ERC/00/5


 

TWENTY-SECOND FAO REGIONAL CONFERENCE FOR EUROPE

PORTO, PORTUGAL, 24-28 JULY 2000

Agenda Item 8

REBUILDING AND DEVELOPING OF AGRICULTURE IN AREAS STRICKEN BY DISASTER AND ARMED CONFLICT (BALKANS)

Table of Contents

 

I. INTRODUCTION

1. This paper provides information on the activities undertaken by the Rome-based food and agriculture agencies to address the impact of disaster, armed conflict and the rehabilitation and development needs of the agricultural sectors of the Balkan countries1. The background section reviews political developments in the region and describes events that disrupted peace and stability and had serious repercussions on the agricultural sectors of the countries. The next chapter presents briefly the coordination mechanism which governs the cooperation of the Rome-based agencies with a particular view to emergencies. This is followed by reviews of emergency food assistance (WFP provided) and emergency relief operations undertaken by the international community with FAO assuming the coordinating role of interventions for the agricultural sector. In the ensuing chapter, the contribution to rehabilitation interventions are specified by country and by the respective donors. The concluding chapter outlines the ongoing and planned investment activities focusing on the agricultural and rural sector in the Balkan countries. It includes a summary of the EU-lead initiative of the Stability Pact for South-eastern Europe and the future activities of Rome-based food and agricultural organizations to meet rehabilitation needs in the agricultural sectors in the region.

II. BACKGROUND

2. The fall of the Berlin Wall in November 1989 and the subsequent dissolution of the communist and socialist block had as a consequence the creation of numerous independent countries, a process which was accompanied, in many cases, by civil strife and broader conflicts of vastly differing intensity. In 1991, armed conflict preceded the move to the independence of Slovenia and Croatia. Whereas in Slovenia hostilities were of a limited scale, the conflict in Croatia led to the occupation of about one third of the Croatian territory. United Nations Protection Forces were deployed in March 1992 to help normalize the situation in the occupied regions, which represented much of the best agricultural land resources of the country. As a result of the conflict and the break-up of the former Yugoslavia, per caput GDP in Croatia fell from US$3,351 in 1990 to US$2,505 in 1993 mostly due to significant loss in productive capacity, hyperinflation and the deceleration of economic reform.

3. As of 1992, the conflict in Bosnia and Herzegovina (BIH) intensified and despite numerous efforts by the international community to achieve peace, hostilities continued until the restoration of peace with the signature, in December 1995, of the Dayton Accord. The Accord foresaw the establishment of two entities in the state of Bosnia and Herzegovina and the return of refugees and displaced persons to their community of origin. In an additional protocol, the restitution of the land area of the Republic of Croatia was agreed upon. The three and a half years of conflict devastated human and physical resources and shattered the economy of BIH. About 1.2 million people left Bosnia and Herzegovina, some 200,000 were dead or missing and of the people who remained, more than one million were displaced as a result of the hostilities. Total damage to the agricultural sector was estimated at US$4.54 billion; in some areas up to 70 percent of the farm equipment and 60 percent of livestock were lost, farm buildings and irrigation systems were destroyed and food marketing systems were disrupted.

4. Following the Dayton Accord on BIH, the international community pledged its support to a medium-term priority reconstruction and recovery programme of US$5.1 billion. Given the volatility of the region, this amount was increased during subsequent donors' conferences to US$5.35 billion. About US$300 million were foreseen for the agricultural sector while the bulk was allocated for infrastructure repair and housing.

5. The expectations of the international community, that with the peace process in Bosnia and Herzegovina being underpinned through the deployment of an international stabilization force (SFOR) of some 60,000 soldiers and a massive reconstruction programme being implemented, the region would stabilize and concentrate on its economic development, were not met with success. UN/EU sanctions imposed since 1991 against the Federal Republic of Yugoslavia had adverse effects on the overall economy and on agricultural and agro-industrial production in the country. The sanctions also had a severe impact on economic conditions of the FYR of Macedonia depriving this country, a food exporter, of its traditional trading partners, a situation that was exacerbated by the trade blockade imposed by Greece. Effects of the sanctions were particularly severe in the Province of Kosovo where agriculture, albeit less developed than in other regions, accounts for some 40 percent of the economy and where more than 60 percent of the population is rural. During 1998, a large number of the Kosovar population had left their homes, voluntarily or forcefully, and abandoned their farms and livestock. After a breakdown in negotiations, NATO's air offensive against military targets in the Federal Republic of Yugoslavia, including Kosovo and Montenegro, began on the evening of 24 March 1999. This resulted in some 800,000 persons either being displaced or seeking refuge in neighbouring countries. By June 1999, the UN Security Council adopted Resolution 1244 as the basis for deploying a security force (KFOR) in the Province. Other central aspects of Resolution 1244 were the de-militarization of the province, the setting up of a civil administration, provision of emergency assistance and reconstruction of the Province.

6. The hostilities in the region also affected the agricultural sectors of neighbouring countries, i.e. Romania and Bulgaria in as much as trade flows were disrupted and transportation of goods had to be rerouted (traffic by ship on the Danube was reduced to less than 25 percent of its full capacity due to the damage on the infrastructure incurred).

