro does not recognize Kosovo food safety certifications and often require additional testing and certification. Macedonia at times requires HACCP Countries certification for entry of agriculture products into the country. – Assessment. Albanian Customs has at times assessed the value of goods as higher than the declared value increasing VAT liability. Exports to the EU require that the exporting country be listed on the “Third Country Eligibility List”. EU Generalized Although Kosovo is not on the list, and exports could technically be rejected, exports of fresh and System of processes products are entering the EU. Preferences Food shipments have been turned back for quality and safety related reasons. A shipment of wine to (GSP) Austria was turned back because lab test results were not accepted. A shipment of low alcohol beer to Italy was turned back because the alcohol content was found to be too high. Exports to the US have been minimal and, for this reason, few exporters are knowledgeable of US US GSP requirements or able to meet standards. The most important standards are FDA labeling requirements and USDA Prior Inspection of Facility requirements

Sources: Interviews Note : FTA is free trade agreement. 92 Trade Access Issues (Incomplete Enforcement of Trade Agreements)

Many of the implementation issues result from a lack of capacity in trade facilitation Selected Agencies with Responsibility for Trade Facilitation

Agency Staff Role Issues Responsible for development and implementation of MTI’s lack of capacity is crippling. Few of the staff adequately trade policy. understand CEFTA and general trade best practices. The lack of Department of 5-10 Chairs CEFTA Committees on Agriculture, Customs and capacity typically translates into poorly chosen and ineffective Trade, MTI Rules of Origin, and Tariff and Non-Tariff Barriers. safeguard measures. Little donor assistance has been provided. Represents Kosovo to CEFTA Secretariat Enforces CEFTA provisions at the border. The Customs Authority has taken its role seriously, and fields specific Kosovo Provides advisory opinions on CEFTA rules. requests for information from the Private Sector, but does not deeply 600 Customs understand CEFTA rules and lacks resources necessary to broadly provide information. Responsible for negotiating bilateral commercial and Adequate understanding of its role, but emphasizes political benefits Dept of Bilateral 1-5 trade agreements. of agreements far more than economic benefits. Affairs, MFA Virtually no coordination with other GoK entities or Civil Society. Constitutional responsibility for leading foreign policy and Has taken little initiative in articulating trade policy as a component of Office of the 1-5 signing international agreements. foreign policy. President

Responsible for conducting safety testing and issuing Although consolidation is planned, KFVA handles only animal products. export certificates for animal products. Conducts testing Export certificates for plant and processed products are issued by other Kosovo Food & and provides import certificates for agriculture imports agencies. Veterinary 5-10 (drugs, semen, etc.). KFVA is just starting the process of EU compliance. It is hoped that an Agency (KFVA) According to Food Law of April 9, 2009, similar functions EU Food & Veterinary Office (FVO) can be established in 2010 and from the Institute of Agriculture and the Plant Protection compliance obtained in 2011. Department will be consolidated in KFVA.

Conclusions An overall weakness of the system is that there is no apex organization or inter-ministerial body to coordinate trade facilitation and examine trade issues on an economy-wide (rather than sector specific) basis. Trade actions often favor one sector at the expense of another. In addition, no organization has the skills or resources to negotiate effectively with trade partners.

Sources: Interviews 93 Trade Access Issues (Insufficient Response to Trade Partner Subsidies)

Agricultural supports are bound by CEFTA and, for Kosovo’s trading partners, also by the WTO Agreement on Agriculture Treaties Governing Agricultural Supports

CentralCentral EuropeEurope FreeFree TradeTrade AgreementAgreement WTOWTO AgreementAgreement onon AgricultureAgriculture CEFTACEFTA generallygenerally providesprovides ththatat tradetrade relationsrelations amongamong FinancialFinancial assistanceassistance toto farmerfarmerss throughthrough directdirect (price(price partiesparties bebe developeddeveloped inin accordanceaccordance withwith WTOWTO rulesrules support)support) oror indirectindirect meansmeans araree classifiedclassified inin 33 categoriescategories or “boxes”: However,However, itit doesdoes notnot fullyfully followfollow thethe WTOWTO agreementagreement or “boxes”: −Green Box: permitted as minimally trade- onon agricultureagriculture andand isis generagenerallylly moremore permissivepermissive inin −Green Box: permitted as minimally trade- distorting. They include direct income support to termsterms ofof agricultureagriculture subsidiessubsidies permitted.permitted. distorting. They include direct income support to farmers,farmers, ruralrural developmentdevelopment andand environmentenvironment ––Members Members areare requiredrequired toto followfollow thethe WTOWTO programsprograms andand shouldshould bebe “decoupled”“decoupled” from from agreementsagreements onon SanitarySanitary && Phyto-sanitaryPhyto-sanitary production level and should not be targeted to MeasuresMeasures (SPS),(SPS), TechniTechnicalcal BarriersBarriers toto TradeTrade production level and should not be targeted to (TBT)(TBT) andand Valuation.Valuation. specificspecific productsproducts −Amber Box: discouraged as trade distorting (e.g., – Members are not allowed to use export subsidies −Amber Box: discouraged as trade distorting (e.g., – Members are not allowed to use export subsidies measures to support prices, subsidies directly forfor agriculture,agriculture, defineddefined asas subsidiessubsidies thatthat createcreate measures to support prices, subsidies directly moremore outputoutput thanthan cancan bebe absorbedabsorbed inin thethe locallocal relatedrelated toto productionproduction quanquantitiestities oror targetedtargeted atat market.market. specificspecific crops).crops). LevelsLevels mumustst bebe reducedreduced toto 15%15% forfor developeddeveloped andand 1010%% forfor developingdeveloping countries.countries. OtherOther subsidiessubsidies areare generallygenerally permitted.permitted. −−BlueBlue BoxBox:: permittedpermitted “with“with conditions”.conditions”. RefersRefers toto anyany “amber“amber box”box” progr programam implementedimplemented withwith measuresmeasures toto reducereduce prproduction.oduction. NoNo limits.limits.

Implications for Kosovo All of Kosovo’s neighbors are CEFTA members and all except Serbia are WTO members. Kosovo is required to comply with CEFTA regulations on agricultural subsidies and has expressed an intention to comply with WTO requirements. Kosovo’s trade policy calls for development of “green box” policies focused on support to poor farmers in remote areas and on the provision of health, water and educational facilities as a way of improving the quality of rural life.

Source: WTO, CEFTA, Trade Policy of Kosovo/MTI (2009) 94 Trade Access Issues (Insufficient Response to Trade Partner Subsidies)

Agricultural supports vary significantly by commodity type with grains and animal products receiving the most

Production Support Estimate (PSE) by Commodity PSE is the total of all OECD Countries, % (1986-2003) supports to agricultural 81% producers over the 78% farm gate value of all production.

Average for all 59% Commodities 54% 55% Average for all 52% 51% Commodities 47% 48%

40% 41% 37% 38% 37% 33% 32% 31% 29% 27% 26% 24% 24% 20% 21% 18% 17% 17%

7% 8% 5%

1986-1988 2001-2003 Rice Sugar Milk Other grains Lamb Wheat Beef and Veal All Commodities Other Commodities Maize Oilseeds Pork Poultry Eggs Wool

Source: OECD (2003) Note : PSE is the total of all supports to agricultural producers over the farm gate value of all production. 95 Trade Access Issues (Insufficient Response to Trade Partner Subsidies) Overall, OECD countries spent over €229 billion in agricultural supports in 2003 with milk receiving more support than any other commodity

Total Production Supports by Commodity OECD Countries, € Billion (1986-2003)

€264 €257 €255 €244 €241 €236 €235 €228 €232 €229 €215 €214 €209 €214 €208 €211 €202 €203 Other Commodities Eggs and Wool Poultry Sugar Oilseeds Other Grains Maize Pork Wheat Rice

Beef & Veal

Milk

7 4 7 9 1 2 8 89 91 9 96 9 98 9 0 0 9 9 9 9 1986 19 1988 1 1990 1 1992 1993 19 1995 1 19 1 19 2000 20 20 2003p

Source: OECD (2003) 96 Trade Access Issues (Insufficient Response to Trade Partner Subsidies)

The level of support varies significantly by country …

Production Support Estimate (PSE) by Country % - 2008 or Latest Data

61.9% 58.1%

51.0% 51.7% 47.8%

27.8% 26.6% 24.9% 24.5% 20.9%

13.1% 13.0% 8.7% 6.9% 6.3% 5.9% 0.8% Korea Japan EU-27 Turkey Mexico Poland Iceland Norway Canada Bulgaria Hungary Slovakia Australia Romania New Zealand United States Czech Republic

Source: OECD (2009) Note : PSE is the total of all supports to agricultural producers over the farm gate value of all production. All countries are 2008 except Hungary, Slovakia and Poland (2003) and Romania and Bulgaria (2006). Thereafter, these countries are included in the EU average. 97 Trade Access Issues (Insufficient Response to Trade Partner Subsidies) …and, across the OECD, market price supports, considered a minimally-distorting “green box” measure, were the most commonly used

Production Support Estimate (PSE) by Country % - 2008 or Latest Data

Misc Based on farm income Based on input constraints Based on input use Based on historical entitlements Based on area planted Based on output

Market Price Supports

ia d a e l da lic an ico n i g a a b p rea la a age u o a r r str Ja K e u Can Iceland Mex Z Norway Poland Turkey A Rep Hungary Slovak Ave Ave ited States U Switzerland n ch New E CD ze U C OE

Source: OECD (2004). Note : EU is EU-12 for 1986-94, EU-15 from 1995. Market Price support is net of producer levies and excess feed costs. 98 Trade Access Issues (Insufficient Response to Trade Partner Subsidies)

Although there is little data, all of Kosovo’s neighbors are employing some kinds of supports for the agriculture sector Summary of Subsidies in Neighboring Countries

AnecdotalAnecdotal evidenceevidence existsexists ofof subsidiessubsidies amountingamounting toto approximatelyapproximately €€ 270 270 perper 0.10.1 HaHa andand upup toto 50%50% ofof thethe AlbaniaAlbania costcost ofof irrigationirrigation systemssystems andand coldcold storagestorage units.units. AdditionalAdditional perper headhead subsidiesubsidiess maymay existexist forfor sheepsheep andand cattlecattle

AnecdotalAnecdotal evidenceevidence ofof questionablequestionable rereliabilityliability ofof subsidiessubsidies ofof €.04€.04 perper kikilogramlogram ofof vegetablesvegetables producedproduced andand MacedoniaMacedonia ofof €30€30 perper headhead ofof shsheepeep owned.owned. TheThe subsidysubsidy onon sheepsheep isis partpart ofof aa programprogram toto reburebuildild thethe sizesize ofof Macedonia’sMacedonia’s herdherd

Serbia subsidizes mechanization and marketing of agricultural products directly with a budget of SerbiaSerbia Serbia subsidizes mechanization and marketing of agricultural products directly with a budget of approximatelyapproximately €20M€20M perper yearyear

Montenegro is openly providing export subsidies on processed foods that are likely in violation of CEFTA MontenegroMontenegro Montenegro is openly providing export subsidies on processed foods that are likely in violation of CEFTA requirementsrequirements

Conclusions Most of Kosovo’s neighbors and partners in CEFTA provide some subsidies on agriculture including some that are likely in violation of CEFTA requirements and subject to de minimis regulation under WTO rules (amber box). Several industries - notably the milk industry - have made claims that these subsidies damage their competitiveness on the domestic market. At present, though, all evidence is anecdotal. In order for Kosovo to in a position to take action under CEFTA more detailed information must be requested from the parties or otherwise obtained.

Source: HPK Study, Interviews. 99 Trade Access Issues (Recognition of Sovereignty)

There are currently 63 countries that recognize Kosovo including 22 out of the 27 EU member countries Countries that Recognize Kosovo’s Independent Status

Finland Iceland Sweden Norway Estonia Canada Netherlands United Kingdom Denmark Latvia Lithuania Ireland Germany Poland Slovakia Belgium Austria Hungary France Croatia Romania Italy Bulgaria USA Spain Turkey Portugal Albania Greece Japan Macedonia Cyprus Afghanistan South Korea Malta Jordan Bahrain Saudi Arabia UAE Dominican Republic Belize Senegal Gambia Burkino Faso Costa Rica Panama Sierra Leone Malaysia Colombia Liberia Maldives

Peru Comoros Marshall Islands Palau Micronesia Australia Naura Countries Recognizing Samoa

Countries Not Recognizing New Zealand EU Members Not Recognizing

Sources: Ministry of Foreign Affairs, News Sources. Note : Several countries have not been labeled on the map because of space. They are Czech Republic, Lichtenstein, Luxembourg, Monaco, Montenegro, San Marino, Slovenia, Switzerland. 100 Trade Access Issues (Recognition of Sovereignty)

Only two countries actively block trade with Kosovo although there is a risk that others might also Countries That Block Trade with Kosovo

Russia Belarus

Bosnia Romania Spain Serbia Azerbaijan China Cyprus

Vietnam

Venezuela CommentsComments Burundi OnlyOnly SerbiaSerbia andand BiHBiH actively actively blockblock thethe transittransit ofof goods,goods, vehiclesvehicles andand peoplepeople fromfrom KosovoKosovo Bolivia acrossacross theirtheir territories.territories. ThereThere areare 1212 otherother countriescountries whichwhich dodo notnot recognizerecognize KosovoKosovo andand havehave takentaken anan activeactive position against recognition at the ICoJ. Argentina position against recognition at the ICoJ. AlthoughAlthough tradetrade withwith thesethese countriescountries hashas notnot beenbeen tested,tested, itit isis feltfelt thatthat therethere couldcould bebe aa riskrisk ofof tradetrade disruption.disruption. TheseThese countriescountries areare Argentina,Argentina, Azerbaijan,Azerbaijan, Belarus,Belarus, Bolivia,Bolivia, Burundi,Burundi, China,China, Cyprus,Cyprus, Spain,Spain, Russia,Russia, Romania,Romania, VenezuelaVenezuela andand Vietnam.Vietnam.

Source: Lloyd’s (2007); Interviews 101 Table of Contents

Overview of Deliverable

Baseline Analysis of Agriculture Sector – Quantitative Baseline of Kosovo’s Agriculture Sector – Overview of Constraints and Opportunities – International Best Practices Assessment

Recommendations to Improve Kosovo’s Agriculture Sector

102 International Best Practice Assessment

Benchmarking Methodology

Benchmarking Analysis

103 Benchmarking Methodology

A combination of quantitative and qualitative criteria were selected to identify relevant countries for benchmarking Country Selection Framework QuantitativeQuantitative QualitativeQualitative

Agricultural Productivity (Tons/Ha, 2007) (1) Seasonality and Target Markets 46.4 45.1 Mix of On, Off and On 40.5 36.1 36.7 Niche agricultural Season 33.4 30.6 31.3 exporters Niche 25.6 Season 21.9 Target market overlap 19 20 16.6 Off 14.6 for agricultural exports Season

Best-In-Class Countries Italy Spain Kenya Serbia Croatia Kosovo Albania Best in class examples of countries that excel at Bulgaria Slovakia Morocco Slovenia

Macedonia dealing with challenges relevant to Kosovo South Africa South

Czech Republic Czech Best in class competitors that produce and export Agricultural Export Value Growth (%, 2004-2008) (1) (2) agriculture commodities similar to those in Kosovo

62%

38% 35% 33% Geographic Characteristics 31% 28% 28% 18% 12% 10% 10% 8% 7% Size of the country 2% Location of the country (landlocked vs. coastal)

c a a o a ly a o li tia a i i a y c Climate, soil, water, etc. b ov b It ain u ak s r p venia doni lgari v o Ken S o Croa e u lo K Albania Se Sl Rep B S uth Africa Moroc o Mac S ech z C (1) Commodities include cereals, fruits and vegetables; (2) Figures for Morocco & Macedonia are 2003-2007; Kosovo (2005-2008); Source: FAOSTAT; Trademap; BAH Analysis 104 Benchmarking Methodology As a result, eight countries were selected as primary benchmarking targets – however, when applicable, best practices from other countries were also analyzed Overview of Benchmark Countries Examined According to Six Dimensions

Leveraging Small Infrastructure Government Demand-Driven Farmers Capacity Transportation Agriculture Trade Access Countries Export Strategies Potential Building Regulations Macedonia ✓✓ ✓ Serbia ✓ ✓ ✓✓✓ Morocco ✓ ✓ ✓ Primary Italy ✓ ✓ ✓ Benchmarks Spain ✓ ✓ ✓ Kenya ✓✓✓ Slovakia ✓ ✓ ✓ Israel ✓ ✓ ✓ South Africa ✓ ✓ United States ✓ ✓ Croatia ✓ Albania ✓ Secondary Benchmarks Czech Republic ✓ Brazil ✓ Mozambique ✓ Slovenia ✓ Chile ✓ Source : BAH Analysis 105 Benchmarking Methodology The benchmarking analysis focused on six key dimensions that are designed to address constraints facing Kosovo’s agricultural sector Overview of Benchmarking Dimensions Dimensions Description 11 Coordination among Small Farmers: Models of farmer cooperatives; coordination among associations Leveraging Small Extension Services: Models for providing extension services; types of training administered Leveraging Small Lack of Financing for Small Farmers: Access to credit for small-scale farmers; use of crop insurance, purchase order FarmersFarmers PotentialPotential financing, microfinance and other financial products Land Consolidation: Steps to comprehensive land consolidation; models for land consolidation 22 Donor Coordination: Export promotion strategies for agricultural commodities enhanced by effective donor coordination Demand-Driven Product Characteristics: Development of new products based on understanding of consumer tastes and preferences Demand-Driven Reliability & Flexibility of Distribution: Improved distribution channels for small volumes; collection centers ExportExport StrategiesStrategies Promotion & Branding: Cost effective export promotion strategy; promotion of new products in strategic markets Pricing: Optimal pricing; methods for addressing seasonality issues for farmers to receive best prices 33 Development of Irrigation Networks: Development of innovative irrigation systems with restricted water access; models of InfrastructureInfrastructure irrigation charging systems CapacityCapacity BuildingBuilding Building greenhouse capacity: Methods to support development of greenhouses; types of extension programs for developing greenhouse capacity

44 Costs of Road Delivery: Methods to decrease cost of transportation; prioritization of road investments Transportation Facilitated Border Crossing: Development of additional transportation channels to reach destination markets Transportation Air Transport and Shipping: Use of air cargo forwarders and commercial airlines to transport goods to strategic markets Cold Chain: Improved cold chain systems for small-scale farmers

55 Government Food Safety & Quality: Regulatory models for overseeing food safety and quality; private quality labs Government Compliance with Regulations: Comparative costs for farmers to comply with international food safety standards AgricultureAgriculture Regulation of Inputs: Regulations surrounding seed and fertilizer use RegulationsRegulations Environment : Methods to enforce and implement pesticide regulation to protect the environment

6 6 Trade Facilitation Capacity: Development of trade facilitation capacity measures; donor-funded methods for advancing trade facilitation capacity development TradeTrade AccessAccess Responses to Subsidies : Interim solutions to subsidies; advanced solutions for subsidies, including export risk guarantee Recognition of Sovereignty: Methods to increase trade recognition

Source : BAH Analysis 106 International Best Practice Assessment

Benchmarking Methodology

Benchmarking Analysis

107 Leveraging Small Farmers Potential Cooperatives of smallholder famers have become a common model in Italy to increase their ability to compete on the market and create economies of scale Overview of Italian Cooperatives by Crop Average Revenue per Coop Type ($mil) Average Workforce per Coop Type (N) 59.43 202 114 38.39 29 22 6.04 4.81 4.93 4.98 16 3.72 3.79 9 11 2.06 5 7 8 0.70 4 0.20 0.51 3 Veg Veg Rice Rice Joint Joint Wine Wine Dairy Dairy Farm Farm Grain Grain Supply Supply Poultry Poultry Fruits & Fruits & Sugar & Sugar Sugar & Sugar Forestry Farming Forestry Farming Olive Oil Olive Olive Oil Olive Tobacco Tobacco Livestock Livestock Services & & Services Services & & Services Average Revenue per Member in Coop Type ($mil) CommentsComments 3.92 0.14 TheThe membershipmembership ofof manymany ItalianItalian cooperativescooperatives isis 0.09 comprisedcomprised primarilyprimarily ofof smallsmall producersproducers 0.06 0.07 0.04 0.02 0.02 0.03 0.03 – The goal of the cooperative model is to support 0.00 0.01 – The goal of the cooperative model is to support smallsmall farmfarm operationsoperations Veg

Rice – Cooperatives aggregate efforts of farmers who Joint Wine

Dairy – Cooperatives aggregate efforts of farmers who Farm Grain Supply Poultry Fruits & Sugar & Sugar Forestry Farming would not otherwise be able to compete Olive Oil Olive Tobacco would not otherwise be able to compete Livestock Services & & Services effectivelyeffectively onon thethe marketmarket Average Number of Members per Coop Type (N) ––In In thethe absenceabsence ofof economieseconomies ofof scale,scale, 1039 693 cooperativescooperatives enableenable smallsmall farmersfarmers toto avoidavoid 436 significantsignificant economiceconomic losseslosses thatthat couldcould forceforce 350 317 themthem toto sellsell theirtheir farmsfarms 177 123 31 52 57 58 22 Veg Rice Joint Wine Dairy Grain Poultry Fruits & Sugar & Sugar Forestry Farming Olive Oil Olive Tobacco Livestock Source: Alternative Italian Agricultural Cooperative Systems in the Changing EU Food System; BAH Analysis 108 Leveraging Small Farmers Potential

Public cooperatives- those managed by an outside manager- tend to use internal sources of equity extensively Overview of Italian Cooperatives by Equity Management Type

Equity / Asset Ratio (EAR) by Coop Cluster Type OverviewOverview ofof CooperativesCooperatives byby FunctionFunction

0.48 0.40 CooperativesCooperatives cancan bebe classifiedclassified accordingaccording toto function:function: 0.30 – Bargaining & Service: provide members with 0.22 0.25 – Bargaining & Service: provide members with 0.22 “intangibles”“intangibles” services services 0.04 ––Hollow: Hollow: moremore extremeextreme formform ofof bargainingbargaining coopcoop – Labor: operate mostly in labor-intensive businesses Bargaining & “Hollow” Labor Durable- “Public” Industrialized Value- – Labor: operate mostly in labor-intensive businesses Service Coop Coop Sharing Coop Coop Added ––Durable-sharing: Durable-sharing: allowallow smallsmall farmersfarmers toto utilizeutilize costlycostly Coop Coop Coop fixedfixed assetsassets atat aa fairfair priceprice ––Public: Public: achieveachieve largelarge averageaverage scalescale ofof operationsoperations Internal Sources Ratio (ISR) by Coop Cluster Type usingusing productsproducts ofof aa largelarge numbernumber ofof smallsmall patronspatrons 0.10 ––Industrialized: Industrialized: membershipmembership comprisedcomprised ofof large,large, 0.04 0.01 0.00 professionalprofessional farmersfarmers -0.10 ––Value-added: Value-added: focusfocus onon developingdeveloping highhigh valuevalue -0.31 processedprocessed productsproducts

-0.87 ManagementManagement ofof PublicPublic CoopsCoops Bargaining & “Hollow” Labor Durable- “Public” Industrialized Value- Service Coop Coop Sharing Coop Coop Added PublicPublic coopscoops areare largelylargely supervisedsupervised byby third-partythird-party Coop Coop Coop managersmanagers hiredhired byby thethe cooperative.cooperative. TheThe managersmanagers instructinstruct farmersfarmers onon thethe typestypes andand amountsamounts ofof cropscrops toto grow,grow, andand Allocated Equity Ratio (AER) by Coop Cluster Type managemanage thethe capitalcapital structurestructure ofof thethe coopcoop 0.89 0.83 OnOn average,average, publicpublic coopscoops tendtend toto bebe leveragedleveraged becausebecause ofof 0.57 the low contribution of farmers’ assets 0.46 0.50 0.46 the low contribution of farmers’ assets 0.35 ––The The coopcoop isis thethe onlyonly oneone thatthat isis usingusing thethe internalinternal sourcessources ofof equityequity extensivelyextensively ––On On average,average, 10%10% ofof revenuesrevenues areare retainedretained asas Bargaining & “Hollow” Labor Durable- “Public” Industrialized Value- Service Coop Coop Sharing Coop Coop Added financialfinancial resources,resources, whichwhich representsrepresents aa sizablesizable shareshare Coop Coop Coop

Note: EAR = percent share of total assets financed through equity; ISR = capacity of the cooperative to accumulate equity from business operations; AER = percentage of allocated equity on total equity Source: Equity Management Practices in Italian Agricultural Cooperatives: a Cluster Analysis Approach; BAH Analysis 109 Leveraging Small Farmers Potential In Macedonia, a number of small agriculture cooperatives have come together under an umbrella association, AKOM, which provides advocacy support Overview of Alliances of Cooperatives in Macedonia (AKOM)

SupportSupport toto Farmer'sFarmer's AssociationsAssociations inin MacedoniaMacedonia ProjectProject Provides support CommentsComments

AlliancesAlliances ofof FunctionFunction:: FoundedFounded inin JuneJune 2007,2007, AKOMAKOM isis aa non-non- FederationFederation ofof FarmersFarmers Partnership CooperativesCooperatives inin governmentalgovernmental organizationorganization createdcreated toto unite,unite, representrepresent inin MacedoniaMacedonia (FFRM)(FFRM) MacedoniaMacedonia (AKOM)(AKOM) andand serveserve cooperativescooperatives inin MacedoniaMacedonia vis-à-visvis-à-vis Provide representation governmentalgovernmental andand non-governmentalnon-governmental institutionsinstitutions concerningconcerning cooperativecooperative issuesissues (policy,(policy, economy,economy, PrvaPrva lozarska lozarska OvcarskaOvcarska kooperativa kooperativa kooperativakooperativa IzgrevIzgrev finance,finance, legallegal etc.)etc.) (Wine(Wine andand fruit)fruit) (Sheep(Sheep breedingbreeding && cheese)cheese) ObjectivesObjectives:: NektarNektar Koop Koop – Promote the development of coops AgrokulturaAgrokultura koop koop – Promote the development of coops (Beekeeping(Beekeeping && (Procurement(Procurement ofof Inputs)Inputs) accompanyingaccompanying products)products) ––Advance Advance informationinformation exchangeexchange amongamong coopscoops ––Represent Represent andand provideprovide advocacyadvocacy forfor coopscoops withwith FarmerFarmer DemetraDemetra NGOsNGOs andand thethe governmentgovernment (Sheep breeding & cheese) (Marketing for ag products) (Sheep breeding & cheese) (Marketing for ag products) ––Support Support promotionpromotion andand marketingmarketing effortsefforts ––Provide Provide servicesservices andand expertiseexpertise toto coopscoops Eko – kooperativa Koperant Eko – kooperativa Koperant – Research and provide findings to coops (Processed(Processed forestforest fruits)fruits) (Marketing(Marketing forfor agag products) products) – Research and provide findings to coops SampleSample ActivitiesActivities:: DevelopedDeveloped workshops,workshops, studystudy tripstrips andand consultingconsulting servicesservices forfor cooperativescooperatives PigiPigi NovaciNovaci koop koop (Pig(Pig products)products) (Marketing(Marketing forfor agag products) products)

VedroVedro kooperativa kooperativa LejlaLejla (Milk(Milk andand accompanyingaccompanying (Milk)(Milk) products)products)

Source: Alliances of Cooperatives in Macedonia website; BAH Analysis 110 Leveraging Small Farmers Potential

Extension models around the world fall into four main categories: public sector, partnerships, cost-recovery and privatized Overview of Extension Model Types

11 Systems that provide public sector Extension Model Types by Delivery & Funding funding and delivery of extension PublicPublic SectorSector services, either partially or entirely. Some countries have slowly started introducing charges for previously free services, such as the United States Public Sector Extension Cost Recovery (fee-based) Systems 2 Services 2 Involves contracting out the delivery of Public extension field services to non- (OECD countries, Pluralism, (Canada, Israel, USA) Pluralism, governmental organizations, such as non- previously in Mexico) Partnerships,Partnerships, profit NGOs, or to for-profit companies, PowerPower SharingSharing including consultancy firms and farmers’ cooperatives

Delivery 3 3 Some agricultural advisory services have redesigned their fiscal arrangements, Pluralism, Partnerships, Privatization, CostCost RecoveryRecovery (fee-based) initiating cost recovery or fee-based Power Sharing Commercialization (fee-based) services to farmers. Became prevalent in

Private Systems Systems the European OECD member countries, (Chile, Estonia, Hungary, (The Netherlands, New largely because of national deficits Venezuela, S. Korea, Taiwan) Zealand, England & Wales) 44

Both the funding and the delivery of Public Private Privatization,Privatization, extension services are shifted entirely, or CommercializationCommercialization Funding largely, to the private sector

Source: FAO- Agricultural and Rural Extension Worldwide: Options for Institutional Reform in the Developing Countries; BAH Analysis 111 Leveraging Small Farmers Potential The US has established a public land-grant model for funding extension services; the government funds extension at universities, which in-turn provide services to farmers Example of United States Model: Public Sector Extension Services 11 PublicPublic SectorSector ExtensionExtension Services-Services- United United StatesStates CommentsComments BackgroundBackground:: TheThe CooperativeCooperative ExtensionExtension SystemSystem inin the United States is a non-formal educational USUS DepartmentDepartment ofof the United States is a non-formal educational AgricultureAgriculture (USDA)(USDA) programprogram designeddesigned toto "reach"reach out,"out," withwith teachingteaching andand research.research. Land-grantLand-grant institutionsinstitutions "extend""extend" theirtheir Oversees resources,resources, solvingsolving publicpublic needsneeds withwith collegecollege oror Approves university resources through non-credit programs in budget NationalNational InstituteInstitute ofof FoodFood university resources through non-credit programs in CongressCongress && AgricultureAgriculture (NIFA)(NIFA) agricultureagriculture

Funds & supports StructureStructure:: TheThe USDAUSDA overseesoversees thethe workwork ofof NIFA,NIFA, whichwhich fundsfunds andand supportssupports extensionextension programsprograms atat Land-grant land-grant universities. Programs are largely WashingtonWashington StateState land-grant universities. Programs are largely universities UniversityUniversity ExtensionExtension administeredadministered throughthrough thousandsthousands ofof countycounty andand ProgramProgram regionalregional extensionextension offices,offices, whichwhich bringbring land-grantland-grant expertiseexpertise toto locallocal levelslevels Oversees extension programs and offices in over 39 counties FundingFunding:: NIFANIFA distributesdistributes annualannual CongressionallyCongressionally appropriatedappropriated formulaformula grantsgrants toto supplementsupplement statestate andand countycounty fundsfunds toto designateddesignated land-grantland-grant universitiesuniversities ––The The amountamount ofof fundsfunds providedprovided toto eacheach institutioninstitution isis determineddetermined byby formulae,formulae, oftenoften statutorilystatutorily defined,defined, thatthat maymay includeinclude variablesvariables suchsuch asas thethe ruralrural populationpopulation oror farmfarm populationpopulation ––Local Local oror regionalregional universityuniversity leadersleaders decidedecide whichwhich specificspecific projectsprojects willwill bebe supportedsupported byby anan institution’sinstitution’s formulaformula grantgrant allotmentallotment

Source: USDA- NIFA website; Washington State University Extension Program; BAH Analysis 112 Leveraging Small Farmers Potential Kenya uses partnership arrangements for training, while Germany has developed a cost-recovery model; the Netherlands has privatized the provision of extension services Example of Partnership, Cost-Recovery and Privatized Models 22 33 44 Pluralism,Pluralism, Partnerships,Partnerships, PowerPower Sharing-Sharing- CostCost RecoveryRecovery (fee-based)(fee-based) System-System- Privatization,Privatization, Commercialization-Commercialization- KenyaKenya GermanyGermany NetherlandsNetherlands

DutchDutch StateState ofof Gov’tGov’t of of KenyaKenya GovernmentGovernment ThuringiaThuringia Assigns responsibility Supports Outsources & Buyer NGO subsidizes Buyer Sponsors & Funds & NGO DLVDLV Funds Trains Trains PrivatePrivate FarmerFarmer companiescompanies OrganizationOrganization Provides training Pays for services FarmerFarmer Funds OrganizationOrganization training FarmersFarmers

Background: Public-private partnerships Background: In Germany, all of the Federal Background: The Netherlands decided to among the government, buyers, farmer groups States are responsible for extension services. privatize its public extension agents, at first by and NGOs have become more common to At one point, 80% of farmers used extension transferring them with initial financial support support smallholders’ compliance of IFSS. services, creating a drain on the state budget to work with farmer associations Such partnerships focus on providing Structure: The government has outsourced Structure: More recently, the Dutch information, financial support, and capacity extension services to private companies since government has assigning responsibility for building 1998 extension services to a private company, DLV, Structure: The group’s certification is Funding: Public funding for extension which provides training to farmers in exchange sponsored by the buyer, with the training services dropped over 50%. As a result, part for a fee provided by the NGO. The certification loses of the extension cost is paid by farmers while Funding: Farmers pay for extension services validity if the relationship between the buyer the other part is subsidized by the which are provided by DLV and farmer group fail. The government government. With the introduction of the cost- supports the process and relationship recovery model, demand for extension fell, Funding: Mix of funding is provided by the with only 13% of farmers using the system. buyer and NGOs, who provide training Farmers pay for training that they need

Source: Food Safety Requirements in African Green Bean Exports and Their Impact on Small Farmers; Contracting for Extension; FAO- Agricultural and Rural Extension Worldwide: Options for Institutional Reform in the Developing Countries; BAH Analysis 113 Leveraging Small Farmers Potential In order to improve farmers’ access to credit, South Africa has developed a model based on financial intermediation at the local level through “Village Banks” Overview of Village Banks in South Africa South Africa Village Banks Village Bank Evolution

South Africa’s farmers had difficulty in accessing credit through commercial banks Savings Loans Commercial – Distance from branch networks Phase Phase Phase – Lack of collateral – Moral hazard and adverse selection Rotating Loans to Provision of

Background Government did not offer customized credit Background savings community insurance and lines for small farmers associations authorities as fund (savings of well as for transferring to Village Banks project was funded by USAID, specified individuals for producers with additional resources from World Bank amounts to give entrepreneurial At this stage, “Savings-first” institutions – concession of lump payouts to and targeted link to the credit only when volume of savings allowed it each member) investment formal financial Institutions owned by member farmers – Deposit and activities sector is controlled by local communities

Overview withdrawal Only achieved stressed – Overview Decentralized services at local level services for after savings eased Typically negligible loss ratio local producers assets are at regulations to Self-regulated the level of become formal with no supporting loan institutions (e.g. Different products according to farmer government portfolio lower segments (defined by gender and source of interference capitalization income) – e.g. women farm workers, Small size and requirements) unemployed rural poor, small scale profits – staff is employers, etc. motivated Bank revenue is generated by interest on through variable loans and depositing of resources in the Service Offering Service Offering earnings nearest commercial bank branch (“link bank”)

Source: Lit Search; BAH Analysis 114 Leveraging Small Farmers Potential There are also a wide range of products that comprise the agricultural finance system, including purchase order financing, crop insurance and microfinance payment systems Overview of Financial Products to Increase Smallholder Farmers’ Access to Credit

PurchasePurchase OrderOrder FinancingFinancing (POF)(POF) CropCrop InsuranceInsurance MicrofinanceMicrofinance PaymentPayment SystemsSystems

Transaction-based form of working capital A mechanism that provides insurance for System that enables individuals to perform financing. a variety of crop types in the event of basic banking functions via mobile phone – When a business receives an order loss and SMS from a buyer, a POF lender advances – Different crop insurance types – Enables users to check status of a loan to the business to cover all the include single-risk, combined, yield, accounts, make payments of loans steps necessary (production, revenue, whole-farm yield, and and/or transfer funds purchasing, processing, packaging, indirect insurance – Can lower the costs of providing etc.) to ship the order – Crop insurance can be voluntary or financial services in remote, sparsely Definition Definition – POF allows for a longer horizon that compulsory, depending on the populated areas includes production of the commodity country. However, possible risks of – Continued growth and improved to be shipped crop insurance include moral interoperability depend heavily on the hazard, where farmers may take regulatory and enabling environment excessive risk or not take enough and their impact on product measures to mitigate risk innovation The purchase order (the contract between Farmers in Central and Eastern Europe In 2000, Kenya’s Equity Building Society the seller and buyer) becomes the hold approximately 3% of the crop introduced mobile banking in about 20 of collateral for the loan insurance in the world. Most insurance the country’s most isolated towns and – The accounts receivable is premiums are concentrated in the United villages transferred to the lending institution States and Europe – The program offered a range of and becomes the source of loan Donors can play a role in the introduction financial services, including repayment of crop insurance. For instance, the World agricultural loans, even in remote Example Example – The financial institution collects Bank provided research support before rural areas, with full cost recovery. By payment for the loan plus interest and the introduction of crop insurance in early 2004, these mobile units were fees from the buyer once the product Morocco to ensure success serving 29 locations and about has been delivered 12,000 clients

Source: System of Warehouse Receipts; Managing risks and designing products for agricultural microfinance; Warehouse Receipts: facilitating credit and commodity markets; Insurance of crops in developing countries; BAH Analysis 115 Leveraging Small Farmers Potential

According to the FAO, land consolidation is a best practice for addressing rural poverty in Eastern Europe Overview of Best Practice Land Consolidation Techniques Steps to Comprehensive Land Consolidation 1 1 Includes analyzing the situation to identify needs, MethodsMethods toto LandLand ConsolidationConsolidation InitiateInitiate LandLand preparing a concept plan that outlines goals, costs ConsolidationConsolidation and sources of financing, receiving approval and Land consolidation can occur in several ways, for ProjectProject forming management team to oversee effort example: 2 – As consolidated farm, where a farm comprises 2 Activities such as selecting consultants, defining the a number of parcels located some distance from one another DesignDesign ProjectProject area and scope of the project, preparing the cost- estimate and schedule of the project, and defining the – As consolidated ownership, where a farmer’s performance monitoring system to measure success holding includes land owned by the farmer as well as land leased from others. The leased 33 Includes identifying or adjudicating boundaries and land may be owned by a neighboring farmer or Inventory Existing Inventory Existing legal status of parcels, delimiting important it may involve a case of “absentee ownership” Situation Situation environmental areas, determining the value of parcels, with the owner living in a distant city and addressing objections to land ownership 4 AdvantagesAdvantages 4 Activities such as preparing a plan the details the new Define the Detailed Define the Detailed parcel layout location of new roads, facilities, etc., Consolidation Plan Consolidation Plan socializing the plan with different scenarios and the Land consolidation can offer benefits: impact of each, and approving and refining the plan – Facilitate the creation of competitive agricultural production arrangements by enabling farmers 55 to have farms with fewer parcels that are larger Implement Detailed Includes selecting the contractors to complete the Implement Detailed and better shaped, and to expand the size of Consolidation Plan work, constructing any new or reformed public works, Consolidation Plan their holdings and surveying new boundaries – Can offer opportunities for land owners to sell 66 their land to others willingly. The objective is not ConcludeConclude Activities include addressing any remaining to make people landless ConsolidationConsolidation compensation or cost issues; updating the cadastral ProcessProcess map, and issuing and registering new titles

Source: FAO- The design of land consolidation pilot projects in Central and Eastern Europe; BAH Analysis 116 Demand-Driven Export Strategies Three main methods were used to coordinate multiple donor activities to support development of SIEPA in Serbia: line ministry coordination, sub-group meetings and a donor coordination matrix Donor Coordination Mechanisms to Support Development of SIEPA T E O T IVVE NNO TTI USS Donors Coordination Mechanisms Recipient AAU XHH EEX EAR EAR CommentsComments InstitutionalInstitutional strengtheningstrengthening && costcost sharingsharing OverviewOverview:: CreatedCreated inin 20012001 byby thethe GovernmentGovernment ofof Serbia,Serbia, SIEPASIEPA overseesoversees thethe promotionpromotion ofof SerbianSerbian Line Ministries USAIDUSAID Line Ministries exportsexports onon thethe internationalinternational market,market, andand assistsassists (Ministry of Economy, ClusterCluster developmentdevelopment (Ministry of Economy, foreignforeign investorsinvestors andand buyersbuyers 11 National SME Dev supportsupport National SME Dev Types of Coordination: Since its inception, Agency)Agency) Types of Coordination: Since its inception, SIEPASIEPA hashas receivedreceived assistanceassistance fromfrom aa numbernumber ofof UNIDOUNIDO donors.donors. ThreeThree mainmain methodsmethods havehave beenbeen usedused toto Support for Natl Agency for Support for Natl Agency for coordinatecoordinate assistanceassistance efforts:efforts: SMESME DevelopmentDevelopment ––Coordination Coordination throughthrough lineline ministries,ministries, suchsuch asas thethe MinistryMinistry ofof Economy,Economy, directlydirectly impactedimpacted Japanese Government Japanese Government Donor byby thethe assistanceassistance Funding support Donor SerbiaSerbia InvestmentInvestment Funding support Coordination w/ ––The The UNUN ResidentResident DirectorDirector andand thethe WorldWorld 2 Coordination w/ andand ExportExport 2 10 Sub-groups & BankBank initiatedinitiated monthlymonthly donordonor coordinatorcoordinator 10 Sub-groups & PromotionPromotion AgencyAgency GTZ SIPEA Support meetingsmeetings toto reviewreview current,current, futurefuture andand GTZ SIPEA Support (SIEPA)(SIEPA) BusinessBusiness advisoryadvisory && plannedplanned activitiesactivities andand providedprovided jointjoint policypolicy linkagelinkage servicesservices guidanceguidance toto thethe government.government. SIEPASIEPA promotedpromoted andand supportedsupported thesethese meetingsmeetings SwissSwiss DevDev CorpCorp directlydirectly FundingFunding forfor businessbusiness ––USAID USAID developeddeveloped aa donordonor coordinationcoordination development services development services matrixmatrix toto tracktrack allall donordonor activitiesactivities DonorDonor ResultsResults:: SIEPASIEPA hashas receivedreceived aa numbernumber ofof World Bank / MIGA 33 CoordinationCoordination World Bank / MIGA awards,awards, includingincluding shortlistshortlist forfor WTPOWTPO BestBest TradeTrade CapacityCapacity buildingbuilding && MatrixMatrix PromotionPromotion OrganizationOrganization fromfrom aa DevelopingDeveloping institutionalinstitutional strengtheningstrengthening CountryCountry inin 20082008 andand specialspecial prizeprize forfor thethe BestBest PracticesPractices inin PromotionPromotion fromfrom thethe LaLa BauleBaule 2007 2007 SIDASIDA WorldWorld InvestmentInvestment ConferenceConference NationalNational FDIFDI strategystrategy developmentdevelopment

Source: Lit Search; EAR Action Programme 2006 for Serbia; SEDP Final Report, 2007; Comparative Overview of Local Government Ministries in the Region and Abroad; Transitional Support Strategy Update; SME Development 117 Demand-Driven Export Strategies Kenyan green bean exporters have developed a strategic market in the UK by tailoring production to buyer preferences, using contract farming and developing additional safety codes of practices Key Success Factors: Development of Kenyan Green Beans to Meet Consumer Needs II Studies show that buyers in developed countries may choose to buy agricultural commodities from developing markets for three main reasons: 1) the buyer may not find any existing suitable standard for regulating particular production processes 2) the buyer may not regard existing standard as sufficiently credible; or 3) the buyer may deliberately develop a standard that differentiates the in-house brand from that of competitors TailoringTailoring Kenya has developed a strategic market for exporting green beans to supermarkets in the United Kingdom ProductionProduction – Semi-processed ‘high-care’ products such as mixed salads, assortments of cut vegetables for dips, vegetable toto Buyer-Buyer- kebabs, stir-fry and other mixes, are all produced under very stringent hygienic conditions DrivenDriven – Kenyan producers have been able to add value, via consumer packing of cut, sliced and modified vegetables or SupplySupply ChainChain vegetable combinations. The “high-care” market has been a key to profitability Exporters who supply the UK supermarket chains closely monitor and coordinate input supply, quality and usage as well as technical advice to the growers. EU importers do not directly monitor the green bean growers, but rather monitor the exporters and expect that the exporters will in turn monitor their growers. Leading export companies will regularly test workers for presence of pathogens, penalizing producers for any infractions

