EAU_MAFRD_-_DI_-_Final_Report_to_USAID.pdf

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KOSOVO NEW

OPPORTUNITIES FOR

AGRICULTURE PROGRAM

ESTABLISHMENT OF AN ECONOMIC ANALYSIS UNIT

(EAU)

A REPORT PREPARED FOR THE MINISTRY OF

AGRICULTURE, FORESTRY AND RURAL

DEVELOPMENT (MAFRD)

FEBRUARY 2012

This publication was produced for review by the United States Agency for International Development. It was prepared by Tetra Tech ARD.

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ESTABLISHMENT OF AN ECONOMIC

ANALYSIS UNIT (EAU)

A REPORT PREPARED FOR THE MINISTRY

OF AGRICULTURE, FORESTRY AND

RURAL DEVELOPMENT (MAFRD)

Prepared for the United States Agency for International Development, USAID Contract

Number EDH-I-00-05-00006-00, TO AID-165-TO-11-00001, Kosovo New Opportunities for Agriculture Program, under the Rural and Agricultural Incomes with a Sustainable

Environment (RAISE Plus) Indefinite Quantity Contract (IQC).

Implemented by:

Tetra Tech ARD

159 Bank St., Suite 300

Burlington, VT 05401

DISCLAIMER

This report was prepared by the New Opportunities for Agriculture project team of Tetra

Tech ARD based on a Final Report prepared by:

Prof. Dr. Muje Gjonbalaj, PhD, Chairman, Department of Agricultural Economics, University of Pristina, Pristina, Kosovo;

Dr. Drini Imami, PhD, Department of Agricultural Economics, University of Tirana, Tirana, Albania; and

Dr. Martin Mautner Markhof, PhD, AgroService, Vienna, Austria [Funded by GIZ]

The authors’ views expressed in this publication do not necessarily reflect the views of the

United States Agency for International Development or the United States Government.

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CONTENTS

CONTENTS............................................................................................................................ iii

List of Tables ............................................................................................................................. v

List of Acronyms and Abbreviations ........................................................................................ vi

1. Executive Summary

Goal of Assignment

Proposed EAU Mission Statement

Summary of Key Findings

Summary of Key Recommendations

2. Background

3. Recommended EAU Scope of Work

Proposed Main Activities for EAU

Costing and Gross Margin Analysis

Farm Accountancy Data Network (FADN) & Standard Output (SO)

Market and trade research

Outlook and Projections

Competitive Analysis

Agriculture Surveys

Forestry Economics

Monitoring and Evaluation

Market Price Information System

Value Chain and Supply Chain Analysis

Rural, Regional & Socio-Economic Development

Consumer Behavior

Coordination of Work within MAFRD

Relevant Donor Activities

European Union / EU Twinning

USA / USAID

Germany / GIZ

Austria / Austrian Development Agency (ADA)

Sweden / SIDA

Switzerland / HELVETAS, InterCooperation

4. Work Plan and Capacity Building Plan iv

Recommended Work Plan

Recommended Capacity Building

5. Annexes

Annex 1: Joint Scope of Work for EAU Design Mission (Combined GIZ and USAID

NOA Mission)

Annex 2: Job Description – EAU Manager

Annex 3: Examples of Agricultural Economic Analysis Institutions in Other EU

Member Countries

Annex 3.1 Poland - Institute of Agricultural and Food Economics/National

Research Institute Poland

Annex 3.2 Lithuania - Institute of Agrarian Economics

Annex 3.3 Hungary - Research Institute for Agricultural Economics (AKII)

Annex 3.4 Germany - The Johann Heinrich von Thünen Institute (vTI), Federal

Research Institute for Rural Areas, Forestry and Fisheries

Annex 3.5 Austria Federal Institute of Agricultural Economics (Bundesanstalt für

Agrarwirtschaften - AWI v

LIST OF TABLES

Table 1: Core Economic Analysis Activities Proposed for EAU and Expected Outputs, Outcomes and Impacts

Table 2: Agricultural Economic Analysis Activities Involving Other MAFRD or

External Entities and Roles

Table 3: Recommended Work Plan for Phasing-In Key EAU Activities

Table 4: Capacity Building Activities Recommended for EAU Staff

Table 5: Recommended Capacity Building Timetable for EAU Staff

Table 6: Recommended Capacity Building Activities Timetable for University of Pristina . 17

Table 7: Indicative Timetable for Proposed Capacity Building STTA file:///C:/Users/Martin/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/QJLAJ9VK/Final%20Report%20Economic%20Analysis%20Unit%20Imami-Gjonbalaj%20120301.docx%23_Toc318401672 file:///C:/Users/Martin/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/QJLAJ9VK/Final%20Report%20Economic%20Analysis%20Unit%20Imami-Gjonbalaj%20120301.docx%23_Toc318401672 file:///C:/Users/Martin/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/QJLAJ9VK/Final%20Report%20Economic%20Analysis%20Unit%20Imami-Gjonbalaj%20120301.docx%23_Toc318401673 file:///C:/Users/Martin/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/QJLAJ9VK/Final%20Report%20Economic%20Analysis%20Unit%20Imami-Gjonbalaj%20120301.docx%23_Toc318401673 file:///C:/Users/Martin/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/QJLAJ9VK/Final%20Report%20Economic%20Analysis%20Unit%20Imami-Gjonbalaj%20120301.docx%23_Toc318401674 file:///C:/Users/Martin/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/QJLAJ9VK/Final%20Report%20Economic%20Analysis%20Unit%20Imami-Gjonbalaj%20120301.docx%23_Toc318401675 file:///C:/Users/Martin/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/QJLAJ9VK/Final%20Report%20Economic%20Analysis%20Unit%20Imami-Gjonbalaj%20120301.docx%23_Toc318401676 file:///C:/Users/Martin/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/QJLAJ9VK/Final%20Report%20Economic%20Analysis%20Unit%20Imami-Gjonbalaj%20120301.docx%23_Toc318401677 file:///C:/Users/Martin/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/QJLAJ9VK/Final%20Report%20Economic%20Analysis%20Unit%20Imami-Gjonbalaj%20120301.docx%23_Toc318401678 vi