7. In January and March 2000, two mine spills occurred in the region releasing cyanide and heavy metals into the affluents of the Tisza and Danube rivers. While the former caused considerable losses in the fish population of the Tisza river, it left no apparent environmental damage. The impact of the second spill is currently being assessed.

III. RESPONSE BY THE ROME-BASED FOOD AND AGRICULTURE ORGANIZATIONS TO THE BALKAN CRISIS

8. As a first step to respond to emergencies, FAO and the World Food Programme (WFP) have set up well tested mechanisms of collaboration, based on periodic coordination meetings, joint missions, processing of food emergency operations and daily informal and official contacts with the FAO Global Information and Early Warning System (GIEWS). Joint FAO/WFP Crop and Food Supply Assessment Missions are fielded to rapidly assess the food supply situation during ongoing emergencies, so that timely and appropriate action can be taken to avoid hardship and loss of lives. The findings of such missions have attained a high profile in donor pledging decisions due to their thoroughness, objectivity and impartiality.

9. During the recent Balkan crises, FAO/GIEWS and WFP conducted joint missions to Albania and The Former Yugoslav Republic (FYR) of Macedonia in early June 1999 to assess the impact of refugees on the hosting populations. In July 1999, shortly after the return of the bulk of the Kosovar refugees and Internally Displaced Persons (IDPs) to their homes in the Kosovo Province, another joint FAO/WFP Crop and Food Supply Assessment Mission was mounted to the Province itself to assess the food supply situation and provide vital information for planning relief assistance for the coming months. It should be noted that the reports of such joint missions are often used by WFP for preparing emergency food aid requests (Emergency Operations).

10. For the Balkans, FAO Director-General and WFP Executive Director jointly approved emergency operations valued at about US$409 million in 1999.

A. Emergency food assistance in the region

11. WFP has played a major role in addressing the food needs of conflict-affected populations in the Balkans throughout the 1990s. Since 1992, WFP has provided 1.5 million metric tonnes of food assistance to the region. This assistance was provided to those groups whose food security had been jeopardized due to disruption of agricultural activity, interruption of normal trade channels and economic crisis related to conflict.

12. When population movements reached unprecedented levels in early 1999, WFP assistance was targeted principally to the countries receiving massive numbers of Kosovar refugees. In early June 1999, a peak of 440,000 refugees was reached in Albania, and 270,000 in Macedonia. Food assistance was rapidly provided to these refugees.

13. The rapid and spontaneous repatriation of Kosovars in June 1999 required immediate re-targeting of food aid flows. Joint FAO/WFP Crop and Food Supply Assessment Missions in May/June 1999 were undertaken in order to establish the broader economic and social context within which the relief aid should be provided . In particular, the missions aimed to assess the impact on staple food availability and labour markets resulting from the large number of refugees who had found temporary homes with relatives and clan members. The missions also considered the possible need for immediate food-for-work assistance for these people. The main findings of the missions indicated that the conflict had not had a major negative impact on local agriculture in Albania and the FYR of Macedonia. Therefore, assistance to these countries was phased down to 60,000 and 20,000 refugees respectively, the current caseload. In the FYR of Macedonia, those assisted are the remaining Kosovar refugees, including Serb and Roma minorities who arrived after the end of the conflict. In Albania, the FAO/WFP Mission noted that some localized impact on rural populations had occurred as a result of hosting massive numbers of refugees. Moreover, food security of agricultural households had been precarious since the early 1990s pointing to a need to establish appropriate food security and nutrition surveillance systems in order to identify and monitor food insecure groups. There is also a clear need for appropriate nutrition education strategies to encourage the consumption of balanced diets. Both food aid and agricultural inputs were also recommended for the most vulnerable groups . WFP continues to provide assistance to 60,000 persons including those vulnerable rural households and social groups such as pensioners, female-headed households and the disabled.

14. As food aid was directed away from Albania and the FYR of Macedonia, it followed the influx of repatriates in June 1999. In 1998, WFP had already begun to provide assistance to the growing number of IDPs and refugees. By late 1998 the caseload had reached 420,000 and with the June 1999 repatriation there were some 950,000 persons in need of food assistance. Food aid operations were suspended on 23 March 1999 with the evacuation of all international staff, but resumed on 13 June 1999 when the first humanitarian convoys followed the deployment of the international security presence, the NATO Kosovo Forces (KFOR).

15. WFP assistance to the region has included Federal Republic of Yugoslavia (FRY - Serbia and Montenegro, excluding Kosovo) since 1992. The Belgrade-based operation began in 1992 following the first movement of refugees from other parts of the former Yugoslavia, principally from Croatia. WFP provided assistance to these, to refugees from Bosnia and Herzegovina, and beginning with the escalation of the Kosovo conflict, to increasing numbers of ethnic Serbs displaced into Central Serbia and Vojvodina. During the same period (1992 - 1998) WFP began providing assistance to Croatian and Bosnian refugees in Montenegro. WFP opened its office in Podgorica in September 1998 and has continued to assist the previous caseload of refugees and IDPs as well as the 1999 influx of Serb and Roma minorities from Kosovo.

