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REPUBLIC OF ALBANIA MINISTRY OF AGRICULTURE, FOOD AND CONSUMER PROTECTION

AGRICULTURE AND FOOD SECTOR STRATEGY 2007-2013

November 2007

Agriculture and food sector strategy

List of people who contributed to the strategy


Jemin Gjana Ndoc Faslia Agron Vata Aleksander Kolaci Arben Muka Bahri Musabelliu Dali Oreshka Engjell Shkreli Enver Isufi Etleva Husi Gertrud Buchenrieder Ilir Rrembeci Isuf Demirxhiu Kristaq Kume Llazar Korra Merita Petushi Minever Rusi Myslym Osmani Nikollaq Roshanji Roland Cela Selim Belortaja Shkelzen Marku Valbona Paluka Zyhdi Teqja Ndue Preka Adrian Maho Ahmet Osja Andrea Zamara Astrit Balliu Brunhilda Stamo Dhimiter Papamihali Enver Ferizaj Esat Hasani Fatos Cocoli Hamza Hyka Irfan Tarelli Kit Nicholson Lavdosh Feruni Maksim Harullaj Merita Uruci Mira Allmuca Nazif Tivari Osman Hoxha Sabah Sena Skender Tola Tatjana Dishnica Vjollca Ibro

Agriculture and food sector strategy

Advisory Group

Agron Sula Altin Ylli Dhimo Velo Engjell Skreli Enver Isufi Isuf Demirxhiu Merita Uruci

Ahmet Osja Artan Belegu Edmond Ziso Enver Ferizaj Gjergj Buxhuku Lavdosh Feruni Stefan Pinguli

Technical Group

Ndue Preka Agron Vata Hajdar Kuci Myslym Osmani Elma Vathi

Adrian Doko Brunhilda Stamo Irfan Tarelli Valbona Paluka

Contributing agencies and organisations

Albanian Centre for International Centre Agricultural University of Tirana BioAdria European Commission Italian Cooperation SNV University of Korca World Bank

AECI Albanian Agribusiness Council Chamber of Industry and Commerce GTZ Konfindustria Swiss Cooperation USAID

Agriculture and food sector strategy

Table of contents
1.
1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11

Current situation ............................................................................. 11


Role of agriculture in the national economy ................................................... 11 Agricultural land .................................................................................... 12 Farm size ............................................................................................. 13 Agricultural inputs .................................................................................. 14 Agro-industry ........................................................................................ 15 Trade and marketing of agricultural products ................................................. 16 Irrigation and drainage ............................................................................ 18 Food safety and standards ........................................................................ 20 Extension, research, technology transfer and agricultural information ................... 23 Main development trends ......................................................................... 24 Financial support for agriculture ................................................................. 28
Budget expenditure and investment for agriculture and food ......................................... 28 Investment and credit in agriculture and agro-industry ................................................ 29 Main agricultural policies and their results ............................................................... 31

1.12 1.13

Analysis of the network of sector actors ........................................................ 32 SWOT analysis of the sector ...................................................................... 33

2. 3.
3.1 3.2 3.3 3.4 3.5 3.6 3.7

Vision, strategic priorities and strategic goals .......................................... 35 Policies ......................................................................................... 41


General policy concept of agricultural development ......................................... 41 Agricultural development policies ............................................................... 41 Policy approaches for agricultural development .............................................. 43 Profile of agricultural policies .................................................................... 43 Agricultural policies by expected results ....................................................... 44 Mountain areas ...................................................................................... 49 Crosscutting policies ............................................................................... 50

4. 5.

Resource implications ....................................................................... 52 Accountability, monitoring and evaluation .............................................. 57

References ............................................................................................ 60

Agriculture and food sector strategy

Abbreviations
AFSS CARDS CESVI CIPRO DCM EU FAO GDP GTZ HACCP IFAD IPA IPARD LEADER MAFCP MTBP NSDI NPI-SAA OECD OIE PPP RDCS SAA SAPARD SBCA SWOT UNDP USAID Agriculture and Food Sector Strategy Community Assistance for Restructuring and Development Support Cooperazione e sviluppo Central Immovable Property Registration Office Decision of the Council of Ministers European Union Food and Agriculture Organisation Gross domestic product Gesellschaft fr Technische Zusammenarbeit Hazard Assessment and Critical Control Points International Fund for Agricultural Development Instrument for Pre-Accession Assistance Instrument for Pre-Accession Agricultural and Rural Development Liaison Entre les Activitees de Development Economique et Rural Ministry of Agriculture, Food and Consumer Protection Medium-Term Budget Programme National Strategy for Development and Integration National Plan for the Implementation of the SAA Organization for Economic Cooperation and Development Office International des Epizooties Plant protection product Rural Development Crosscutting Strategy Stabilisation Association Agreement Special pre-Accession Programme for Agricultural and Rural Development Small Business Credit and Assistance project Strengths, weaknesses, opportunities and threats United Nations Development Programme United States Agency for International Development

Agriculture and food sector strategy

Introduction
Purpose of the strategy
The National Strategy for Development and Integration (NSDI) is prepared in the framework of the Integrated Planning System as a coherent reflection of sector and crosscutting strategies. One of the most important strategic documents in this framework is the Agriculture and Food Sector Strategy (AFSS). The AFSS is based on: the Government Programme on the economic development of the country and in particular the development of agriculture and food the effort towards European and Euro-Atlantic integration, in other words the implementation of the Interim Agreement, the Stabilisation Association Agreement (SAA) and the NATO membership plan the public investment programme and external assistance Apart from being a contribution to the NSDI, the AFSS aims to provide the link between the strategic objectives, with a 7-year perspective, and the expenditure programmes prepared in the framework of the Medium-Term Budget Programme (MTBP). The other purposes of the strategy are: to ensure the coherence of policies and the longterm orientation of the development of the agriculture and food sector to clarify the reform and development process taking place in the public and private sectors to outline the needs for technical and financial support to agriculture

Preparation process of the strategy AFSS conceived as a professional output


The AFSS was prepared by a technical group of high professional qualifications, which comprised well-known specialists in various fields, such as economy, agriculture, agro-processing, veterinary science, plant protection etc. Their effective inclusion and in an institutional manner in the technical process of preparation of the AFSS was an important starting point for a product of a high scientific level.

AFSS conceived and realised as a democratic process


The draft strategy was underlined by a broad consultation process. For this purpose, an Advisory Group was established, comprising excellent professionals with field experience working in management posts with respect to the problems of agriculture, with representatives from agricultural and agro-food businesses, organisations and various stakeholder groups. The consultation with this Group ensured the inclusion in this strategy of realistic ideas and points of view with respect to the problems at hand and the needs for an effective development policy. In addition to this continuing consultation process, the draft AFSS was underlined also by a broad, democratic consultation process. It was consulted with regional actors of agricultural and rural development, such as representatives of business, farmers and their associations, local networks of non-government organisations, universities and foreign development agencies. The

Agriculture and food sector strategy

AFSS was particularly consulted with the civil society also at the central level. The consultation with the donors was the last stage, which led to valuable ideas and suggestions to further improve the draft. In support of the implementation of the strategy, a number of project concepts have been prepared, which were presented to donors and the government for approval and eventual finalisation.

AFSS conceived and realised as a transparent process


The preparation of the strategy was not at all a closed process. During the process, the draft strategy was available on the internet for the general public. During the process of preparation and discussions, the draft was publicised and distributed to a large number of experts and personalities of the field for their additional comments and contributions. During the discussion, an electronic, internet-based debate was also organised on special issues that are critical for the development of agriculture and food, such as the issue of better financial support, the preparation of project concepts for future development etc. All these did not only make the strategy drafting process transparent but also contributed to the corresponding improvement of the draft.

AFSS conceived and realised as a non-political process


One of the most important aspects of the AFSS preparation process was also its non-political character. This was considered as a key issue to make the AFSS an output of as broad and varied contributions and opinions as possible. This was realised through the invitation that was extended to a number of well-known opposition agricultural policy experts. The base of the strategy was broadened and further consolidated through the serious engagement of these specialists and professionals. It was made more sustainable and, as a result, more effective.

AFSS has all main development actors as its owners


The entire preparation process of the AFSS, in its conception and realisation, helped achieve our fundamental goal, to produce an output that is not owned only by the Ministry of Agriculture, Food and Consumer Protection, but all actors of agricultural and agro-industrial development, starting from farmers, agro-business, civil society, agencies and various stakeholders. Therefore we believe that we have in hand a strategic output which will serve the rapid and sustainable development of the agricultural and agro-processing sector.

AFSS is an Albanian output


The strategy has been produced by Albanian professionals; therefore this is primarily an Albanian output. However, it also includes the contribution of foreign experts. This was done both through direct ways, on the basis of comments made by well-known agricultural and rural development experts, and through indirect ways, on the basis of the use of a large number of documents, studies and analyses written by foreign experts on agricultural development policies in Albania.

AFSS has crosscutting approach


The strategy was not a closed process. While being integral part of a broad strategic document, the NSDI, and taking into account the linkages of the agriculture and food sector with other sectors of socio-economic development in the country, the AFSS has important contact points with the Rural Development Crosscutting Strategy, with the Regional Development Crosscutting Strategy, the strategies of education, tourism, environment etc. This approach has allowed a number of agricultural development issues and objectives to be treated and formulated in close connection with related issues and corresponding objectives of other strategies, and has increased the coherence and integrity of the AFSS.

Agriculture and food sector strategy

AFSS and Common European Policy


The AFSS is linked with the Common European Policy. The new European policy on agriculture is included in the framework of rural development. Rural development in the EU includes four axes: Axis 1: Raise competitiveness of agriculture and forestry Axis 2: Improve the environment and the village Axis 3: Improve the quality of life and diversify the economy in rural areas Axis 4: LEADER or development with participation Keeping in mind our vision for agricultural development (competitiveness) it is clear that our agriculture and food strategy is aligned with it (Axis 1). Similarly, in our approach to agricultural development, the participation of beneficiaries and all actors of agricultural development, from the identification of problems and all the way to monitoring and evaluation, is foreseen as to take place with broad and democratic participation, which is in accordance with the philosophy of Axis 4 of European policy. The EU aims to promote competition and the competitiveness of the products of European farmers by removing subsidies to the quantity of production (the socalled single payment mechanism). This will strengthen competition, because farmers will be oriented more to market demand. This mechanism does not encourage large farms, so that even they need to think more about competition. The subsidy to European farmers is also linked with the demand for food safety, the protection of the environment, product quality, animal and plant health etc (there are 18 standards that need to be fulfilled in this framework before farmers can receive assistance).

AFSS and SAA


The SAA between the Republic of Albania and the EU was signed on 12 June 2006. The SAA will enter into force after it has been ratified by all EU member states, a process which is expected to take place about two years. The SAA defined three principal criteria for Albanias EU membership: Democracy and the rule of law, or political criterion Establishment of a functional market economy, or economic criterion Adoption of the acquis communautaire, which has 31 chapters, or European standards These standards are divided into 31 areas and 145 sub-areas. The National Plan for the Implementation of the SAA (NPI-SAA) was approved with DCM No. 463, 5.7.2006. This plan was prepared in response to the EU decision of January 2006 On the principles, priorities and conditions contained in the European Partnership with Albania, which provided Albanias short- and medium-term priorities for European integration. For each chapter, area and sub-area, the NPI-SAA lists all the legal initiatives and implementing actions for the short-term (2006-2007), medium-term (2008-2010) and long-term (2011-2012). The NPISAA also has six annexes: list of legal initiatives; cost of preparation and translation of legislation; assessment of needs for additional staff; training needs; assessment of funds for infrastructure; information technology and consulting; and list of implementing actions. The link between the AFSS and the SAA is integral and is reflected in various aspects: In the vision of the AFSS: The vision of the AFSS is competitiveness and integration of Albania into the EU. Competitiveness is closely linked with the establishment of a functional market

Agriculture and food sector strategy

economy, which will help to cope with the challenges of competition, and the establishment of a legal framework according to European standards. In the goal and objectives of the AFSS: The goal of the AFSS is to guarantee the sustainable development of the agricultural and agro-industrial sector, while the objectives are related to the sustainable management of agricultural land, the increase in the living standards of farmers, the increase of food safety, the improvement of agricultural marketing etc. All these reflect the three criteria of the SAA. In the policies outlined in the AFSS: Among the primary policies of the AFSS are legal improvements according to European standards, improved information, support to production technologies, support to new production methods, strengthening of agricultural planning, analysis and monitoring institutions etc. All these aim to contribute to the fulfilment of the three criteria set by the EU in order for Albania to become a member of this institution.

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Agriculture and food sector strategy

1. Current situation
1.1 ROLE OF AGRICULTURE IN THE NATIONAL ECONOMY

Agriculture is one of the most important sectors of the national economy, contributing about 21% of the GDP (in 2006). Rural households continue to dominate with more than 50% of the population and agriculture is the main employment alternative of people living in rural areas. The real average annual growth rate of agriculture production during the last five years is estimated at about 3-3.5%.

Table 1
Sector Agriculture Industry Construction Services Total

Agriculture in GDP (%)


1996 36.1 9.7 5.0 49.2 100 2000 25.5 7.6 8.1 58.8 100 2005 20.5 9.7 14.8 55.0 100

Source: INSTAT

Figure 1
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Dynamics and structure of GDP

15916

20973

21386

24967

84371

85301

86982

86992

Fruits Field crops Livestock

77426

89587

90529

93664

2000

2004

2005

2006

Source: MAFCP statistical yearbook, 2006

However, agriculture sector growth is below the mean national rate and far from its potential. This is the result of the specific problems that this sector is facing, among which the most evident are the migration from rural areas, land ownership and the very limited size of farms, the marketing of products, the irrigation and the drainage system, the low level of technologies used, the weak organisation of farmers, the low level of development of agroprocessing etc. These conditions and problems have a negative impact on the interest for substantial investment in the production of agro-food goods.

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Agriculture and food sector strategy

1.2

AGRICULTURAL LAND

The total agricultural land represents only 24% (about 699,000 ha) of the total area of the country. Moreover, only 561,000 ha is arable land. About 43% (or 304,000 ha) of the total agricultural land is in lowland areas with relatively high productivity potential, about 34% (or 239,000 ha) is in other lowland areas, and the remaining 23% (or 159,000 ha) is in the mountain areas and is dedicated almost exclusively to fruit tree cultivation. By the end of 2006, the main indicators of the agricultural land privatisation process are: About 561,000 ha of land have been distributed, which constitute 98.6% of the available agriculture area that was foreseen for distribution (about 569,000 ha). About 445,000 agricultural households have acquired land, which constitutes about 65% of the entire population. About 137,000 ha are owned by the state, of which 110,000 ha are administered according to Law No. 8312, by municipalities and communes, while 27,000 ha are defined as available to the state. Land reform is currently facing problems that are related to the resolution of conflicts on land property. These conflicts are mostly evident in the periphery of large urban centres as well as along the coast.

Land market
The land market in Albania remains underdeveloped. Until now only 2% of farmers have sold land and only 3.5% have rented it out. Although the tax on land transactions fell from 2.5% to 0.5% in 2004, the level of agricultural land transactions did not change visibly. Some of the factors that constrain the development of the land market are: the extensive fragmentation of land; the tendency among the young not to work in agriculture; the strong ties of farmers to their land; the tendency not to sell inherited land; the disillusionment of farmers with the previous system of cooperatives; the large size of farm households; uncertainty about land ownership; overlapping ownership in some cases; the illegal division of and construction on agricultural land etc. Analyses show that it is necessary to rent land. The efficiency of a farmer who rents land is 28%, compared to the efficiency of a farmer (12%) who rents land out and the efficiency of a farmer who neither rents nor rents out land (28%). However, the land market remains one of the most difficult challenges in the agricultural sector.

