Agribusiness Between Albania and the Netherlands Investment Opportunities

Agribusiness between Albania and The Netherlands Investment opportunities

March 2018 Commissioned by the Embassy of The Netherlands in Albania in cooperation with RVO

Agribusiness between Albania and The Netherlands

Colophon

Title Agribusiness between Albania and The Netherlands; Investment opportunities

Version Final

Company DSA and Urban Patterns

Authors Dr. Drini Imami and Ellen van der Lei

Date March 2018

For further information on this publication the authors can be contacted:

DSA

Drini Imami: [email protected]

Urban Patterns

Ellen van der Lei: [email protected]

This report was drafted during Autumn 2017.

No part of this publication may be reproduced in any form by print, photo print or any other means without permission by DSA and Urban Patterns.

Agribusiness between Albania and The Netherlands

List of Acronyms AUT Agricultural University Tirana AZhBR-ARDA Agriculture and Rural Development Agency/Payment Agency BAS (EBRD) Business Advisory Service Danida Danish International Development Agency (Danish IDA) GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit (German IDA) EBRD European Bank for Reconstruction and Development EC European Commission EU European Union FAO Food and Agriculture Organization of the United Nations FDI Foreign Direct Investment GVA Gross Value Added IBRD International Bank for Reconstruction and Development (WB Group) IPARD Instrument of Pre-Accession for Rural Development MAFF Mountain Areas Financial Facility MARDWA Ministry of Agriculture, Rural Development and Water Administration of Albania MARD Ministry of Agriculture and Rural Development MAP Medicinal and Aromatic Plants SDC Swiss Agency for Development and Cooperation (Swiss IDA) TA Technical Assistance USAID United States Agency for International Development WB World Bank

Agribusiness between Albania and The Netherlands

Table of Contents Summary ...... 5 Introduction ...... 8 Methodology ...... 9 Overview of the agrifood sector in Albania ...... 10 Analysis and investment opportunities in agrifood sector in Albania ...... 13 Vegetables ...... 13 Fruits and nuts...... 15 Soft fruits ...... 18 Fruit and vegetable processing industry ...... 18 Medicinal and Aromatic Plants ...... 19 Trade between The Netherlands and Albania ...... 21 Dutch companies in Albania and opportunities ...... 23 Support schemes from the Dutch government for Albania ...... 25 Business environment and investment facilities ...... 28 Food and safety standards ...... 28 Access to finance, inputs and services ...... 29 Education, R&D and innovation in the agriculture sector ...... 30 Land tenure market and property rights ...... 31 Government policy and financial support for the agriculture sector ...... 31 Conclusions and recommendations ...... 35 Conclusions ...... 35 Recommendations ...... 37

Agribusiness between Albania and The Netherlands

Summary

The study aims at exploring opportunities for cooperation, trade and investment in the agrifood sector between The Netherlands and Albania focusing on selected (sub)sectors, namely vegetables, fruit including soft fruit and medicinal and aromatic plants (MAPs). The agrifood sector is an important sector for both countries - in the case of Albania it accounts for almost half of the employment and about 1/5 of the Gross Value Added of the Albanian economy.

Vegetables

Vegetable is one of the leading and fastest growing agriculture (sub)sectors in Albania - vegetable represent about 1/5 of the agrifood exports, with greenhouse tomato and cucumber being two key products in the production and export basket. A large share of the production is exported to neighboring countries in the Western Balkans and Eastern European or new EU countries (eg. Bulgaria, Romania) which are less demanding in terms of (safety and quality) standards when compared to Northern European markets which are more difficult to enter because they apply stricter standard controls. To enable horticulture growers to produce for the more interesting Northern European markets, safety and quality standards of fruits and vegetables (as well as other food products) should improve, and preferably be certified (eg. GlobalGap) to demonstrate standards and traceability.

Fruits and soft fruits

Within the fruits value chain, apple, nuts and watermelon & melons are leading products (groups) in terms of production and trade (in the international trade classifications (HS) also watermelon & melons, are considered fruit). Fruits make up 10% of the total agrifood export. However the opportunities for new investors to enter the Albanian market are likely not in the traditional segments.

Speaking with Dutch international investors in the fruit sector, the production of soft fruits seems most profitable in Albania. The climate is mild and the yields which can be achieved here are more competitive than other products. With the possibility to have two harvests a year, products can be sold on the market in (Western) Europe early in the season, with attractive prices. There is potential and growing interest, which represents an incentive to look into this sector further for investment opportunities. However, there are also gaps in terms of (insufficient) facilities (storage, transport) and financing opportunities. From the statistics that are available a strong increase can be seen at the export of berries, although the export levels are modest considering the potential. It shows the potential of this relatively new sector in Albania.

Another important category is citrus (within citrus, the fastest growing is clementine/tangerine /manderina), which has a strong export orientation. Production is concentrated in Southern Albania (Vlore/Sarande). In 2010 there was no export, in 2016 export of citrus had grown to 8% of total fruit exports.

Agribusiness between Albania and The Netherlands

MAPs

In the sector of MAPs we can see that Albania is historically a key exporter worldwide. Next to the wild MAPs, there is observed a growth in the cultivation trends, partially triggered by governmental subsidies. The quality is well known, many of the Albanian MAPs are naturally among the best of the world. Improvements in quality, traceability and overall standards is necessary to strengthen the position of Albanian MAPs. For this sector the focus in trade relations should be on companies in The Netherlands which are importing these products. Bilateral trade relations can be strengthened. There are certain expos and events in The Netherlands where Albanian companies can take part. Furthermore, opportunities to invest in the processing of MAPs in Albania can be explored.

There is a potential to capitalise on the autochthone varieties, which represent economic potential and can be further explored in the context of future projects. Dutch institutions and companies can be engaged or supported to explore further collaboration.

The industry of food processing is not sufficiently developed in Albania, particularly related to horticulture products (processing). There are a few players on the market but, as the quantities are not big enough this does not seem interesting (yet) for Dutch investors.

Financial sector

The Dutch Government Agency RVO offers financial programmes for companies and institutions looking to invest in other countries. The programmes Partners for International Business, DHI (demonstration projects, feasibility studies and pre investment studies) and Dutch Trade and Investment Fund are available for companies interested in the Albanian market. Besides this there are incentive programmes from the Albanian government or donor funding. The new funding schemes from EU (IPARD) will become operational in 2018 (calls for applications are expected to be launched within the first half of 2018). As access to financing is one of the challenges to overcome (especially for smaller farmers), the FED invest fund can be seen as a best practice example. One of the issues to explore is under which conditions financial institutions are willing to lend to newcomers in the market.

Institutional framework, research and technology

Currently there is lack of cooperation between the agriculture research and academic institutions of both countries. AUT has expressed a strong interest to establish a close cooperation with Wageningen University, and receive coaching/support as well as implement joint projects. One of the recommendations is to intensify the opportunities for exchange of students and lecturers, e.g. by providing guest lectures and providing internships (eg. 3-6 months) at Dutch companies for young workers or students. Joint cooperation to support the private sector (eg. through improving production technologies) or improving evidence-based policy-making can be considered.

The Albanian agriculture sector should benefit from better and faster technological development, in order to become more competitive. Investing in better quality seeds and seedlings is one of the main concerns of the Albanian growers. With higher investment in the seeds, much higher yields can be achieved.