IIII Contract farming has helped poor smallholders in Kenya by facilitating access to markets, such as the UK – In particular, contract farming allows smallholders access to technical information regarding the pesticide usage, UsingUsing ContractContract hygiene requirements and agronomic practices that facilitate compliance with IFSS FarmingFarming toto – Contracted smallholders receive technical information in the form of handouts, training and field extension MeetMeet DemandDemand services – Contract production of green beans enables buyers to monitor and enforce IFSS compliance (at lower transaction costs) under a longer-term relationship IIIIII Developing Kenya has also developed homegrown food safety standards (KenyaGAP, Horticultural Ethical Business Initiative) for Developing horticulture crops destined for the export market Additional Additional Compliance with these codes are mandatory for growers and exporters CodeCode ofof Development of code of practices is a strategic method for exporters to signal their desire to meet high consumer PracticesPractices standards Source: Strategic use of private standards to enhance international competitiveness: Vegetable exports from Kenya and elsewhere; Food Safety Requirements in African Green Bean Exports and Their Impact on Small Farmers; BAH Analysis 118 Demand-Driven Export Strategies The vast majority of Romanian dairy producers are family farms that have less than two cows, with 21% of milk production going to the milk collection system… Overview of Romanian Dairy Producers

Size Structure of Livestock Farms (2001) Total Raw Milk Production (2001) State Farms Other Large Farms 95% 2% 1%

4.01%

0.36% 0.08% 0.04% 0.03% 0.02% 0.01% 0.01% Family Farms 97% 1-2 3-5 6-10 11-15 16-20 21-30 31-50 51-100 more heads heads heads heads heads heads heads heads than 100 heads

Size Distribution of Dairy Industry, Number of Employees (2004) Use of Milk Production (2001)

93.2%

Milk Collection System 21%

Farm Usage & Direct Sales 2.90% 3.00% 79%

0.70% 0.20%

0–49 50–99 100–249 250–499 Over 500

Source: The Dynamics of Vertical Coordination in Agrifood Chains in Eastern Europe and Central Asia; BAH Analysis 119 Demand-Driven Export Strategies …however, a recent survey of dairies showed increased use of collection arrangements, payment systems and support mechanisms for smallholder farmers in Romania Overview of Collection Centers, Payments and Assistance in Romania TypesTypes ofof CollectionCollection ArrangementsArrangements OverviewOverview ofof FarmFarm AssistAssistanceance byby DairiesDairies SurveyedSurveyed

11 Danone Friesland Promilch Raraul Farmers deliver milk to FarmerFarmer toto collection points at firms Collection Point / Extension services FirmFirm Collection Point / DairyDairy FirmFirm Provide good quality 2 inputs financing 2 Firms collect milk from FirmFirm fromfrom farmers for delivery to Support to purchases of collection points Collection Point / FarmerFarmer Collection Point / simple inputs DairyDairy FirmFirm Investment support by 33 small loans Collect Deliver rdrd 33 PartyParty milk CollectionCollection milk Support in receiving DairyDairy FirmFirm ConveyorsConveyors PointPoint bank loans

PaymentPayment SystemsSystems toto EnsureEnsure QualityQuality CommentsComments ExamplesExamples ofof extensionextension programs:programs: 11 Payments Proportional to Quality: Farmers are paid at collection centers according to the fat content and protein ––Friesland Friesland sendssends inspectorsinspectors inin thethe field,field, whowho visitvisit farmersfarmers and advise them on milk hygienic circumstances, cleaning content, density and germ counts in milk supplied and advise them on milk hygienic circumstances, cleaning practices,practices, andand fodderfodder managementmanagement 22 Bonus System: Farmers are paid a relatively low base price, but ––Promlich Promlich distributes distributes leafletsleaflets withwith practicalpractical informationinformation onon bonuses are provided when farmers deliver above-average milk cultivatingcultivating feed,feed, storingstoring milk,milk, cleaningcleaning practices,practices, etc.etc. quality, according to protein content, germ count and consistency ExamplesExamples ofof investmentinvestment programs:programs: in delivery ––Danone Danone supports supports farmersfarmers whowho aimaim toto improveimprove theirtheir businessbusiness throughthrough small-scalesmall-scale investments.investments. TheThe farmerfarmer maymay applyapply forfor 33 Penalization System: Firms measure milk according to a pre-financedpre-financed inputsinputs onlyonly afterafter hehe hashas delivereddelivered good-qualitygood-quality specified number of grades. Farmers delivering milk at the milkmilk toto DanoneDanone for for atat leastleast sixsix months.months. lowest grades are penalized Source: The Dynamics of Vertical Coordination in Agrifood Chains in Eastern Europe and Central Asia; BAH Analysis 120 Demand-Driven Export Strategies Effective promotion methods include targeted marketing based on product type and pre-positioning of commodities at agriculture food fairs Innovative Promotion & Branding Methods TargetedTargeted PromotionPromotion BasedBased onon ProductProduct TypeType Pre-PositionedPre-Positioned DistributionDistribution atat FairsFairs ASOEX / ProChile co-funded an intensive marketing Agricultural food fairs are important for promoting campaign targeting the sale of blueberries in the UK new products, learning about consumer tastes, and “Eat the Blues – You Have to Eat Them to Beat increasing innovation Them” campaign included a number of efforts: Smallholder farmers may be constrained if they – An on-the-street sampling scheme in Yorkshire, cannot ship and distribute their products readily at with handouts of fresh, free blueberries international fairs OverviewOverview – Free 3-week distribution to premium health spas – The USAID South African Trade Hub addressed – Aggressive sampling at radio stations and shows this challenge by sponsoring six regional companies to attend the 2006 Spring Fancy – A national print and online PR campaign geared Foods Show in Chicago to the over-50s with the potential to reach over – The program helped pre-position distribution of 3.5 million consumers products so that small farmers could promote and easily sell their products with minimal lag time during and after the food fairs

Shipments have grown from 1,440 tons in 2005-2006 Participation helped raise the collective profile of to 2,307 tons in 2006-2007, an increase of 60 percent southern Africa as a supply source for specialty foods ImpactImpact Due the success of the pilot program, the marketing Three of the six companies sponsored by the USAID campaign has become of yearly event, with possible Trade Hub have since realized new exports to the expansion into other countries U.S. specialty and gourmet food sector Timeline for Success at Food Fairs

Year 1 Year 2 Year 3 Buyers examine Buyers take sample Buyers are ready to product and of product at food purchase larger express interest fair and tests with orders based on local market market assessment

Sources: “The Emergence of New Successful Export Activities in Latin America: The Case of Chile” (IADB); Lit Search, Interviews, USAID website; Fresh Plaza website; BAH Analysis 121 Demand-Driven Export Strategies In order to optimize pricing for commodities, best practices point to three solutions: align with market prices, establish a niche product or develop a franchised quality product Methods to Optimize Pricing for Agricultural Commodities 11 22 33 AlignAlign withwith MarketMarket PricesPrices EstablishEstablish aa NiceNice ProductProduct BuyBuy IntoInto AA FranchisedFranchised ProductProduct

The Foreign Agricultural Trade of the Kenyan green bean producers pinpointed The Pink Lady® trade mark was originally United States (FATUS) service provides a market for “high-care” products to UK established in Australia for use on apples historical prices for USA’s exports and supermarkets that met specified quality standards imports, by crop and country of origin / – Customers differentiated value based – In countries where the trade mark is destination on quality of the product rather than registered, apples sold under the – User-friendly interface, with updated price Pink Lady® brand must meet information – Exporters enforced and even rigorous and specific standards, and – Diverse breakdowns, allowing developed stringent international the trade mark can only be used producers to even assess impact of food safety standards to meet under license customs and duties on market prices consumer quality standards – License holders pay royalties, which for their crops – Exporters have also developed cover management of the trade mark Service is on-line and free of charge flexible distribution arrangements to – Members span over four continents The tool allows producers to check trends supermarkets, at times decreasing or in countries such as the United and recent development of crops in increasing the size of order hours States, South Africa, Chile, Japan, international markets before delivery. The variability is Uruguay, etc. – Monitor competitors’ positions offset by the continued relationship Because of the high quality of the Pink with the buyer – Assess and act on seasonal trends Lady brand, producers can expect to receive a premium on price Source: USAID; USDA; International Pink Lady Alliance Limited; Booz Allen Analysis 122 Infrastructure Capacity Building Despite the lack of water access, the Israeli government has developed innovative irrigation methods to increase productivity while decreasing water use Overview of Israel’s Irrigation System and Impact TypesTypes ofof MicroMicro IrrigationIrrigation MethodsMethods ImplementationImplementation && ImpactImpact

Drip irrigation can supply from one liter to 20 Water Use Per Hectare Crop Productivity Per Unit 3 3 liters per hour. With a peak water utilization (m /yr) of Water (kg/m ) DripDrip IrrigationIrrigation 9000 2.5 rate of 95%, this method is suitable for intensive cultivation 5700 1.2 Sprinklers are designed for crops that require Mini-sprinklerMini-sprinkler irrigation of an entire area or field. The sprinklers achieve a water utilization rate of 70%-80% 1952 1995 1952 1995

In an underground drip irrigation system, air CommentsComments valves open when the water is turned off and UndergroundUnderground allow air into the pipe to prevent external dirt DespiteDespite thethe scarcityscarcity ofof water,water, thethe IsraeliIsraeli governmentgovernment hashas from being sucked into the dripper takentaken aa numbernumber ofof stepssteps toto increaseincrease farmers’farmers’ access access toto waterwater Portion of Israeli Land with Efficiency Rate According ––According According toto thethe WaterWater Law,Law, waterwater isis consideredconsidered aa publicpublic Different Irrigation Types (%) to Irrigation Types (%) goodgood andand managedmanaged byby thethe WaterWater Commissioner,Commissioner, whowho isis responsibleresponsible forfor determiningdetermining thethe useuse andand allocationallocation ofof 95% waterwater inin allall areas,areas, includingincluding irrigationirrigation forfor agricultureagriculture Sprinklers ––In In 2006,2006, thethe IsraeliIsraeli governmentgovernment developeddeveloped thethe NationalNational 20% 75% ProgramProgram forfor PromotingPromoting WaterWater TechnologiesTechnologies -- NEWTech. NEWTech. The program invests in human capital, R&D funding and Micro-Irrigation The program invests in human capital, R&D funding and local market implementation for the development of 80% local market implementation for the development of irrigationirrigation systems.systems. TheThe IsraeliIsraeli MinistryMinistry ofof Industry,Industry, TradeTrade andand LaborLabor leadsleads thethe ProgramProgram withwith 1010 otherother governmentgovernment Micro-irrigation Sprinker entitiesentities Source: Irrigation and Desertification: Ecological Consequences of Arid Land Reclamation in the Aral Sea Basin and Land Degradation Control; Management of Water Resources in Israel; Israel Agriculture; BAH Analysis 123 Infrastructure Capacity Building Four main types of irrigation charging systems exist around the world: area-based, crop-based, volumetric and tradable water rights Types of Irrigation Charging Systems

Area-basedArea-based Crop-basedCrop-based VolumetricVolumetric TradableTradable WaterWater RightsRights

A fixed rate per hectare of A variable rate per irrigated A fixed rate per unit water Entitlements of users in an farm with a “two-part” tariff hectare of crop, i.e. different received, where the charge is irrigation project, otherwise designed to cover the fixed charges for different crops proportional to the volume; or, a known as rights holders, costs of the service, or a (not based on volume, but rising block tariff where the are allowed to buy or sell fixed rate per hectare the type of crop and area charge is tied to quantity of rights in accordance with irrigated irrigated serve as proxies for water, but tiered unit costs can specified rules designed Description Description the volume of water be applied for different farms primarily to protect third received) parties’ rights

The marginal price of water The marginal price of water Provides an incentive to save Brings supply and demand is zero. Farmers take as is zero. Farmers take as water and has the potential to into balance. Where water is much water as they would much water as they would reduce consumption scarce and rationed, farmers like to consume, but the cost like to consume, but the cost For block tariffs, low rates are for will use water carefully even is unaffected by the amount is unaffected by the amount substantial, initial entitlements though the marginal price to used used and high rates are for additional them may be zero water beyond threshold. Results in a low total cost and a high Incentives for Farmers Incentives for Farmers marginal price

In Spain, the most In Egypt, several charging In Israel, farmers receive a Available in the United widespread charging mechanisms exist, including water allocation for which they States, sales require mechanism is a fixed charge the crop based pricing for are charged on an increasing authorization by a licensing per hectare. The variable irrigation block tariff according to the authority (most western element is the energy cost percentage of the allocation states) or may require court associated with pumping and used approval (e.g. Colorado) pressurizing water delivery Country Example Country Country Example Country systems

Source: Water Charging in Irrigated Agriculture; Cost Recovery for Agriculture: Egyptian Experience; BAH Analysis 124 Infrastructure Capacity Building A number of methods exist to support expansion of greenhouses, including donor funding, tax credits, investment support, income support and loan programs Overview of Methods to Support Greenhouse Development MethodsMethods toto SupportSupport GreenhouseGreenhouse DevelopmentDevelopment ExamplesExamples ofof DonorDonor SupportSupport MechanismsMechanisms

Funding can come in several forms, from investment 11 USAID / Croatia: Modernization of Greenhouse Facilities loans for building greenhouses (World Bank in DonorDonor FundingFunding Armenia) or providing monetary support to improve machinery (USAID in Croatia) to decrease costs and USAID / Croatia USAID / Croatia Help farmers reorganize and improve competitiveness purchase equipment for greenhouses The Canadian government set up the Scientific Farmers had outdated equipment and the capacity of their seedling Research and Experimental Development Tax Credit Tax Credits production facilities was inadequate. Machinery was also expensive Tax Credits Program, an incentive program designed to for farmers encourage the development of new products and With USAID support, pepper production jumped by 50% over the processes, including greenhouses previous year and costs fell by 15% The Government of Ontario, Canada, has set-up a 22 $12M investment fund to promote consumer Donor Efforts in Armenia to Improve Infrastructure InvestmentInvestment awareness of locally produced goods, including SupportSupport agriculture grown using greenhouses. Programs include consumer promotion and setting-up a ACDI/VOCAACDI/VOCA USDAUSDA CARDCARD DAI-ASMEDAI-ASME IFADIFAD distribution network for greenhouse goods Technical Marketing Market Loans The Government of Canada has developed a Net assistance assistance research IncomeIncome Income Stabilization Account (NISA) program, which Support is meant to stabilize farm income. Farmers deposit a Support portion of their income, which is directly matched by the government. In years of low income, farmers can GreenhousesGreenhouses make withdrawals The Canadian government has a federal government The greenhouse industry received support from multiple donors to guaranteed loans program designed to increase the improve infrastructure. From 2003-2006, the acreage of LoanLoan ProgramsPrograms availability of loans for greenhouse producers. Farm greenhouses in Armenia doubled. On average, 10 ha of Credit Canada (FCC) also provides flexible loan greenhouses were constructed annually options features, including multiple interest rate and payment options Source: USAID Website; Government of Canada Website; Assessment of the Potential of the Armenian Greenhouse Cluster; BAH Analysis 125 Infrastructure Capacity Building

Extension programs for irrigation can be provided through universities, governments or public-private partnerships Delivery Types of Extension Programs for Irrigation

InIn thethe UnitedUnited StatesStates,, universitiesuniversities provideprovide tailoredtailored extextensionension servicesservices inin greenhousegreenhouse development development ––In In Colorado,Colorado, majormajor cropscrops growngrown inin greenhousesgreenhouses areare container-growncontainer-grown plants,plants, includingincluding pottedpotted color,color, beddingbedding andand foliagefoliage plants,plants, cutcut flowers,flowers, andand tomatoestomatoes – The Colorado State University Floriculture and Greenhouse Extension program offers a number of University – The Colorado State University Floriculture and Greenhouse Extension program offers a number of University toolstools forfor farmers,farmers, includingincluding 1)1) publicationspublicationsinin areasareas suchsuch asas diseasedisease managementmanagement andand waterwater reuse;reuse; 2)2) presentationspresentations andand workshopsworkshops;; 3)3) accessaccess toto in-housein-house professorsprofessorswhowho areare expertsexperts inin greenhouse;greenhouse; 4)4) accessaccess toto anan onlineonline CooperativeCooperative ExtensionExtension GreenhouseGreenhouse ListservListservthatthat servesserves asas aa discussiondiscussion listlist andand aa pointpoint ofof exchangeexchange forfor greenhousegreenhouse farmersfarmers

InIn Alberta,Alberta, Canada,Canada, thethe MinistryMinistry ofof AgricultureAgriculture andand RuralRural DevelopmentDevelopment hashas developeddeveloped aa numbernumber ofof resourcesresources toto supportsupport andand promotepromote greenhousegreenhouse vegetablevegetable productionproduction –– OnlineOnline guidesguides includeinclude informationinformationonon industryindustry statistics,statistics, regulatoryregulatory requirements,requirements, marketmarket basics,basics, GovernmentGovernment productionproduction knowledge,knowledge, investmentinvestment andand capitalcapital requirementsrequirements –– PublicationsPublicationsaboutabout startingstarting andand developingdeveloping greenhousesgreenhouses inin AlbertaAlberta –– AccessAccess toto technicaltechnical advisorsadvisors inin thethe MinistryMinistrywhowho areare greenhousegreenhouse specialists,specialists, horticulturehorticulture specialistsspecialists andand economiceconomic analystsanalysts

InIn thethe UnitedUnited StatesStates,, aa regionalregional public-privatepublic-private coalitioncoalitionwaswas establishedestablished toto promotepromote IntegratedIntegrated PestPest ManagementManagement (IPM)(IPM) forfor thethe greenhousegreenhouse industryindustry inin NorthernNorthern NewNew EnglandEngland ––The The coalitioncoalition includedincluded growers,growers, researchers,researchers, extensionextension specialistsspecialists andand educatorseducators,, socio-economists,socio-economists, PublicPublic PrivatePrivate bio-controlbio-control andand pesticidepesticide suppliers,suppliers, statestate agriculturalagricultural personnelpersonnel andand otherother keykey industryindustry representativesrepresentatives PartnershipsPartnerships ––The The mainmain objectivesobjectives ofof thethe programprogram areare toto 1)1) developdevelop workshopsworkshopsonon IPMIPM 2)2) developdevelop anan analysisanalysis ofof thethe needsneeds ofof growersgrowers toto improveimprove productivityproductivityandand reducereduce chemicalchemical pesticidepesticide inputs;inputs; 3)3) createcreate aa coalitioncoalition ofof stakeholdersstakeholders inin thethe greenhousegreenhouse industryindustrywhichwhich willwill serveserve asas thethe foundationfoundation forfor preparingpreparing collaborativecollaborative researchresearch andand extensionextension activitiesactivities

Source: A Public-Private Partnership to Promote IPM Implementation in Northern New England Greenhouse Ornamentals; BAH Analysis 126 Transportation In Brazil, access to road infrastructure was a major challenge for small farmers – one of the country’s largest states developed a prioritization model to invest specific “logistical” funds Increasing Road Access for Small Farmers in Brazil

SmallSmall FarmerFarmer AccessibilityAccessibility StudiesStudies DescriptionDescription

Small farmers’ accessibility to major logistics network in Brazil was evaluated through studies funded by government – Assessment of time and distance to main transportation backbones helped determine which areas required investments – Qualitative aspects, such as pavement conditions, were also considered Baselining Baselining Results of baselining stage were a set of logistics infrastructure interventions required to enhance accessibility of small farmers to transportation backbones, with cost estimates and eventually forecast of return rates (based on production and trade flow estimates)

Portfolio was prioritized considering a “cost per capita” metric – projects with lower cost per capita were the first to be completed

Indicators for completion of projects were incorporated to the state’s overall performance metrics – accessibility of small farmers to logistics network became part of the state’s strategy and has specific budget allocation Prioritization Prioritization A letter of commitment was signed by local representatives and state’s authorities, so as to ensure continuity of projects past government mandates (4 years)

Source: Booz Allen Project – “RumoS 2015” (Government of Rio Grande do Sul State – Brazil); BAH Analysis 127 Transportation Both the Serbian and Mozambique governments effectively used donor support to find ways to decrease the costs of ground transportation and facilitate road delivery for agricultural goods Types of Donor Assistance to Decrease Ground Transportation Costs Serbia-Serbia- EBRD EBRD RoadsRoads TechnicalTechnical AssistanceAssistance Mozambique-Mozambique- MCC MCC RoadRoad SectorSector InvestmentsInvestments While the road network in Serbia provided adequate Almost two-thirds of the population in Mozambique coverage and communication, routes needed to be depends on agriculture for their livelihood improved to meet increase in traffic volume – Success of the agriculture sector is dependent on the availability of reliable ground transport Overview The responsible government agency, Serbian Roads Overview Directorate, needed assistance in developing a Road – Studies showed that the Northern provinces Recovery Plan to determine the investments (Cabo Delgado, Niassa, Nampula, and Zambézia) required to improve road conditions, which would lacked the road density to sustain transport of best improve economic conditions goods The Serbian government used donor assistance in MCC Mozambique worked with the National Road two ways: Administration and the Road Fund to: – US Trade and Development Agency (USTDA), – Conduct an extensive study of the road network TypesTypes ofof who funded and oversaw development of the (5,231 km in the four provinces) to determine DonorDonor feasibility study for roads assistance areas of improvement and the costs required SupportSupport – The World Bank, which developed the Highway – Use the Road Economic Decision model to Development and Management Tool (HDM-4) to simulate the economic effects of road analyze the current road system, create a cost / interventions based on costs, resources, and benefit analysis of improvements to be road conditions completed under the Road Recovery Plan Based on the recommendations of the Road MCC Mozambique made a final selection of road Recovery Plan, the Serbian government improvements that would facilitate delivery of developed three types of budget scenarios agriculture goods ResultsResults // (pessimistic, moderate, optimistic) – The study estimated that the net value of new ImpactImpact – The government, along with USTDA, determined production for both cash and food crops would the optimal amount of funding that would be produce USD 37.7 million in value add required – Smallholder farmers producing maize and cash – Amount of improved road conditions and crops would benefit from better market access increased economic development were projected and reduced import and transport costs Source: EBRD Roads Technical Assistance Project in Serbia; MCC Mozambique: Proposal for Road Sector Investments in the North; BAH Analysis 128 Transportation Israel’s largest exporter of produce, Agrexco, found a cost effective method to bypass borders by developing specialized reefer vessels to directly transport goods to Europe Agrexco’s Specialized Reefer Vessels – Key Facts

Agrexco has two specialized reefer vessels bearing its name, delivered in 2003 based on a 15-year usage contract with owner Agrexco’s Routes and Breakdown of Exports The ships feature new technologies that allow flexibility in capacity usage –

OverviewOverview cars can be loaded into the refrigerated area, providing an important asset for LEGEND: back-haulage Air COLOGNE Sea (Spec. Reefer) During peak seasons, Agrexco charters two additional vessels, along with Sea (Conv. Reefer) support ventilated liners

MARSEILLES KOPER Average speed is 22 knots – almost twice as fast as any other reefer vessel EconomicsEconomics Capacity of 880 TEU (~60,000T) Return business consists of cars back to Israel (to Israeli and Asian markets) PIRAEUS ASHDOD Agrexco products set sail from Haifa and Ashdod towards Europe (Marseilles and Valencia) – From Ashdod (loading port) to Marseilles, ships usually take 3 days RoutesRoutes andand – 80% of the produce go to the company’s distribution center in Marseilles MarketsMarkets where Agrexco has a distribution center Conventional ServedServed – At Marseilles, new containers and cars are loaded into the vessel - two Reefer day-shifts for cargo loading Vessels – Ship heads to Valencia (additional cars are loaded) and after 14 days of 16% departure, arrives back at Ashdod Air Cargo Specialized 19% Reefer Vessels The 14-day timetable is composed so that there is time to make up if delays 65% TimeTime andand occur due to bad weather – ships can be loaded at night, for an extra cost that CapacityCapacity rather than paying fuel and other additional costs Mgmt. Mgmt. Agrexco also charters capacity to 3rd party companies (round-trip contracts)

Source: Interviews; Logistics Study for Agricultural Flow – Egypt / Europe; FAO - Global Agricultural Marketing Management (1997); Lit Search; BAH Analysis 129 Transportation

Kenya has successfully developed a strategic export market for green beans to the UK using air transport Kenya: Using Air Freight to Develop Strategic Green Bean Market Reasons Behind Success of Green Bean Market

11 Producers and exporters of green beans chose to Kenyan Green Bean Exports Using Air expand in markets that differentiated on quality, not Transport by Destination, 2004 price – UK clients and consumers are prepared to pay Product Other 6% Product a premium for “high-care” and quality green Tailored to Belgium 4% Tailored to beans MarketMarket Netherlands 6% – The increased demand for volume (four-fold increase of green bean imports from 1990 to 2004) enabled exporters to offset costs of air freights

22 Most green bean farms are within a two-hour France 15% proximity to the Nairobi airport Airport proximity benefits green bean exporting due UK ProducerProducer to: 70% ProximityProximity – Perishability of the product toto AirportsAirports – Low value-volume ratio of the product, which is due to high processing requirements and makes long-distance transport costly – Requirement of flexibility in orders 33 Total:Total: 32,44132,441 TonsTons Green beans are transported by one of two ways: AvailabilityAvailability – Studies estimate that 60-70% of cargo is ofof AirAir carried as belly freight on passenger planes, FreightFreight with British Airways offering daily flights to OptionsOptions London, facilitating shipment of green beans – Dedicated freight craft

Source: A life cycle analysis of UK supermarket imported green beans from Kenya; Strategic use of private standards to enhance international competitiveness: Vegetable exports from Kenya and elsewhere; Food Safety Requirements in African Green Bean Exports and Their Impact on Small Farmers; BAH Analysis 130 Transportation A recent study in Serbia recommended the development of field packing areas to enable vertically integrated cold-chain distribution of berries for small-scale farmers Overview of Recommended Field Packing System for Smallholder Farmers Field Packing Process AdvantagesAdvantages 11 Producers deliver shipments of fresh berries to field packing centers, which could be private or ReceiveReceive shipmentsshipments fromfrom Integrates purchasing locations into cold municipal centers, and are in close proximity to farmersfarmers storage and processing facility systems by farms applying vertical integration Centers pay producers for berries according to going farmgate prices Costs arising on the way from producers to cold stores are decreased 22 Products have extended shelf life Berries are sorted, cleaned and packed either capabilities, possibly double existing limits Sort,Sort, cleanclean andand packpack manually or using machines agriculturalagricultural goodsgoods – Figures estimate that machine use is Consistent presentation and packaging for equivalent to the work of 100 manual sorters enhanced marketability

33 Utilizing field-level packing and cooling systems, Disadvantages chilled berries are prepared for local distribution Disadvantages PlacePlace goodsgoods inin pre-coolingpre-cooling with relative ease and limited cost Pre-cooling and packaging is important for product durability and differentiation Smallholder farmers may not have means to transport goods to field packing centers Producers are dependent on the center to 44 Using small refrigerated trucks, fresh chilled give determine the cost for goods, which TransportTransport refrigeratedrefrigerated berries are transported in small quantities directly may not be the best price they could receive goodsgoods toto marketmarket to market to wholesalers, retail supermarket on the market chains, hotels, restaurants (in compliance with Field centers focus on domestic required standards) consumption, which is small in comparison to export quantities

Source: Cold Chain Strategy for Serbia; The Market Chain of Fruit Production in Serbia; BAH Analysis 131 Government Agriculture Regulations While the PPECB operates as a quasi-private quality control body for South Africa, the EACCE is a government body in Morocco that ensures exports meet international food safety standards Overview of Quality Control Agencies

Perishable Products Export Control Board (PPECB) L'EtablissementL'Etablissement AutonomeAutonome dede ContrôleContrôle etet dede CoordinationCoordination Perishable Products Export Control Board (PPECB) desdes ExportationsExportations (EACCE)(EACCE) South Africa’s official export certification agency for perishable Morocco’s official institution overseeing quality control and products – mandated by the Government of South Africa – coordination of exports, as mandated by the Government of controls all agriculture and animal exports from the country Morocco – Defines rules and impose penalties – Ensures that all agriculture and food products exported – Negotiates with producers, shipping companies and other out of the country meet international food safety and General General General General stakeholders standard guidelines Description Description – Coordinates food exports through development and Independent service provider of quality certification and cold execution of sector strategies and support of bilateral and chain management services for producers and exporters multilateral export agreements Financially and legally autonomous, the EACCE is overseen Board comprised of representatives of main crop producers and by a President, 10 members from the government, a member largest exporter companies from the Marketing and Exports Association, and eight 30 offices located in 11 production regions, reaching 1,500 members representing the exporters and producer locations 21 regional offices located across the country Matrix accreditation units – crop-specific and functional Organization

Organization Three types of labs are located in regional offices: specialization microbiological, phyto-sanitary and packaging

Two main service streams, reflected in the organizational Services are provided in three main areas: structure – An export development unit, which oversees marketing – Statutory services (Inspection & Cold Chain): government- efforts, data collection, and coordination of exports mandated activities – A technical division that oversees quality control of – Non-Statutory Services (Customized Services): independent infrastructure, processed products and fresh foods and profit-oriented service providing, with tailored solutions Services

Services – A laboratory division that oversees analysis of products Funds are acquired through a legislated levy placed on all Funds are acquired through a mix of government funding and exporters (fixed cost per carton exported, migrating to a a levy placed on imports differentiated levy by product type) Source: PPECB, EACCE; BAH Analysis 132 Government Agriculture Regulations The PPECB maintains a nationally and internationally recognized lab which provides testing for government and private entities to ensure safety and quality PPECB Quality Control Lab Interactions

CouncilCouncil forfor SABS DepartmentDepartment ofof DepartmentDepartment ofof DepartmentDepartment ofof SABS ScientificScientific andand (National(National regulatoryregulatory HealthHealth TradeTrade AgricultureAgriculture IndustrialIndustrial ResearchResearch body)body)

Mandated to audit compliance & enforce LabsLabs Quality Standards and LabsLabs LabsLabs Food Safety Standards

SASA NationalNational AccreditationAccreditation PPECBPPECB SchemeScheme

Accreditation of Oversees work laboratories to ISO / food quality control quality food control quality food food quality control quality food IEC 17025 Conducts tests to monitor monitor to tests Conducts monitor to tests Conducts Conducts tests to monitor monitor to tests Conducts QualityQuality ControlControl LabLab

Completes testing & analysis

Exporters,Exporters, ProducersProducers

CommentsComments TheThe PPECBPPECB maintainsmaintains aa privateprivate lablab thatthat overseesoversees testingtesting forfor threethree areasareas:: MycotoxinMycotoxin Analytical Analytical Program,Program, FatsFats AnalyticalAnalytical Program,Program, LabelingLabeling AnalyticalAnalytical ProgramProgram ––In In additionaddition toto governmentgovernment labslabs underunder thethe DepartmentDepartment ofof Health,Health, CSIRCSIR andand SABS,SABS, thethe PPECBPPECB lablab completescompletes thirdthird partyparty analysesanalyses PPECBPPECB hashas beenbeen accreditedaccredited accordingaccording toto internationalinternational standards,standards, suchsuch asas thethe ISOISO // IECIEC 1702517025,, andand hashas alsoalso developeddeveloped aa cross-accreditationcross-accreditation withwith thethe UnitedUnited KingdomKingdom AccreditationAccreditation StandardsStandards.. AsAs aa result,result, SouthSouth AfricanAfrican andand thethe UKUK recognizerecognize eacheach other’sother’s accreditationaccreditation standardsstandards

Source: PPECB website; PPECB 2008-2009 Annual Report; Standards and global trade: a voice for Africa; BAH Analysis 133 Government Agriculture Regulations Studies on Kenyan green bean producers show that costs for international food safety standard (IFSS) compliance are significantly lower for farmer groups versus small or large farmers Overview of Farmer Costs for IFSS Compliance

Total Income by grower type, 2006 Costs (in Kenya shillings) associated with IFSS compliance and 1,1120,000 1,248,000 336,000 certification by grower type, 2006 (*) 438,954 96% 76% 27% Needs assessment 6% Pesticide storage 6% unit Charcoal cooler 9%

73% Analyses 10% 311,340

Grading shed 10% Remaining income 14% 12% 228,190 9% 24% 3% 11% 2% Cost of Compliance 23% as % of income 4% Certification 24% 14% Farmer Group Large Farmer Small Farmer 8% 11% CommentsComments 38% CostCost perper unitunit incomeincome isis smallersmaller forfor thethe farmerfarmer Pre-audit 30% 31% group,group, withwith eacheach farmerfarmer payingpaying onlyonly 29,26429,264 shillingsshillings forfor compliancecompliance 23% Income increases as more farmers work 11% Income increases as more farmers work togethertogether toto increaseincrease productivityproductivity andand Farmer Group Large Farmer Small Farmer innovationinnovation

Note (*): Does not include costs for toilet or disposal Source: Food Safety Requirements in African Green Bean Exports and Their Impact on Small Farmers; BAH Analysis 134 Government Agriculture Regulations Spain’s seed import regulations work under “certified origin” schemes – other countries also adopt solutions to regulate inputs of seeds and fertilizers Overview of Input Regulations in Benchmark Countries SeedSeed ImportImport RegulationsRegulations FertilizerFertilizer ImportImport RegulationsRegulations

Spain works under a “certified-origin” scheme. For For fertilizers, imports also work under varieties registered in the EU, some countries have “certified-origin” and positive list approval (for specific types of seeds) same treatment as EU – Fertilizers have to be previously countries registered at the Ministry of Agriculture Internal trade of imported varieties must be to be allowed to enter Spain communicated to the Ministry of Agriculture – Only fertilizers from certified plants are SpainSpain (database of imported seed sellers, buyers and accepted – for countries outside the EU, transactions) importers are required to send Spain also adheres to OECD-sponsored seed Certification of Approval in country of scheme that harmonize regulations in order to origin and related legislation to be facilitate the import and export of seed; typically vetted by Spanish Authorities through removal of technical trade barriers with recognized labels (e.g., passports for trade)

Serbia: Ministry of Agriculture provides a pre- Australia: fertilizer imports must also meet approval process – new seeds are imported strict Australian Quarantine regulations within 7 days, and, unless stated otherwise, pre- administered by the Australian Quarantine approval is considered final after 6 months Inspection Service (AQIS). Most fertilizer products require an import permit and are OtherOther Croatia: The Institute for Seeds and Seedlings required to conform to import conditions CountriesCountries enforces seed laws set by the OECD, and conducts all DUS and VCU testing to determine domestic movement and imports of seeds. The Institute follows additional regulations set by the Ministry of Agriculture Forestry and Water Management

Source: Interviews; Spain’s Ministry of Agriculture; DAI “Assessment of Egypt’s Agricultural Sector Competitiveness” (2002); Seed Production in Croatia; BAH Analysis 135 Government Agriculture Regulations Protection of the environment against pesticide misuse is supported by bans, as well as awareness and monitoring on use and distribution of pesticides Best Practices to Protect the Environment Against Pesticide Misuse

CroatiaCroatiausesuses aa mixmix ofof bansbans andand restrictionsrestrictions onon pesticidespesticides – Certain pesticides (Alachlo) cannot be applied with sprayers ProhibitProhibit useuse ofof – Certain pesticides (Alachlo) cannot be applied with sprayers specific ––Pesticides, Pesticides, suchsuch asas Atrazine,Atrazine, areare limitedlimited toto areasareas accordingaccording toto specificspecific humidityhumidity levelslevels (1.5(1.5 kgkg ai/haai/ha inin humidhumid specific andand 11 kgkg ai/haai/ha inin aridarid areas)areas) pesticides pesticides ––Other Other pesticidespesticides areare restrictedrestricted accordingaccording toto thethe typetype ofof agricultureagriculture commoditycommodity (endosulfan(endosulfan banned banned forfor oil-oil- seedseed raperape andand forestry;forestry; trifIuralintrifIuralin use use isis notnot permittedpermitted inin post-harvestpost-harvest sownsown soyasoya beanbean andand sunflower)sunflower)

Encourage InIn Croatia,Croatia, thethe MinistryMinistry ofof Agriculture,Agriculture, ForestryForestry andand WaterWater ManagementManagementhashas organizedorganized anan extensionextension serviceservice Encourage which provides non formal education, training and knowledge transfer to farmers on pesticide use. The costs of proper use of which provides non formal education, training and knowledge transfer to farmers on pesticide use. The costs of proper use of thisthis serviceservice areare coveredcovered byby MinistryMinistry ofof Education.Education.ShortShort coursescourses (one(one dayday oror severalseveral hours)hours) areare providedprovided byby pesticidespesticides expertsexperts toto farmersfarmers inin villagesvillages oror inin smallersmaller municipalitiesmunicipalities

InIn thethe CzechCzech Republic:Republic: ––All All professionalprofessional pesticidepesticide usersusers havehave toto keepkeep sprayspray recordsrecords forfor 33 yearsyears ––Farms Farms largerlarger thanthan 1010 haha areare requiredrequired toto submitsubmit pesticidepesticide useuse summariessummariestoto thethe DepartmentDepartment ofof Information.Information. MonitorMonitor thethe FarmersFarmers reportreport onon amountsamounts appliedapplied byby formulatedformulated product,product, cropcrop andand geographicalgeographical regionregion – Pesticide sales data are also collected by the Czech Crop Protection Association useuse andand – Pesticide sales data are also collected by the Czech Crop Protection Association InIn Slovakia:Slovakia: distributiondistribution ofof ––All All traderstraders areare requiredrequired toto reportreport salessales datadata annuallyannually,, includingincluding manufacturer,manufacturer, importer,importer, distributorsdistributors andand pesticidepesticide retailers.retailers. TheyThey areare requiredrequired toto reportreport thethe namename andand amountamount ofof formulatedformulated productsproducts forfor agriculturalagricultural andand non-non- agriculturalagricultural pesticidespesticides ––All All farmersfarmers havehave toto keepkeep detaileddetailed recordsrecords ofof theirtheir pesticidepesticide useuseandand areare requiredrequired toto submitsubmit summariessummaries toto thethe CentralCentral ControlControl andand TestingTesting InstituteInstitute ofof AgricultureAgriculture

Source: Inventory of Agricultural Pesticide Use in the Danube River Basin Countries; Education for Family Farms and Gender Aspects in Croatia; BAH Analysis 136 Trade Access

The Macedonian government’s increased trade facilitation capacity stemmed from four key success factors… Success Factors for Trade Facilitation Capacity Building in Macedonia In an effort to accede to the WTO, the Macedonian government undertook Multi-ProngedMulti-Pronged trade facilitation capacity building simultaneously at multiple agencies: CapacityCapacity – Training for government officials at agencies such as the Ministry of BuildingBuilding inin thethe Economy to develop WTO agreements for the accession process GovernmentGovernment – Technical assistance provided to Customs Administration personnel to support compatibility of customs regime with international standards BenefitsBenefits forfor MacedoniaMacedonia Capacity building has been targeted at the national and regional levels: ByBy takingtaking stepssteps toto InterventionsInterventions atat – National: Targeted technical assistance to Ministry of Economy, Customs accedeaccede toto thethe WTO,WTO, thethe NationalNational && Administration, and the Ministry of Finance governmentgovernment waswas ableable toto RegionalRegional LevelsLevels – Regional: Participation in regional initiatives, such as the regional seminars on trade facilitation for the Southeast European countries strengthenstrengthen tradetrade facilitationfacilitation capabilitiescapabilities ––As As aa result,result, thethe The Minister of Economy mobilized support for trade facilitation capacity processprocess ofof building for WTO Accession and developed the required technical expertise accession,accession, asas muchmuch PoliticalPolitical WillWill && through the accession process with the support of donors asas accessionaccession itself,itself, CommitmentCommitment – Since its accession in 2002, the government has continued capacity waswas beneficialbeneficial toto building, through implementation of the New National Customs Declaration improvingimproving capacitycapacity Processing System and improved management at border crossings inin multiplemultiple governmentgovernment In laying the foundation for strengthened trade capacity, Macedonia has been agenciesagencies able to take advantage of CEFTA ExecutionExecution ofof – Macedonia has instituted a CEFTA office in the Ministry of Economy and OtherOther TradeTrade has spent considerable effort in increasing capacity through training AgreementsAgreements programs – The government has also taken advantage of UN / WTO technical assistance to promote capacity in trade best practices

Source: Trade Facilitation in the WTO Context; Non-Tariff Barriers and Trade Facilitation; Contribution of Customs for Enhanced Traffic of Goods Through National Border Crossings; BAH Analysis 137 Trade Access

… as well as country-focused and regional donor-funded projects Donor-Funded Methods for Trade Facilitation Capacity Building in Macedonia

Method Description Impact

USAID provided expert technical assistance drafting Accession process was completed in less documentation, identifying inconsistencies in the than three years of negotiations and Macedonian trade regulations, training Macedonian Macedonia became the 146th member of officials to extend their understanding of WTO the WTO in 2003 agreements and preparing them for negotiations Country-Country- FocusedFocused The United Nations Economic Commission for Following the workshop, the Macedonian Europe provided workshops on trade data government started implementation of harmonization and the Single Window system Single Window for agencies, exporters, importers, carriers, brokers and freight forwarders

Led by the World Bank and the United States, the Trade Reduced nontariff costs to trade and and Transport Facilitation in Southeast Europe transport, decreased smuggling and (TTFSE) program provided customs services procedures corruption at border crossings, and improved reform, support to integrated customs information customs administrations and other border- systems, and improvement of roads and border-crossing control agencies Region-Region- facilities for eight countries, including Macedonia FocusedFocused Through the Southeast Europe Regional Cross-Border Simplified transit documentation Trade Facilitation, USTDA provided technical requirements to facilitate and increase trade assistance to develop a regional “single window” among the three countries entry system for the Customs Administrations of Macedonia, Serbia and Bulgaria

Source: Trade Facilitation: Challenges and Opportunities in Eastern Europe and the Former Soviet Union; USTDA Trade Capacity Building Sector; USAID Trade Capacity Building Database; BAH Analysis 138 Trade Access

A number of interim solutions exist for responding to competitor subsidies… Interim Responses to Subsidies for Developing Countries

ExerciseExercise AllowedAllowed CEFTA focuses on transparency in trade rather than free trade, InformationInformation and therefore contains information requirement provisions GatheringGathering && – For example, any subsidies that are executed by other DonorDonor FundingFunding forfor ExportExport RiskRisk Dispute Dispute countries should be made public (Art 44) ProgramsPrograms ResolutionResolution – CEFTA allows arbitration if parties do not feel they have ProvisionsProvisions underunder received satisfactory information or remedy (Art 43) ForeignForeign governmentsgovernments andand donorsdonors havehave CEFTACEFTA helpedhelped countriescountries inin thethe regionregion establishestablish exportexport riskrisk guaranteeguarantee programsprograms Legitimate methods exist to keep products that violate basic food ––The The MinistryMinistry ofof EconomyEconomy inin thethe safety provisions from being imported into Kosovo NetherlandsNetherlands developeddeveloped aa DevelopDevelop governmentalgovernmental programprogram thatthat aimsaims toto LegitimateLegitimate – Recently, a non-milk product was being imported as a milk product into the country. In response, Kosovo Customs added encourageencourage DutchDutch investmentsinvestments inin BarriersBarriers BasedBased onon labeling requirements that required foreign companies to SerbiaSerbia andand assistassist SMEsSMEs that that areare QualityQuality && specify the ingredients of the import establishingestablishing cooperationcooperation withwith DutchDutch PackagingPackaging – All measures must be allowed under the WTO Technical partnerspartners byby co-financingco-financing riskrisk Barriers to Trade Agreement insuranceinsurance andand exportsexports (up(up toto 50%50% cost-share)cost-share) Article 23 provides that where domestic producers of a product are – The Serbia and Montenegro Export ExecuteExecute – The Serbia and Montenegro Export suffering serious economic injury due to imports, the CEFTA Credit Agency (SMECA) was LegitimateLegitimate TariffTariff Credit Agency (SMECA) was member has the right to take safeguard measures, including established in 2001 through a World ProvisionsProvisions UnderUnder established in 2001 through a World increased tariffs, so long as the measure meets CEFTA disclosure BankBank loanloan ofof $11.5M.$11.5M. ProductsProducts forfor CEFTACEFTA requirements nationalnational andand foreignforeign businessesbusinesses includeinclude exportexport creditcredit insurance,insurance, exporterexporter performanceperformance insuranceinsurance andand Countries can enter into agreements with foreign governments or DevelopDevelop ExportExport importimport creditcredit insuranceinsurance donors to provide support for export risk guarantee programs and RiskRisk ProgramsPrograms finance programs through loans. Donor support aims at with Donor with Donor decreasing the perceived risk from foreign companies and FinancingFinancing governments

