Inter-Sectoral Rural development Strategy of Albania

42 Pages·2015·0.53 MB·English

INTER-SECTORAL
RURAL DEVELOPMENT STRATEGY
OF ALBANIA, ISRDSA
2007-2013

Prepared by the Ministry of Agriculture, Food and
Consumer Protection (MAFCP)

Tirana, Nendor 2007
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INTRODUCTON

The Inter-sectoral Rural Development Strategy of Albania (ISRDSA) constitutes
a national strategy plan for rural development of Albania. It lays down the priorities of
the rural development policy. The priorities have been set up in accordance with the
European Community priorities on rural development policy. The NSP shall apply for
the period 2007-2013 and shall be, if not defined otherwise by the priorities,
implemented throughout the territory of the Republic of Albania. The document is
designed in compliance with the baselines set out in Article 11 of the Council
Regulation (EC) No.1698/2005 on support for rural development by the European
Agricultural Fund for Rural Development (EAFRD). National priorities and activities
have been designated in a manner and a form enhancing the synergies with other
public financing instruments on agricultural policy and, especially, on economic and
social cohesion as well as environment and space. The NSP is prepared in
compliance with the Community strategic guidelines and the broader Community
strategic guidelines for sustainable use of resources (Council decision of Gőtteborg)
and the enhancement of economic growth and job creation (Lisbon Strategy).

The National Strategy plan aims at strengthening the multifunctional role of
agriculture in Albania. Particularly emphasized are the needs for restructuring the
agriculture and food industry as well as the need to enhance competitiveness of the
entire agricultural sector and agro-food chain. The NSP is founded on the principles for
sustainable management of renewable natural resources and pays special attention to
the maintenance of cultural landscape and environmental protection, as well as the
maintenance of the settlement and rural identity in the countryside. It also reflects the
multifunctional role of forests, which give Albanian landscape a unique mark and
represent an important element of environmental consistency and a source for
biodiversity. The NSP priorities shall also contribute towards economic and social
enhancement of the countryside and will introduce new approaches for increasing
employment opportunities in rural areas. The National Strategy Plan represents a
reference framework for designing the rural development programme for the whole of
Albania for the period 2007-2013.

The preliminary preparations of the NSP took place in cooperation with competent
administrative authorities at the national, regional and local level, economic and social
partners, as well as other interested representatives of the civil society including non-
governmental organizations. The present NSP draft is subject to a wide public
discussion and debate with and among partners mentioned above.
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CONTENTS

INTRODUCTON ..................................................................................................................... i

CONTENTS .............................................................................................................................. ii

EXECUTIVE SUMMARY .....................................................................................................1

I. SOCIO – ECONOMIC AND ENVIRONMENTAL SITUATION AND THE
POTENTIALS FOR DEVELOPOMENT ..........................................................................4

I.1 Background .........................................................................................................................4
I.2 Agriculture, forestry and food-processing industry .......................................................5
I.3 Rural Environment ...........................................................................................................11
I.4 Quality of Life in Rural Areas .......................................................................................112
I.5 Rural Development based on the local initiatives .......................................................14

II. PURPOSE, STRATEGYC PRIORITY AND GOALS ........................................14

II.1 Purpose of the Strategy .................................................................................. 14
II.2 Time Period of the Strategy ............................................................................. 14
II.3 Strategic Priority .............................................................................................. 15
II.4 Goals ............................................................................................................... 15

III. POLICIES AND ACTIVITIES ...............................................................................15

IV. MANAGEMENT AND BUDGET ...............................................................................24

IV.1 Management .................................................................................................. 24
IV.2 Budget ............................................................................................................ 27

VI. MONITORING AND EVALUATION ....................................................................30
VI.1 Payment agency………………………………………………………………… 30
VI.2 Definition of “Rural Areas” ........................................................................... 332

VII. CONSISTENCY AND COMPLEMENTARITY
OF THE STRATEGY .................................................................................................33

VII.1 Consistency of the Plan with other International ........................................... 33
and European strategy documents and action plans ................................... 33
VII.2 Coordination among the priority areas .......................................................... 33
VII.3 Consistency with other Sector and Cross-Sector Strategies ......................... 34
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EXECUTIVE SUMMARY

Albania is a small country with a population of 3.1 millions inhabitants. It is
mountainous and only 24% of the land is classified as agriculture land, 36 % as forests
and 15 % are pastures. Agriculture is still the biggest contributing sector for income
generation for the largest part of the population, as well as a source of employment.
Rural population makes 54% of total population, and 71 % of the working force is
employed in agriculture or agriculture related activities.

