Agriculture in FYR Macedonia

The World Bank supported Agriculture Strengthening and Accession Project (ASAP) supports FYR Macedonia in developing agricultural institutions in an EU compliant manner. Agriculture accounts for 16% of GDP and some 20% of employment in the country. The sector also plays a central role in the rural areas, where almost half of FYR Macedonia’s population lives. Sector performance over the last decade has been mixed, largely due to the dependency of the sector on different weather events, such as droughts and excessive rainfalls. In addition, the agri-food industry faces multitude constraints to competitiveness, including low levels of investment in farm technology and supply chains, as well as underdeveloped land and rural credit markets. Similar to the development in other countries in the region, increasing trade liberalization and modernization of the economy are transforming Macedonian agriculture. FYR Macedonia’s status as an EU Candidate Country imposes additional institutional and regulatory requirement.

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80%

the percent of the cultivated land used by approximately 180,000 private family farms.

Challenge

The agriculture sector plays an important role in FYR Macedonia’s economy through its contributions to GDP (agriculture accounts for 12% of GDP), employment, trade and the rural economy, with the country’s nearly half the population living in rural areas. About 49% of the total land area is agricultural land, split evenly between cultivable land and pastures. Of the cultivated land, about 80% is used by approximately 180,000 private family farms.

Though many of them are becoming increasingly commercially oriented, trade liberalization and modernization of the economy pose new challenges to the country’s agricultural sector. Opportunities that arise with increased trade are vast, but unless producers and agro-processors in the country become more competitive, it will be difficult for them to compete against foreign products, both on foreign and domestic markets. Current constraints to productivity and competitiveness include low use of quality inputs, such as seeds and fertilizers, limited use of technology, and dilapidated and poorly maintained irrigation systems. Lack of reliable irrigation makes farmers dependent on the weather which, in turn, discourages cultivation of high-value crops. Outdated equipment, the inability to meet quality and food safety standards, and poor marketing skills -- all impact the agro-food processors’ competitiveness.
Overcoming these constraints called for effective public sector actions that would facilitate the private sector investments through transparent, predictable policies and regulations and investment in public goods. FYR Macedonia’s status as an EU Candidate Country gives the country access to significant financial assistance for the sector, but it also imposes new institutional and regulatory requirements.
Approach
The government of Macedonia requested the World Bank’s assistance in addressing many of the challenges and constraints outlined above. Specifically, support was sought to strengthen the capacity of the Ministry of Agriculture, Forestry and Water Economy to support the agriculture sector, including improving its ability to formulate and implement effective policies and increase effectiveness of public expenditures in an EU-compliant manner.
In response to this request, the Agriculture Strengthening and Accession Project (ASAP), approved by the World Bank Board of Executive Directors in May 2007, was prepared to improve the delivery of government assistance to the agricultural sector in accordance with the European Union’s (EU’s) pre-accession requirements. The project provides technical and financial assistance to support agricultural growth and rural development while advancing the country’s broader strategic development goals of economic development and the EU accession. The project builds on the findings of the 2006 World Bank Study on Agriculture and EU Accession.
The project supports setting up the necessary institutional framework compliant with the EU accession requirements and to enable Macedonia’s access to the pre-accession assistance. In addition, ASAP finances activities that strengthen the capacity of the Veterinary Department to deliver services that help producers and agro-processors meet new food safety and quality standards. Lastly, in response to the Government’s request, ASAP supports the ongoing institutional reform of the irrigation sector, which was initiated under the previous World Bank Irrigation Restructuring and Rehabilitation Project.
Results
Increased capacity of the Ministry of Agriculture, Forestry and Water Economy in the delivery of the EU rural development funds under the EU Instrument for Pre-Accession Assistance for Rural Development (IPARD), managed through the Macedonian Paying Agency since December 2009. The conferral of management enables Macedonian farmers and agro-food processors to apply for IPARD grants to finance investments that will position them better to access EU markets and to become more competitive among other EU producers.

Reduction in the prevalence of veterinary diseases (brucellosis and tuberculosis), increased preparedness for disease outbreaks, enhanced food safety, and increased safeguarding measures for animal and public health through the individual identification and registration of animals.

Strengthened capacity of the Ministry of Agriculture, Forestry and Water Economy to ensure sustainability and improved delivery of irrigation and drainage services in the water sector. The project’s support to the water sector resulted in the establishment of Water Economies, Irrigation Water Communities, and Water User Associations. Recently, the Water Economies associations have undergone training to strengthen their capacity to deliver services and support the organization of the Irrigation Water Communities.