Agribusiness between Albania and The Netherlands

Knowledge transfer and trainings (preferably involving institutions from both countries) can be an important step and strategy to improve in this context. Companies in The Netherlands, which are world leading on developing new sorts of seeds and seedlings, have open days where companies can go and gain experience. Other fields of improving technology is to build up well managed laboratories. In this way water and soil samples can be executed locally. Companies in The Netherlands have shown an interest in exploring opportunities in emerging or growing markets like Albania.

Agribusiness between Albania and The Netherlands

Introduction

The Embassy of The Kingdom of The Netherlands in Albania is actively promoting economic (trade and investment) relations between the two countries. The embassy continuously makes efforts to increase the visibility of the potential that Albania has to offer in its key sectors1. This study focuses on the agricultural sector, with the aim to highlight trade opportunities and to promote such developments in this sector.

International trade has grown between both countries – Dutch exports have increased by more than 5 times since 2000, from 12.5 Mill Eur in 2000 to 57.8 Mill Eur in 2016, while the Albanian exports have increased even at higher pace, from 1.4 Mill Eur to 10.9 Mill Eur for the same time period. Despite this progress, the overall trade gap remains high. Trade between The Netherlands and Albania involves mainly agrifood products and inputs; Dutch exports to Albania are dominated by agrifood exports, whereas Albanian agrifood exports to The Netherlands are modest.

In addition to the growing trade, economic relations between both countries have witnessed also a growing presence of Dutch business investments in Albania. In 2015 and 2016 the Netherlands has been the second biggest investor in Albania.

After high investments in Albania in the last years in the oil and gas sector, the FDI may decline in the coming years. For local economic development and employment this might have negative effects, and the focus should be on other sectors, of which one is the agriculture sector.

The study combines desk review together with information gained from interviews with companies (traders or investors) and experts in The Netherlands and in Albania. The authors of this report have referred to the triple helix approach. In the agricultural sector government support (policy, financial schemes), knowledge and innovation are extremely important. As Albania has had limited financial support and innovation in the sector, opportunities should be created by research institutions in both countries to set up collaboration with each other (e.g. Wageningen in The Netherlands and Agricultural University of Tirana in Albania), and with both public sector (e.g. policymakers) and private sector.

This report is based on a rapid appraisal and it is structured as follows: chapter 2 describes the methodology and approach, the third chapter provides a short overview of the Albanian agriculture development, whereas the fourth section provides insight into each of the main agrifood sectors. Chapter 5 describes the trade relation between Netherlands and Albania, and chapter 6 the challenges and opportunities in the agrifood sector. The last chapter highlights conclusions and recommendations.

1Focus sectors are energy, (agro)tourism, textile, water and agriculture

Agribusiness between Albania and The Netherlands

Methodology

The first stage of the study consisted of the prioritisation of the (sub)sectors or subsectors or group of products for which there is the biggest potential for trade and investments relevant for both countries. Specific (sub)sectors that have been chosen in close consultation with RVO/Embassy of The Kingdom of The Netherlands in Albania and stakeholders, during the first phase of the study, following the desk research, include horticulture sector with focus on greenhouse vegetable and soft fruits, and Medicinal and Aromatic Plants (MAPs).

Greenhouse vegetables represent the most important agrifood item of Albanian exports, while The Netherlands is a leading actor in this domain. Albania imports inputs (eg. seeds) and technology from The Netherlands, while more investment and trade can take place in this sector between both countries, considering mutual interest and advantages (The Netherlands in terms of know-how and access to EU markets and Albania in terms of climate).

MAPs is the other most important Albanian agrifood export, such exports target also The Netherlands. Whereas, soft fruits have been chosen because of specific Dutch entrepreneur interest, experience and investment in this sector and the potential of this sector due to the climate in Albania.

The study combines analysis of secondary and primary data. For various issues/indicators, analysis was based on the secondary data (including sectoral/ structural data). The constraint faced is that for some indicators (related to domestic production and trade) there are no available statistics, while for some others there are no recent statistics. However, regarding international trade, latest data are available and were analysed.

The secondary data were retrieved from MARD (Ministry of Agriculture, Rural Development), INSTAT (Albanian Institute of Statistics), UNSTAT, EUROSTAT, etc. In addition, a review of previous relevant studies, reports, and articles was carried out.

The primary data collection consisted of in-depth interviews carried out with various stakeholders on different levels. These interviews with key informed stakeholders enabled the obtaining of up-to-date understanding about the main patterns, challenges and opportunities for the key sectors.

Agribusiness between Albania and The Netherlands

Overview of the agrifood sector in Albania

The agriculture sector has always played an important role in the Albanian economy. Albanian agriculture sector has been growing over the years. Agriculture Gross Value Added (GVA) has increased by 2/3 since 2005, reaching over 2.1 billion Eur in 2016, which can be considered a remarkable achievement. Contribution to the overall economy (in relative terms has) been stable at about 1/5 throughout the years implying that the agriculture has been growing at a similar pace with the rest of the economy (Table 1).

Table 1: Gross value added of the agriculture, forestry, hunting and fishery sector (A)

Indicator 2005 2010 2013 2014 2015 2016 GVA (at current mill. 1,218.8 1,616.5 1,884.0 1,990.9 2,004.3 2,152.9 prices) Eur Share in GVA of % 20.5 21.2 22.2 22.7 21.6 22.9 all activities Source: INSTAT and Ministry of Finance and Economy (2017)

Agriculture remains one of the largest sectors in Albania also in terms of employment. Agriculture accounts for about half of total employment. It is by far the main source of employment and income in rural areas despite the limitations this sector faces.

The number of farms/agriculture holdings has decreased by 6% since 2005, however it is still high (exceeding 300,000). Sociodemographic changes (explained below) have contributed to the significant decrease of population (and number of households) living in rural areas thereby also contributing to the decrease in the number of agriculture holdings. Despite these developments, farm size remains small (average size is ca 1.2 Ha).

Figure 1: Areas of agriculture, bio farms and distribution centers

Agriculture Bio farms Distribution centers

Source: Metabolism of Albania, 20152

2 Source: George Brugmans, Marieke Francke, Freek Persyn (ed), The Metabolism of Albania: Activating the Potential of the Albanian Territory, 2015, iabr/UP, Rotterdam

Agribusiness between Albania and The Netherlands

Albania’s labour market has undergone structural changes over the last decade. Since 2000 formal non- agricultural employment in the private sector has almost doubled (see Figure 2). Emigration and urbanisation brought a structural shift away from agriculture and toward industry and a variety of services, including banking, telecommunications and tourism. Thus, over the years, there has been observed a significant decrease in employment in the agriculture sector– namely more than 40 percent reduction since 2000, which as mentioned above, it is strongly related to the massive migration to urban areas or abroad and the restructuring of the economy. In the coming years, as the agriculture sector modernizes and productivity increases, the number of employees in the agricultural sector is expected to continue to decrease – however the pace will depend on socio-demographic developments (e.g. migration) and alternative employment opportunities (offered by other sectors)3.

Figure 2: Employment by sector

Source: INSTAT (2017)

The sector has become more efficient, as shown by the increasing of GVA in the last decade (in current Euro values) when compared to the number of farms and on farm employment. While the employment in the agriculture sector has decreased over the last 10 years, GVA has increased significantly on the other hand, thereby farms have become more productive and profitable.

The domestic demand and consumption has grown faster than the domestic production in most subsectors, resulting in a high and increasing trade deficit during 1990s and 2000s. Trade deficit expanded until 2010, while the situation started to improve in the last years, as domestic production was meeting better the domestic demand, while exports increased substantially over the last years. The increased output and productivity of the Albanian agriculture succeeded in stabilizing in absolute terms the trade deficit, while there were marked significant improvements in relative terms too: export flows started to

3Unemployment is one of the major socio-economic challenges faced by the Albanian society, which is more common among young.