LIST OF ACRONYMS AND ABBREVIATIONS

ADA Austrian Development Agency

ARDP Agriculture and Rural Development Program 2007-2014

CAP Common Agricultural Policy

EAU Economic Analysis Unit

EC European Commission

EU European Union

EUROSTAT European Union Trade Statistics Database

FADN Farm Accountancy Data Network

FAO Food and Agriculture Organization of the United Nations

FAOSTAT FAO Trade Statistical Database

GDP Gross Domestic Product

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH

IT Information Technology

KPEP Kosovo Private Enterprise Program

M&E Monitoring and Evaluation

MAFRD Ministry of Agricultural, Forestry and Rural Development

MDC Municipal Development Center

MIS Market Information System

MOU Memorandum of Understanding

MSc Master of Science

NGO Non Governmental Organization

NOA New Opportunities for Agriculture Program

PhD Doctor of Philosophy

SIDA Swedish International Development Agency

SNV Netherlands Development Organization

SO Standard Output

SOW Scope of Work

SPSS Statistical Package for the Social Sciences

STTA Short-Term Technical Assistance

TA Technical Assistance

TAIEX EU Technical Assistance and Information Exchange Instrument

TOR Terms of Reference

UNSTAT United Nations Trade Statistics Database

UP University of Pristina

USAID U. S. Agency for International Development

USD US Dollar

E S TABLISHMENT OF AN E CONOMIC A N ALYSIS U NIT : A R E PORT

P R EPARED FOR THE M I NISTRY OF A GRICULTURE , F ORESTRY AND

R U RAL D EVELOPMENT

BY PROF. DR. MUJE GJONBALAJ,

DR. DRINI IMAMI AND DR. MARTIN MAUTNER MARKHOF

In late 2011, The Ministry of Agriculture, Forestry and Rural Development (MAFRD) established the objective of creating an economic analysis unit (EAU) within the ministry that could conduct economic analyses to support the ministry’s policy making processes.

MAFRD contacted the Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH

(GIZ) and subsequently USAID/NOA to request technical assistance in the design and start-up of the EAU. A team of three consultants (GIZ – 1 and USAID/NOA) was identified and work on this assignment within MAFRD during the months of January-February, 2012. The combined Scope of Work (SOW) for the three consultants is given in Annex 1. This report presents the team’s joint findings and recommendations.

1. EXECUTIVE SUMMARY

GOAL OF ASSIGNMENT

The strategic goal of the assignment was to assist MAFRD in the development of an internal economic analysis capacity that would contribute to improving the competitiveness of

Kosovo’s agricultural subsectors, agro-processing and rural locations. Improved policy making based on reliable data will create the framework conditions for sustainable development and competitiveness in rural areas. Thereby, poverty and out-migration from rural areas will be reduced.

The more specific objective was to define the specific objectives, functions, and activities of

EAU and to assess the resources key to the functioning of the EAU.

PROPOSED EAU MISSION STATEMENT

The EAU will provide data and analyses to MAFRD to achieve better planning, programming, and policy making, and to support extension service programs to improve farm management.

SUMMARY OF KEY FINDINGS

1. Limited data produced and limited access / use of the currently elaborated data

2. Lack of data / analysis as background for decision making by MAFRD including subsidies

3. Lack of appropriate information for farmers and agro-enterprises (costing, market information, etc.)

4. Non-functional advisory service

5. Limited coordination with other Kosovo institutions (universities, other agencies ...)

6. Weak capacity building process in place

SUMMARY OF KEY RECOMMENDATIONS

1. Organization of data collection systems and surveys (e.g. annual agriculture survey, MIS etc.)

2. Assessment of market trends, sector’s competitiveness and weaknesses to provide guidelines for policy making

3. Providing information / analyses related to farmers‘ and processors‘ decision making

(e.g. costing, market information etc) in order to improve management / efficiency

4. Restructuring advisory services (e.g. coordinated under MAFRD)

5. Improve linkages with other Kosovo institutions - EAU should play key role in coordinating institutions that provide data / analyses and research (e.g. University of

Pristina, donor projects etc.)

6. Need of support for capacity building activities for EAU staff according to work requirements

2. BACKGROUND

The Republic of Kosovo occupies an area of 10,908 km². Agricultural land comprises 53% of

Kosovo's total land area and forests 41%. The majority of agricultural land is privately owned

(80%), providing subsistence farming for individual households; however around 60% of the forest land belongs the government. Although Kosovo's agricultural sector is generally characterized by small farms, low productivity, and underdeveloped advisory services, agriculture contributes around 12% of Kosovo's overall GDP. Agriculture is the largest employer in post-war Kosovo, accounting for approximately 35% of total employment. A considerable part of the rural population engages in agriculture: 90% of the population has land for cultivation, 55% has livestock and 15% grows food primarily for self consumption.