Source: USAID- Financial & Consultancy Support Available to Serbian SMEs; PPPs- EVD (International Business Cooperation); SMECA website; CEFTA; BAH Analysis 139 Trade Access …more advanced solutions include export risk insurance & guarantee programs, which can be provided through public, private or semi-private entities Organizational Models for Advanced Export Risk Insurance and Guarantee Programs Germany Switzerland Turkey (Private institution operating under government) (Independent government agency) (State-owned bank) Mandate: The Federal Government has Mandate: Established by the Swiss Mandate: Turk Eximbank offers specialized entrusted the management of the Official Government, Swiss Export Risk Insurance financial services through a variety of short-, Export Guarantee Scheme to a consortium (SERV) offers an extended range of export medium- and long-term credit, insurance of two private companies, Euler Hermes and credit insurance products and guarantee programs PWC AG Structure: Governed by a management Structure: Managed by a Board of Structure: Governed by an inter-ministerial board with members appointed by the Directors, which provides supervision Committee with representatives from Federal Council principles for the General Directorate to 1 1 several ministries Resources: Capital is structured in three follow Organizational Resources: Federal Government grants main areas: risk bearing capital, core Resources: The sole shareholder, Turkish Overview cover within an exposure limit on total capital, and balance carried forward Treasury, makes capital contributions to the commitments fixed annually by Parliament Relations with State: Established under the Bank; receives domestic and foreign loans Relations with State: Consortium acts only supervision of the Federal Department of Relations with State: As a state-owned in the name and for the account of the state Economic Affairs and governed by the bank, maintains close co-operation with and is governed by the Federal Budget Law Federal Council related government entities Relations with Private Sector: Steps in Relations with Private Sector: Relations with Private Sector: Almost 70% when privately owned insurance industry Complements, does not compete with of the commercial risk is delegated to does not provide sufficient cover private sector reinsurance companies Export guarantee schemes: Exporter insurance and guarantee schemes: Exporter insurance and guarantee schemes: – Wholeturnover Policy for safeguarding – Supplier Credit Insurance covers – Short-term export credit insurance trade receivables political risk, transfer risk, commercial provides companies with whole – Manufacturing Risk Cover for risk turnover insurance cover for one year 22 Examples of production costs of exports – Manufacturing Risk Cover for inability for exports sold on short-term credit Services – Supplier Credit Cover for amounts to continue production – Medium- and long-term export credit Provided receivables – Confiscation Risk Cover for political insurance is offered to protect against – Revolving Specific Policy risk and force majeure commercial and/or political risks Other – Contract guarantee insurance Export finance programs: – Constructional Works Cover – Short-term export credit – Contract Bond insurance – Medium- and long-term export credits

Source: Export Credit Financing Systems in OECD Member Countries and Non-Member Countries, 2007 Update; BAH Analysis 140 Trade Access Four methods exist to help countries increase recognition of sovereignty: transit, corridor development, harmonized documents & procedures, and automated customs procedures Methods to Increase Recognition of Sovereignty

HarmonizedHarmonized DocumentsDocuments AutomatedAutomated CustomsCustoms TransitTransit CorridorCorridor DevelopmentDevelopment && ProceduresProcedures ProceduresProcedures

Allows temporary Development of a tract Use of common By developing suspension of customs of land (such as a customs declaration automated customs duties or other taxes system of roads) that documents, such as the procedures, countries payable on goods allows a individuals from electronic transmission will avoid delays that originating from and/or a country to pass of data ahead of the are endemic to paper- destined for a third through another to arrival of cargo at the backed transit systems, country while under facilitate trade and transshipping point thereby increasing

Description transport across the access a port Harmonization with efficiency in the Description territory of a defined other countries creates movement of goods customs area greater access to trade with partner countries

TIR Convention, used by A PPP was established Baltic Common Transit COMESA and SADC more than 32,000 among transport Procedure signed have launched transport companies in operators in co- between Latvia, Estonia programs that aim at the over 50 countries in operation with the public and Lithuania to allow consolidation and Europe, central Asia and authorities and facilitated transit of extension of the Middle East, allows governmental cargos carried by road computerized customs road transport operators institutions (as the transport procedures and to cross borders in transport regulators) in transport information Example

Example international and transit Namibia to establish the systems traffic without involving Walvis Bay corridor for major procedures and landlocked neighbors costs countries to have access to the Atlantic Ocean

Source: Trade, Trade Facilitation and Transit Transport Issues for Landlocked Developing Countries; BAH Analysis 141 Table of Contents

Overview of Deliverable

Baseline Analysis of Agriculture Sector

Recommendations to Improve Kosovo’s Agriculture Sector – Overview – Recommended Diversified Crop Mix for Kosovo – Initiatives & Action Plan for Implementation – Reaching Kosovo’s Overall Potential

142 The final deliverable for AgStrat covers three interrelated areas: crop diversification, initiatives & action plan to address constraints and projected impact for the program

Overview of Recommendation Types in AgStrat Study

WorkingWorking withwith internationalinternational andand locallocal horticulturehorticulture andand agricultureagriculture experts,experts, ourour teamteam developeddeveloped aa quantitativequantitative modelmodel toto recommendrecommend aa diversifieddiversified listlist ofof 1010 cropscrops forfor productionproduction inin KosovoKosovo RecommendedRecommended ––Crops Crops werewere analyzedanalyzed accordingaccording toto naturalnatural resourceresource feasibility,feasibility, DiversifiedDiversified CropCrop MixMix productionproduction value,value, economiceconomic feasibilityfeasibility && valuevalue chainchain constraintsconstraints ForFor eacheach ofof thethe toptop 1010 recommendedrecommended crops,crops, wewe analyzedanalyzed andand developeddeveloped “Go-to-Market”“Go-to-Market” snapshots snapshots onon informationinformation neededneeded toto facilitatefacilitate marketmarket entryentry

BasedBased onon thethe recommendedrecommended listlist ofof crops,crops, asas wellwell asas aa baselinebaseline analysisanalysis ofof Kosovo’sKosovo’s agricultureagriculture sector,sector, wewe proposepropose 2121 initiativesinitiatives alongalong sevenseven AgStratAgStrat Final Final mainmain areasareas Initiatives & Action – Each of the proposed initiatives includes duration, DeliverableDeliverable Initiatives & Action – Each of the proposed initiatives includes duration, PlanPlan implementationimplementation steps,steps, indicators,indicators, potentialpotential risksrisks // mitigationmitigation factors,factors, milestones,milestones, keykey counterpartscounterparts andand costcost TheThe actionaction planplan providesprovides thethe sequencingsequencing ofof initiativesinitiatives toto supportsupport diversificationdiversification ofof Kosovo’sKosovo’s cropcrop mixmix

WeWe havehave forecastedforecasted thethe potentialpotential impactimpact usingusing twotwo methodsmethods ifif KosovoKosovo effectivelyeffectively implementsimplements thethe proposedproposed initiativesinitiatives ––Benchmark Benchmark approach:approach: CountriesCountries thatthat KosovoKosovo cancan aspireaspire toto Kosovo’sKosovo’s OverallOverall mirrormirror bothboth economicallyeconomically (impact(impact onon GDP,GDP, employmentemployment andand PotentialPotential exports)exports) andand inin termsterms ofof theirtheir agricultureagriculture sectorsector (yield,(yield, value,value, croppingcropping intensity,intensity, jobjob creation,creation, investment)investment) ––Initiative-based Initiative-based approach:approach: TheThe projectedprojected returnreturn onon investmentinvestment atat thethe initiativeinitiative levellevel andand aggregate,aggregate, sectorsector levellevel

Sources : BAH Analysis 143 Table of Contents

Overview of Deliverable

Baseline Analysis of Agriculture Sector

144 We have developed a six step process for identifying Kosovo’s diversified crop base Process for Identifying Kosovo’s Diversified Crop Base

4a4a Economic Feasibility

Universe of Ag Natural Resource Production Value Chain Final Crop 11 22 33 55 66 Commodities Feasibility Value Constraints Ranking Identify commodities that can be produced economically and efficiently based on: – Demand in target markets – Lack of significant scale economies – High Value per weight

4b4b Economic Attractiveness 10 Ten 167 Commodities 106 Commodities Top 50 Commodities Top 20 Commodities Commodities Determine long Filter out Rank Examine short Recommend list of all commodities commodities by list of final list of possible that cannot be value per commodities agricultural agricultural supported by hectare($/Ton X according to the commodities commodities in micro-climates Tons/Hectare) investment that Kosovo the world in Kosovo Select Top 50 requirements, should develop Categorize Estimate commodities Identify commodities that will ease to produce, Used as basis crops into potential produce discernable and ease of for detailed specific areas of acreage for each economic impact according to: market access destination focus remaining crop – Labor intensivity market and – Import substitution investment – Potential for downstream analysis processing Source: BAH Analysis 145 1. Universe of Ag Commodities For the first filter, we developed a list of 167 potential crops for Kosovo focusing on four main categories of agricultural production… Primary Agricultural Commodities*

11 22 33 44 Spices,Spices, HorticultureHorticulture CerealCereal OilOil Crops/NutsCrops/Nuts StimulantsStimulants

ApplesApples PeachesPeaches ArtichokesArtichokes BarleyBarley AlmondAlmond SaffronSaffron ApricotsApricots PearsPears AsparagusAsparagus CanaryCanary SeedSeed BrazilBrazil nutsnuts AniseAnise ArecanutsArecanuts PersimmonsPersimmons Beans,Beans, greengreen FonioFonio CashewsCashews ChamomileChamomile AvocadosAvocados PineapplesPineapples CabbagesCabbages MaizeMaize ChestnutsChestnuts ParsleyParsley BananasBananas PlantainsPlantains Carrots,Carrots, turnipsturnips MilletMillet HazelnutsHazelnuts CinnamonCinnamon BlueberriesBlueberries PlumsPlums KaleKale OatsOats KolanutsKolanuts ClovesCloves BlackberriesBlackberries MedlarMedlar KohlrabiKohlrabi QuinoaQuinoa PistachiosPistachios CocoaCocoa beansbeans MulberriesMulberries QuinceQuince BrusselsBrussels sproutssprouts RiceRice MacadamiaMacadamia nutsnuts CoffeeCoffee CarobsCarobs TangerinesTangerines Cauliflowers,Cauliflowers, RyeRye WalnutsWalnuts GingerGinger CashewCashew appleapple WatermelonWatermelon broccolibroccoli SorghumSorghum CastorCastor oiloil seedseed MateMate CherriesCherries VinegrapeVinegrape Chilies,Chilies, pepperspeppers TriticaleTriticale CoconutsCoconuts NutmegNutmeg CranberriesCranberries BambaraBambara beans beans CeleryCelery WheatWheat GroundnutsGroundnuts PeppermintPeppermint DatesDates Beans,Beans, drydry KidneyKidney beansbeans BuckwheatBuckwheat HempseedHempseed PyrethrumPyrethrum FigsFigs LentilsLentils Cucumbers,Cucumbers, FlaxFlax fibrefibre HopsHops TeaTea GooseberriesGooseberries LupinsLupins gherkinsgherkins JuteJute KapokseedKapokseed TobaccoTobacco GrapefruitGrapefruit Peas,Peas, drydry EggplantsEggplants ManilaManila fibrefibre KariteKarite nuts nuts VanillaVanilla KiwiKiwi PigeonPigeon peaspeas RadishRadish RamieRamie SunflowersSunflowers TurmericTurmeric DurianDurian VetchesVetches GarlicGarlic SisalSisal LinseedLinseed Thyme,Thyme, baybay leavesleaves TamarindsTamarinds CassavaCassava KapokKapok fibrefibre AlfalfaAlfalfa MelonseedMelonseed CurryCurry JackfruitJackfruit ChicoryChicory rootsroots Lettuce,Lettuce, chicorychicory MustardMustard seedseed BasilBasil PassionPassion fruitfruit PotatoesPotatoes MushroomsMushrooms OilOil palmpalm fruitfruit PomegranatePomegranate SweetSweet potatoespotatoes TrufflesTruffles OlivesOlives LycheeLychee TaroTaro OkraOkra PoppyPoppy seedseed CarambolaCarambola YamsYams OnionsOnions RapeseedRapeseed Lemons,Lemons, limeslimes YautiaYautia CaperCaper SafflowerSafflower seedseed Mangoes,Mangoes, guavasguavas JuniperJuniper berriesberries PeasPeas SeedSeed cottoncotton OrangesOranges TableTable grapegrape CourgetteCourgette SesameSesame seedseed OtherOther melonsmelons TomatoesTomatoes PumpkinsPumpkins SoybeansSoybeans PapayasPapayas LeeksLeeks SpinachSpinach SunflowerSunflower seedsseeds Note (*): Not all crops listed; Horticulture includes fruits, vegetables, roots & tubers, and pulses Source: FAOSTAT; UN Comtrade 146 1. Universe of Ag Commodities

…and also mapped the type of historical agricultural production by municipality Snapshot of Agricultural Commodities Produced by Municipality

Ferizaj Gjakova Gjilan Mitrovica Peja Pristina Prizren Novobërda Leposaviqi Rahoveci F. Kosova Malisheva Skenderaj Kamenica Z. Potoku Suhareka Podujeva Gllogovci Kaçaniku Mitrovica Vushtrria Dragashi Shtërpca Prishtina Gjakova Zveçani Prizreni Shtimja Ferizaji Deçani Lipjani Gjilani Obiliqi Istogu Klina Peja Vitia

Wheat ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Rye ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Barley ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Oats ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Maize ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Potato ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Tomato ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Aubergine ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Pepper ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Pumpkin ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Mushroom ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Cucumber ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Water melon ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Cabbage ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Note: Grouped municipalities according to 2007 Household Survey produced by the Statistics Office of Kosovo Source: Surveyed Municipality Agriculture Offices 147 2. Natural Resource Feasibility The natural resource feasibility filter is based on an in-depth examination of six natural and manmade factors to determine the different climate zones in Kosovo Climate Zone Determination Factors

Maximum temperature – Implies rainfall/irrigation requirements TemperatureTemperature Minimum temperature – Too low limits survival for certain fruit crops Average temperature – Not as telling as the max/min but important to understand overall climate

Total annual solar radiation hours – A higher solar radiation could allow for late varieties and is SolarSolar good for germination of seeds, as well as maturation of annual industrial crops, fruits, and RadiationRadiation vegetables

Pedological map of Kosovo and soil samples – Analysis of organic content, fertility, PH level, SoilSoil TypeType water capacity and need for drainage; For example, higher organic soils can allow for better crop cultivation and fertility Natural

Maximum precipitation, minimum precipitation, average precipitation and corresponding PrecipitationPrecipitation time period - For example, maize, vegetables, and fruits require more water while cereals having a different growing season satisfy their water needs during winter/spring

Elevation by region – Generally can grow all crop types up to an elevation of 700 meters while Altitude Altitude only some forest production can be grown at higher elevations

Access to irrigated land by municipality and climate zone – Irrigation supplements rainfall IrrigationIrrigation particularly in the drier summer season for crops requiring more water Manmade

Source: BAH Analysis 148 2. Natural Resource Feasibility-Temperature

Relatively small temperature variation exists across Kosovo with Peja experiencing both the highest and lowest temperatures Temperature Variation Across Kosovo

Podujeva Meteorological Station Min Temp: -7.4C Mitrovica Meteorological Station Max Temp: 26.3C Min Temp: -8.4C Average: 10.3C Max Temp: 28.8C Average: 10.4C Podujeva Pristina Meteorological Station Mitrovica Min Temp: -7.5C Max Temp: 31.9C Peja Meteorological Station Average: 11C Min Temp: -8.4C Max Temp: 32.7C Average: 12.2C Peja Pristina

Rahovec Meteorological Station Min Temp: -2C Max Temp: 29C Ferizaj Meteorological Station Average: 8C Rahovec Ferizaj Min Temp: -7.6C Max Temp: 30.7C Average: 10.6C Prizren

Prizren Meteorological Station Min Temp: 0C Max Temp: 29C Average: 11.5C

Note: Min, max, average temperatures are from: 2001-2008 for Prizren, Rahovec; 2002-2008 for Peja, Pristina, Ferizaj; 2003-2008 for Mitrovica; 2004-2008 for Podujeva; Data for Mitrovica, Rahovec, Prizren, Podujeva was aggregated over these periods, but annual data was available for Ferizaj, Peja, and Pristina Meteorological Stations Note: Data for meteorological stations cover 10 square km Source: Meteorological Institute; BAH Analysis, UNDP Funded Support for the Development of the Wine Industry of Kosovo (SWIK) Study, 2002 149 2. Natural Resource Feasibility-Temperature

In addition, little temperature fluctuation occurs across the regions during the growing season from March to October Monthly Temperature for Kosovo (2005-2008, Celsius) 35

Ferizaj 25 Peja Pristina

15 Non-Growing Season Growing Season

5 Note: Temperature data shown represents a sample of data set. Complete temperature analysis included Meteorological Institute data from 2001- 2008 and SWIK UNDP study -5 data from 1977-1991 Jul Jul Jul Jul Jun Jan Jun Jan Apr Apr Apr Jan Jun Jan Apr Jun Oct Nov Oct Nov Oct Nov Oct Nov Feb Feb Mar Mar Feb Mar Feb Mar Aug Sep Dec Aug Sep Dec Dec Sep Aug Aug Sep Dec May May May May 2005 2006 2007 2008

Note: Non-aggregated temperature data was only available for Ferizaj, Peja, and Pristina Meteorological Stations Note: SWIK study contains historical temperature data from 1977 to 1991 for Dukadjini and Pristina Source: Meteorological Institute; BAH Analysis, UNDP Funded Support for the Development of the Wine Industry of Kosovo (SWIK) Study, 2002 150 2. Natural Resource Feasibility- Solar Radiation Annual solar radiation is also almost uniform across Kosovo, predominately falling between 2600 and 3000 total annual radiation hours Photosynthetically Active Radiation (PAR) Map (Total Annual Radiation Hours)

Source: UNDP Funded Support for the Development of the Wine Industry of Kosovo (SWIK) Study, 2002 151 2. Natural Resource Feasibility- Soil Type According to the 1974 Soil Survey, there are 13 different pedological units across Kosovo which can be subdivided into 26 soil types Soil Types Across Kosovo

CommentsComments

KosovoKosovo benefitsbenefits fromfrom thethe presencepresence ofof 1313 ofof thethe 2828 pedologicalpedological units units defineddefined byby thethe FAO-UNESCOFAO-UNESCO 19881988 classificationclassification

TheThe soilsoil typestypes areare thoroughlythoroughly mixedmixed soso thatthat mostmost soilsoil typestypes presentpresent cancan bebe foundfound inin mostmost areasareas ofof thethe countrycountry

However,However, overall,overall, thethe WesternWestern partpart ofof thethe countrycountry hashas moremore presencepresence ofof alluvialalluvial soilsoil whilewhile thethe EasternEastern partpart hashas moremore presencepresence ofof vertisolsvertisols and and reddish-brownreddish-brown soilssoils

Source: 1974 Pedological Survey of Yugoslavia; BAH Analysis 152 2. Natural Resource Feasibility- Soil Type

However, most of Kosovo is comprised of six main pedological units Main Types of Pedological Units in Kosovo

CharacteristicsCharacteristics EffectsEffects onon CropsCrops CompositionComposition

11 Deep or very deep soils, possibly high water High vigour, high yield, late Sandy Loamy AlluvialAlluvial capacity, possibly high water table, possibly variety, good technological Loamy high fertility maturity

22 Shallow to medium depth, low to high water Possible nutritional disorders in Non calcareous capacity, rich in swelling clays that crack in springtime, unbalanced yield to Brownized VertisolsVertisols dry period, cold in springtime, dry in growth ratio, water stress in Leached with pseudogley summertime midsummer, good maturity in low Eroded yielding conditions

3 3 ReddishReddish Shallow to medium depth, low to medium Balanced yield growth ratio, good Sandy loamy Brown water capacity, adequate fertility technological maturity Loamy Brown Leached

44 Acidic soils with a hydromorphic layer Possible nutritional disorders in Umbric PodzolPodzol - - spring, unbalanced yield to growth PseudogleyPseudogley ratio, good maturity only in low yielding conditions

55 Very light structure, modification in color, Medium to good organic content, Eutric CambisolsCambisols structure and consistency low to medium water capacity, Dystric adequate fertility

66 Low deep soils with light structure & Modestly suited for agriculture Umbric LeptosolsLeptosols presence of rock at maximum depth of 30 use in plane or low slope zones, cm, modest presence of organic matter, the soil structure and depth could modest water capacity and fertility improve

Source:1974 Pedological Survey of Yugoslavia; UNDP Funded Support for the Development of the Wine Industry of Kosovo (SWIK) Study, 2002,BAH Analysis 153 2. Natural Resource Feasibility- Precipitation

Precipitation data indicates a range of annual rainfall from 598 mm to 798 mm and is slightly higher than average in Peja and Rahovec Precipitation Variation Across Kosovo* (Millimeters)

Mitrovica Meteorological Station Min Monthly Rainfall: 18.1mm Podujeva Meteorological Station Max Monthly Rainfall: 129.5mm Min Monthly Rainfall: 13.1mm Average Annual Rainfall: 649.7mm Max Monthly Rainfall: 125.5mm Average Annual Rainfall: 598.7mm

Peja Meteorological Station Pristina Meteorological Station Min Monthly Rainfall: 38mm Mitrovica Max Monthly Rainfall: 102.4mm Min Monthly Rainfall: 26.7mm Average Annual Rainfall: 798.8mm Max Monthly Rainfall: 72.6mm Average Annual Rainfall: 601.4mm

Peja Podujeva

Pristina Rahovec Ferizaj Meteorological Station Min Monthly Rainfall: 29.6mm Ferizaj Max Monthly Rainfall: 91.1mm Average Annual Rainfall: 689.5mm Prizren Rahovec Meteorological Station Min Monthly Rainfall: 44mm Max Monthly Rainfall: 96mm Average Annual Rainfall: 765mm Prizren Meteorological Station Min Monthly Rainfall: 35mm Max Monthly Rainfall: 88mm Average Annual Rainfall: 716mm

Note: Min, max, average annual rainfall data are from: 2001-2008 for Prizren, Rahovec; 2002-2008 for Peja, Pristina, Ferizaj; 2003-2008 for Mitrovica; 2004-2008 for Podujeva; Data for Mitrovica, Rahovec, Prizren, Podujeva was aggregated over these periods, but annual data was available for Ferizaj, Peja, and Pristina Meteorological Stations; (*) Rainfall data was used to determine min and max values in order to compare across the stations; Data for meteorological stations cover 10 square km Source: Meteorological Institute; BAH Analysis 154 2. Natural Resource Feasibility- Precipitation

Across all the regions, precipitation is generally higher during the beginning and the end of the growing season Monthly Precipitation Across Kosovo (2005-2008, Millimeters)

200

Ferizaj Peja 150 Pristina

Non-Growing Season 100 Growing Season

50 Note: Rainfall data shown represents a sample of data set. Complete rainfall analysis included Meteorological Institute data from 2001-2008 and SWIK 0 UNDP study data from 1977- 1991 Jul Jul Jul Jul Jun Jan Apr Jun Jan Jan Apr Jan Apr Apr Jun Jun Nov Oct Nov Oct Nov Oct Oct Nov Feb Feb Mar Mar Feb Mar Feb Mar Aug Aug Sep Dec Sep Dec Dec Aug Sep Dec Aug Sep May May May May

2005 2006 2007 2008

Note: Non-aggregated rainfall data was only available for Ferizaj, Peja, and Pristina Meteorological Stations Note: SWIK study contains historical rainfall data from 1977 to 1991 for Dukadjini and Pristina Source: Meteorological Institute; BAH Analysis, UNDP Funded Support for the Development of the Wine Industry of Kosovo (SWIK) Study, 2002 155 2. Natural Resource Feasibility- Altitude

Cultivation occurs in a range of altitudes with low lying regions best-suited for horticulture in the western portion of the country Altitude Across Kosovo (Meters)

Best Suited for Horticulture: 300-500 m

Source: BAH Analysis 156 2. Natural Resource Feasibility- Irrigation

While only 17.4% of the arable land in Kosovo is irrigated, there is a wide range of irrigation available throughout the regions Irrigation in Kosovo Irrigation Scheme Irrigated Area by Municipality

Source: Agriculture Household Survey, 2007, Statistics Office of Kosovo; BAH Analysis 157 2. Natural Resource Feasibility- Climate Zones The natural resource feasibility analysis reveals three primary climate zones in Kosovo: Dukadjini, Kosovo Plains, and Mountains… Overview of Climate Zones Across Kosovo

Climate Zone 2:

Kosovo Plains

Climate Zone 1:

Dukadjini

Climate Zone 3:

Mountains

Source: BAH Analysis 158 2. Natural Resource Feasibility- Climate Zones

…with each displaying unique characteristics across six areas Description of Climate Zones in Kosovo

DukadjiniDukadjini (DK) (DK) KosovoKosovo PlainsPlains (KP)(KP) MountainsMountains (MT)(MT)

Milder temperatures because of Similar to temperatures in DK, but Lower temperatures due to TemperatureTemperature mountain and river influence lower temperature extreme elevation

2500 to 3000 2500 to 3000 1800 to 2600 depending on Solar Radiation Solar Radiation elevation

Soil Type Alluvial, Vertisols, Reddish Brown Alluvial, Vertisols, Cambisols, Leptosoil, Calcic Vertisols, Soil Type Reddish Brown, Podzol Pseudoclay Cambisols

Precipitation comes from the Precipitation comes from the Has the highest rain and snow PrecipitationPrecipitation TrendsTrends northwest, peaks in the spring and northwest after DK and receives precipitation levels due to elevation fall, and is higher than KP lower rainfall

AltitudeAltitude 300-500 meters 500-1000 meters 1000-3000 meters

Presence of the Radoniqi-Dukadjini Presence of the Ibër-Lepenc For the most part un-irrigated IrrigationIrrigation and Drini i Bardhë systems system in the north of K-P with only except where coterminous with informal irrigation in the South large-scale systems

Dukadjini Agricultural Zone has a Kosovo Plains Agricultural Zone has a Mountainous Agricultural Zone has milder continental climate being continental climate that can be the typical climatic characteristics influenced by the Mediterranean influened by the Russian anticyclone of mountainous European areas climate and Drina river. This zone (winds). This zone has a shorter with higher precipitation, lower GeneralGeneral DescriptionDescription has a longer growing season than growing season than DK, has less yearly temperatures, and KP or MT by two weeks, has good access to irrigation facilities, and has predominance of Leptosoil, Calcic rainfall, better access to irrigation, predominately Vertisols/Reddish Vertisols, Cambisols soil types and more Alluvial, Vertisols, and Brown/Alluvial/ Cambisols/Podzol soil Reddish Brown soil types. types.

Source: BAH Analysis 159 2. Natural Resource Feasibility- Climate Zones

The Kosovo Plains Zone has the most arable land, with 112K ha, and the Mountains Zone has the least at 54K ha Breakdown of Total Arable Land

Total Arable Land by Municipality Arable Land by Climate Zone (Ha, 2007) (Ha, 2007)

111,898

60,750 54,258 Plains Kosovo Dukadjini Mountains

Source: Agriculture Household Survey, 2007, Statistics Office of Kosovo; BAH Analysis 160 2. Natural Resource Feasibility- Climate Zones

As a result, certain horticulture and cereal products can be better developed as primary crops depending on the climate zone Overview of Crop Type by Zone

Description Crops Currently Grown Total Favorable Crops in Model

A longer growing season, milder Melon, pear, peaches, cherries, 74 crops considered “most favorable” for temperatures, higher rainfall, and more watermelon, pepper, tomatoes, this climate zone alluvial, vertisols, and reddish brown soil Dukadjini cucumbers, cabbage 11 types make Dukadjini ideally suited for labor intensive horticultural crop cultivation in deciduous fruits and vegetables With less access to irrigation and soils that Wheat, rye, barley, maize, potatoes, 45 crops considered “most favorable” for are richer in organic matter such as onions, beans, peas this climate zone 22 Kosovo Reddish Brown/Podzol/ Vertisols/ Plains Cambisols, Kosovo Plains is well suited for industrial crop cultivation like winter cereal and potato production Mountainous agro-forest area is Cherries, hazelnuts, chestnuts, berries, 14 crops considered “most favorable” for characterized by cooler temperatures, mushrooms this climate zone shorter growing seasons, and soil types 3 Mountains 3 that limit possible agriculture production to crops including select nuts and berries

105105 cropscrops forfor whichwhich therethere 167167 cropscrops analyzedanalyzed areare favorablefavorable conditionsconditions inin KosovoKosovo

Note: (*) 100+ crops includes: 27 vegetables, 23 fruit, 19 oil crops, 12 cereals, 10 spices & stimulants, 8 pulses, 6 roots & tubers Source: BAH Analysis 161 3. Production Value

We then calculated the potential production value per hectare for each remaining crop in order to select the top 50 high-value crops Filtering Methodology to Identify 50 Strategic Crops

FilteringFiltering MethodMethod OverviewOverview

ThisThis filterfilter ranksranks overover 101000 cropscrops accordingaccording toto theirtheir productionproduction valuevalue 100+ Crops TheThe averageaverage cropcrop yieldyield datadata comescomes fromfrom thethe 50 Crops FAOStatFAOStat databasedatabase andand isis supplementedsupplemented withwith expertexpert opinionopinion ToTo determinedetermine priceprice perper crop,crop, anan averageaverage importimport priceprice perper tonton forfor thethe EU(2EU(27)7) waswas usedused asas aa proxyproxy −− TheThe unitunit priceprice perper tonton datadata comescomes fromfrom TradeMap,TradeMap, FAOStat,FAOStat, andand isis supplementedsupplemented withwith expertexpert opinionopinion TheThe productionproduction valuesvalues foforr overover 100100 cropscrops werewere rankedranked andand sortedsorted toto identifyidentify thethe toptop 5050 cropscrops withwith thethe highesthighest productionproduction valuevalue

Production Value per Hectare Average Crop Yield Unit Value X (Euro/Hectare) = (Ton/Hectare) (Euro/Ton)

Source: BAH Analysis 162 3. Production Value

First we identified the yield for each crop, which ranged from 0.1 to 500 tons/hectare Average Crop Yield for the Top 50 Crops (Tons/Hectare)

500.0

60.0 46.9 46.9 35.4 33.3 28.8 24.7 24.7 23.6 23.6 23.0 23.0 22.7 22.0 22.0 22.0 22.0 22.0 22.0 22.0 21.3 21.1 18.5 18.3 Basil Alfalfa Celery Other Radish chicory turnips Parsley melons Lettuce, Carrots, other Chilies, Beetroot sprouts peppers leaves Potatoes Brussels squash Courgette Tomatoes Eggplants gherkins Pumpkins, Sugar beet Sugar Cabbages, Thyme, bay Thyme, Peppermint Chamomile Mushrooms Cucumbers, Chicory roots Chicory Persimmons

17.5 17.0 17.0 17.0 17.0 16.6 15.1 14.4 12.0 11.8 11.8 10.1 10.0 9.7 9.2 8.0 7.3 7.3 7.3 7.1 7.1 7.1 6.8 5.9 5.9 Maize Garlic Pears Leeks Bulbs Apples Onions Sweet Apricots Spinach Quinces Kiwi fruit potatoes Peaches, Vinegrape Artichokes nectarines brocccoli Rice, paddy Rice, Table grape Table Peas, green Peas, String beans String Strawberries Cauliflowers, Beans, green Beans, Watermelons Pomegranate Kidney beans Kidney

Source: FAOStat, BAH Analysis 163 3. Production Value

Then we determined the unit value (Euro/ton) for each crop, where prices ranged from 47 to 16M Euros/ton Unit Value for the Top 50 Crops (Euro/Ton)

16M

500K 5680 5231 5000 4885 4885 3550 3453 3436 3387 3292 3292 3210 2890 2848 2848 2840 2489 2417 2408 2324 2176 2175 1827 Figs Hops Bulbs Saffron Truffels Walnuts Cherries Almonds Pine nuts Pine Hazelnuts Chestnuts Mulberries Asparagus Bilberries Currants, Poppy seed Poppy Cut flowers flowers Cut Flower buds Flower raspberries Cranberries, Strawberries Tobacco, beans String Chicory roots Chicory Blackberries, Chilies and Chilies gooseberries Juniper berries Juniper peppers, green peppers, unmanufactured

1720 1700 1598 1399 1399 1383 1333 1331 1230 1228 1191 1191 1191 1191 1191 1158 1140 1130 1124 1105 1093 1071 1005 983 969 Basil Garlic sloes green seed Anise, Plums, Beans, chicory Carobs Parsley badian, Lettuce, other Mustard Apricots Kiwi fruit leaves Peaches, Tomatoes Eggplants Artichokes nectarines Cabbages, Thyme, bayThyme, Peppermint Blueberries Groundnuts Chamomile Table grape Table Mushrooms Peas, green Peas, Persimmons

Source: FAOStat, TradeMap, Comtrade, BAH Analysis 164 3. Production Value

We multiplied the yield and unit value per crop to identify the top 50 crops with the highest potential production value Potential Production Value for the Top 50 Crops (Euro/Hectare) 1600.0 699.7 114.5

52.8 38.7 34.3 29.2 29.0 26.2 26.2 26.2 26.2 26.2 25.0 24.4 24.4 24.3 22.8 21.1 20.9 20.2 18.8 18.8 18.6 17.8 Basil Bulbs Saffron chicory Truffels Parsley Lettuce, Chilies, other sprouts Kiwi fruit peppers Beetroot leaves Brussels Courgette Eggplants Tomatoes gherkins bilberries Cabbages, Cut flowers Thyme, bayThyme, Peppermint Chamomile Mushrooms Flower buds Flower Cucumbers, Cranberries, String beans String Chicory roots Chicory Persimmons

17.4 17.0 16.4 15.7 15.3 14.9 14.7 14.4 14.3 13.7 13.6 13.3 13.2 12.3 12.3 11.6 11.2 11.0 10.0 9.8 9.7 9.2 9.0 8.7 8.4 Garlic Pears Alfalfa Leeks Celery Apples Radish turnips Apricots Carrots, Spinach Cherries Potatoes squash Peaches, broccoli Artichokes nectarines Pumpkins, Asparagus Currants, Table grape Table raspberries Maize, green Maize, Strawberries Cauliflowers, Blackberries, Beans, green Beans, gooseberries Pomegranate Other melons melons Other

Source: FAOStat, TradeMap, Comtrade, BAH Analysis 165 4. Economic Attractiveness & Feasibility

These 50 crops were further filtered according to economic feasibility and economic attractiveness… Filtering Methodology to Identify 20 Strategic Crops

50 Crops

20 Crops FilteringFiltering MethodMethod OverviewOverview ThisThis filterfilter ranksranks thethe 5050 cropscrops accordingaccording toto their:their: −− EconomicEconomic feasibilityfeasibility −− EconomicEconomic attractivenessattractiveness EconomicEconomic feasibilityfeasibility identifiesidentifies andand prioritizes:prioritizes: −− CropsCrops withwith thethe highesthighest demanddemand byby thethe EUEU −− CropsCrops thatthat cancan bebe growngrown onon smallsmall plotsplots ofof landland −− CropsCrops withwith thethe highesthighest EUEU importimport price/tonprice/ton Six Dimensional Filter EconomicEconomic attractivenessattractiveness ididentifiesentifies andand prioritizes:prioritizes: 4a 4b 4a 4b −− CropsCrops thatthat cancan bebe highlyhighly laborlabor intensiveintensive EconomicEconomic FeasibilityFeasibility EconomicEconomic AttractivenessAttractiveness −− CropsCrops beingbeing importedimported byby KosovoKosovo thatthat couldcould bebe Demand in Target produced locally 11 11 Labor Intensivity produced locally Markets −− CropsCrops thatthat havehave greatergreater potentialpotential forfor high-valuehigh-value processingprocessing Lack of Significant 22 22 Import Substitution The final ranking of crops is derived from the Economies of Scale The final ranking of crops is derived from the consolidationconsolidation ofof thesethese sixsix rankings,rankings, andand leadsleads toto thethe selectionselection ofof thethe toptop 2020 cropscrops Potential for 33 High Value per Weight 33 Downstream Processing

Source: BAH Analysis 166 4. Economic Attractiveness & Feasibility

…using a combination of agriculture databases and expert analysis to determine the results of each filter Calculation Methodology and Data Sources

CalculationCalculation MethodologyMethodology DataData SourceSource WeightWeight

1. Demand in Ranked and prioritized crops in order of decreasing demand Comtrade,Comtrade, FAOStat,FAOStat, 1. Demand in Ranked and prioritized crops in order of decreasing demand http://france.usembassy.gov/irs-euro.html, 25% Target Markets by the EU (27) http://france.usembassy.gov/irs-euro.html, 25% Target Markets by the EU (27) BAHBAH AnalysisAnalysis

2.2. LackLack ofof CropsCrops thatthat cancan bebe growngrown onon smallsmall farmsfarms (less(less thanthan 55 ha)ha) SignificantSignificant receivedreceived thethe highesthighest rankingranking whilewhile cropscrops growngrown onon largelarge SurveyedSurveyed AgricultureAgriculture Experts,Experts, BAHBAH AnalysisAnalysis 15%15% EconomiesEconomies ofof farmsfarms (greater(greater thanthan 5050 ha)ha) receivedreceived thethe lowestlowest rankingranking ScaleScale

TopTop quartilequartile ofof cropscrops withwith thethe highesthighest importimport valuevalue perper tonton intointo 3. High Value per the EU received the highest ranking while the lowest quartile 3. High Value per the EU received the highest ranking while the lowest quartile Surveyed Agriculture Experts, BAH Analysis 20%

4A. Economic Feasibility 4A. Economic Surveyed Agriculture Experts, BAH Analysis 20% 4A. Economic Feasibility 4A. Economic WeightWeight ofof cropscrops withwith thethe lowestlowest importimport valuevalue perper tonton receivedreceived thethe lowestlowest rankingranking Highly labor intensive crops requiring more than 500 hours/ha Highly labor intensive crops requiring more than 500 hours/ha Centro Ricerche Produzioni Vetetali (CRPV): per year for cultivation and harvest received the highest Centro Ricerche Produzioni Vetetali (CRPV): 1. Labor Intensivity per year for cultivation and harvest received the highest COLTURE ARBOREE I COSTI DI 20% 1. Labor Intensivity ranking while low labor intensive crops requiring less than COLTURE ARBOREE I COSTI DI 20% ranking while low labor intensive crops requiring less than PRODUZIONEPRODUZIONE 2008,2008, BAHBAH AnalysisAnalysis 100100 hours/hahours/ha perper yearyear receivedreceived thethe lowestlowest rankingranking

IfIf thethe annualannual importimport valuevalue isis greatergreater thanthan 250,000250,000 Euros,Euros, thisthis 2.2. ImportImport cropcrop couldcould bebe consideredconsidered forfor importimport substitutionsubstitution andand receivedreceived KosovoKosovo CustomsCustoms Data,Data, BAHBAH AnalysisAnalysis 5%5% SubstitutionSubstitution aa higherhigher rankingranking Crops that could be used to produce many high-value 3. Potential for Crops that could be used to produce many high-value 3. Potential for processed products in Kosovo received the highest ranking Downstream processed products in Kosovo received the highest ranking Surveyed Agriculture Experts, BAH Analysis 15% Downstream while crops with few processing options received the lowest Surveyed Agriculture Experts, BAH Analysis 15% Processing while crops with few processing options received the lowest

4B. Economic Attractiveness 4B. Economic Processing 4B. Economic Attractiveness 4B. Economic rankingranking

Source: BAH Analysis 167 4. Economic Attractiveness & Feasibility

After combining the filters on a weighted basis, we identified 20 potential high-value, economically attractive and feasible crops Selection of 20 Strategic Crops Crop Target Market Economies High Value/ Labor Intensivity Import Downstream Weighted Rank Demand 25%d of Scale 15%vv Weight 20%ff 20% Substitution 5% d Processing 15% d Score

Chilies and peppers, green 1 1 1 1 1 1 1.0000 1 Strawberries 1 1 0.75 1 0.01 1 0.9005 2 Mushrooms 1 1 0.75 1 0.01 1 0.9005 2 Peaches and nectarines 1 1 0.5 1 1 1 0.9000 4 Blackberries, raspberries 0.75 1 1 1 0.01 1 0.8880 5 Cherries 0.75 1 1 1 0.01 1 0.8880 5 Kiwi fruit 1 1 0.75 0.67 1 1 0.8840 7 Truffles 1 1 1 0.67 0 1 0.8840 7 Cucumbers and gherkins 1 1 0.5 1 1 0.67 0.8505 9 Cut flowers 1 1 1 1 0 0.33 0.8495 10 Flower buds 1 1 1 1 0 0.33 0.8495 10 Pears 1 1 0.5 0.67 1 1 0.8340 12 Cranberries and bilberries 0.5 1 1 1 0 1 0.8250 13 Saffron 0.5 1 1 1 0 1 0.8250 13 Table grape 1 1 0.75 1 0 0.33 0.7995 15 Apples 1 1 0.25 0.67 1 1 0.7840 16 Asparagus 0.25 1 1 1 0.01 1 0.7630 17 Currants and gooseberries 0.25 1 1 1 0 1 0.7625 18 Bulbs 0.75 1 1 0.33 0.01 1 0.7540 19 Lettuce and chicory 0.75 1 0.75 1 0.01 0.33 0.7375 20

Source: BAH Analysis 168 5. Value Chain Constraints We further analyzed the remaining crops across the agriculture value chain to better understand the challenges and opportunities that would be faced in introducing them to Kosovo

Investment, Production, and Market Access Considerations Along the Agriculture Export Value Chain

11 Investment 22 Production 33 Market Access

Production Distribution in Pre-Production Post Harvest and Storage Transportation Foreign Investment Handling Harvesting Markets

Time to first Crop Quality control Product shelf life Refrigeration Distance to Revenue management including lab Cold chain and requirements markets Skills (production testing pre-cooling Perishability in Type of customer planning, development Sorting, grading requirements transport Demands for required planting, pruning harvesting) Packaging Product Local transportation reliability Infrastructure, segregation from storage facility Inputs (seeds, Flexibility of machinery & requirements to various ports or delivery equipment fertilizer, airports pesticides, etc.) Pre-treatment investment requirements International Soil Humidity transport through preparation requirements land, air, or maritime shipping

Source: BAH Analysis 169 5. Value Chain Constraints More specifically, this final Value Chain Constraints filter focused on investment required, ease to produce, and ease of market access

Overview of Value Chain Constraints Analysis Filter Dimensions

11 Time to First Revenue and Life of Plant: Time required until first full harvest and productive life of plant; Capital cost to plant and cultivate Skills Development: Requirements for training and skills development needed to familiarize with test plots or Investment Investment to introduce new varieties of existing crops RequiredRequired Infrastructure, Machinery & Equipment: Cost for irrigation systems given crop water requirements; Cost for equipment, climate control and hail cover Soil Preparation: Soil analysis, fertilization, and other preparation required to ensure healthy soil

Crop Management: Knowledge and expertise required for successful planning and overall crop management 22 -- planting, setting of fruit, pruning, harvesting, etc. Inputs: Complexity and cost of inputs for pest management, fertilization, disease management, etc.; Difficulty of compliance with regulations in target markets EaseEase toto ProduceProduce Quality Control: Specificity of product quality requirements, number and specificity of grades for fresh and processed varieties, requirements for lab testing Sorting, Grading and Packaging: Needed frequency of collection, difficulty of sorting and grading, infrastructure required for packing, labeling, drying and other post-harvest processes

