1. Macro-Economic Framework for Agriculture A. Prices/Subsidies
Markets and prices are fully liberalized. Market structures remain weak, but are improving with improved wholesale and retail structure and infrastructure investments. Trade policy open.
All agricultural producer and consumer prices deregulated.
• Government has retained small subsidies for irrigation.
• Markets are improving due to improvements in rural roads and market infrastructure.
• Growth in the fourth quarter of 2004 was led by ag. Exports.
• Public transfer system for low income groups in rural areas has limited resources.
Distortion free marketing and incentive system and a more open trade policy.
• Refrain from introducing agricultural price interventions.
• Continue development of infrastructure with focus on maintenance.
• Improve means to target transfer payments to rural poor.
• Continue to decrease barriers for business development.
• Increase transparency and cost of doing business (permitting and licensing etc.).
B. Trade Policies
• WTO member since September 2000.
• Recent import tariffs decrease: ad valorem tariffs of 0-18%.
• Free trade agreement with Macedonia, Kosovo, Bulgaria and Croatia.
• Member of Stability Pact for South Eastern Europe.
• Preferential trade agreement with EU.
- Stability and Association Agreement negotiations with EU ongoing.
• Advance multilateral and bilateral trade agreements.
• Promote export production under preferential trade agreement.
• Review product range in agreements and emphasize products of high importance to the Albanian economy.
• Start working on implementing quality standards and food safety so as to participate in European markets.
C. Taxation
• Land tax introduced in 2003, implemented to varying degrees in municipalities, established as one revenue resource for local Government.
• Review impact of current taxation practice and adjust policy accordingly.
Comprehensive re-distribution of all public agricultural land completed, but some of this land still lacks secure, unambiguous property rights.
• All agricultural land re-distributed.
• 80% of the agricultural land has been registered and titled. First registration process of remaining land is ongoing.
• Forest and pasture land under public ownership and transfer to communes for management ongoing.
• Inadequate legal and administrative procedures for resolving ownership disputes.
• Land market is developing, though informal transactions prevail due to tedious, costly and time consuming registration procedures.
• Restitution law has been passed. Government is in the process of designing plan for implementation.
• Undertaking land transactions continues to be a time consuming and expensive process.
Full ownership rights and a working land market for efficient land transfer.
• Complete first time registration of land and correct errors in registration process.
• Complete transfer forest and pasture land to commune/village control, develop forest management plans and budget adequately.
• Put appropriate measure in place to resolve claims of former land owners and registration disputes.
• Implement recommendations of review laws related to property rights to improve efficiency and reduce transaction costs.
• Implement business plan for registry office and improve automation process.
• Assure handling of key concerns in finalization of restitution law.
3. Competitive Agro-Processing and Services for Agriculture
• 90% of agro-processors now privatized, recent government commitment to accelerate and complete privatization of the remaining (mostly larger) State-Owned Enterprises.
1. Macro-Economic Framework for Agriculture A. Prices/Subsidies
Significant but incomplete liberalization of markets prior to independence, limited further progress since independence.
• The policy environment for agricultural producers is heavily influenced by the expectation of Croatia’s future entry in the EU.
• The Law on State Subsidies in Agriculture of 2002 introduced significant changes since it distinguishes, based on productive assets (land size, animal numbers), between commercial farms and non-commercial farms. It introduced minimum production capacity to be eligible for agricultural subsidies.
• The production support scheme apply only to commercial farms and it includes provision for a national maximum amount to be set annually for each production and maximum amount of yearly subsidy payment by farm. A total amount equivalent to EUR 200 million has reportedly been paid by the MAFWE in 2003, which is in line with the production incentives distributed in recent years.
• The new income support scheme applies to non-commercial farms that own or use less than 3 ha of cultivated land.
Distortions free marketing and incentive system and a more open trade policy.
• Progressively reduce the aggregate support to the agriculture sector by reducing the number of crops eligible for area payments and phase out the system of support for livestock production. According the WTO rules the current system is not "blue box" compliant.
• Abandon the calculation of national crop quotas on the basis of self-sufficiency requirements.
• Improve the targeting and forecasting of the Government’s agriculture subsidies by accelerating the development of a national farm registry and the establishment of an EU-compliant paying agency.
B. Trade Policies
• Following negotiation of a Stabilization and Association Agreement with the EU in 2002, Croatian accession to the EU was confirmed in April 2004.
• Since independence food imports have been growing more rapidly than domestic production and exports, with an increasing agriculture trade deficit in recent years, especially for high value food items and agricultural raw materials for processing.