The process of acquiring the land ownership title has been realised in 542,000 ha or 97.2 % of the total area that is actually being distributed. About 15,000 ha of agricultural land are currently being used by agricultural households, which for different reasons do not possess a land ownership title. This occurs more frequently in the regions of Shkodra, Kukes and Fier. Various conflicts also present an obstacle for the distribution of land ownership titles. The process of first registration of agricultural land as immovable property, which is a preliminary stage to the final award of a land ownership title issued by the Local Immovable Property Registration Offices, has been completed in about 87.5% of all cadastral rural areas of the country. Until the end of 2005, the first registration of agricultural land was performed by the Management Unit for Land Registration at MAFCP. On the basis of DCM No. 159, dated 21.3.2006, this activity is now being conducted by the Central Immovable Properties Registration Office (CIPRO). According to CIPRO data, more than 20,000 transactions of immovable properties

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Agriculture and food sector strategy

in rural areas have been completed. The rate of transactions has increased especially over the last 2-3 years, mainly in the periphery of big urban centres. There is a lack of correspondence between land use rights and the obligation of the owner to protect the land despite the fact that the law on land protection was approved much more recently than the law on private land ownership. In the mean time, agricultural land has been continuously harmed by human activity and natural factors. Currently, several thousand hectares of agricultural land are damaged that cannot be rehabilitated. Although the law envisages the establishment of land protection institutions, these have not yet been set up. The radical change of the nature of land ownership and the respective rights calls for a radical change in the land administration mechanism. The current state of land administration corresponds neither to the requirements of effective and sustainable management nor to the achievement of the objectives defined for the European integration of the country. According to data from different assessments, about 80-85% of the agricultural land (i.e. of land distributed to farmers) has been utilised in recent years. Although Law No. 9244, dated 17.6.2004 regulates the relationship between the private ownership title and the obligation to protect land as a national resource, it has not been possible to elaborate adequate land use policies during the transition period that would be comparable to corresponding countries in other countries in the region. In the past but also nowadays, there is evidence of agricultural land deterioration which has brought a decrease of its physical limits, such as illegal constructions, enlargement of urban areas which has been detrimental to agricultural land, damage of river beds etc. Besides the fact that the total surface of agricultural land is declining, the use of inappropriate agricultural practices has brought about serious damage to the agro-ecological value of the land. The most serious negative effects are salination, transformation to marshland, and land pollution in some parts of the country. Similarly, a land information system, which would be built on a modern methodology and would serve its protection and good management, is yet to be established.

1.3

FARM SIZE

Agriculture is dominated by farms which are small in size (1.13 ha on average) and fragmented (3.9 plots per farm on average, with an average size of 0.25 ha per plot). This constitutes an important obstacle to the improvement of agricultural productivity and to the efficient development of the agricultural sector. Small farms are most common in the mountain and northern areas of the country. The smallest farms are found in the regions of Kukes, Dibra, Shkodra and Lezha (the average farm size is 0.52 ha, 0.58 ha, 0.93 ha and 1.00 ha respectively). The fragmentation of agricultural land brings with it a number of difficulties for the production and marketing of agricultural products and has prevented the wider use of agricultural machinery. On the other hand, the uncontrolled movement of population from rural zones to major urban centres has resulted in considerable tracts of agricultural land remaining uncultivated. These and other production or commercial factors have created an appropriate environment for the large-scale importation of unprocessed foreign agricultural products, mainly from neighbouring countries.

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Agriculture and food sector strategy

Figure 2

Farm size by group


0.1-0.5 ha 29% 10%

>2.1 ha

1.1-2 ha 36%

0.6-1 ha 25%

Source: MAFCP Annual yearbook, 2006

1.4

AGRICULTURAL INPUTS

Farmers are facing many problems regarding mechanisation. A large number of tractors and other mechanical equipment have been imported to Albania in recent years. Nevertheless, farmers do not yet have sufficient access to modern equipment. The owners of this equipment charge farmers very high prices for particular mechanised services, such as ploughing, sowing, harvesting and transporting. This has as a result that the level of mechanisation grows only slowly and that the use of traditional methods, such as animal power and manual work, remain the only alternative for a large number of farmers. Only 74% of agricultural households use machines for ploughing. About 23% of households use animals for ploughing, and 59% are use machines and manual work. Manual work is the dominant ploughing method in mountain farms (75%), in small farms (up to 1 ha) and in medium farms (between 1 and 2 ha). The use of animals for ploughing takes place not only in mountain and hill areas but also in the plains. As mentioned above, manual work is not a practice driven by the lack of tractors, since there is one tractor per 70 ha in Albania. This phenomenon is not linked to the lack of various agricultural mechanical means but is related primarily to the high price of the service, the low efficiency of agricultural activity and the very small and fragmented farm area.

Use of agricultural inputs


There was a tangible reduction in the use of chemicals in agriculture in 2006. A farm used on average a quantity of chemical fertilisers that was lower by 17%. In particular, the quantity of ammonia fell by 54% and the quantity of nitrates by 24%. The proportion of farms that use chemical fertilisers has almost not changed (99%) but the number of farms that use urea has increased considerably (27%), at the same time that the number of farms that use nitrates has also increased (by 30%). A positive development in the context of applying good agricultural practices is the fact that the number of farms applying organic fertilisers has increased substantially by 33%. In this context, the increase in the quantity of pesticides used by 55% and in the number of farms using pesticides by 35% is considered negative. As for the use of tractors, although their total number has declined, the number of farms that use tractors to plough the land has remained approximately at the same level, while the number of farms where ploughing is done manually has fallen considerably by about 8%, which implies an increase in the use of animals. This is considered a consequence of the unaffordable price of tractor services.

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Agriculture and food sector strategy

At the national level, about 93% of all farmers use chemical fertilisers. Chemical fertilisers constitute about 23% of total farm expenditure, in other words the largest part of the value of inputs purchased by farms (about 50%). Only about 40-45% of farmers use purchased feed for livestock. The number of farmers who purchase animal feed is higher in mountain areas as a result of the low production of forage and the need for larger feed reserves during the winter season.

1.5

AGRO-INDUSTRY

Albanian agro-industry is a complex sector composed of small private businesses that have been created through the privatisation of the former agroprocessing state enterprises and new investment by private initiative. The privatisation of these state agro-processing enterprises started in 1992 with the bread, flour, milk, alcoholic and nonalcoholic beverage industries.

Figure 3
200 180 160 140 120 100 80 60 40 20 0 2000

Growth of agricultural and agro-industrial production

Agriculture Agroprocessing

2001

2002

2003

2004

2005

2006

Source: MAFCP statistical yearbook, 2000-2006

Before 1990, the food industry collected and processed 50-80% of all agriculture production. Agro-processing enterprises also did the marketing of their products. The food industry produced about 42% of the total value produced by industry and employed about 47,000 people. In 2006, there were 2053 food enterprises, of which 46% where in the bread and flour sector. More than 20% of these are located in the Tirana prefecture. About 9995 people are employed in the food industry. The production value of the food industry is 18% of the general value of agricultural and agro-processing production (according to INSTAT). The progress of this sector compared to agriculture is demonstrated in Figure 3. In terms of the number of agro-processing businesses, the bread and confectionery industry is leading with 966 enterprises or 47% of the total, followed by the dairy processing industry with 362 enterprises or 18% of the total and the flour industry with 272 enterprises or 13% of the total. On the basis of some indicators, the agro-food enterprises are in general very small and the vast majority does not comply with EU food safety standards. As a result, they can not reach foreign markets, particularly those of the EU. Investments to support the corresponding development policies are needed in order to increase the competitiveness of the Albanian food processing industry.

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Agriculture and food sector strategy

Even in the cases of big and modern enterprises that are producing for export, the raw materials are not procured domestically because domestic sources are limited in terms of quantity, quality and price competitiveness. For example, in the case of the vegetable processing industry that applies the deep freezing technology, more than 2,000 tons of vegetables are produced per year but 90% of the raw materials are imported from Greece, Italy and Macedonia. The food industry as an important branch of the Albanian economy has achieved marked and sustainable development in recent years. The value of production has reached in recent years about 48 billion lek, growing at about 11.6% on average every year, starting from 2000. The highest growth has been observed in the sub-sectors of dairy processing and meat processing. The level of investment is another important indicator of the development of the food industry. As shown in Table 2, investments have increased peaking in 2005 at about 2.9 billion lek. Two main features can be observed when analysing these investments: (i) investment in technology has been increasing year by year, unlike investment in buildings, a fact which shows that following improvements in the total volume there is also an improvement in the quality of investment; (ii) similarly, during recent years, the financing of investment is increasingly provided by domestic investors and bank credit.

Table 2

Private investment in agro-processing (million lek)


2000 2004 92.4 790.0 114.7 96.9 271.0 932.7 2297.7 2005 425.6 624.3 1124.5 203.4 62.8 475.9 2916.5 2006 170.3 1194.8 79.6 295.8 47.0 258.0 2045.5

Meat Milk Flour Bread and confectionery Mineral water and soft drinks Other Total

120.7 51.5 77.9 67.4 394.7 141.1 853.3

Source: MAFCP statistical yearbook, 2000-2006

1.6

TRADE AND MARKETING OF AGRICULTURAL PRODUCTS

Agriculture, characterised by the small farm size, remains still oriented to auto consumption. As a result, although 90% of farmers enter the market, only 30% of crop and livestock production is destined for the market. The income from sales of agricultural products is about 220,000 lek per farm, of which 58% are from livestock products. About 43% of farms earned up to about 55,000 and only 13% of farms earned on average above 400,000 lek. The regions of Kukes, Lezha, Dibra and Korca are well below the average, whereas the regions of Fier, Vlora and Berat are well above the average. Farmers earn their income primarily from plants in the Fier, Kora and Durres regions and from livestock in the Dibra, Kukes, Vlora and Elbasan regions. Income from the sale of plant products per farm are about 92,000 lek per year. About 75% of farmers earn income below 44,000 lek per year, while 35% earn less than 10,000 lek per year from sales. Farmers in the Dibra, Kukes, Gjirokastra and Lezha regions earn below average, while in the Fier, Vlora and Berat regions they earn well above average. Trade in domestic agricultural and food products is still under-developed. Starting from the fact that imported goods dominate the market, the satisfaction of the needs of the Albanian market through domestic products needs to be an important strategic objective, while the increase in the level of exports needs to be another, equally important objective. Currently, the export

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Agriculture and food sector strategy

potential of domestic production is still very limited. This is a result mainly of: (i) the insufficiently low production level of agriculture and agro-processing; (ii) the lack of trade facilities (of storing, processing, and packaging products); (iii) the low standards related to food safety; and (iv) the weak competitiveness of domestic agricultural products because of their low quality and relatively high production cost.

To what extent are market needs covered by domestic production?


Agricultural and agro-industrial imports are very large at about 400 million. Agricultural imports constitute about 20% of the countrys total imports, while exports are only 8-9%. This is also the result of the fact that Albania does not satisfy its needs for a considerable number of agro-food products. Albania secures 40% of its needs in wheat (or flour), 52% of its needs in fruit, 25% of its needs in poultry, 80% of its needs in beef, 60% of its needs in pork, 90% of its needs in potatoes, and 95% of its needs in vegetables and milk. These figures can be deployed as arguments to develop agricultural sub-sectors where production is in deficit, as well as arguments to expand the support to agriculture.

The exportimport balance of food products is an important synthetic indicator to monitor the progress of agriculture in the country. According to data in recent years, the situation of export and import remains problematic. The export-import ratio is 1:7.4 (Table 3). Agriculture, which is a potential export sector, is also facing weak organisation problems among exporters (and their corresponding structures), markets, collection, storage and the agroprocessing industry; administrative problems of state structures controlling quality and standards; and the insufficient scale of implementation of the law on food control. Higher exports will follow as a result of supporting government policies and increased business competitiveness by identifying: (i) what the market is demanding from its suppliers (with regard to product type, quality, packaging and marketing channels), (ii) what production capacities are needed; and (iii) how competitors have resolved these problems.

Table 3

Export and import trends (in thousand lek)


2004 2005 5 567 089 42 445 000 1:7,6 2006 7 154 416 53 190 000 1:7,4

Exports Imports Ratio Source: MAFCP statistical yearbook, 2006

5 147 000 42 903 000 1:8,3

The importance of increasing exports is not only related to reducing the trade balance deficit but also to improving product quality, increasing domestic production capacities, creating jobs, increasing prosperity and the ensuring the overall economic development of the country. The resulting quality improvement of products will have a positive impact on exports and will increase the substitution rate of imports with domestically produced goods. Regional free trade agreements and the SAA with the EU offers many opportunities to the Albanian economy to increase the exports of certain products like fruit, vegetables, wine, olive oil, fish, some processed products, livestock products etc. Albania conducts a considerable part of its international trade with the EU countries and other countries in the region, especially with Italy, Greece and Turkey.