Before the conflict of the 1990s, Kosovo was mostly food self-sufficient with large quantities of agricultural products exported to the region. This situation reversed after the war as traditional markets were lost, livestock numbers plummeted, and use of agricultural land area dropped drastically and the availability of previously subsidized inputs (fertilizers and irrigation water) reduced dramatically. The sector is now characterized by unfavorable farm structures (average land holding of less than 2 ha per family spread into eight plots), outdated farm technologies, lack of technical expertise, outmoded farm management practices, a weak rural infrastructure, a rudimentary rural advisory system and limited access to credit.

The Ministry of Agriculture, Forestry and Rural Development (MAFRD) was established in

2002 with supervisory functions in rural development and forestry and transformed into a national ministry at independence in 2008. The MAFRD strategy is formulated in the

Agriculture and Rural Development Plan 2007 - 2013 (as revised in 2009) and in the Action

Plan of the Economic Vision of Kosovo 2011 – 2014.

In most EU new transition countries members, agriculture related economic research is conducted by “Institutes of Agriculture Economics.” However, the names differ slightly from one country to another. In most cases, such institutes are responsible for statistics and economic analysis related to agriculture and rural development, and usually such institutes are Liaison Agencies for the Farm Accountancy Data Network (FADN).

Some of the typical tasks that such institutes implement are:

- Farm Accountancy Data Network (FADN) and Standard Output calculation (SO)

- Unit costs of the selected agricultural products

- Market Price Information System

- Market and trade research

- Consumer behavior

- Outlook/projections of agricultural markets

- Competitiveness analysis

- Value chain/supply chain analysis

- Rural, regional and socioeconomic development

Such institutes receive their core funding from the respective countries’ Ministries of

Agriculture, but also often implement research projects financed from the funds of the other ministries or the EU. Such institutes collaborate with universities and some of its members hold joint appointments as university faculty, Graduate students typically hold internships and complete research for MSc and PhD theses in close cooperation with the Institutes.

However, such institutes typically have decades of experience and one hundred or more highly qualified staff), enabling the realization of many complex tasks. See Annex 3 for more detailed information regarding Poland, Hungary, Lithuania, Germany and Austria.

3. RECOMMENDED EAU SCOPE OF WORK

The Economic Analysis Unit (EAU) is a staff unit reporting directly to the Permanent

Secretary (PS), at least for the time being. It was established at the beginning of January 2012 and is actually staffed with 3 employees. It is expected that the vacancy “Head of Unit“ will be advertised in February 2012 and eventually a person will be selected and hired by April /

May 2012. In addition, it is expected that another staff will join EAU later this year, who will be specialized in forestry economics analysis.

PROPOSED MAIN ACTIVITIES FOR EAU

The menu of activities proposed for EAU shown in Table 1 is divided into core activities, information systems and other activities. The table below provides in form a “log frame”, also the expected outputs, outcomes and impact as result of the proposed activities.

The Farm Accountancy Data Network (FADN) is an instrument for evaluating the income of agricultural holdings and the impacts of the European Union (EU) Common Agricultural Policy (CAP). Establishment of such an FADN capacity is a condition for Kosovo’s eventual accession to the EU.

SO is the monetary value of the gross agricultural output at the farm-gate price for individual farm activities

Table 1: Core Economic Analysis Activities Proposed for EAU and Expected Outputs, Outcomes and Impacts

Core Analysis

Activities

Information

Systems Required Outputs Outcomes Impacts

Costing, Gross

Margin

FADN

Key competitive sectors identified

Optimal farm size is identified

Farmers invest in more profitable/ competitive activities and improve management

MAFRD and donor support is more efficient

(targeting the right sectors and farms)

Kosovo farmers increase profits

Kosovo

Agriculture becomes more competitive

Market and trade analysis

Market Price

Information System

Outlook/projections

& scenarios

Monitoring &

Evaluation

Other activities:

- Value chain/supply chain analysis

- Rural, regional & socioeconomic development

- Consumer behavior

Costing and Gross Margin Analysis

Conducting costing and gross margin analysis for the main agriculture activities is indispensable to assess competitiveness of agriculture products. So far, there have been dozens of “costing analysis exercises” carried out by various institutions (mostly donor projects) for various products, applying different methods for different products – most of the cases such costing analysis was not updated.

EAU will conduct costing and gross margin analysis in a systematic way, updating the data regularly – this is the first priority activity to be developed. Costing and gross margin information is not only useful for policy-making (e.g. choosing the most promising sectors to support through subsidy schemes) but also, through the extension services, to inform farmers for investment options and preparing business plans. The quantitative analysis is based on a set of indicative production budgets estimated specially for this information, aimed to reflect the current costs and returns to agriculture production in different selected regions. These budgets’ models may cover a range of annual & perennial crop (as fruits, vineyard orchards and vegetables in open field & under protected areas) and livestock products, whose selection will be in line with the Kosovo agriculture development priorities and Ministry and Donors support strategies for agriculture and rural development. More specifically, some of the main agriculture activities that are proposed by various projects are: vegetable (tomatoes, pepper, and cucumber), fruits (apple, table grape), livestock (cattle, small ruminants) and cereals.