• Significant reductions in import protection will be implemented from 2003-2006 under the WTO agreement, and trade agreements with the EU and numerous other trading partners will take effect during the same period.
• A total of 32 bilateral and multilateral agreements with major trading partners have been signed.
• Transpose all aspects of EU’s acquis communautaire into the national legislation.
• Implement the WTO agreement, which establishes a more rational and transparent basis for trade and price policy. Under the agreement the country has committed itself to reduce the level of protection on agricultural products and to remove export subsidies.
• Explore agriculture export opportunities under the trade agreements with emphasis on the interim trade agreement with the EU which offers tariff-free access for all Croatian agricultural exports to EU countries, except for wine and baby beef.
• The evident growth in country’s tourism sector represents another opportunity for the domestic food industry with major seasonal advantages as the peak tourist season (June-August) corresponds to the peak period of fruit and vegetable production.
C. Taxation
• Land tax abolished in 1996.
2. Land Reform and Farm Restructuring
Small-scale private farms predominated before independence, slow progress with privatization and re-structuring of the remaining ex-Social Sector Enterprises.
• Small-scale private farms account for 66% of agricultural land but are very small (average 2.9 ha) and highly fragmented.
• Ex-Social Sector Enterprise land transferred to the State in 1991. New Land Law that legally bounds the Government to dispose this land came to force in 2001.
• Conditions for an active land market not yet in place: property rights remain unclear due to the major inconsistencies between the land registry and the cadastre.
Private ownership of all land; secure, transferable property rights; and an active land market.
• Enact laws on land consolidation and enforce existing inheritance laws to prevent further land fragmentation.
• Lease state land subject to ownership claims; sell all other state owned land.
• Passage of amendments to Cadastre and Land Registration Laws to make them compatible; update and reconcile Cadastre and Land Registry.
3. Competitive Agro-Processing and Services for Agriculture
The Government intends to divest itself of its agricultural and food company portfolio before the end of 2005. Any company not privatized by this date will be placed into bankruptcy.
• Only a small number (about 13) of the former socially owned agricultural and food companies remain to be privatized. However, a half of these are AgroKombinats which combine agricultural production on a very large scale with processing activities.
• The bulk of the food processing sector has been long privatized and operates under competitive conditions. Agro-processing sector continues to receive very high levels of protection so raising consumer prices.
• Food safety regulations and quality standards do not match EU standards and the Croatian food industry is generally unprepared for the competitive environment of the common EU market.
Competitive, privately owned agroprocessing, input supply and service subsectors operating with minimal government protection.
• Privatize the remaining AgroKombinats. Companies with previously failed privatization tenders will be broken up and sold with fewer and less diverse production activities.
• Reduce protection for agro-processors and encourage competition among domestic suppliers and from external suppliers.
• Food safety management and risk assessment systems are effective and EU/WTO compliant.
4. Rural Financing
Slow emergence of a viable private banking system, which is active in the agriculture sector.
• Most rural credit comes from public sector institutions, the Ministry of Agriculture operates two rural credit programs. The credit is distributed and administrated by commercial banks, however the decision to allocate available credit is not based on purely commercial criteria and therefore repayment rates are rather low.
• Private sector banks show little interest in servicing the credit needs of the great majority of farmers.
Viable financial institutions serving the agricultural sector and rural areas efficiently.
• Support the development of collateral instruments suited to agriculture and support training of agricultural lending officers.
• Guide interim publicly funded rural credit schemes and transform them into Rural Credit Guarantee Fund.
5. Institutional Framework
Gradual adjustment of institutional structure to a role suited to a market-oriented economy.
• Bulk of MAF budget is still allocated to direct payment for production and processing.
• Significant progress with the development of a public extension system but the institutional framework and links with the private sector are still weak.
• Established Agricultural Research Council as the basis for focusing research and linking it with extension has made significant progress.
• A farmer-managed Agricultural Chamber system for technical support to agriculture have been legislated under the new Law on Agriculture. The system will be established under a separate Law on Agricultural Chambers.
Efficient and effective public sector administration and support for commercial private agriculture.
• Initiate the timely adjustment of the agriculture sector to the food safety requirements of the EU by introducing adequate regulations and enforcement capacity.
• Reform existing system of incentives and the use of MAF budgetary resources.
• Continued support for reform of extension program and its integration in the Chamber System.
• Continued efforts to reform research system.
• Continued efforts to increase the institutional capacity for policy analysis.
• Agricultural Chambers to be based on administrative units of sufficient size to create the critical mass of funding and expertise to support a sustainable technical service.