33 Storage: Storage life of products, importance of uninterrupted cold chain and pre-cooling, requirements for EaseEase ofof MarketMarket segregation of products to control odors, requirements for pre-treatment, humidity requirements, etc. AccessAccess Transportation: Refrigeration requirements, perishability during transport, etc. Distribution to Markets: Distance to markets, type of customer (retailer, wholesaler, processor), demands for reliability and flexibility of delivery

Source: BAH Analysis 170 5. Value Chain Constraints

We developed a scale that defines required investment levels …

Required Investment Ranking Description

Weight Description

Almost no time is required until first harvest occurs Productive life of the plant is greater than 20 years Expertise for test plots or new varieties already exists Minimal cost for irrigation, machinery, and other equipment Minimal time is required until first harvest occurs Productive life of the plant is 11-20 years Expertise for test plots or new varieties already exists or can be obtained with minimal difficulty Reasonable costs for irrigation, machinery, and other equipment Slightly longer amount of time is required until the first harvest occurs Productive life of the plant is 2-10 years Some expertise exists, but additional expertise will be obtained with greater difficulty Higher costs for irrigation, machinery, and other equipment Significant time is required until the first harvest occurs Productive life of the plant is 1 year or less Little expertise or familiarity with test plots and new varieties with needed expertise difficult or expensive to obtain Prohibitive costs for irrigation, machinery, and other equipment

Source: BAH Analysis 171 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop crops according to investment commitment Required Investment Analysis and Rank

Crop Type of Crop Time to First Harvest Productive Life Investment Cost* Score Multi annual 3-4 years Up to 25 years Up to 100,000 Euro/ha

Skill Development: Additional knowledge is required to update varieties cultivated, introduce new types of virus-free stocks & rootstock, Apples and update training and pruning techniques Infrastructure, Machinery & Equipment Needed: Drip irrigation system with fertilization, hail storm net cover set on proper poles and wires, a tractor, a crusher and weed sprayer, chemical sprayer, fork lift and a motor harvester/pruning carriage Soil Selection & Preparation: Conducting a soil analysis, selecting medium quality calcareous/ alkaline (iron clorosis) or slightly acid soils, and preparing soil (soil ripping, soil drainage, medium depth plough, organic and chemical fertilization, squaring and trees plantation) Multi annual 2-3 years up to 20 years From 10,000-60,000 Euro/Ha Blackberries/ Skill Development: Very simple crop so minimal additional training is needed about how to grow, harvest, etc. Raspberries Infrastructure, Machinery & Equipment Needed: Small tractor with a crusher or motor cultivator, eventually a drip irrigation system with fertilization Soil Selection & Preparation: Conducting a soil analysis, selecting marginal and slightly alkaline/slightly acid soils, and preparing soil (soil drainage, medium depth plough, organic and chemical fertilization, squaring and trees plantation) Multi annual 3-4 years 25+ years Up to 100,000 Euro/ha

Cherries Skill Development: Additional knowledge is required to introduce new varieties particularly for sweet cherries Infrastructure, Machinery & Equipment Needed: A drip irrigation system with fertilization, a hail storm net cover set on proper poles and wires, a tractor, a crusher, a weed sprayer, a chemical sprayer, a motor harvester/pruning carriage Soil Selection & Preparation: Conducting a soil analysis, selecting light drained soils, and preparing soil (soil ripping, soil drainage, medium depth plough, organic and chemical fertilization, squaring and trees plantation)

Note: (*) Investment cost includes infrastructure, machinery, equipment, soil preparation, and seeds/plants/trees; Fork lift and motor harvester/pruning carriage equipment is considered a production cost and not upfront investment cost; Land cost not included Source: BAH Analysis 172 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop crops according to investment commitment (cont’d) Required Investment Analysis and Rank

Crop Type of Crop Time to First Harvest Productive Life Investment Cost* Score Multi annual 2-3 years Up to 20 years From 10,000 to 60,000 Euro/Ha Cranberries/ Skill Development: Very simple crop so minimal additional training is needed about how to grow, harvest, etc. Bilberries Infrastructure, Machinery & Equipment Needed: A small tractor with a crusher or motor cultivator, eventually a drip irrigation system with fertilization Soil Selection & Preparation: Conducting a soil analysis, selecting acid soils, and preparing soil (soil drainage, medium depth plough, organic and chemical fertilization, squaring and trees plantation) Multi annual 2-3 years Up to 20 years From 10,000 to 60,000 Euro/Ha Currants/ Skill Development: Very simple crop so minimal additional training is needed about how to prune, grow, and harvest Gooseberries Infrastructure, Machinery & Equipment Needed: A small tractor with a crusher or motor cultivator, eventually a drip irrigation system with fertilization Soil Selection & Preparation: Conducting a soil analysis, selecting slightly acid soils rich of humus, and preparing soil (soil drainage, medium depth plough, organic and chemical fertilization, squaring and trees plantation) Multi annual 3-4 years Up to 25 years Up to 100,000 Euro/Ha

Skill Development: Additional knowledge is required to produce kiwi since it is not currently produced in Kosovo including varieties to be Kiwi cultivated, pruning and harvesting techniques, basic parasite and fungal control, etc. Infrastructure, Machinery & Equipment Needed: A drip irrigation system with fertilization, a hail storm net cover set on proper poles and wires, a tractor, a crusher, a weed sprayer, a chemical sprayer , a fork lift, a motor harvester/pruning carriage Soil Selection & Preparation: Conducting a soil analysis, selecting less calcareous/ alkaline (iron clorosis) soils, and preparing soil (soil ripping, soil drainage, medium depth plough, organic and chemical fertilization, squaring and trees plantation)

…and analyzed the potential for Kosovo to develop crops according to investment commitment (cont’d) Required Investment Analysis and Rank

Crop Type of Crop Time to First Harvest Productive Life Investment Cost* Score Multi annual 3-4 years Up to 20 years Up to 100,000 Euro/Ha

Peaches/ Skill Development: Additional knowledge is required to update varieties cultivated, introduce new types of free virus stocks & rootstock, Nectarines and update training and pruning techniques Infrastructure, Machinery & Equipment Needed: A drip irrigation system with fertilization, a hail storm net cover set on proper poles and wires, a tractor, a crusher, a weed sprayer, a chemical sprayer, a fork lift , a motor harvester/pruning carriage Soil Selection & Preparation: Conducting a soil analysis, selecting light and drained soils, and preparing soil (soil ripping, soil drainage, medium depth plough, organic and chemical fertilization, squaring and trees plantation) Multi annual 3-4 years up to 25 years Up to 100,000 Euro/Ha

Skill Development: Additional knowledge is required to update varieties cultivated, introduce new types of free virus stocks & rootstock, Pears and update training and pruning techniques Infrastructure, Machinery & Equipment Needed: A drip irrigation system with fertilization, a hail storm net cover set on proper poles and wires, a tractor, a crusher, a weed sprayer, a chemical sprayer a fork lift , a motor harvester/pruning carriage Soil Selection & Preparation: Conducting a soil analysis, selecting less calcareous/ alkaline (iron clorosis) soils, and preparing soil (soil ripping, soil drainage, medium depth plough, organic and chemical fertilization, squaring & trees plantation) Multi annual From the first year Up to 5-7 years From 60,000 up to 150,000/250,000 Euro/Ha Skill Development: Additional knowledge is needed to update varieties and introduce new production models and techniques (e.g. mulching, etc.) Strawberries Infrastructure, Machinery & Equipment Needed: Cost reflects production in plastic tunnels, but the production period could be expanded by investing in a more sophisticated type of green house with higher investment costs but higher revenues; Machinery and equipment are needed as per cultivation of horticultural crop (e.g. medium tractor, tiller, crusher, sprayer, etc.) Soil Selection & Preparation: Conducting a soil analysis, selecting less calcareous/ alkaline (iron clorosis) or slightly acid soils, and preparing soil (soil drainage, medium depth plough, organic and chemical fertilization, mulching (plastic or organic material) and stolon plantation) Note: (*) Investment cost includes infrastructure, machinery, equipment, soil preparation, and seeds/plants/trees; Fork lift and motor harvester/pruning carriage equipment is considered a production cost and not upfront investment cost; Land cost not included; Modern greenhouses cost 150,000 Euro/ha and plastic tunnels are 40,000 Euro/ha Source: BAH Analysis 174 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop crops according to investment commitment (cont’d) Required Investment Analysis and Rank

Crop Type of Crop Time to First Harvest Productive Life Investment Cost* Score Multi annual 2-3 years Up to 25 years Up to 100,000 Euro/Ha

Skill Development: Additional knowledge is required to update varieties cultivated, introduce new types of free virus stocks & rootstock, Table Grape and update training and pruning techniques Infrastructure, Machinery & Equipment Needed: Drip irrigation system with fertilization, a hail storm net cover set on proper poles and wires, a tractor, a crusher and a weed sprayer, a chemical sprayer, a fork lift and a motor harvester/pruning carriage Soil Selection & Preparation: Conducting a soil analysis, selecting less calcareous/ alkaline (iron clorosis) or slightly acid soils, and preparing soil (soil ripping, soil drainage, medium depth plough, organic and chemical fertilization, squaring and trees plantation) Annual to Multi annual From first to third year 1-3 years Up to 10,000 Euro/Ha

Skill Development: Since simple crop, minimum additional knowledge is required (e.g. varieties) Bulbs Infrastructure, Machinery & Equipment Needed: Related to annual crop cultivation machineries (tractor, tiller) and a light plough to harvest the bulbs Soil Selection & Preparation: Conducting a soil analysis, selecting light calcareous/ alkaline or slightly acid soils, and preparing soil (soil drainage, medium depth plough, organic and chemical fertilization) Multi annual All year long but mostly Strictly correlated to Up to 150,000/250,000 from early spring to late the species Euro/Ha autumn Cut flowers Skill Development: Significant and sophisticated level of knowledge is required Infrastructure, Machinery & Equipment Needed: High investment and production costs due to greenhouse construction and maintenance Soil Selection & Preparation: Conducting a soil analysis, selecting light calcareous/ alkaline (iron clorosis) or slightly acid soils, and preparing soil (soil drainage, medium depth plough, organic and chemical fertilization)

…and analyzed the potential for Kosovo to develop crops according to investment commitment (cont’d) Required Investment Analysis and Rank

Crop Type of Crop Time to First Harvest Productive Life Investment Cost* Score Multi annual All year but mostly from Strictly correlated to Up to 150,000/250,000 early spring to late autumn the species Euro/Ha Skill Development: Significant and sophisticated level of knowledge is required Flower Buds Infrastructure, Machinery & Equipment Needed: High investment and production costs due to greenhouse construction and maintenance Soil Selection & Preparation: Conducting a soil analysis, selecting light calcareous/ alkaline (iron clorosis) or slightly acid soils, and preparing soil (soil drainage, medium depth plough, organic and chemical fertilization) Multi annual 2-3 years Up to 20 years From 60,000 to150,000/ 250.000 Euro/Ha Skill Development: More knowledge required for variety selection & cropping techniques due to its long term producing species Infrastructure, Machinery & Equipment Needed: : Cost reflects production in plastic tunnels but the production period could be Asparagus expanded by investing in a more sophisticated type of green house with higher investment costs but higher revenues; Machinery and equipment are needed as per cultivation of horticultural crop (e.g. medium tractor, tiller, crusher, sprayer, etc.) Soil Selection & Preparation: Conducting a soil analysis, selecting light calcareous/ alkaline or slightly acid soils, and preparing soil (soil ripping, soil drainage, medium depth plough, organic and chemical fertilization, dig the ditch 60x20 (as largeness x depth) and rhizome plantation) Annual From late spring to early Annual From 60,000 to150,000/ autumn 250,000 Euro/Ha Skill Development: Low to medium level of additional knowledge required to introduce new growing techniques, varieties and related Chilies/ marketing Peppers Infrastructure, Machinery & Equipment Needed: Cost reflects production in plastic tunnels, but the production period could be expanded by investing in a more sophisticated type of green house with higher investment costs but higher revenues; Machinery and equipment are needed as per cultivation of horticultural crop (medium tractor, tiller, crusher, sprayer, etc.) Soil Selection & Preparation: Conducting a soil analysis, selecting light calcareous/ alkaline or slightly acid soils, and preparing soil (soil drainage, medium depth plough, organic and chemical fertilization, mulching (plastic or organic material) and young plant plantation)

Note: (*) Investment cost includes infrastructure, machinery, equipment, soil preparation, and seeds/plants/trees; Fork lift and motor harvester/pruning carriage equipment is considered a production cost and not upfront investment cost; Land cost not included; Modern greenhouses cost 150,000 Euro/ha and plastic tunnels are 40,000 Euro/ha Source: BAH Analysis 176 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop crops according to investment commitment (cont’d) Required Investment Analysis and Rank

Crop Type of Crop Time to First Harvest Productive Life Investment Cost* Score Annual From late spring to early Annual From 60,000 to150,000/ autumn 250,000 Euro/Ha Skill Development: Low/medium level of knowledge required to introduce new growing techniques, varieties, related marketing Cucumbers/ Infrastructure, Machinery & Equipment Needed: Cost reflects production in plastic tunnels, but the production period could be expanded Gherkins by investing in a more sophisticated type of green house with higher investment costs but higher revenues; Machinery and equipment are needed as per cultivation of horticultural crop (medium tractor, tiller, crusher, sprayer, etc.) Soil Selection & Preparation: Conducting a soil analysis, selecting light calcareous/ alkaline or slightly acid soils, and preparing soil (soil drainage, medium depth plough, organic and chemical fertilization, mulching (plastic or organic material) and young plant plantation) Annual From late spring to early Annual on inoculated From 60,000 to150,000/ autumn substrata 250,000 Euro/Ha Skill Development: Production knowledge needed is not complicated, but production requires intensive cultivation methods , a particular location for production (also greenhouses), and inoculated substrata not currently available in Kosovo but could be imported. Training Mushrooms needed for varieties such as champignons and pleurotus Infrastructure, Machinery & Equipment Needed: Cost reflects production in plastic tunnels, but the production period could be expanded by investing in a more sophisticated type of green house with higher investment costs but higher revenues; Machinery and equipment are needed as per cultivation of horticultural crop (medium tractor, tiller, crusher, sprayer, etc.) Soil Selection & Preparation. No soil preparation needed as production is done on inoculated substrata Annual From late spring to summer Annual From 60,000 to150,000/ 250,000 Euro/Ha Lettuce & Skill Development: Medium level of knowledge required to introduce new growing techniques, varieties, related marketing Chicory Infrastructure, Machinery & Equipment Needed: Cost reflects production in plastic tunnels but the production period could be expanded by investing in large green houses with higher investment costs but also higher revenues; medium tractor, tiller, crusher, sprayer, etc. Soil Selection & Preparation: Conducting a soil analysis, selecting slightly calcareous/ alkaline or slightly acid soils, and preparing soil (soil drainage, medium depth plough, organic and chemical fertilization, mulching (plastic or organic material) and young plant plantation)

Note: (*) Investment cost includes infrastructure, machinery, equipment, soil preparation, and seeds/plants/trees; Fork lift and motor harvester/pruning carriage equipment is considered a production cost and not upfront investment cost; Land cost not included; Modern greenhouses cost 150,000 Euro/ha and plastic tunnels are 40,000 Euro/ha Source: BAH Analysis 177 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop crops according to investment commitment (cont’d) Required Investment Analysis and Rank

Crop Type of Crop Time to First Harvest Productive Life Investment Cost* Score

Multi annual From the first year Up to 7 years From 10,000 to 60,000 Euro/Ha Skill Development: Medium level of knowledge is required as this crop requires a very precise use of the agricultural techniques for soil Saffron preparation, harvesting and selecting techniques Infrastructure, Machinery & Equipment Needed: Costs based on production in open field with very good soil preparation; Medium tractor, tiller, crusher, sprayer, etc. Soil Selection & Preparation: Conducting a soil analysis, selecting light and drained soils, and preparing soil (soil ripping, soil drainage, medium depth plough, organic and chemical fertilization, bulb plantation) Multi annual From the 4/5 years Up to 50-80 years and From 10,000 to 60,000 more Euro/Ha Skill Development: Medium level of knowledge is required including: inoculation of trees such as hazelnut, oak, beech, poplar, cultivated in neutral or slightly alkaline soils, cultivation techniques (irrigation in late spring/summer particularly in beginning of crop production, Truffles simple maintenance of the planted inoculated tree), harvesting requires the training of a sniffing dog able to understand where the truffles are Infrastructure, Machinery & Equipment Needed: Cost based on setting up production in ornamental trees. Medium tractor, tiller, crusher, sprayer, etc. Soil Selection & Preparation: Conducting a soil analysis, selecting medium quality slightly calcareus/ alkaline soils or slightly acid soils, and preparing soil (soil drainage, medium depth plough, organic and chemical fertilization, squaring and young plant plantation)

We next created a scale that defines the levels for the “ease of production” ranking … Ease of Production Ranking Description

Weight Description

Extensive expertise exists for overall crop management Input costs are minimal, input requirements are straightforward, and regulatory compliance is easily obtained Product quality/grade requirements are minimal and easily obtainable Simple sorting/grading/etc. procedures, minimal and inexpensive infrastructure requirements Sufficient expertise exists for overall crop management Input costs are reasonable, input requirements are understandable, and regulatory compliance can be obtained Product quality/grade requirements are manageable and obtainable Understandable sorting/grading/etc. procedures, reasonable infrastructure requirements Some expertise exists for overall crop management Input costs are higher, input requirements can be unclear, and regulatory compliance can require significant effort Product quality/grade requirements can be extensive and can be difficult to obtain Several sorting/grading/etc. procedures, significant infrastructure requirements Minimal expertise exists for overall crop management Input costs are prohibitive, input requirements are unclear, and regulatory compliance requires significant effort Product quality/grade requirements are extensive and difficult to obtain Extensive, complicated sorting/grading/etc. procedures, prohibitive infrastructure requirements

Source: BAH Analysis 179 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop each crop based on ease of production Ease of Production Analysis and Rank

Crop Explanation Score Crop Management: Additional knowledge and expertise is needed in training and pruning to improve quality of harvesting Inputs: Pest management is relatively simple as long as weather forecasts are observed and followed; the cost of pest management and fertilization is relatively low; compliance with regulations in target markets is possible with average effort Apples Quality Control: Processes to produce fresh, intact product (no pinches, hail storm damage, etc.) are fairly simple to master. Categorization by diameter is required with ow quality products (small diameter, defects) are generally sent for processing. Lab testing needed to determine level of pest residuals Sorting, Grading & Packaging: Harvesting occurs in two intervals; requires significant, specialized infrastructure and machinery to select, package, label products Crop Management: This crop requires minimal additional training for pruning and quality harvesting Inputs: Pest management is not complex since the crop has practically no parasites, cost of pest management and fertilization is very low, compliance with regulations in target markets can be easily obtained Blackberries/ Quality Control: Procedures are minimal and obtainable, fresh intact product is selected meeting quality requirements Raspberries while the lower quality is generally processed, practically no need for lab testing for pest residuals since the species has no parasite Sorting, Grading & Packaging: Continuous harvesting is needed, but requires simple sorting and packaging procedures and modest infrastructure requirements Crop Management: Additional knowledge and expertise is needed to introduce new varieties, train and prune the trees, and improve quality harvesting Inputs: Pest management is not complex since the crop has few parasites, cost of pest management and fertilization is low, compliance with regulations in target markets can be easily obtained Cherries Quality Control: Fresh intact product needs to be categorized by diameter, low quality products (low diameter, defects) generally sent for processing, need lab testing to determine level of pest residuals Sorting, Grading & Packaging:The crop is harvested by hand, requires simpler sorting and packaging procedures and modest to high infrastructure requirements

Source: BAH Analysis 180 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop each crop based on ease of production (cont’d) Ease of Production Analysis and Rank

Crop Explanation Score Crop Management: This crop requires minimal additional training for quality harvesting Inputs: Pest management is not complex since the crop has practically no parasites, cost of pest management and fertilization is very low, compliance with regulations in target markets can be easily obtained Cranberries/ Quality Control: Procedures are minimal and obtainable, fresh intact product is selected meeting quality requirements Bilberries while the lower quality is generally processed, practically no need for lab testing for pest residuals since the species has practically no parasite Sorting, Grading & Packaging: Continuous harvesting is needed, but requires simple sorting and packaging procedures and modest infrastructure requirements Crop Management: Additional knowledge and expertise is needed to train and prune the trees and improve quality harvesting Inputs: Pest management is not complex since the crop has very few parasites, cost of pest management and Currants/ fertilization is very low, compliance with regulations in target markets can be easily obtained Quality Control: Procedures are minimal and obtainable, fresh intact product is selected meeting quality requirements Gooseberries while the lower quality is generally processed, practically no need for lab testing for pest residuals since the species has few parasite Sorting, Grading & Packaging: Continuous harvesting is needed, but requires simple sorting and packaging procedures and modest infrastructure requirements Crop Management: Additional knowledge and expertise is needed to train and prune the trees and improve quality harvesting Inputs: Pest management has low complexity since the crop has practically no parasites, cost of pest management and fertilization is low, compliance with regulations in target markets is easily obtainable Kiwi Quality Control: Procedures are fairly simple, fresh intact product needs to be categorized by diameter, low quality products (small diameter, defects) generally sent for processing, need lab testing to determine level of pest residuals Sorting, Grading & Packaging: Harvesting occurs in two intervals; requires significant, specialized infrastructure and machinery to select, package, label products

Source: BAH Analysis 181 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop each crop based on ease of production (cont’d) Ease of Production Analysis and Rank

Crop Explanation Score Crop Management: Additional knowledge and expertise is needed to train and prune the trees and improve quality harvesting Inputs: Pest management requires some technical assistance resulting in medium complexity, cost of pest management Peaches/ and fertilization is medium, compliance with regulations in target markets can be achieved with medium difficulty Quality Control: Procedures are fairly simple, fresh intact product (no pinches, hail storm damage, etc.) needs to be Nectarines categorized by diameter, low quality products (small diameter, defects) generally sent for processing, need lab testing to determine level of pest residuals Sorting, Grading & Packaging: Harvesting occurs in two intervals; requires significant, specialized infrastructure and machinery to select, package, label products Crop Management: Additional knowledge and expertise is needed to train and prune the trees and improve quality harvesting Inputs: Pest management is relatively simple as long as weather forecasts are observed and followed, cost of pest management and fertilization is medium, compliance with regulations in target markets is possible with average effort Pears Quality Control: Procedures can be easy, fresh intact product (no pinches, hail storm damage, etc.) needs to be categorized by diameter, low quality products (small diameter, defects) generally sent for processing, need lab testing to determine level of pest residuals Sorting, Grading & Packaging: Harvesting occurs in two intervals; requires significant, specialized infrastructure and machinery to select, package, label products Crop Management: This crop requires minimal additional training for introduction of new varieties and quality harvesting Inputs: Pest management is not complex, pest management and fertilization costs are medium, compliance with regulations in target markets can be obtained with medium difficulty Strawberries Quality Control: Procedures are easy and obtainable, fresh intact product is selected meeting quality requirements while the lower quality is generally processed, strong need for lab testing due to pest residuals Sorting, Grading & Packaging: Continuous harvesting is needed, but requires simple sorting and packaging procedures and modest infrastructure requirements

Source: BAH Analysis 182 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop each crop based on ease of production (cont’d) Ease of Production Analysis and Rank

Crop Explanation Score Crop Management: Additional knowledge and expertise is needed to train and prune the trees, and improve quality harvesting Inputs: Pest management requires weather forecasting and technical assistance and has a medium complexity, cost of pest management and fertilization is relatively high, compliance with regulations in target markets is possible with Table Grape average effort Quality Control: Procedures can be easy, fresh intact product needs to be categorized by quality size, need lab testing to determine level of pest residuals Sorting, Grading & Packaging: Harvesting occurs in different intervals; requires significant, specialized infrastructure to select, package, label products Crop Management: Minimal expertise is required for crop management particularly directed to production techniques and quality harvesting Inputs: Pest management has a low complexity, cost of pest management and fertilization is low, compliance with regulation in target market can be achieved with minimal effort Bulbs Quality Control: Requirements are minimal and easy to meet, the bulbs are selected by calibre and the lowest are kept for seed Sorting, Grading & Packaging: Harvesting occurs one time, requires simple sorting and packaging procedures, and modest infrastructure requirements Crop Management: Significant expertise is required particularly for production techniques and high quality harvesting Inputs: Pest management needs some technical assistance and has a medium/high complexity related to the cultivated species, cost of pest management and fertilization is medium, compliance with regulations in target markets can be difficult Cut Flowers Quality Control: Procedures can be difficult to obtain while flowers are selected by quality size, residual testing could be required Sorting, Grading & Packaging: Continuous harvesting is needed, and requires significant, specialized infrastructure to select, package, label products

Source: BAH Analysis 183 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop each crop based on ease of production (cont’d) Ease of Production Analysis and Rank

Crop Explanation Score Crop Management: Significant expertise is required particularly for production techniques and high quality harvesting Inputs: Pest management needs some technical assistance and has a medium/high complexity related to the cultivated species, cost of pest management and fertilization is medium, compliance with regulations in target markets can be difficult Flower Buds Quality Control: Procedures can be difficult to master as different species of flowers have different requirements for quality, color and size. There are multiple sorts per flower type. Residual testing is required. Sorting, Grading & Packaging: Continuous harvesting is needed, and requires significant, specialized infrastructure to select, package, label products Crop Management: Additional knowledge and expertise is required particularly directed to crop production techniques and high quality harvesting Inputs: Pest management is not complex, cost pest management and fertilization is low, compliance with regulations in target markets can be obtained with medium difficulty Asparagus Quality Control: Procedures are minimal and easy to obtain, small/medium shoots have a better quality, larger shoots could be processed, residual testing is required Sorting, Grading & Packaging: Continuous harvesting is needed, and requires collection infrastructure where workers, not machines, select, package, and label products Crop Management: Additional knowledge and expertise is required particularly directed to crop production techniques and quality harvesting Inputs: Pest management has a medium complexity, average costs for pest management and fertilization, compliance Chilies/ with regulations in target markets can be obtained with medium effort Peppers Quality Control: Procedures are minimal and easy to obtain, fresh intact product is selected by size, the lowest quality product is processed, need of lab testing for pest residuals Sorting, Grading & Packaging: Continuous harvesting is needed, and requires collection infrastructure where workers, not machines, select, package, and label products

Source: BAH Analysis 184 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop each crop based on ease of production (cont’d) Ease of Production Analysis and Rank

Crop Explanation Score

Crop Management: Additional knowledge and expertise is required particularly directed to crop production techniques and quality harvesting Inputs: Pest management has a medium complexity, average costs for pest management and fertilization, compliance Cucumbers/ with regulations in target markets can be obtained with medium effort Gherkins Quality Control: Procedures are minimal and easy to obtain, fresh intact product is selected by size, the lowest quality product is processed, need of lab testing for pest management residuals Sorting, Grading & Packaging: Continuous harvesting is needed, and requires collection infrastructure where workers, not machines, select, package, and label products Crop Management: Additional expertise is required for crop management particularly for production techniques and quality harvesting Inputs: Pest management is not complex and has practically no parasites, cost of pest management and fertilization is low, compliance with regulations in target markets are easily obtained Mushrooms Quality Control: Procedures are minimal and easy to obtain, higher quality products can be of all sizes and will have no defects while the other products are processed, lab testing for pest residuals is minimal Sorting, Grading & Packaging: Continuous harvesting is needed, and requires collection infrastructure where workers, not machines, select, package, and label products Crop Management: Medium expertise is required particularly directed to new variety testing and quality harvesting Inputs: Pest management is not complex, cost of pest management and fertilization is low, compliance with regulations Lettuce & in target markets is easily obtainable Chicory Quality Control: Procedures are minimal and easy to obtain, higher quality products can be of all sizes and will have no defects while the other products are processed, lab testing for pest management residuals is needed Sorting, Grading & Packaging: Harvesting occurs in different times and requires collection infrastructure where workers, not machines, select, package, and label products

Source: BAH Analysis 185 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop each crop based on ease of production (cont’d) Ease of Production Analysis and Rank

Crop Explanation Score Crop Management: Additional knowledge is required for crop introduction and diffusion, production techniques, quality harvesting, and destemming Inputs: Pest management is not complex since the crop has practically no parasites, cost of pest management and fertilization is low, compliance with regulations in target markets is easy to obtain Saffron Quality Control: Requirements are managable and obtainable, fresh intact stigmas of different sizes are selected and processed, no need of lab testing for pest management residuals Sorting, Grading & Packaging: Continuous harvesting is needed, and requires collection infrastructure where workers select products and machines dry, package, and label products Crop Management: Minimal expertise is required in crop production techniques and quality harvesting Inputs: Pest management is not complex and is related to the host species, cost of pest management and fertilization is low, compliance with regulations in target markets can be obtained with average difficulty Quality Control: Procedures can be difficult to obtain and require high quality standardization in shape, size, smell, Truffles denomination of origin, etc., high quality intact products are of mixed sizes, the lowest quality is processed, need lab testing for fertilizer residuals Sorting, Grading & Packaging: Procedures are complex, the crop needs a trained dog for harvesting, requires specialized workers, not machines, to select, package, and label products

Source: BAH Analysis 186 5. Value Chain Constraints For the final component of the Value Chain Constraints, we created a scale that defines the level of difficulty in getting products to market… Ease of Market Access Ranking Description

Weight Description

Long product storage life, minimal storage requirements Low perishability, minimal transport requirements Close proximity to markets, reliable demand, flexible delivery

Relatively long product storage life, reasonable storage requirements Relatively low perishability, reasonable transport requirements Relatively close proximity to markets, fairly reliable demand and flexible delivery

Relatively short product storage life, several storage requirements Relatively high perishability, several transport requirements Relatively significant distance to markets, fairly unreliable demand and inflexible delivery

Short product storage life, extensive storage requirements High perishability, extensive transport requirements Significant distance to markets, unreliable demand, inflexible delivery

Source: BAH Analysis 187 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop crops based on the ease of market access rankings Ease of Market Access Ranking Description

Crop Explanation Score Storage: Very long storage life (up to 9 months according variety) obtained with cold chain or modified atmosphere in controlled humidity, pre treatment needed for longer storage Transportation: Refrigeration required for long distances, modest perishability Apples Distribution to Markets: Close proximity to markets but must meet quality standards, crop could easily reach distant markets given value of crop and perishability, products can be purchased by all customer types (wholesaler, retailer, processor), crop requires medium reliability of demand, delivery can be flexible Storage: Very short storage life (up to 15-20 days) obtained with cold chain, no treatment needed for storage Blackberries/ Transportation: Refrigeration required for transportation, very high perishability Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach short to medium Raspberries distant markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires strong reliability of demand, no flexibility in delivery Storage: Very short storage life (up to 1 month) obtained with cold chain. Pre-cooling required in most conditions. Transportation: Refrigeration required for transportation, very high perishability Cherries Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach long distance markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires strong reliability of demand, no flexibility in delivery Storage: Very short storage life (up to 15-20 days) obtained with cold chain, no treatment needed for storage Cranberries/ Transportation: Refrigeration required for transportation, very high perishability. Distribution to Markets: Close proximity to markets but must meet quality standards, crop most likely will not reach Bilberries distant markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires strong reliability of demand, no flexibility in delivery Storage: Very short storage life (up to 15-20 days) obtained with cold chain, no treatment needed for storage Currants/ Transportation: Refrigeration required for transportation, very high perishability. Distribution to Markets: Close proximity to markets but must meet quality standards, crop most likely will not reach Gooseberries distant markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires strong reliability of demand, no flexibility in delivery

Source: BAH Analysis 188 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop crops based on the ease of market access rankings (cont’d) Ease of Market Access Ranking Description

Crop Explanation Score Storage: Very long storage life (up to 8 months) obtained with cold chain or modified atmosphere in controlled humidity, no need for pre treatment for longer storage Transportation: Refrigeration required for long distances, modest perishability Kiwi Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach distant markets given value of crop and perishability, products can be purchased by all customer types (wholesaler, retailer, processor), crop requires medium reliability of demand, delivery can be flexible Storage: Short storage life (up to 1/2 month) obtained with cold chain and pre cooling, no need for pre treatment for longer storage but pre cooling may be needed when fresh product is stored Peaches/ Transportation: Refrigeration required for long distances, medium to high perishability Nectarines Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach distant markets given value of crop and perishability, products can be purchased by all customer types (wholesaler, retailer, processor), crop requires reliability of demand and a modest flexibility of delivery Storage: Long storage life (up to 6-7 months according variety) obtained with cold chain or modified atmosphere in controlled humidity, pre treatment needed for longer storage Transportation: Refrigeration required for long distances, modest perishability Pears Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach distant markets given value of crop and perishability, products can be purchased by all customer types (wholesaler, retailer, processor), crop requires medium reliability of demand, delivery can be flexible Storage: Very short storage life (up to 15 days ) obtained with cold chain and pre-cooling could be required if stored Transportation: Refrigeration required for long/medium distances, very high perishability Strawberries Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach short to medium distant markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires strong reliability of demand, no flexibility in delivery

Source: BAH Analysis 189 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop crops based on the ease of market access rankings (cont’d) Ease of Market Access Ranking Description

Crop Explanation Score Storage: Medium storage life (up to 4 month) obtained with cold chain, pre cooling could apply when fresh product is stored Transportation: Refrigeration required for transportation, medium perishability Table Grape Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach distant markets given value of crop and perishability, products can be purchased by all customer types (wholesaler, retailer, processor), crop requires medium reliability of demand, delivery can be flexible Storage: Medium/long storage life (up to 6 month according to variety) obtained with cold chain or modified atmosphere in controlled humidity, some pre treatment needed for packaging Transportation: Refrigeration required for long distances, low perishability in low humidity Bulbs Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach very distant markets given value of crop and perishability, products can be purchased by all customer types (wholesaler, retailer, processor), crop requires medium reliability of demand, delivery can be flexible Storage: Very short storage life (up to transportation period) obtained with cold chain, pre cooling could apply for better conservation in transport Transportation: Refrigeration required for transportation, very high perishability Cut Flowers Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach distant markets given value of crop and perishability but must have speedy transport, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires strong relationships with buyers, no flexibility in delivery Storage: Very short storage life (up to transportation period) obtained with cold chain, pre cooling could apply for better conservation in transport Transportation: Refrigeration required for transportation, very high perishability Flower Buds Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach distant markets given value of crop and perishability but must have speedy transport, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires strong relationships with buyers, no flexibility in delivery

Source: BAH Analysis 190 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop crops based on the ease of market access rankings (cont’d) Ease of Market Access Ranking Description

Crop Explanation Score

Storage: Very short storage life (up to 15 days ) obtained with cold chain, pre cooling could apply for better conservation Transportation: Refrigeration required for transportation, very high perishability Asparagus Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach medium distant markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires strong reliability of demand, no flexibility in delivery Storage: Short storage life (up to 1 month ) obtained with cold chain, pre cooling could apply Chilies/ Transportation: Refrigeration required for transportation, very high perishability Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach medium distant Peppers markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires strong reliability of demand, no flexibility in delivery Storage: Short storage life (up to 1 month ) obtained with cold chain Cucumbers/ Transportation: Refrigeration required for transportation, very high perishability Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach medium distant Gherkins markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires strong reliability of demand, no flexibility in delivery Storage: Short storage life (up to 15 days) obtained with cold chain, but better to be consumed fresh Transportation: Refrigeration required for transportation, very high perishability Mushrooms Distribution to Markets: Close proximity to markets but must meet quality standards, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires strong reliability of demand, no flexibility in delivery

Source: BAH Analysis 191 5. Value Chain Constraints

…and analyzed the potential for Kosovo to develop crops based on the ease of market access rankings (cont’d) Ease of Market Access Ranking Description

Crop Explanation Score Storage: Medium storage life (up to 15 days ) obtained with cold chain Lettuce & Transportation: Refrigeration required in transportation, very high perishability Chicory Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach nearby markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires high reliability of demand, and no flexibility in delivery Storage: No storage life since flowers are harvested and immediately processed inside the farm Transportation: No refrigeration required, minimal transportation requirements, very low perishability Saffron Distribution to Markets: Close proximity to markets but must meet quality standards, crop could reach long distant markets given value of crop and perishability, products can be purchased by every type of costumer (wholesalers, retailer, processors), crop requires low reliability of demand, flexibility in delivery Storage: Short storage life (up to 15 days) obtained with cold chain but better to be consumed fresh Transportation: Refrigeration required for transportation, very high perishability Truffles Distribution to Markets: Close proximity to markets but must meet quality standards, products will be distributed in specialized shops of connoisseurs and could be processed as truffle cream or stored under olive oil, crop requires strong reliability of demand and no flexibility of delivery

Source: BAH Analysis 192 6. Final Product Selection Based on this final analysis, ten strategic export crop categories were identified including bulbs, lettuce/chicory, asparagus, apples, and table grapes Selection of 10 Strategic Crops in Diversified Crop Mix

Filter 4 – Economic Step 5 – Value Chain Constraints Step 6 Crop Top 20 Rank Weighting Investment Required Ease to Produce Ease of Market Access Final Rank Bulbs (flower) 19 0.75 1 Lettuce/chicory 20 0.50 2 Asparagus 17 1.25 3 Apples 16 1.50 4 Table grape 15 1.75 5 Cucumbers/gherkins 9 2.75 5 Currants/gooseberries 18 1.00 7 Saffron 13 2.00 7 Cranberries/bilberries 13 2.00 7 Kiwi fruit 7 3.00 7 Pears 12 2.25 11 Chilies/peppers 1 4.00 12 Blackberries/raspberries 5 3.25 13 Cherries 5 3.25 13 Strawberries 2 3.75 15 Mushrooms 2 3.75 15 Peaches/nectarines 4 3.50 17 Truffles 7 3.00 18 Cut flowers 10 2.50 19 Flower buds 10 2.50 19

Note: Top 20 ranking determined by economic feasibility and attractiveness filter; Harvey ball scale is as follows: 1- ; 2- ; 3- ; 4- Source: BAH Analysis 193 Finally, we created ‘Go To Market’ snapshots which include four main components: supply, demand, infrastructure, and variety selection

Overview of ‘Go To Market’ Components

Supply Demand Determine largest suppliers of selected crop varieties Determine the largest importers of selected crop by volume varieties by volume Assess whether suppliers are increasing or decreasing Assess whether buyers are increasing or decreasing quantity exported quantity demanded Analyze growing season gaps and potential to take Evaluate opportunities to take advantage of seasonal away market share prices Identify relevant supplier trends (e.g. oversupply of Identify relevant buyer trends (e.g. changing customer crop variety, increasing quality standards/regulations, preferences in taste, shape, color; buyer/supplier supplier consolidation, new technologies, etc.) relationship dynamics)

‘Go‘Go ToTo Market’Market’ ComponentsComponents

Infrastructure Variety Selection Determine infrastructure requirements for production, Identify the types of varieties that exist for a particular such as greenhouse capacity and irrigation networks crop Assess onsite processing and packaging Examine the unique characteristics that define each requirements variety category Identify distribution infrastructure needs for roads, air transport, shipping, collection centers, cold chain, etc.