Data collection is mainly realized through direct structured interviews with the farmers and specialists (e.g. agronomists) to be done by two future short term experts (STE) jointly with

EAU staff. In the longer run, such data will be generated through FADN as in other countries

(e.g. Hungary) and STEs should compile a list of questions to be added to the current FADN survey questioner, for this purpose. The focus of structured interviews/questioners is to collect data on quantity of inputs used, yields (for surface unit or year), the medium selling price of inputs and outputs (or prices by type and quality category), etc. In addition will be collected data related to the deprecation costs, which are: i) the establishment costs in perennials crops; ii) store-houses, greenhouses, different tools, etc; iii) equipments invested, etc.

Data analysis is realized based on data set collection in context of, medium yield and input assumptions, and investment costs for each models of enterprisers, using a set of interconnected excel sheets (program) or other programs, that will be designed by the consultants based on previous experiences (e.g. FAO, GIZ, InterCooperation). In addition to excel, also SPSS may be used for more elaborated analysis of data. Moreover, InterCooperation has designed software for costing analysis which has been implemented by ca 20 farms, and that software can be considered too as a basis by the experts (EAU already possesses the software and has been trained to use it). InterCooperation has shown willingness to transfer the ownership of this software to EAU, and provide TA for improving it, if necessary, but that kind of support should come from MAFRD and be included in a

Memorandum of Agreement. The STTAs should decide which is the most suitable format and software of data analysis and reporting, during the costing analysis that they will do jointly with EAU (TOR of two STTAs are provided in the section of TOR in this report).

Last, but not least, during this mission the consultants assisted EAU to collect a rich archive of previous costing analysis done in Kosovo. These studies were categorized by subsector and products, and will be reviewed by the STE in the early stage of the work.

In the appendix of the report there are found more details regarding costing, and there is proposed also an outline of TOR for STEs that would assist for this task.

Farm Accountancy Data Network (FADN) & Standard Output (SO)

FADN is an instrument for evaluating the income of agricultural holdings and the impacts of the subsidy schemes. Derived from national surveys, the FADN is the only source of microeconomic data that is harmonized, i.e. the bookkeeping principles are the same in all countries. FADN data are used to assess primarily Standard Output (SO) and farm typology.

While establishment of FADN and calculations of SO are required by EU in context of approximation process, such data may be used in various economic analysis assignments, including also costing. In some countries, FADN survey is used to collect additional data to calculate costing (e.g. in Hungary or Macedonia) and that would be a suitable approach for

EAU in Kosovo too.

There has been an attempt by Statistical Division of MAFRD to implement FADN and SO calculation, at simplified version. On the other hand, the staff of EAU has been trained to do a more complete analysis and calculation of SO.

In the future, EAU could be responsible to design the FADN survey and analyze, while

Statistical Division of MAFRD could be responsible to supervise the field implementation in cooperation with extension services that may do the data collection. The current Twining

Project and TAIEX Project may assist in this process.

Market and trade research

The objective would be to assess recent trends in domestic and international markets and trade. Provision systematic (monthly) trade (import-export) data from customs and/or

Statistical Agency, in cooperation with Statistical Department of MAFRD, is necessary to perform such analysis. In addition, know-how of using various international trade databases and information sources is necessary. MIS data as well as information on consumer behavior would provide complementary added value in analyzing market and trade.

The “Market Development Division” that will be established at MAFRD is expected to take the lead regarding market and trade research, however, strong cooperation with EAU, Statistical Agency and Statistical Department of MAFRD will be necessary and useful.

Outlook and Projections

Projections/outlooks may be used as indicators of possible future development in the agriculture markets (e.g. price evolutions). A second use of the Outlook projections is to provide a basis for scenario analysis (e.g. what will happen with the consumption, cost and prices of apple if there will be introduced subsidy X or will be wavered tariff Y for A input – how much the consumption may increase, import may be substituted, prices may fall due to such subsidy or input tariff waver).

For calculating projections/outlooks there are needed past and present data for main variables to be analyzed (e.g. input, products prices, costing data, import, export and production data etc.). Data that will be collected and used for costing analysis (as shown above) including market and trade data and MIS (as shown below) will serve as a basis for such research. In addition, specific data related to some crops may be collected through the extension services.

There are different methods and approaches (ranging from simple excel application to more complex econometric analysis and software). Staff of EAU will need training and coaching in the first stages of such analysis to acquire the basic tools and know-how for this purpose

(Capacity Building needs of EAU staff are listed and explained in a separate report).

Competitive Analysis

The purpose is to assess whether agricultural systems are competitive under existing technologies and prices – that is, whether farmers, traders, and processors earn profits facing actual market prices. There are different methods/approaching for assessing competitiveness of various subsectors such as Policy Analysis Matrix (quantitative approach) or elements of

Value Chain Analysis (usually more qualitative).

Staff of EAU will need training and coaching in the first stages of such analysis to acquire the basic tools and know-how for this purpose (Capacity Building needs of EAU staff are listed and explained in a separate report).

Agriculture Surveys

Agriculture surveys are necessary to collect data from field and based on them to produce key indicators on the agriculture sector (e.g. yield, production, sales, inputs etc.). There should be at least an annually survey to collect all main data on agriculture subsectors. In the past, Agency of Statistics has implemented such survey through external funding, however, in

2010 and 2011; the yearly survey was not carried out due to missing external funds.

Yearly agriculture surveys, as well as other more specific surveys (e.g. FADN) may be carried out on sustainable basis in the future, if, as part of the extension reform, extension services at MAFRD will have resources/staff in the field directly employed by MAFRD that can collect such data.

