MINISTRY OF AGRICULTURE, FORESTRY AND WATER MANAGEMENT
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MINISTRY OF AGRICULTURE, FORESTRY AND WATER MANAGEMENT Republic of Serbia. Rural Development and Poverty Reduction. Goran Zivkov. Belgrade, Ju ly 2006. Contents of the Presentation. Serbian agriculture – in general Rural development and rural economy Poverty in rural areas Causes

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MINISTRY OF AGRICULTURE, FORESTRY AND WATER MANAGEMENT

Republic of Serbia

Rural Development and Poverty Reduction

Goran Zivkov

Belgrade, July2006


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Contents of the Presentation

  • Serbian agriculture – in general

  • Rural development and rural economy

  • Poverty in rural areas

    • Causes

    • Consequences

  • Strategy for developing agriculture and addressing the problems

  • Measures of the agrarian policy for reducing rural poverty

  • Discussion and proposals



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Agriculture IndicatorsStill very important

  • Agricultural land: 5.7 million ha

  • Arable land: 4.2 million ha

  • 87% private ownership

  • Around 0.7 million farms

  • Average farm size: 3 ha (10.6)

  • Share of primary production is 14 percent inGDP


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Serbia’s wealth measured by the GNI is at the level of developing countries

Share of agriculture in the GNI is at the level of African countries


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Farm Capacities developing countriesPolicy Challenge

To encourage them to transfer to productions of a greater value or to become commercial farms

Ensure for them further development and enlargement

Create methods for them to develop a democratic decision-making structure and to transform them to serve producers

Restructuring and privatization

Important for providing food and food safety, so that they should have access to inputs, but are outside commercial flows


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Production Index developing countries2000 – 2005 (previous year = 100)

Trend line


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Production Trends 2000 – 2005 developing countries


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Trade in Agricultural Products developing countries (mill. USD)


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Trade with developing countries EU (mill USD)


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R developing countriesural Areas


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Despite the several-decade long trend of social and economic devastation, 44% of the inhabitants of Serbia live in the village

Share of rural population in total population

  • Criteria for measuring the rural population

  • A lot or a little

  • Effects of the increase of the population in rural areas?

  • - Expense

  • + Real estate value

  • + Use of living space

  • + Balanced development

  • + ...


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Almost all village inhabitants are engaged in agriculture, and for a third this is their main activity

Share of agricultural population in the total urban and rural population

  • Still a very high share of the agricultural population

  • Underdevelopment of other sectors

  • Short-lasting refuge

  • Economic growth / Development of the service sector in rural areas / Rural diversification


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Leaving villages and for a third this is their main activity

Number of villages in Serbia


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Leaving villages and for a third this is their main activity

Process of the population’s migration from villages to towns

  • Being engaged in agriculture is a difficult and painstaking process

  • Marginalization of the village (disparaging and belittling attitude to the village)

  • Entertainment and recreation practically do not exist in rural mountainous areas

  • Problem of finding a spouse

  • Petar Bjelica, Ph.D.

Number of settlements where population growth has been registered (53-91)

Number of settlements where population reduction has been registered (53-91)

1856

4087


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Tasks of the Rural Policy and for a third this is their main activity

Drawing up a National Action Plan for the development of the village and support to the drawing up of regional and local action plans

Creation ofspace for the affirmationanduse of territorial specificities

Decentralization of support to rural developmentthrough the development of an interactive link between Government institutions and the local community

Support to economically valuable projectscreated at the level of the local community and individuals in rural environments, as well as the promotion and exchange of examples and good practices with similar areas.


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Tasks of the Rural Policy and for a third this is their main activity

Supportto the development of sustainable agriculture with autochthonous products that have a geographic origin, the development of processing and the local market through the promotion of rural, agro and ecological tourism

Harmonizing economic interests in agriculture with interests of environmental protection and the reduction of agriculture-related contamination


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R and for a third this is their main activityural Poverty


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Rural and for a third this is their main activity Poverty

Large and considerably larger than among the urban population


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Rural and for a third this is their main activity Poverty

Regional imbalance and critically large in certain areas


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What are the main causes of poverty increase/reduction in rural areas

Annual variations and dependence on natural conditions

  • The still large impact of agricultural production on poverty

  • A considerable number around the poverty line

  • A larger impact on temporary, and not chronic poverty

  • The need to find a way to minimize the impact of an extremely bad year


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Price drop due to larger supply rural areas

Price increase due to lower supply

Quantity

Supply

Demand

Price


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Price drop due to larger supply rural areas

Price growth due to lower supply

Quantity

Supply

How to minimize the impact of extremely bad years when we have a shortfall in all productions and a considerably reduced demand due to the high price which cannot compensate for the drop in production?

Demand

Price


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What are the main causes of poverty increase/reduction in rural areas

Development of the infrastructure which is to offer the

basic services

  • Link between education and poverty

  • Basic access to health institutions

  • Larger expenses due to inaccessibility (of green markets, the hospital)

  • ...