Note: employment figures, especially regarding agriculture sector, should be analyzed with caution, due to hidden unemployment

Agribusiness between Albania and The Netherlands

compensate a larger share of imports. However, even if in the last years the export import cover ratio has doubled (from 11% in 2005 to 22% in 2015 and 25% in 2016), it still remains low.

Table 2: Trade in food and agricultural products

Category Units 2005 2010 2015 2016 Export of agri-food products mill. Eur 43.3 68.7 150.8 184.5 - share in export of all products % 8.2 5.9 8.7 10.4 Import of agri-food products mill. Eur 370.4 632.5 693.4 730.6 - share in import of all products % 17.6 18.2 17.8 17.3 Trade balance in agri-food products mill. Eur -327.1 -563.8 -542.6 -546.1 Export/Import cover ratio % 11.7 10.9 21.7 25.2 Source: INSTAT (2017)

The best performing sectors in terms of international trade/export are vegetable, followed by fish, MAPs and fruits. Of these sectors, fruits, vegetable and MAPs are considered of high relevance and represent (past and potentially future) business and cooperation potential between Dutch and Albanian actors.

Table 3: Ranking of top exporting sectors

Sector (HS chapter) 2005 2010 2014 2015 2016 Vegetable (HS 07) 2.4% 4.9% 13.6% 19.5% 21.1% Preparation of fish or of crustaceans (HS 16) 30.4% 27.6% 19.6% 17.0% 17.4% MAPs (HS 12) 28.4% 23.1% 22.0% 19.5% 15.7% Fish, crustaceans, mollusks (HS 03) 3.3% 13.7% 10.1% 13.0% 14.8% Fruits and nuts (HS 8) 1.3% 4.2% 11.3% 9.4% 10.3% Source: INSTAT (2017)

Agribusiness between Albania and The Netherlands

Analysis and investment opportunities in agrifood sector in Albania

In this chapter we will give more information on the selected (sub)sectors and the key facts and developments. The selected sectors are vegetables, fruit and soft fruit and medicinal and aromatic plants (MAP).

Vegetables

Vegetables production and productivity has grown over the last years, as a result of: i) investments in production and post-harvesting facilities (often driven by governmental or donor subsidies), ii) enhancement of producers’ knowhow, iii) increased professionalism and network of regional traders, with Albanian exporters growing in size and market outreach.

The production of vegetables has grown from 620.000 tons in 2000 to a production of 1.129.000 tons in 2016. There has been marked an improved performance of the vegetable sector fuelled by both increase of greenhouse and field vegetable. Whereas potatoes production has been stable in the last years, after a significant increase during the years 2000s, counting 238.000 tons in 2016.

The vegetables sector is the best performing agrifood subsector (alongside MAPs) in terms of international trade. In the vegetable sector, a significant increase of exports is observed, from quasi-inexistent in early 2000 to significant levels in the last years. Vegetable make up 21% of total agrifood exports, which marks a significant increase when compared to just less than 3% in 2005.

This is the result of increased levels of production and the extension of production calendar and improved quality (e.g. through increased greenhouse production). In 2016, exports of vegetable mounted to almost 40 Mill Eur (almost 4 times higher compared to 2013).

Table 4: Albanian international trade: vegetables (HS 7)

Category 2005 2010 2011 2012 2013 2014 2015 2016 Import_Eur (Mill.) 12.8 20.0 15.0 15.3 16.6 19.2 14.4 14.4 Export_Eur (Mill.) 1.0 3.4 6.5 7.8 10.7 16.3 29.4 38.9 Balance 8.0% 16.8% 43.2% 51.0% 64.6% 85.1% 204.0% 269.8% Share total ag. Imp. 3.5% 3.2% 2.3% 2.3% 2.5% 2.9% 2.1% 2.0% Share total ag. Exp. 2.4% 4.9% 8.1% 8.5% 10.2% 13.6% 19.5% 21.1% Source: INSTAT (2017)

Agribusiness between Albania and The Netherlands

The surface of greenhouses has more than doubled since 2005 (Table 5) - the increase of greenhouse area, coupled with improved production technologies, has resulted in significant increase of production enabling increased exports for the key vegetables produced under greenhouse (most notably tomatoes). All the main vegetables have marked growth in production since 2010, particularly tomatoes – more than 1/2 of tomatoes and cucumbers production takes place in greenhouses. In 2016 the production of tomatoes has been 285.000 tons, compared to 94.000 tons of cucumbers and 77.000 tons of peppers4. Tomato (almost exclusively greenhouse production) is one of the main exported vegetables (26 Mill USD), followed by cucumber (6,8 Mill USD in 2016 (UNSTAT 2017)).

Table 5: Area of Greenhouses (Ha) in Albania

Category 2005 2010 2014 2015 2016 Heating greenhouses 35 57 55 70 71 with glasses 11 16 14 15 19 with plastic 24 41 41 55 52 Solar greenhouses 615 771 1030 1173 1334 with glasses 81 80 60 46 47 with plastic 534 691 970 1127 1287 Total Greenhouses 650 828 1085 1243 1405 Source: INSTAT (2017)

Figure 3: Location of different types of agriculture in Albania

Most of the vegetable production is concentrated in the Region (Qark) of Fier (which includes also Lushnje and Divjaka), where also greenhouse production is concentrated with almost 1/3 of total production. Fier is followed by the regions of Tirana and Shkodër, which together make up for more than half of the total production in Albania. For the locations of the regions and production within Albania see the map beside.

Source: Urban Patterns (2018)

4 EBRD (2017) “Appraisal of the Albanian horticulture sector with focus on international trade and cold-storage capacities”

Agribusiness between Albania and The Netherlands

Looking at an international scale in the Balkan region, in the case of tomatoes, production in Albania exceeds that of other countries in the region, except for Turkey, which is a strong regional player. Albania, together with Bosnia Herzegovina and Kosovo have seen the highest growth of production of tomatoes between 2010 and 2016. The share of production of tomatoes which goes for export has increased significantly, from 3.3% in 2010 to 22.4% in 20165. Cucumber and pepper production and international trade follows similar pattern like tomatoes.

Table 6: Dynamics of Tomatoes production in EU, Albania and other countries in the region (000 tons)

Country 2010 2014 2015 2016 2016/2010 EU (28) 14.744 15.737 17.624 17.956 122% Montenegro 8 2 3 3 42% Macedonia 168 161 173 162 96% Albania 199 234 257 285 143% Serbia 189 128 147 160 85% Turkey - 11.850 12.615 12.600 No data 2010 B & H 37 29 41 57 156% Kosovo 13 13 21 21 161 % Source: EUROSTAT (2017)

Fruits and nuts

Similar to vegetable production also the production of fruits in Albania has marked a significant increase, production has doubled since 2005 because of both higher yields (caused by improved production technologies) and increased area of plantation. That has enabled an improvement of the trade balance through reduction of imports and increase of exports (such as in the case of apple and citrus fruits).