Statistical Division of MAFRD could be responsible to planning and organization of the yearly survey in cooperation with extension services, while EAU could assist in the process of the design and analyzes of the yearly survey. The current Twining Project may assist in this process.

Forestry Economics

MAFRD proposes to eventually incorporate economic analysis related to the forestry sector into EAU, with support from several donors already supporting MAFRD’s work in forestry.

An additional specialist should be hired to cover/specialize in this sector. FAO project

GCP/KOS/005/FIN may assist by providing technical expertise and training the EAU staff in forestry economic analysis. Finish Development Agency (which is currently financing FAO project GCP/KOS/005/FIN), SIDA, SNV and the European Union with a forestry twinning project are currently engaged in the forestry sector and may further assist in establishing forestry economic analysis systems.

Monitoring and Evaluation

At present, Monitoring and Evaluation is carried out by Management Authority, MAFRD – one person/specialist is responsible for it. Strong cooperation with EAU in the near future

(e.g. 2012) for monitoring and evaluation is highly recommended, while in the longer run

(after 2013) the possibility of shifting this function to EAU may be considered.

Market Price Information System

Having in place a functional Market Information System (MIS) to collect and report data on wholesale, retail and farm prices daily/weekly is indispensable – such information is needed for gross margin analysis, market analysis, competitive analysis etc. MIS prices data would be useful also for traders and farmers themselves, if they are communicated systematically to them (e.g. through extension services).

So far, InterCooperation (Swiss Development Cooperation) has run MIS till 2009, and Food-

KS (NGO) is running MIS in Kosovo. Food-KS collects wholesale and retail prices on 500 agriculture products and inputs on weekly basis. The system of data reporting of Food-KS is easy to use and fairly good, but there are concerns about the quality and reliability of data collected given the high number of items for which data are collected. In addition, they do not apply weighted average (they apply on arithmetic average). Nevertheless, for the time being, Food-KS, being the only organization running MIS in Kosovo, may be a source of reference.

EAU may cooperate with Food-KS while InterCooperation (SDC) may provide technical expertise in improving data collection and reporting. MAFRD may provide partial financing to Food-KS, till another strategy may be considered (e.g. at a later stage, may be considered running MIS in house, from Market Development Division jointly with Statistical

Department of MAFRD and EAU).

At present farm prices are not collected and reported. As part of the reform of the extension services, extension services in the field may collect farm prices for the main agriculture products and report them to Market Development Division jointly with Statistical Department of MAFRD, EAU etc.

The current Twining Project may assist for MIS as part of their Component 4 on Agriculture

Information Systems.

Value Chain and Supply Chain Analysis

At the time of this mission FAO was planning to carry out the work with financial support from the

Government of Finland.

Supply chain management, the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers, nowadays influences strongly the agricultural sector. As the agricultural production process is getting more and more interlinked, it is important to look at the whole value / supply chain when considering supporting farmers who usually are at the beginning of the chain as producers of raw materials such as milk, meat, herbs and others.

When farmers are not well connected to the processors (as it is the case for meat in Albania or for cereals in Bosnia and Herzegovina) it might be worthwhile to find out solutions how to improve the complex and dynamic supply and demand networks for the sake of the local farmers.

However, an FAO study on agro-industrial supply chain management concludes that ‘people make the difference’ in value chain partnerships. Time is needed to build trust and to create commitment between the successive links in the chain. It requires the use of tools; for example workshops with partners, chain performance measurements, agreements on responsibilities and the division of costs and revenues. In the project, trust between partners in the chain has grown significantly. Especially the understanding of each other’s role, added value and gains for chain cooperation lead to a common competence to act as a whole.

For the MAFRD – through EAU - it becomes necessary to develop local capacities in performing value / supply chain analyses. At present it would not be realistic for EAU to carry out such services, given the high load with other more core activities.

However the Department of Agricultural Economics, University of Pristina might consider these analyses as one of their top priority research areas (including Ph.D. and M.Sc. thesis) and cooperate with EAU to perform analysis of the value chain of the main agriculture subsectors regularly.

Rural, Regional & Socio-Economic Development

Rural, regional and socio-economic development related research is necessary to obtain a more complete view. Management Authority (MAFRD), Department of Agricultural

Economics of UP and Faculty of Economics of UP may carry out in organized and coordinated way the research agenda on rural, regional and socioeconomic development. UP

(Department of Agricultural Economics and Faculty of Economics), may consider this as one of the top priority research areas (including PhD and MSc thesis), and that may be reflected in an MOU. It might be natural for EU and GIZ to assist with technical expertise and capacity building given the specific value chain approach interest and experience.

Consumer Behavior

Analyzing consumer behavior is highly important. Market Development Division (MAFRD), Department of Agricultural Economics, UP and Faculty of Economics, UP may carry out in organized and coordinated way the research agenda on consumer survey. UP (Department of

Agricultural Economics and Faculty of Economics), may consider this as one of the top priority research areas (including PhD and MSc thesis), and that may be reflected in a MoU.

GIZ and USAID may assist with technical expertise and capacity building for consumer behavior analysis.

COORDINATION OF WORK WITHIN MAFRD

In some activities, EAU will take the lead within MAFRD. In other activities, EAU will play a secondary or supporting role. This division of responsibilities is outlined in Table 2.