A successful rural strategy requires a sustainable macroeconomic development
framework, characterized by strong economic growth, low inflation rates, stable local
currency, sustainable levels of low fiscal deficit, and a consolidated foreign stability.
This provides the preconditions for growth of rural products and services and for
market development.

In spite of all this, there is still continuing poverty in Albania, especially in rural
zones. According to the latest Living Standards Measurement Survey1 (LSMS), 18.5%
of all Albanians are poor. This figure is even higher in rural areas, where 24.2% of the
population is poor. There is considerable regional variation in poverty levels, with the
poverty headcount in mountain areas being about three times higher than in Tirana. In
the last three years, urban poverty has declined faster than rural poverty, but there has
been some reduction in the differences between regions. Poverty is higher in families
with plenty of children and low school education, many of which live in rural areas. As
a result, Albania has experienced rapid rural-urban migration, which has led to social
disruption and greater vulnerability, in particular amongst fractured? urban families and
ageing rural populations.

The rural sector is not enough efficient: Under the communist regime it was
dominated by big state farms and collective cooperatives, whereas due to later
reforms it is now characterized by a multitude of small family farms, with an average
size of 1.1 ha, and usually very fragmented. Farm production increased after new
owners of the farms started to work intensively on their farms. The success in
improving yields in recent years suggests that public support for farm modernisation
has produced and will continue to produce useful results. However, markets and food
quality standards are still not developed in Albania and increased production needs to
be supported by improved marketing, in order to be sustainable. Therefore, support for
farm modernisation and market development will be of great importance.

The natural environment in rural Albania is still largely unspoilt and it is an important
national. The natural environment is also a potential source of incomes for rural areas,
both through the quality it can provide for food products and through its attractiveness
for tourism and recreation.

Rural Albania is more dependent on agriculture than does population in most
European nations and has poorly developed manufacturing and services. The
modernisation of farming will lead to the reduction of employment opportunities in the
farming sector and one of the key elements of rural development is therefore to
diversify economic activities in rural areas.

1 Year 2005
2
Rural infrastructure is not well developed: roads are in a poor condition; water
supplies are often interrupted and very few villages have organised sanitation

systems. Improving rural infrastructure is an important priority for the rural
economy and for improving the quality of life and reducing rural-urban migration.

The key issues above are shared with many European countries and the Albanian
rural development strategy builds on EU experience in regard to rural development.
The main pillars of rural development for Albania are i) sustainable increase of farm
income; ii) sustainable management of natural resources including forestry, pastures
and water; and iii) creation of new job opportunities and better quality of life through
diversification and improved rural infrastructure. These three pillars are equivalent to
the three main axes formulated in the EU Rural Development Regulation and in EU
support schemes for accession and pre-accession countries. These priorities will
contribute to the reduction of poverty. The Albanian strategy also follows EU practice
in identifying a fourth axis, that of locally based community development planning,
whith a reserved budget and integrated into the design of activities in the other axes.
Within each pillar, a number of measures are defined.

Albania already dedicates yearly about 7 billion leks to rural development out of a
total public investment of about 40 billion leks. Current expenditure is dominated by
farm and infrastructure investment.

The table below summarises the measures of the rural development strategy, along
with the current and planned expenditure distribution at the end of the strategy. The
switch from current spending to the end-period spending will be phased out through
the strategy.