Source : BAH Analysis 194 Go To Market Snapshot- Bulbs Demand for bulbs is increasing in Eastern Europe, with lilies and tulips among the most popular varieties. Prices for bulbs fluctuate, depending on the season

‘Go To Market’ Snapshot -- Bulbs

SupplySupply DemandDemand InfrastructureInfrastructure VarietyVariety SelectionSelection

The Netherlands, New Japan, North America (US Bulbs do not require There are several species of Zealand and the US are the and Canada) and Western greenhouses, as they can bulbs in the market including largest world suppliers of Europe (mainly Holland) are be grown in open fields or Lily, Tulip, Calla Lily bulbs the largest import markets semi-covered fields (using (Zantedeschia), Kenya is the main supplier for bulbs plastic rain cover) to protect Ornithogalum, Iris, Bagonias to European markets (also From October to April, from rain and Gladioli South Africa, Zimbabwe, prices are higher for bulbs Either machines or hand- Each species has various Ethiopia to a smaller extent) because worldwide supply is labor can be used for sub-species. For example, South America (Colombia, lower; conversely, prices are cultivating bulbs there are over 100 varieties Ecuador and Chile in lower from April-September If machines are used, simple of Cala Lilies but only 10-15 particular) supplies North because worldwide supply is tractor machinery and are commonly seen America higher extraction bulb diggers are Varieties are differentiated based on color and value New Zealand and Australia Overall demand for bulbs most commonly seen (price) mainly supply Asia has increased in Eastern A consistent reliable source European countries such as Lilies have high market of water is necessary, such value but are difficult to Bulgaria, Hungary, Romania as overhead irrigation, drip and Russia in recent years grow, while Daffodils are irrigation or storage tanks easier to grow but receive a There is an emergence of Cold storage facilities are lower value in the market the Middle Eastern market required for bulbs

Source: Managing Director, Bloomz New Zealand, 2010 195 Go To Market Snapshot- Lettuce/Chicory Hydroponic greenhouses are used for lettuce/chicory and a cold chain system is required for fresh varieties; iceberg lettuce is becoming increasingly popular in Eastern Europe

‘Go To Market’ Snapshot -- Lettuce/Chicory

SupplySupply DemandDemand InfrastructureInfrastructure VarietyVariety SelectionSelection

Spain, the US, and the Canada, Germany and UK Hydroponic greenhouses Romaine, leaf, butterhead Netherlands are the three are the top lettuce importers are typically used for lettuce. and iceberg lettuce are the largest exporters of lettuce, making up 19%,18% and All lettuce types are most common varieties of making up 32%,19% and 17% of world imports germinated with sprinklers lettuce in the market 7% of world exports respectively in 2008 and subsequently irrigated Some studies show that respectively in 2008 Lettuce prices are with drip, sprinkler, or consumers are opting to In the US, lettuce exports characterized by wide intra- furrow; all lettuce types replace iceberg lettuce with have increased continuously seasonal variation largely require frequent irrigations leaf and romaine lettuce in in value since 1989 when an because of an increasing to minimize moisture stress their home-made salads for estimated $60.5 million overlap of harvest periods Fresh cut lettuce requires added taste, texture, and worth was exported among producing areas, cold chain. After harvest, variety. Eastern Europe, compared to a record of production expansion to lettuce is transported to a however, has seen a surge $275.2 million in 2004 new areas, and weather cooling shed and distribution in the availability of iceberg US lettuce exports mainly conditions center where it is stored at lettuce, with consumers go to Canada, Mexico and 35 to 36° F favoring its crispy texture Japan, whereas Spain and Technological Historically, leaf and Netherlands’ exports tend to improvements, mainly in romaine lettuce have stay in Europe packing materials, have received higher prices than iceberg and other head been largely responsible for China is the world’s leading varieties producer of lettuce, followed the increase in availability of by the US; however, a large different varieties and ready- portion of China’s to eat salads production is consumed domestically

Source: USDA Foreign Agricultural Service; USDA Economic Research Service; TradeMap; Agricultural Issues Center ,University of California 196 Go To Market Snapshot- Asparagus Supply of asparagus is increasing faster than demand, causing prices to drop, although white asparagus is holding up well

‘Go To Market’ Snapshot -- Asparagus

SupplySupply DemandDemand InfrastructureInfrastructure VarietyVariety SelectionSelection

The largest exporter of The top asparagus Asparagus is highly The two forms of asparagus asparagus is Peru, which importers are the US, the perishable and requires a in the marketplace are white exported about 90,000 metric EU and Japan cold chain system. and green asparagus. White tons (mt) in 2006. Mexico, the Due to intense competition Asparagus is typically asparagus in generally second largest exporter, from Mexico and Peru, US partially cooled during canned/jarred and green supplied about 50,000 mt, exports of asparagus have washing, selection, and asparagus is either sold and the US exported about been declining while imports packing, and then hydro- fresh or frozen/chilled 10,000 mt in the same year. have been steadily cooled to near 32 °F after About 40%of asparagus Out of the three, only Peru’s increasing packing grown in Peru is green and export market share has Consumer demand is based Processing of asparagus for shipped to the U.S. market, grown each year over the last on freshness, length and pickling can bring growers a while the rest is white, which several years diameter of the stalks, color price premium and can be is processed and sent to the China is one of the leading of spears, tightness of the sold in winter months when EU market producers of white spear tips, and the extent of prices are higher given White asparagus is widely (canned/jarred) asparagus. bruising lower supply used in Europe and Asia, Spain, Germany, Netherlands World demand is growing Asparagus needs to be while green asparagus is and France are major buyers slower than supply in many blanched and sterilized popular in the US of China’s white asparagus, markets, causing prices to before being placed in cans White asparagus is accounting for 80% of drop. Peruvian asparagus generally priced higher than China’s total asparagus producers have already green asparagus exports in 2008. However, experienced falling prices in production is predicted to the US and Europe drop by 20% in 2010 due to continued low prices

Source: USDA/FAS , Agricultural Issues Center ,University of California 197 Go To Market Snapshot- Apples Global apple exports and imports are increasing and China is by far the leading world supplier. Apples can be stored fresh for up to 4-5 months

‘Go To Market’ Snapshot -- Apples

SupplySupply DemandDemand InfrastructureInfrastructure VarietyVariety SelectionSelection

China is the largest exporter Russia is the world’s largest Drip irrigation system is There are several thousand of apples, supplying the importer of apples, importing generally used for apples varieties of apples but some of world with 1.5 million metric 1.1 billion metric tons in Ultra-Low Oxygen (ULO) the most common ones are tons in 2008/09; China’s 2008/09, 4% more than the cold storage facilities can Gala, Golden Delicious, Granny exports are forecast to surge previous year keep apples fresh for 4-5 Smith, Liberty and Red more than 15% due to new Overall world imports of months. Producers may Delicious plantings in the northwest apples are forecast up 20% decide to store apples until Liberty apples, which are scab- provinces and increased due to strong demand for the off-season, when they resistant, are grown commonly demand from Asia and the high quality fruit from the US can sell them for higher in Belarus, Germany, Italy and Middle East and from Chile and other prices Latvia The EU is the second Southern Hemisphere Apples to be sold fresh into Jonagold (a combination of largest apple exporter in the countries during their off- the marketplace should be Golden Delicious and Jonathan) world; production is forecast season. World demand has harvested at a later maturity apples are one of the major down 4% due to reduced also expanded for healthy than apples that are pre- varieties grown worldwide and area in Poland and snack and off-season fruit destined for long-term are popular in Europe. Jonagold pollination problems in Consumers tend to buy storage accounted for nearly 60% of Spain apples based on color, apple production in Belgium. It Global apple exports have though color does not effect is also an important variety in jumped 15% in the past 3 taste or texture Japan, and is the third most years mainly due to growth important variety in Canada in China and the EU apple Gala apples are also becoming markets, favorable weather increasingly popular in Europe and improved management because they are considered to be high quality

Source: USDA/FAS ; Agricultural Issues Center ,University of California; Cornell University, College of Agricultural and Life Sciences 198 Go To Market Snapshot- Table Grape Chile and the US are the leading table grape suppliers to the world; high quality requirements must be met for table grapes to be successfully marketed

‘Go To Market’ Snapshot -- Table Grape

SupplySupply DemandDemand InfrastructureInfrastructure VarietyVariety SelectionSelection

Chile is the largest world The EU, US and Russia are Chilean and South African The more than 60 varieties supplier of fresh table grapes, the top table grape importers grapes are shed packed of table grapes are grouped exporting 850,000 metric tons The EU accounts for about 1/3 because they tend to be into three groups: red, black, (mt) in 2008/09; the US is the of world imports but the sent to distant markets, green (also called white) second largest supplier, economic crisis is expected to whereas most grapes from Thompson Seedless grapes exporting 336,045 mt in reduce EU imports by 4% in the US are field packed (green) are one of the most 2008/09, followed by Italy 2009/2010 Table grapes should be commonly grown grapes in Chile and US accounted for ½ Lack of decay, cracked quickly stored in a cold the US an Chile. These of global grape exports in berries, stem browning, storage facility at a grapes are popular because 2009 shriveling, sunburn and insect temperature of 30-32° F they are seedless, have thin Southern hemisphere damage are important factors Table grapes typically skin and crisp texture exporters are expected to for consumer acceptance; high require a hot, dry climate, While green grapes are continue expanding exports consumer acceptance is also deep well-drained soil and a commonly consumed in the due to demand by northern attained for fruit with high large amount of irrigation US, red grapes are more hemisphere consumers for off- Soluble Solids Concentration water popular in Europe season fruit (SSC) ratio Because of their high quality China is the largest producer, Croatian customers prefer requirements at the point of but a small exporter due to low table grape varieties with big sale, table grapes demand quality and handling capacity berries, such as those hand labor, technical Macedonia, Montenegro and imported from Italy, Spain, knowledge and experience Bosnia are large suppliers of South Africa and Chile. table grapes to Eastern Macedonian grapes are Europe considered to be lower quality

Source: USDA/FAS; UC Davis Horticulture Crops Research Laboratory; USAID/Macedonia AgBiz Program; TradeMap Note : Exported quantity in tons, data was used from 2004-2008 199 Go To Market Snapshot- Cucumbers/Gherkins Cucumbers / gherkins are highly labor intensive crops that can either be processed or sold fresh; global demand has remained stable

‘Go To Market’ Snapshot -- Cucumbers/Gherkins

SupplySupply DemandDemand InfrastructureInfrastructure VarietyVariety SelectionSelection

Mexico, Spain, and Germany, US and UK are Cucumbers are grown in The main types of Netherlands are the top the largest importers of either open field or cucumbers are pickling three exporters of cucumbers / gherkins, greenhouses. Greenhouse cucumbers (gherkins) and cucumbers / gherkins in the making up 26%, 19% and cucumbers are grown fresh salad (slicing) world. Mexico and Spain’s 8% of world imports hydroponically. Drip cucumbers exports grew by 12% and respectively in 2008 irrigation supplies nutrients 2% respectively from 2004- Consumption of gherkins and water to each plant 2008, while Netherlands’ has remained stable and Gherkins are very labor exports have gone down generally remains consistent intensive, as they have to be slightly for the same years year-round hand-picked and growing Spain and the Netherlands Consumers of cucumbers / and maintaining them are the cheapest producers gherkins tend to be most requires craftsmanship and of fresh cucumbers in driven by price, but flavor crop knowledge Europe1 and texture are also A cold chain needs to be set Due to its labor-intensive important attributes up for fresh crops. nature, gherkin production is Processed gherkins must be being moved to countries packed in a jar within 20 hrs such as Serbia and India, to maintain freshness where labor is relatively cheap

Source: USDA/FAS; UC Davis Horticulture Crops Research Laboratory; TradeMap; Gherkin trader , Koeleman Foods International Note (1): The Netherlands is able to produce cucumbers cheaply in part because it uses hydroponic greenhouses, which boost production. While cucumbers are grown in open fields in Spain, cheaper immigrant labor (mainly from Romania) is utilized, bringing down costs 200 Go To Market Snapshot- Currants/Gooseberries Ukraine is a significant exporter and importer of currants / gooseberries; currant prices have been dropping in the last decade so some caution is required

‘Go To Market’ Snapshot – Currants/Gooseberries

SupplySupply DemandDemand InfrastructureInfrastructure VarietyVariety SelectionSelection

Gambia and Ukraine are the Poland and Ukraine are Currants are machine There are 4 sections of leading exporters of among the top importers of harvested. Full production is economically important currants/gooseberries. In currants / gooseberries in achieved in year 4 (3+ years currant species within the 2008, Gambia alone Europe. Asia is also a after planting) with a yield of genus: black currants, red accounted for over 90% of popular market, with 7,000 lbs and white currents, world exports. Ukraine Indonesia and Malaysia as Due to their fibrous, shallow ornamental currants, and accounted for 6%. India is the top importers roots, currants are ideal for golden currants third leading exporter, The market for black drip irrigation Red currants (mostly sold accounting for a little over 1% currants is primarily for Sprayers and tractors are fresh) are the most common of exports processed (concentrate) other equipment generally type of currant found in the Commercial production of product which is a global used for currants European market currants and gooseberries Black currants, which are market. Producers therefore Fruit for processing is has had limited success in the are often competing with low less common in the U.S. due to a federal ban that generally hand-picked when European market, are cost producers in Eastern fully sized but not was placed on Ribes plants Europe mostly used for processing (includes currants / completely ripe. Unripe (juice, jam) The increase in currant currants can be placed in gooseberries) which were production in the last thought to have caused cold storage for a few days, decade has led to low fruit if necessary, while disease in pines. The federal prices globally restriction was lifted in 1996, gooseberries can keep for but there is still confusion up to 2 weeks regarding the legality of growing these plants

Source: TradeMap; British Columbia Ministry of Agriculture; University of Kentucky, College of Agriculture 201 Go To Market Snapshot- Saffron

Saffron is highly labor-intensive and sells at very high prices, but buyers should be weary of counterfeit supply

‘Go To Market’ Snapshot -- Saffron

SupplySupply DemandDemand InfrastructureInfrastructure VarietyVariety SelectionSelection

Spain is the world’s largest The major importers of Saffron is an extremely Iran is able to produce a saffron exporter, making up saffron in 2008 were Italy, labor-intensive crop, as very high quality saffron at 46% of world exports, US, UAE and France more than 80% of favorable prices because though production High consumer demand is production must be done by labor is relatively cheap. decreased from 20 metric shown for saffron with depth hand (harvesting, drying, Three main varieties of tons to 5 metric tons in the of color (dark red with no packaging) Iranian saffron include: last several years because yellow plant parts mixed in), Immediate post-harvest Select Pushali, ‘Coupe’ growers have sought less flavor intensity and fresh processing gives the best Sargol, and Mashad. The labor-intensive crops aroma saffron spice quality. After first two varieties are higher While Iran produces over Global demand for saffron is harvest, flowers are taken to grade, due to their high 90% of the world’s raw under pressure due to its warehouses where stigmas coloring strength and fine saffron, it is not the largest high price; however, are separated from each flavor components exporter because it lacks a bringing down prices may bud by hand. Once the Unlike Iranian varieties, strong processing system. compromise supply because stigmas have been Spanish varieties (Mancha Spain processes and re- saffron is labor-intensive removed, they are lightly Select and Mancha exports about 40% -50% of Saffron prices at wholesale dried over charcoal embers. Superior) tend to leave the Iran’s saffron and retail rates range from Saffron for processing is yellow "tails" on the There is a large supply of US$500-$5,000/pound. In sold in plastic bags placed stamens, making the red counterfeit saffron in the Western countries, the in cardboard boxes coloring less deep than world because it is easy to average retail price is Saffron for retail and food Iranian varieties manipulate the coloring and $1,000/pound. A pound service is sold in tins sell at a high price comprises between 70,000 to 200,000 threads.

Source: World Applied Sciences Journal, The Third Afghan National Conference of Saffron in Herat Province , 2008, TradeMap 202 Go To Market Snapshot- Cranberries Global cranberry supplies have been decreasing but demand continues to rise, mainly in North America and UK, causing prices to increase

‘Go To Market’ Snapshot -- Cranberries

SupplySupply DemandDemand InfrastructureInfrastructure VarietyVariety SelectionSelection

The largest exporters of The largest world importers Man-made wetlands or bogs Cranberries are native to cranberries are Canada, Chile of cranberries in 2008 were are used for harvesting North America, where there and US, making up 37%, 25% US, Canada and UK cranberries are more than 100 varieties and 16% of world exports While supplies of Sprinkler systems are used to The most common varieties respectively in 2008* cranberries have decreased hydrate berries and some are Early Blacks, Howes While both Canada and the US’ in recent years, global growers have water reservoirs and Stevens. Although Early exports have decreased by 2-3% demand continues to rise, adjacent to the bogs for ready Black is not as productive as between 2004-2008, Chile’s causing prices to go up. In water supply other varieties, it is popular exports have increased by 31% 2007, frozen berries sold at Flooding is used for because of its earliness in for the same years levels above $1.50/pound harvesting of processed ripening and its ability to US cranberry production was and concentrate sold at cranberries only. Water grow in many types of down 10% in 2009 possibly due levels between $80 and harvesting requires proper cranberry soil. Howes are to cooler, wet weather in $100+/gallon handling and storage to popular because they are Massachusetts and Wisconsin, The popularity of maintain quality well-colored, glossy and which reduced pollination and cranberries has been Cranberries for the fresh frost resistant caused frost that damaged bogs increasing in recent years market are harvested 95% of the US cranberry market due to strong marketing mechanically without flooding, is made up of processed campaigns and evidence of using a picking machine that cranberries; only about 5 % of the fruit's health benefits combs the berries off the the total cranberry crop is sold vines for fresh fruit Cranberries are not commonly grown in Europe

Source: USDA, FAS, TradeMap Note : Export/import data for cranberries was found on TradeMap which groups cranberries with other fresh fruits of the genus Vaccinium 203 Go To Market Snapshot- Kiwis

New Zealand and Italy are the leading suppliers of kiwis in the world and mainly export the Hayward variety

‘Go To Market’ Snapshot -- Kiwis

SupplySupply DemandDemand InfrastructureInfrastructure VarietyVariety SelectionSelection

The most common varieties In 2008, New Zealand was the Frequent irrigation is required The top importers of kiwis in of kiwi are: Hayward, (green leading exporter of kiwis in the for kiwis, either through a drip, the world are Belgium, flesh, fuzzy skin) Zespri Gold world, followed by Italy and Chile. minisprinkler or undervine Germany, Spain, Netherlands and Green, (established by The three countries exported sprinkler system. Kiwifruit vines and Japan, making up 12%, New Zealand’s Zespri Group) 34%, 25% and 13% of kiwis in need more irrigation than 9%, 9%, 5% and 5% of Hardy Kiwi (does not have the world respectively grapes or fruit trees under imports respectively hair) and Kiwigold (yellow In 2007, Italy produced over similar soil and weather EU countries are primarily flesh) 500,000 tons of kiwis, while New conditions supplied by the top EU 95% of Italian kiwis are of the Zealand produced 385,000 tons Once harvested, kiwis are exporters (Italy, France and Hayward variety. Hayward is China, Chile, France, Greece, carried in field boxes to packing Greece). Europe is also a also the dominant variety Japan and the US are also stations. The fruits are significant market for Chile, as grown in New Zealand and significant producers mechanically conveyed across 60% of Chilean kiwis were Chile In 2007, New Zealand exported imported by Europe in 2006 a brushing machine that Zespri Gold is considered a 60% of its kiwis to Europe and removes the hairs and, in some Japan and the US are also a difficult product because it 30% to Asia, mainly to Japan key importers of Chilean kiwis. plants, the styles and sepals as well has a shorter selling season About 70% of Italy’s kiwis are The US also imports from New than the traditional Green Kiwis are packed in a fiberboard exported, mostly to other EU Zealand variety. Only 17-18% of New or wooden boxes countries Zealand’s kiwi exports were Continued growth in world kiwi Kiwis are placed in cold storage of the Zespri Gold variety in production, together with for up to one year at 0°C to 2007 improved storage facilities, have maximize their storage life allowed kiwi sales in the northern and southern hemispheres to overlap, resulting in declining export prices Source: Fresh Plaza Kiwi Report 2007, USDA Foreign Agricultural Service, 2001, TradeMap 204 Go To Market Snapshot- Pears World pear exports are expanding due to increasing demand from Russia and Asia. Some pear varieties, such as D’Anjou, require cold storage in order to ripen

‘Go To Market’ Snapshot -- Pears

SupplySupply DemandDemand InfrastructureInfrastructure VarietyVariety SelectionSelection

China, the EU and the US Russia is the world’s largest A drip irrigation system with There are over 3,000 known accounted for half of global importer with 360,000 metric fertilizers is most often used pear varieties grown around pear exports in 2009 tons in 2008/09. Russia is for pears the world but the most US pear exports are likely to purchase 10% more Pears that have been common varieties include projected to gain 10% due to this year due to smaller graded and packed are Bartlett, D’Anjou, Bosc, greater purchases from domestic supplies and either sent to cold storage or Comice and Forelle Brazil and Russia; EU higher demand for sent via truck or rail for Red and Green Anjou exports are also expected to inexpensive fruit from China shipment to fresh market varieties have been most rise by 7% and China’s by EU imports are expected to Canned pears are packaged popular among Russian 5% due to growing demand fall slightly in 2010 due to in either lugs or bins and are consumers, while the from Asian markets demand being filled by loaded on cannery trucks Bartlett variety remains the World pear exports are ample domestic supplies with fork-lift equipment most common variety sold forecast to expand 4% in D'Anjou and Comice worldwide 2010 due to expected higher varieties will not ripen demand from Canada and unless they have been held Russia 8 -10 weeks in cold storage Slightly larger world production is predicted, resulting from favorable weather and improved management practices

Source: USDA, FAS, TradeMap 205 Detailed Go To Market Snapshot- Table Grapes We selected one crop, Table Grapes, to do a more comprehensive review and identified major players and trends impacting the market Breakdown of Supply and Demand and Related Trends

Quantities Exported, 2004-2008 (in tons) Breakdown of Supply, 2008 CAGR Breakdown of Supply, 2008 1000000 Chile 5% 800000

US 10% Other 1 600000 Chile 31% Italy 2% 34% 400000 South Africa 2% 200000 Netherlands 11% US South Africa, 6% Italy 15% 0 Netherlands 9% 2005 2006 2007 2008 5%

Quantities Imported, 2004-2008 (in tons) BreakdownBreakdown ofof Demand,Demand, 20082008 800000 CAGR US 600000 2% 16% US

Netherlands Other 2 Netherlands 15% 9% 400000 55% Germany Germany -0.2% 8% 200000 UK 4% UK 7% Canada 3%

0 Canada 5% 2004 2005 2006 2007 2008

Note (1) : Includes supply from 86 other countries such as Turkey, Egypt, Mexico, Spain, India, Brazil, Greece, Argentina, China, Hong Kong Note (2): Includes supply from 136 other countries such as France, Hungary, Hong Kong, Poland, Mexico, Belgium, Ukraine, Czech Republic, China, Bangladesh Source: TradeMap 206 Detailed Go To Market Snapshot- Table Grapes

Table grapes have specific infrastructure requirements that are critical for successful production, processing, and distribution

Infrastructure Requirements for Table Grapes

Drip Irrigation System: A typical irrigation system for table grapes includes pumps, filters, and pipes. The type of catching pump depends on the area of grapes to be irrigated with the system (e.g. larger pump is required for larger areas of land). Water quality determines the type of filters required (e.g. river water with algae requires a different filter than underground water with sand). Typically use plastic pipes for the primary and secondary distribution lines. Primary lines must be in place prior to planting during soil preparation while secondary lines must be put in before trees start to sprout. Drip or spray sprinklers can be used. Injectors distribute fertilizer ProductionProduction throughout system InfrastructureInfrastructure Hail Storm Net Cover: Assemble during the year of first grape harvest or earlier in the life of the tree if hail storms occur once per year on average. Hail storm net is positioned 3-4 meters over the grape trees. Quality plastic nets last approximately 10-12 years. Will need to replace one time since the grape system lasts around 25 years Factory Shed: Storage facility required for harvesting equipment, tractor, sprayer, rotary tiller, forklift, carriage to transport to collection center

Cooling System: Required if don’t pack and sell grapes immediately 1-2 days after harvest. Grapes can be stored up to 3-4 months. Cooling system has two main components: pre-cooling chamber and cold Processing and chamber. Grapes enter the pre-cooling chamber (20° Celsius) right after harvest and are moved to the cold Processing and chamber (around 5° Celsius) after a couple days. Each cooling system has a capacity of 25 metric tons Packaging Packaging and stores up to 100 metric tons of fruit per year Infrastructure Infrastructure In/Out Weighing System: Capable of weighing up to 20 ton trucks. In the packaging line,1 weighting system is required for every 10 workers packaging and weighing boxes Outside of packaging, no other processing occurs for table grapes Road Transport: Table grapes are typically delivered by road since they can be expensive to transport long distances. Use refrigerated trucks at around 5° Celsius DistributionDistribution Air and Sea Transport: Requires cold storage containers or facilities around 5° Celsius InfrastructureInfrastructure Distribution Center: A center typically has a receiving storage chamber, cold storage facilities, and cold trucks of varying sizes according to business capacity Sources: Interviews 207 Detailed Go To Market Snapshot- Table Grapes Seeded grapes continue to be the main variety of table grapes produced by the EU; prices for the Italia variety have been dropping in the past few years due to limited demand

Table Grapes Variety Overview

Table Grape Varieties of EU’s Top Three Producers Average Grower’s Price, Italy 2 (Italy, Spain, Greece, 2007-2009) (Price in Euro/Kg, Marketing Year 2007-2010) Italy Greece

Euro per Kg It alia Victoria Victoria, 1.50 1.40 Red Globe Red 1.32 Globe, Seedless 1.19 Seedless 1.25 1.15 seedless 34% 34% 1.00 0.94 1.01 Italia (seeded)1 Seeded 0.95 66% 66% .83 0.66 0.73 0.75 0.68 0.68 0.80 0.73 0.68 0.51 0.54 0.43 0.56 Spain 0.50 0.53 0.51 0.41 0.39 0.44 0.47 0.25 0.43 0.31 0.25 0.24 0.14 Seedless Seeded 0.00 30% (Aledo, Ideal, Oct Oct Muscatel, Oct Nov Dec Nov Dec July Nov Dec July July Aug Aug Aug Sept Sept Sept June June Domingo, June Napoleon) 2007/08 2008/09 2009/10 70%

Source: USDA Foreign Agricultural Service, GAIN Report , EU-27 Fresh Deciduous Fruit Annual, 2009 Note (1): Production of seedless grapes in Italy continues to be marginal, due to their lower profitability, particularly in terms of yields, although their prices are substantially higher than seeded grapes (2) Italian growers' prices are used as a proxy because Italy produced 63.5% of all table grapes produced in the EU market. Prices of Italia during the current marketing year have decreased by 21% in October 2009 compared to the previous year, and 31% lower than two years ago. This is a result of the limited demand from both domestic and export markets. Greece has been experiencing a partially similar situation, with producer prices averaging well below last year’s levels. An additional factor in Greece and for seedless table grapes in Spain is the strong Euro exchange rate, compared to the British pound and other currencies. 208 Detailed Go To Market Snapshot- Table Grapes

A number of success factors exist for marketing table grapes, all of which require a concerted strategy among producers

Success Factors for Effectively Marketing Table Grapes 11 IdentifyIdentify retailers,retailers, Contact retailers about buying Fresh Grapes from the importersimporters andand exporting country distributorsdistributors ofof FreshFresh Partner with designated distributors for delivery of Fresh GrapesGrapes inin eacheach targettarget Grapes from exporting country marketmarket CommentsComments 2 None of these steps will 2 Implement plans through associations and producers to None of these steps will be successful unless all enforce certifications including GlobalGAP, BRC, IFS be successful unless all Implement and refine Implement and refine Develop optimal packaging requirements such as grape thethe freshfresh grapegrape quality control and quality control and bunches in punett, breathable bag, etc. producersproducers areare onon thethe packaging requirements packaging requirements Enforce sanitary inspections so that Pesticide Residue samesame pagepage andand supportsupport aa Analyses for shipments meet target market requirements unifiedunified strategystrategy AssociationsAssociations shouldshould 33 developdevelop internalinternal marketmarket Develop fund for marketing events to attract attention and controlscontrols toto makemake suresure Design marketing recognition of Fresh Grapes from export country Design marketing thatthat allall membersmembers adhereadhere programprogram toto launchlaunch FreshFresh Develop targeted, strategic marketing efforts for specific toto thethe programprogram andand GrapesGrapes CampaignCampaign countries and regions, as in the case of Chilean blueberries in London produceproduce tabletable grapesgrapes thatthat meetmeet aa certaincertain levellevel ofof qualityquality andand freshnessfreshness 44 Market entry will not be immediate as the table grape LaunchLaunch adad campaignscampaigns inin market has established producers and exporters targettarget marketsmarkets toutingtouting – Countries entering the market will need to thethe qualityquality andand freshnessfreshness differentiate themselves by delivering high quality ofof FreshFresh GrapesGrapes for better prices

Sources: Interviews 209 Table of Contents

Overview of Deliverable

Baseline Analysis of Agriculture Sector

210 Twenty-one initiatives will support implementation of crop diversification and address Kosovo’s agriculture challenges for both traditional and new crops Overview of Proposed Initiatives

1 A. Improve business viability and coordination of associations B. Introduce and strengthen extension system to promote traditional crops and improve diversity LeveragingLeveraging SmallSmall C. Increase and diversify types of financial products available to smallholder farmers FarmersFarmers PotentialPotential D. Improve cadastral system and test effectiveness of pilot land consolidation program

2 A. Develop and launch donor coordination activities for agriculture B. Create market intelligence system and communication plan Demand-DrivenDemand-Driven C. Improve capacity of collection centers, pack houses and cold storage FocusFocus D. Establish centralized organization to oversee marketing & export promotion of agriculture goods

3 A. Rehabilitate the large-scale irrigation system in Kosovo B. Increase use of small-scale irrigation systems InfrastructureInfrastructure C. Support development of greenhouses CapacityCapacity BuildingBuilding D. Increase energy competitiveness of the agriculture sector

4 A. Prioritize and develop rural roads using cost-benefit analysis and PPPs B. Develop air perishables plan and remove regulatory and market obstacles TransportationTransportation C. Analyze and communicate cost advantages of the new Tirana highway

Crop Diversification Initiative Crop Diversification 5 A. Establish a centralized, strengthened organizational model for food safety and quality control GovernmentGovernment B. Help private quality control labs to achieve international certification AgricultureAgriculture C. Establish program to protect the environment against pesticide and input misuse RegulationsRegulations 6 A. Develop institutional initiatives to facilitate trade and build capacity in the Government of Kosovo TradeTrade AccessAccess B. Develop and execute interim response to subsidies in neighboring countries 0

Sources : BAH Analysis 211 The primary initiative will be a crop diversification program which will bring significant volumes of high value crops to market by the end of the third year

Initiatives to Increase the Value and Diversity of Kosovo’s Agricultural Output 1 Increase Value and Leveraging Small Increase Value and Increase Value and Increase Value and Leveraging Small Diversity of Kosovo’s Diversity of Kosovo’s Diversity of Kosovo’s Diversity of Kosovo’s FarmeFarmerrss PotentialPotential Agricultural Output Agricultural Output Agricultural Output Agricultural Output (Year 1) (Year 2) 2 (Year 3) (Year 4&5) 1. Communicate the high 1. Continue year one 1. Continue year one and 1. Continue previous years Demand-DrivenDemand-Driven priority crops to farmers programs to include two programs – focus programs – shift FocFocuuss and agribusiness additional farmers; on services to ensure financial support from owners and identify 2. Develop capacity of crop- that a broad base of grants to sustainable ve i 3 champions for specific small farmers are forms of loans and t specific co-ops and

ia crops; associations participating and insurance; it successful; In Infrastructure 2. Develop test plots for 2. Focus support on multi- Infrastructure 3. Complete crop-specific n priority crops and begin 2. Develop market annual crops that are o CapacityCapacity BuilBuildidinngg i value chains for storage, t extension services; packing, labeling, linkages and provide reaching maturity (e.g. ca i

f 4 technical support for kiwi)

i 3. Begin to provide cost- transportation; domestic and export share grants, insurance 4. Design and implement

vers sales of new, high-value i and loans for producers TransportationTransportation marketing programs in D of new crops; crops;

p Kosovo and in target o

r 4. Visit fairs to develop export markets;

C 5 relationships and market 5. Make test shipments to GovernmentGovernment intelligence buyers; AgricultureAgriculture RegulatiRegulatioonsns Improve yields and value in Continued improvement Kosovo produces and 6 Kosovo produces and high priority crops already in yields and values. First sells significant sells growing volumes grown in small quantities shipments of new high- volumes of new high- of new high-value TradeTrade AccessAccess in Kosovo (e.g. gherkins, value crops made to value crops crops. Multi-annuals table grape, chicory) domestic and export come to market. 0 buyers

Sources : BAH Analysis 212 Initiatives can be executed using full resources or achieving “quick wins” Recommended Initiatives: Implementation with Quick Wins & Full Resources

QuickQuick WinsWins FullFull ResourcesResources

Ramp up production of high-value crops already Develop production, sales and exports of significant CropCrop grown in Kosovo (e.g. gherkins, table grape, chicory) volumes of high-value crops realizing efficiency gains DiversificationDiversification and address value chains gaps throughout the value chain Improve the effectiveness of associations and coops Develop extension and “coop-like” services by in areas such as input purchase, labor and LeveragingLeveraging building relationships between lead firms and equipment sharing and marketing SmallSmall FarmersFarmers growers (PPP model) Develop extension services through both PPP and PotentialPotential Implement a guarantee program for equipment public models leasing and finance Implement land consolidation programs Improve coordination of donor spending on agriculture production and marketing Improve the organization and processes for food Development market information system including safety and quality and attain a European-level of Demand-DrivenDemand-Driven farm gate and market pricing in Kosovo target quality FocusFocus countries Develop a functional public-private investment Attract private investment to collection, packhouse promotion organization for agriculture and storage businesses

Invest in the financial and engineering sustainability InfrastructureInfrastructure Finance development of water-efficient small-scale of the formal irrigation system CapacityCapacity irrigation systems and modern greenhouse through Develop over 200 additional hectares of BuildingBuilding grants programs greenhouses with a marketing chain for climate- controlled crops

213 Initiatives can be executed using full resources or achieving “quick wins” (cont’d) Recommended Initiatives: Implementation with Quick Wins & Full Resources (cont’d)

QuickQuick WinsWins FullFull ResourcesResources

Publicize the economic benefits of the Tirana Use an economic model to prioritize farm-to-market highway and attract Albania-based freight forwarders TransportationTransportation road projects and develop the rural road network to Kosovo through construction PPPs Obtain ICAO license for air freight pick-ups at ICAO Centralized organizational structure driving compliance of national and international food safety standards, thereby increasing exports of agriculture Work with MAFRD, KFVA, and Ministry of Health to goods Government improve food safety inspections Government Developing system of private quality labs that are Agriculture Establish alliances with inputs importers to provide Agriculture internationally recognized and have developed Regulations training to farmers in proper application of inputs, Regulations bilateral agreements with key exporting countries thereby driving increase in production value Fully automated tracking system tracking sales and distribution of all inputs, thereby decreasing the presence of counterfeit pesticides to less than 1% Focus on improved capacity of all trade officials in Develop the data needed to enforce CEFTA GoK, including Department of Trade (MTI), Kosovo information sharing provisions (Art 44) on all Customs, Dept of Bilateral Affairs (MFA), Office of countries placing subsidies on agriculture goods the President and KFVA, to negotiated trade TradeTrade AccessAccess Develop an inter-ministerial council for trade and a agreements with regional countries “rapid reaction force” to respond to trade issues Develop legitimate trade responses developed for all affecting agriculture subsidies placed on agriculture goods, driving an increase in domestic consumption

214 All initiatives can be implemented in a phased approach during roll-out of crop diversification… Proposed Implementation Timeline Initiative Year 1 Year 2 Year 3 Year 4 & 5 Crop Diversification Initiative

A. Improve business viability and coordination of associations

B. Introduce and strengthen extension system to promote traditional crops and improve diversity

C. Increase and diversify types of financial products available to smallholder farmers Potential Leveraging

Small Farmers Farmers Small D. Improve cadastral system and test effectiveness of pilot land consolidation program

A. Develop and launch donor coordination activities for agriculture

B. Create market intelligence system and communication plan

C. Improve capacity of collection centers, pack houses and cold storage Demand-

Driven Focus Driven D. Establish centralized organization to oversee marketing & export promotion of agriculture goods

A. Rehabilitate the large-scale irrigation system in Kosovo

B. Increase use of small-scale irrigation systems

C. Support development of greenhouses Building Capacity

Infrastructure Infrastructure D. Increase energy competitiveness of the agriculture sector

A. Prioritize and develop rural roads using cost-benefit analysis and PPPs

B. Develop air perishables plan and remove regulatory and market obstacles

Transport C. Analyze and communicate cost advantages of the new Tirana highway

A. Establish a centralized, strengthened organizational model for food safety and quality control

B. Help private quality control labs to achieve international certification

Gov’t Ag C. Establish program to protect the environment against pesticide and input misuse Regulations A. Develop institutional initiatives to facilitate trade and build capacity in the Government of Kosovo

B. Develop and execute interim response to subsidies in neighboring countries Trade Sources : BAH Analysis 215 … and are consistent with the strategy developed by MAFRD

Agriculture Opportunities Strategy Initiatives

IncreaseIncrease valuevalue andand diversitydiversity ofof agriculturalagricultural outputoutput (0)(0) Agriculture and Rural Development Plan ImproveImprove coordinationcoordination andand businessbusiness servicesservices ofof associations (1a) (ARDP) Framework associations (1a) IntroduceIntroduce andand strengthenstrengthen extensionextension servicesservices (1b)(1b) (2009-2013) IncreaseIncrease andand diversifydiversify typestypes ofof financialfinancial productsproducts availableavailable toto smallholdersmallholder farmersfarmers (1c)(1c) AxisAxis 11 ImproveImprove cadastralcadastral systemsystem (1d)(1d) IncreaseIncrease accessaccess andand useuse ofof marketmarket informationinformation (2b)(2b) Kosovo Agri-Rural Development ImproveImprove capacitycapacity ofof collectioncollection centerscenters (2c)(2c) EstablishEstablish centralizedcentralized orgorg forfor marketingmarketing andand promotionpromotion (2d)(2d) EnsureEnsure compliancecompliance withwith qualityquality andand safetysafety standardsstandards (5(5 aa && b)b) Axis 1 Axis 2 Axis 3 EncourageEncourage farmfarm enterpriseenterprise diversificationdiversification (0)(0) Environment & Rural Promote sustainable and alternative land use (1d) Axis 2 Promote sustainable and alternative land use (1d) Competitiveness Improved Land Diversification Axis 2 EstablishEstablish programprogram toto protectprotect thethe environmentenvironment againstagainst Use and Quality of pesticidepesticide andand inputinput misusemisuse (5c)(5c) Rural Life IntroduceIntroduce PPPPPP extensionextension servicesservices inin ruralrural areasareas (1b)(1b) IncreaseIncrease typestypes ofof financialfinancial productsproducts forfor ruralrural farmersfarmers (1c)(1c) BrandBrand andand marketmarket locallocal productsproducts (e.g.(e.g. RahovicaRahovica table table AxisAxis 33 grapes)grapes) (2d)(2d) IncreaseIncrease useuse ofof smallsmall scalescale irrigationirrigation systemssystems (3b)(3b) Axis 4 Community-Based Local Development Strategies CreateCreate andand rehabilitaterehabilitate roadsroads inin ruralrural areasareas (4a)(4a) IncreaseIncrease competitivenesscompetitiveness andand accessaccess toto energyenergy (3d)(3d)

IncreaseIncrease valuevalue andand diversitydiversity ofof agriculturalagricultural outputoutput (0)(0) ImproveImprove coordinationcoordination andand businessbusiness servicesservices ofof AxisAxis 44 associationsassociations (1a)(1a) IntroduceIntroduce PPPPPP extensionextension servicesservices forfor communitiescommunities (1b)(1b)

Sources : Agriculture and Rural Development Plan (ARDP) 2009-13, BAH Analysis 216 Crop Diversification Initiative Initiative: Increase the Value and Diversity of Kosovo’s Agricultural Output (Year 1) Duration: 5 years Supporting Analysis: pp18, 26, 29 (AgStrat Baseline)

Description Implementation Steps Currently there are not many types of crops or 1. Communicate high priority crops to farmers/agribusiness owners and identify champions for crops diverse varieties of each crop cultivated in a. Identify farmers/associations capable of growing top crops identified in the crop diversification model Kosovo. This is a legacy of the Yugoslav b. Articulate benefits of growing top crops and potential varieties to farmers, determine which crops production system and of a sector that is they would consider cultivating, and select 2-4 new crops and specific crop varieties for test plots focused primarily on local tastes. This puts the c. Introduce new varieties and expand volumes of high yield/value crops already produced in Kosovo sector at risk, exacerbates the trade deficit, and (e.g. gherkins, grape, chicory) reduces the livelihoods of farmers. 2. Develop test plots for priority crops and begin extension services The crop diversification initiative is designed to a. Select organizations or technical experts that can provide the necessary knowledge and extension help Kosovo address these challenges and services needed for farmers to successfully grow quality, high yield crops bring significant volumes of high value crops to b. Begin trainings with identified pilot farmers to explain in detail how to grow each crop, including market by the end of the third year. The first planting, seed varieties, pesticide use, and water irrigation year of the crop diversification initiative will: 1) c. Discuss planting techniques required to cultivate varieties that will meet customer preferences for communicate the high priority crops to farmers taste, color, shape, size, etc. as well as meet or exceed quality requirements and safety standards and agribusiness owners and identify d. Plant and monitor varieties in test plots. At the end of the growing season, analyze which varieties champions for specific crops, 2) develop test are best suited for production in which areas and document lessons learned and changes for plots for priority crops and begin extension production in year two services, 3) begin to provide cost-share grants, 3. Begin to provide cost-share grants, insurance, and loans for producers of new crops insurance and loans for producers of new a. Establish credit/insurance mechanisms for farmers producing new pilot varieties crops, and 4) visit fairs to develop relationships b. Establish a small grants program with cost-share and market intelligence 4. Visit fairs to develop relationships and market intelligence a. Conduct market analysis for top crops and varieties selected to have a thorough understanding of the potential customers, targeted customer buying preferences, and main competitors supplying these products (leverage MIS once launched) b. Determine quality requirements and safety standards specific to each target market c. Analyze the distribution channels and identify distributors, wholesalers, and retailers d. Identify and attend select trade fairs (e.g. Fruit Logistica) as participants to begin to develop relationships and gather market intelligence Indicator Key Risks / Mitigation Plans Key Milestones Increase in export value Farmers do not want to grow new crops or varieties: 1% increase in export value Increase in jobs Detail benefits from growing each crop (potential 30 smallholder farmers and 2 largeholder Number of farmers participating in test plots farm gate prices for products meeting quality farmers participating in test plots Yield of test plots for each crop requirements, processing potential, size of target 50% of farms achieve at least an average yield Proportion of harvest meeting quality and market) and initial technical and financial support to for test plots when compared to regional safety standards participate in initial crop diversification program benchmarks for crop 50% of harvest meets quality/safety standards Sources : BAH Analysis 217 Crop Diversification Initiative Initiative: Increase the Value and Diversity of Kosovo’s Agricultural Output (Year 2) Duration: 5 years Supporting Analysis: pp18, 26, 29 (AgStrat Baseline)

Description Implementation Steps The goals during the second year of the crop 1. Continue year one programs to include additional farmers diversification initiative are to: 1) continue a. Identify additional farmers to expand test plot production and monitoring year one programs to include additional b. Conduct testing to confirm rigorous quality and safety standards are met (conducted by the new food farmers, 2) develop capacity of crop-specific safety and quality control organization) cooperatives and associations, 3) complete 2. Develop capacity of crop-specific cooperatives and associations crop-specific value chains for storage, packing, a. Encourage cooperation within smallholder farmer community to ensure that economies of scale may labeling, and transportation, 4) design and be obtained for competitive opportunities implement marketing programs in Kosovo and b. Increase capacity of cooperatives and associations to cultivate (with competitive yields), harvest, and in target export markets, and 5) make test organize high quality products that meet international quality and safety standards as a group shipments to buyers 3. Complete crop-specific value chains for storage, packing, labeling, transportation a. Design packaging and labeling to ensure quality and freshness and to enable portion control given some consumers pay more for individually labeled and packaged produce b. Analyze current packaging, storage, labeling, and transportation requirements near test plots c. Conduct gap analysis to determine needed infrastructure for each crop-specific value chain d. Develop plan to identify investors/donors/others to build and efficiently manage infrastructure 4. Design and implement marketing programs in Kosovo and in target export markets a. Develop marketing programs and campaigns to introduce crops to target markets b. Attend target trade fairs (e.g. Fruit Logistica) to expand potential buyer network, approach buyers with range of varieties, and offer sample products to buyers as well as gather innovative ideas and additional market intelligence 5. Make test shipments to buyers a. Select top products for export and work with KFVA to efficiently complete export requirements Indicator Key Risks / Mitigation Plans Key Milestones Increase in export value Buyers are unaware of Kosovo’s new crop variety 5% increase in export value Increase in jobs production: Farmers and associations must work 70 smallholder farmers and 5 largeholder Number of farmers participating in test plots with marketing experts and actively participate in farmers participating in test plots Yield of test plots for each crop high profile trade shows to expand their network and 60% of farms achieve at least an average yield Proportion of harvest meeting quality and spread the word about Kosovo’s ability to produce for test plots when compared to regional safety standards high-quality crop varieties that meet customer benchmarks for crop Number of contracts secured for export orders preferences 60% of harvest meets quality/safety standards Total quantity ordered for export by crop 5 contracts secured for export orders (varies by crop)

Sources : BAH Analysis 218 Crop Diversification Initiative Initiative: Increase the Value and Diversity of Kosovo’s Agricultural Output (Year 3) Duration: 5 years Supporting Analysis: pp18, 26, 29 (AgStrat Baseline), p8,37 (AgCLIR)

Description Implementation Steps In the third year, the crop diversification 1. Continue year one and two programs—focus on services that ensure smallholder farmer participation initiative will: 1) continue year one and two a. Continue to work with smallholder cooperatives to increase yields and meet customer demands by programs – focus on services to ensure that a increasing their management capacity, knowledge of agriculture contracts, and trust broad base of small farmers are participating b. Continue to develop and implement micro-lending products to ensure cost-share grants, insurance, and successful and 2) develop market linkages and loans are available for farmers (especially smallholder producers) and provide technical support for domestic and c. Work collaboratively with the food safety and quality control organization to ensure farmers export sales of new, high-value crops (especially smallholder farmers) thoroughly comprehend quality/safety requirements d. Develop the capacity of smallholder farmers to ensure they can meet quality/safety requirements e. Conduct rigorous quality testing at KFVA in conjunction with associations, processors and donors to certify quality products and reject products that do not meet quality standards with clear documentation outlining reasons for rejection f. Work with processors and purchases to select and package quality products for export markets; and, work with Customs to complete necessary paperwork and other requirements to efficiently export to target markets 2. Develop market linkages and provide technical support for domestic and export sales a. Conduct direct marketing in domestic / export markets for traders in local green markets in Pristina b. Continue to attend current tradeshows to aggressively market and sell products as well as attend new trade fairs serving strategic markets or selected crops c. Attend trade shows to display, market, and sell products d. Contact potential buyers and send sample products to other buyers not present at trade shows e. Consider hosting potential buyers in Kosovo if sufficient demand for crops exists f. Export high-quality products to identified destinations g. Follow up with buyers to address any unforeseen challenges and ensure client satisfaction Indicator Key Risks / Mitigation Plans Key Milestones Increase in export value Buyers do not perceive Kosovo as a high-quality 10% increase in export value Increase in jobs producer: Highlight Kosovo’s significant investment 150 smallholder farmers and 8 largeholder Yield of test plots for each crop in and commitment to its new quality and food safety farmers participating in test plots Proportion of harvest meeting quality and organization, upgraded quality labs, and highly 75% of farms achieve at least an average yield safety standards trained professionals enabling Kosovo to rigorously for test plots when compared to regional Number of contracts secured for export orders assess crops and enforce stringent quality standards benchmarks for crop Total quantity ordered for export by crop 75% of harvest meets quality/safety standards (varies by crop) 10 contracts secured for export orders Number of trade fairs attended 5 trade fairs attended Number of farmers/association representatives Minimum of 5 farmers/association attending each trade fair representatives attending each trade fair Sources : BAH Analysis 219 Crop Diversification Initiative

Initiative: Increase the Value and Diversity of Kosovo’s Agricultural Output (Year 4 & 5) Duration: 5 years Supporting Analysis: pp18, 26, 29 (AgStrat Baseline)