16. A joint WFP/UNHCR Food Aid Needs Assessment Mission to Serbia/Montenegro in July 1999 confirmed the need for assistance to vulnerable households among the resident (i.e., non-IDP, non-refugee) population. These were principally urban residents, mostly pensioners unable to meet basic subsistence needs, as well as handicapped persons and invalids. For 2000, WFP has projected assistance to 540,800 persons in these categories, in addition to the 337,500 refugees and IDPs to be assisted, phasing down to 170,000 by the end of 2000.

17. As the acute emergency phase comes to an end, WFP has planned systematic phase-down of its relief assistance. Already in late 1999, WFP had begun to implement its programme based on criteria according to which only the most vulnerable groups would continue to receive food aid. In-depth studies of household food economies were undertaken as the basis for this targeting exercise. Consequently, the beneficiary caseload in Kosovo province decreased to 900,000 by January 2000. Further significant decreases in the level of relief assistance are planned to coincide with the spring 2000 harvest which will improve the food security of most agricultural households. WFP has coordinated with FAO's Emergency Coordination Unit (FAO/ECU) in Pristinain assessing food needs. This cooperation is now reinforced through the establishment of a joint FAO/WFP Food Security Surveillance System, financed by the Office of US Foreign Disaster Assistance (OFDA).

B. Emergency relief assistance for the agricultural sectors

Bosnia and Herzegovina

18. In 1994, FAO established an Emergency Coordination Office in Bosnia and Herzegovina. The office played an important role in the coordination of agricultural interventions, facilitated the participation of FAO staff in project formulation and implementation, prepared material which was used for fundraising, organized emergency distribution of agricultural inputs, participated in inter-agency appeals, oversaw the implementation of Telefood projects and backstopped a UNDP/Japanese Trust Fund-supported project which undertook the rehabilitation of the seed industry. Some 22 emergency projects were implemented for the distribution of inputs to war-affected farmers in Bosnia and in Herzegovina. Funds were made available for this activity by the Governments of Belgium, Finland, France, Italy, the Netherlands, Norway, Switzerland, United Kingdom, United States of America as well as by UNDP and UNHCR. Table 1 on the next page provides an overview of donor assistance and beneficiary countries in the region.

19. A "Task Force" for agriculture was established and chaired by FAO, and was the central point for coordination of agricultural activities in both entities of Bosnia and Herzegovina, with active participation of government officials, UN bodies, bilateral donor representatives and a large number of NGOs. As chairperson of the Task Force, the FAO Emergency Coordinator provided technical advice to donors and NGOs on agricultural issues such as suitability and quality aspects of seed varieties and planting material to be imported. In addition, the FAO Emergency Coordinator provided technical advisory services through a network of national agronomists working in the field.

The "Kosovo crisis"

20. The failure to find a peaceful settlement for the Kosovo and the commencement of armed conflict resulted in an almost unprecedented exodus of some 800,000 refugees into neighbouring countries, i.e. the FYR of Macedonia and Albania and the internal displacement of the majority of the remaining population (estimated at 600,000), while some 150,000 people had been displaced to other parts of Serbia and Montenegro. The rapidly evolving situation represented an enormous challenge for the international community and in particular for the UN humanitarian agencies. FAO responded swiftly to this challenge and initially provided support to the Ministries of Agriculture and Food in both Albania and the FYR of Macedonia to enable these countries to cope with the massive influx of refugees in the rural areas and the impact of this situation on the agricultural sector. However, the conditions changed rapidly after 10 June 1999 when an agreement was reached between the Government of the Federal Republic of Yugoslavia and NATO allowing the deployment of peacekeeping troops in the Province of Kosovo. By late July 1999, most of the refugees had returned to their original homelands in Kosovo.

Table 1: Emergency assistance by country and donor (1994-2000) - (in US$)

Beneficiary Country Bosnia & Herzegovina Albania FYR of Macedonia Kosovo Total
Donor          
FAO/TCP 818,000 787,200 705,052 387,000

2,697,252
UNHCR 7,697,354 -- -- --

7,697,354
UNDP 2,600,000 -- -- --

2,600,000
World Bank       565,000  
Finland -- -- -- 2,191,472

2,191,472
France 10,000 -- -- 193,416

203,416
Italy 668,083 -- -- 700,000

1,368,083
Luxembourg -- 256,000 -- 868,129

1,124,129
Netherlands 2,477,489 -- -- 3,000,000

5,477,489
Norway -- -- -- 1,239,956

1,239,956
Sweden -- -- -- 2,099,287

2,099,287
United Kingdom -- 626,000 -- --

626,000
United States -- -- -- 2,337,975

2,337,975
Multilateral 5,223,495 -- -- --

5,223,495
Total 19,494,421 1,669,200 705,052 13,582,235

35,450,908

Kosovo Province

21. In response to the new situation FAO undertook, in July 1999, a food and agricultural needs assessment mission to identify priority areas for intervention. The mission resulted in a reorientation of FAO's assistance strategy and led to the decision to move immediately the FAO Emergency Coordinator and additional technical staff from Tirana to Pristina to form an FAO Emergency Coordination Unit (ECU). By July 1999 this unit was operational and had the following Terms of Reference:

22. Initial operations of the FAO/ECU were covered by FAO's own resources. However, additional funding was secured through the generous response of donors to the UN Inter-agency Consolidated Appeal for the South Balkans which was launched under the auspices of the United Nations Office for the Coordination of Humanitarian Affairs (OCHA) in July 1999. Overall contributions to the FAO component of the appeal amounted to US$9.7 million, representing some 44 percent of the total amount originally sought, i.e. US$22 million. This represents a very high percentage, as average results of Inter-agency Consolidated Appeals amount to about 5 percent. In addition, donors having had the opportunity to assess the work of ECU have made additional funds available (US$2.9 million) for interventions to be implemented by ECU.

23. The initial emergency assistance provided to the Kosovar returnees consisted in the distribution of winter wheat seeds and fertilizer to some 70,000 of the most vulnerable families, which represented about 35 percent of the total needs. In addition, about 7,800 households received hand tools to enable them to restart agricultural activities.

24. At present, the FAO/ECU continues to provide technical assistance to the various agencies involved in emergency agricultural assistance. In addition, the FAO/ECU identified several assistance projects for vulnerable rural families, including returnees, displaced and "at-risk" (ethnic minorities) households for which funding has been secured (US$3.3 million from various donors). All project activities, with the exception of one in the forestry sector, are being implemented in cooperation and, in certain cases, based on specific agreements, with international NGOs.

25. Based upon the results of the wheat harvest expected in the summer of 2000, further needs for emergency assistance in the Province will be reviewed. FAO is currently involved in the distribution of fertilizer, maize and vegetable seed. In addition, support is being provided to re-establish a seed control laboratory and seed multiplication capacity (US$1.0 million). Other activities which are intended to pave the way for the transition from emergency to rehabilitation/development include support for the repair of farm machinery (US$1.5 million), a livestock vaccination campaign and development of a livestock database (US$161,500), support to the forestry sector with a view to its rehabilitation (US$1.24 million) and the establishment of a food surveillance system (jointly with WFP for an amount of US$628,425 - mentioned in paragraph 17 above). All these activities are being implemented in 2000 and in close collaboration with NGOs operating in Kosovo.

26. Most of the activities outlined above are being carried out with funds obtained under the 1999 Consolidated Appeal. A further appeal, the 2000 UN Inter-agency Consolidated Appeal for South-eastern Europe was launched under the auspices of OCHA in Geneva in November 1999. FAO appealed for US$25,060,000 to assist initially 70,000 needy households, a number that is expected to decrease to 40,000 by the end of 2000 reflecting the progressive improvement of the situation. Funds so far received by FAO2 amount to US$3.3 million (from Norway, Finland and Sweden). Additional pledges have been made in the amount of US$3.98 million, for which the official approval is awaited. Available funds allow to address the most urgent needs of the Province and contribute to the early recovery of the agricultural productive capacity of affected rural families in the Province, significant needs remain to be covered.

Albania

27. As an immediate response to the crisis, the FAO Director-General approved an emergency Technical Cooperation Programme (TCP) project (US$395,800 for a duration of six months) to assist Albanian authorities to cope with the massive influx of refugees from Kosovo. Twelve FAO staff members including an Emergency Coordinator responsible for the coordination of the assistance programmes for the agricultural sector undertaken by NGOs and other bilateral donors , were fielded in April 1999 to assist the Ministry of Agriculture and Food to respond to the humanitarian crisis and to carry out an in-depth assessment of the impact of the crisis on the food economy as well as on household food security. Following the cessation of hostilities in June 1999 and the return of most of the refugees to Kosovo, the Coordinator and the Coordination Unit were transferred to Pristina (July 1999) and continued their activities there.

28. An FAO report, "The Impact of the Kosovo Crisis on Albanian Agriculture and the Environment", prepared by the twelve FAO staff fielded to Albania in April 1999, was presented at a national workshop held in Tirana at the end of October 1999. Specific recommendations included the distribution of inputs to facilitate the recovery for the next agricultural campaign, training of vulnerable farmers, improvement of market facilities, rehabilitation and support to food processing factories, environmental measures and repair of roads to facilitate communications. Ongoing development projects were requested to take these recommendations into consideration in their implementation activities.

29. The FAO assistance programme in Albania to support Albanian families hosting Kosovar refugees through the provision of agricultural inputs benefited from contributions from the Governments of Luxembourg and United Kingdom (US$256,000 and US$626,000, respectively). FAO's own resources in support of this programme amounted to US$400,000. The assistance consisted of wheat seed, fertilizer and animal feed which were distributed through NGO partners to some 4,700 host families in the Kukes area, with the objective to reduce the negative impact of the refugees on the food security situation of resident households. Maize seed was distributed to an additional 7,800 host families. This assistance allowed the families to increase their wheat production by about 30 percent (i.e 2.4 tonnes per hectare) and increase milk availability, which if sold would have a value of about US$170 per farm household.