Table 7: Production of fruit trees (000 tons)

Fruit trees 2010 2011 2012 2013 2014 2015 2016 Total (000 trees) 10.190 11.225 11.607 11.909 12.254 12.405 12.594 In production (000 trees) 7.439 8.313 8.992 9.292 9.654 10.185 10.575 Yield (kg/tree) 22,6 22,6 23,4 23,5 22,8 23.6 24.7 Production (000 ton) 167 188 210 218 220 245 261 Source: INSTAT (2017)

Three important features are worth to be mentioned among the reasons behind this progress:  The number of fruit trees has more than doubled since 2000. The availability of subsidies has played an important role in this increase.  Production of citrus products (particularly mandarins/tangerines/clementines) achieved a remarkable growth. Citrus growing now is a relatively efficient production cluster in Sarande.

5 Source: calculations of the authors based on data from Instat, Eurostat and Unstat 2017

Agribusiness between Albania and The Netherlands

 Yields also sensibly increased, mainly due to widespread use of higher quality inputs including seedlings, as well as irrigation. In terms of cultivated area, there is a balance between stone fruits (36%), seeds fruits (29%) and nuts (23%, mainly chestnuts and to some extend walnuts).

Fruit production is concentrated in the Region of Korça (South East Albania) with about 30% of the total production, followed by the regions of Elbasan, Berat, Fier and Dibër - all these regions together account for more than two thirds of total fruit production in Albania. Areas or regions which are specialised for specific crops are Korca (about 1/2 of total apple production), Vlora/Saranda (soft citrus and melons), Tropoja and Shkoder (Rec) for chestnuts.

Figure 4: Production intensity of fruits in Albania

Source: FAO.org Fruit make up 10% of total agrifood exports, which marks a significant increase (success) when compared to just less than 2% in 2005. Another important product that has marked growth in production and has a strong export orientation is watermelon & melons (although watermelon belongs to the family of vegetable, in international trade statistics it appears under Fruit HS 08). Between 2010 and 2016 the production of watermelon & melons has grown from 200.000 ton to 241.000 tons. From the domestic production of watermelon 10% is exported. Production of watermelon in Albania exceeds significantly

Agribusiness between Albania and The Netherlands

that of other countries in the region, except for Turkey which is a strong regional player6. Melons & watermelon is the second most exported product category after nuts (see figure 5).

Figure 5: Structure of fruits exports (HS 08) (Million USD) (2016)

10 8 6 4

2 Mill dollars dollars Mill (2016) 0 nuts watermelon citrus apple berries other

Source: UNSTAT (2017)

Production levels of nuts has increased significantly over the last decade – the main exported nut is chestnut. Considering the trends and considering that there is a lot of idle land that is suitable for nuts, further development / progress of the sector is viable. Nuts (especially chestnuts) represent an important source of income for silvo-pastoral communities (considering that nuts are mostly located in those areas), where intensive agriculture is not viable in Albania, and alternative employment opportunities are few.

Another important fruit is apple, whose production and export has increased significantly over the years. Although the main priority has been and will remain better tackling of the domestic demand, resulting in further import substitution. Also citrus represents a potential with a strong export orientation. In 2010 there was no export of citrus fruits from Albania. In 2016 this has risen to 8% of total fruits exports, consisting mainly of manderina/clementine/tangerines which account for the largest share in production of citrus fruits (66%).

Table 8: Albanian international trade of fruits and nuts (HS 08)

Category 2005 2010 2011 2012 2013 2014 2015 2016 Import_Eur (Mill.) 41.3 47.1 39.8 38.7 38.8 46.6 41.9 46.4 Export_Eur (Mill.) 0.5 2.9 4.0 5.2 9.4 13.5 14.2 19.0 Balance 1.3% 6.2% 10.0% 13.3% 24.2% 28.9% 33.9% 40.9% Share total ag. Imp. 11.1% 7.5% 6.1% 5.8% 5.8% 6.9% 6.0% 6.4% Share total ag. Exp. 1.3% 4.2% 5.0% 5.6% 9.0% 11.3% 9.4% 10.3% Source: INSTAT (2017)

6 EBRD (2017) “Appraisal of the Albanian horticulture sector with focus on international trade and cold-storage capacities”

Agribusiness between Albania and The Netherlands

Soft fruits

Albania has a great potential to increase the production of various soft fruits (eg. different types of berries) due to climate advantage and thereby there are expected increased investments in this field, including foreign investors. One type of berry for which there is a tradition in production and export is bilberry (boronice - wild) – interviewed experts estimate that the current production exceeds 600 ton, largely concentrated in northern Albania (mountains of Tropoja). Because they are grown in the mountains (as wild), it is easy to certify organic. In the past, most was sold as dry, while currently most is sold as fresh. Most bilberries are exported/sold through various channels to the neighboring countries (Kosovo and Montenegro) which can be further re-exported to EU markets.

Recently there has been an increase in investments in cultivated berries, such as strawberries and raspberries (including also foreign investment such as Superberry, which is shown later in this report). Because there is no data available from the statistical offices related to production, below we provide only international trade statistics. We observe a significant increase of exports of strawberries, into the EU, marking a potential development of the sector in the future.

Table 9: Albanian exports of strawberries and other berries to the EU

Year 2015 2016 2017* Euro 100 kg Euro 100 kg Euro 100 kg Strawberries € 8.390 158 € 270.806 2.061 € 603.454 4.839 Source: EUROSTAT (2017) * Preliminary

We observe an increasing interest in the production of soft fruits in Albania among investors (including also foreign/Dutch ones) such as the case of raspberries. More information on this sector can be found in the next chapter of this report.

Fruit and vegetable processing industry

Albanian fruit and vegetables processing industry is one of the weakest segments of the agroindustry. This industry consists of four comparatively larger companies in Berat, Lushnje, Tirana and Lezha respectively. These companies offer a wide range of products, which is larger than that one of smaller competitors; the smaller companies in most cases offer a few, basic products, such as jams, pickles and canned vegetables in brine. The sector is still in phase of consolidation. The largest enterprises have made some sizeable investments, but still face difficulty in ensuring suitable supplies of raw produce in terms of quantities and standardisation in accordance to processors’ needs, while competition for the end market is strong, considering the small size of the Albanian market.

Agribusiness between Albania and The Netherlands

In terms of processed fruits and vegetable international trade, there has been significant increase in both imports and exports. One of the most exported items, is preserved (table) olives.

Table 10: Albanian international trade of preparation of vegetables, fruit and nuts including preservation table olives (HS 20)

Category 2005 2010 2011 2012 2013 2014 2015 2016 Import_Eur (Mill.) 12.9 14.7 14.3 14.1 15.2 17.0 21.0 24.3 Export_Eur (Mill.) 1.0 2.6 2.9 3.1 3.9 4.5 6.3 7.2 Balance 8.1% 17.6% 20.0% 21.9% 25.8% 26.7% 30.0% 29.8% Share total ag. Imp. 3.5% 2.3% 2.2% 2.1% 2.3% 2.5% 3.0% 3.3% Share total ag. Exp. 2.4% 3.8% 3.6% 3.3% 3.7% 3.8% 4.2% 3.9% Source: INSTAT (2017) Medicinal and Aromatic Plants

The production base of these plants in Albania has been traditionally dominated by wild MAP, available all over the country, whose quality is well known and represent the most valuable asset of the sector. MAPs has been one of the most important sectors of agrifood export, especially in terms of international trade. Exports consist mainly of raw MAPs – only a small share of MAPs are processed into essential oils, while there has been no production of detergents, cosmetics or industrial medicines based on MAPs in Albania.