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Agriculture and food sector strategy

1.7

IRRIGATION AND DRAINAGE

According to Law No. 8518, dated 30.7.1999 On irrigation and drainage, MAFCP is responsible for the administration of irrigation and drainage, and for flood protection. It ensures the provision of the following services: (i) the irrigation of 360,000 ha through water user associations; (ii) the drainage of 280,000 ha through 16 drainage boards; (iii) protection from flood for 130,000 ha, also through 16 drainage boards. Drainage boards are responsible for the use and maintenance of drainage and flood protection systems. The boards are financed by the state budget, in the areas where they operate, and are dependent on the MAFCP. In those irrigation systems that have been transferred to water user associations and federations, the responsibility for use and maintenance is with the water user associations and federations themselves (farmers). Currently, the systems for irrigation, drainage and flood protection from include: Drainage and flood protection: The total area that has been designed to be covered by the drainage system is 280,000 ha. In fact: (i) the drainage system has been rehabilitated in an area of 200,000 ha but needs to be maintained every three years and at the moment even this rehabilitated area is in the same situation as before rehabilitation; (ii) the other 80,000 ha need basic rehabilitation and after that maintenance every 3-4 years. The system is designed to drain: (i) 205,000 ha with the gravity technique; (ii) 75,000 ha through pumping waterworks. In support of drainage, there are 28 waterworks with 134 electric pumps in 10 districts in the lowland area of the country (Shkodra, Lezha, Kurbin, Durres, Kavaja, Lushnja, Fier, Vlora, Saranda, Berat) but about 50% of the electric pumps are in use for more than 20 years. The network of drainage canals are about 15,700 km long. The total area of agricultural land under continuous risk of flooding is about 130,000 ha (protected by dikes, a network of canals and waterworks), whereas dikes that protect from both the rivers and the sea constitute a total of 850 km. Irrigation: The total area that can be currently irrigated (i.e. where the infrastructure has been rehabilitated) is 188,000 ha, out of a total area of 423,000 ha that has been designed for irrigation. Of this figure: (i) about 70,000 ha can be excluded because they have lost their function as agricultural land (i.e. they have been transformed into urban areas), or they rely on irrigation with water pumping techniques which are not efficient; (ii) 173,000 ha need the continuous rehabilitation. Out of 639 pumping stations that have been constructed, only about 100 are working. The other pumping stations need investment for rehabilitation. In some cases, they have been completely destroyed and have lost their function as pumping stations. The network of irrigation channels has a total length of 25,000 km, and is classified as follows: (i) 2,000 km of main irrigation channels; (ii) 6,200 km of secondary irrigation channels; (iii) 16,800 km of tertiary irrigation channels. The most important projects in agriculture have financed the rehabilitation of irrigation system. The first and second World Bank projects have financed the rehabilitation of about 150,000 ha, while the state budget has funded the rehabilitation of about 30,000 ha (a total of 180,000 ha). Maintenance and management of the irrigation and drainage systems: This is ensured: (i) from the 16 Drainage Boards financed by the state budget; (ii) from 530 Water User Associations, and (iii) from 24 Water User Federations. Considering that the situation of the irrigation and drainage system is not satisfactory and that this system is a crucial factor for the increase of agricultural
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Agriculture and food sector strategy

production and income, the MAFCP has assessed the systems of irrigation, drainage and protection from erosion caused by rivers and the results achieved in irrigation management by the Water User Associations and in drainage and flood protection by the Drainage Boards. By DCM No. 121, dated 19.5.2006 On the approval of an action plan for the rehabilitation of the irrigation, drainage, and flood protection systems, an action plan for the period 2007-2009 has been approved and the respective costs have been estimated. The irrigation and drainage system uses open channels and, on the basis of a 40-year experience, there is a need for annual maintenance and constant rehabilitation. The process of maintenance and rehabilitation follows a 3-4 year cycle and has a relatively high cost which varies: (i) 40,00060,000 lek/ha for the irrigation system; (ii) 15,00020,000 lek/ha for the drainage system (excluding the maintenance and the electric power consumption of waterworks and pumps). An analysis of the situation shows that, as a result of soil deposits over a period of several years due to the fact that clearing works have not taken place, urgent interventions and considerable financial support is needed to stabilise the operation of the irrigation, drainage and flood protection systems. The rehabilitation of river dikes is also urgent. The cost for the rehabilitation of river dikes to protect agricultural land from erosion and flooding is estimated at about 2,500 million lek only for urgent interventions. Water user associations play an important role in the management of irrigation. With respect to the management of the infrastructure of irrigation, drainage and flood protection, the following data are available: 362 associations cover about 234,010 ha, of which in about 188,000 ha the irrigation system has been rehabilitated, while about 19% of the area is not cultivated. Irrigation takes place in 55% of the rehabilitated area with free flow (gravity), in 13% with pumping stations, while in 32% of the rehabilitated area no irrigation takes place. Critical issues: The current situation of the irrigation system and its management does not ensure a service to the farmer, especially regarding the quantity of water and the duration. During the summer season, out of a water deficit of about 400-500 mm, only 200-250 mm can be provided. From an analysis of this situation, the following simple conclusions can be drawn: The efforts to improve the irrigation and drainage indicators have not been accompanied accordingly by an increase in agricultural productivity, with the result that farmer income remains low. The safety of reservoir dams, as a result of the lack of permanent monitoring and investment in rehabilitation, is at an inadequate level. Therefore urgent interventions are needed in about 126 dams. A lot of damage is caused in riverbeds because of uncontrolled gravel extraction. The monitoring of the quality of water used for irrigation in certain coastal areas is weak, with the result that there is an increase in salinity. There is a need for investments to increase the water collection capacity in order to respond to the future demand that is projected to continuously increase. There is a need to use modern technologies in the irrigation system to increase efficiency. An integrated plan for the use of water in specific areas is missing. There is no programming for the assessment and use of water resources that would consider all factors (soil, water, plants, and climatic conditions) and would protect drainage systems from flooding. There is an evident need for intensive continuation of the process of rehabilitating the irrigation, drainage and flood protection systems, until the management of irrigation systems by
19

Agriculture and food sector strategy

Water User Associations is consolidated and until the drainage and flood protection systems are managed by the Drainage Boards financed by their own budget. The respective legal frame, Law No. 8518, dated 30.7.1999 On irrigation and drainage, should be amended accordingly. These measures will increase the responsibility and the efficiency of the water users and will decrease the financial participation of the state budget.

1.8

FOOD SAFETY AND STANDARDS

Veterinary control: This service protects the national territory from animal infections and it protects public health from diseases coming from animal products, through improvements in the control procedures in border crossing points. There are 14 border veterinary inspection points. All cargoes with imported animal products are controlled in these points. Only after this control in these points, which are the first barriers of veterinary control of animal products, and after customs control, can these products freely move in the domestic market. The infrastructure of these inspection points leaves much to be desired. With the completion of a CARDS project, the infrastructure of 7 border veterinary inspection points will be improved. The improvement of infrastructure will strengthen veterinary control. In total, 128 importers, processors and sellers of animal-origin products have been approved by the food safety inspectorate. On a monthly basis, all these units are inspected, whether they import, keep in refrigerators, or process food products. The control is monthly and is conducted on the basis of inspection protocols. About 90% of these units are under the permanent control of the food safety inspectorate. Food establishments are improving their conditions, in compliance with the veterinary legislation in force and in fulfilment of their obligations according to protocols with veterinary inspectors. A small number even satisfies the standards to export to EU countries. The drafting of the new law on food is a basic requirement for the development of the food industry in the country and for the introduction of HACCP system after a period of two years, which will ensure safer products from a health point of view.

A new approach to food safety: HACCP


Hazard Assessment and Critical Control Points (HACCP) is a method of food safety control which consists of the prevention of risk or causes of illnesses that may result from food. This is ensured through measures that identify and eliminate risk factors during the entire production process, unlike other methods of quality control that only assessed the final product. HACCP is based on seven principles: analysis and identification of possible risks of chemical, biological or mechanical character; definition of critical control points, which are points during the technological process of production where food safety can be controlled; definition of preventive measures for each control point; definition of monitoring procedures at control points; definition of actions that need to be taken to eliminate identified causes; definition of procedures for verification whether the production system functions appropriately; and definition of methods and standards of registration and documentation of the HACCP system. The idea of HACCP was developed many years ago in the USA, as a method for securing the food of astronauts in space travel. Nowadays, this approach is certified by many international food safety organisations, such as the Food and Drug Administration in the USA, the European Agency of Food Safety, and the Codex Alimentarius Commission. HACCP is today used broadly as a method of guaranteeing food safety by companies and businesses in many countries in the world. Even in Albania it has been endorsed and implemented by a small number of agro-food businesses. According to the new draft law on food, two years after this law comes into force, all agro-food businesses will be obliged to use HACCP, while certification is not obligatory. The introduction of the HACCP system is not easy, as it requires considerable expenses, ranging from consulting services to investment in equipment and instruments.

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Agriculture and food sector strategy

The municipal veterinary service is responsible for controlling markets in terms of the veterinarian and sanitary conditions of marketing animal origin products. In shops, there is a marked improvement in meeting the necessary veterinarian and sanitary conditions. In wholesale markets, although municipalities have a permanent veterinary inspectorate, there is an unsatisfactory level of veterinarian and sanitary conditions. With the strengthening of joint controls between the municipal and MAFCP veterinary service efforts are made to meet these conditions. The control of agro-food products continues to face many problems and is not yet fully efficient. Among the most important problems are the following: Food safety inspectors, who are responsible for controls at the customs and in markets, do not have the necessary equipment to select samples and conduct rapid analyses. The legal framework for the official control of food products that are produced locally or imported needs to be improved through approximation with EU legislation. Food safety inspectors do not have the necessary means of communication to ensure an effective control of food products. The regional food safety inspectorates do not have a database for the identification, control and follow up of different problems, such as falsification, packaging, trading and importing of food products, as well as for the exchange of information across regions. The national standards on the safety and quality of food products are not harmonised with EU standards. The degree of implementation of international systems of safety and quality, such as HACCP and ISO, is low. The problem of labelling imported food products in Albanian continues, as importers do not implement DCM No. 554 On the labelling of imported food products. About 90% of all food producers are inspected and monitored by the food safety inspectorate with respect to meeting the requirements of existing legislation and to ensure a high level of protection of the health and interests of consumers. According to DCM No. 604 On the labelling of food products, all food producers licensed by the food safety inspectorate should have the labels of their products approved by MAFCP. About 85% of food producers have already had the labels of their products approved and about 10% are in the process of approval. The controls of the food safety inspectorate are part of the customs practices, where controls are made in terms of the labelling of food products in Albanian and samples are taken and sent for analysis. With respect to the enforcement of DCM No. 554 On the labelling of imported food products, the control has been continuous and about 70% of imported food products are now labelled also in Albanian. It is estimated that about 90% of food products are regularly controlled by the food safety inspectorate at the customs. The implementation of food quality and safety systems by the producers remains a problem, as only 2% of the producers have implemented these systems. Animal health: After the 1990s, the transition from big state enterprises to small home-based ones created favourable premises for the introduction and persistence of different pathogens and for the change of the general epidemiological situation in the country, as the risk for public health from zoonotic diseases increased. Moreover, the insufficient control of animal movement has brought about a rapid increase of animal disease prevalence in the whole country. Albania is currently free from foot and mouth disease, cattle contagious pleuromonia, small ruminants pest, pig vesicular disease, as well as African swine fever. Some diseases included in the list of the World Organisation of Animal Health are present in the country and cause important economic losses to farmers, such as: Newcastle disease, classical
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Agriculture and food sector strategy

swine fever, cattle anaplasmosis, cattle babesiosis, anthrax, tuberculosis, cattle brucellosis, brucellosis melitensis, contagious agalaxis, varoatosis in bees etc. As a result, human infection cases from zoonotic diseases have increased: about 400 cases of salmonelosis, about 700 cases of brucellosis, about 100 cases of leismanosis, and 60 cases of anthrax. The screening of animals for the above infections on more than a third of the total animal population (brucellosis of small ruminants, cattle tuberculosis) has shown a prevalence from 0.64-5% for brucellosis melitensis and of 0.19% for tuberculosis. For this reason, even the control of these infections is very difficult. Currently, in Albania are there about 322,736 livestock farms with a total of 634,000 cattle, 2,770,000 small ruminants, 152,000 pigs, and 6,200,000 poultry. National programmes are prepared and implemented by the veterinary service for the control of animal diseases, especially for zoonotic diseases with risks also for humans. The veterinary budget is used for the control of diseases like tuberculosis, brucellosis, anthrax, and classical swine fever; the national programmes for the monitoring of residues, the monitoring of water and molluscs, and the animal identification and livestock farm registration system. About 10% of the total veterinary budget is used for emergencies (such as outbreak and elimination of illnesses, avian influenza). All other illnesses present in Albania, whether infectious or parasitic of a non-endemic character are covered by the farmers themselves. Plant protection: The phyto-sanitary control of production in farms that want to export their production is currently supported by the state. The export of plant products is accompanied by a phytosanitary certificate which is compliant with EU standards. The following issues or problems can be mentioned in relation to plant protection: The establishment of protected areas, as one of the main requirements for complying with the EU standards in plant production and export of agricultural products, has only just started. This has begun in the zone of Divjaka for the cultivation of potatoes. For many years there has been phyto-sanitary control of plant products and a fight against specific parasites (whose list is approved by the Minister), which is covered by the MAFCP budget. For example, we can mention the fight against grasshoppers and rats, which can cause great damage to plantations, and the olive fly. However, the phyto-sanitary control is very difficult in the fragmented farms. There is a large network of importers and traders of plant protection products (PPP). The PPP that have been approved for use cover all aspects of protection of cultivations from parasites. Currently, there are no expired PPP in the market, since all those PPP have been eliminated 6 years ago with EU funds (PHARE programme). No problems of this type have occurred during this period, since traders and, particularly, importers have been guided carefully on the introduction of PPP in the market. Quality analyses, for example on active ingredients and the extent to which they are included in the products or on the residue control in plant products, are not being done because the laboratory infrastructure is still poor. The active ingredients of the PPP that are registered in our country are all included in the EU list, while ingredients that the EU has asked to be removed from the market have been specified by MAFCP decisions. Similarly, all marketed PPP are registered at the outset and are labelled in Albanian. Despite positive developments in recent years, there are also gaps especially in terms of quality: There are often unsuitable storing and trading facilities for the PPP, in respect of product safety and human health.
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Agriculture and food sector strategy

The available means are inappropriate as they do not correspond to the demands of agriculture; there is an unbalanced relationship between their different types, as standard pumps dominate. This has created problems especially in the treatment of fruit trees, vineyards, greenhouses, where treatments are done almost always with standard pumps. The use of chemical stimulants, mainly for greenhouse vegetables and fruit trees, is low and is done without technical criteria. There is lack of effective advisory service for the protection of agriculture from parasites, as advice is mainly provided by the traders of PPP themselves. The defects of this lack of advice are beginning to be felt, particularly in greenhouses, vineyards and fruit trees (apples), where the interest of farmers is the largest. The level of education and training for the protection against harmful effects of PPP is still low. The persons that use these products are not always well trained The use of PPP according to rules, related to health and the disposal of the packaging after the completion of work, is problematic. The problem is particularly concentrated in the use of Class 1a PPP and of fumigators, which are often used by people who do not have the necessary qualifications. The monitoring of residues in food products of plant origin is not carried out. The necessary legal framework to regulate the maximum level of residue in plants is not complete, since the implementation of a complete legislation package needs big investments to establish the laboratories, which will control and determine the level of residues in plant products. For these reasons, it is foreseen that this legal framework will start being prepared and implemented after 2010.

1.9

EXTENSION, RESEARCH, TECHNOLOGY TRANSFER AND AGRICULTURAL INFORMATION

Extension service: The extension service consists of public and private service providers. The public service is the most organised and dominant form, as it is spread all over the country. It is part of the MAFCP structure at central and regional level with a network of information centres. About 245 agricultural specialists are employed in this service on a national scale. This technical assistance service provides knowledge and information for all farmers and other persons interested in agricultural activities. The staff of the extension service is generally responsive and capable of its tasks and possesses good knowledge and a well-defined concept on the methodology of extension. It keeps continuous contact with farmers, through a planned program of activities on the basis of both groups and individuals. In collaboration with scientific research institutions, 7-8 technical booklets are prepared each year and distributed to farmers, while a considerable number of leaflets and other informative materials are also handed out. To respond to the needs and requests of interested persons, the public extension service implements a training programme, which has mainly covered issues of plant cultivation and animal breeding technologies, elements of the farm budget, financial management, marketing and farmer organisation. In collaboration with research staff and farmers, the public extension service also follows and implements applied research at the farm level, establishing relationships between researchers, extension staff and farmers. It also carries out a series of extension activities with farmers, such as demonstrations, field-days, visits, fairs and other group meetings, planned in the annual working programme. The contacts with farmers are attained through agricultural information centres, which are already spread across all important agricultural zones of the country. The main focus of these

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Agriculture and food sector strategy

centres is to provide informational material of high quality. At present, 120 agricultural information centres are set up and operate all over the country. The main focus for the extension service in the future will be to consolidate these centres and increase their efficiency. Agricultural research and technology transfer: Until the middle of 2006, 9 research institutions were under the authority of MAFCP. The objective of the agricultural research was to increase its role and efficiency at the service of the agricultural development strategy and policies. According to DCM No. 515, dated 19.7.2006, On the restructuring of research institutions under the authority of MAFCP, five Centres of Agricultural Technology Transfer were created from six existing research institutions, in Fushe Kruja, Vlora, Shkodra, Lushnja and Kora. Following this restructuring, two of the existing institutions (the Institute of Zootechnical Research and the Institute of Vegetables and Potatoes) were replaced by the Centres of Agricultural Technology Transfer in Fushe Kruja and Lushnja respectively. This restructuring was also accompanied with the change of objectives, placing emphasis on technology transfer in accordance with the needs, conditions and regional priorities. Some of the important problems that the extension service faces are: (i) the limited number of extension specialists (in average, there is one extension specialist per 2000 farmers) and their engagement with a lot of tasks that are outside their specific field; (ii) the insufficient financial support in the form of investment in agricultural information centres and operational costs to realise the extension activities; and (iii) the high average age of extension specialists and their limited skills in using computers and information technology. Statistical service. The agricultural statistical service is organised at the central and the regional level. The statistical sector in MAFCP has a chief and 3 specialists. At the regional level there are 12 regional offices with 47 employees with 26 employees across all districts working under them. Currently, the statistical service has 73 employees across the country. Every year two agricultural surveys take place, with a sample of 2800 active farmers that represent about 375,000 farmers; one survey on the production activity in greenhouses, where about 600 farmers out of a total of 5000 farmers are interviewed; and an another survey on the production activity in large farms. Four monitoring surveys are conducted each year to evaluate agro-business. Progress has been made to standardise agricultural indicators according to EUROSTAT. Some of the most important problems that the statistical service is facing are: (i) the adaptation of the statistical system to that of the EU countries, to ensure that the necessary statistical indicators to monitor agricultural and rural development are measured; (ii) the small sample size, which has negative impacts on the accuracy and reliability of collected data and indicators at the regional level; (iii) the lack of financial means to carry out special surveys for activities such as vineyards, olives, potatoes etc; (iv) the weak service in the absence of internet connection in all districts; (v) the improvement of the reporting system to combine information from different sources that are related with the same indicator; (vi) the lack of financial means to design new software and to conduct surveys in order to improve the information that they provide; and (viii) the small number of agricultural statistics specialists at the central level.

