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Stimulating growth through agricultural investment
Meeting focuses on poorest transition countries in Central and Eastern Europe and Central Asia
4 May 2006, Rome/Berlin – Economic growth in the countries of Central and Eastern Europe and Central Asia will require increased investment in agriculture as many of these economies are deeply rooted in the farm, the UN Food and Agriculture Organization (FAO) said today at a meeting in Berlin called to ensure that agricultural investments yield optimal results for these countries.

The two-day meeting, sponsored by FAO, the European Bank for Reconstruction and Development (EBRD) and the World Bank, and hosted by the German Corporation for Technical Cooperation (GTZ), will explore, among other issues, promising approaches to rural finance in the so-called early transition countries (ETCs) -- Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, the Republic of Moldova, Tajikistan and Uzbekistan.

These seven countries, where more than 50 percent of the population lives below the national poverty line, are the focus of an EBRD initiative that aims to stimulate market activity by using a streamlined approach to financing more and smaller projects, mobilizing more investment and encouraging ongoing economic reform.

“Donors are clearly interested in the early transition countries and understand the need to do more on agriculture, given the importance of the agriculture sector to these countries’ economies,” said FAO Investment Centre Director Charles Riemenschneider.

Riemenschneider cites the EBRD’s ETC Fund, which pools donor funds to make it easier to match financing with projects, helping many qualify for EBRD loans or equity investment. With financial support from the ETC Fund, FAO is working with the EBRD’s Group for Small Business in two early transition countries -- the Kyrgyz Republic and Tajikistan – to review the state of financing to small and medium-sized agricultural enterprises there.

“FAO is assessing the demand for credit in rural areas so that it can make practical recommendations to the EBRD on how to reach rural clients through existing partner banks,” said EBRD Banker Sabina Dziurman. “To do that, we also want FAO to draw on past success stories, as well as past failures, of the donor community.”

The World Bank, for instance, has an extended portfolio of rural finance interventions in every ETC except Tajikistan. At the meeting, the World Bank will present two of its projects, implemented in Moldova and the Kyrgyz Republic, which have been particularly successful models for deepening financial services in poor, predominantly agricultural economies.

EastAgri, a network of funding institutions, including private banks, committed to improving their agricultural and agribusiness investment portfolio in Central and Eastern Europe through information sharing, has expanded its coverage to include early transition countries, where it hopes to disseminate lessons learned in rural credit, agriculture and agribusiness investment.

The network, initially launched by the EBRD and FAO, emphasizes the need for a demand-driven approach, where investment flows to commercially viable ventures. As Sam Fankhauser, Director of Policy Studies and Sector Strategy at EBRD’s Chief Economist Office, says: “Countries in transition often don’t have the luxury to provide much social protection to their agricultural sector. Investing in financially sustainable projects throughout the food chain is a way to provide income to rural populations.”

The Berlin meeting is being organized by EastAgri, which is sponsored by FAO, the EBRD, the World Bank and the Central European Initiative (CEI), a forum for political, economic and cultural cooperation comprising 17 countries in Central and Eastern Europe.

Representatives from international financing institutions, development agencies, donor governments and the private sector, as well as from the ministries of agriculture in a number of the countries concerned, are expected to attend.

Greater coordination

Other topics of discussion include an examination of successful public-private partnerships in rural finance and agricultural development throughout the region, and the adjustments that western Balkan countries need to make to integrate their agricultural markets into European Union markets.

For the western Balkans, discussion will focus on the type of support that donors and funding institutions can provide pre-accession countries in the region to facilitate this process, such as a proposed EBRD multidonor trust fund for the western Balkans, similar to its ETC Fund.

According to Kaj Mortensen, who heads the EU’s programme to prepare the agriculture sector and rural areas in candidate countries for EU membership, the collaboration of partners like the World Bank and EBRD is an advantage to the process.

“The World Bank’s project in Croatia is helping the country’s agriculture sector ready itself for the challenges and benefits of accession,” said Mortensen. “Not only will it strengthen Croatia’s capacity for absorbing EU financial assistance and facilitate implementation of the EU Common Agricultural and Rural Development Policy, it will also help strengthen government institutions in areas that are key to improving access to EU markets for Croatian food products.”

Participants at the meeting will also review issues limiting the development of Ukraine’s agriculture sector, as well as current and planned interventions by donors and international financing institutions with a view to achieving greater coordination of assistance.

“There is a lot of interest from donors in Ukraine’s agriculture sector,” said World Bank Lead Sector Economist Julian Lampietti. “The World Bank wants to make sure that its new projects are aligned with the support being provided by the EU and other donors in order to maximize the overall impact of all donor activities in the country.”
Contact
Teresa Buerkle
Information Officer, FAO
teresamarie.buerkle@fao.org
(+39) 06 570 56146
(+39) 348 141 6671

Contact:

Teresa Buerkle
Information Officer, FAO
teresamarie.buerkle@fao.org
(+39) 06 570 56146
(+39) 348 141 6671

FAO/22630/J. Spaull

Farmers scything grass in Georgia.

FAO/22689/J. Spaull

A market in Azerbaijan.

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Stimulating growth through agricultural investment
Meeting focuses on poorest transition countries in Central and Eastern Europe and Central Asia
4 May 2006 – A two-day meeting opening today in Berlin will explore ways to ensure that agricultural investments in Central and Eastern Europe and Central Asia yield optimal results.
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