More than 95% of the total MAPs collected are exported. Albania is an international player ranked as among the top 30 world MAP exporters in early 2010s. Albania is an important supplier of raw material or half finished products for many EU and US industries in different fields (food and beverage industry, healthcare, cosmetics and perfumes, additives etc.); almost ¾ of sage imported by USA has been of Albanian origin7.

The product is harvested wild and dried by rural dwellers, after which it is collected by regional collectors. These regional collectors are trade partners and/or agents for wholesalers/exporters. There have been three main drivers of the supply chain evolution, namely: i) a strong and valuable demand for MAP, especially wild ones, ii) the process of growth of local collectors, that gradually consolidated, invested and started direct exports and, iii) the depopulation of many inner areas, that, coupled with overexploitation of wild MAPs in the other areas, forced to gradually shift increasing part of the business from collection of wild MAPs to cultivation.

Since early 2010ies, there has been a significant increase of cultivation of MAPs, especially sage, partially triggered by governmental subsidies, resulting in an increase of the overall MAPs supply, compensating for the contraction of the wild MAPs supply. The main cultivated plants are sage, lavender, thyme, oregano, lemon verbena and other products.

7 Imami, D., Ibraliu, A., Fasllia, N., Gruda, N., & Skreli, E. (2015). Analysis of the medicinal and aromatic plants value chain in Albania. Gesunde Pflanzen, 67(4), 155-164.

Agribusiness between Albania and The Netherlands

Compliance with standards of exported products (safety standards, standardization of moisture level, mixing of varieties with different value, etc) has been a challenge to be competitive for export. Even if many of Albanian wild MAP are naturally among the best in the world (e.g. percentage of sage essential oil on dried product is high and is reputable worldwide), export prices are often below average for comparable quality, because they discount frequent cases of inadequate respect of standards.

The number of farmers cultivating MAPs exceeds 4,000 – about 90% of them are located in the region of Shkodra. The total area cultivated with MAPs in Albania exceeds 5,000 ha – most of which has been cultivated during early 2010ies. Main reasons for farmers’ engagement in MAPs cultivation include the presence of processors/exporters, sector high profitability, and support by a government subsidy scheme.

Exports of MAPs has been increasing significantly over the years accounting for 15% - 25% of agricultural exports.

Table 11: Albanian international trade of MAPs (Oil seeds and oleaginous fruits) (HS 12) Category 2005 2010 2011 2012 2013 2014 2015 2016 Import_Eur (Mill.) 1.8 2.4 3.5 2.9 4.0 4.9 5.4 6.5 Export_Eur (Mill.) 12.3 15.9 19.1 20.9 25.4 26.3 29.3 29.0 Balance 668.9% 652.8% 551.3% 711.5% 632.4% 542.5% 541.3% 447.4% Share total ag. Imp. 0.5% 0.4% 0.5% 0.4% 0.6% 0.7% 0.8% 0.9% Share total ag. Exp. 28.4% 23.1% 24.0% 22.6% 24.3% 22.0% 19.5% 15.7% Source: INSTAT (2017)

More future investments are needed and expected in this sector, related to different facilities and equipment for MAP drying, sanitation, packaging, distillation, production of different products requiring essential oils or MAPs and grinded sorts for retail use. The types of investments required is clear, but since each operator still want a full range of facilities rather than using independent service providers (which, for lack of potential market were never established) the pace of investments will depend by the capacity and financial possibilities of individual operators.

Agribusiness between Albania and The Netherlands

Trade and investment relations between Albania and The Netherlands

Trade between The Netherlands and Albania

The Foreign direct investments (FDI) in Albania have been growing over the last few years. More and more international investors are finding their way to the country. In the last few years FDI has been for the larger share in projects in the oil and gas sector and infrastructure projects. In the graph below the total FDI into Albania is presented for the years 2014-2016.

Figure 6: Flow of FDI to Albania worldwide (incl The Netherlands) and The Netherlands separate

FDI Albania 2014-2016

2016 1st half 2015 2nd half 2015 1st half 2014 2nd half 2014 1st half

0 100 200 300 400 500 600

The Netherlands Total world

Source: Data Embassy of The Netherlands (November 2017)

In the first half of 2017, The FDI coming from The Netherlands was second highest with 77 Mill Eur, with Switzerland being the country with the highest amount of FDI in Albania (87 Mill Eur). Looking at the recent years, Greece is the country with the highest influx of FDI into Albania (mainly telecommunication), but The Netherlands rank second8.

8 Source invest-in-albania.org

Agribusiness between Albania and The Netherlands

In figure 7 the total trade between Albania and The Netherlands is shown between 2010 and 2017 (till October 2017). The numbers for 2017 are updated till October 2017. The total trade volume in 2017 will be similar to that of 2016 looking at the full year.

Figure 7: Dynamics of Dutch export to and import from Albania (mill Eur)

*Data 2017 between January and October Source: CBS statline (January 2018)

Agrifood products represent an important share of Dutch exports to Albania (more than 1/2 of Dutch exports to Albania consist of agrifood products), while Albanian agrifood exports to The Netherlands are negligible both in absolute value (most years, far below 1 Mill Eur) and also in relative terms (less than 1/10 of Albanian exports to The Netherlands consist of agrifood products). Despite the strong gap (or high trade deficit), overall, the increasing trend of trade between both countries indicates a potential for further growth in trade and business relations.

Table 12: International trade between The Netherlands and Albania for agrifood products (in Mill Eur)

2005 2010 2011 2012 2013 2014 2015 2016 Import 0.0 0.0 0.1 0.2 0.4 0.7 1.1 0.9 Export 12.2 13.9 15.0 15.6 21.4 20.3 20.3 32.4 Source: EUROSTAT (2017)

Although vegetables are the most exported products from Albania looking at the total value of exports to The Netherlands (value in Euro), the top categories are decorative plants and flowers, followed by MAP and oil seeds. Vegetables come only after that.

Agribusiness between Albania and The Netherlands

Table 13: Dutch import of agrifood products from Albania in 2016 (000 Eur) Product 000 Eur Percentage Trees, plants, cut flowers 685 77% MAPs, oil seeds, et 136 15% Fresh vegetables 28 3% Dried vegetables 28 3% Other 18 2% Total 895 100% Source: EUROSTAT (2017)

Looking at the import from The Netherlands, the most imported product (looking at value in Euro) is beverages, followed by fish, and then vegetables.

Table 14: Dutch exports of agrifood products to Albania in 2016 (000 Eur) Product 000 Eur Percentage Beverages 7.085 22% Fish 5.254 16% Vegetables 1.757 5% Meat 1.397 4% Oil seeds and oleaginous fruits; MAPs 1.314 4% Potatoes 1.229 4% Seeds 1.220 4% Other 13.137 41% Total 32.395 100% Source: INSTAT 2017 Dutch companies in Albania and opportunities

In the context of the study, interviews have been conducted with Dutch companies active in Albania or who have shown interest in doing business in Albania. Albanian companies which have relations with The Netherlands have also been interviewed. Some companies interviewed in the context of this study import seeds or seedlings from The Netherlands, or have imported technology (like greenhouses). One of the goals of this market scan is if there is an interest of the Dutch and/or Albanian side of the agrifood sector to put more joint effort for increasing and improving the trade relations. In Annex 1 the list of companies whose representatives have been interviewed can be found.

It can be concluded that few Dutch companies are operating in this sector in Albania. There is a growing interest, and hence it is important to showcase these examples and create the right circumstances for interested companies. One of the few foreign companies which is working in the field of soft fruits, which has a potential for future growth, is the company Superberry, managed by a Dutch entrepreneur, which is described in the Box below.