1.10 MAIN DEVELOPMENT TRENDS


Agricultural production and incomes have followed a noticeably increasing trend. Livestock production accounts for about 46% of the total production of the sector, followed by plant production (about 44%) and fruit production (about 11%). Fruit and livestock production have had the highest growth rates. As a result of the scarcity of some production factors and of the low efficiency with which existing factors are being utilised, the level of productivity, production, and income from agriculture in Albania is still very low in comparison with EU countries. According to the national accounts, the value added of agricultural products is estimated at about 155 billion lek. About

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Agriculture and food sector strategy

756,000 people work in agriculture and the annual value added per worker is around 200,000 lek or 1,700. This value is still too low compared with the level in the 15 EU countries (26,000) and even the new EU member countries (6,500). The income from livestock is 1.6 times higher than the income from arable crops. Farmers are still producing mainly for auto consumption, while agricultural activities are generally diversified and extensive. Farmers are suffering from underdeveloped public services and a weak physical infrastructure. Priority is given to subsistence production and only a small part of agricultural production is destined for the market. The main agricultural products are grains (especially wheat), vegetables, potatoes and beans. Wheat is the most important cultivation in terms of surface, but it earns a very low income. Very small quantities of grains are sold in the market, while vegetables, potatoes and fruits are becoming an increasingly important source of income for family farms. Forage (maize and alfalfa) is cultivated in about 30-35% of farm area and is increasing as the interest of farmers is switching to forage.

Figure 4
600

Productivity trends

Wheat 500 Vegetables Potato 400 Forages Fruit 300 Olives Grape 200 Cow milk Sheep milk 100 Goat milk Eggs 1992 2000 2005 2006

Source: MAFCP statistical yearbook, 1992-2006

During the transition period, some important trends are observed. With reference to 1992 as a base year and on the basis of data, studies and the following figures, some of these trends are: A perceptible and continuous decrease of the area cultivated with arable crops, especially wheat and tobacco. The causes are the low economic returns and foreign competition in the case of wheat, and the lack of domestic processing facilities in the case of tobacco. A continuous increase of the area cultivated with forages and potatoes, and an initial increase followed by stabilisation of the area cultivated with vegetables. The cause is a response to emergency, followed by increasing market demand for livestock products and fresh vegetables. A considerable increase of vegetable production in greenhouses, in response to the economic returns to their production and the substantial gap in the local supply of vegetables. A substantial increase of the yields in forages, potatoes, milk from cattle and goats, eggs and, particularly, fruits and grapes.

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Agriculture and food sector strategy

A rapid increase in the number of fruit trees and the area planted with vineyards (the latter mostly after 1996). This sub-sector has the most rapid development in terms of area cultivated and yields. In recent years, there is an increase in the number of specialised livestock farms. Similarly, the numbers of farms with 510 calves for beef production, of farms with 11-50 cows for milk, of farms with 1150 goats or with more than 500 sheep have increased as well, a fact that reveals a strengthening tendency for agricultural specialisation. The number of agricultural farms with more than 5 calves grew by 50% in 2006 compared to 2004. During this period poultry farms with turkeys increased by 10%, farms with more than 10 beehives grew by 38%, farms with more than 6 cows grew by 22%, farms with more than 6 sows grew by 4%, the number of poultry farms with more than 5000 hens grew by 18%, while the number of farms with more than 50 pigs fell by 60% and the number of large poultry farms with more than 50,000 hens fell by 50%. A crystallisation of agricultural development poles is observed, such as the regions of Kora, Berat and Dibra for fruit; Fier for milk cows; Elbasan, Shkodra, Dibra and Vlora for small ruminants; Shkodra and Lezha for pigs; Fier, Tirana and Durres for vegetables; and Fier, Berat, and Vlora for viticulture. These reveal important steps for regional specialisation.

Figure 5
250

Trends in terms of area cultivated, trees planted or number of animals

Wheat 200 Vegetables Potato Forages 150 Fruit Olives 100 Grape Cow milk 50 Sheep milk Goat milk 0 1992 2000 2005 2006 Eggs

Source: MAFCP statistical yearbook, 1992-2006

There are some clear trends for exports as well, which are dominated by processed products. Agricultural exports have a slight increasing trend, which is dominated by vegetables, although the total volume of export is limited. Livestock products are those exported least. The following graphs illustrate these trends. Figure 7 shows a positive trend in the import/export ratio, mainly due to the increase of exports. Figure 8 suggests that non-genuine agricultural products dominate exports, such as medicinal plants, canned fish, leathers, mineral water etc. The low competitiveness of Albanian products, which is related mainly to low quality, as well as the lack of food safety and the high cost of production are the most important local obstacles for export. This is also confirmed by the fact that the products that are exported most either do
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Agriculture and food sector strategy

not raise concerns for food safety or guarantee a high degree of food safety (canned fish, medicinal plants, tobacco, watermelons etc)

Figure 6
8000 7000 6000 5000 4000 3000 2000 1000 0

Export trend

7154 5119 3827 4076 5147 5567

2001

2002

2003

2004

2005

2006

Source: MAFCP statistical yearbook, 2001-2006

Figure 7
12.0 10.0 8.0 6.0 4.0 2.0 0.0

Trend of the import/export relationship

10.6 8.5 8.8

8.5

7.4

8.1

2001

2002

2003

2004

2005

2006

Source: MAFCP statistical yearbook, 2001-2006

In recent years, organic agriculture practices have been revived. From a formal point of view, organic agriculture in Albania dates since 1997 with the establishment of the Organic Agriculture Association. This association began supporting organic products assisted by foreign-financed projects (FiBL, Avalon). There is even a shop for organic products in Tirana. Today there are about 93 organic farms, while the surface allocated to organic production is 1074 ha. The majority of the farms and the surface are certified by the Organic Agriculture Association, AlbInspekt, or foreign agencies. The main organic products are medicinal plants, olive oil, fruit and grapes, vegetables and milk, some of which are exported in countries such as Switzerland, and Holland. Similarly, a small quantity of eggs, cheese, wine and meat is also produced. In order to support organic agriculture in Albania, the Parliament approved Law No. 9199, dated 26.2.2004 On the production, processing, certification and marketing of organic products. The organic movement in Albania is also endowed with new actors and activities, such as AlbInspekt,

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Agriculture and food sector strategy

an Albanian association that certifies organic products, and foreign certification bodies like BioInspecta, BCS ko Garantie, CERES, SKAL, ICEA and Italian Codex. BCS, CERES, SKAL and Italian Codex have certified only the large exporters of medicinal plants, while BioInspecta has certified two successful export cases, fresh spices and olive oil, both for the Swiss market. BioAdria, a research and advisory service network which comprises many experts in organic production techniques, is focused on scientific research and advisory services that it offers to organic farmers. Other actors are entering the organic movement, such as the Albanian Organic Horticulture Association BioPlant. Organic agriculture in Albania also benefits from the activity of donors, such as Oxfam, GTZ, SNV and FAO. In the framework of INTERREG IIIa, there have taken place activities to expand the level of knowledge of experts and farmers on organic agriculture techniques, especially in relation to biological protection and composting, as well as to train the staff of the public extension service. At the moment, the project Sustainable agriculture support to Albania is being financed by the Swiss Development Cooperation.

Figure 8

Structure of exports in 2006


Livestock 3% Fishery 3%

Plants and fruit 30% Agroindustry 64%

Source: MAFCP statistical yearbook, 2001-2006

1.11 FINANCIAL SUPPORT FOR AGRICULTURE Budget expenditure and investment for agriculture and food
As Figure 9 shows, after a positive trend until year 2004, funds for agriculture have fallen, with the largest single fall recorded in 2005. The fall in investment, despite the light increase in total expenditure, is a serious warning about the future of financial support to agriculture. The signals are strong and it would be good to take measures as early as possible. The public contribution to agriculture has continuously been quite limited, at about 1-1.5% of the budget and even less in GDP terms. In general, investments in agriculture have been financed through foreign loans and grants. The domestic investment component does not have a clearly positive trend and appears stable, while foreign investments present an unclear and uncertain trend, before falling substantially, practically falling by one half, in 2005. This fact shows that in the future agriculture risks remaining without the necessary foreign financial support, unless urgent and systematic work takes place to identify new projects to be presented to donors, and unless the business climate is improved to encourage private investment that will compensate for the potential donor investment gap.

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Agriculture and food sector strategy

Figure 9
6000 5000 4000

Trend of public investment in agriculture

5371 4602 3925 4731 4550 3098

3000 2000 1000 0 2000 2001 2002 2003 2004 2005 2263

2006

Source: MAFCP statistical yearbook, 2006

If we were to do a thorough analysis, it is easy to establish that the largest investments have been and are still being made for the rehabilitation of irrigation and drainage, followed by investments on agricultural land and services.

Investment and credit in agriculture and agro-industry


Although they are both important sectors with high potential, private investment in agriculture and agro-industry is still not on a large scale according to the latest assessments. As in previous years, investment in all its forms, private and public, does not exceed the limit of 0.3% of GDP. The detachment of the banking business from the rural areas and the problems that have been mentioned in the above short analysis, constitute the main factors that explain this low figure. Following a considerable increase relative to 2000, the level of investment in agro-processing industry has stabilised, as a result of the lack of credit for domestic investors and the insufficient interest from foreign investors in this direction. Moreover, the development of the agro-processing industry is conditioned by the low quality or the insufficient supply of the agricultural products that are used as raw materials, as well as the competition with low process from imported products of questionable quality. By comparison, financial support to farmers and agriculture in general is also provided by a number of rural financing agencies and institutions. Rural financing in Albania, especially financing directed to farmers, can be currently and has in the recent past been accessed through the contributions of some actors, projects or agencies, such as the Mountain Areas Financial Fund, the Mountain Areas Development Agency, the project 2KR, the Agricultural services project, the FAO project of support for agricultural production, the completed USAID Small business credit and assistance project, the Union of Credit-Saving Associations, the project Sustainable agriculture support to Albania, a number of other independent projects of different international associations, as well as the banking system and farmers themselves. Their total support has been considerable, but on the whole inadequate. They have supported individual farmers, farmer associations, various agro-businesses, through grants, loans and credit, with technology, seeds and seedlings, breeds, marketing, knowledge and technical assistance. Currently, the most active actors are the Mountain Areas Financial Fund, the Mountain Areas Development Agency and the Union of Credit Saving Associations. There are no exact data on the number of beneficiaries but these are known to add up to several thousand.

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Agriculture and food sector strategy

Fruticulture in policy focus


A direct support programme for farmers was set up for the first time in post-communist Albanian agriculture to promote the development of viticulture, fruits and olives, with DCM No. 3, dated 10.1.2007. According to this decision, farmers who plant grapes or new fruit trees over no less than 3 dynym and those who plant new olive trees over no less than 2 dynym are eligible to receive 50,000 lek per dynym (for grapes) and 35,000 lek per dynym (for fruit and olive trees). The right to benefit from this support is awarded following a review on the basis of six criteria against which points are assigned: Location, 15 points Species, 10 points Variety, 10 points Time over which trees have been planted, 10 points Area, 35 points Technology, 20 points Eligible farmers must secure 70 points or more, according to an evaluation commission. This support programme has been welcomed and not only by farmers and it is expected to have a noticeable impact on production over the next 3-4 years. There has been no preliminary costbenefit analysis; therefore the effectiveness of the programme will only be fully evaluated later. In the future, it needs to be assessed how the criteria and the weights attached to them can be improved in the selection of applications, perhaps including also other criteria, such as improvements in land quality and protection, in order to be better aligned with the new agricultural policy on agriculture.

In the future, it is expected that more finance will be injected into the agriculture and food sector. Except for two continuing projects, the strengthening and expansion of to more regions of the Union of Credit Saving Associations remains the main alternative. By comparison, the banking system needs to play a stronger role but for this to happen it is necessary that the land market and the cooperation between farmers are promoted, since the default risk is high among farmers and the transaction costs of credit would be high and prohibitive because of the large number of farmers. Guaranteeing free competition, for example through implementation of the food safety legislation, particularly in the agro-processing sector, would encourage investment in this sector even through loans. The improvement in the quality of information on the market and the assistance to identify new profit-making activities and to develop good business plans would have an impact on the number of private loans. It is also possible to discuss the alternative of channelling state aid through the banking sector, to ensure efficiency and a high rate of return on loans. In the meant time, it is necessary to find ways to put to use the savings of farmers, which are believed to add up to several hundreds of million euro. Direct support, as in the case of the viticulture and fruit programme, would be effective even in this direction, because in contrast to a grant farmers would have to invest also their own capital to complete an investment or benefit from it. Foreign experience (such as in Bangladesh and the Grameen Bank, in Romania etc) can also be utilised to strengthen the Albanian rural financial system. Reforms in the banking system would also be valuable (setting a minimum obligatory contribution to agriculture as well as ceilings for the maximum size of the loan in order for more small-size loans to be provided and for more small farmers to benefit). It is suggested that the promotion of loan taking and saving among farmers can also mobilise cheap financing. In this case, it is important that groups are
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Agriculture and food sector strategy

established on the basis of joint interests or similar characteristics (in the case of the Grameen Bank up to 5 farmers with up to 0.5 ha of land). In addition, accompanying loans with other necessary services for farmers may have an impact on the growth of loan taking among small farmers.