Table 2: Agricultural Economic Analysis Activities Involving Other MAFRD or External

Entities and Roles

Activities EAU

Market

Develop.

Unit4

Managing

Authority

Advisory and

Technical

Services

Kosovo

Statistical

Office

Univ. of

Pristina

Core EAU Analysis Activities

Costing, Gross

Margin, Standard

Output

Lead

Unit

Support

(statistics office)

Data collection

Market and Trade

Analysis Support

Lead

Unit

Outlook and

Projections Lead

Unit

Data provision Support

Information Systems and Data Collection Tools

FADN and Standard

Output Lead

Unit

Support

(statistics office)

Data collection

Market price information system

Support Lead

Unit

International trade

(import-export) reports (MAFRD

Lead unknown)

Support

Data provision

Monitoring and

Evaluation

Lead

(M&E office)

Other Data Collection and Analysis Activities

Value chain analyses Support Support

Unit

Rural, Regional &

Socioeconomic

Development

Consumer Behavior Support

The EAU will report directly to the Permanent Secretary (PS) and will cooperate mainly with the following departments and units:

To be created in 2012

In the process of creation in 2012

Policy Development Department, later on Rural Development Department / Managing

Authority

- EAU to deliver regular standard product calculations for all agricultural products

- EAU to provide in-depth analyses on request, especially for programming activities

Statistical Division as part of the actual Policy Development Department

- EAU to receive data from the agricultural survey, census and FADN research activities

- EAU to provide the Statistical Division with methodology regarding data collection and preparation

Monitoring & Evaluation Division as part of the actual Policy Development Department

- EAU to receive historical data and impact analyses of past support measures

Department for Rural Development and Advisory Services

- EAU to provide the extension workers in the fields with methodology regarding surveys, data collection and others

- EAU to provide the extension workers with actual data on production costs and market trends so that they might inform farmers accordingly who then will be in the position to produce more competitively

- EAU to receive more precise individual farm data (yields, revenues, expenditures, labor, etc.) from the extension workers

All communication and exchange of information should be a two-way-communication. It seems to be very important that all involved stakeholders, especially when within the

MAFRD, have a clear division of labor to ensure that that the way or reporting is clear.

RELEVANT DONOR ACTIVITIES

The team of consultants interviewed selected donors and program implementers currently working with MAFRD in order to:

1. Solicit their ideas concerning the mission and work of EAU

2. Determine ongoing or past work they had funded or participated in that could provide information and data to EAU

It is recommended that all past and future donor funded work on agricultural economic issues in Kosovo (production or trade) be turned over to MAFRD and added to the EAU data library.

European Union / EU Twinning

Project: Support for the Ministry of Agriculture, Forestry and Rural Development (MAFRD) in legislative and policy development and in implementing the Agricultural and Rural

Development Program (ARDP) / KS 2010/IB/AG01

Member States: Austria (Agrarmarkt Austria in cooperation with Austrian Federal Ministry of Agriculture, Forestry, Environment and Water Management, Federal Institute of

Agricultural Economics) in cooperation with Hungary and Germany

Start: January 2012 – December 2013

Overall project objective: To increase the contribution of the agriculture and rural development sector to economic development and growth in Kosovo.

Project purpose: To help strengthen administrative structures within the MAFRD and civil society organizations; to formulate and implement the national agriculture and rural development program in conformity with EU principles and standards.

This twinning project has 5 components:

Component I “Mid-term evaluation of the current ARDP 2007-2013 and preparation the ARDP 2014-2020”

Component II “Strengthen the capability of socio-economic partners (civil society organizations, local action groups, agricultural producer organizations and other stakeholders) for dialogue with MAFRD in programming and implementing the

ARDP 2014-2020”

Component III “Further strengthening of ARDP implementing structures (Managing

Authority, Component IV “Preparation of a framework for an Agricultural Information System

(AIS) based on existing data and registers”

Component V “Development of a comprehensive IT strategy (IT Master plan) for

MAFRD incl. PU”

Under Component IV, this project may assist for improvement of MIS and FADN.

Project: Further Support to Sustainable Forestry Management in Kosovo. - This twinning project is funded by EU and managed by the EC Liaison Office in Kosovo; it is focused in a strategic coordination to acquire the best practices of Austria, Italy and Bulgaria and to build capacities in the forestry sector. The project is being implemented by the Österreichische

Bundesforste (Austrian Federal Forests), in close cooperation with the Umweltbundesamt

(Austrian Environmental Agency), Ministry of Agriculture and Food of Bulgaria, which is represented by Executive Forest Agency and with Ministry of Agriculture, Food and Forest

Policies of Italy. Project will terminate by the end of 2012.

This project has limited resources to commit directly to EAU, however it may share the information and data that they possess with EAU.

USA / USAID

The USAID Kosovo Private Enterprise Program (KPEP), a four-year initiative launched in

October 2008, aims to stimulate the private sector competitiveness of Kosovo's economy.

The program has a budget of USD 17.8 million and four primary components:

Private sector development in targeted sectors and value chains with growth potential

Business enabling environment to foster Kosovo's competitiveness

Workforce development and training to advance modernization, entrepreneurship, and innovation

Support for business services to strengthen competitiveness

The goals are to promote improved quality and efficiency of locally produced goods and services, expand employment for all of Kosovo's citizens including youth and minorities, reduce Kosovo's trade imbalance, and further Kosovo's integration into the Balkans and beyond.