Description Implementation Steps In the fourth and fifth years, the crop 1. Continue previous years programs – shift financial support from grants to sustainable forms of loans and diversification initiative will: 1) continue insurance previous years programs – shift financial a. Continue all programs from previous years support from grants to sustainable forms of b. Begin to wind down grants funding while increase cost share loans and insurance and 2) focus support on c. Provide technical assistance to financial services companies to ensure that financial products for multi-annual crops that are reaching maturity crop diversification are robust and commercially viable (e.g. kiwi) d. Identify sources of financing to replace donor support 2. Focus support on multi-annual crops that are reaching maturity a. Focus extension on multi-annual crops introduced in the diversity initiative and only reaching maturity at this time (e.g. kiwi). b. Support producers of multi-annuals in making test shipments to buyers

Indicator Key Risks / Mitigation Plans Key Milestones Increase in export value Sustainability. Focus on transition of all programs to 20% increase in export value Increase in jobs GoK and other stakeholders. Ensure that financial 300 smallholder farmers and 12 largeholder Yield of test plots for each crop products are commercially viable. Identify sources farmers participating in test plots Proportion of harvest meeting quality and of funding to replace donor funds. 75% of farms achieve at least an average yield safety standards Access to capital for producers of multi-annuals. for test plots when compared to regional Number of contracts secured for export orders Assist multi-annual producers with cash flow benchmarks for crop Total quantity ordered for export by crop management as crops reach maturity. 75% of harvest meets quality/safety standards (varies by crop) 20 contracts secured for export orders Number of trade fairs attended 5 trade fairs attended

Sources : BAH Analysis 220 Crop Diversification Initiative

Initiative: Increase the Value and Diversity of Kosovo’s Agricultural Output Duration: 5 years Supporting Analysis: pp18, 26, 29 (AgStrat Baseline)

RationaleRationale KeyKey CounterpartsCounterparts Experts train farmers on production TargetedTargeted cropscrops willwill increaseincrease farmerfarmer livelihoodslivelihoods techniques and address challenges with test Crop Experts providingproviding anan incentiveincentive forfor expansionexpansion forfor thethe 30%30% ofof Crop Experts plots to be able to meet quality/safety smallsmall farmersfarmers whowho leaveleave partpart ofof theirtheir landland fallowfallow standards and customer preferences becausebecause theythey havehave nono profitableprofitable useuse forfor it.it. Experts to conduct market analysis for Marketing/Marketing/ selected crops, develop marketing CropCrop diversificationdiversification hashas prioritizedprioritized laborlabor intensiveintensive crops,crops, PackagingPackaging strategy/campaign for selected crops, thethe cultivationcultivation ofof whichwhich willwill significantlysignificantly reducereduce ruralrural ExpertsExperts develop packaging labels unemployment.unemployment. IncreasedIncreased demanddemand forfor sorting/grading,sorting/grading, Customs to provide assistance to help new packing, storage, processing and transportation will Customs packing, storage, processing and transportation will Customs exporters navigate export process Ministry/ createcreate manymany knock-onknock-on jobsjobs inin agribusiness.agribusiness. Ministry/ Quality Organization to train farmers on Quality Org TargetedTargeted cropscrops areare inin highhigh demanddemand inin regionalregional marketsmarkets Quality Org quality/safety standards and monitor crops and the European Union and will decrease the trade and the European Union and will decrease the trade Ministry of Leverage Peja Institute and MoA experience deficit through expanded exports and substitution of Ministry of deficit through expanded exports and substitution of Agriculture/Agriculture/ with test plots and crop specific production imports. imports. PejaPeja Institute Institute knowledge and techniques ProductionProduction ofof thethe targetedtargeted cropscrops willwill developdevelop Kosovo’sKosovo’s reputationreputation asas aa skilledskilled producerproducer ofof high-valuehigh-value Provide technical and financial assistance to horticulture,horticulture, brandedbranded forfor thethe country.country. DonorsDonors launch and monitor progress of crop diversification strategy

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical Assistance:Assistance:$10,800,000$10,800,000 (8(8 peoplepeople forfor 55 years)years) SmallSmall GrantGrant FundFund (1,000(1,000 grantsgrants averagingaveraging $5000):$5000): $5,000,000$5,000,000 SupportingSupporting forfor RevolvingRevolving LoanLoan FundFund oror Insurance:Insurance:$1,000,000$1,000,000 (amount(amount inin subsidiessubsidies forfor guarantee-guarantee- assumptionassumption willwill leverageleverage aa $10,000,000$10,000,000 guarantee)guarantee) 11 TotalTotal EstimatedEstimated CoCosts:sts: $$ 16,800,00016,800,000

Note (1) : Assumption that DCA leverage funds 10:1; based on expert analysis Sources : BAH Analysis 221 Initiatives for leveraging smallholder farmers’ potential range four main programs covering associations, extension systems, financial products and a land consolidation program

Initiatives to Leverage Small Farmers’ Potential 1

LeveragingLeveraging SmallSmall AA BB CC DD IntroducIntroducee aandnd InIncreasecrease anandd ImprovImprovee ccaaddaasstrtralal FarmersFarmers PotentialPotential ImprovImprovee bubussinineessss strstreengthngtheenn eexxtentenssionion divdiveerrssifyify ttyyppeess ofof sysystemstem aandnd tetestst vviiabilityability andand sysystemstem toto prpromoteomote finanfinancciiaall pprroductsoducts effeeffectivctiveneneessss ofof pipilotlot 2 coocoorrdindinaationtion ofof traditionaltraditional cropscrops andand avavailailaablblee toto landland ccoonnssolioliddationation assocassociiaattioionsns improvimprovee divdiveerrssityity smsmaallholdllholdeerr farfarmmererss progrprogramam Demand-DrivenDemand-Driven Focus Associations and Currently no effective There is significant gap While the legal Focus cooperatives are public sector model or in the range and number framework for 3 crucial to the success PPP model for of financial products that property and property of smallholder farmers. extension services are targeted to registration are in line Infrastructure However, functioning exists. We propose a smallholder farmers. with best practices, Infrastructure associations are a multi-model approach to The initiative aims at implementation of the CapacityCapacity BuildingBuilding minority -- only 9.6% of 1) develop the public providing smallholder cadastral system is associations in Kosovo sector model to help farmers greater access very weak. We 4 are considered active. farmers effectively to financial instruments propose a three-part The primary goals of produce and sell that will increase effort that will improve TransportationTransportation the initiative are to 1) traditional crops that are production, sales and the current cadastre assist associations and considered both high export overall though: system to align land cooperatives in profit and high yield and 1) a guarantee program rights with geographic

Crop Diversification Initiative Crop Diversification 5 developing sustainable 2) establish the PPP for leasing, insurance distribution, increase GovernmentGovernment value-added services model of providing and other innovative judges’ ability to Agriculture and 2) develop extension services to products, 2) introduction adjudicate cases of Agriculture sustainable service help farmers, of mobile banking land dispute and test RegulationsRegulations relationships between processors and system and 3) a the effectiveness of 6 lead firms and exporters effectively program to partner with land consolidation. smallholder growers. produce and market a MFIs to offer more cost- diversified crop mix. effective products in TradeTrade AccessAccess rural areas. 0

222 Leveraging Small Farmers Potential

Initiative 1A: Improve business viability and coordination of associations Duration: 3 years Supporting Analysis: pp48-49 (AgStrat Baseline), pp37-39 (AgCLIR)

Description Implementation Steps Associations and cooperatives are crucial to 1. Assist associations and cooperatives in developing sustainable value-added services the success of smallholder farmers. However, a. Complete exhaustive analysis of all associations according to crop type, management model, functioning associations such as Perdrini and revenue, equity management Anadrini are a minority -- only 9.6% b. Complete survey for consumer perception to determine the areas where associations could enhance associations (13 total) in Kosovo are or support development of new products considered active. Much of the difficulty lies in c. Pinpoint weaknesses in stage of association development and formulate business case to help establishing active associations that provide support those that appear to be financially stable and meet consumer demand valuable services to farmers and have a self- d. If necessary, refine management model, including appointment of board and senior leadership sustaining business model. Some of the e. Identify and provide technical assistance as necessary to address weakness in areas of the obstacles include dependence on extended agriculture value chain, including production, processing and marketing family for production relationships, lack of trust f. Establish policy and legislation to legalize cooperatives in Kosovo in developing business ventures and little 2. Develop sustainable service relationships between lead firms and smallholder growers emphasis placed on relationships with buyers. a. Based on exhaustive analysis of current associations, identify gaps in associations available to Therefore, we propose a two-pronged farmers according crop type, management model, regional coverage approach to 1) assist associations and b. Identify and examine financial viability and management model of processors, exporters or large cooperatives in developing sustainable value- producers in similar crop sectors to potentially develop lead associations added services and 2) develop sustainable c. Match processors, exporters and producers with pools of farmers to develop value-added services service relationships between lead firms and d. Develop management models with lead firms and growers to ensure sustainability and value-add smallholder growers. e. Identify and provide technical assistance as necessary to address weaknesses in areas of the value chain, including production, processing and marketing f. Develop contracts between growers and lead firms and create a low-cost adjudication process to address disputes Indicator Key Risks / Mitigation Plans Key Milestones Increase in production value Farmers’ unwillingness to work with lead firms: At least 15 assisted associations operating as Increase in export value assign responsibility to farmers on board and provide profitable businesses by the end of year 2 Value of agriculture goods bought and sold by clear decision rights and interaction mechanisms Increase in consumer satisfaction of lead firms Inability to improve production, processing and/or association-developed products by 50% as Increase in the range and depth of services marketing: monitor product development, pinpoint measured by consumer survey provided by associations recurring weakness and address with technical Increase in consumer satisfaction for products assistance developed by associations Fear that lead firms with take advantage of small farmers: develop clear MoUs between lead firms and farmers

Sources : BAH Analysis 223 Leveraging Small Farmers Potential

Initiative 1A: Improve business viability and coordination of associations Duration: 3 years Supporting Analysis: pp108-110 (AgStrat Baseline)

RationaleRationale KeyKey CounterpartsCounterparts

StrengtheningStrengthening associationsassociations inin KosovoKosovo willwill helphelp farmersfarmers Maintain data and information on all produceproduce productsproducts thatthat meetmeet consumerconsumer demand,demand, therebythereby associations, including results from analysis increasingincreasing competitivenesscompetitiveness ofof productsproducts MAFRDMAFRD of all associations Monitor development of new and current AssociationsAssociations willwill createcreate greatergreater economieseconomies ofof scale,scale, associations whichwhich willwill helphelp farmersfarmers decreasedecrease theirtheir costscosts andand competecompete moremore effectivelyeffectively onon thethe marketmarket DirectDirect technicaltechnical assistanceassistance willwill helphelp farmersfarmers understandunderstand Provide monetary and technical assistance in addressing indentified weakness thethe methodsmethods ofof production,production, processingprocessing andand marketingmarketing DonorDonor Work with lead firms and farmers to develop neededneeded toto createcreate sustainablesustainable businessbusiness modelsmodels ProgramsPrograms management models and provide technical Associations will help foster greater trust and working Associations will help foster greater trust and working assistance for pilot associations relationshiprelationship amongamong farmersfarmers andand leadlead firmsfirms ProvideProvide basisbasis forfor knowledgeknowledge transfertransfer amongamong leadlead firmsfirms andand smallsmall farmersfarmers Work with donor programs to improve CurrentCurrent Improve distribution networks among lead firms and business viability of associations Improve distribution networks among lead firms and AssociationsAssociations Openly communicate recurring weaknesses farmersfarmers inin associations,associations, therebythereby increasingincreasing salessales toto thethe && LeadLead FirmsFirms endend consumerconsumer and obstacles to be addressed

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical AssistanceAssistance:: $2,592,000$2,592,000 (4(4 peoplepeople for for 33 years)years) SmallSmall GrantsGrants toto AssociationsAssociations andand LeadLead FirmsFirms (40(40 grantsgrants atat $10,000$10,000 each):each): $400,000$400,000

TotalTotal EstimatedEstimated CostsCosts :: $2,992,$2,992,000000 forfor TATA andand SmallSmall GrantsGrants

Sources : BAH Analysis 224 Leveraging Small Farmers Potential Initiative 1B: Introduce and strengthen extension system to promote traditional crops and improve diversity Duration: 2 years Supporting Analysis: pp50-51 (AgStrat Baseline), pp25-26 (AgCLIR)

Description Implementation Steps Currently no effective public sector model or 1. Develop public sector extension services for traditional crop mix PPP model for extension services exist. The a. Complete assessment of current extension services provided for traditional crops that are Ministry of Agriculture operates an Extension considered high profit / high production Department in each of the municipalities, but b. Assess and pinpoint current weakness in farmers’ production, processing and marketing of activities are limited to data collection. Donor- traditional crops funded projects such as KPEP and c. Develop extension program that includes recommended workshops/classes, on-site interventions, Intercooperation provide extension services, publications, websites and access to technical advisors to address identified weaknesses but the government does not play a role. d. Formulate detailed budget to implement public sector extension program Therefore, we propose a multi-model approach e. Draft public sector extension program and MoU, including the services to be provided by the to 1) develop the public sector model to help MAFRD, experts, universities, the Peja Institute; program will include governance structure, funding farmers effectively produce and sell traditional mechanism and sources, decision rights and accountability crops that are considered both high profit and f. Secure funding sources, launch public sector extension services, and monitor effectiveness high yield and 2) establish the PPP model of 2. Work with donors to develop partnership (PPP) extension services for crop diversification providing extension services to help farmers, a. Determine the skills and knowledge that will be required for farmers to grow new high-value crops processors and exporters effectively produce b. Identify pilot group of farmers who will produce crops and assess skill sets to pinpoint gaps that can and market a diversified crop mix. be addressed by extension programs c. Work with Donor Coordination Committee and MAFRD to identify the proper donors and buyers who could provide extension services under partnership model d. Develop extension program that includes recommended workshops/classes, on-site interventions, publications, websites and access to technical advisors to develop new crops e. Formulate detailed budget to implement PPP extension program f. Draft PPP extension program and MoU, including the services to be provided by the donors and buyers; program will include governance structure, funding mechanism and sources, decision rights and accountability g. Secure funding and investment sources, launch PPP extension services, and monitor effectiveness Indicator Key Risks / Mitigation Plans Key Milestones Increase in yield Inability to identify proper experts for training: work with MAFRD At least 1000 farmers assisted Number of farmers trained and reached and donors to exhaustive search for key agriculture experts within first year of program through public and PPP extension services Low participation rate from farmers: develop more on-site Minimum 100 training programs and Number of training programs and interventions interventions for areas with low participation rates on-site interventions administered administered Inability to attract buyers for PPPs: provide investment and/or Completely operational public sector tax incentives for participation extension program by end of year 1 Enforcement of agreement and funding: monitor effectiveness of At least 5 PPP extension programs program and address problems as they arise created by end of year 1

Sources : BAH Analysis 225 Leveraging Small Farmers Potential Initiative 1B: Introduce and strengthen extension system to promote traditional crops and improve diversity Duration: 2 years Supporting Analysis: pp111-113 (AgStrat Baseline)

RationaleRationale KeyKey CounterpartsCounterparts

Oversee development of public extension TheThe publicpublic sectorsector modelmodel willwill bebe moremore effectiveeffective inin Ministry of Ministry of system; provide funding, monitor developingdeveloping aa largelarge scalescale programprogram forfor highhigh profitprofit // highhigh Agriculture Agriculture effectiveness of program and make changes yieldyield products products ––Experience/ Experience/ knowledgeknowledge existsexists inin keykey governmentgovernment Donor Oversee development of PPP extension agenciesagencies (MAFRD,(MAFRD, PejaPeja Institute, Institute, etc.)etc.) andand Donor CoordinationCoordination system; identify donors and partners, farmers,farmers, therebythereby ensuringensuring successsuccess ofof programprogram CommitteeCommittee monitor progress and make changes TheThe PPPPPP modelmodel willwill bebe effectiveeffective inin ensuringensuring knowledgeknowledge transfertransfer betweenbetween companiescompanies andand donorsdonors toto farmers,farmers, Develop training programs, materials, University of processorsprocessors andand governmentgovernment entitiesentities University of website and publication for extension PristinaPristina ––Introduction Introduction ofof newnew cropscrops willwill requirerequire outsideoutside system expertiseexpertise thatthat maymay notnot currentlycurrently existexist inin KosovoKosovo AA multi-modelmulti-model approachapproach ensuresensures thatthat KosovoKosovo takestakes Provide expertise in specific crop areas to develop extension programs advantageadvantage ofof allall possiblepossible partnerspartners andand fundingfunding sourcessources PejaPeja Institute Institute Monitor content delivered in programs HighHigh penetrationpenetration raterate ofof publicpublic sectorsector modelmodel throughthrough training of farmers, associations, processors, etc. who training of farmers, associations, processors, etc. who Provide funding and expertise to develop in turn, can train members and employees Buyers & in turn, can train members and employees Buyers & PPP extension programs in coordination Companies PPPPPP modelmodel couldcould attractattract presencepresence ofof moremore buyersbuyers whowho Companies with donors areare interestedinterested inin workingworking withwith farmersfarmers inin KosovoKosovo

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical AssistanceAssistance inin MinistryMinistry forfor PublicPublic ModelModel:: $1,296,000$1,296,000 (3(3 peoplepeople forfor 22 years)years) Short-termShort-term TATA toto ImplementImplement thethe PPPPPP approach:approach: $432,000$432,000(1(1 fullfull timetime personperson equivalentequivalent forfor 22 years)years) AdministrationAdministration ofof 200200 TrainingTraining ProgramsPrograms:: $300,000$300,000 (20(20 participantsparticipants atat raterate ofof $1,500$1,500 perper program)program) ExpertsExperts forfor 200200 TrainingTraining ProgramsPrograms:: $720,000$720,000 (2(2 trainers,trainers, averageaverage 22 dayday classes)classes) On-SiteOn-Site TechnicalTechnical AssistanceAssistance:: $300,000$300,000 (1,000(1,000 farmersfarmers 44 timestimes perper year,year, $75$75 forfor eacheach visit)visit) AdministrationAdministration CostsCosts forfor OnsiteOnsite AssistanceAssistance:: $60,000$60,000 TotalTotal EstimatedEstimated CostsCosts :: $3,108,000$3,108,000 forfor TrainingTraining && On-SiteOn-Site AssistanceAssistance

Sources : BAH Analysis 226 Leveraging Small Farmers Potential Initiative 1C: Increase and diversify types of financial products available to smallholder farmers Duration: 3 years Supporting Analysis: pp52, 114-5 (AgStrat Baseline), pp 18-29 (AgCLIR)

Description Implementation Steps Currently small farms represent 98% of total 1. Develop guarantee program to increase commercial presence of leasing, insurance and other innovative farms in Kosovo. There is significant gap in the products to smallholder farmers range and number of financial products that are a. Examine and identify banks and companies nationally and regionally who could offer leasing targeted to smallholder farmers. Primary services, insurance and other innovative products to smallholder farmers reasons for this gap include distance from b. Work with donors to set-up leasing and other guarantee programs with banks / companies, detailing banking networks, lack of smallholder farmer target markets, funding sources, guarantee structure and recourse for disputes collateral, and little knowledge among the 2. Introduce mobile banking system targeted to rural areas and smallholder farmers banking and commercial sector about a. Work with current microfinance providers, such as Kosinvest, to identify potential telecom partners, agriculture producers in Kosovo. In addition, donors and banks and determine mobile banking services to be offered for target markets while microfinance has been successful in b. Develop business model detailing the funding structure and operational structure of mobile banking Kosovo, financial products are limited to loans arrangement, including roles and responsibilities of banks, telecoms, donors, etc. and target mostly urban areas. Finally, large c. Introduce policies/regulations for interoperability, payment systems and consumer protection market potential exists for leasing farm d. Develop MoU between banks, telecom companies and donors to delineate roles, responsibilities, equipment to smallholder farmers. Close to funding commitments and recourse for disputes 80,000 tractors and motocultivators and 3. Work with MFIs in Kosovo to provide more cost-effective and attractive financial products smallholder available in the market for leasing. While two farmers in rural areas companies are registered for leasing, neither a. Complete scan of MFIs operating nationally and regionally to identify partners are active except in vehicle leasing. b. Examine and identify target regions and communities of smallholder farmers that lack access to cost We proposed a three-part effort that provides effective and attractive financial instruments (deposits, loans and crop insurance) smallholder farmers greater access to financial c. Work with MFIs and donor institution to determine the portfolio of financial products to be offered, the instruments that will increase production, sales amount of funding necessary for program and secure resources and export overall: 1) a guarantee program for d. Develop MoUs between donors, banks and community leaders to delineate roles, responsibilities, leasing and other innovative products, 2) funding commitments and recourse for disputes introduction of mobile banking system and 3) a program to partner with MFIs to offer more cost-effective products in rural areas. Indicator Key Risks / Mitigation Plans Key Milestones Increase in production value Lack of interested banks, telecom companies, etc. in program Over 500 farmers reached through Increase in number of farmers with access to because of risk and repayment issues: use donor backing to MFI partner program by end of year financial instruments guarantee repayment 1 Increase in financial literacy among smallholder Lack of penetration rate among smallholder farmers: develop Mobile banking system established farmers communication plan describing program and resulting benefits and launched by end of year 1 Increase in mechanization rate from leasing Delays in implementing policies and legislation for mobile Over 10,000 pieces of equipment program banking: bring in and work with experts who have launched leased by the end of year 1 similar programs in other countries Sources : BAH Analysis 227 Leveraging Small Farmers Potential Initiative 1C: Increase and diversify types of financial products available to smallholder farmers Duration: 3 years Supporting Analysis: pp52, 114-5 (AgStrat Baseline), pp 18-29 (AgCLIR)

RationaleRationale KeyKey CounterpartsCounterparts

IncreasedIncreased accessaccess toto financefinance willwill enableenable farmersfarmers toto havehave Assist in drafting and implementing thethe resourcesresources theythey needneed toto increaseincrease productionproduction ofof highhigh GoKGoK regulations and policies required for mobile banking system yieldyield // highhigh profitprofit goodsgoods GreaterGreater understandingunderstanding andand presencepresence ofof banksbanks couldcould Work with GoK, banks, telecom companies leadlead toto increasedincreased investmentinvestment inin Kosovo’sKosovo’s agricultureagriculture DonorDonor and equipment companies to determine the sectorsector CoordinationCoordination markets, services and funding required from Leasing program could lead to increased CommitteeCommittee programs; provide funding for guarantee Leasing program could lead to increased program mechanizationmechanization ofof farmers,farmers, therebythereby increasingincreasing productivity and quality of agricultural goods Work with donors, banks and microfinance productivity and quality of agricultural goods Telecom Telecom institutions to introduce mobile banking MobileMobile bankingbanking systemsystem increasincreaseses ruralrural farmers’farmers’ access access companies companies system toto finance,finance, especiallyespecially thosethose thatthat areare farfar fromfrom bankingbanking networksnetworks Provide equipment to be leased through Equipment Equipment backing of financial intermediaries and companies companies donors

BanksBanks && Provide funding and expertise to introduce MicrofinanceMicrofinance wide range of financial products for InstitutionsInstitutions smallholder farmers

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical AssistanceAssistance:: $1,944,000$1,944,000 (3(3 peoplepeople forfor 33 years)years) DCADCA // RevolvingRevolving FundFund forfor LeasingLeasing andand InsuranceInsurance:: $1,000,000$1,000,000 (amount(amount inin subsidiessubsidies forfor guarantee-guarantee- assumptionassumption willwill leverageleverage aa $10,000,000$10,000,000 guarantee).guarantee). TotalTotal EstimatedEstimated CostsCosts :: $2,944,$2,944,000000 forfor TATA && DCADCA // RevolvingRevolving FundFund

Sources : BAH Analysis 228 Leveraging Small Farmers Potential Initiative 1D: Improve cadastral system and test effectiveness of pilot land consolidation program Duration: 4 years Supporting Analysis: pp45-48 (AgCLIR report); p116 (AgStrat baseline)

Description Implementation Steps While the legal framework for property and 1. Improve cadastre registry system to track land ownership, size and location property registration are in line with best a. Develop automated registry system in all Municipal Cadastre Offices and a centralized system at practices, implementation of the cadastral Kosovo Cadastral Agency (KCA), including system to update information across the network system is very weak. Significant discrepancies b. Aggregate all land ownership information into automated system exist between the immovable property rights c. Work with governments of neighboring countries to return all previous registries to Kosovo registered at the KCA, Municipal Cadastre d. Develop and launch program to survey, validate and reconcile land ownership information (including Offices and true geographical distribution of geography and size) with current immovable property rights property. In addition, many courts do not follow e. In case of discrepancies between KCA and survey program where there are no land disputes, the evidentiary requirements for making final update registry with current information; in cases of dispute, forward case to adjudication process decisions and / or do not have correct 2. Provide training and technical assistance to municipal courts to improve adjudication process information to resolve land disputes. a. Identify procedural deficiencies based on OSCE study in addition to on-site visits of municipal courts While studies show that large and specialized b. Create centralized, automated case management system that aggregates land disputes cases in farms make better use of the land, leaving only municipalities, including network to KCA to access current registry information 1.7% fallow, compared to 9.5% for all farms, a c. Develop training program on 1) processes, decision rights, and evidentiary requirements for number of constraints exists for land municipal courts that addresses identified gaps and 2) implementation and use of the automated consolidation, such as movement of property case management system rights through family generations, unclear d. Launch training program across all municipalities and central court system and monitor progress in titling, and potential for increased rural resolution of disputes. Where weaknesses continue, provide targeted technical assistance unemployment. 3. Develop pilot program for land consolidation a. Evaluate MAFRD’s current efforts on land consolidation to extract findings for revised pilot We propose a three-part effort that will improve b. Develop project framework for land consolidation for an identified region with significant land the current cadastre system to align land rights fragmentation, including cost-estimate, schedule, and performance monitoring system with geographic distribution, increase judges’ c. Determine inventory of land parcels, including geography, size, value, and any current disputes ability to adjudicate cases of land dispute and d. Prepare draft consolidation plan, including new layout of parcels, ownership structure, location of test the effectiveness of land consolidation. roads and facilities e. Socialize plan with key stakeholders and make any necessary changes before implementation Indicator Key Risks / Mitigation Plans Key Milestones Increase in production value Delays in compiling and reconciling information for cadastral Cadastral registry system inputted Proportion of titles that correctly reflect land system: launch parallel, coordinated efforts across municipalities with all correct information and ownership and geographic distribution to reconcile data reconciled by year 1 Proportion of land disputes resolved through Inability of judges to resolve disputes despite training: targeted 50% increase in resolved cases by reformed adjudication system technical assistance to address weaknesses and movement of end of year 1 Increase in production value of agriculture land “difficult cases” to a central court system Consolidation plan completed and in pilot program for land consolidation Lack of stakeholder buy-in for land consolidation: clearly defined socialized by end of year 1 MoU and land rights defined for participating farmers

Sources : BAH Analysis 229 Leveraging Small Farmers Potential Initiative 1D: Improve cadastral system and test effectiveness of pilot land consolidation program Duration: 4 years Supporting Analysis: pp45-48 (AgCLIR report); p116 (AgStrat baseline)

RationaleRationale KeyKey CounterpartsCounterparts

DecreaseDecrease inin landland disputesdisputes willwill stabilizestabilize ownershipownership Work with GoK entities to identify and Donor structurestructure forfor farmers,farmers, potentiallypotentially increasingincreasing useuse ofof land,land, Donor provide monetary/technical support for Coordination productivity and jobs Coordination cadastre registry system, adjudication productivity and jobs Committee Committee process and pilot land consolidation pilot LandLand consolidationconsolidation programprogram willwill helphelp createcreate economieseconomies ofof scalescale andand competitivecompetitive agriculturalagricultural productionproduction arrangementsarrangements forfor farmersfarmers withwith fewerfewer parcelsparcels ofof landland KCAKCA andand Aggregate and automate information for AccurateAccurate andand updatedupdated cadastralcadastral registryregistry willwill enableenable MunicipalMunicipal cadastral registry system; oversee land GoKGoK and and stakeholdersstakeholders toto betterbetter tracktrack useuse ofof landland andand OfficesOffices survey program to reconcile land information devisedevise supportsupport programsprograms thatthat cancan increaseincrease agriculturalagricultural productivityproductivity Work with donors and subject matter experts In a land consolidation program, landlords can In a land consolidation program, landlords can MunicipalMunicipal to implement dispute resolution training encourageencourage tenantstenants toto maintainmaintain propertyproperty andand makemake courtcourt systemsystem program and automated case management improvementsimprovements (according(according toto HACCP,HACCP, etc.),etc.), therebythereby system openingopening upup newnew marketmarket opportunitiesopportunities

KosovoKosovo Work with adjudication training program and PropertyProperty donors to develop and enforce evidentiary AgencyAgency requirements to resolve disputes over land

HighHigh LevelLevel CostCost EstimateEstimate

SystemsSystems WorkWork toto DevelopDevelop CadastralCadastral RegistryRegistry SystemSystem:: $2,000,000$2,000,000 TechnicalTechnical AssistanceAssistance:: $2,592,000$2,592,000 (3(3 peoplepeople forfor 44 years)years) PilotPilot SupportSupport inin 22 MunicipalitiesMunicipalities:: $864,000$864,000 (1(1 fullfull timetime personperson perper municipalitymunicipality forfor 22 yearyear pilot)pilot) TotalTotal EstimatedEstimated CostsCosts :: $5,456,000$5,456,000 forfor SystemsSystems Work,Work, TATA && PilotPilot SupportSupport

Sources : BAH Analysis 230 Initiatives to improve the demand-driven focus of the sector include better donor coordination, market intelligence, improved packing and storage and a stronger export promotion agency

Initiatives to Improve the Demand-Driven Focus of the Agriculture Sector 1

LeveragingLeveraging SmallSmall AA BB CC DD EsEstatabbllisishh cencenttrralizedalized FarmersFarmers PotentialPotential DevDeveeloplop aandnd llaaununchch CrCreeaattee mmaarrkketet ImpImprovrovee capacitcapacityy ooff orgorgaanizationnization toto donordonor coordcoordiinationnation intellintelligigenenccee sysystemstem colcollleectionction cceenternterss,, ovoverersseeee mmaarrkketingeting && 2 acactivtiviittiieses ffoorr andand ccoommummunicnicaationtion ppaackck hhouousesses aandnd eexxportport prompromotionotion ofof agagririculturculturee planplan coldcold ssttororagagee agagririculturculturee ggoodsoods Demand-DrivenDemand-Driven Focus The primary goal of this Access to supply and Currently, Kosovo’s This initiative will Focus initiative is to develop demand data and distribution establish a public- 3 and implement donor market price infrastructure capacity private Agriculture coordination activities information (farm gate, is insufficient to Export Promotion Infrastructure agriculture programs with retail, wholesale) is support significant organization focused Infrastructure active support and essential to making growth in production . on agriculture CapacityCapacity BuildingBuilding participation from key informed production A two-pronged activities initially and implementers. A donor and sales decisions for strategy will be will expand to other 4 could initially create and agriculture goods that developed including sectors over time. chair a Donor will maximize revenue the 1) design and This agency will take TransportationTransportation Coordination Committee, potential. This initiative implementation of a over the agriculture with transition to a will: 1) design and targeted marketing promotion functions of government agency, to develop a market campaign to attract the Investment

Crop Diversification Initiative Crop Diversification 5 coordinate donor intelligence system to investors for needed Promotion Agency of GovernmentGovernment expertise, funds, and track key data and 2) infrastructure and 2) Kosovo (IPAK) and Agriculture activities to achieve develop and execute a the provision of will provide training, Agriculture maximum impact on the communication plan to technical assistance distribute market RegulationsRegulations sector. ensure all intended for investors to intelligence 6 beneficiaries are aware support business information, and of and have access to planning and launch launch targeted the data and reports branding and TradeTrade AccessAccess promotion campaigns 0

Sources : BAH Analysis 231 Demand-Driven Focus

Initiative 2A: Develop and launch donor coordination activities for agriculture Duration: Ongoing Supporting Analysis: pp56,117 (AgStrat Baseline); p11, 18, 38 (AgCLIR)

Description Implementation Steps Effective donor coordination and 1. Form Donor Coordination Committee: communication is essential to leveraging a. Identify initial donor and/or proper ministerial champion (i.e. MAFRD) and nominate qualified available expertise and funding to achieve individual to lead and oversee Donor Coordination Committee maximum benefit potential. While there are b. Determine additional government Ministry representatives several donor organizations active in Kosovo’s c. Contact donors working in Kosovo’s agriculture sector, confirm interest in participating in Donor agriculture sector, there is poor coordination Coordination Committee, and designate a POC for coordination activities with decision making across current and planned projects. authority The primary goal of this initiative is to develop d. Ensure all key implementers for coordination projects participate in the Committee and implement donor coordination activities e. Define Donor Coordination Committee strategy, mission statement, goals, objectives, protocols for agriculture programs with active support and working together and operating responsibilities participation from key implementers. A donor could initially create and chair a Donor 2. Conduct Donor Coordination Activities: Coordination Committee, with transition to a a. Create and maintain a comprehensive donor matrix outlining donor funding priorities and expertise, government agency, to coordinate donor current and planned agriculture projects, project location and duration, intended beneficiaries, local expertise, funds, and activities to achieve counterparts and support, desired outcomes, etc. maximum impact on the sector including b. Using donor matrix, identify and prioritize regional and crop-specific opportunities for cooperation on infrastructure, production, extension, and current and future projects, assign personnel responsible, outline detailed implementation steps marketing necessary for successful coordination of selected donor activities c. Initiate monthly donor coordinator meetings to review current and planned activities, monitor progress, and address challenges Indicator Key Risks / Mitigation Plans Key Milestones Value of donor investment in agriculture Donors lack of participation: Replace donor €15-18M of donor investment in agriculture coordinated through committee representatives with alternates, clearly document coordinated through committee Proportion of donor organizations represented benefits and incentives for participants in all selected 75% donors active in Kosovo are represented in Donor Coordination Committee vs. total coordination projects, and post progress publically in Donor Coordination Committee donors active in Kosovo Lack of trust or fear of reliance on other donors: Donor Coordination Committee meeting Proportion of donor members present at Donor Develop MoU and/or other contractual agreements attendance at 75% Coordination Committee meetings vs. total clearly stating roles, responsibilities, and conflict Donor coordinated projects are 25% of total donor members of Donor Coordination resolution procedures number of donor funded projects Committee Proportion of donor coordinated projects vs. total number of donor funded projects

Sources : BAH Analysis 232 Demand-Driven Focus

Initiative 2A: Develop and launch donor coordination activities for agriculture Duration: Ongoing Supporting Analysis: pp56,117 (AgStrat Baseline); p11, 18, 38 (AgCLIR)

RationaleRationale KeyKey CounterpartsCounterparts Potential initial organizer of Donor ReduceReduce duplicative,duplicative, potentiallypotentially contradictorycontradictory donordonor Coordination Committee, with transition to fundedfunded effortsefforts inin thethe agricultureagriculture sectorsector government agency (to be determined) FacilitateFacilitate collaborativecollaborative partnerships,partnerships, improveimprove donordonor DonorsDonors Provide monetary and technical assistance communication,communication, andand buildbuild trusttrust for coordinated agriculture projects Focus donor efforts to achieve maximum impact and Assist lead government agency to monitor Focus donor efforts to achieve maximum impact and progress of donor coordinated projects returnreturn onon investmentinvestment alongalong thethe agricultureagriculture valuevalue chainchain Potential organizer to create and oversee AllowAllow donorsdonors toto taketake onon projectsprojects requiringrequiring largerlarger fundingfunding amounts by sharing the costs across organizations Donor Coordination Committee activities amounts by sharing the costs across organizations Maintain donor coordination matrix MAFRDMAFRD EnsureEnsure properproper sequencingsequencing ofof projectsprojects alongalong thethe containing donor and project data agricultureagriculture valuevalue chainchain Monitor and document progress of donor FacilitateFacilitate knowledgeknowledge exchangeexchange andand discussionsdiscussions toto coordinated projects determinedetermine bestbest approachapproach toto dealdeal withwith constraintsconstraints facingfacing Contribute to identification, prioritization , Kosovo’sKosovo’s agricultureagriculture sectorsector and implementation of agriculture priorities OtherOther and corresponding coordinated donor MinistriesMinistries funded projects Actively participate in Donor Coordination Committee meetings

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical AssistanceAssistance DevelopDevelop donordonor coordinationcoordination matrixmatrix (5(5 totaltotal person-days):person-days): $4,500$4,500

TotalTotal EstimatedEstimated Costs:Costs: $4,500$4,500 forfor TATA

Sources : BAH Analysis 233 Demand-Driven Focus

Initiative 2B: Create market intelligence system and communication plan Duration: 3 years to establish and ongoing maintenance Supporting Analysis: pp55, 122 (AgStrat Baseline); p39 (AgCLIR)

Description Implementation Steps Access to information such as supply and 1. Create market intelligence system (MIS) demand data, market price information, and a. Determine appropriate home sponsor for this initiative (e.g. MAFRD, SOK) and conduct necessary quality requirements is essential to making capacity building activities as needed informed production and sales decisions. For b. Develop list of intended beneficiaries example, the Foreign Agricultural Trade of the c. Identify quantitative and qualitative data requirements (e.g. import and export volume by crop United States (FATUS) service provides worldwide, farm gate/wholesale/market price information by crop, consumer preferences by market, historical prices for USA’s exports and imports, safety standards, quality information, pesticide usage, contacts for wholesalers, distributers, etc.) by crop and country of origin / destination d. Design templates for standard database reports and market research reports for major crops In addition, it is critical to know your end e. Determine data sources, collection methods, collection frequency, and organization/person customer and be able to produce high quality responsible for data collection and market research reports products that meet desired end customer f. Develop a plan to ensure data collection and report development is maintained and up to date preferences in order to sell your agriculture g. Select appropriate database system and tailor it to address data requirements, desired functionality goods. In Kosovo, there is limited knowledge (i.e. search functions, data reports, email and SMS capabilities) , and potential end user restrictions and ability to meet customer requirements (i.e. knowledge or access limitations) unless an intermediary (such as Perdrini) h. Test functionality to ensure intended beneficiaries can use and understand database prior to rollout educates farmers on requirements. Most 2. Develop and execute communication plan: exporters are dependant on customers with a. Create detailed marketing campaign and training program (train the trainers) plans to introduce knowledge of the end market. market intelligence system to smallholder farmers and other beneficiaries throughout Kosovo b. Conduct MIS training sessions to showcase database components, illustrate how to use data to This initiative will: 1) design and develop a make more informed production and sales decisions, explain how to access data (e.g. online, SMS) market intelligence system to track key data c. Conduct tailored outreach events to provide additional technical information through handouts and and 2) develop and execute a communication discussion forums to cover topics such as the importance of proper pesticide usage, hygiene plan to ensure all intended beneficiaries are requirements and agronomic practices required to comply with international food safety standards aware of and have access to the data/reports Indicator Key Risks / Mitigation Plans Key Milestones Increased value of production Beneficiaries don’t know how to effectively use MIS: 5% increase value of production Number of MIS training sessions conducted Involve select beneficiaries throughout design and 2 training sessions/month/ trainer Number of market intelligence system users testing phase and execute rollout training program 5,000 market intelligence system users Frequency of market intelligence system users and follow up training sessions Average user accesses information 2 times per % of smallholder farmer users Services not sustainable: Identify Government of week Number of outreach events and total Kosovo funding source and leverage for-profit 75% of the users are smallholder farmers attendance models (fee for service, consulting, subscription, 2 outreach events/region/month for 20 people page view advertising, split of SMS fees)

Sources : BAH Analysis 234 Demand-Driven Focus

Initiative 2B: Create market intelligence system and communication plan Duration: 3 years to establish and ongoing maintenance Supporting Analysis: pp55, 122 (AgStrat Baseline); p39 (AgCLIR)

RationaleRationale KeyKey CounterpartsCounterparts Possible home/sponsor to lead development TheThe marketmarket intelligenceintelligence systemsystem willwill establishestablish aa of market intelligence system and ongoing consolidated,consolidated, ‘one‘one stopstop shop’shop’ platform platform toto disseminatedisseminate MAFRD/SOKMAFRD/SOK data collection effort criticalcritical productionproduction andand marketmarket datadata Create quarterly market research reports EnableEnable producersproducers toto makemake informedinformed productionproduction Conduct topic specific outreach activities decisionsdecisions thatthat meetmeet customercustomer requirementsrequirements forfor variety,variety, Possible home/sponsor for data collection shape, grade, size and packaging of products and Local shape, grade, size and packaging of products and Local efforts (trade data, market data, safety and possibly identify and predict buyer trends Organization possibly identify and predict buyer trends Organization quality standards) and outreach activities ClearlyClearly documentdocument safetysafety standardsstandards andand qualityquality standards required to increase export potential and sell standards required to increase export potential and sell Inform development of market intelligence products to target markets products to target markets Farmers/Farmers/ system and regularly access data EmpowerEmpower producersproducers withwith instantinstant priceprice informationinformation toto AssociationsAssociations Actively participate in and help improve helphelp ensureensure farmersfarmers receivereceive thethe highesthighest marketmarket pricesprices outreach activities IdentifyIdentify opportunitiesopportunities toto taketake awayaway marketmarket shareshare fromfrom regionalregional competitorscompetitors givengiven decliningdeclining growthgrowth Provide assistance to develop and launch DonorsDonors market intelligence system and develop outreach programs

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical Assistance:Assistance: ConductConduct requirementsrequirements analysis,analysis, design,design, andand developdevelop MIS:MIS: $700,000$700,000 TestTest andand deploydeploy MISMIS andand launchlaunch trainingtraining program:program: $600,000$600,000 DevelopDevelop andand conductconduct outreachoutreach programsprograms (1(1 personperson forfor 11 year):year): $216,000$216,000 TotalTotal EstimatedEstimated Costs:Costs: $1,516,000$1,516,000 forfor TATA

Sources : BAH Analysis 235 Demand-Driven Focus

Initiative 2C: Improve capacity of collection centers, pack houses and cold storage Duration: 3 years Supporting Analysis: pp58-62 (AgStrat Baseline); p8, 37 (AgCLIR)

Description Implementation Steps To effectively and efficiently move agriculture 1. Design and implement a targeted marketing campaign goods from producers to markets, a production a. Conduct detailed needs assessment to clearly document specific infrastructure requirements value chain must have a sufficient capacity in including number by infrastructure type, capacity, location, clientele profile (small holder farmers, for collection, packing, processing and storage large holder farmers), etc. in key agricultural areas. Currently, Kosovo’s b. Prepare a series of pre-packaged investor prospectuses for each type of infrastructure investment distribution infrastructure capacity is insufficient starting with Vegco to highlight the demand plan, costs, financials, IRR, Capex and legal overview. to support significant growth in production . For c. Explore successful organizational models (private institution operating under government, instance, Kosovo has only 5 collection and independent government, state-owned bank) offering insurance programs to cover political and packing operations dedicated to the production commercial risks for investors value chain and also has limited cold chain d. Develop marketing materials highlighting possible incentives, local resources available such as infrastructure. Overall, key roles in the skilled labor and inputs, and examples of other successful ventures distribution chain are not being filled. e. Identify target investor pool including Kosovo diaspora and investors active in the region with To address this challenge, a two-pronged assistance from the Kosovo Chamber of Commerce (KCC) and the Alliance of Kosovo Businesses strategy will be developed including the: 1) (AKB) design and implementation of a targeted f. Contact and develop a relationship with individuals in target investor pool, send prospectus and marketing campaign to attract investors for marketing materials, invite them to Kosovo to see first hand existing business opportunities needed infrastructure and 2) the provision of technical assistance for investors to support 2. Provide technical assistance business planning and launch a. Develop detailed technical assistance plan outlining areas of support, eligibility and duration of support, organizations and personnel providing support, etc. b. Areas of support can include:1) development of supply contracts with farmers and cooperatives, 2) assistance with regulations, land purchases, licensing and visa, 3) support for financing of equipment purchases, and 4) development of linkages and contracts with buyers Indicator Key Risks / Mitigation Plans Key Milestones Total Investment Investors do not want to invest in Kosovo due to 4 investors per year building infrastructure in Number of investors building infrastructure in perceived risk: Develop marketing materials Kosovo Kosovo highlighting political stability. Develop risk insurance €4 million in FDI per year (based on Vegco, Proportion of built infrastructure vs. total (e.g. Serbia and Montenegro Export Credit Agency - each investment is1M Euros) needed infrastructure SMECA). Prepare a pre-packaged investment 75% of needed infrastructure is built prospectus based on VegCo.

