12 November 2003, Budapest/Rome -- Creating a coordinated approach to financing agricultural development in Central and Eastern Europe and the Commonwealth of Independent States (CIS) will improve investment in the region, FAO said.

At a two-day forum hosted on 12-13 November 2003 by FAO and the European Bank for Reconstruction and Development (EBRD) in Budapest, major international financial organizations, development agencies and private banks met to create a formal network of institutions financing agriculture.

Following the break-up of the Soviet Union and the fall of communism, many countries of the region faced a triple challenge - to build new states, found democratic institutions and create market economies.

Financial institutions such as the EBRD were set up to provide support to nurture the private sector in a new democratic environment.

"We would like all international financial institutions working in the region to coordinate their investment projects and become more streamlined," said FAO expert François Dauphin.

"At the moment several institutions are active in the agriculture sector - from policy work to public investment through to lending to private companies. Without enough coordination, however, the results are limited," he said.

A dram of success

One example of a joint approach to financing agriculture is Armenia's Yerevan Brandy Company.

Founded in 1887 by an Armenian who learnt the delicate skills of brandy-making in France, the company has been making oak-aged brandy for over a hundred years.

This has been a source of national pride and a major export earner.

In 2000, a US$20 million loan from the EBRD to the Yerevan Brandy company, now a subsidiary of a European beverage producer, has allowed it to refurbish its production facilities and increase its capital, as well as to develop new markets in Europe.

The EBRD loan bolstered the agricultural sector in a small, land-locked country where almost half the population depends on farming for their livelihoods.

More than 3 000 Armenian grape growers are now selling 15 000 tonnes of grapes to the company each year at pre-agreed prices.

In addition to offering secure markets through long-term purchasing contracts, the brandy company has been helping local grape producers recover from severe frost and assist them to obtain chemicals and fertilizers and plant new vineyards.

Triple tipple

In turn, the grape-producers have been financed by the Agricultural Cooperative Bank of Armenia (ACBA).

The ACBA was the first cooperative bank set up in the former Soviet Union, the result of a joint project of the International Fund for Agricultural Development (IFAD), the European Union and the World Bank.

Adding its own contribution, FAO has been helping the brandy company fulfil its obligation to the EBRD to carefully use natural resources by finding a sustainable, local alternative to the all-important oak barrels, traditionally sourced in France.

This illustrates what can be achieved by working together: an alliance between public and private investment has helped meet long-term development objectives.

"Even though our countries of operations, and especially low-income CIS countries, are a difficult environment for agricultural investment, there are success stories," said Gilles Mettetal, Deputy Director of the EBRD Agribusiness team.

"We hope the result of this forum will be a solid commitment to set up a streamlined networking structure so that agricultural projects in the region can be carried out in a more coordinated way, and therefore more effectively," he added.
Stephanie Holmes
Information Officer
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(+39) 06 570 56350