The FYR of Macedonia

30. As was the case for Albania, the FAO Director-General approved a TCP project to assist the Ministry of Agriculture to cope with the humanitarian crisis immediately after the onset of the conflict in Kosovo (US$400,000). However, the rapid evolution of the situation in the country, with the massive return of the refugees to Kosovo, limited the expected impact of the project and only a few volunteers were fielded. The project nevertheless succeeded in identifying some key areas where assistance in the short- and medium-term would be necessary, including food quality control at the borders and enhancing marketing facilities. These recommendations have been communicated to FAO technical divisions for follow-up.

31. In order to provide key agricultural inputs to some 9,200 Macedonian families hosting Kosovar refugees, FAO made US$400,000 available under its Technical Cooperation Programme. The inputs were distributed through a network of NGO implementing partners.

C. The rehabilitation phase

32. The rehabilitation of the agricultural sector of several independent countries in the Balkans (e.g. Croatia and Bosnia and Herzegovina) that emerged from armed conflicts during the first half of the 1990s is well under way but not completed. In this process, the World Bank and the EU are the main sources of financial support. While the Bank concentrated its support on the reconstruction and rehabilitation of farm infrastructure essential for the recovery of the productive capacity of the sectors, EC and European Bank for Reconstruction and Development (EBRD) channelled their support to general infrastructure and capacity building. IFAD and bilateral donors supported the rehabilitation process with projects in line with their particular mandate. A summary of contribution by donors and countries is provided in Table 2 on the next page.

FAO's contribution to the rehabilitation process

Slovenia

33. Slovenia's agricultural sector did suffer indirectly from the break-up of former Yugoslavia through major disturbances in its agricultural trade patterns and access to external markets, but did not suffer material damage.

Table 1. Donor contribution to the rehabilitation phase3

Country Donor Year Value (in US$)
Croatia FAO 1993 360,000
  World Bank 1996 25,000,000
  World Bank 1996 17,000,000
  World Bank 1996 42,000,000
  EBRD 1997 19,300,000
  World Bank 1998 40,600,000
Total Croatia     144,260,000
Bosnia & Herzegovina World Bank/IFAD 1996 25,000,000
  World Bank 1997 7,000,000
  FAO 1998 396,000
  IFAD/IDA 1998 15,000,000
Total Bosnia & Herzegovina     47,396,000
Kosovo World Bank 2000 25,000,000
FYR Macedonia IFAD 1996 8,100,000
  World Bank 1996 12,000,000
  World Bank 1996 8,400,000
  World Bank 1997 12,500,000
Total FYR Macedonia     41,000,000
Albania IFAD 1994 26,600,000
  World Bank 1994 10,000,000
  World Bank 1996 8,000,000
  World Bank 1999 24,000,000
  IFAD 1999 13,600,000
Total Albania     82,200,000

34. In 1991, the FAO/World Bank Cooperative Programme (FAO/WB CP) prepared an agricultural contribution to the World Bank Economic Memorandum. In 1994, at the request of the Government and the World Bank, TCI identified an irrigation development project and, in the same year, a joint EBRD/FAO mission visited Slovenia to identify projects in the area of agro-processing and rural credit. During 1997/98 FAO's Policy Assistance Branch for Europe (REUP) conducted a study on "Policy Options for Slovene Agriculture in an EU Accession Environment" which aimed at clarifying the country's options related to agricultural trade with the EU and other regional trade bodies and at assessing the competitiveness of the agricultural sector with a view to possible EU accession.

The FYR of Macedonia

35. The FYR of Macedonia was safeguarded from armed conflict but suffered major disruptions in its agricultural trade as the result of UN sanctions against Yugoslavia which interrupted the traditional trade flows with Serbia and Montenegro and by the blockade imposed by Greece (February 1994 to September 1995) depriving the country from traditional markets and suppliers in the south. The resulting drop in living standards in FYR of Macedonia is now being addressed through support programmes financed in particular by the World Bank and the EC.

36. With the assistance of the FAO/WB CP, three World Bank projects have been prepared in support of the agricultural rehabilitation sector. All three projects have been financed and are currently being implemented: (i) Irrigation Rehabilitation Project; (ii) Private Farm Support Project; and (iii) Private Sector Development Project.

Croatia

37. The reconstruction of war-affected areas in Croatia has received support mainly through three World Bank loans: the Emergency Farm Reconstruction Project (US$25 million), the Eastern Slavonia Reconstruction Project (US$67.3 million, of which US$ 40.6 million is Bank's credit) and the Coastal Forestry Project (mainly aiming at the restoration of forests destroyed during the war around Dubrovnik, Zadar and Split - total cost US$63.7 million, of which US$42 million comes from a World Bank loan), all formulated with FAO support. In addition, FAO formulated "A Strategy for Sustainable Agricultural Development" whose recommendations were endorsed by the World Bank and EBRD. These recommendations also led to the formulation and financing of the Private Farmers Support Services Project (US$30 million, 57 percent of which is finannced by a World Bank loan) and the preparation of a project in support of the construction of wholesale markets in three cities (Zagreb, Osijek and Rijeka - US$39.6 million, 49 percent of which is to be financed by an EBRD loan).