Sources : BAH Analysis 236 Demand-Driven Focus

Initiative 2C: Improve capacity of collection centers, pack houses and cold storage Duration: 3 years Supporting Analysis: pp58-62 (AgStrat Baseline); p8, 37 (AgCLIR)

RationaleRationale KeyKey CounterpartsCounterparts

TheThe appropriateappropriate number,number, capacity,capacity, placement,placement, andand AgricultureAgriculture Lead development of targeted marketing qualityquality ofof collectioncollection centers,centers, packpack houses,houses, andand coldcold ExportExport campaign Agency chainchain infrastructureinfrastructure buildsbuilds aa strongstrong andand comprehensivecomprehensive Agency Work with other ministries to provide (AEA)/IPAK(AEA)/IPAK productionproduction infrastructureinfrastructure distributiondistribution chainchain ableable toto defined technical support effectively and efficiently meet growing export demand effectively and efficiently meet growing export demand Ministries including Trade and Industry and IncreaseIncrease inin collectioncollection andand storagestorage centerscenters willwill improveimprove OtherOther Forestry, Agriculture, and Rural thethe flexibilityflexibility ofof distributiondistribution forfor sellerssellers allowingallowing farmersfarmers MinistriesMinistries Development will support AEA/IPAK to toto taketake advantageadvantage ofof higherhigher offoff seasonseason pricesprices andand provide defined technical assistance reducereduce reliancereliance onon importsimports AdditionalAdditional packpack houseshouses andand coldcold chainchain infrastructureinfrastructure Interested investors will work with AEA/IPAK willwill satisfysatisfy customercustomer demandsdemands forfor qualityquality andand enableenable InvestorsInvestors and local ministries to establish businesses predictable,predictable, flexible,flexible, andand reliablereliable deliverydelivery IncreaseIncrease inin taxtax revenuerevenue receivedreceived andand employmentemployment created from new businesses created from new businesses Provide technical assistance to develop and DonorsDonors launch targeted marketing campaign and build business plans

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical AssistanceAssistance:: $972,000$972,000 (1.5(1.5 peoplepeople forfor 33 years)years) ODCs:ODCs:$250,000$250,000 forfor marketingmarketing costscosts

TotalTotal EstimatedEstimated CostsCosts :: $1$1,222,000,222,000 forfor TATA andand ODCsODCs

Sources : BAH Analysis 237 Demand-Driven Focus

Initiative 2D: Establish centralized organization to oversee marketing & export promotion of agriculture goods Duration: 3 years Supporting Analysis: pp55, 64, 65, 121 (AgStrat Baseline), p34, 37 (AgCLIR)

Description Implementation Steps IPAK does not focus on agribusiness given the 1. Establish organization importance of the sector in the economy. a. Define the public-private structure, mission and programs for the Agricultural Export Agency (AEA) Overall, the agency has a €250k budget and b. Develop the public-private governance model including the governmental sponsor (e.g. PM, MTI, only 13 employees, many of whom do not MAFRD) and the private-sector participants, develop the resource plan, and hire qualified staff speak foreign languages. Services provided to c. Develop marketing and promotion plan including events and low-cost marketing programs and users are generally considered poor. Since define focus on crops, products and markets agriculture is a significant portion of Kosovo’s d. Develop performance metrics and M&E economy, it is essential to have a strong, 2. Provide training and technical assistance capable organization leading marketing and a. Develop/provide trainings on sales, marketing, public relations, negotiation, customer service, export promotion to realize Kosovo’s full contracts, etc. agriculture export potential 3. Launch branding campaigns This initiative will establish a public –private a. Create branding campaigns focused on positioning priority crops above the commodity level (e.g. organization to focus on Agricultural export “Try Kosovo Kiwi!”); promotion. This agency will take over the b. Develop campaigns focused on attributes of Kosovo that emphasize value-add – certifications such agriculture promotion functions of IPAK and will as organic, halal or fair trade, designations based on historic producer regions (e.g. Rahovica table provide training, distribute market intelligence grapes), production by small family farmers information, and launch targeted branding and 4. Initiate Promotion campaigns promotion campaigns. a. Launch low-cost and highly effective marketing campaigns such as “earned media”, web sites, advertising and direct marketing to retailers and buyers in target markets (e.g. Chilean blueberries) b. Target marketing based on product type and pre-positioning of commodities at agriculture food fairs c. Support qualified smallholder farmers to distribute their products readily at international fairs (e.g. USAID South African Trade Hub sponsored six companies to attend the 2006 Spring Fancy Foods Show in Chicago, helped pre-position distribution of products so small farmers could promote and easily sell their products with minimal lag time during and after the food fairs, provided free 3-week distribution to premium health spas, offered samples at radio stations and shows, and launched a national print and online PR campaign with the potential to reach over 3.5 million consumers) Indicator Key Risks / Mitigation Plans Key Milestones Increase in agriculture export value Products do not meet quality and safety standards: 10% increase in agriculture export value Number of training sessions conducted Establish and enforce stringent quality and safety 3 trainings per region per month Number of attendees at training sessions standards and launch an information campaign to 20 attendees for each training session Growth in export quantity for targeted crops educate producers on the importance of standards 25% CAGR in export quantity for first 5 years Number of internationally recognized brands Small producers cannot reach economies of scale: 4 additional internationally recognized brands Number of exporters represented at trade fairs Support bundling of less-than-truckload quantities 5 exporters represented at each trade fair

Sources : BAH Analysis 238 Demand-Driven Focus

RationaleRationale KeyKey CounterpartsCounterparts

Kosovo’sKosovo’s agricultureagriculture goodsgoods havehave weakweak branding.branding. TheyThey AgricultureAgriculture Help farmers find markets for their products areare positionedpositioned onon thethe lowestlowest rungrung ofof thethe supplysupply chainchain ExportExport and increase knowledge of demand driven Agency andand areare usedused primarilyprimarily toto fillfill seasonalseasonal demanddemand inin Agency export considerations (AEA)(AEA) neighboringneighboring marketsmarkets whenwhen domesticdomestic productsproducts areare Monitor progress of service delivery unavailableunavailable Support AEA to execute its mission ExportExport promotionpromotion isis fragmentedfragmented andand isis notnot focusedfocused onon Reorganize and redefine purpose to build on IPAK keykey marketsmarkets andand crops.crops. LittleLittle focusfocus hashas beenbeen placedplaced onon IPAK existing strengths and eliminate weaknesses promotionalpromotional eventsevents besidesbesides tradetrade fairsfairs Monitor progress of service delivery ThisThis organizationorganization willwill centralizecentralize andand strengthenstrengthen MarketingMarketing Work with the AEA to outline and implement Kosovo’sKosovo’s marketingmarketing andand promotionpromotion capabilities,capabilities, andand ExportExport key marketing and promotion services facilitate significant export growth and enhanced brand facilitate significant export growth and enhanced brand PromotionPromotion Ensure service delivery excellence and recognitionrecognition worldwide,worldwide, developdevelop capacitycapacity andand knowledgeknowledge ExpertsExperts results ofof smallsmall andand largelarge holderholder farmersfarmers toto makemake informed,informed, proactiveproactive decisionsdecisions whenwhen identifyingidentifying potentialpotential marketsmarkets andand buyersbuyers Provide monetary and technical assistance DonorsDonors to develop the AEA

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical Assistance:Assistance:$1,296,000$1,296,000 (2(2 peoplepeople forfor 33 years)years) ODCs:ODCs: $250,000$250,000 forfor marketingmarketing costscosts

TotalTotal EstimatedEstimated CostsCosts :: $1$1,546,000,546,000 forfor TATA andand ODCsODCs

Sources : BAH Analysis 239 Initiatives to improve infrastructure include four programs focused on irrigation, greenhouses and electrical infrastructure

Initiatives to Improve Infrastructure Capacity 1

LeveragingLeveraging SmallSmall AA BB CC DD FarmersFarmers PotentialPotential RehabilitateRehabilitate thethe InIncreasecrease useuse ooff InIncreasecrease enerenerggyy SupportSupport ddeevveelopmlopmeenntt larlarggee--scalescale irrirriigagattiioonn ssmmall-scaleall-scale irirrriigagattiioonn compcompetitivetitiveenessness ofof 2 ofof grgreeeenhounhousseess sysystemstem inin KosovKosovoo sysystemstemss thethe agagriricultuculturree sseecctortor Demand-DrivenDemand-Driven Focus The purpose of this Water-efficient small- Expansion of climate- Like other industries Focus initiative is to take a scale irrigation controlled cultivation in Kosovo, agriculture 3 comprehensive provides savings, is essential in Kosovo is effected by chronic approach to reform of reduces water both to substitute shortages of Infrastructure the large-scale consumption and is imports and to expand electricity and other Infrastructure irrigation systems important for exports. Although sources of energy (i.e. CapacityCapacity BuilBuildidinngg encompassing both development of many greenhouse area has natural gas, fuel). The engineering and high-value crops. The increased, most crops purpose of this 4 economic issues, all 4 purpose of this are still grown in open initiative is to assess basins and inter-basin initiative is to increase field. The purpose of the effects of the TransportationTransportation transfer systems, and use of small-scale this initiative is to availability and cost of water demand for all irrigation systems, overcome barriers to power on agriculture uses (human develop capacity in expansion of climate- and implement

Crop DiversificationInitiative 5 consumption, industry irrigation installation controlled cultivation programs in GovernmentGovernment and irrigation). companies and by overcoming alternative fuels, Agriculture develop access to technical, knowledge conservation and Agriculture finance mechanisms. and access to finance pooling of RegulationsRegulations barriers. investments in energy 6 distribution equipment. TradeTrade AccessAccess 0

Sources : BAH Analysis 240 Infrastructure Capacity Development Initiative 3A: Rehabilitate the large-scale irrigation system in Kosovo Duration: 4 years Supporting Analysis: pp66-72, pp123-124 (AgStrat Baseline)

Description Implementation Steps The large-scale irrigation system in Kosovo is 1. Provide training on Integrated Water Resource Management not sustainable, suffering from low demand in a. Provide training to experts who will participate in the 2011 Water Strategy, led by MESP some areas with scarcity of supply in others; 2. Conduct a study to provide clarity and transparency to investment decisions covering all basins and IPs prices insufficient to recover cost; low (as recommended by World Bank) investment in operations & maintenance; and a. Institutional appraisal - capacity, available funding and public expenditure human capacity issues . Of the 71k hectares b. National Water Demand Management Program - develop processes for managing trade-offs in water covered by the systems only 18k are currently use and investment including pricing and conservation programs irrigated. In order to reform this system, a c. Development of investment plan for Ibër basin including inter-basin use of the Gazivodë Reservoir comprehensive approach must be taken which d. Identification of water demand scenarios and likely shortages encompasses both engineering and economic e. Development of resource plan for irrigation providers issues; all 4 basins and inter-basin transfer f. Assessment of climate change on supply and demand of water issues and water demand for all uses (human g. Prioritization of investments using multi-criteria analysis- priorities, costing, funding models consumption, industry and irrigation). 3. Organizational and Process Re-design at MESP, MAFRD and IPs a. Support development of more effective organizations and processes for water management b. Support changes to laws and enforcing regulations 4. Technical assistance to IPs to establish sustainable business models focusing on Radoniqi and Ibër- Lepenc a. Develop financial plans including estimates of break-even irrigated area, needed O&M investments and shadow price b. Develop and implement marketing plans including creation of Water Use Associations to improve collection c. Consider options for private-sector financing Indicator Key Risks / Mitigation Plans Key Milestones Increased revenue in O&M at the Irrigation Inability to attract sufficient investment from private sector, Completion of IWRM training Providers development banks or Kosovo Central Budget (KCB) - Completion of investment study Increased investment in O&M at the Identification of funding models at time of investment Irrigation Providers prioritization, focus on feasible investments only Increase in irrigated area Lack of political will to enforce Water Law which calls for “full Investment in expansion and rehabilitation of cost recovery” and to re-organize water management functions irrigation systems at MAFRD, MESP and IPs - Strong GoK buy-in at PM level needed before project start Possibly adverse effects on low-value staples crops (e.g.. corn) if prices increase - Need for effective extension services to assist in transition to higher value crops

Sources : BAH Analysis 241 Infrastructure Capacity Development Initiative 3A: Rehabilitate the large-scale irrigation system in Kosovo Duration: 4 years Supporting Analysis: pp66-72, pp123-124 (AgStrat Baseline)

RationaleRationale KeyKey CounterpartsCounterparts

SustainableSustainable operationoperation ofof atat leastleast somesome ofof thethe IrrigationIrrigation OPM - Project sponsor. Direction setting for public Providers,Providers, improvingimproving thethe efficiencyefficiency ofof thethe systems,systems, reducingreducing expenditure priorities, organization. thethe strainstrain onon thethe GoKGoK budget budget andand avoidingavoiding pendingpending financialfinancial GoKGoK MESP Dept of Water crisis. MAFRD Dept of Irrigation & Drainage and of Rural crisis. Development PrioritizationPrioritization ofof investmentsinvestments inin waterwater infrastructureinfrastructure resultingresulting inin sustainablesustainable useuse ofof allall fourfour riverriver basinsbasins inin Kosovo.Kosovo. LikelyLikely Development of finance, marketing and investment Irrigation prioritiespriorities includingincluding expansionexpansion ofof thethe RadoniqiRadoniqi system, system, re-re- Irrigation functions ProvidersProviders planningplanning ofof thethe DukadjiniDukadjini system system whichwhich hashas lostlost 75%75% ofof itsits Provision of irrigation services to farmers originaloriginal areaarea toto urbanization,urbanization, andand rechargingrecharging ofof thethe DriniDrini i i Funding of technical assistance BardhBardhëëbasinbasin fromfrom thethe IbIbëërr basin. basin. TheThe plannedplanned expansionexpansion ofof Donor the Ibër Lepenc system to the southeast of the country should Donor Coordination and communication the Ibër Lepenc system to the southeast of the country should Programs Protection of subsistence farmers who could be also be considered. Programs also be considered. hurt by higher tariffs ExpansionExpansion ofof thethe totaltotal irrigatedirrigated areasareas resultingresulting inin higherhigher cropcrop yields.yields. DevelopmentDevelopment Lead financing of projects including private ImprovedImproved waterwater pricingpricing promotingpromoting efficientefficient useuse ofof waterwater forfor BanksBanks investors and GoK public expenditures economiceconomic purposes.purposes. Develop water use associations to pool purchases of water Cooperatives Cooperatives Improve water use efficiency by advising farmers on water-saving techniques

HighHigh LevelLevel CostCost EstimateEstimate TechnicalTechnical AssistanceAssistance:: ––IWRM IWRM TrainingTraining -- $25,000 $25,000 (50(50 participants)participants) ––Investment Investment AnalysisAnalysis -- $1,100,000 $1,100,000 (61(61 person-months,person-months, IBRDIBRD analysis)analysis) ––Implementation Implementation -- $3,200,000 $3,200,000 (5(5 peoplepeople forfor 33 years)years) CapitalCapital ExpenseExpense:: MinimumMinimum €25.6M€25.6M(Ibër-Lepenc(Ibër-Lepenc 1 1 -- €6.4M; €6.4M; RadoniqiRadoniqi - - €9.6M; €9.6M; DriniDrini i i BardhëBardhë - - €9.6M) €9.6M) TotalTotal EstimatedEstimated Costs:Costs: TATA == $4$4,300,000;,300,000; CapExCapEx = = >€25,600,000>€25,600,000 11 Note (1) : CapEx requirements not included in high level cost estimate Sources : BAH Analysis 242 Infrastructure Capacity Development

Initiative 3B: Increase use of small-scale irrigation systems Duration: 2 years Supporting Analysis: pp66-72, pp123-124 (AgStrat Baseline)

Description Implementation Steps Water-efficient small-scale irrigation provides 1. Pilot Programs for Water-Efficient Small Scale Irrigation Systems savings to farmers, reduces water consumption a. Identify irrigation suppliers/installers and provide technical assistance in technology, marketing and and is important for development of many business plan. crops (e.g. table grapes, fruit trees). The b. Identify gaps in available technologies. purpose of this initiative is to increase use of c. Work with suppliers and other counterparts to identify pilot sites d. Support pilot sites with small grants. small-scale irrigation systems, develop e. Measure and communication cost savings and yield improvements and resulting ROI. capacity in irrigation installation companies and f. Work with Ministry of Environment and Spatial Planning (MESP) to identify licensing and other develop finance mechanisms. regulatory issues and remove obstacles. g. Examine whether incentives can be provided by GoK for efficient water use.

2. Establish financing programs for small-scale irrigation systems a. Communicate financial facts about small-scale irrigation to banks and MFIs - costs, improvements in farm cash flow, etc. b. Work with banks and MFI to design procedures to increase financing for irrigation systems. c. Consider provision of a DCA or other guarantee mechanism to support investment in small-scale irrigation systems d. Identify potential for vendor financing working with technology and equipment providers

Indicator Key Risks / Mitigation Plans Key Milestones Additional income to small irrigation Availability of investment capital for cost-shares in pilot systems. Implementation of at least 10 pilot providers Mitigation - partial financing of investments through grants systems in first year and 40 in Increased revenue (yield and value) to program, development of bank and MFI financing mechanisms, second year farmers work with at least some large farms. Development of capacity in at least Development of a financing program Capacity of irrigation suppliers/installers to participate in the 1 provider/installer of irrigation Development of capacity in irrigation system pilots. Mitigation - provision of technical assistance to systems suppliers suppliers/installers both on technical issues and on marketing and business planning.

Sources : BAH Analysis 243 Infrastructure Capacity Development Initiative 3B: Increase use of small-scale irrigation systems Duration: 2 years Supporting Analysis: pp66-72, pp123-124 (AgStrat Baseline)

RationaleRationale KeyKey CounterpartsCounterparts

Water-efficientWater-efficient small-scalesmall-scale irrigationirrigation providesprovides savingssavings toto farmersfarmers andand reducereduce waterwater consumptionconsumption Provision of technical assistance to irrigation DonorDonor installers and farmers DripDrip irrigationirrigation isis criticalcritical forfor severalseveral ofof thethe high-valuehigh-value ProgramProgram Supervision of pilot programs cropscrops inin thethe cropcrop diversitydiversity initiativeinitiative includingincluding tabletable Management of Small Grant Fund grapes,grapes, chicory,chicory, asparagus.asparagus.

Improving process for water licensing for MESP MESP systems under 100 ha

Potential source of financing or water- MAFRD MAFRD efficiency incentives through grant fund

Banks, MFIs Banks, MFIs Source of financing for small-scale irrigation and Irrigation and Irrigation systems VendorsVendors

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical Assistance:Assistance:$160,000$160,000 (9(9 totaltotal person-monthsperson-months asas partpart ofof aa largerlarger initiative)initiative) SmallSmall GrantsGrants Fund:Fund:$1,000,000$1,000,000 ($10k($10k averageaverage grantgrant sizesize forfor 100100 systems)systems) PotentialPotential DCADCA oror otherother FinanceFinance Mechanism:Mechanism: (Not(Not budgeted)budgeted)

TotalTotal EstimatedEstimated Costs:Costs: $1,160,$1,160,000000 forfor TATA andand SmallSmall GrantsGrants

Sources : BAH Analysis 244 Infrastructure Capacity Development

Initiative 3C: Support development of greenhouses Duration: 4 years Supporting Analysis: pp73-78, 125 (AgStrat Baseline)

Description Implementation Steps Expansion of climate-controlled cultivation is 1. Technical assistance to Kosovo installers of modern greenhouses essential in Kosovo both to substitute imports a. Work with 3-5 installers of modern, block-style greenhouses to improve technology and equipment, and to expand exports. Although greenhouse construction quality, cost control and marketing. cultivation has expanded to over 154 Ha over b. Create vendor financing options with equipment suppliers that reduce the up-front capex required for the past 4 years, most crops are still grown in greenhouses. 2. Extension services for climate-controlled cultivation open field. The purpose of this initiative is to a. Identify the right model for provision of services overcome barriers to expansion of climate- b. Provide training and extension to improve crop management (insect and disease control, planting controlled cultivation by providing technical and harvesting schedule, etc) assistance to greenhouse construction c. Advise farmers on crop diversification, identifying high-value crops that can benefit from greenhouse companies, improving crop management development techniques, developing marketing & distribution 3. Development of marketing & distribution plans for climate-controlled crops channels and creating financial products. a. Work with distributors in the local market and with exporters to create distribution and sales channels for climate-controlled production b. Advise farmers on price fluctuations and the best times and channels for sale of greenhouse grown crops 4. Development of financial products to support development of greenhouses a. Explore options for donor funding, tax credits, investment and income support b. Work with banks to develop cost-effective products suitable for the 6-9 year pay-back period required for greenhouse investments including term loans, mortgages and leasing

Indicator Key Risks / Mitigation Plans Key Milestones Increased value of crops produced in Availability of finance: modern greenhouses require a substantial Program should target at least 130 greenhouses or other climate-controlled investment and changes in crop management techniques to hectares of new greenhouses over 4 conditions achieve pay-back. The program will not be acceptable unless years, an approximate doubling of Value of investment in greenhouses sources of financing can be developed and farmers’ growing the current stock Expansion of total area of greenhouses practices be changed – Of that, area under “modern” Mitigation greenhouses as opposed to tunnels Number of farmers trained and supported with – Provide extension services on crop management and post- extension services harvest distribution to ensure ROI is achieved Number of greenhouse installation companies – Focus on financial products that provide an incentive for supported investment including “better than market” finance from donors or MAFRD and/or from vendors of greenhouse equipment

Sources : BAH Analysis 245 Infrastructure Capacity Development Initiative 3C: Support development of greenhouses Duration: 4 year Supporting Analysis: pp73-78, 125 (AgStrat Baseline)

RationaleRationale KeyKey CounterpartsCounterparts

WithoutWithout greenhouses,greenhouses, mostmost cropscrops areare harvestedharvested withinwithin aa Provide technical assistance to greenhouse two-weektwo-week windowwindow causingcausing aa glutglut ofof productproduct duringduring thatthat construction firms time and a scarcity at other times. This problem must be Development of extension programs and time and a scarcity at other times. This problem must be DonorDonor training for farmers addressedaddressed bothboth forfor importimport substitutionsubstitution andand exportsexports andand ProgramProgram developmentdevelopment ofof greenhousesgreenhouses areare critical.critical. Development of access to finance programs include possible provision of grants and/or This program will address the obstacles to expansion of This program will address the obstacles to expansion of capital or guarantees to banks greenhousesgreenhouses includingincluding thethe qualityquality ofof construction,construction, farmers’farmers’ knowledge knowledge ofof thethe bestbest plantingplanting andand harvestingharvesting Support access to finance programs through schedules,schedules, knowledgeknowledge ofof appropriateappropriate cropcrop managementmanagement MAFRDMAFRD grant funding and KCB allocation techniquestechniques forfor greenhousegreenhouse cultivation,cultivation, lacklack ofof post-post- Support training programs harvestharvest processingprocessing andand marketingmarketing channels,channels, andand diversificationdiversification ofof thethe cropscrops plantedplanted inin greenhouses.greenhouses. Support introduction of new technologies Equipment BecauseBecause thethe paybackpayback periodperiod isis 6-96-9 years,years, eveneven withwith Equipment and construction techniques SuppliersSuppliers andand improvementsimprovements inin allall ofof thesthesee areas,areas, accessaccess toto financefinance isis Support vendor financing programs InstallersInstallers alsoalso anan importantimportant –– perhaps perhaps thethe mostmost importantimportant –– Provide training to farmers obstacleobstacle toto overcome.overcome. ThisThis programprogram willwill addressaddress thethe obstacle by developing two types of financing: 1) vendor obstacle by developing two types of financing: 1) vendor Provide training and extension programs financingfinancing providedprovided byby internationalinternational equipmentequipment supplierssuppliers Associations/Associations/ Support development of distribution & throughthrough KosovoKosovo greenhousegreenhouse constructionconstruction companiescompanies andand UniversitiesUniversities marketing chain 2)2) bankbank financingfinancing providedprovided throughthrough banks.banks.

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical Assistance:Assistance:$2,600,000$2,600,000 (3(3 peoplepeople forfor 44 yearsyears asas partpart ofof aa largerlarger initiative)initiative) FinanceFinance FundFund andand Grants:Grants: $2,900,000$2,900,000 (Total(Total investmentinvestment toto developdevelop 130130 haha ofof greenhousegreenhouse isis €19.5M€19.5M oror $29.3M.$29.3M. WeWe havehave assumedassumed thatthat grants,grants, 2-stage2-stage lendinglending andand guaranteesguarantees willwill needneed toto covercover 10%10% ofof thisthis total.)total.) TotalTotal EstimatedEstimated Costs:Costs: $5,$5,500,000500,000 TATA andand FinancingFinancing

Sources : BAH Analysis 246 Infrastructure Capacity Development Initiative 3D: Increase energy competitiveness of the agriculture sector Duration: 2 years Supporting Analysis: Not specifically addressed in baseline

Description Implementation Steps Like other industries in Kosovo, agriculture is 1. Identify impacts of power and fuel shortages on all stages of the agriculture value chain effected by chronic shortages of electricity and a. Determine availability and cost of electricity compared to benchmark countries natural gas. While it is assumed that this b. Determine cost and availability of natural gas and other fuels compared to benchmark countries situation will improve with the completion of the c. Forecast supply and estimate unmet demand for each of the next ten years Kosovo e Re, the impacts on all aspects of the 2. Develop a plan to mitigate unmet and uneconomic demand over the next ten years agriculture value chain including irrigation, a. Consider alternate power sources and fuels greenhouse, soil preparation and harvesting, b. Consider conversation and renewables cold storage, packaging, etc. must be c. Highlight activities and methods that are uncompetitive under current energy supply conditions understood. The purpose of this initiative is to d. Analyze energy pricing for agriculture and recommend changes 3. Implement programs to increase energy competitiveness assess the effects of the availability and cost of a. Provide small grants for alternative fuels including farm waste and fuel crops (e.g. canola) and small- power on agriculture and implement programs scale wind and solar (e.g. solar for irrigation pumping) in alternative fuels, conservation and pooling of b. Provide small grants for conservation and energy efficiency projects investments in energy distribution equipment. c. Provide incentives to discontinue uneconomic activities d. Create Agriculture Processing Parks in A+ or A areas that will enable agribusinesses to pool the costs of investment in energy distribution.

Indicator Key Risks / Mitigation Plans Key Milestones Value of energy saved There is a risk that incentives for alternative fuels will distort 100 programs implemented Total additional investment in energy decisions about whether to plant fuel crops instead of food or 20 programs in first year Number of farmers and agribusinesses export crops. Mitigation: The 10-year plan will examine in detail assisted which fuel substitution programs are economically rationale. In addition, specific grant proposals will be evaluated to ensure that grants are non-distorting.

Sources : BAH Analysis 247 Infrastructure Capacity Development Initiative 3D: Increase energy competitiveness of the agriculture sector Duration: 2 years Supporting Analysis: Not specifically addressed in baseline

RationaleRationale KeyKey CounterpartsCounterparts

TheThe availability,availability, reliabilityreliability andand costcost ofof electricity,electricity, naturalnatural gasgas andand otherother fuelsfuels effectseffects thethe competitivenesscompetitiveness ofof thethe Conduct analysis and provide technical DonorDonor KosovoKosovo agricultureagriculture sector.sector. assistance ProgramProgram TheThe implicationsimplications onon competitivenesscompetitiveness mustmust bebe Administer and monitor grants program understoodunderstood andand aa planplan developeddeveloped toto offsetoffset disadvantagesdisadvantages especiallyespecially untiluntil thethe KosovoKosovo ee ReRe powerpower plantplant cancan bebe broughtbrought onon line.line. Act as primary GoK counterparts for the program This initiative will improve the competitiveness of MAFRD,MAFRD, This initiative will improve the competitiveness of Provide data and validate assumptions for agribusiness by substituting cheaper and more readily MinistryMinistry ofof agribusiness by substituting cheaper and more readily analysis. Ensure that agriculture demand is EnergyEnergy availableavailable biofuelsbiofuels for for electricityelectricity andand hydrocarbons,hydrocarbons, byby incorporated into national energy plans introducingintroducing conversationconversation projects,projects, byby assistingassisting As possible, contribute to grants program agribusinessesagribusinesses inin identifyingidentifying andand discontinuingdiscontinuing processesprocesses thatthat areare notnot competitivecompetitive becausebecause ofof energyenergy andand byby developingdeveloping AgricultureAgriculture ProcessingProcessing ParksParks withwith Assist the program in providing technical assistance, communicating about the grants A+A+ energyenergy supplysupply fromfrom KEK.KEK. AssociationsAssociations program and identifying and qualifying grants applications

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical Assistance:Assistance:$1,080,000$1,080,000 asas partpart ofof aa largerlarger programprogram (2.5(2.5 personspersons forfor 22 fullfull years)years) SmallSmall GrantsGrants Program:Program:$1,500,000$1,500,000 (100(100 projectsprojects atat aa grantgrant valuevalue ofof €10k,€10k, oror $15k,$15k, onon average)average)

TotalTotal EstimatedEstimated Costs:Costs: $2,580,000$2,580,000 forfor TATA andand SmallSmall GrantsGrants ProgramProgram

Sources : BAH Analysis 248 Initiatives to improve transportation include three programs to develop the rural road network, develop air freight services and communicate benefits of the new road link to Tirana

Initiatives to Improve Transportation 1

LeveragingLeveraging SmallSmall AA BB CC FarmersFarmers PotentialPotential PriorPrioriitizetize anandd devdeveeloplop rurruraall DevDeveeloplop aaiirr peperirishshablableess planplan AnaAnallyyzzee andand communicommuniccaatete ccoostst 2 roroadadss uussinging cocost-bst-benenefitefit andand rreemovmovee rreegulgulatoryatory aandnd advadvaantagntageess ofof thethe nneeww TiTirraannaa ananaallyyssiiss andand PPPPPPss markemarkett oobbssttaclesacles highhighwwaayy Demand-DrivenDemand-Driven Focus The density of the rural road Development of high-value The Tirana highway will be Focus network in Kosovo is lower agriculture exports often relies complete by Spring 2010. 3 than any of its regional on air transportation, which Interviews with Pristina-based competitors, which act as a provides advantages in freight forwarders indicate that Infrastructure disadvantage to agriculture freshness, timeliness and they do not plan to shift Infrastructure and rural economic activity in reliability of delivery. In significant traffic to this route. CapacityCapacity BuildingBuilding general. The purpose of this Kosovo, there is very little Some of this behavior is initiative is to prioritize export by air and no dedicated economically rational, but some 4 developments in the rural road freighters servicing the is based on habit or lack of network based on the country. The purpose of this knowledge as many freight TransportationTransportation economic impact of the initiative is, in the short-term, operators are used to the investments, identify funding to remove policy obstacles to Yugoslav network. The purpose and develop tenders for new an air perishables freighter of this initiative is to provide

Crop DiversificationInitiative 5 construction including service from Pristina-Milan quality data on the economics of GovernmentGovernment development of PPPs that can and, in the long-term, to the new route, to communicate it Agriculture lessen the initial capital outlay develop a strategy expansion and to attract additional freight Agriculture for road construction. of cost-effective air forwarders from Albania and RegulationsRegulations perishables services from elsewhere in the region to 6 Pristina. Kosovo.

TradeTrade AccessAccess 0

Sources : BAH Analysis 249 Transportation

Initiative 4A: Prioritize and develop rural roads projects using cost-benefit analysis and PPPs Duration: 4 years Supporting Analysis: pp127-128 (AgStrat Baseline)

Description Implementation Steps The density of the rural road network in Kosovo 1. Prioritize planned investments in farm to market roads using a cost-benefit economic model is lower than any of its regional competitors, a. Create a comprehensive list of planned rural road projects which act as a disadvantage to agriculture and b. Determine the economic impact of each project in terms of economic output (GDP) and employment rural economic activity in general. The purpose using a model like the World Bank Road Economic Decision (RED) model. of this initiative is to prioritize developments in c. Working with stakeholders, prioritize projects in terms of cost-benefit for rural development. the rural road network based on the economic d. Work with a Kosovo stakeholder to transfer the model and the analytical framework impact of the investments, identify funding and 2. Develop detailed costing and project plans for each High Priority project develop tenders for new construction including a. Estimate the length of road for each project and establish the International Roughness Index (IRI) for development of PPPs that can lessen the initial each road segment capital outlay for road construction. b. Using data from similar projects, cost the project based on the length, IRI of each segment and the type of road desired. 3. Identify financing model, create tender process and identify contractors a. Define the source(s) of financing and financing model for each project including direct payment, BOTs, etc. b. Conduct pre-tender meetings with potential bidders. c. Develop tender documents and assist Kosovo counterparts to manage tender process. 4. Manage construction projects and maintenance; repeat prioritization a. Assist Kosovo counterparts to manage the projects. b. Development maintenance plans. c. On an annual basis, repeat cost-benefit analysis to prioritize next round projects.

Indicator Key Risks / Mitigation Plans Key Milestones Total reduction in transport costs Availability of funding to complete projects. Mitigation Prioritization and costing analysis complete Reduction in prices of raw materials – Develop diversified sources of funding including At least 2 projects tendered in first year and 10 Length of road constructed Kosovo budget, development banks and private in life of project Value of tenders completed investors in PPPs Model successfully transferred to counterpart Interest/willingness of GoK to prioritize development and process in place for on-going prioritization of rural roads using an economic benefit model. of projects Mitigation. Work closely with MOT and other counterparts to ensure that they agree with the specifics of the model and have the knowledge to use it.

Sources : BAH Analysis 250 Transportation

Initiative 4A: Prioritize and develop rural roads projects using cost-benefit analysis and PPPs Duration: 4 years Supporting Analysis: pp127-128 (AgStrat Baseline)

RationaleRationale KeyKey CounterpartsCounterparts

KosovoKosovo hashas thethe lowestlowest roadroad networknetwork densitydensity ofof anyany Identify the list of possible projects country in the region. Low quality of the road network Participate in and approve the prioritization, country in the region. Low quality of the road network MinistryMinistry ofof has been identified as an impediment for farm to market costing and development of projects has been identified as an impediment for farm to market TransportTransport transporttransport andand otherother ruralrural investmentinvestment (e.g..(e.g.. TinaTina Manage tenders, projects and maintenance AssociationAssociation interviews).interviews). FundingFunding isis limited.limited. of roads TheThe initiativeinitiative willwill addressaddress thisthis problemproblem inin aa cost-cost- effectiveeffective wayway byby prioritizingprioritizing farmfarm toto marketsmarkets roadsroads thatthat Finance the analytical phases of the project. Identify sources of financing for construction will provide the highest benefits in terms of rural DonorsDonors andand will provide the highest benefits in terms of rural including through loans, risk insurance, etc. incomes and employment and financing them first. DevelopmentDevelopment incomes and employment and financing them first. Support sustainability of the analytical BanksBanks ItIt willwill alsoalso identifyidentify diversifieddiversified sourcessources ofof financingfinancing forfor framework and the construction; measure PPPsPPPs that that cancan bebe usedused toto reducereduce thethe up-frontup-front capitalcapital results investmentinvestment requiredrequired forfor roadroad development.development. Support financing of the projects through attraction of finance partners in PPP PrivatePrivate consortia SectorSector Oversee the building and maintenance of Source : CIA World Factbook infrastructure

HighHigh LevelLevel CostCost EstimatesEstimates TechnicalTechnical AssistanceAssistance:: InitialInitial AnalysisAnalysis -- $250,000 $250,000 (based(based onon similarsimilar MCCMCC studiesstudies inin Serbia,Serbia, Mozambique)Mozambique) ImplementationImplementation -- $3,900,000 $3,900,000 (6(6 peoplepeople forfor 44 yearsyears asas partpart ofof aa largerlarger program)program) CapEx:CapEx: PavingPaving andand upgradingupgrading ofof farm-to-marketfarm-to-market roadsroads estimatedestimated atat $120,000-150,000$120,000-150,000 perper km.km.11 TotalTotal EstimatedEstimated Costs:Costs: $4,150,$4,150,000000 forfor TATA andand ImplementationImplementation

Note (1) : CapEx requirements not included in high level cost estimate Sources : BAH Analysis 251 Transportation Initiative 4B: Develop air perishables plan and remove regulatory and market obstacles Duration: 1 year Supporting Analysis: pp84, 130 (AgStrat Baseline)

Description Implementation Steps

Development of high-value agriculture exports 1. Identify and resolve policy obstacles to air freight pick-up at Pristina airport often relies on air transportation, which a. Identify the specifics of the ICAO licensing requirement provides advantages in freshness, timeliness b. Develop a strategy to negotiate with ICAO in cooperation with existing carriers servicing Pristina and reliability of delivery. In Kosovo, there is (Turkish, Austrian, Slovenian) very little export by air and no dedicated c. Resolve issues to enable exports on the existing Istanbul to Milan freighter operated by Turkish freighters servicing the country (Turkish Air 2. Develop a forward-looking plan to expand air freight access flies a freighter from Milan but does not pick up a. Based on development of high-value crops, development a 10-year estimate of demand for in Pristina). The purpose of this initiative is to perishables air freight develop an air perishables plan including the b. Estimate the price point at which air freight will be economically feasible c. Interview air freight operators to determine the point at which expanded air freight at PRN is feasible level of demand that would make air transport d. Prepare a high level estimate of the level of demand that would require additional capital investment feasible and infrastructure, economic and at PRN policy obstacles to development of this area. 3. Brief counterparts on results and establish supply and demand commitments a. Secure commitments from international organizations and companies to use commercial air freighter service as perishables volume increases as a way to increase supply ahead of demand b. Establish commitments from air freight operators to offer commercial services at sustainable rates to Pristina airport

Indicator Key Risks / Mitigation Plans Key Milestones

Increase in quantity exported by air “Chicken and the egg” problem / additional air service will not Completion of plan and briefing of Total saving on air freight from use of re- come without more market demand - To mitigate, 1) identify private sector stakeholders routed freighter commitments from international organizations to use new air including major freight airlines not Number of weekly freighters servicing PRN. freight services while perishables demand builds up; 2) create yet in Kosovo (Lufthansa and Tons of agriculture perishables shipped from demand estimates in conjunction with the “high value crops” Scandinavian are the largest). Kosovo programs to show a 5-year perishables demand estimate Introduction of at least one weekly Recognition of sovereignty issues may complicate negotiations dedicated freighter service. with ICAO – To mitigate, fully research in pilot phase and At least 25 tons of perishables approach accordingly. shipped in first year

Sources : BAH Analysis 252 Transportation Initiative 4B: Develop air perishables plan and remove regulatory and market obstacles Duration: 1 year Supporting Analysis: pp84, 130 (AgStrat Baseline)

RationaleRationale KeyKey CounterpartsCounterparts

DevelopmentDevelopment ofof perishablesperishables exportsexports forfor manymany cropscrops willwill rely on availability and affordability of air transport. The MinistryMinistry ofof Source of data on infrastructure and policy rely on availability and affordability of air transport. The Transport/ benchmarks include several examples - most notably Transport/ constraints benchmarks include several examples - most notably Pristina Kenyan green bean exports to the UK. Pristina Main counterpart for negotiations with ICAO Kenyan green bean exports to the UK. AirportAirport (perhaps with Ministry of Foreign Affairs) TheThe mostmost affordableaffordable servicesservices areare providedprovided onon dedicateddedicated airair freightersfreighters onon “dead“dead head”head” services, services, wherewhere KosovoKosovo producersproducers cancan exportexport freightfreight usingusing sparespare capacitycapacity onon airair Fund technical assistance portion of work freightersfreighters usedused toto importimport goodsgoods toto Kosovo.Kosovo. DonorsDonors andand Assist in developing short-term “demand Currently Turkish Air operates a dedicated air freighter DevelopmentDevelopment Currently Turkish Air operates a dedicated air freighter commitments” from international BanksBanks flyingflying betweenbetween Istanbul-Pristina-MilanIstanbul-Pristina-Milan andand MilanMilan isis oneone organizations and multi-national companies ofof thethe largestlargest terminalterminal marketsmarkets forfor produceproduce inin Europe.Europe. AnAn ICAOICAO licenselicense mustmust bebe obtainedobtained toto enableenable TurkishTurkish AirlinesAirlines toto pickpick upup freightfreight atat PristinaPristina on on thisthis route.route. PrivatePrivate Provide data on feasibility - costs at various TheThe purposepurpose ofof thisthis initiativeinitiative isis provideprovide accessaccess toto airair Sector levels of volume shipment for Kosovo’s perishables exports through a re- Sector shipment for Kosovo’s perishables exports through a re- FreightFreight Support GoK in ICAO negotiations routed freighter service, providing access to new routed freighter service, providing access to new CompaniesCompanies Operate services markets.markets.

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical Assistance:Assistance:$350,000$350,000 forfor 33 peoplepeople forfor 44 monthsmonths

TotalTotal EstimatedEstimated CostCosts:s: $350,000$350,000 forfor TATA

Sources : BAH Analysis 253 Transportation Initiative 4C: Analyze and communicate cost advantages of the new Tirana highway Duration: 1 year Supporting Analysis: p83 (AgStrat Baseline)

Description Implementation Steps

The Tirana highway will be complete by Spring 1. Detailed cost and time analysis of shipping routes 2010, significantly reducing the transportation a. Interview Skopje, Pristina, Peja, Novi Pazar, Ljubljana and Tirana based shippers to determine the cost to the Port of Durres and to the Albanian cost and time required to ship to/from points in Europe through various routes from various points in coastal highway. Interviews with Pristina- Kosovo including Pristina and Peja. Include analysis of land-sea and land-air routes. based freight forwarders indicate that they do b. Understand the drivers of cost and actions that could be taken to lower cost, time or uncertainty on not plan to shift significant traffic to this route. various routes Some of this behavior is rational as shipping c. Publish analysis comparing the various routes through Kulla or Merdare will remain more economical in many cases. However, some is 2. Communication and marketing to freight companies based on habit or lack of knowledge as many a. Communicate the results of the study to ensure that shippers have full information and are making freight operators are used to the Yugoslav informed choices regarding shipping routes. network. The purpose of this initiative is to b. Through interviews, identify conditions that would attract additional shipping companies to Kosovo. provide quality data on the economics of the c. Working with the GoK and private sector, promote Kosovo as a location for shipping and freight forward companies to invest. new route, to communicate it and to attract additional Albania-based shippers to Kosovo.

Indicator Key Risks / Mitigation Plans Key Milestones

Increase in exports resulting from No significant risks. Completion of analysis and briefing increased market access to stakeholders Number of new freight forwarders locating to or adding service for Kosovo Amount of investment by freight forwarders in Kosovo

Sources : BAH Analysis 254 Transportation Initiative 4C: Analyze and communicate cost advantages of the new Tirana highway Duration: 1 year Supporting Analysis: p83 (AgStrat Baseline)

RationaleRationale KeyKey CounterpartsCounterparts

TheThe currentlycurrently mostmost usedused transittransit routeroute forfor agriculturalagricultural productsproducts to/fromto/from KosovoKosovo isis thethe routeroute throughthrough KullaKulla and and Ministry of Transport to serve as GoK liaison Montenegro.Montenegro. ThisThis routeroute hashas significantsignificant disadvantages:disadvantages: for the project GoK ItIt isis 17%17% moremore expensiveexpensive thanthan thethe directdirect routeroute GoK MTI, MEF and Kosovo Customs to make throughthrough SerbiaSerbia (if(if thatthat routeroute werewere open);open); reforms to attract additional investment from freight forwarders ItIt isis subjectsubject toto snowsnow closureclosure inin winterwinter months;months; ItIt requiresrequires transittransit ofof BiHBiH which which atat timestimes refusesrefuses KosovoKosovo certificatescertificates ofof originorigin forfor non-recognitionnon-recognition reasonsreasons DonorDonor Fund technical assistance portion of work TheThe openingopening ofof thethe TiranaTirana highwayhighway offersoffers aa newnew optionoption toto ProgramsPrograms transporttransport goodsgoods eithereither byby landland throughthrough AlbaniaAlbania andand CroatiaCroatia oror byby land-sealand-sea throughthrough thethe portport ofof DurresDurres CurrentlyCurrently mostmost operatorsoperators inin KosovoKosovo dodo notnot havehave sufficientsufficient informationinformation aboutabout thethe newnew route.route. InIn addition,addition, PrivatePrivate Sources of data and counterparts for project because most are Yugoslav companies, there is a pre- SectorSector because most are Yugoslav companies, there is a pre- Potential new investors in the transport disposition to Yugoslav road networks. This initiative will FreightFreight disposition to Yugoslav road networks. This initiative will sector reducereduce transporttransport costscosts byby makingmaking operatorsoperators awareaware ofof CompaniesCompanies alternatealternate routesroutes andand willwill attractattract newnew investmentsinvestments fromfrom freightfreight forwardersforwarders locatinglocating toto Kosovo.Kosovo.