Table 1: Albania Rural Development Strategy: axes, measures and prioritisation
Existing Planned
2006 2013
Axis 1 m Lek m Lek % of total
Farm Modernisation 2,633 4,675 27.5%
Value Added / Marketing 210 2,550 15.0%
Forests 369 850 5.0%
Training / Advisory Services 0 425 2.5%
Total 3,213 8,500 50.0%
Axis 2
Less Favoured Areas 1,558 170 1.0%
Agro-environment & Natura 2000 1,530 9.0%
Total 1,558 1,700 10.0%
Axis 3
Non-farm Employment 0 1,190 7.0%
Quality of Rural Life / Infrastructure 2,583 4,760 28.0%
Total 2,583 5,950 35.0%
Axis 4
Participatory Development 0 850 5.0%

Grand Total 7,355 17,000 100.0%

In addition to the programme identified above, the rural development strategy also
includes education, health, economic development and rural infrastructure
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development not covered by local sources. The rural coverage of these activities will
be monitored using a system of ‘rural proofing’, similar to that developed in EU

member states. Each of the key ministries involved (notably Education, Health,
Economy and Transport) is required to submit a regular annual ‘rural proofing’ report
which presents their programmes in rural areas, compared with urban programmes,
including evidence about expenditure per capita.

Based on the NSP, an Operational Programme of Rural Development for the whole
territory of Albania will be prepared. The implementation of the rural development
policy will be in the mid-term period carried out by the Rural Payment Agency of
Albania which will be organised as an independent institution under the umbrella of the
MAFCP with the support of different Government agencies at different levels.
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I. SOCIO – ECONOMIC AND ENVIRONMENTAL
SITUATION AND THE POTENTIALS FOR
DEVELOPOMENT

I.1 Background

Albania is a country of about 28,000 km2 and a population of 3, 1 millions of people.
The population is concentrated on the coastal plane, which covers 25 % of the
territory. Over 60 % of the country is mountainous. There have been important
population movements in the last ten years, including a strong rural-urban migration,
notably into Tirana. The rural population declined as a result from 65% to 55%.

Poverty in Albania is high, but it has been declining and now affects 18.5% of all
Albanians, with half of those living in extreme poverty. One out of three families has
problems related to immediate infrastructure improvement. Infant mortality and
mortality rates of under-five children are relatively high as compared to other countries
in the region, and almost one in seven children under age five is undernourished.
Illiteracy has increased; and three quarters of poor families experience acute social
problems of one kind or another. The probability of living in poverty increases with the
size of the family and is closely linked with unemployment.

People living in rural areas are significantly poorer than those in urban areas. This
poverty has many dimensions such as: (i) low or very low income levels of the poor; (ii)
higher incidence of health risks and lack of appropriate medical services; (iii) illiteracy
or low educational levels; and (iv)limited access to government decision making
process. Poverty levels are relatively higher in groups for which farming is the main
income source. This is supported by the fact that about 50 percent of the poor are
farmers.

Urbanization has demonstrated its potential for poverty reduction. Urban poverty has
declined faster than rural poverty, with the urban poverty headcount falling from 19.5
to 11.2 percent, between 2002 and 2005, while the rural headcount fell from 29.6 to
24.2 percent. There is also evidence of regional convergence in the distribution of
poverty. A particularly dramatic improvement has happened in the mountain regions,
which had by far the highest poverty rates in the country in 2002, coming down close
to the national rural average in 2005. This is caused largely by the high levels of
remittances in mountain areas, both from urban regions and from outside Albania.
Despite the importance of remittances, there is also evidence of increased poverty
within Tirana, in the zones with the highest incidence of new residents. Access to
infrastructure and basic services is also more limited in these areas as compared to
the city in general.

The rural-urban migration reflects a profound structural transformation of the
Albanian economy away from agriculture and traditional industry, and towards higher
productivity sectors, including trade and services, tourism and construction. Agriculture
has traditionally played an important role in the economy, accounting for 24 percent of
GDP and 58 percent of employment in 2004. The challenges for this sector will be to
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modernise agricultural production, to continue to diversify into agro-processing, raising
the quality sufficiently to compete in European markets, and to develop higher-

value products for which the domestic demand will grow with incomes going up.