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What are the main causes of poverty increase/reduction in rural areas

Agrarian policy and state policy

  • Industry/services - agriculturetransfer

  • Agricultural producers - consumerstransfer

  • Non-functioning of the farmers’ pension system

  • Policy resulting in refugee, IDPs…

  • ................


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Agrarian budget rural areas 2000-2006 (million dinars)

(25 bn dinars = 270 million euros in 2006)


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Modernization of Agricultural and Adjustment to the rural areasWTO & EU

Budget Goal

2005 … +1…..______________n_______________….-1…..EU


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Support Structure rural areas


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2. rural areasAlleviating transition shocks

1. Economic growth and development

2. Alleviating transition shocks

3. Social welfare measures

Main Policy DirectionsPolicy Separation

  • MARKET SUPPORT: The abolition of support to prices and payments by hectare and replacement with subsidies for inputs (a reduction from 90% to 38%)

  • STRUCTURAL SUPPORT: Introduction of payments for rural development to support investments (25% of total support)

  • CREDIT SUPPORT: Introduction of credit support (22%)

  • INCOME SUPPORT: Considerable support for income(12%)


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1. rural areasEconomic Growth and Development





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Peć rural areas

Istok

Zubin Potok

Zvečan

Leposavić

Kuršumlija

Tutin

Novi Pazar

Raška

Sjenica

Prijepolje

Nova Varoš

Ivanjica

Priboj

Čajetina

Užice

Bajina Bašta

Nova Crnja

Žitište

Sečanj

Beočin

Irig

Alibunar

Kovin

Majdanpek

Žagubica

Bor

Boljevac

Soko Banja

Knjaževac

Svrljig

Bela Palanka

Gadžin Han

Pirot

Babušnica

Dimitrovgrad

Crna Trava

Surdulica

Bosilegrad

Trgovište

Preševo

Kačanik

Štrpce

Prizren

Opolje

Gora

Dečani

Kladovo

Kučevo

Less favorable areas

(Areas with poorer conditions for agricultural production)

INCENTIVES OF THE MAFWM FOR 2006


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LFA rural areas

  • A marginal area is an area of a municipality on whose territory there exist

    • natural (high altitude, poor land quality, slanting terrain, floods and all types of erosions) and

    • legal (protection of nature and protection of water sources) restrictions for the development of intensive agricultural production on large areas.

  • Insufficiently developed areas (Law on Insufficiently Developed Areas of the Republic of Serbia for the period until 2005, Official Gazette of RS number 53/95 – settlements in the territories of the mentioned municipalities from articles 3 and 4 including the municipal center),

  • The altitude of the settlement, i.e. the area where the investment is being realized, above 600 m and

  • Protected areas – national parks and areas of exceptional natural value of special importance (Law on the Spatial Plan of the Republic of Serbia, Official Gazette of RS number13/96).


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Dependence on demand rural areas

Grants for

rural development


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Subsidies for rural areas

introducing

standards


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2. Alleviating the rural areasTransition Shock


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Fuels rural areas

Input

subsidizing

Fertilizers

INCREASED CONSUMPTION

100 liters

16 dinars

Registered

Finding new markets

Consumption growth on existing market

Increased purchasing power

Lowering of cost price

30% refund with a receipt

Integration

Better product marketing

Introduction of new technologies


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Funds of the agrarian budget rural areas

Bank funds

Change in the payment system through the establishment of a register

  • The establishment of a credit history (acquired trust)

  • Changed structure

Necessary funds

2004 2005 2006 2007 2008 2009 2010 …

Credit support

  • To develop the financing of the agricultural sector from real sources, instead of burdening producers

  • Development of a credit history

  • Increased competitiveness by enabling producers to gain access to capital

  • 5 – 7 years

  • 700 million to 1 billion EUR

  • To support the credit market with money from the agrarian budget

  • To withdraw and leave financing to banks

MAIN GOAL:

DURATION:

NECESSARY FUNDS:

ACTIVITIES:


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Short-term Credits in rural areas2005

  • A total of over 23,341 short-term creditspaid

    • Average credit value 69,879 dinars


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Long-term credits in 2005 rural areas

  • A total of over 1,923 long-term credits paid

    • Average value 16,188 EUR


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3. rural areasSocial Welfare Measures


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Main goals rural areas

  • Support to non-commercial farms

    • 40,000 dinars per household member

    • People above 55 years of age

    • Farmer insured for a minimum of 10 years


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4.000 dinars rural areas

+

4.000 dinars

4.000 dinars

Development of a Land Leasing Market

  • the development of a land leasing market implying that the land is cultivated by the one who is able to do so in a more successful manner;

  • the joining of cultivated land;

  • support to households whose members are no longer able to cultivate their land due to their age.

Producer above the age of 60

Producer below the age of 40

NEW


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Message rural areas

  • Poverty requires the special attention of all the factors of society and its reduction must be a priority

  • Without understanding the essence of lasting and occasional poverty it is impossible to check it

  • Rural poverty is the result of the long-lasting neglect of a balanced development, which is why it is necessary to establish coordination among all those who can contribute to its reduction


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