The New Opportunities for Agriculture Program (NOA) aims to support USAID / Kosovo’s

Economic Growth Strategy of promoting growth, creating jobs and generating exports. The

Program’s objectives are as follows:

Products and Farmers Linked to Markets;

Agricultural Products Diversified and Increased;

Food Quality and Safety Improved;

Increased Affordable and Accessible Credit; and

Improved Coordination within the Agricultural Sector.

NOA has supported EAU (by providing two experts) and may support study visits in summer

2012.

Germany / GIZ

GIZ is actually implementing the projects „Rural economic development“ with a territorial approach (focus on Sharr-region in the South and planning region East) and “Enhancement of competitiveness of the private sector“; the last one includes agriculture, especially wine, herbs and berries. The support to the MAFRD to set up this EAU has to be seen under the objective to improve the competitiveness of agriculture sector and to contribute on a systemic level to the improvement of capacities on the macro- and policy-making level.

GIZ has supported EAU (by providing one expert) and is committed to do so in the future.

GIZ may support internships, and provide (finance) expertise for costing analysis, value chain analysis and consumer behavior analysis.

Austria / Austrian Development Agency (ADA)

ADA is working in 3 main areas: rural development, higher education and research; and private sector development. - In the municipality Suhareke / Suva Reka ADA supports the

Municipal Development Centre (MDC), this is an integral part of the municipal administration, assisting mainly farmers and agro-processors. MDC has the target to improve the local agricultural production, the value chain and to develop markets. Also the capacity of the municipality and their staff (related to regional planning) will be improved, in order to offer better support to the agro-sector and to enhance the attractiveness of the municipality for external investment and funding. Finally, ADA has a fund to support local/regional business initiatives which have usually an agricultural background; the fund is used via call for proposals. The fund represents more than half of the project budget; awarded projects are subject to continued monitoring and technical support by local and foreign experts.

Sweden / SIDA

Until end of 2012 there is an ongoing Swedish program to support good statistics authority;

for this reason Statistics Sweden has one person on-site on a long-term basis (Ms. Milva

EKONOMI, milvaekonomi@yahoo.com), plus two local employees for the project. It also sends experts on short assignments and organizes study visits to Sweden. Most of the training is done at the statistics authority’s headquarters, but it has also trained statistics collectors at its local offices.

Another sector of high priority to SIDA is the environment and here especially the forestry sector. Activities, managed by SNV, are ongoing since 9 years and focus on Municipalities and private forest owners (130,000). Furthermore SIDA supports the MAFRD on central www.sida.se/English/Countries-and-regions/Europe/Kosovo/Programmes-and-projects1/Case-1/ http://www.sida.se/English/Countries-and-regions/Europe/Kosovo/Programmes-and-projects1/Case-1/ level on demand; therefore SIDA has a fund of Euro 400,000 annually for a forest sector wide approach which could finance cost-benefit-analysis on forestry and others.

SIDA has no resources available to assist directly EAU during 2012, but it is developing its new strategy and program 2013 – 2017 and as part of the new strategy support may be foreseen.

Switzerland / HELVETAS, InterCooperation

From 2001 onwards InterCooperation was doing the project “Horticultural Promotion in

Kosovo” (HPK) which was financed by the Swiss and Danish governments: HPK was working towards the development of the horticulture sector and aimed to help increase employment in rural areas, make local production competitive with imports thereby capturing the local market. The project will come to an end in late 2012. HPK worked with (i) producers, nurseries, processors and traders; (ii) representative bodies such as producer associations; (iii) service providers – such as input suppliers, advisers and banks; and (iv)

Government and other national bodies.

InterCooperation agreed to share their software which is already in use with the EAU staff and might be further adapted to the requirements of costings and more. The HPK team will also make all their reports and studies available for EAU.

4. WORK PLAN AND CAPACITY BUILDING PLAN

RECOMMENDED WORK PLAN

The work plan includes the main activities costing, FADN & standard output, outlook / projections & scenarios, market and trade research, competitive analyses, agriculture surveys, forestry economics, monitoring and evaluation. Furthermore there are other activities like market price information system, value chain / supply chain analyses, studies on rural, regional & socioeconomic development and consumer behavior; the later ones are not within the core activities during the starting period of EAU but might be done by them later on.

The three-year timetable for phasing in the various EAU activities is shown in Table XXX

Table 3: Recommended Work Plan for Phasing-In Key EAU Activities

RECOMMENDED CAPACITY BUILDING

The EAU staff all possess master degrees, but still require a broad range of skill building to be able to carry out the projected analyses. This capacity building will require investment on the part of MAFRD, as well as donor support.

The proposed capacity building plan focuses at the beginning on English language skills and costing / accounting; step by step the training will also cover applied statistics background

(methods, time series/trend, regression, forecasting etc), SPSS and excel (application of (time

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Costing, margin analysis

FADN (Farm Accountancy Data Network)

Market and trade analysis

Outlook/projections & scenarios

Main EAU activities 2012 2013 2014 series/trend, regression etc), accessing and use of databases (e.g. EUROSTAT, UNSTAT, FAOSTAT, etc.), MIS / prices and trade data analyses, standard output (SO) calculation, research and survey design and analysis and finally studies developing policy interventions scenarios.

Tables 4 summarizes the highest priority skill areas for capacity building among the EAU staff. Table 5 presents the proposed timetable for these capacity building activities required to match the phasing in of activities shown above in Table 3. Table 6 shows a timetable for activities involving the University of Pristina.