Kosovo

38. Immediately after the adoption of the UN Security Council Resolution 1244 on 10 June 1999, the FAO/WB CP took, in coordination with other FAO units, a number of initiatives for the preparation of a reconstruction and economic recovery programme and for the identification of investment projects in the agricultural sector, namely:

39. At the Second Donors' Conference in November 1999, the short- and medium-term Programme for Reconstruction and Recovery in Kosovo (US$2.34 billion), prepared by the European Commission and the World Bank, was submitted to all participants. The agricultural section in the main text and the agricultural annex were prepared by the World Bank with FAO/WB CP contributions. The total external financing requirements for the agricultural sector were estimated at US$235 million, including US$8 million for the winter of 1999/2000; US$86 million for April-December 2000 and US$141 million for the second phase reconstruction 2001-2004.

Bosnia and Herzegovina

40. Reconstruction Support in Bosnia and Herzegovina during the past four years (1996-99), has reached US$43 million in terms of completed agricultural projects. Projects are ongoing for an additional amount of US$70 million. Therefore, total disbursements are expected to reach US$113 million, corresponding to about five percent of total reconstruction support. Substantial amounts have been channelled to agriculture through credit lines, support to government institution building, rural housing and transportation but the exact amounts are not available.

41. FAO through the FAO/WB CP has assisted the Government in formulating the two main World Bank-financed projects in agriculture: the completed Emergency Farm Reconstruction Project and the on-going Forestry Sector Reconstruction Project. FAO/CP also provided regular backstopping and monitoring and evaluation support to both projects. The Emergency Farm Reconstruction Project can be considered a success as its implementation targets were all met due to the efficiency of a Project Management Unit in Sarajevo, hence vital inputs and in particular imported livestock could be made available to the beneficiaries.

42. In 1998, FAO financed, under its TCP programme, the formulation of a "Medium-term Agriculture Sector Strategy for Bosnia and Herzegovina" (US$296,000). The project involved national specialists from both entities who worked in close cooperation with international specialists in undertaking analytical sector work. The final strategy document is the basis of programming and planning work in both entity Ministries, which is being undertaken with EU Phare assistance. In the Federation, the document has been sent to the cantonal authorities for comments which are expected to be included into the document prior to its submission to Parliament for approval. The document was well received by the donor community as it contains numerous recommendations for areas of donor financing.

Federal Republic of Yugoslavia

43. In April 2000, FAO's Special Relief Operations Service (TCOR) fielded a needs assessment mission to Serbia and Montenegro. Based on its findings, the mission recommended that FAO initiate an emergency programme for the supply of agricultural inputs and implements (also including emergency support to livestock) to vulnerable small-scale farmers, refugees and IDPs. FAO intends to submit several project proposals for the forthcoming Mid-term review of the UN Inter-Agency Consolidated Appeal for South-eastern Europe (end May 2000).

IFAD's contribution to the rehabilitation process

Bosnia and Herzegovina

44. IFAD co-financed the Farm Reconstruction Project and contributed in particular to the livestock restocking component (US$6.3 million in the form of a loan and US$1 million as grant). Considering the strong need for continued restocking, IFAD, in April 1997, approved the Small Farm Reconstruction and Development Project. The project was conceived as a follow-up to the Farm Reconstruction Project and covered both entities (Federation of Bosnia and Herzegovina and Republika Srpska). Total cost of the project amount to US$15 million of which
US$14 million on highly concessional terms from IFAD and US$1 million on IDA terms from the World Bank. The project has been operational since February 1998 and is intended mainly to finance the following components: farmer training programme to promote local capacity building; import and local procurement of livestock; livestock distribution; limited institutional support; and local support services for livestock.

Federal Republic of Yugoslavia

45. No detailed independent assessment of damage to the agricultural sector and related agro-industries has been made. Estimates are, however, available from sources within Federal Republic of Yugoslavia. Medium/long term damage is limited in the Republic of Montenegro but very substantial for some agro-industries, in particular the fertilizer industry in the Republic of Serbia. The agricultural sector has been affected by the lack of domestic investment capital during the 1990s and from the embargo by western countries. Major political changes are a prerequisite for the resumption of substantial investment support from IFIs.

IV. FROM EMERGENCY TO RECOVERY/REHABILITIATION AND DEVELOPMENT

46. With the emergency phase having come to a conclusion, rehabilitation/recovery and development assistance to the region is organized under a system of different frameworks, of which the Stability Pact for South-eastern Europe4 is the most important. Within this Stability Pact the EU has organized a process of Stabilization and Accession covering Albania, Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the FYR of Macedonia as its main contribution to the Stability Pact providing a political and economic development perspective to encourage regional cooperation and to offer a clear prospect of integration into the EU's structure. Under these arrangements the World Bank and the European Commission have been mandated to coordinate all matters related to the economic recovery, reform and reconstruction of the South-eastern Europe. Under these arrangements other donor initiatives will have to be integrated into the overall recovery and rehabilitation programme for the region.