Main agricultural policies and their results


During the recent period, agricultural policy can be characterised as a primarily indirect support, which has focused on the following main aspects: Rehabilitation of infrastructure Establishment of a business-friendly environment Support to farmer services Institutional strengthening By indirect support is understood the relative lack of credit and grants directed by the government to farmers. The indirect support is primarily focused on the rehabilitation of the infrastructure of irrigation and drainage, markets and laboratories of control. Date from the period 2000-2005 show that about 37% of foreign financing was directed to irrigation infrastructure, while, if we were also to include markets and laboratories, the financing would exceed 40% of the total. PHARE and 2KR are two other important foreign investment components of this period, with approximately 25% of the total, which have contributed substantially also in the provision of agricultural inputs (machinery, pesticides, seeds etc). As a result of these policies, the irrigation potential of agriculture has been improved and a good drainage of land is guaranteed. These policies are considered as the most necessary over this period. The establishment of a business-friendly climate has aimed primarily at the privatisation and liberalisation of the economy and of agriculture in particular. The privatisation and distribution of the land and properties of the former cooperatives and agricultural farms, as well as of the assets of the agro-processing enterprises, in parallel with the liberalisation of the business decision making are the main pillars of pro-business policy. Fiscal exemptions and incentives for farmers as well as the registration and inclusion in the cadastre of agricultural lands, which is expected to be completed soon, have also had a special role. In this context, the policies for the development of information systems can also be cited, where a number of donors have been involved, such as the World Bank, USAID, the European Commission and GTZ. The support to farmer services has focused mainly on technical advice, such as but not only the Dutch project on the agricultural extension service, through which thousands of farmers and agriculture specialists were trained and the agricultural extension service was restructured towards a new policy and system. Institutional strengthening has consisted of providing new technical and administrative knowledge and experience through training and formal qualifications to technical and administrative staff of the Ministry and its structures. In this framework, there has been external support in the direction of preparing development policies and programmes, providing working means and instruments, establishing and modernising laboratories of control and analysis of diseases and food, preparing laws for the market economy, and finally approximating the national agricultural legislation with that of the European Union. In 2007, Albanian farmers benefited for the first time from a grant scheme, such as the support programme for fruit and grapes, which is expected to have a significant impact on the production of fruit, olives and grapes, as well as on farmer income.

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Agriculture and food sector strategy

Agricultural policies have so far had positive and considerable results. Agricultural yields have risen markedly, often also in spectacular fashion, agriculture is an open sector for investment, the private initiative dominates in agriculture, the mentality and business capabilities of farmers and agro-processing entrepreneurs have developed considerably, the availability of water and other agricultural inputs has grown, agricultural resources tend to be utilised more efficiently and the market gives the important signals to orient the production structures and the decisions of businesses.

1.12 ANALYSIS OF THE NETWORK OF SECTOR ACTORS


In the planning, implementation and technical areas, MAFCP has played a key role in the development of agriculture. The government and other high institutions of the state have ensured political and strategic support. Other line ministries have also played an exceptional role, in particular the Ministry of Finance and the Ministry of Economy. The performance of MAFCP has been satisfactory, with a staff at high technical levels and sufficiently motivated through financial mechanisms. In general, the performance needs to improve in the future, in light of the new commitments for integration and the preparation and implementation of more effective development policies. The MAFCP needs to demonstrate a stronger commitment in the implementation of its duties with higher effectiveness. For this reason, it would be necessary to flexibly and gradually complement existing capacities with new knowledge and more dynamic skills. This can happen through considered additional recruitments or through well-targeted training programmes to confront effectively the critical current and future challenges. In this context, the participatory character of planning, monitoring, implementing and evaluating activities of MAFCP is being deepened and this will continue, as an expression of democratic dialogue with all development actors, with farmers and their organisations. The facilitating role of MAFCP for development will be strengthened also through its regional structures and the centres of agricultural technology transfer, which are expected to play a stronger role in the future. The MAFCP has had constant and effective support through a large number of actors and other partners for development, such as the World Bank, USAID, the European Commission, FAO, GTZ, the Italian Cooperation, the Swiss Cooperation, SNV, the Spanish Cooperation, the Government of Japan etc. These and other important partners have ensured that Albanian agriculture continues to develop and restructure in a sustainable way in the framework of a dynamic market and in a system with new rules. It is acknowledged with realism and gratitude that they are responsible for all the progress that Albanian agriculture has achieved so far in its road towards the market economy and, already, towards European integration. In the framework of new developments, the communication, coordination and dissemination of information between MAFCP and other line ministries as well as with international partners are improving but need to improve even more. This communication needs to intensify in the future not only in the programming area but especially in the operational and implementation field. This would guarantee continuous support to agriculture with development projects and ideas, which are critical for agriculture even over a relatively long-term. This would also serve a better restructuring of the overall support, its better focus on development priorities, and the elimination of overlaps of contributions and efforts between actors. Since 2006, the MAFCP has begun its activities in that direction, with support from some actors, so that donor assistance becomes more effective in the future. At the same time, the MAFCP is trying to list, facilitate and document all other contributions that remain unknown or unregistered until today, that are expected to be considerable, in order for them to become a part of the agricultural development strategy in the future.

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Agriculture and food sector strategy

1.13 SWOT ANALYSIS OF THE SECTOR


As witnessed over time and shown through studies, the agricultural and agro-processing sector is characterised by some quite positive features, which at the same time constitute its strengths. These aspects are the basis to take into account in the programming activities for development but also in order to justify the dynamic optimism which supports the progress of Albanian agriculture. The main strengths are: Agriculture and agro-processing are almost entirely a private sector, a fact that constitutes a fundamental guarantee for free development initiative. Free entrepreneurship has created and will also create in the future large opportunities for innovation, constant support by the international partners and different operators of the financial sector for development. Free enterprise is the main guarantee for the sustainable development of Albanian agriculture. Albania has appropriate climatic, microclimatic and land conditions, rich and varied biological resources, which are the basis for healthy and productive agricultural activities. The country has an old and valuable agricultural tradition, which effectively assists in strategic development planning and gives the promise that agriculture will remain an important craft in the future. The country has a relatively well-educated agricultural population, which is a pledge for satisfactory effectiveness and productivity in agriculture. Agriculture has benefited from a considerable technical and financial support during its difficult transition, a fact that has not only resolved difficult problems and situations but has also created new conditions for a more effective and sustainable development. A realistic strategy must also identify and assess objectively the weaknesses of the sector. The sector appears to suffer also from weaknesses that are internal or created over time, which are thought not only to have a negative impact on the pace of development but also to provide it with some characteristic attributes. These weaknesses are: The small and fragmented farm: it is known that the cause is to be found in the low potential of agricultural land in Albania but also in the characteristics of the land reform after 1990. This weakness has played and is expected to play a key impeding role in the development of the credit market for farmers, of agricultural and agro-processing marketing, as well as of direct foreign investment in agriculture. It is important that the strategy of agriculture integrates policies and efforts with the maximum impact on reducing the side-effects of this weakness. A very large number of farms and a large agricultural population are undoubtedly a weakness. As a result, the management of the sector becomes more difficult, effective employment becomes more problematic, the administration of support is more costly, and the regulation of the sector becomes even more difficult. A new generation that is not as passionate for agriculture may be a problem in terms of handing down the tradition, which may have an impact on the sustainable development of production sources, primarily of agricultural land. The high diversification of production in farms is a fundamental characteristic that is visible in small Albanian farms. This is the result of the lack of food security but also considerable market risks and the various difficulties of agricultural marketing. The noticeable lack of direct public financial support: in these years, the Albanian farmer has received more indirect support, in the form of privatisation, liberalisation, infrastructure, extension, credit for means of production and grants, usually in small volumes and not from the state. There has been no credit or direct subsidies, no direct policies on products, agricultural inputs, land, exports etc.

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Agriculture and food sector strategy

However, the sector has opportunities to benefit from the government programme on rural roads with its tangible effect on marketing, from major rehabilitating investments in irrigation and drainage, from the untapped potential of agro-processing (especially in rural areas), from the support for the promotion of reciprocal joint action among farmers, from investments completed or planned for wholesale and rural markets, from the public extension and orientation service and from control and certification activity of the state. More specifically, the agricultural sector has a large opportunity to benefit from the large development support to be offered by the process of European integration, from the implementation of the Interim Agreement and from the implementation of the SAA after its ratification has been completed. As a potential candidate for EU membership, the economy, including also agriculture and agro-processing, can benefit from the two first components of the IPA. With the anticipated change in the status of Albania from a potential to a candidate country of the EU the benefits are expected to increase further, as in this case the country can benefit from all components of this pre-accession programme. It is important to take all the necessary and critical steps to receive the potential benefits, such as the Payments Agency (as well as a number of other conditions), which once activated in the framework of rural development will also strongly support agriculture. At the same time, a series of threats mean that the development of the agricultural and agroprocessing sector risks being slow or uncertain: Lingering property conflicts and compensation of former owners: This may keep tension and ownership insecurity at high levels and therefore frustrate improvements in the business climate and complicate the development of the land market. Completion of foreign projects and programmes for agriculture and food: Almost all ongoing programmes are coming to an end in 2009 and unless new programmes are identified, there is a risk that there is no support for agriculture in 2010 through important, foreign-financed projects. This means that it is urgent to work at the strategic level, but also at other levels, to identify, work out and propose new necessary projects in agriculture and food. Delays in the approximation of Albanian legislation to the acquis communautaire: This may happen not only because the local expertise is inadequate but also because of the considerable volume and cost of the work involved. This calls for programming, implementation and constant and accurate monitoring of all activities that are related to this aspect of the integration process. Failure to staff and recruit young, recently educated employees, according to the right procedures and rules, with energy, dynamism and modern potential, which are necessary not only to preserve the experience and the working ethic in the public administration but also in order to bring a new spirit, a new dynamism, new attitudes and new commitment in the agriculture development and integration work. Failure to treat agriculture as a priority sector: This would have as a consequence that the public financial support for agriculture would be below the required levels. Agriculture and agro-processing remain the main engines of national economic development and inadequate support towards it would have an impact on the rate of economic growth and, at the same time, of poverty reduction. Of course, these are only some potential risks but they can be eliminated if they are taken well into account and the necessary measures are taken. In the framework of the AFSS, eliminating these risks would be vital for the rapid and sustainable development of the sector.

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Agriculture and food sector strategy

2. Vision, strategic priorities and strategic goals


Vision
The agricultural and agro-processing sector must reach a higher level of productivity and competitiveness, both in domestic and foreign markets, on the basis of improving the conditions to allow the private initiative to operate and of fully supporting development in a sustainable way, guaranteed by efficient institutions. The sector depends on the level of technology and knowledge and on the efficiency of using land, labour and other inputs. Higher productivity and competitiveness are foundations for production to increase, for market access to improve for farmers and agro-processing businesses, for income to increase, and for the living standards of farmers and their families to improve. The increase in the quality of agro-food products is a fundamental factor for the increase of competitiveness. The increase in quality will come from technological improvements but also from new methods and techniques of integrated management of production systems and the reduction in the use of chemicals, which will promote the increase of organic production. The strategic vision of the AFSS considers the development of agriculture and agro-processing through the spectrum of European integration, which guides the vision of the government for these sectors and bodes well for meeting the standards and requirements of a faster integration of Albania into the EU, in general, and of the SAA, in particular.

Strategic priorities
It is already clear that without a gradual increase of financial support for farmers and agroprocessors, in the form of grants or loans for development, in order to enable and accelerate farm and business modernisation and to increase productivity and competitiveness, progress will be too slow. All the technical support, from which farmers and agro-businesses have benefited so far in different ways, ranging from training to advice), has already improved the software of development. Now, the effectiveness and speed of development will depend on interventions and improvements in the hardware, i.e. in improving the technological level of production, which demands more direct investment. This is the reason why planning a larger financial support is considered a strategic priority for the farm and agro-business sector. Irrigation and drainage have taken the lions share of agricultural funds up to now, as water is the main input for the increase of agricultural production. Considering the current situation, as a large part of the irrigation and drainage system is still not rehabilitated or inefficient, it will be necessary to complete and improve this process. The market is the key factor generating development stimuli for the production sectors. As identified in the first part, the marketing of agricultural products is underdeveloped. In previous years or even at the moment, some development initiatives are being implemented which have proved insufficient to establish agricultural marketing at the farm or at the market level according to the necessary standards. This makes it a special priority. The level of technology and knowledge, including information remains a key factor for increasing productivity, production itself, product quality and, through these, competitiveness and the level of market access for farmers and agro-businesses. Although the technology level in farms and agro-businesses has considerably improved compared to the first transition years, it is still low compared to other countries. For this reason, it is an important strategic priority. Food safety for agricultural and agro-processed products is a vital issue that is related to the quality and security of life. The issue of food safety is critical, very fragile and highlighted even in the integration dialogue of the country with the EU. Meanwhile, despite progress that has

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Agriculture and food sector strategy

been identified above, there are many serious aspects of food safety elements and issues of food safety yet unconsolidated and still waiting for a relevant resolution. Therefore, guaranteeing a more food safety for the population will be an absolute priority. Food safety will be guaranteed through technological improvements, the application of new methods and systems of food safety control, the use of integrated pest management methods, the integrated management of plant nutrition and animal breeding, and the use of good agricultural practices, which together will increase the importance and weight of organic products in agricultural production and the consumer basket. Based on the above arguments, the AFSS defines five priorities: 1. Financial support for farms, agricultural and agro-processing businesses will increase 2. The management, irrigation and drainage of agricultural land will improve 3. The marketing of agricultural and processed produts will improve 4. The level and quality of technologies, information and farmer knowledge and agroprocessors will improve 5. Food quality and safety of agricultural and agro-processed products will increase

Strategic sectors
Strategic sectors will be developed with priority. The basic factors that were considered in defining the priorities are: (i) the development trends so far; (ii) the future development potential, given the agro-climatic conditions and the tradition; (iii) the impact on farmer income; (iv) market conditions and, generally, competition and (v) the export potential. The strategic sectors over the period 2007-2013 are: 1. Fruit, olive and grape production 2. Vegetable production 3. Livestock products 4. Industrial processing of fruit and vegetables 5. Industrial processing of grapes 6. Industrial processing of milk and meat

Fruit and grapes


Fruit and grapes will be an important priority in agricultural development. The main arguments in support of this priority are: Albania used to have a very developed fruit and grape sector and, in terms of production, productivity, and number of trees, the country has not yet reached the pre-transition levels recent trends reveal a fast growth in production and the number of trees, although not in terms of productivity profit margins for farmers are relatively higher; in some areas around Korca, the farmers admit that the cost of apple production is a third of its price, while the ratio is even more favourable in the case of grapes
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Agriculture and food sector strategy

agro-climatic diversity and potential allow the production of a large variety of fruit there are large opportunities to generate value added (post-harvest operations) in fruits and grapes, a fact that will considerably increase farmer profit margins Albania imports large quantities of fruits and grapes, spending a considerable amount of foreign currency; therefore, prioritising the increase of fruit production will have an impact on the trade deficit, on foreign reserves and on investment in the national economy finally, the consumption of fruit as part of the Albanian menu is growing and is expected to grow even further, which suggests that demand for fruit will continue to increase This sub-sector could develop even in new, non-traditional directions, such as strawberries, primarily for export but also for the domestic market. However, in order to support this sub-sector, regional, climatic, and micro-zonal characteristics will be taken into account to generate maximum impact and to be fully consistent with the characteristics of environment, culture and cultivation traditions. There is a body of research on regional specialisation of trees and vine varieties that could be used if needed.

