ANNUAL REPORT (APRIL 20, 2018- APRIL 19, 2019) SERBIA COMPETITIVENESS SYSTEMS STRENGTHENING (CSS) ACTIVITY May 20, 2019 This report is made possible by the support of the American People through the United States Agency for International Development (USAID). The contents of this report are the sole responsibility of Cardno Emerging Markets USA, Ltd. and do not necessarily reflect the views of USAID or the United States Government. ANNUAL REPORT (APRIL 20, 2018 - APRIL 19, 2019) SERBIA COMPETITIVENESS SYSTEMS STRENGTHENING (CSS) ACTIVITY Submitted by: Cardno Emerging Markets USA, Ltd. Submitted to: USAID Serbia Contract No.: AID-169-C-17-00003 Competitiveness Systems Strengthening Activity 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. Serbia Competetiveness Systems Strengthening (CSS) Activity Table of Contents ACRONYMS ...........................................................................................................................................................................2 EXECUTIVE SUMMARY ..................................................................................................................................................1 INTRODUCTION ..................................................................................................................................................................2 SUMMARY OF RES ULTS .................................................................................................................................................4 1) CONTEXT ANALYSIS:....................................................................................................................................................... 4 2) PROJECT ANALYSIS: ........................................................................................................................................................ 7 CLA Approach to Project Management ................................................................................................................... 11 TECHNICAL ACTIVITIES ............................................................................................................................................ 13 SUB-PURPOSE I: MARKET COMPETITIVENESS OF SELECTED VALUE CHAINS INCREASED ...................................... 14 a) Promotion of Serbian food products and processors........................................................................................ 14 b) Specific Market Linkages Efforts.......................................................................................................................... 20 SUB-PURPOSE 2: BUSI NESS SUPPORT SY ST EM S COORDINATION STRENGTHENED .................................................. 25 a)Consolidation of the F&V sector with PKS ........................................................................................................... 26 b)Premium Food Design Hubs .................................................................................................................................... 30 c) Workforce Development ………….……………………………………………………………………………….…29 SUB-PURPOSE 3: RESOURCES FOR ENTERPRISE GROWT H MOBILIZED ........................................................................... 32 a) Facilitating Foreign Direct Investment.......................................................................................................... 33 b) Credit Gurantee Scheme…………………….………………………………………………………….…………..33 c) Financial Trainings …………………………………………….…………………………………………34 PR AND OUTREACH ....................................................................................................................................................... 37 ANNEX A: AMELP : ........................................................................................................................................................ 38 ANNEX B: PERFORMANCE MONITORING AND EVALUATION PLAN (PMEP) ................................ 39 ANNEX C: PROGRESS AGAINST THIRD WORKPLAN – ............................................................................... 41 ANNEX D: SUCCESS STOR IES .................................................................................................................................... 51 ANNEX E: S ELF ASS ESSMENT ON PROGRESS................................................................................................. 58 ATTACHMENT A:ORGANIZATIONAL CHART ................................................................................................. 59 ATTACHMENT B: CSS GRANTS AND SUBCONTRACTS UPDATE ............................................................ 65 ATTACHMENT C: PRESS CLIPPING....................................................................................................................... 67 Annual Report Y2 Page ii Serbia Competetiveness Systems Strengthening (CSS) Activity ACRONYMS APSF Association for the Promotion of Serbian Food B2B Business-to-Business BFS Belgrade Food Show BSO Business Support Organization CLA Collaboration, Learning, and Adaptation CSS Competitiveness Systems Strengthening DCA USAID’s Development Credit Authority FDI Foreign Direct Investment FoA Faculty of Agriculture, University of Belgrade FON Faculty of Organizational Sciences, University of Belgrade FP Facilitation Partner F&V Fruits and Vegetables FY Fiscal Year GHP / GMP Good Hygiene Practices / Good Manufacturing Practices GG Global Gap (Quality Standard) HoReCa Hotel/Restaurant/Café ILC Industry Leader Company IQF Individually Quick Frozen IPARD Instrument for Pre-Accession Assistance in Rural Development MENA Middle East and Northern Africa MIS Marketing Intelligence System MoA Ministry of Agriculture, Forestry and Water Management MoE Ministry of Economy NBS National Bank of Serbia NAPP National Association of Serbian Prune Producers PFDH Premium Food Design Hub PKS Chamber of Commerce and Industry (“Privredna komora Srbije”) RAS Serbian Development Agency RF Results Framework SME Small and Medium Enterprise VC Value Chain VCRA Value Chain Readiness Assessment YFI Association Youth for Impact Annual Report Y2 Page ii Serbia Competetiveness Systems Strengthening (CSS) Activity Executive Summary Although Serbia's agrifood industry is a significant part of its economy and is widely consid- ered to have great potential for growth, it is relatively small in European terms. Serbian land accounts for just 1.9% of the entire EU, and its total production accounts for 1.1% of EU output. Compared to just the 13 new member states, Serbia has 7% of their total land resources and only 4% of their exports. When talking about production compared to the EU, Serbia’s only really significant products (10-50% of EU production) are raspberries, plums, sour cherries, quince and soybeans; while maize, peppers and watermelons are considered relatively im- portant (5-10% of EU production). Considering Serbia’s land and production size, it is clear that Serbia’s comparative advantages lie in the fruit and vegetable sectors, rather than the meat or milk sectors, which require greater economy of scale. In addition, due to a significant fragmentation and small average holdings, Serbia’s opportunities rather lie in producing niche products for a targeted group of (wealthier) EU buyers, than in serial production of large quantities targeting the broad global market. With domestic and regional market demand shrinking, increasing depopulation of rural areas, and limited presence in key high-value markets, Serbia must develop an export strategy that takes into consideration all these facts, and targets the most promising value chains to establish a model for others to follow. Government strategies still lack focus and are mostly targeting agricultural production, with space for improvement in stimulating investments and exports. There is also a very limited connection between academia, research, and the private sector, specifically in the area of new technologies, staff development, and market research. Youth engagement, a key element in bringing change in other industries and sectors, is at a very low level. CSS, thus, has a very targeted focus. For the most promising sub-sectors of the industry (fro- zen, fresh and specialty), key gaps to opening new markets and identifying new buyers have been identified. A group of stakeholders who can assist companies to utilize these opportunities has been recognized to ensure market-driven selection of beneficiaries. Pilots have been launched in the first two years to test project assumptions and selected interventions poised to drive local market change by empirically increasing the value of sales and driving investments. In the frozen segment, this includes working on interventions that will secure more private label deals for firms, open new markets, consolidate supply chains to ensure better food safety, and promote organic production. In the fresh segment, the primary focus is integration with formal EU distribution systems for apple, berry and selected fruit and vegetable value chains. Finally, for the specialty food sector, CSS is actively working on promoting entrepreneurship and identifying market opportunism in some of the fastest growing market segments in the world (organic, bio, healthy, functional, ethnic, etc.). With two years completed, the project can confidently state that most of the pilots have pro- duced impressive results, and some of them have shown signs