Table 4: Capacity Building Activities Recommended for EAU Staff

Activities Type of expertise Person Days Possible Donor Support Estimated Budget

Capacity Building for EAU

English Local Teacher

10 weeks X 4 days/week

X 3 hours = 120 hours To be determined To be determined

Agriculture costing/accounting ISTE

On job training (as part of TA for costing analysis – 2 STE for a total of ca 35 days for costing analysis)

GIZ and NOA (e.g. one expert sponsored by GIZ and one by NOA)

10,000 - 20,000

EUR (depending on cost of experts)

SPSS and Excel NSTE 5 m.d. NOA 1,000 – 1,500 EUR

Applied statistics background NSTE or ISTE 12 m.d. NOA

2,500 – 5,000 EUR

(depending on expert)

Research & survey design & analysis ISTE 8 m.d. KOS (Fabrizio) 4,000 - 5,000 EUR

Forecasting & scenarios analysis ISTE 8 m.d. Swiss Cooperation 4,000 - 5,000 EUR

FADN elaboration/analysis 5 – 10 m.d. Twining Project

Part of Component

4, Twining Project

MIS/prices and trade data analysis 5 – 10 m.d. Twining Project

Part of Component

4, Twining Project

Internships

Capacity Building for UP in cooperation with EAU and Market Development Unit

Consumer behavior ISTE 10 m.d. GIZ 4,000 - 5,000 EUR

Value Chain Analysis ISTE 20 m.d.

GIZ or NOA

(training to be combined with 1 complete VC study)

8,000 - 10,000

EUR

Table 5: Recommended Capacity Building Timetable for EAU Staff

Capacity

Building for

EAU

February 2012 March 2012 April 2012 May 2012 June 2012 July 2012

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

W

English

X X X X X X X X X X

International trade analysis X

Agriculture costing & accounting

X X X X X X X X

SPSS and Excel

X

Applied statistics background

X X

FADN

elaboration/anal ysis

MIS/prices and trade data analysis

Research & survey design & analysis

Forecasting & scenarios analysis

EAU Staff

Internships

Table 5 (continued): Recommended Capacity Building Timetable for EAU Staff

Capacity Building

Field

August 2012 September 2012 October 2012 November 2012 December 2012

W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4

English

International trade analysis

Agriculture costing

& accounting

SPSS and Excel

Applied statistics background

FADN

elaboration/analysis

MIS/prices and trade data analysis

Research & survey design & analysis

Forecasting & scenarios analysis

Internships X X X X

X X X X X X X X

Table 6: Recommended Capacity Building Activities Timetable for University of Pristina

Capacity

Building for UP

October 2012 November 2012 December 2012

W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4

Consumer behavior analysis

Value Chain

Analysis

X X X X

English language

Justification: Good command of English language is necessary to have efficient collaboration with international experts, read international publications, attend workshops/internships abroad and write reports in English, in addition to Albanian.

Mode of Learning: It is indispensable that the EAU attends an intensive course, 3 – 4 days per week, 2 – 3 hours per day (after working hours). The English course should be interactive. Emphasis on communication skills should be in the first 2 months, while emphasis on essay writing should be put in the third month

External Expertise Required: Experienced English language teacher, preferably familiar to economic terminology.

Agriculture Costing/Accounting and Gross Margin Analysis

Justification: Good understanding of costing methods (including costing data collection, analysis, reporting etc) is necessary to conduct periodical/systematic costing analysis (which is one of the main activities of EAU) and other types of economic analysis on competitiveness.

Mode of Learning: There is a need for a short intensive training about costing analysis (ca 3 days), and then on job training. One of the short term experts that may come to assist in doing the costing analysis may provide such training. On-job training will be part of the joint work with short term experts that will do the costing analysis jointly with EAU.

External Expertise Required: There are needed two STTA to provide at the same time technical assistance in the costing and establishing the system of costing, and at the same time, built up the capacities of EAU to carry costing analysis in the future independently.

Experts will make use of a rich archive of previous studies conducted by various institutions

(this archive is built by EAU), technical experts (e.g. agronomists, veterinarians) who can provide missing data needed for calculating costing, and list of farms for various products (to collect the data) – the technical experts and farms including contact information, are already identified by EAU.

One expert is needed for costing analysis of meat (ruminants and chickens) and dairy (milk) production, and cereals, and another expert for fruits (3-4 main fruits) and vegetable (2-3 main field vegetables and 2-3 main greenhouse vegetable). In both cases focus should be on primary production (processing will not be considered for analysis at this stage). The work will be developed closely with EAU staff.

The suggested timing: between end February and Mid April. In the first week of the assignment they should work together with EAU staff to determine methodology and detailed working plain. The other weeks of STTAs, should not overlap so that they make best use of the EAU staff in the field data collection. In-between missions, EAU staff will be collecting and entering data, and draft preliminary analysis.

Table 7: Indicative Timetable for Proposed Capacity Building STTA

STTA

March 2012 April 2012

Week 1 Week 2 Week 3 Week 4 Week 1 Week 2 Week 3 Week 4

STTA 1 X X

STTA 2 X

Short term expert for meat (ruminants and chickens) and dairy (milk)

Estimated number of day: 17 man days

Expert background:

Agricultural economist, at least 10 years of experience in agriculture economics development or research

Experience in agriculture costing analysis is required.

Specific experience in the…