Agribusiness between Albania and The Netherlands

Box 1. Case study Superberry

The company Superberry produces raspberries in Albania and is owned by a group of Dutch investors who all work in the horticulture sector. The manager is a Dutch entrepreneur. The company entered Albania, thanks to financial (grant) support from the Private Sector Investment Programme (PSI), formerly known as PSOM, which is a Dutch government subsidy programme supporting innovative investment projects in developing countries. The objectives of PSI are to stimulate financial growth, create employment opportunities and generate income. This programme is not available anymore for Albania.

Superberry has a collection and packing center in the area of Fier and production facilities in Divjaka. Next to production Superberry also is involved in marketing of the berries mainly to European countries including Austria, Italy and France.

To meet the demand in terms of volumes, the business started with a large number of farmers in contract production of berries, but the lack of discipline and responsibilities of farmers by not following the production protocol, has led to low quality products (too much quality B and C) and non-fulfillment of contract agreement in some cases. Few farmers which met the minimum standards still have contracts with Superberry (these are the most structured greenhouses), and are happy with the production and sales. This result, in combination with the market opportunities and the Global Gap certification shows the potential of the Superberry company to grow in the fruit sector.

Superberry has the Global Gap certification and farmers can benefit from this certification, however they have to do limited investments to be able to meet Global Gap certification requirements. With this certification the production is more likely to be sold to countries in the EU, and can have a higher turnover.

Superberry has developed a production protocol and is able to provide farmers with advisory services. If necessary they can call specialists on different fields of expertise. Superberry stores berries in cold storage. The total export activities and logistics also are organised by Superberry manager who has direct contact with the off takers in Europe.

As a conclusion: grant support is necessary to encourage start up investments in new products and countries, to reduce the risk of the entrepreneur. The company brought not only technology but also organisational know-how. Contract farming works well when there is a clear market demand, and when there are investments in standards and technical assistance by the buyer (this case Superberry). GlobalGAP certification is an advantage and in some cases a precondition to access main EU markets.

Source: Interview with Superberry Administrator

Agribusiness between Albania and The Netherlands

As of the above example, the soft fruit sector seems one of the most potential investment sectors (production) for Albania. Several companies have requested information at the Dutch embassy in Albania, and also looking at the growth of the exports of strawberries and other berries this seems a trend which gives investment opportunities.

As said there are not many Dutch investors yet in Albania, but investment potential is there. The soft fruit sector is labour intensive, and does not need very large areas of land to have viable business as when compared to field vegetable or cereals. As labour costs in Albania are the lowest in the region, this is an important incentive for investors. Besides this, the climate and soil is very suitable for soft fruits in various parts of Albania, representing a promising investment window. There can be two harvests in one year, and the fruits can be on the markets in EU countries at an early period (for example before products come to those markets from other countries in the region), which gives a great advantage in selling the product for higher prices.

Speaking to actors and companies in the MAP sector in Albania, the growth could be in the processing of the raw material. Currently the raw materials are exported and the processing and packaging is done mostly in the countries of destination. For the companies active in Albania future investments would enable the increase of the added value and more local employment opportunities at the local level.

Support schemes from the Dutch government for Albania

Companies interested in doing business in Albania or with Albanian companies can receive (financial) support from RVO, the agency for international businesses. The instruments available for Albania are the following (as of December 2016):

Figure 8: Available instruments from the Dutch government for Albania

Source: RVO and embassy of The Netherlands in Albania

Below is described more information on the schemes which are interesting for investors in the agriculture sector in Albania, which are the PIB, the DHI and the DTIF.

Agribusiness between Albania and The Netherlands

DHI is a subsidy/grant scheme for demonstration projects, feasibility studies and pre investment studies and aims at supporting businesses that seize opportunities in emerging countries. The programme is open for Dutch SMEs in all countries (apart from The Netherlands). The DHI scheme consists of 3 modules:  Demonstration projects: presentation of a technology, capital goods or service in one of the DHI countries;  Feasibility studies: assessment of the profitability of a foreign investment in a product or service;  Investment preparation studies: assessment of the technical and commercial profitability of an investment in a company in one of the DHI countries.

PIB is meant to create public private partnerships. PIB supports consortia of at least three Dutch companies from the so-called top sectors (agrifood, chemical sector, creative industry, energy, high tech systems & materials, life sciences & health, logistics, horticulture & starting materials and water) which are aiming to enter a new market together as a consortium. This is done by an integrated approach, instead of individual activities. The Dutch government acts as a partner and concentrates on tasks such as economic diplomacy, matchmaking, government to government cooperation (G2G) and technical assistance and/or knowledge transfer (K2K).

The PIB is an interesting case for the agrifood sector. As described above the programme can contribute to several tasks. It is not meant for investing, that still needs to come from the companies. But an important task is for entering the market, to understand the market, see its positive sides and the challenging sides. The PIB is extremely useful for this side of the investment opportunity.

The funds made available from PIB will be 50% of the Dutch government and 50% by the companies themselves. The funds from the government can be used for networking and promotional activities, matchmaking and economic diplomacy, for example:  Initiating projects and opporunities;  Lobby and maintain network between the two countries;  Implement promotional activities and  Follow-up of missions and attending business fairs and events.

The DTIF offers loans, guarantees and export financing, helping Dutch companies to take the next step towards achieving their international ambitions. DTIF consists of two components: Investment and Exports. This instrument can be used when a business plan is more mature and investors are willing and ready to invest in the production. It is meant for Dutch companies willing to invest in other countries or wanting to export to international market and is open for all sorts of Dutch companies. The part for investing in international market consist of loans or equity participation. There is a maximum of 15 Mill Eur for the investing programme of DTIF. For exporting the programme can support with a guarantee insurance or financing of the export of goods.

Agribusiness between Albania and The Netherlands

Eligible companies should have their office in The Netherlands, already have substantial turnover and should be able to invest a minimum of 20% of its own resources in the investment. Also a co-financing party should be part of the project.

The other programmes mentioned in the figure are:  The Dutch Visitor Programme (DVP);  Starters in International Business (SIB).

The DVP invites young, promising professionals to the Netherlands to become personally acquainted with the country and to promote mutual understanding between the Netherlands and our visitors’ home countries (high potentials and influentials).

The SIB is set up as an informative website for Dutch startup companies who are interested in doing international business. It’s a digital toolkit with information about starting to export and contains a coaching programme through Chambers of Commerce and business associations.

Agribusiness between Albania and The Netherlands

Business environment and investment facilities

As mentioned in the chapters before, the Albanian economy is greatly depending on the agriculture sector. This means there is a need as well as a potential for investing in this sector in Albania, or to start trading with Albanian counterparts. Having said that, there are also some challenges to overcome for doing business in Albania. In this chapter we describe some aspects of the business environment and supporting facilities.

Looking at countries in the region, Albania is ahead of countries like Greece and Bosnia and Herzegovina, but behind the other regional competitors.

Table 15: Ranking ease of doing business

Country dec-17 dec-16 Macedonia 11 10 Kosovo 40 60 Montenegro 42 51 Serbia 43 47 Italy 46 50 Albania 65 58 Greece 67 61 Bosnia and Herzegovina 86 81 Source: worldbank and tradingeconomics9

During 2015/16 Albania made substantive improvements to its local regulatory framework in three main areas. It made dealing with construction permits easier by lifting the moratorium on and reintroducing the issuance of building permits. Getting electricity was made easier by speeding up the process for obtaining a new connection. Finally, Albania made paying taxes easier by introducing an online system for filing and paying taxes. Food and safety standards

There are gaps in food safety standards throughout the downstream food value chain. Albania faces gaps in the national food safety control system in terms of legislation, infrastructure, institutional capacity and enforcement. The problems in the Agricultural Health and Food Safety System have been identified by several studies, most notably in the meat and dairy products.