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical Assistance:Assistance:$324,000$324,000 (1.5(1.5 peoplepeople forfor oneone year)year)

TotalTotal EstimatedEstimated CostCosts:s: $324,000$324,000 forfor TATA

Sources : BAH Analysis 255 Initiatives to strengthen government agriculture regulations include centralizing food safety & quality control, strengthening private labs and establishing an environmental protection program

Initiatives to Strengthen Government Agriculture Regulations 1

LeveraginLeveragingg SmallSmall AA BB CC EEsstablitablisshh aa cceentrntraalilized,zed, FarmeFarmerrss PotentialPotential EEsstablitablisshh prprogrogramam toto strstreengthngtheenneedd HelpHelp privprivateate qualityquality proteprotecctt ththee eennvviironmentronment orgorgaanizationalnizational modmodeell forfor ccoonnttrrooll lalabsbs ttoo acachiehievvee 2 agagaaiinnsstt ppeestisticcididee andand foodfood ssaafetyfety andand ququaalitylity inteinternrnationationaall cceerrtifitificcaattiionon inputinput misumisussee controlcontrol Demand-DrivenDemand-Driven Focus Establishment of a Private labs in Kosovo are Pesticide and input misuse Focus government body that can not internationally poses serious problems to the

ve 3 effectively oversee food recognized and do not have environment, leading to ti

a safety will be critical for bilateral agreements with destruction of arable land and Kosovo to increase other governments. The lack potentially decreasing

Initi Infrastructure Infrastructure competitiveness and of recognition impedes agriculture yields. We propose CapacityCapacity BuilBuildidinngg exports of its agricultural Kosovo’s ability to remain a three-part approach to goods on regional and competitive. We propose a protect the environment and ication f 4 international markets. The two part effort to reform arable land against initiative will consist of a private quality control labs in destruction: 1) develop more versi TransportationTransportation two-part effort to: 1) Kosovo: 1) work with private comprehensive policies and create a centralized labs to create business legislation that restrict illegal organizational structure models that will help them and counterfeit pesticides

Crop Di 5 for food safety and quality achieve international according to application, use GovernmentGovernment control and 2) strengthen certification while remaining and/or commodity type; 2) AgricultureAgriculture capacity in food safety financially stable; and 2) leverage alliances to provide through training and strengthen the skills and training to farmers in input RegulatiRegulatioonsns technical assistance to capacity of individuals use; and, 3) track sales and 6 meet international food working in private labs so distribution of all inputs safety standards. that they can help achieve through a centralized, international recognition. automated system. TradeTrade AccessAccess 0

Sources : BAH Analysis 256 Government Agriculture Regulations Initiative 5A: Establish a centralized, strengthened organizational model for food safety and quality control Duration: 2 years Supporting Analysis: pp 85, 132 (AgStrat Baseline)

Description Implementation Steps Establishment of a government body that can 1. Develop unified organizational model for food safety and quality control effectively oversee food safety will be critical a. Draft revised organizational model to centralize food safety functions within a single entity in the for Kosovo to increase competitiveness and GoK. Model should include roles, responsibilities, decision rights, reporting lines, communication and exports of its agricultural goods on regional and internal operating procedures international markets. Currently, execution of b. Identify budget requirements for new organizational structure, including committees and taskforces food safety standards take place in parallel at to assist with the transition phase the Plant Protection Department at MAFRD, c. Circulate revised organizational structure to senior government leadership in the Prime Minister’s the KFVA under the Office of the Prime office, MAFRD and Ministry of Health Minister and Sanitary Inspectorates under the d. Revise and draft laws required to establish and enforce new organizational model Ministry of Health. As a result, food safety e. Communicate laws defining new food safety organizational structure to Parliament and secure assurance is uncoordinated, which also leads approval to overlap in function. In addition to the f. Develop implementation timeline for transitioning organizational structure to steady state structural issues, government employees lack g. Develop and launch communication plan to socialize organizational changes, including roles, internal the proper skills and capacity to complete operating procedures, to all government employees and stakeholders required functions to meet international food h. Launch transition to new organizational structure safety guidelines. Kosovo will continue to suffer 2. Build capacity in food safety through training and technical assistance to meet international standards from lack of exports and recognition issues if a. Determine employee competencies required to meet international best practices in food safety and these problems are not addressed. achieve recognition. Key areas will include 1) inspection and oversight of production, infrastructure, We propose to a two-part effort to address processing, marketing 2) analysis and testing of products 3) coordination of exporters these issues:1) create a centralized b. Assess competencies of all government employees involved in food safety in Kosovo and determine organizational structure for food safety and gaps in skills quality control and 2) strengthen capacity in c. Identify training needs for all employees based on the gaps food safety through training and technical d. Sketch a detailed training plan outlining courses, partners, funding, timeline, and evaluation assistance to meet international food safety e. Launch training program; provide targeted technical assistance for areas of significant weakness standards. Indicator Key Risks / Mitigation Plans Key Milestones Increase in exported value of agricultural Delays in approving organizational structure: socialize New structure and accompanying goods recommendations and secure buy-in early in the process laws approved within first 2 months Decrease in cost of obtaining export certificates Resistance from government employees on new structure: Transition to new organizational Increase in the number of countries accepting develop targeted communication plan that outlines the benefits structure by end of year 1 exports from Kosovo to Kosovo’s competitiveness and agricultural sector 3,000 government employees Number of employees trained who meet Lack of participation in training: make training mandatory for all trained by end of year 1 required competencies employees to be transitioned to new position

Sources : BAH Analysis 257 Government Agriculture Regulations Initiative 5A: Establish a centralized, strengthened organizational model for food safety and quality control Duration: 2 years Supporting Analysis: pp 85, 132 (AgStrat Baseline)

RationaleRationale KeyKey CounterpartsCounterparts

StrongerStronger reputationreputation forfor foodfood safetysafety andand qualityquality controlcontrol DonorDonor Assist in development and transition to new willwill helphelp increaseincrease thethe country’scountry’s competitivenesscompetitiveness CoordinationCoordination organizational structure; assess training Committee needs and administer capacity building internationally,internationally, therebythereby augmentingaugmenting productionproduction valuevalue Committee andand exportsexports Assist in developing and approving final By achieving international standards, greater ability for GoK / By achieving international standards, greater ability for GoK / organizational structure for food safety and Parliament KosovoKosovo toto establishestablish strategicstrategic marketsmarkets inin foreignforeign Parliament quality control in Kosovo countriescountries throughthrough bi-lateralbi-lateral recognitionrecognition ofof foodfood safetysafety standardsstandards Work with donors and other GoK GreaterGreater likelihoodlikelihood forfor countriescountries toto decreasedecrease tradetrade MAFRDMAFRD // PejaPeja counterparts to transition to new barriers for agricultural commodities across the board InstituteInstitute organizational model and support capacity barriers for agricultural commodities across the board building Centralized structure will allow for stricter, coordinated Centralized structure will allow for stricter, coordinated Work with donors and other GoK enforcement of food safety standards on producers, Prime enforcement of food safety standards on producers, Prime counterparts to transition to new Minister processorsprocessors andand exportersexporters Minister organizational model and support capacity OfficeOffice // KFVAKFVA ProductionProduction ofof highhigh qualityquality productsproducts willwill enableenable building producersproducers toto taketake advantageadvantage ofof preferentialpreferential tradetrade Implement functional changes as necessary regimesregimes underunder CEFTACEFTA MinistryMinistry ofof according to new, centralized. Ensure that HealthHealth services do not overlap with those of the centralized unit

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical AssistanceAssistance:: $1,296,000$1,296,000 (3(3 peoplepeople forfor 22 years)years)

TotalTotal EstimatedEstimated CostCostss :: $1,296,000$1,296,000 forfor TATA

Sources : BAH Analysis 258 Government Agriculture Regulations Initiative 5B: Help private quality control labs to achieve international certification Duration: 2 years Supporting Analysis: pp 86, 133 (AgStrat Baseline)

Description Implementation Steps Currently two private quality control labs exist 1. Revise business model for labs to achieve certification according to best practice models in Kosovo. However, neither of the private labs a. Examine business model, functional structure and service offerings of private labs and pinpoint are internationally recognized or have bilateral weaknesses against international best practice models agreements with governments in other b. Refine and recommend new business model that will enable labs 1) achieve international countries. The lack of recognition greatly certification and 2) remain financially stable impedes Kosovo’s ability to remain competitive c. Formulate timeline and plan for private labs to achieve international certifications (ISO, etc.) both regionally and internationally. This could d. Determine funding requirements to reform private labs, including money for technical assistance, lead to a continued decrease in sales and infrastructure, equipment, technicians, analysts, etc. exports. e. Determine funding support and technical assistance to be provided with donor support We propose a two-part effort to reform private f. Launch program and monitor progress according to timeline for achieving certifications; provide quality control labs in Kosovo: 1) work with technical assistance to target identified weaknesses private labs to create business models that will 2. Build capacity in private quality control labs to increase ability to achieve international recognition help them achieve international certification a. Determine employee competencies required to meet international best practices for private quality while remaining financially stable; and 2) control labs strengthen the skills and capacity of individuals b. Assess competencies of employees and determine gaps in skills working in private labs so that they can help c. Where relevant, identify training needs for all employees based on the gaps; for significant gaps, achieve international recognition. determine the profiles of individuals that should be hired and develop recruitment plan d. Sketch a detailed training plan, outlining courses, partners, funding, timeline, and evaluation e. Launch training program; provide targeted continued technical assistance to complement training f. Launch recruitment plan to hire required resources

Indicator Key Risks / Mitigation Plans Key Milestones Increase in exported value of agricultural Delay in acquiring international certification: constant monitoring Reformed private lab business goods of progress against timeline; provide targeted technical models launched by the end of year Decrease in the value of commodities rejected assistance to areas that are off track 1 because of food safety issues Inability to find required people and skill sets for private labs: use Recruiting for private labs 100% Increase in the number of countries accepting exchange program format for experts from labs in other complete by the end of year 1 exports from Kosovo countries to provide training and technical assistance At least 3 agreements at negotiation Number of international certifications acquired Employee attrition to more lucrative positions: provide program phase for bi-lateral recognition with for university students to work in private labs while acquiring international labs by the end of year their degrees 1

Sources : BAH Analysis 259 Government Agriculture Regulations Initiative 5B: Help private quality control labs to achieve international certification Duration: 2 years Supporting Analysis: pp 86, 133 (AgStrat Baseline)

RationaleRationale KeyKey CounterpartsCounterparts

StrongerStronger reputationreputation forfor foodfood safetysafety andand qualityquality controlcontrol will help increase the country’s competitiveness Provide technical assistance and monetary will help increase the country’s competitiveness assistance to help labs achieve international internationally, thereby augmenting production value DonorDonor internationally, thereby augmenting production value certification CoordinationCoordination andand exportsexports Identify partners for labs, including CommitteeCommittee ByBy achievingachieving internationalinternational standards,standards, greatergreater abilityability forfor international labs and international KosovoKosovo toto establishestablish strategicstrategic marketsmarkets inin foreignforeign government entities countriescountries throughthrough bi-lateralbi-lateral recognitionrecognition ofof foodfood safetysafety standardsstandards Establish MoUs for private labs to complete MAFRD,MAFRD, PejaPeja Third party labs provide additional assurance that third party testing of agriculture goods Third party labs provide additional assurance that Institute,Institute, Define audit and quality control procedures agricultureagriculture goodsgoods meetmeet internationalinternational foodfood safetysafety KFVA,KFVA, MoHMoH standardsstandards for private labs PrivatePrivate labslabs cancan performperform qualityquality controlcontrol andand auditingauditing ofof testingtesting completedcompleted byby governmentgovernment entitiesentities InIn casescases ofof highhigh volume,volume, GoKGoK can can outsourceoutsource testingtesting andand Accredit labs according to national KFVA/KFVA/ standards analysisanalysis toto internationallyinternationally certifiedcertified privateprivate labslabs MAFRDMAFRD Determine impact of private lab testing on export and import of goods

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical AssistanceAssistance:: $432,000$432,000 (1(1 peoplepeople forfor 22 years)years) SmallSmall GrantsGrants ProgramProgram:: $150,000$150,000 (5(5 smallsmall grantsgrants atat $30,000$30,000 forfor eacheach lab)lab)

TotalTotal EstimatedEstimated CostsCosts :: $582,000$582,000 foforr TATA andand SmallSmall GrantsGrants ProgramProgram

Sources : BAH Analysis 260 Government Agriculture Regulations Initiative 5C: Establish program to protect the environment against pesticide and input misuse Duration: 2 years Supporting Analysis: pp 87-88, 136 (AgStrat Baseline)

Description Implementation Steps Pesticide and input misuse poses serious 1. Develop more comprehensive policies and legislation prohibiting use of illegal and counterfeit pesticides problems to the environment, leading to a. Draft comprehensive list of banned and counterfeit pesticides, according to composition, application destruction of arable land and potentially method and/or restriction according to commodity type, based on international best practice models decreasing agriculture yields. Farmers are not b. Socialize and vet list of prohibited and counterfeit pesticides with agriculture experts from the donor trained in the use of pesticides and tend to community, MAFRD, Peja Institute, etc. over-apply relative to the amounts needed for c. Revise and/or draft policies and legislation enforcing bans on restricted pesticides and products specific crops. The situation is more critical d. Communicate revised policies and legislation through awareness program for farmers, processors, with the rapid growth in counterfeit pesticides in manufacturers, distributors, importers, etc. Eastern Europe. Input distributors report very 2. Establish alliances to provide extension services in pesticide, seed and other input use infrequent inspections from MAFRD and a. Identify pesticides, seed and other input distributors, retailers and importers operating in the region complain that lack of enforcement makes it who currently provide training on application for farmers difficult to compete with illegal or counterfeit b. Identify members of the donor community and GoK to serve as partners in the alliance imports. c. Define MoU among all partners in alliance, including roles, responsibilities, funding sources We propose a three-part approach to protect d. Develop training program, content and timeline. Arrangement could possibly focus around the environment and arable land against distributors, retailers and importers providing training on pesticide, seed and input use for farmer destruction: develop more comprehensive associations buying inputs policies and legislation that restrict illegal and e. Launch extension program and monitor progress; make changes as necessary counterfeit pesticides according to application, 3. Create automated pesticide, seed and input tracking system use and/or commodity type; 2) leverage a. Develop automated registry system housed possibly MAFRD. alliances to provide training to farmers in b. Establish MoU to share pesticide, seed and input data with traders and Customs. Create network to pesticide, seed and input use; and, 3) track link sales data from retailers and import data from the Customs Authority sales and distribution through a centralized, c. Develop training program both internally within the MAFRD to update and track pesticide, seed and automated system housed within the GoK. input sales and distribution and externally for traders and Customs to provide accurate data Indicator Key Risks / Mitigation Plans Key Milestones Increase in production value of goods Continued use of banned pesticides, seeds and inputs by Revised policies and legislation for Increase in exports of agriculture farmers: develop more stringent inspection and penalization banned pesticides implemented by commodities system for misuse end of 1 Decrease in use of banned pesticides, seed Lack of participation in training program: develop training MoU for two alliances established and inputs programs targeting associations to reach more farmers by end of year 1 Number of farmers trained who are properly Lack of participation in tracking system: develop arrangement to Automated tracking system using pesticides, seeds and inputs provide market data from MIS directly to all retailers and developed in designated GoK entity Proportion of pesticide, seed and input sales importers participating in the program by end of year 1 and imports tracked in automated system

Sources : BAH Analysis 261 Government Agriculture Regulations Initiative 5C: Establish program to protect the environment against pesticide and input misuse Duration: 2 years Supporting Analysis: pp 87-88, 136 (AgStrat Baseline)

RationaleRationale KeyKey CounterpartsCounterparts Experts help develop regulations Donor ProtectingProtecting useuse ofof arablearable landland willwill leadlead toto increasedincreased Donor Serve as partners in alliances Coordination yieldsyields andand qualityquality ofof agricultureagriculture goodsgoods Coordination Provide funding and technical expertise for CommitteeCommittee StringentStringent bansbans onon pesticidespesticides andand seedsseeds improvesimproves automated tracking system reputationreputation ofof Kosovo’sKosovo’s abilityability toto produceproduce safe,safe, high-high- Provide input and enforce banned list qualityquality goods,goods, therebythereby increasingincreasing exportsexports andand producedproduced MAFRDMAFRD Potentially house automated tracking valuevalue system AlliancesAlliances createcreate solidsolid networksnetworks forfor farmersfarmers toto buybuy pesticides,pesticides, seedsseeds andand inputsinputs fromfrom legallegal andand well-well- Provide input and enforce banned list establishedestablished distributorsdistributors Peja Institute Peja Institute Participate in extension program for farmers ExtensionExtension programsprograms increasesincreases farmers’farmers’ ability ability toto develop products that meet international food safety develop products that meet international food safety Serve as partners in alliances to provide standards Pesticide standards Pesticide funding and extension services Retailers & TrackingTracking systemsystem willwill helphelp GoKGoK entities entities limitlimit thethe salesale andand Retailers & Provide sales information for tracking SuppliersSuppliers distributiondistribution ofof illegalillegal pesticides,pesticides, seedsseeds andand inputsinputs thatthat system couldcould potentiallypotentially destroydestroy qualityquality ofof arablearable landland inin KosovoKosovo KosovoKosovo Provide import data for automated tracking CustomsCustoms system

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical AssistanceAssistance:: $864,000$864,000 (2(2 personperson forfor 22 years)years) GrantsGrants ProgramProgram toto CertifyCertify RetailersRetailers andand DistributorsDistributors:: $225,000$225,000 (15(15 grantsgrants atat aa costcost ofof $15,000$15,000 each)each) ConductConduct RequirementsRequirements forfor AutomatedAutomated TrackingTracking SystemSystem(analysis,(analysis, design,design, andand develop):develop): $500,000$500,000 TotalTotal EstimatedEstimated CostsCosts :: $1,589,00$1,589,0000 forfor TATA andand GrantsGrants ProgramProgram

Sources : BAH Analysis 262 Initiatives for trade access include developing institutional initiatives to facilitate trade and developing interim response to subsidies in neighboring countries

Initiatives to Increase Trade Access 1

LeveraginLeveragingg SmallSmall AA BB FarmeFarmerrss PotentialPotential DevDeveeloplop institutionalinstitutional initiinitiaativtiveess toto DevDeveeloplop aanndd eexecuxecutete inteinterrimim 2 facilitatefacilitate tratraddee andand buildbuild capacitycapacity inin resresppoonnsese ttoo ssuubsidbsidiesies inin thethe GovGoveernrnmentment ofof KoKossoovvoo neighborneighboringing countricountrieess Demand-DrivenDemand-Driven FocFocuuss Although Kosovo participates in A number of neighboring countries, CEFTA and can exercise benefits employ subsidies that are likely in

ve 3 under EU GSP and US GSP, violation of CEFTA requirements. ti

a implementation has been The subsidies will continue to incomplete with all the agreements, damage Kosovo’s competitiveness Initi InfrasInfrastructuretructure CapacityCapacity BuilBuildidinngg thereby hindering the growth in internationally and on the domestic trade. The initiative will consist of market if proper response two main programs to address mechanisms are not implemented. ication

f 4 these issues: 1) creating a The primary goal of this initiative is centralized, coordination body with to develop legitimate, effective versi TransportationTransportation representatives from government responses to subsidies through two organizations (MTI, MEF, MFA, methods: 1) formulating remediation Customs, PM’s Office, President’s plans by applying key CEFTA

Crop Di 5 Office, MAFRD), civil society provisions and 2) exercising the GovernmentGovernment (Chamber of Commerce, Chamber right to enforce legitimate responses AgricultureAgriculture of Advocates) and the private sector to trade allowed under CEFTA. RegulatiRegulatioonsns to facilitate trade and 2) developing multiple capacity building efforts 6 using both national and regional efforts. TradeTrade AccessAccess 0

Sources : BAH Analysis 263 Trade Access Initiative 6A: Develop institutional initiatives to facilitate trade and build capacity in the Government of Kosovo (GoK) Duration: 5 years Supporting Analysis: pp 89-93, 137-138 (AgStrat Baseline), pp 43-51 (AgCLIR)

Description Implementation Steps Although Kosovo participates in CEFTA and 1. Develop an inter-ministerial council to facilitate trade policy can exercise benefits under EU GSP and US a. Identify representatives from government organizations (MTI, MEF, MFA, Customs, PM’s Office, GSP, implementation has been incomplete with President’s Office, MAFRD), civil society (Chamber of Commerce, Chamber of Advocates) and the all the agreements, thereby hindering the private sector growth in trade. Implementation issues stem b. Develop rules of order, mission, bylaws and administration of meetings from two primary reasons: 1) no central body c. Define and designate leadership team, including roles, responsibilities, decision rights and plan for exists to coordinate trade facilitation and council to be housed in the PM’s office examine trade issues on an economy-wide d. Identify sources of funding and timeline; initial finding could come from donor support with transition (rather than sector specific) basis and 2) key to PM’s office for sustainability GoK trade entities, such as the Department of e. Establish core "Rapid Response team“ which would include 5-6 key players in trade and at least one Trade (MTI), Kosovo Customs, Dept of from private sector. Rapid response team would always be available to take immediate action on Bilateral Affairs (MFA), Office of the President emerging trade issues. and KFVA, lack the skills or resources to 2. Develop multi-pronged capacity building effort in the GoK negotiate effectively with trade partners. a. Assess skills sets of all employees involved in trade facilitation at Department of Trade, Kosovo Customs, Department of Bilateral Affairs (MFA), Office of the President and KFVA to determine gaps The initiative will consist of two main programs b. Design national capacity building plan, including training, technical assistance and workshops, to 1) to address these issues: 1) creating a strengthen trade facilitation 2) improve implementation of current trade agreements and 3) develop centralized, coordination body among the GoK, process to accede to the WTO 4) prepare them for negotiations for future trade agreements civil society and private sector to facilitate c. Determine regional capacity building plan, including initiatives to participate in regional seminars with trade and 2) developing multiple capacity neighboring countries and exchange programs with trade officials in other governments building efforts using both national and regional d. Work with other donors to determine cost, funding sources and timeline; pinpoint partners to efforts. implement national and regional capacity building plans e. Launch capacity building efforts and monitor effectiveness; make changes as necessary

Indicator Key Risks / Mitigation Plans Key Milestones Increase in exports of agriculture goods to Lack of participation in inter-ministerial council: make Execution of all preferential trade CEFTA partners participants accountable for roles in the rules of order, also regimes under CEFTA with Albania Decrease in imports of agriculture goods from specifying methods of recourse for non-fulfillment of obligations and Croatia by end of year 2 CEFTA partners Absence of discernable improvement in trade facilitation: for Inter-ministerial council established Increase in the benefits executed under organizations with continued weaknesses, developed targeted and responding to trade issues on a preferential trade regimes technical assistance to address issues regular basis by end of year 1 Increase in bilateral agreements executed with trade partners

Sources : BAH Analysis 264 Trade Access Initiative 6A: Develop institutional initiatives to facilitate trade and build capacity in the Government of Kosovo Duration: 5 years Supporting Analysis: pp 89-93, 137-138 (AgStrat Baseline), pp 43-51 (AgCLIR)

RationaleRationale KeyKey CounterpartsCounterparts

IncreaseIncrease inin exportsexports ofof agriculturalagricultural goodsgoods underunder Provide initial funding and coordination Donor preferential trade regimes Donor support in set-up of inter-ministerial council preferential trade regimes Coordination Coordination Provide funding and technical support for Strengthened government’s trade capacity could Committee Strengthened government’s trade capacity could Committee capacity building efforts decreasedecrease thethe numbernumber ofof countriescountries thatthat areare currentlycurrently blockingblocking trade,trade, therebythereby openingopening upup newnew marketsmarkets forfor exportsexports MTI,MTI, MEF,MEF, Inter-ministerialInter-ministerial bodybody inin conjunctionconjunction withwith strengthenedstrengthened MFA,MFA, Representatives on inter-ministerial council trade capacity will enable the government to respond trade capacity will enable the government to respond Customs,Customs, Receive capacity building support on trade moremore effectivelyeffectively toto unfairunfair tradetrade practicespractices PM’sPM’s Office, Office, facilitation issues IncreasedIncreased capacitycapacity toto negotiatenegotiate bi-lateralbi-lateral agreementsagreements President’sPresident’s Designate members of “Rapid Response” Office withwith tradetrade partnerspartners Office team StrengthenedStrengthened capacity,capacity, especiallyespecially atat Customs,Customs, couldcould decreasedecrease thethe numbernumber ofof illegalillegal importsimports enteringentering thethe MAFRD, countrycountry MAFRD, ChamberChamber ofof Commerce,Commerce, Representatives on inter-ministerial council ChamberChamber ofof AdvocatesAdvocates

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical AssistanceAssistance:: $1,620,000$1,620,000 (1(1 personperson fullfull timetime andand 11 personperson half-timehalf-time for for 55 years)years)

TotalTotal EstimatedEstimated CostCostss :: $1,620,000$1,620,000 forfor TATA

Sources : BAH Analysis 265 Trade Access Initiative 6B: Develop and execute interim response to subsidies in neighboring countries (GoK) Duration: 5 years Supporting Analysis: pp 94-99, 139 (AgStrat Baseline), pp 43-51 (AgCLIR)

Description Implementation Steps A number of neighboring countries, including 1. Develop remediation plans to trade subsidies by exercising key provisions under CEFTA Albania, Macedonia and Montenegro, employ a. With donor support and spearheaded by the Ministry of Trade & Industry, develop core team of subsidies that are likely in violation of CEFTA experts to examine current trade subsidies applied by neighboring countries. Members will be requirements. The subsidies will continue to appointed to analyze subsidies in specific sub-sectors (i.e. dairy, horticulture, livestock, fish) damage Kosovo’s competitiveness b. Complete exhaustive analysis of current subsidies, in particular exercising Article 44 of the CEFTA internationally and on the domestic market if agreement which requires that subsidies executed by countries be made public proper response mechanisms are not c. Develop response plans and safeguard measures, including increased tariffs for goods where implemented. At present, Kosovo is not domestic producers are suffering serious economic injury due to imports, as allowed under Article 23 exercising key CEFTA provisions, including of CEFTA legitimate responses to subsidies and barriers d. Socialize response plan with inter-ministerial committee and secure buy-in to trade, because they 1) lack the process and e. Launch response plan and communicate safeguard measures to neighboring countries as per capacity and 2) do not exercise key information CEFTA disclosure requirements gathering provisions. f. For areas where information was not sufficiently provided under CEFTA, examine possibility of The primary goal of this initiative is to develop launching arbitration procedures based on time, cost, and potential economic impact legitimate, effective responses to subsidies 2. Formulate and enforce legally-accepted trade responses to competitor subsidies under CEFTA through two methods: 1) formulating a. Develop task force to examine imports of agriculture goods according to a variety of sectors (i.e. remediation plans by enforcing CEFTA dairy, horticulture, livestock, fish). provisions and 2) exercising the right to b. Task force launches effort to test products that could potentially violate basic international food develop and enforce legally-accepted trade safety standards responses allowed under CEFTA. c. Task force develops potential list of responses for implementation; socialize list with inter-ministerial committee and secure buy-in d. Draft communiqué detailing list of responses based on violations and submit to countries to increase transparency e. Develop and administer training to Customs officials at border posts for them to spot and refuse imports violating food and safety standards Indicator Key Risks / Mitigation Plans Key Milestones Increase in domestic sales of agriculture Lack of capacity to develop effective remediation plans: provide Remediation plan developed and goods donor support in form of technical assistance to core team of approved by inter-ministerial council Increase in exports of agriculture goods to experts by end of month 6 CEFTA countries Additional subsidies and barriers placed by neighboring List of potential responses Decrease in imports of goods violating food countries: continued technical assistance provided by donors to developed and approved by inter- safety standards from CEFTA countries ask for full disclosure of subsidies and provide support for ministerial council by end of year 1 arbitration

Sources : BAH Analysis 266 Trade Access Initiative 6B: Develop and execute interim response to subsidies in neighboring countries Duration: 5 years Supporting Analysis: pp 94-99, 139 (AgStrat Baseline), pp 43-51 (AgCLIR)

RationaleRationale KeyKey CounterpartsCounterparts

TheThe decreasedecrease inin importsimports fromfrom neighboringneighboring countriescountries willwill Provide technical assistance / funding for Donor increase competitiveness of goods on the domestic Donor core team in developing remediation plan increase competitiveness of goods on the domestic Coordination market Coordination and to assist task force in developing market Committee Committee legitimate responses to subsidies PotentialPotential forfor neighboringneighboring countriescountries toto decreasedecrease subsidiessubsidies ifif KosovoKosovo appearsappears toto bebe aa moremore crediblecredible Spearhead effort to develop remediation trading partner. Could potentially lead to an increase in Government trading partner. Could potentially lead to an increase in Government plan and develop legitimate responses to exports of Kosovo exports of Kosovo subsidies DecreaseDecrease thethe numbernumber ofof illegalillegal andand unsafeunsafe agricultureagriculture goodgood enteringentering thethe marketmarket Review remediation plan and list of potential Inter- Sector-focusesSector-focuses taskforcetaskforce willwill ensureensure thatthat allall areasareas ofof Inter- trade responses; provide final approval ministerial agricultureagriculture areare properlyproperly examinedexamined forfor subsidiessubsidies andand ministerial Oversee efforts to enforce remediation plan Committee responsesresponses areare developeddeveloped Committee and enforce legitimate responses

Receive training and exercise right to refuse KosovoKosovo goods that violate food safety standards in CustomsCustoms Kosovo

HighHigh LevelLevel CostCost EstimateEstimate

TechnicalTechnical AssistanceAssistance:: $1,620,000$1,620,000 (1(1 personperson fullfull timetime andand 11 personperson half-timehalf-time for for 55 years)years)

TotalTotal EstimatedEstimated CostCostss :: $1,620,000$1,620,000 forfor TATA

Sources : BAH Analysis 267 Table of Contents

Overview of Deliverable

Baseline Analysis of Agriculture Sector

268 The potential impact of the agriculture reforms were developed using two approaches: benchmark-based and initiative-focused

Approaches to Project Potential Impact on Kosovo’s Agriculture Sector

Purpose: Identify target countries whose current agriculture performance will serve to project Kosovo’s agriculture performance in 5 and 10 years Methodology: Top down approach that compares Kosovo’s agriculture Benchmark-Benchmark- performance to selected regional and best practice benchmark countries BasedBased along agriculture metrics including agriculture production, exports, full-time ApproachApproach employment, and yield Output: Estimates for Kosovo’s increase in agriculture production, increase in agriculture exports, and additional agriculture jobs created by year 5 and year 10

Purpose: Quantify the impact to Kosovo’s agriculture sector of implementing the 21 recommended initiatives Methodology: Bottom up approach that calculates the monetized value Initiative-Initiative- and return on investment (ROI) for each recommended initiative designed FocusedFocused ApproachApproach to develop the diversified crop base and address Kosovo’s challenges in the agriculture sector Output: Value and ROI for each initiative and overall value and ROI for all initiatives

Source: BAH Analysis 269 Benchmark-Based Approach

We evaluated a number of different benchmark countries along key agriculture, export and employment statistics… Key Agriculture Statistics for Benchmark Countries KosovoKosovo MacedoniaMacedonia AlbaniaAlbania CroatiaCroatia SloveniaSlovenia SlovakiaSlovakia PolandPoland ItalyItaly

AgriculturalAgricultural ProductionProduction (€)(€) 228M 640M 616M 1,849M 637M 1,637M 14,503M 35,419M

AgriculturalAgricultural ProductionProduction (MT)(MT) 0.5M 1.5M 1.4M 3.3M 0.9M 3.2M 34.9M 51.5M

AgriculturalAgricultural EmploymentEmployment 90.8K 320.5K 5,938.4K 515.6K 207.7K 217.7K 5,093.5K 1,938.1K (FTEs)(FTEs)

ExportExport ValueValue (€)(€) 4.4M 69.6M 3.2M 106.5M 48.1M 271.2M 1,444.4M 4,285.5M

ExportsExports asas %% ofof ProductionProduction 1.9% 10.9% 0.5% 5.8% 7.6% 16.6% 10.0% 12.1%

YieldYield (MT/ha)(MT/ha) 20 25.6 33.4 21.9 36.1 19.0 33.7 45.1

ValueValue (€/MT)(€/MT) N/A 1 433 430 569 729 507 416 688

CroppingCropping IntensityIntensity (area(area 0.48 0.48 0.35 0.61 0.7 0.6 0.74 0.74 hvstdhvstd / / agag land) land) Note: In order to compare across countries and data sources, looked at cereals, fruit and vegetables commodities only; Used 2007 data for all except agricultural land, which was 2005 Note (1) : Price data for Kosovo not provided Source: FAOSTAT, ILO, CIA factbook, TradeMap, WDI for agricultural land (2005), Statistics Office of Kosovo, Customs Office of Kosovo, BAH Analysis 270 Benchmark-Based Approach

…and selected Macedonia and Slovenia to serve as proxies for 5- year and 10-year goals respectively

Primary Selection Criteria for 5 & 10 Year Goals

11 Higher Yield 22 Exports a Higher Proportion 33 Higher Value of Goods (Metric Tons / Ha) of Production (%) (Euros / Metric Tons)

36.1 10.9% 729

25.6 7.6%

433 20.0

1.9%

N/A 1

Kosovo Macedonia Slovenia Kosovo Macedonia Slovenia Kosovo Macedonia Slovenia

Note: In order to compare across countries and data sources, looked at cereals, fruit and vegetables commodities only; Used 2007 for data shown Note (1) : Price data for Kosovo not provided Source: FAOSTAT, TradeMap, Statistics Office of Kosovo, Customs Office of Kosovo, BAH Analysis 271 Benchmark-Based Approach

Kosovo has the potential to increase production by €798M, create 151K more jobs and augment exports by €73.2M by 2020… Impact to Kosovo’s Agriculture Sector: Five and Ten Year Projections

Five & Ten Year Production Potential Five & Ten Year Employment Potential (1) Five & Ten Year Export Potential (Euros) (Number of FTEs) (Euros)

+798M +73.2M +151K 1,026M 77.6M 242,212

+39K +27.7M 129,742 +67M 32.1M

295M 90,750 228M

4.4M

2010 2015 2020 2010 2015 2020 2010 2015 2020

CAGR 5.3% 16.2% CAGR 7.4% 10.3% CAGR 48.8% 33.2%

Note: In order to compare across countries and data sources, looked at cereals, fruit and vegetables commodities only; Used 2007 for data shown Note (1) : Employment figures based on employment growth rates of Macedonia & Slovenia, and discounted by a negative growth rate in ag employment for Slovenia in 2015 and for Italy in 2020 Source: FAOSTAT, TradeMap, Statistics Office of Kosovo, Customs Office of Kosovo, BAH Analysis 272 Benchmark-Based Approach

…however, Kosovo may need to increase exports by a larger amount to support target production levels

Component Marginal Analysis to Absorb Projected Production (2010- 2020, in Euros)

376M 1,026M

+195%

363M Cumulative Effect 532% +188%

50M 44M +26% 228M 35M -15% +23%

Current Imports (decrease of Consumption Growth Consumption Growth Consumption Growth Additional Exports Target Production Consumption (2010) 50%) Due To Larger Due To Inflation Due To Greater Per Needed To Support level (2020) Population Capita Consumption Target Production Level (2020)

Note : Assumers that 50% vegetable, fruits and cereal imports will decrease; 1.775% population growth rate (Statistical Office of Kosovo); assumes 2% inflation growth; growth rate for per capita increase in consumption: 10% (2004-2008) Source: BAH Analysis; Statistical Office of Kosovo 273 Initiative-Focused Approach

Total estimated costs for all initiatives is €42.8M over 5 years, with crop diversification comprising 28% of total costs Cost Breakdown by Area and Initiative

Cost Breakdown for Recommendation Areas Cost Breakdown by Initiative (Percentage of Total) (Euros)

11.9M 10.2M 3M 9.5M 3.4M 2.4M 2.3M Trade Access, 5% 7% Gov’t Ag Regulations, 6% 19% 7%

Transportation, 8% 38% 36% Crop 46% 50% Diversification 28% 100% 41% Infrastructure 20% 29% Capacity 86% 17% Development Leveraging 22% Small Farmers 8% Potential 24% 21%

37% 50% 35% 32% Demand Driven Focus, 7% 21% Total:Total: €42.8M€42.8M .1% Crop Leveraging SM Demand Driven Infrastructure Transportation Ag Regulations Trade Diversification Potential Focus

Initiative A Initiative C Initiative B Initiative D Source: BAH Analysis 274 Initiative-Focused Approach The annualized cost of implementing the recommended initiatives is €8.6M, which represents 52% of current annualized donor spending on agriculture

AgStrat Implementation Costs vs. Current Annualized Donor Spending on Agriculture 1 (Euros)

52% CommentsComments 16.5M GivenGiven thethe currentcurrent fundfundinging ofof approximatelyapproximately European Bilaterals €€ 15-18M, 15-18M, KosovoKosovo isis well-positionedwell-positioned toto 15% undertakeundertake substantialsubstantial reformsreforms inin agricultureagriculture – If Kosovo continued to receive the World Bank – If Kosovo continued to receive the 27% samesame fundingfunding annually,annually, approximatelyapproximately 52%52% wouldwould covercover allall 2121 initiativesinitiatives inin thethe AgricultureAgriculture 8.6M USAID Strategy.Strategy. TheThe differencedifference couldcould bebe 16% usedused toto supportsupport ototherher prioritiespriorities inin agricultureagriculture

European ––With With increasedincreased donordonor coordination,coordination, Commission efficiencyefficiency andand cost-savingscost-savings couldcould bebe 42% realizedrealized

Annualized AgStrat Current Annualized Spending- Implementation Costs 2009

Note (1): Spending provided as estimated range of €15-18M, but €16.5 figure used for purposes of comparative analysis Source: Interviews, Slide 58 of AgStrat Interim Deliverable, BAH Analysis 275 Initiative-Focused Approach

At an aggregate level, implementation of all the initiatives are expected to generate a conservative ROI of 6.06 Value Breakdown by Area and Initiative Return on Investment of New Initiatives 1 (Euros) Value Breakdown by Initiative (Euros) ROI: 6.06

259M 76.9M 92.2M 17.6M 30.5M 14.2M 15.9M 12.2M Trade, 5% 4% 13% Ag Regulations, 6% 35% Transport, 5% 34% 38% Infrastructure 95% 12% 100% DD Focus, 7% 25% 79% 16% 57%

Leveraging Small Farmers 22% 24% Potential 58% 35%

26% 10.5% 26% 28% 42.8M Crop 10.5% 5% Diversification 4% 30% Crop Leveraging SM Demand Driven Infrastructure Transportation Ag Regulations Trade Diversification Potential Focus

Initiative A Initiative C Initiative B Initiative D 5-Year Projected Cost Projected Value Total Note (1) : ROI assumptions conservative because 1) calculation based on 1 iteration for total costs over 5 years; 2) value created from production based on figures for fruits, vegetables and cereals Source: BAH Analysis 276 Initiative-Focused Approach Institutional and infrastructure-related initiatives tend fall in lower ROI ranges because of the focus on strengthening the current state rather than producing direct value Value Breakdown by Area and Initiative 1A: Improve business viability and coordination of associations 1B: Introduce and strengthen extension system to promote traditional crops and improve diversity CommentsComments 1C: Increase and diversify types of financial products available to AlthoughAlthough somesome initiativesinitiatives havehave smallholder farmers comparativelycomparatively smallersmaller ROI,ROI, theythey cancan stillstill 2A: Develop and launch donor coordination activities for agriculture ROI greater produceproduce significantsignificant valuevalue forfor thethe agricultureagriculture ROI greater 2C: Improve capacity of collection centers, pack houses and cold storage than 10 sectorsector than 10 4B: Develop air perishables plan and remove market and regulatory obstacles ––In In general,general, initiativesinitiatives thatthat areare 5C: Establish program to protect the environment against pesticide smallersmaller inin scopescope cancan bebe linkedlinked moremore misuse readilyreadily toto aa short/short/ medium-term,medium-term, 6B: Develop and execute interim response to subsidies in neighboring quantifiablequantifiable returnsreturns countries ––Large-scale Large-scale projectsprojects tendtend toto taketake 0: Crop Diversification Initiative moremore timetime toto realizerealize returnreturn 1D: Improve cadastral system and test effectiveness of pilot land Overall,Overall, thethe ROIROI forfor infrastructureinfrastructure andand ROI between ROI between consolidation program institutionalinstitutional projectsprojects tendtend toto smallersmaller 5 and 10 5 and 10 3B: Increase use of small-scale irrigation systems because:because: 3D: Assess energy requirements for agriculture ––Projects Projects tendtend toto focusfocus onon strengtheningstrengthening currentcurrent statestate andand 2B: Create market intelligence system and communication plan servicesservices ratherrather thanthan producingproducing 2D: Establish centralized organization to oversee marketing & export additionaladditional directdirect valuevalue promotion of agriculture goods – In the case of greenhouse, ROI was 3A: Rehabilitate the large-scale irrigation system in Kosovo – In the case of greenhouse, ROI was determined based on production 3C: Support development of greenhouses determined based on production value of traditional crops rather than value of traditional crops rather than ROIROI lessless 4A: Prioritize and develop rural roads projects using cost-benefit analysis and PPPs thethe recommended,recommended, higherhigher valuevalue thanthan 55 4C: Analyze and communicate cost advantages of the new Tirana highway cropcrop mixmix 5A: Establish a centralized, strengthened organizational model for food safety and quality control 5B: Help private quality control labs to achieve international certification 6A: Develop institutional initiatives to facilitate trade and build capacity in the Government of Kosovo Sources : BAH Analysis 277 The initiative-focused analysis accounts for 86% of the total value identified by the 2015 estimate of Kosovo’s potential from the benchmark-based approach Overview of Value Created by Recommended AgStrat Initiatives

Projected Value Creation: Initiative vs. Benchmark Approaches (Euros)

86%

301M CommentsComments InitiativeInitiative focusedfocused analysisanalysis identifiesidentifies 86%86% ofof thethe valuevalue projectedprojected fromfrom benchmarks.benchmarks. TheThe initiativeinitiative basedbased analanalysisysis isis inherentlyinherently conservativeconservative becausebecause ––The The projectedprojected valuevalue ofof thethe initiativesinitiatives 259M isis basedbased onlyonly onon inindidicatorscators thatthat cancan bebe readilyreadily monetizedmonetized ––Parallel Parallel effortsefforts inin otherother areasareas relatedrelated toto agriculture,agriculture, suchsuch asas investorinvestor protection,protection, education,education, socialsocial servicesservices andand contractcontract enforceenforcementment willwill helphelp toto provideprovide additionaladditional valuevalue inin helpinghelping KosovoKosovo toto meetmeet ititss overalloverall potentialpotential

Initiative-Focused Benchmark-Based Approach Approach

Sources : BAH Analysis 278