Vegetables
The production of vegetables will also be a priority. In Albania, a large range of vegetables is produced. The prioritisation of vegetables is based on the following arguments: (i) although domestic production is growing, it is still in deficit, as the majority of vegetables consumed are imported, with considerable expenditure of foreign currency; (ii) Albania has a good production potential at a low production cost, with fertile and suitable land in many areas, sufficient water, and experience; (iii) consumer demand for fresh domestic products is never met, as local products are preferred to imported ones; and (iv) there are significant farmer profit margins from the production of vegetables.

Livestock
Livestock is a priority sector. In fact, it is the sector that has experienced the fastest development during the years of transition. Livestock products are the basis of the menu; therefore this development has come as a result of the demand to meet vital food needs. Initially, this sector was covering the needs of rural households, while the livestock sector now covers overall consumer demand, including urban consumers. The livestock sector is considered a priority for the following reasons: (i) Albania has optimal conditions to breed sheep and goats in hilly and mountainous areas and cows in some flat areas; (ii) the population has old traditions in livestock breeding; (iii) productivity and efficiency in the livestock sector are problematic, which calls for policies to restructure, reorient and regionalise; (iv) livestock products are very delicate and sensitive in terms of food safety; therefore, policies to improve management and animal health are necessary. However, the support to the livestock sector will be differentiated, selective, based on regional characteristics, breeds, products and their problems.

Industrial processing of fruit and vegetables


Industrial processing of fruits and vegetables is closely linked to the priority assigned to the production of fruits and vegetables but this is not the only reason to consider it a priority. Albania does not have the financial and technical capacities to establish a large manufacturing industry. For example, it cannot establish comparative advantage in the electro-technical industry, not least due to its small market size. Albania should prioritise the processing of fruits and vegetables because: (i) the quantity of fruits and vegetables that is processed domestically is small and foreign products prevail in the market; (ii) the development of domestic fruit and vegetable production means that domestic raw materials will always be available; (iii) the development of this industry will reduce the
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Agriculture and food sector strategy

problems of the fruit and vegetable market: it will become more complex and the supply will rapidly increase, aided by the direct support to fruit and vegetable production; (iv) industrial processing of fruit and vegetables will enhance opportunities for non-agricultural employment in both urban and rural areas; (v) the increase of industrial processing capacities will mean automatically increase of commercial demand for farm products, in other words they will provide a strong supplementary stimulus for the promotion of agricultural priorities; as a result these three priorities will interact in a dynamic way, in a virtual circle, strengthening and helping each other to develop.

Industrial processing of grapes


Assigning priority to the production of grapes should be matched with the prioritising of grape processing. Supporting grape industrial processing capacities would help to move the focus of processing from farm houses to processing plants, which could even be in the farm premises and owned by the grape producers. This would improve the quality of Albanian wine and its ability to compete, at least in the domestic market. There would be a significant impact on reducing the trade deficit.

Industrial processing of milk and meat


The industrial processing of milk and meat is currently among the most advanced industries in Albania. There have been important private investments even using the most contemporary technology. However, in general, this sector suffers from structural weaknesses, while there is still a lot of room for health and food safety conditions to improve. Prioritising support to this sector can be argued on the basis of: (i) the need to promote and guarantee food safety standards for this sector, which are closely related with the EU accession requirements; (ii) the need to respond better to the current farm production potential and the expected increase in the supply of dairy products; (iii) the strong incentive effect that support to the milk and meat industrial processing sector will have on demand and quality standards for livestock products, i.e. it will encourage restructuring and innovative developments in livestock farms and in the entire livestock production system. However, the strategic sectors will develop on the basis of studies identifying the most favourable areas and adequate supporting policies from the economic, social, and environmental point of view, in order for economic efficiency, productivity and employment to increase, environment to be protected and production resources not to be wasted.

Strategic goals
The strategic goals are long-term objectives that will be achieved following the implementation of the AFSS, which guarantees that the agriculture and food sector will develop according to the defined vision and based on the above mentioned strategic priorities and sectors. The main goal of the AFSS is to support in a sustainable way the agricultural and agro-processing sector. Sustainable development guarantees that the demand food of the current generation is not satisfied at the expense of the future generations; that employment is sustainable; that income is sufficient; and that working conditions are appropriate for farmers. It guarantees the preservation and improvement of production capacities of natural resources, without breaking the ecological cycle and the natural equilibria, without destroying the social and cultural customs of rural communities; and without polluting the environment, while reducing the vulnerability of the agricultural sector to the natural, social and economic factors. Sustainable development ensures harmonisation between three fundamental aspects: economic, social and environmental development.

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Agriculture and food sector strategy

The economic aspect is related to ensuring a sufficient rate of economic growth to reduce poverty and increase the living standards of farmers and their households, to increasing the economic efficiency of production and to stabilising development. The social aspect is related to poverty reduction in villages, the preservation of traditions and cultural heritage of the rural population and the strengthening of the participatory character of development. The environmental aspect is related to the safeguarding of biodiversity, the preservation of natural resources and the prevention of environmental pollution. In accordance with the general goal, the AFSS also had some specific goals: 1. Sustainable land management, as a basic component of, and in full compliance with, sustainable agricultural development 2. Increased employment, income, and living standards of farmers and their households 3. Increased economic efficiency of the agricultural and agro-processing sector, which is expressed through an increase in the productivity and the quality of products 4. Assurance of higher food safety standards for the entire population 5. Improvement of agricultural marketing

The AFSS must ensure sustainable land development as the main agricultural resource. This means that land should be managed in a rational way so that agricultural production and farmer welfare constantly increase. This also means that production inputs, such as land, water, genetic resources, livestock, fruit trees, and the agricultural environment, will be better managed, will be used more effectively and will not be wasted in order to safeguard the production and generation capacities and the life of future generations. More broadly, sustainable agricultural development also supports sustainable national economic development, social sustainability and cohesion, the protection of biodiversity and the quality of life in rural areas. Therefore, sustainable agricultural development cannot but be a strategic goal of the AFSS. The AFSS is at its heart an economic development strategy. No strategy would make sense if it did not help create new jobs and improve farmer living standards following its implementation. In Albania, agricultural employment has its limitations and problems. The agricultural sector employs the majority of Albanians but, at the same time, this employment has a strong seasonal element and the number of employed people per hectare is among the highest in Europe. It suffices to say that labour productivity and income in agriculture are very low. Therefore, an increase in employment and income is an essential part of the AFSS. Economic efficiency is related with the productivity in the use of production factors and with the quality of produced goods, therefore also with the level of cost and prices. These are the basic factors of market competitiveness and the ability of the farmer to sell his products. In order to increase efficiency, the availability of production factors must increase but also in the necessary proportions. Otherwise, productivity and quality will not increase. Therefore, one of goals of the AFSS is to increase the use of production factors in agriculture (fertilizers, machinery, breeds, seeds and seedlings with high potential), which will guarantee an increase in productivity and quality as a basis for increases in production, income, and welfare. Undoubtedly, high standards of farm and agro-processing products are a requirement of the AFSS. Health safety is vital, an absolute priority for the consumer and a primary quest in the negotiations and agreements that aim to integrate Albania into the EU; therefore, guaranteeing the food and health safety is a strategic goal of the AFSS.
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Agriculture and food sector strategy

Improving agricultural marketing is important because it expresses the public response to the increase in production, itself a response to demand. Therefore, demand-driven policies or market policies will have a special place in political commitments over the period covered by the AFSS. The above-mentioned goals will also improve food security in the country. Food security appears simple but is important. Regardless of past ideological memories, ensuring a critical food supply with national resources is always a strategic issue. The country cannot be entirely based on the market to resolve the food security problem. The inability to guarantee food security is one of most spectacular market failures, a fact that is accepted not only in theoretical terms. In this context, it is a task for the strategy to develop agriculture in a harmonised and diversified way so that the country would be able at any time to meet urgent needs for basic commodities over a certain time.

AFSS and the Millennium Development Goals


The AFSS is fully consistent with the Millennium Development Goals. The link is realised specifically through two of these goals and the corresponding policies. These goals are: Goal 1: Eliminate extreme poverty, hunger and other dimensions of poverty Goal 7: Ensure sustainable environmental development The AFSS contributes to the achievement of Goal 1 through the increase in production, employment and farmer income, thus contributing to sustainable welfare for farmers and their households. The AFSS contributes to the achievement of Goal 7 through support to integrated production systems (integrated pest management, integrated management of plant nutrients or animals, integrated land management, integrated farm management etc).

AFSS and the Rural Development Crosscutting Strategy


There is an organic link between AFSS and the Rural Development Crosscutting Strategy (RDCS). First, this is reflected in the general goal of the two strategies. The goal of the RDCS is to contribute to the equal development of all rural areas in Albania, to improve the quality of life in rural areas and to reduce poverty. In other words, the two strategies share the goal of income growth as the main road towards poverty reduction. Second, the coherence between the two strategies is also apparent in their specific goals. Two of the specific goals of the RDCS is the increase in the competitiveness of the agricultural and agro-processing sector and the protection of the environment. These two goals are integrated in the vision of the AFSS and its objectives, such as the sustainable management of agricultural land, as one of the main natural resources, and the core aspects of environmental protection. Third, the main component of the rural environment is agriculture; therefore the RDCS and the AFSS have a related focus, the development of agriculture and, in general, of rural areas. Fourth, the coherence between the two strategies is also reflected in the development priorities and policies. In the framework of the agricultural sector competitiveness, farm modernisation is expressed as one of the main priorities of the RDCS. The same is true of the AFSS, where the following are seen as the main directions of farm modernisation: support of farms with new technologies, improved methods and techniques of plant cultivations and animal breeding, improved farm management, support to agro-processing and preservation of products at the level of farm or farmer group. Of course, the scope of RDCS is broader, because it also includes other sector apart from agriculture, such as forestry, rural infrastructure, energy, health, education and social services.

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3. Policies
3.1 GENERAL POLICY CONCEPT OF AGRICULTURAL DEVELOPMENT

The strategy and development of agriculture need a clear conceptual policy basis. Although the manner, priorities and areas of interventions through different policies, whether public or private, are well-outlined in multi-year and one-year strategic ones, there is a need for a clearer and systematic reformulation of the agriculture policy concept to be implemented in Albania. The new concept of agricultural policy will consist of the following important principles: Increase the participatory or inclusive character of the political process throughout the policy cycle: identification, design, approval, implementation, monitoring and evaluation. Ensure the continuity of the policy cycle, avoiding pauses and breaks, to ensure the continuity of support to agriculture. Focus more on direct support, to ensure an impact on critical points, on direct factors, such as technology, growth of agricultural production and improvement in quality. Pass to a phase of obligatory and standardised monitoring and evaluation of policy and programme impact, as a condition that will not only increase managerial engagement but will also ensure the effectiveness of development programmes. Measure results or effects of development policies against SMART indicators. Focus attention on demand-driven or market agricultural policies. In the future, policies that aim to manage consumer demand will need to have a special place, deriving from their effectiveness in other countries but also in Albania. Integrate the Millennium Development Goals, to which Albania is a signatory, in particular the poverty reduction goal. Although this goal is not derived explicitly, it is reflected implicitly in the above-mentioned principles of the new agricultural policy and will be achieved through the increase in production and rural employment. This explicit reformulation would be an important condition in order for the agricultural strategy to be coherent, objective and to have tangible effects on agriculture and food.

3.2

AGRICULTURAL DEVELOPMENT POLICIES

Ultimately and in sum, the central objectives of the AFSS would be the increase of agricultural and agro-processing production and the improvement of food safety standards. Higher production will be the result of increased area allocated to agriculture planting lands that have been left uncultivated and of higher productivity of plants and animals. Productivity will grow from improved irrigation, agricultural technologies and inputs, and agricultural knowledge and skills. Improved irrigation and technologies call for additional investment but also improved rules and capacities to implement them, while agricultural knowledge and skills call for more expenditure, capacities and appropriate policies. Therefore, investment and technical assistance will be the two important pillars upon which to develop agriculture. In the framework of the above policies to achieve strategic objectives, it will be necessary to use a large number of diverse policy instruments split into two axes:

Policies related to investment in agriculture or agro-processing


Direct payments in the form of grants or credit for investment in production technologies

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Agriculture and food sector strategy

Direct payments in the form of grants or credit to increase the inventory of fruit trees or production animals, equipment, agricultural machinery and storing capacities Direct payments in the form of grants for agricultural or agro-processing inputs Interest rate subsidy (or credit guarantee) of private loans Direct payments or credit to promote and support local initiatives Investment in the infrastructure of markets and producer organisations

Policies related to technical assistance and advice to farmers


Rural innovation platforms Parallel partnerships (associations, producer or marketing groups, local action groups) Vertical partnerships (farmers and traders or agro-processing manufacturers, who cooperate in joint programmes of trading inputs and outputs) Establishment of rules and strengthening of monitoring to eliminate potential monopolistic phenomena in the input market Easing of licensing and tax burden of traders to increase market competitiveness Establishment of farmer schools Improvement of agricultural techniques and capacities Stronger monitoring capacities of the quality of seeds and seedlings Exchange of local experiences in production technologies, trading and organisation of associations Improvement of the knowledge and agricultural information system across the country Promotion of farmer lobbies at the level of the zone across the country Group discussions to identify roads that will promote agro-tourism and organic products Expansion of good agricultural practices and of integrated plant protection Studies to identify niche markets Technical or financial assistance for value-adding activities of farmer products Awareness-raising campaigns Establishment and implementation of standards for agricultural products Improvement in the collection, dissemination, use and publication of statistical information Improvement in the procedures of planning, monitoring, evaluation and publication of their results Legal improvements and approximation with the EU legislation Improvement of the market information system Introduction of the private agricultural advisory services on payment Training of the administration, farmers and producer groups The improvement of food safety standards will depend on the degree of improvement of the production and marketing technologies, the improvement of the food safety legislation and the extent to which it is implemented, the approach to guarantee food safety and the efficiency of monitoring capacities. In general, the following are necessary to ensure improved food safety standards: Effective approximation with the EU legislation, including the safety guarantee systems

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Agriculture and food sector strategy

Improvement of human resources which manage safety problems Improvement of laboratories and the laboratory infrastructure of food safety The type of support needed for food safety is primarily assistance and training (first two bullet points) and investment (third bullet point).