9 Sources: http://www.doingbusiness.org/data/exploreeconomies/albania and https://tradingeconomics.com/albania/ease-of-doing-business

Agribusiness between Albania and The Netherlands

The main law in Albania on food safety is Food Law No 986310, (dated 28.01.2008). It sets requirements for production and circulation of safe food and feed to some extend in line with EU provisions. According to the Food Law (Article 26), food production companies are obliged to implement Hazard Analysis and Critical Control Point (HACCP), as a self-control mechanism. HACCP is a basic tool to improve and ensure food safety in Albania.

The National Food Authority (NFA) was established in line with the Food Law - it has been supported by EU funded projects aiming to consolidate and strengthen the administrative structures responsible for enforcement of EU compliant food safety measures.

MARD (MARDWA) has introduced National Minimum Standards (NMS) in accordance with EU practices. Good Agricultural Practice (GAP) should correspond to the type of farming that a farmer would follow in the region concerned, entailing at minimum, compliance with general statutory environmental requirements.

The Albanian Government considers food safety and consumer’s health protection a policy priority in its agenda, enabling continuous improvements. Access to finance, inputs and services

Access to finance is one of the key factors that condition growth and modernization of the agriculture sector. Despite the macroeconomic stability in the last 15 years, access to finance has been a major challenge for the agriculture sector development in Albania. Indeed, strong macroeconomic framework is necessary but not sufficient. Other preconditions for functioning financial markets may still be inadequate, due to insufficient focus given to developed institutions. Despite the importance of the agriculture sector for the Albania economy, the share of credits provided to agriculture and fishery has been historically extremely small (ca. 2% of total credits of the banks to the private sector).

Micro-finance institutions (MFI) and the Savings and Credit Associations (SCA) (cooperative banks), have been most active organisations providing credit and other financial services to rural areas including farmers. FED invest is a leading microfinance institution specialized in financing the agriculture sector. Now it is in the process of being transformed into a bank– the aim is to be the leading bank operating in the agriculture sector in Albania.

Recently there has been launched a risk guarantee program implemented by EBRD, which is expected to promote lending to the agriculture sector, by co-sharing the risk with financial institutions. This should positively affect access to finance, particularly for farmers, and is expected to contribute to lowering interest rates.

10 All Albanian legislation can be found (in Albanian) in http://ligjet.org.

Agribusiness between Albania and The Netherlands

Farmers in Albania, similar to other developing or transition countries, face major constraints in realizing high-quality, consistent supplies. This is caused by financial constraints as well as low input quality and lack of technical capacity etc. For vegetables, farmers report that seeds are often of low quality. Usually, these seeds are supplied by local input suppliers companies and in some cases also by buyers (wholesalers), whom farmers supply. There are also reported cases where farmers produce themselves the seedlings, aiming at reducing cash-costs, but resulting in lower performance. The most active actors in training and technical assistance for farmers are input suppliers, who often cooperate with public extension services.

Education, R&D and innovation in the agriculture sector

The Agricultural University of Tirana and the Faculty of Agriculture of University of Korca are the only higher education institutions that offer degrees in agriculture related sciences – both these universities are public, while so far, no private university has been active in this field. Agricultural University of Tirana (AUT) was founded in 1951. AUT is the unique center for undergraduate and graduate studies, scientific research, training and extension in the area of agriculture, food and environment.

Regarding secondary education, the number of agricultural vocational schools is very low and the number of agricultural vocational high schools graduates is insignificant compared to pre-transition period – while it was common for most residents in rural areas to attend VET schools, during transition the number of students and graduates reduced significantly to a few hundred during the 2000s, while the last years there was marked an increase to almost two thousand.

Currently there are 11 public vocational education schools offering qualifications in field of agriculture, agribusiness, agro processing, food technology and veterinary, situated in the qarks of Tirana, Durres, Shkodra, Berat, Korça, Fier and Elbasan.

Regarding research and innovation, the Albanian Government has undertaken major reforms in agricultural research dating back to 2006. Five Agricultural Technology Transfer Centers (ATTCs) have been established with the mission of technology transfer – they are under the management and monitoring of MARD.

Fundamental scientific research remains at universities (namely Agricultural University of Tirana) - AUT possesses assets and facilities related to applied research such as experimental and Didactic Economy, Aquaculture and Didactic Economy Lab in Tapiza, the Plant Protection Lab, Institute for Plant Genetic Resources, the Food Research Centre, the Wood Processing Workshop, University’s Veterinary Clinic and Botanical Garden.

Agribusiness between Albania and The Netherlands

Box 2: Institute of Plant Genetic Resources, Agricultural University of Tirana

The Institute of Plant Genetic Resources (IPGR), is located at and is part of Agricultural University of Tirana. IPGR which coordinates the activities in the field of conservation and management of plant genetic resources and as such is a reference institution and unique for Albania. IPGR’s overall aim is to promote the conservation and sustainable use of plant genetic resources for food and agriculture (PGRFA) in Albania. To do so, the institute attempts to coordinate all efforts on PGRFA undertaken by the Agricultural University of Tirana and MARD. IPGR researchers have been actively involved in identifying and doing applied research related to autochthones varieties, in various subsectors, most notably MAPs – such varieties represent also an economic potential which can be further explored in the context of future project where Dutch institutions could be involved. Source: Interview with Prof. Alban Ibraliu Land tenure market and property rights

In early 1990s, a land redistribution reform was endorsed by the government in Albania and implemented in various forms by rural communities. This land reform resulted in small farms, which were fragmented (into small parcels). The land reform also generated property rights insecurity due to overlap of claims between pre-collectivization “old owners” and post-1990’ “new owners” and due to inefficient land institutional functioning. Land market is still fragile due to capital constraints, social factors and high transaction costs11. Since the reform implementation, most agriculture land is owned by agriculture households. However, in early 2010s there were more than 100,000 Ha under state ownership, which can be potentially used in conjunction to new investments. The state has owned during the transition almost all of the country‘s forest, pastureland and protected lands (FAO, 2015). Government policy and financial support for the agriculture sector

The main policy document for agriculture and rural development is the Inter-sectoral Strategy for Agriculture and Rural Development 2014-2020 (ISARD)12 prepared with the support of FAO (Food and Agriculture Organization of the United Nations) and the European Commission (EC). It has been elaborated in line with the EU strategic planning approach for the Common Agricultural Policy (CAP) 2014-2020, while maintaining focus on the specific needs for development of agriculture, agro-processing and rural areas in Albania. These needs and challenges are mapped and analysed in a number of sector analyses and

11 Zhllima, E., Imami, D. (2012). “The Albanian land rights security perception and factors influencing it”. Albanian Journal of Agricultural Sciences, 11 (1) 12 ISARD 2012 – 2020 was prepared in 2012-2014 by MARDWA with the support of project “Preparation of Inter- sectorial Strategy for Agriculture and Rural Development in Albania”, funded by EU and facilitated by the FAO.

Agribusiness between Albania and The Netherlands

surveys accomplished as part of the strategy preparation process. The strategy has been elaborated in a participatory process involving all relevant directorates of MARD and technical bodies.