A. The Stability Pact for South-eastern Europe

47. In order to achieve long-term peace, increased prosperity and poverty reduction in south-eastern Europe, the international community realized that this would be conditioned by the implementation of domestic reform programmes, the rehabilitation of infrastructure, strong governance and institutions and policies to foster social inclusion and cohesion. To this end, the Stability Pact for the Region was adopted at a special meeting of foreign ministers, representatives of international organizations, institutions and regional agencies. The Stability Pact is the instrument to achieve these goals, with the World Bank and the European Commission as the institutions responsible for coordinating a comprehensive approach for regional development and donors' conferences to secure the required external financing.

48. The Regional Funding Conference to discuss regional reconstruction projects in South-eastern Europe (Brussels, 29 to 30 March 2000), convened under Article 41 of the Stability Pact, was organized by the European Union and the World Bank which had carried out an assessment of the needs for rebuilding destroyed regional infrastructure. The objective of the Conference was to raise the necessary funds for the implementation of the first stage priority projects in the framework of the "Quick Start Projects" within the forthcoming 12 months. The aim was to raise _1.8 billion; however, total pledges reached _2.4 billion. Within the rehabilitation interventions, emphasis is given to areas such as democratization and human rights; economic reconstruction, development and cooperation; defence and security affairs and cross-cutting issues such as anti-corruption initiatives, trauma and reconciliation/social development initiatives. No explicit reference within the pledging requests was made to the rehabilitation of the agricultural sectors in these countries, which continue to be of importance in their contribution to GDP and in their provision of employment to a sizeable rural population. Transition to market-based systems, the shock experienced as a result of the breaking away of traditional markets caused by the conflict in the region, the return of refugees to rural areas and association with the EU will require adjustments by these countries for which a broad range of technical assistance is required. These could concern advice in policy formulation, specific advice on crop and livestock production issues, institutional issues, marketing and agro-processing problems, land tenure questions, irrigation rehabilitation and forestry development.

B. Future activities of Rome-based food and agricultural organizations to meet rehabilitation needs in the agricultural sectors in the region

WFP

49. WFP has been the main provider of emergency food assistance during the recent crises. However, recent food economy surveys suggest that food aid is not the most appropriate and effective tool for development in the Balkans today. It is thus unlikely that WFP will be involved in food aid in the Balkans. However, should circumstances require it, the Programme stands ready to provide emergency assistance.

FAO

50. In defining its future activities in the region, FAO intends to give particular attention to assisting the countries in moving from emergency to recovery/rehabilitation and development as well as in implementing reforms in their agricultural sectors. These will include policy and agricultural technical assistance that contributes to establishing market economies and institutions that foster increased production and productivity as well as social inclusion and cohesion, as established in the Stability Pact for South-eastern Europe. Priority will also be assigned to assisting the governments of the region in identifying investment priorities and in formulating project proposals aimed at a sustainable reconstruction and development of the agricultural and rural sectors. In providing this assistance FAO will continue its close association with development partners specially with those involved in the Stability Pact and in particular with its Secretariat.

51. As regards Kosovo, agreements are being finalized with the World Bank and UNMIK for the implementation of an Emergency Farm Reconstruction Programme (EFRP) in Kosovo, for a total expected budget of US$25 million. The World Bank and the FAO Investment Centre formulated the EFRP. The project aims at creating conditions for an early recovery of agricultural production over the next two cropping seasons and to relaunch the rural economy by investing in key farm assets (cattle and farm mechanization) and key agricultural services (veterinary services and policy analysis capacity building). The EFRP has four components: (i) support to re-establishing the national herd (US$8 million); (ii) establishment of veterinary services (US$2 million); (iii) farm machinery repair and replacement (US$13 million); and (iv) agriculture policy capacity building (US$1 million). FAO is also currently finalizing a project agreement with Switzerland that will provide US$1.2 million in support of Emergency Coordination Unit's interventions leading from emergency to the rehabilitation/development phase. The project's objectives are to ensure continued monitoring of the status of the agricultural sector and information dissemination; to support dynamic groups in activities which will lead to self-reliance and to strengthen UNMIK's capacity to develop a coherent agricultural policy for the Province. The project is expected to last until December 2001.

52. In the meantime, UNMIK has prepared a strategic plan for the agriculture sector that has as its main objective to support the structural changes on the rural economy and foster the development of private farming with a commercial orientation. This would ensure the provision of minimum levels of income and food security to the rural communities. Priority areas of intervention indicated in the document concern adjustment of agricultural production patterns to changed conditions, restocking of the livestock herd, support of farm machinery (repair), reorganization of marketing and agro-processing (based on private small and medium enterprise structures), establishment of a rural finance system, irrigation rehabilitation, forestry development, land administration and institutional development (including advisory services and research rationalization). FAO could assist in all of these areas provided the required funding is made available.