3.3

POLICY APPROACHES FOR AGRICULTURAL DEVELOPMENT

The policy approaches that will be implemented in the course of achieving the objectives of the AFSS are: Direct and indirect public financial support Encouragement of domestic resources Learning and linking Participation and dialogue between beneficiaries and stakeholders Empowering of beneficiaries through programmes Creation of a competitive environment Stimulation of cooperation

3.4

PROFILE OF AGRICULTURAL POLICIES

The achievement of strategic goals can be established only if some results or products are realised. These results can be achieved only if proper policies are designed and implemented, a fact which means that the policies in the framework of the AFSS will be: specific consistent with goals and results realistic or supported with sufficient resources acceptable or enjoying stakeholder support consistent with the market mechanism The system of indicators ensures whether a particular policy has produced the right results; therefore, it is necessary that the system of indicators be complete, i.e. that the indicators are: specific measurable time-bound In the coming period, some important criteria of policy making will need to be more closely respected in order for this process to be healthier and to have a higher impact on the development of the sector. The implementation of a policy will therefore depend on whether: it contributes to or is in conflict with the objectives of economic policy it has an impact on the increase of production and incomes it has a negative social impact it has a negative environmental impact it has a negative impact on production efficiency

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it favours or offers unfair advantages to specific groups it has a negative impact on income and welfare equality it leads to a disequilibrium on agricultural development

3.5

AGRICULTURAL POLICIES BY EXPECTED RESULTS

The expected results or products, in order to achieve every goal, as well as the corresponding policies are listed below. In accordance with the goals of the strategy and the results expected from the implementation of the strategy, the main policies that will ensure the achievement of these results and goals are:

Objective 1: Sustainable land management, as the fundamental component for the development of a sustainable agriculture
The expected results for this objective are: Completion of the land reform Prevention of land damage and control of physical transformation of land Improvement of land management Improvement of irrigation, drainage and flood protection

Short-term policies (2008)


Improvements to the laws on land use and transfer, including adequate fiscal policies Training for the organisational and institutional strengthening of water associations Institutional strengthening of land management (land inspectorate) Extension to improve integrated land management Rehabilitation of irrigation and drainage with public funds or through the encouragement of the private sector

Medium-term policies (2009-2010)


Mobilisation and awareness raising among the agricultural development stakeholders to improve the management of agricultural land Land use information system Extension to improve integrated land management Rehabilitation of irrigation and drainage with public funds or through the encouragement of the private sector Training for the organisational and institutional strengthening of water associations

Long-term policies (2011-2013)


Rehabilitation of irrigation and drainage with public funds or through the encouragement of the private sector Strengthening of the role of local government in irrigation and drainage Extension to improve integrated land management Training for the organisational and institutional strengthening of water associations

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Agriculture and food sector strategy

Policies on quality and competitiveness


The increase of the quality of the agricultural products is one of the fundamental factors to increase the competitiveness of the agricultural sector. In addition, the negotiations with Albania for integration into the EU also focus particularly on the policies on quality. For this reason, policies on quality will be important and will focus on: Promotion of advanced technologies: seeds, seedlings, fertiliser, pesticides, water and quality machinery Promotion of new techniques and methods of cultivation and animal breeding, such as: integrated pest management, integrated plant management, integrated farm management, integrated animal management etc, which are collectively known as good agricultural practices. Albania does not have an approved PPP code but this must be sorted out as soon as possible. Preparation of standards for agricultural or agro-processing products according to EU norms and increased effectiveness towards their implementation Promotion of post-harvest operations: standardisation, packaging Appellation of agricultural or agro-processing products according to geographic origin (appellations dorigine controlee), which is also envisaged in the SAA. The first step may be the preparation of lists and followed by implementation. Promotion of a high level of food safety of agricultural or agro-processing products. The latter can be realised along the following lines: Introduction of obligatory requirements for the implementation of the self-control system HACCP and the adoption of ISO standards Improvement of the control of hygiene and sanitation conditions of agro-businesses Registration and effective supervision of animal health Improvement of animal breeding conditions

Objective 2: Increase of employment, income and living standards of farmers and their households
The expected results for this objective are: Increased farm employment Increased farm incomes Improved living standards for farmers

Short-, medium- and long-term policies


Extension for the transfer of technologies, knowledge, skills and experiences Loans or grants for farmers Improved processing of products at the farm level Improved storage of products at the farm level

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Agriculture and food sector strategy

Improved post-harvest operations at the farm level Promotion of agro-touristic activities and farm diversification in general

Action plan on organic agriculture


Organic agriculture is expected to be the focus of attention of agricultural policy, not only because of the effect on quality from the implementation of organic concepts and practices but also for economic efficiency reasons and the income that farmers can earn from organic products. In order to support the organic agricultural production, MAFCP has prepared an action plan. Five priority areas have been identified in the framework of the action plan on organic agriculture in Albania: Preparation, consolidation and implementation of a national policy on organic agriculture, which will enable synergies with the corresponding institutions and other development policies Strengthening of national legislation for organic agriculture and of the national organic agriculture system structure Arrangement of the supply chain facilitating the conversion to organic agriculture (between farmers and processors), increased public awareness and encouragement of the development of the market for organic inputs and outputs Scientific research, education and advisory service in support of organic agriculture with the aim to develop and consolidate a national system of knowledge on organic agriculture Encouragement of the integration of Albania into the international organic agriculture community and promotion of national and international networking

Objective 3: Increase of economic efficiency of the agricultural and agro-processing sector, expressed primarily through the increased productivity and product quality
The expected results for this objective are: Higher yields of priority crops and livestock Lower unit cost for priority crops and livestock Higher farmer margins

Short-, medium- and long-term policies


Preparation and implementation of specific projects to increase the production, use and quality of agricultural inputs Investment in agro-processing Agricultural extension for new technologies, techniques and methods to increase the level of agricultural knowledge and skills among farmers

Objective 4: Guaranteed higher food safety standard for the entire population
The expected results for this objective are:

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Agriculture and food sector strategy

Improved control legislation Consolidated control institutions Improved production technologies Improved production and marketing practices Improved quality of inputs and raw materials Improved animal breeding

Short-term policies (2008)


Improvements in laboratories and instruments of control Improvement and strengthening of the system of agencies and bodies of control Promotion of improved systems and methods of food safety Extension for good agricultural and commercial practices Awareness campaigns on food safety Animal registration Construction of slaughterhouses

Medium-term policies (2009-2010)


Improvements in laboratories and instruments of control Improvement and strengthening of the system of agencies and bodies of control Promotion of improved systems and methods of food safety Extension for good agricultural and commercial practices System of prognosis and signalling for plant protection Awareness campaigns on food safety Animal registration

Long-term policies (2011-2013)


Improvements in laboratories and instruments of control Improvement and strengthening of the system of agencies and bodies of control Promotion of improved systems and methods of food safety Extension for good agricultural and commercial practices Awareness campaigns on food safety

Objective 5: Improvement of agricultural marketing


The expected results for this objective are: Improved trade infrastructure Increased farmer negotiating power Improved market monitoring and analysis

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Agriculture and food sector strategy

Will there be an Albanian kiwi?


The AFSS cannot give a direct answer to this question but offers a chance to find one or several kiwis. These opportunities are based on the analysis of potential national comparative advantages and in the political approach underpinning this strategy, which is an approach based on participation and dialogue with farmers and agricultural development stakeholders. The difficulty of identifying those products that will reach foreign markets is growing as a result of globalisation and the small production potential of the country relative to its competitors, who despite their distant location have a very strong position in the international markets and even in the Albanian market. It is clear that the Albanian kiwi may be found among the typical Albanian agricultural products or specific products that suit the Albanian soil and climate. The instrument that will be used is democratic dialogue, the analysis of tradition and of market demand.

Short-term policies (2008)


Production and distribution of the reliable information at the right time and place Construction of new wholesale markets and new collection points Promotion of parallel and vertical associations and partnerships Promotion of post-harvest operations Encouragement of lobbying for trade policy of farmer groups Fiscal incentives for agro-businesses that are established in rural areas Strengthening of public structures for market monitoring and analysis Encouragement of good production and marketing practices that improve product quality In the framework of improving marketing, the improvement of information would be one of the main priorities. The consolidation of the existing information centres with means, skills and knowledge, and the support of wholesale markers so that they are transformed into agricultural information exchanges would be some of the measures that would assist in that direction. The establishment of the Wholesale Market Agency, as a managing institution for these markets, may help in covering this need.

Medium-term policies (2009-2010)


Production and distribution of the reliable information at the right time and place Promotion of parallel and vertical associations and partnerships Promotion of post-harvest operations Encouragement of lobbying for trade policy of farmer groups Encouragement of good production and marketing practices that improve product quality

Long-term policies (2011-2013)


Production and distribution of the reliable information at the right time and place Promotion of parallel and vertical associations and partnerships Promotion of post-harvest operations Encouragement of lobbying for trade policy of farmer groups Construction of new wholesale markets and new collection points
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Agriculture and food sector strategy

Encouragement of good production and marketing practices that improve product quality

Support of joint action among farmers


As a result of the small farm size in Albania, there are no economies of scale. Therefore the encouragement of farmer associations will be a priority as a way to regain these lost opportunities and to increase the market competitiveness of small farmers. Until now, the Albanian experience has been of ineffective producer associations. Therefore, MAFCP is convinced that the only effective method will be the provision of assistance to establish model associations. For this purpose, MAFCP will also cooperate with some of its international partners, such as SNV and the Spanish Cooperation, in order to promote the establishment of such associations. Work needs to begin from the improvement of legislation. The European experience will be particularly valuable, as it shows that producer organisations, producer groups and cross-sector organisations are effective forms of cooperation for farmers in need of support. Producer organisations. These are voluntary associations of producers, which are established to concentrate agricultural supply, in other words to achieve joint product sales as a way of counterbalancing the concentration of demand or joint purchases. These groups need to be able to adjust supply to changes in demand. They are a way to lower the cost of production and to stabilise prices. They must also be able to protect the environment from their activities. They need to possess the necessary infrastructure to carry out these tasks. They need at least five members, gross annual sales of at least 100,000, appropriate staff etc. Producer organisations receive EU support on the basis of (up to 5-year) action plans, which spell out measures to plan production and concentrate supply, reduce expenditure and stabilise prices, protect the environment promoting organic and integrated production, improve quality and increase product value etc. This assistance is channelled through operational funds. The contribution of members to this fund for fresh fruit and vegetables is 4.1% of the product market value. The EU pays a sum at least equal to that. Producer groups. This represents a less advanced stage compared to producer organisations. The producer entities do not meet the criteria of producer organisations (for example, they do not have the necessary infrastructure or level of gross sales, they have fewer than 5 members etc). In order to be recognised as producer organisations they have an interim period of five years, during which they must present a plan with corresponding measures. These groups can receive assistance declining over time (from 5% to 2%), declining in value (from 2.5% to 1.5% of the market value above 1 million), or in fixed terms (from 100,000 to 50,000) over 5 years. Cross-sector organisations. These are associations of representatives of various activities (producers, traders, or agro-processors). They serve to facilitate activities of common interest such as improving market knowledge, using standard contracts, conducting scientific research etc.

3.6

MOUNTAIN AREAS

The Albanian agriculture in mountain areas has its specificities related to their special land, climatic, natural, historic and social conditions. As a result of these conditions, farms in these areas are smaller, product and input markets are more distant, rural infrastructure is weaker, development opportunities are more limited, economic and social development is delayed, schooling and education are less advanced, poverty in both its monetary and non-monetary

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dimensions is deeper and more pervasive etc. For these reasons, there are harder development challenges and the policy approaches to agricultural development may differ from those applied in lowland areas. While the AFSS is based on the most important principles, rules and policies of agricultural development, it is also flexible so that these policies adjust to the special conditions in different areas of the country. Farmers in mountain areas need specific techniques and technologies to ease their work and increase yields. Non-agricultural activities are even more necessary to diversify income sources. For this reason, training needs are larger and specific. Expenditure on training through projects but also public expenditure on education in these areas is a priority. Secondary schools with an emphasis on agriculture or agro-tourism would be important in these areas. Due to the small farm size, it is urgent to implement policies which could raise the farm size or the number of animals. Policies promoting agro-tourism or mountain tourism, crafts, diverse trade, agro-processing and a broad range of products through sustainable forest management are a priority in these areas. The transfer of knowledge and the support of local initiatives with specific funds and projects need to be included in these policies. The improvement of rural infrastructure in these areas is even more urgent compared to other rural areas and in general the presence of the state needs to be closer. Research to support mountain agriculture needs to be more specific, focusing on products, plants and animals that are appropriate for these areas. Autochthonous and organic products, as well as plants with short vegetation time appear a means to increase farmer income under the limitations of land and climate. The provision of information for the market and for technologies is particularly important in these areas. The role that needs to be played by public agricultural structures is more important since private operators are less developed. As non-agricultural activities in some mountain areas are limited, the provision of agricultural knowledge to the population may be even more crucial, starting from schools in the lower cycle. Training on agricultural works and increase of farm managing capacities are some of the more effective policies to increase agricultural income and reduce poverty in these areas. An important mechanism to raise incomes and protect the environment in these areas is also the participation of residents in public programmes of land protection from erosion and afforestation of non-forest land or of land that is not suitable for agriculture. The promotion of joint action in groups or communities is essential to improve production, sales and benefits from development aid and projects. A fundamental issue of strategic agricultural policy will be the introduction of important measures that will promote and ensure professionalism in the state administration. This means a strengthening of administrative capacities at MAFCP and its agencies to manage effectively the agricultural and agro-processing sector. This includes the improvement of the capacity of MAFCP and its dependent agencies to plan, implement, monitor and analyse, but also to manage effectively the SAA and generally the integration process into the EU.

3.7

CROSSCUTTING POLICIES

The achievement of the objectives in the area of agricultural and agro-processing development will be supported also from crosscutting strategies and policies.

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Agriculture and food sector strategy

The crosscutting strategy of regional development, with its programme of rural road development, will have a strong impact on improving farmer access to the market, therefore on the sale of their products and indirectly also on the restructuring and the increase of agricultural production, non-agricultural employment and farmer income. The sector strategy of tourism, through the promotion of tourism in specified areas, will encourage the production of agricultural products of sufficient quantity and quality near tourist areas, characteristic products, initiatives for new products and services, and marketing. This will also contribute to the achievement of the AFSS objectives. The sector strategy of basic education, through improved access to and quality of schools in rural areas or the improvement of the curriculum, particularly in the direction of agriculture, will have an impact on improving the knowledge and skills of the population in rural areas. This will have a positive impact on the education level of farmers and their households and, through this, will improve agricultural productivity, increase opportunities for non-agricultural employment and raise farmer income. The objectives in the field of energy will improve the supply of energy in rural areas, a fact that is expected to promote the use of fridges to preserve agricultural and agro-processed products in rural areas. The regulatory and fiscal reform which the government is currently undertaking to improve the business environment will also affect the agriculture and food sector. Tax cuts and the easing of licensing procedures, two important aspects of these reforms, are expected to affect the production and marketing of agricultural and agro-processed products (see also the action plan on organic agriculture).

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Agriculture and food sector strategy

4. Resource implications
Introduction on the costing of the strategy
The implementation of the AFSS depends considerably on the ambition of the objectives and the public expenditure that will support their realisation. The main objective which links all other objectives is the growth in agricultural and agro-processing production or rather the increase in productivity since this indicator also includes the number of employed in agriculture. Production per employee is 20 times lower in Albania compared to the average level in the old EU member states or 4 times lower than the new EU member states at the time of their accession. Albania is a poor country, where rural poverty dominates. Albania cannot reduce poverty fast enough unless production does not grow by 3-4% per year. At this level, Albanian farmers will be better off in 2013 but still relatively poor. If Albania is to move from 1800 to 3000 per agricultural employee, which will be well below the level of recent EU member countries, the annual agricultural growth rate needs to be about 8% and if by 2013 this is to reach 5000, still below the level of the above mentioned countries, annual growth needs to be 16%. These growth rates are possible. Studies show that the increase of the irrigated area by just 10%, leads to an increase in production at least by 0.5% (see Albania: Strategic policies for a more competitive agriculture sector, p.26, World Bank, April 2007). If the irrigation objectives are achieved, this in itself will lead to an increase in the production growth rate by about 5%. If uncultivated land is returned to agriculture and land abuses are limited, the production will increase at a rate proportional to the improvements achieved in that direction. Some studies attribute a significant proportion of production growth to increases in the average farm size (see Albania: Strategic policies for a more competitive agriculture sector, p.30, World Bank, April 2007). If regional specialisation is promoted through fiscal policies and direct support programmes, land efficiency and investment will increase, which will lead to higher land productivity. There are studies showing that the role of agricultural extension is as effective in the direction of increasing production as the corresponding technologies. If improvements in production techniques and technologies, in competition through the correct implementation of laws and regulations, and in information, are added then it is possible to say with conviction that the production growth in the agriculture and food sector will exceed 10% per year. Support to agriculture needs to be continuous to ensure continuous and sustainable growth. If one considers growth in the short run, for example over two or three years, a large amount of investment is probably not necessary to achieve a 3-4% annual growth rate, since there is inertia in the economic systems and the supporting non-public activities and investments of previous years continue to have an effect for a number of years. Continuous economic growth rate in the long run will be ensured with sufficient and recurrent support.