Despite the challenges in rural areas, there is still good potential to improve the
situation, based on a favourable natural environment and geographical position,
comparatively low wages, a relatively well-educated population, many young people
included, good traditional farming skills and strong local culture.

I.2 Agriculture, forestry and food-processing industry

Agricultural land accounts for 24% of the total land, with forests accounting for 36%,
pastures and meadows 15% and others 25%. Out of the total agricultural land, 43% is
lowland, 34% hilly and 23% mountains. Agriculture is dominated by small farms (less
than 1.2 ha), fragmented in 3 to 4 plots. This fragmentation is an important obstacle to
an efficient and sustainable development of Albanian agriculture.

Agriculture accounts for about 23% of gross domestic value added and has been
growing at about 3% per year, in real terms. However, given that growth of non-
agriculture sectors has been significant, agriculture’s share of GDP has declined. In
rural areas, agriculture accounts for 71% of the employment, although most of farmers
are underemployed. According to official data, livestock accounts for 45% of total
agriculture value added, crops 44%, and fruit-culture 11%. Over the past five years,
fruits have shown the highest growth rate (at nearly 7% per year), with vineyards
growing particularly strongly. Fruits and grape have high potential for further growth.
Livestock has been growing at about 3%. More than 60% of the population are
somehow involved in herding and rearing livestock, mostly very small scale and
livestock plays an essential role in the smallholder farming systems, as well as serving
an important social security function. Most livestock is kept for milk production, mainly
for home consumption. Milk production suffers from problems of low levels of quality
standard. Livestock also serve as a means of transport and are used for land
preparation. The main crops are fodder and cereals and production has shown little
growth over the last five years.

Agriculture in Albania suffers from low competitiveness and local producers are often
forced to accept very low incomes, in order to compete with imported products. Official
statistics probably reflect the situation in the larger farms and may therefore understate
the problems with efficiency. According to these official statistics, cereal yields are
between 3 and 3.5 t/ha, which is similar to the yields achieved in other Eastern
European countries, and about 65% of the average yields in EU member states. Crop
yields have increased steadily and significantly over the last five years, while crop area
has declined, suggesting that there is a trend towards concentration of production in
more efficient farms. The exception to this trend is with forage crops, where yields
have declined but area changed only slightly. In addition, the area planted to orchards
and vineyards has increased, at the same time as improvements in orchard yields.
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Official statistics for beef production yields about 100 kg deadweight per year, which
is close to EU levels and may fail to capture data from the natural grazing regimes

in the more isolated areas of the country. Although these traditional grazing
regimes are more extensive than is typical in European agriculture, they may also
provide an important source of high quality product that has good market potential, if
properly marketed. Also, it is unlikely that any other productive use of the higher land
will be found.

Only 73% of the families involved to agriculture activities carry out the main land
operations by machines, 24% of the farmers use animals to plant the soil, 63 % of
farmers use machines to prepare the land, but also do include some manual work.
Manual land preparation is particularly frequent in the mountains areas in farms with a
small area of 0.1 to -1.02 ha, where 75% of farmers do some manual work on land
preparation. Manual land preparation is not the tradition in mountain or other areas.
The use of manual land preparation practices is not caused by lack of machinery, as
there is one tractor per 50 ha in Albania. Rather, manual land preparation occurs
because of the low income generated on small farm plots, being not sufficient to afford
the high prices charged for mechanised land preparation.

About 70% of the farmers purchase inputs such as seeds, chemical fertilizers and
pesticides. A higher proportion of lowland farmers use purchased inputs. The highest
expenditure per farm is for chemical fertilizers, which accounts for around 40% of
spending on inputs. Around 40-45% of the farmers purchase livestock feed. Most
livestock feed is bought by highland farmers for winter food, although it is also used for
other purposes.