53. A considerable number of investment projects for World Bank and EBRD financing have been prepared by the FAO Investment Centre during the past three years (see above) and these became operational towards the end of the 1990s with initial disbursement being slow. Hence, many of these projects will have their full impact within the next two to four years and will contribute to the development efforts of these countries. In addition, the Investment Centre is currently involved in the formulation of several projects and studies related to the rehabilitation and development of different subsectors of the agricultural economies in the region. It is expected that several of these projects could lead to substantial loans from the World Bank or EBRD with possible EC co-financing. These activities concern:

Albania:
Fisheries Project (World Bank);
Agricultural Services Project (World Bank).
Bulgaria:
Agricultural Sector Adjustment Loan II (World Bank);
Irrigation Rehabilitation (EC-SAPARD and World Bank);
Forestry Project (World Bank);
Milk Sector Review (EBRD).
Croatia:
Agricultural Sector Review (World Bank);
Sava River Food Control (World Bank);
Dairy Subsector Review (EBRD);
Restructuring of an Agrikombinat in Eastern Slavonia (EBRD).
Romania:
Irrigation Rehabilitation (World Bank);
Forestry Reform Support Programme (World Bank);
Cultural Heritage Project (GEF);
Agricultural Pollution Control Project (GEF);
Milk Sector Review (EBRD).
Kosovo:
Creation of Advisory Centre For Agri-business Entrepreneurs (EBRD).

 

IFAD

54. Bosnia and Herzegovina. IFAD is currently preparing a livestock and rural finance project in Bosnia and Herzegovina which will be based on a two-stage approach of support and financing for the promotion and development of a village-based rural finance system and the establishment of a credit fund for small-scale enterprise development. The expected project cost amounts to US$10 million. The proposed project is designed as part of a long-term intervention of IFAD support to rural areas, mainly the highlands and war-stricken areas of Bosnia and Herzegovina which have the highest percentage of poor, returning refugees and displaced people, allowing project activities to evolve in response to changing circumstances and new opportunities. The present project represents the first tranche of IFAD's funding for an overall long-term intervention. A phased approach would enable the project to respond in a flexible manner to the emerging demands of an economy undergoing substantial reform, and would be able to reflect the adjustments necessary to help build civil society and effect the transition from emergency-like activities to more development-oriented activities motivated by and subject to the rules of an open and market-driven economy.

55. Albania. Within the next three years the main emphasis of IFAD's activities will be on support for project implementation and consolidation of the substantial investments undertaken so far. No new IFAD-financed projects will be developed for Albania.

56. IFAD's interventions in Albania are tailored to meet local requirements, and rest on a marginal area development strategy. This emphasis has guided the Fund's existing interventions providing a basis for promoting sustainable increases in economic activity in more disadvantaged areas in Albania. The Mountain Area Development Programme (MADP) was presented to the Executive Board in December 1999; hence, the project will be implemented during the first half of the new decade. The project amounts to about US$13.6 million including a grant of US$0.4 million and will build upon, consolidate and extend the achievements of the two previous projects targeting 14 of the most disadvantaged districts in Albania. The initial activities to be supported by MADP comprise: (i) provision of rural financial services; (ii) support for rural infrastructure, most notably rehabilitation of small gravity-irrigation schemes, formation of water users associations, rehabilitation of feeder roads and domestic water supply; and (iii) support to primary agricultural production in terms of pasture management, veterinary care and assistance for crop and livestock production.

57. The FYR of Macedonia. IFAD's first project in FYR of Macedonia, the Southern and Eastern Regions Rural Rehabilitation Project is currently implemented and expected to continue into 2002. The project, for which IFAD is financing US$8.1 million (at highly concessional terms), although approved in 1996, became operational in late 1997. The project has been successful in establishing a wholesale lending mechanism managed by a private financial institution responsible for the provision of credit to individual farmers in the project area. Currently, IFAD is developing the Agricultural Financial Services Project (AFSP), scheduled for presentation to the Executive Board in September 2000. This second project, tentatively planned for an amount of US$8 million, will be national in scope and build on the experience of the previous rural rehabilitation project. Its activities are scheduled to include: (i) a rural financial services component with a range of credit products (social, productive and support to SMEs); and (ii) an agricultural marketing component supporting, through extension services and technical assistance, the development of agro-processing industries, agricultural products with export potential, and on and off-farm SMEs. No other assistance is foreseen for FYR of Macedonia during the next three years.

58. IFAD's interventions in FYR of Macedonia are designed to meet local requirements and work within the Government's overall development strategy. One of the most significant issues facing the country is the massive level of unemployment (over 40 percent) that resulted from the retrenchment of the economy following independence. Future IFAD focus on income and employment generating activities in rural areas, as well as the continuing provision of credit for productive agricultural activities, will help alleviate rural poverty and address unemployment.

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1  This document covers mainly Albania, Bosnia and Herzegovina ,Croatia, Former Yugoslav Republic of Macedonia and the Federal Republic of Yugoslavia.

2  As of 15 May 2000.

3  Some of the projects, due to their implementation period of about five years, have a strong developmental component.

4  Participants of the Stability Pact include all EU members and G8 countries, Albania, Bosina and Herzegovina, Bulgaria, Croatia, Hungary, Romania, Slovenia, FYR Macedonia, Turkey as well as all major international organizations and ongoing initiatives in the region.