Methods of costing the strategy


As there is no clearly elaborated methodology to cost the sector strategy and related studies, costing is the most complicated issue of the AFSS. This is because of the fact that the strategy is multidimensional, has a long-term planning horizon that involves a high degree of uncertainty, and a considerable number of sectors and sub-sectors, results, policies, and indicators. In most cases, it is not possible to calculate the unit cost of achieving a particular target, for instance how much money need to be spent to increase the fruit yield by one kilo per tree or how much it would cost to repair a dam; it would often be difficult even to formulate these questions. Because of these difficulties, the strategy costing is based on a process of indirect rather than direct calculations.
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Agriculture and food sector strategy

The indirect approach can be applied in three different ways: based on the expected investments and expenditure based on the expected elasticity or effect of investment on key indicators based on the final levels set for the main targets (2013) The first approach is the simplest but its main shortcoming is that it does not link at all the level of expenditure or investment that need to be made to achieve the predetermined level for the indicators. In addition, estimates of expected investment are usually subjective and the result of mainly non-quantitative evaluations of expected growth rates, based on the quality of business climate, features and rates of past change for both investment and production etc. The second approach is based on the expected increase in the level of investment elasticity for key indicators. In the case of the AFSS, such indicators could be the yields of main products and farm gate prices because the level of these indicators reflects considerably the unit costs of production, product quality and competitiveness, the degree of market access, the level of technologies applied, income per capita and, to some extent, food safety. The third approach would require the main target levels for 2013 to be defined. These levels are not predictions of where these indicators will be in 2013 but predictions of where we want them to be in 2013. Based on that, working backwards, the prediction for every each indicator is made for each year of the strategy and likewise with the cost estimation. In this way, the problem is that the estimation exercise could result in unrealistic figures that are impossible to support, because it does not consider the real opportunities for development. The Medium-Term Budget Programme ceilings that have been approved by the government for the agriculture and food sector significantly simplify costing. In this case, the work of costing the AFSS focuses on the formulation of: the objectives that need to be achieved in the agriculture and food sector the indicators to measure the degree to which these objectives are being achieved the policies that need to be pursued to achieve these objectives The AFSS objectives have been presented in the respective chapter but the degree to which they will be achieved depends also on the volume of state financial support. Policies are generally also not related to the volume of financial support but the degree and the extent to which they are applied across areas, sectors and objectives will depend from the size of this support. The level of the indicators will depend substantially on the volume of financial support to the AFSS.

Costing assuming annual expenditure growth rate of 4-5%


The costing of the AFSS is based on the Medium-Term Budget Programme ceilings for the period 2008-2010 and an assumption of annual growth of 4-5% for the other years. The growth in investment will materialise primarily through the identification of new projects, the funds of IPARD, and partly directly through the government budget. The following table shows the cost of the AFSS, including the administrative costs of MAFCP, by year:

Table 5 Budget of the AFSS (in billion lek)


2008 Budget 5.80 2009 4.70 2010 5.00 2011 5.30 2012 5.60 2013 5.85

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Agriculture and food sector strategy

AFSS and the public budget for agriculture


In the 2008-2010 Medium-Term Budget Programme, the share of agriculture and food in the public budget is expected to fall from 2% to 1.5%. This figure is very small compared to some other sectors. This figure is even more critical taking into account that: 58% of the domestic labour force works in agriculture; about 55% of the population lives in rural areas and about 80% of these are employed in agriculture; agriculture makes up 21% of GDP; poverty is more pervasive in rural areas therefore in agricultural households; and that agriculture is the engine of the countrys economic development. The figures are small also in relation to what other countries spend on agriculture: Moldova spends 3% of the budget on agriculture, Serbia 2.5%, Azerbaijan 6%, Armenia 9%; developing countries generally spend 6-8%, while industrially developed countries spend 3-5%, even though in these countries is about 2-3% of GDP and the proportion of those employed in the sector is often even below 2%. For a rapid development and for a tangible reduction in poverty, apart from the increasing contribution of the private sector, the public budget also needs to support agriculture financially.

Critical issues related to the agricultural budget


Regardless of calculations, achieving a satisfactory level with respect to the targets will depend on a number of critical issues. Among them, the following can be mentioned: the identification and securing of new development projects financial support for agriculture progress with the SAA, which is linked to financing in the framework of the IPA monitoring and evaluation of project effectiveness ensuring a participatory process during the entire policy cycle administrative restructuring and consolidation could be a critical issue because the quality of human resources and implementing structures will be crucial to achieve the policy objectives The identification of new projects is crucial because there are considerable strategic gaps, as almost all current projects come to an end in 2009. Otherwise, a larger public contribution is required to support investment in agriculture. Investments in technology, in more reliable and varied information and in extension will have to play a major role in the structure of public expenditure on agriculture, as no fast and substantial mobilisation of the private credit in agriculture is expected. The mobilisation of savings in the sector will receive special support and is expected to improve the financial of agricultural development. Rural Innovation Platforms and partnerships, such as Local Action Groups in the EU, are expected to play a special role in this respect.

When IPA becomes available in Albania


The Instrument for Pre-Accession will be the only vehicle of EU assistance for countries aspiring for membership, because the previous instruments, such as PHARE, SAPARD, CARDS, and ISPA, will not operate any more. IPA is the mechanism through which the EU will assist countries which have been awarded the status of candidate country. It covers five areas or components: 1. assistance for transition and capacity building 2. Cross-border cooperation

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Agriculture and food sector strategy

3. Regional development 4. Human resource development 5. Rural development (IPARD) Albania is still a potential candidate and as such it can benefit only from the first two components but a part of the funds received through these two components can be also used fort he fifth component. In 2007 Albania received 61 million from the EU for the first two components. In 2010 this amount will increase to 93.2 million. These funds are managed by the Delegation of the European Commission in Tirana. When Albania becomes an EU candidate, it will benefit from support under all five components of IPA, therefore also for rural development, which includes agriculture. On the basis of the experience of other countries it will receive about 93 million each year. In the framework of IPARD or IPA-5 for rural development, Albania will receive about an assistance of 5-13 per hectare or about 5.6-14.6 million per year. Two of the conditions will be the preparation of the rural development strategy according to European standards and the establishment of a payments agency to administer the assistance. Of course, an appropriate system of agricultural information will also need to be established which consists of registers and important indicators, which has a considerable cost.

Financial contributions for agriculture: a broader view


Financial contributions for agriculture and food are expected to be larger than the levels predicted only through the public budget on agriculture. First of all, farmers and agro-businesses will face an additional cost for direct investments; in 2006 they jointly invested about 36 million. Bank loans for agriculture are expected to increase following improvements in the legal framework, particularly for agricultural businesses. The Mountain Areas Financing Fund is quite active in agriculture: at the end of 2006 it had 5343 clients while its credit portfolio was 1.3 billion lek. Out of this amount, the proportion of loans for agro-food businesses and farmers was considerable. With support from IFAD and the Swiss Development Cooperation, the Fund will continue its activities in the following years. The Union of Saving-Credit Associations has been operating since 2002. Together with financing provided by donors and farmer savings through saving-credit associations, this organisation has contributed significantly to agricultural financing. With about 100 associations, 13,000 members and a credit portfolio in excess of 1.6 billion lek this fund has managed to have 500 depositors and 8,700 clients. It will be an important actor in agricultural financing during the time horizon of the AFSS. The Mountain Areas Development Agency has been and will continue to be and other government contributor for agricultural financing. A part of the financing under this programme will be allocated to agricultural technology, marketing and markets, technical assistance and extension. A broad network of mini-projects of agricultural character (or of broader scope) is active in Albania. These have contributed generally to agricultural technology, information and technical advice for farmers and agro-processors, for example Agrinas, Dorkas Aid, Oxfam, Plan Albania, CESVI etc. Their concrete contributions have not been precisely documented but it is believed that they are important and continuing. For example, CESVI is in the process of identifying a new project of about 1.7 million. These contributions will continue in the near future and this will have additional effects on the achievement of the AFSS objectives.

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Agriculture and food sector strategy

Public-private partnership
One of the most important issues in the AFSS is the promotion of cooperation between the government and the private sector in the area of agriculture. Cooperation in agricultural financing through credit and through project support also takes place in the framework of the market in the provision of a series of services, such as advisory and information services, where the public and the private sector provide defined contributions. What is emphasised in this strategy is the strengthening of the partnership in the joint financing of development projects. MAFCP has prepared a number of concept notes for projects, where, except for the government contribution, it is envisaged that the private sector will contribute up to 30-40% of their implementation cost. This partnership will be developed further also in the field of agricultural extension. Of course, in order to set this public-private partnership to a sustainable course the relevant legislation needs to be designed or improved so that it defines the conditions, methods, limits and other changes that need to be institutionalised and strengthened.

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Agriculture and food sector strategy

5. Accountability, monitoring and evaluation


General principles
The effectiveness of the strategy will heavily depend on how effective will be the mechanism of accountability, monitoring and evaluation during the process of strategy implementation. In order to have results in this process, the accountability, monitoring, and evaluation mechanism: will be considered and realised at each level of public management as an integral part of the integrated planning system will become obligatory by normative acts will be standardised in form; methods; timeframe; methods, time and standards of reporting; and type of policies will include, as integral part of a participatory and democratic process, other beneficiaries and stakeholders but not the implementation structures that have a conflict of interest will be based on a SMART-type system of products and indicators, which will be explicit, approved at a preliminary stage and fixed during the process

Monitoring indicators
Below, a set of basic indicators are presented for the evaluation of results from the planned policies. As the tables show, it is currently not possible to have estimates for a number of indicators. Therefore the tables assume that the statistical system will undergo necessary improvements or adaptations to enable the monitoring and evaluation of policy goals. It should also be stressed that some indicators cannot be accurately predicted because of their nature or because of the inability to objectively estimate the magnitude of change in terms of result. However, while this fact may limit to some extent the importance of these particular indicators, it does not diminish their value.

Objective 1: Sustainable land management, as the fundamental component for the development of a sustainable agriculture
Indicator 1 2 3 4 5 Land titles awarded (process expected to be completed in 2008) Irrigated land Drained land Not cultivated land Average farm size Measurement unit % 000 ha 000 ha % ha 2006 97.2 188 200 Not available 1.1 2013 100 250 250 2 1.2

Objective 2: Increase of employment, income and living standards of farmers and their households
Indicator 1 2 Gross income per hectare Gross income per capita Measurement unit 000 lek 000 lek 2006 220 450 2013 320 600

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Agriculture and food sector strategy

Objective 3: Increase of economic efficiency of the agricultural and agro-processing sector, expressed primarily through the increased productivity and product quality
Indicator 1 2 3 4 5 6 7 8 9 10 11 12 Yield of vegetables Yield of fruit Yield of grapes Yield of olives Yield of potatoes Yield of cow milk Yield of sheep milk Yield of goat milk Productivity of agro-processing Productivity of labour Share of fruit cultivation in agricultural GDP Share of livestock farming in agricultural GDP Measurement unit Ton/ha Kg/tree Kg/tree Kg/tree Ton/ha L/head L/head L/head 000 lek/ employee 000 lek % % 2006 223.3 18.8 96.6 11.2 169.5 2275 52.9 100.4 4800 2250 11 45 2013 250 25 110 14 180 2700 58 110 6000 3200 17 50

Objective 4: Guaranteed higher food safety standard for the entire population
Indicator 1 2 3 4 5 6 7 8 9 Registered cattle Registered sheep and goats Farms that apply PPP in agriculture Farms that apply PPP in livestock farming Business certified in HACCP Businesses with ISO Land under the integrated agriculture system Land underorganic farming Agriculture system with few inputs Measurement unit % % % % % % % % % 2006 10 10 Not available Not available Not available Not available Not available Not available Not available 2013 100 100 20 20 30 30 20 5 20

Objective 5: Improvement of agricultural marketing


Indicator 1 2 3 4 Share of farmers who sell in the market Share of production sold Import/export ratio Sales per farm 000 lek Measurement unit % % 2006 93.4 35 7.5 219 2013 98 60 5 320

Synergy between development factors


The synergy between development factors is important in the development of agriculture. This is the energy that develops from the harmonisation of these components. This harmonisation needs to be realised at least in the following three respects:

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Harmonisation within the agricultural sector


Within the agricultural sector we cannot focus on technologies and ignore irrigation or the techniques of cultivation and animal breeding or vice versa; we cannot focus only on production and ignore post-harvest operations or vice versa.

Harmonisation between sectors


We cannot focus only on agriculture and ignore agro-processing. We cannot focus exclusively on agriculture or agro-processing and ignore agricultural marketing. Therefore we need to always take into account the interlinked effects of the development of different sectors, for example regional development through rural roads, on agriculture and trade and vice versa. We cannot leave full responsibility for development to the private sector but need to be aware that agriculture has great need for public support.

Harmonisation between types of policies


In this framework, we cannot ignore demand-driven policies and focus exclusively on supply policies; we cannot ignore trade policies and focus only on production policies; we cannot focus on policies in this sector and forget about crosscutting policies; we cannot forget fiscal policies and concentrate only on agricultural policies or vice versa. We cannot design good agricultural policies if we do not take the education, tourism and environment policies into account. For these reasons, the Albanian agricultural policy needs to be aware that the weak synergy has had a negative impact on the growth rate and the efficiency of agriculture. In the past, the relationship between different components of agricultural development was relatively more independent, while today and in the future these relationships are closer and cannot be ignored without substantial negative effects on the development of the agricultural sector. Therefore the AFSS presents comprehensive policies and approaches that serve agricultural development.

Relationship between conventional and organic agriculture


It is difficult to say what the relationship between conventional and organic agricultural products should be during the years covered by the AFSS. On the one hand, the need to increase local agricultural production is large and urgent, a goal that can be achieved faster through conventional agriculture. However, this will be accompanied by the relatively larger use of artificial chemical inputs and therefore with the pollution of land and with implications on the product quality and food safety. On the other hand, the concepts, knowledge, capacities and preparedness of farmers and consumers to proceed quickly towards the production and consumption of organic products are lagging significantly. This leads one to think that there coexist parallel development alternatives: agriculture using integrated treatment methods, agriculture with low intensity of use of chemicals, and organic agriculture. The best way to reach a good balance between these different directions, in particular between conventional and organic products, is to plan and support activities that can more effectively lead to an increase in organic production, starting with the identification of particular products, the organisation of seminars to exchange experiences, awareness raising campaigns among farmers and consumers, and the collection and distribution of information on organic farms and products. The extension service will need to play an essential role in this process. It is also important not to concentrate only on productivity in terms of output but also in terms of income per unit of area cultivated. This approach would encourage the development of organic agriculture and would assist the closing of the gap between conventional and organic agriculture. The latter can develop faster if areas, micro-zones, and potential products can be identified for which organic production could develop aimed both at the domestic and the foreign markets. In particular, in the framework of the AFSS, organic agriculture will receive special support through action plans for concrete policy measures and promotion activities.

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References
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