As a result of the limited efficiency of Albanian agriculture, the output and income
generated from agriculture is low, as compared to EU standards. According to the
national accounts, the value added of agricultural and rural development is about Lek
155 bn. With about 756,000 people employed in agriculture, the value added per
worker is about Lek 200,000, or € 1,700. This is far away from € 26,000 of the EU-15
and € 6,500 of the new Accession Countries. Incomes per farm from livestock are 2,7
times more than incomes from crop production.

The farming population is still relatively young, with 53% under 55 and a further 24%
under 65 years old. The main farm worker is male for 95% of farms.

Albania has a large trade deficit in agricultural products, with exports amounting to
less than 15% of imports. The position has worsened in recent years, with falling
exports of some agricultural products and generally rising imports. This is caused
partly by lack of competitiveness, reflected in the high production costs of farm
produce in Albania. The weak trading position reflects a number of other specific
problems, including: lack of organization of export traders; underdeveloped market
chains; and some weaknesses related with quality control. Over the last years Albania
finalized a number of unilateral and multilateral trade agreements (WTO agreement,
Free Trade Agreements (FTA) in the region and with the EU) which are supposed to
encourage agricultural imports, but also offer possibilities for exports, especially for
special products, such as medicinal plants, vegetables, fish and live animals. A
common public misconception that imported agricultural goods are of higher quality
means that they can often might have higher prices than local products.
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Food processing accounts for about 40% of agro-industry and is composed of:
small private enterprises; privatised former state enterprises (mainly involved in
bread, flour, milk, and drinks); and private initiatives with new investments. Before
90’s, food industry collected and processed around 50-80% of all agriculture
production, commercialising all produce from the state farms and employing about
47,000 workers. There are now 2060 food enterprises (of which 46% are for bread-
making and flour making) employing about 9900 people. Food processing is growing
rapidly, at about 10% per year in terms of production?, and is now equivalent to over
20% of agricultural value added. Milk and meat processing are showing particularly
strong growth. Some modern food processing (eg frozen vegetables) is undertaken
based on imported raw materials. Exports of processed food products amount to about
10% of the value of imports of processed food products.

Investments in agribusiness have trebled? over the past five years to about 2, 9
billion leks. The increase has occurred both in production technology and buildings
and a large part of the increase has been funded by a dramatic growth in banks credit,
which now accounts for about half total of investment in agro-industry. However,
despite these improvements, food enterprises are still very small and many do not
reach EU food safety standards. As a result, they have no chance of exporting to EU
markets. In order to address these issues, the rural development programme will
provide support to the agro-industry as well.

The major roles of the Ministry of Agriculture, Food and Consumer Protection are to
establish a policy and legal framework and develop associated regulations to allow
agriculture and agri-business to operate efficiently and successfully in Albania and to
ensure the provision of services for smallholder farmers, including extension, research,
livestock disease control, and plant protection.

The Ministry aims at improving the efficiency of research through (i) a program
based primarily on adaptive research, (ii) a reduction in the number of research
institutioins and improved cooperation among the remaining ones, and (iii) a clear
definition of research priorities that reflects development needs for Albania. These
changes aim at promoting demand-driven research that provides low cost and
effective solutions to farmers’ problems. The system will include some competition in
delivery, notably in the production of semen, seeds, and vaccines.

The extension service has been greatly strengthened over the past decade and has
its services available in all districts. The Ministry intents to strengthen the linkage of
the service with the private sector, in order to create advisory centres, which will
provide multi-faceted advice on an increasingly self-sufficient basis. In particular,
advice to larger-scale commercial farmers and agri-businesses will be left to the
private sector and the Ministry will share information with the private sector, to help it
develop. The public extension service will focus increasingly on the small and medium-
scale farmers, especially those with some market orientation. This approach will
involve: improved extension materials; improved advisor capacities; a focus on farmer
groups; better extension-research linkages; continued training for small farmers
including farm budgeting; and the provision of market information. Competitive grant
schemes are currently being piloted in Albania with the objective of promoting farmer
participation. New approaches of agricultural extension will be promoted and made