In general, the National Support Schemes provide three categories of support:

1. Contribution to new plantations or cultivations, in the form of a maximum amount per ha. This support is usually linked to parameters about the method of cultivation (e.g. intensiveness) and has typically minimum and maximum thresholds (in terms of number of Ha). 2. Contribution to (other) investments. The most common schemes (available since more than five years) are: i) Contribution to the installation of drip irrigation and, ii) Contribution to the interest payment up to 70% of the value.

3. Contribution to other specific costs. This support is provided for specific kinds of plant protection treatments (e.g. treatment of olives against olive fly) or certification.

Similar support schemes were also provided for 2017.

Agribusiness between Albania and The Netherlands

The main groups of donor funded projects and facilities for the agrifood sector can be broadly defined as follows:

Figure 9: Donor funded projects and facilities in Albania

It is expected that IPARD calls for applications will start in the first half of 2018. For this programme a budget has been approved of 71 Mill Eur from EC and 24 Mill Eur grant from Albanian government (75% EU: 25% Albanian government), so there is a 94 Mill Eur grant available for investments at farm and processing level during 2014 – 2020.

Agribusiness between Albania and The Netherlands

Below in Box 3 an example is described of a new project in the agriculture sector, focused on the improvement of financial services. Fed invest is the local partner of the project.

Box 3: FED invest project "Improvement and expansion of financial services, with the scope of economic development of rural Albania"

The project "Improvement and expansion of financial services, with the scope of economic development of rural Albania" has started late 2016, and is funded by the Foreign Ministry of the Netherlands, the European Fund for Southeast Europe (EFSE), Rabo International Advisory Services (RIAS) and FED invest.

This project is implemented by FED invest with the technical assistance of RIAS and EFSE, aimed at improving the structural financial involvement in Albania, contributing to the development of the rural economy of the country and increasing the living standards of the rural population. The project follows the successful transformative development of the former Albanian Savings and Credit Union in FED invest, through the merger by absorption of 70 savings and credit associations and the licensing of the new association by the Bank of Albania on 2 March 2016. Extended in more than a third of the country's villages, FED invest is a financial cooperative, owned by its base of more than 37 thousand members nationwide. As such, the strategic and institutional focus of FED invest on agriculture is unique in Albania, because it doesn’t aim to maximize profits, but is focused on providing maximum value for its members and providing adequate and favorable financial services. The project objectives reflect the aspirations of FED invest, supported by the symbiotic connection of the Institution with the rural community, to become an important actor of agro-finance in the rural areas, funding a larger number of small and medium enterprises and service providers for all those who currently have no access to financial services.

This project, has been supplemented by another initiative, which took place during 2014-2017, funded by RVO, which consists of support for FED invest client farms in the horticulture sector to establish cooperatives – as part of this imitative, a group of farmers and FED invest representatives took part in a study visit to Holland to become familiar with agriculture cooperatives there, as well as received training regarding cooperative (trainings took place in The Netherlands and in Albania). The last step of this initiative, was the preparation of the business plan for 2 selected farmer groups which demonstrate interest and capacity to establish cooperatives. This initiative is being followed up by the most recently launched JICA project “Smallholder Families' Financial Inclusion Project in Albania) (October 2017 – September 2021)”. This JICA project, aims to support FED invest with both financial and non-financial services, and it is fully funded by JICA, however, is expected to build upon the work initiated by RVO through RIAS, while RIAS is involved in its implementation too.

Source: www.fedinvest.al and interviews with RABO/Project consultants

Agribusiness between Albania and The Netherlands

Conclusions and recommendations

In this chapter we describe the conclusions after analysing the sector. The study findings point out that agriculture is and will remain a very important sector for socio-economic development of Albania, and that it represents a potential for investments.

Conclusions

One of the (sub)sectors which has great potential for cooperation and investment is the soft fruits sector (various types of berries). The Albanian climate and soil is very favourable for soft fruits; year round production is possible and harvest can take place twice a year. Yields are more competitive than other products. It is a relatively new sector in Albania, and facilities like storage and transport are not fully organised yet, however this sector is receiving more investments since a few years. Another new category in the export market is the export of citrus, which is produced in Southern Albania.

Traditional production of e.g. nuts can also be a target sector, as its export has increased significantly in recent years. It has not been a main focus and outcome of this study, but the opportunities this sector gives could also be taken into account in further exploring opportunities.

The other sector with great potential is the MAP sector, which is historically an important one for the Albanian export basket, and has certainly great potential for increasing the trade relations. The Albanian products are well known for their quality. The Albanian producers have connections with the Dutch market and businesses but to a limited extend. Already existing connections can be intensified and the knowledge of the Albanian potential in The Netherlands should be intensified e.g. through participations in fairs.

Even greenhouse vegetables can be targeted, considering the production and market potential that such groups of products have demonstrated in the case of Albania, and on the other hand, the expertise and interest that exist on the Dutch side. That could include development of intensive production entities (eg. greenhouse for vegetable or berries), capitalising on the advantages provided by the Albanian climate, local expertise and Dutch expertise in terms of production technologies and markets.

Dutch companies show interest in upcoming markets like Albania. Knowledge of the country, investment climate, labour market and climate aspects are unknown. Many investors or traders already do business in neighbouring countries, like Serbia, Croatia, Greece, Turkey and Romania.

Looking at the level of knowledge of technological aspects or irrigation, improvements can be accomplished by starting cooperations with either technological institutes in The Netherlands or the Wageningen University. Cooperation can take place in the fields of improving efficiency of irrigation, using better and more controlled propagation material, introducing best practices and optimising the use of

Agribusiness between Albania and The Netherlands

fertilizers and other inputs. This gives opportunities for Dutch companies active in the supply of technology.

The following figure sums up the opportunities and challenges in the agriculture sector in Albania.

Figure 10: Core SWOT elements matrix

Agribusiness between Albania and The Netherlands

Recommendations

1. Promotion of the Albanian investment climate and conditions in The Netherlands for investors in the agrifood sectors, especially for greenhouse vegetable and the soft fruit (sub)sector, but also for the more traditional (sub)sectors of fruits and nuts. Companies show an interest in new upcoming markets.

2. For the MAP sector the existing platforms and exhibitions in The Netherlands can be targeted, as well as importers of MAPs. A mapping can be done of the activities in The Netherlands concerning MAPs and in Albania the existing companies need to be analysed and can be contacted.

3. Involvement of research institutions, such as AUT and Wageningen University for applied research. For example, IPGR researchers have been actively involved in identifying and doing applied research related to autochthones varieties, in various subsectors, most notably MAPs – such varieties represent also an economic potential which can be further explored in the context of future project where Wageningen University and other Dutch institutions could be involved, in close cooperation with the private sector.

4. Involve companies at the experimental farm of AUT, which includes ca 140 Ha high quality agriculture land, very-well located, which can be utilized with mutual benefit for the involved partners. Developing successful raw/pilot models, can have a chain affect, thereby enabling other farmers to learn, as well as students and academic staff to enhance their practical and scientific skills/know-how with a spillover effect.

5. Matchmaking for students and young workers: support the exchange of knowledge, enabling young workers or students to follow a three to six month internship at a Dutch company.

6. Support the exchange of knowledge on technology. Workshops, trainings and exchanges can be organised for Albanian companies to Dutch expertise centers. Many Dutch companies are active in this field, for example in soil and water testing, irrigation and drainage.

7. Matchmaking between Dutch traders of fruits and vegetables with the main traders active in Albania (national and international).