Ex-post Evaluation of the SAPARD Programme in the Republic of Croatia ( )

Transcription

1 Ex-post Evaluation of the SAPARD Programme in the Republic of Croatia ( ) Prepared by Knowledge Power/Moc Znanja Contact Person: Slaven Aljinovic Zagreb, October

2 EXECUTIVE SUMMARY 9 1. INTRODUCTION General information on the SAPARD Programme SAPARD Programme goals SAPARD Programme priorities SAPARD Programme measures SAPARD Programme funds SAPARD Programme implementation results Agriculture and rural development overview Geographical location Administrative organization Economic context Rural area Agricultural regions Agriculture and food industry Agriculture Food industry Trade balance of agricultural and food Products Implementation framework of the SAPARD Programme Legislative framework of the SAPARD Programme SAPARD Programme modifications 25 2

3 1.3.2 Financial framework of the SAPARD Programme SAPARD Programme funds Re-allocation of SAPARD Programme funds N+3 Rule SAPARD Programme financial efficiency Administrative framework of the SAPARD Programme Ministry of Agriculture, Fisheries and Rural Development (MAFRD) SAPARD/IPARD Programme Managing Authority Directorate for Market and Structural Support in Agriculture SAPARD Agency SAPARD Programme Monitoring Committee National Fund Programmes influencing the SAPARD Programme implementation Preparatory programmes for the SAPARD Programme Implementation National rural development programmes Information and promotion campaigns METHODOLOGY FOR THE EX-POST EVALUATION SAPARD Programme monitoring and evaluation framework SAPARD Programme monitoring SAPARD Programme evaluation Ex-post evaluation goal Ex-post evaluation research SAPARD Questionnaire 38 3

4 3. IMPLEMENTATION OF THE SAPARD PROGRAMME MEASURES Measure 1 Investments in agricultural holdings Goals of Measure Complementarity of Measure Planned realization for Measure Implementation results for Measure Constraints for the implementation of Measure Implementation of national programmes Access to finance Administrative system Consultancy services Territorial aspects of Measure 1 utilization Effectiveness of Measure Measure 2 - Improving the processing and marketing of agricultural and fishery products Goals of Measure Complementarily of Measure Planned realization for Measure Implementation results for Measure Constraints for the implementation of Measure Effectiveness of Measure Measure 3 - Improvement of infrastructure in rural areas Measure 4 - Technical assistance 60 4

5 3.5 Cross-cutting questions Findings regarding the administration of the SAPARD Programme SAPARD/IPARD Programme Managing Authority Lessons Learned - SAPARD/IPARD Programme Managing Authority DMSSA-SAPARD Agency Public calls Control of the SAPARD Programme implementation Beneficiary rating of DMSSA-SAPARD Agency Efficiency and effectiveness of the DMSSA-SAPARD Agency Lessons learned DMSSA-SAPARD Agency SAPARD Programme Monitoring Committee Key determinants of the SAPARD Programme implementation Efficiency of the SAPARD Programme Effectiveness of the SAPARD Programme Coherence of the SAPARD Programme SAPARD Programme contribution towards sustainable adaptation Administration Agricultural holdings/enterprises Legislation Employment in rural areas Characteristics of SAPARD Programme beneficiaries Involvement of the representatives of public and private bodies SUGGESTIONS AND CONCLUSIONS 84 5

6 5. ANNEXES 86 Annex 1 List of contacted institutions, agricultural holdings, enterprises and consultants 86 Annex 2 Literature list 87 Annex 3 SAPARD Questionnaire for beneficiaries who used Measure 1funds 88 Annex 4 SAPARD Questionnaire for beneficiaries who used Measure 2 funds 93 Annex 5 SAPARD Questionnaire for potential beneficiaries who did not use SAPARD Programme funds 99 Annex 6 List of selected consulting companies and development agencies under the tender for Measure 1 of the Measures 10*10 rural development programme. 101 Annex 7 List of food processing companies using services of selected consulting companies and development agencies in order to assess preparedness of project documentation in regards to the SAPARD Programme requirements 102 6

7 List of tables Table 1. SAPARD Programme funds allocation and utilization for Measure 1 and Measure 2 (in HRK) 16 Table 2. Main macroeconomic indicators Table 3. Agricultural area of the Republic of Croatia according to usage 21 Table 4. Livestock in the Republic of Croatia ( in 000 ) 22 Table 5. Croatian trade of agriculture and food products ( ) 24 Table 6. Re-allocation of the SAPARD Programme funds to Measures 1 and 2 (in HRK) 27 Table 7. Realization of Measure 1 projects by sector 42 Table 8. Results of Measure 1 by questions, criteria s and indicators 44 Table 9. SAPARD Questionnaire Beneficiaries rating of the influence of administration on the SAPARD Programme implementation 47 Table 10. Realization of Measure 2 projects by sector 55 Table 11. Results of Measure 2 by questions, criteria s and Indicators 56 Table 12. Cross-cutting questions, criteria s and indicators 62 Table 13. SAPARD Questionnaire Beneficiaries rating of the DMSSA-SAPARD Agency support 77 List of figures Figure 1. Structure of agricultural production in the Republic of Croatia 22 Figure 2. Planned budgetary allocations of SAPARD Programme 26 Figure 3. Beneficiaries quality rating of information received about the SAPARD Programme 34 Figure 4. Planned allocation of Measure 1 funds by sector 40 Figure 5. Planned allocation of Measure 2 funds by sector 53 Figure 6 Status of applied project proposals by the SAPARD 75 Programme calls List of maps Map 1. Counties of the Republic of Croatia 18 Map 2. Agricultural regions and sub regions of the Republic 19 of Croatia Map 3. Croatian counties in which Measure 1 was not utilized 51 7

8 Abbreviations C CCE: Croatian Chamber of Economy CAEI: Croatian Agricultural Extension Institute CAP:Common Agricultural Policy D DG AGRI: Directorate General Agriculture and Rural Development DMSSA: Directorate for Market and Structural Support in Agriculture E EC: European Commission EU: European Union F FTE: Full Time Equivalent G GDP: Gross Domestic Product H HRK: Croatian Kuna M MAFA: Multi - Annual Financing Agreement MAFRD: Ministry of Agriculture, Fisheries and Rural Development MAFW: Ministry of Agriculture, Forestry and Water Management O OG: Official Gazette P PAFFRD: Paying Agency in Agriculture, Fisheries and Rural Development R RC: Republic of Croatia S SSB: State Statistical Office W WB:World Bank 8

9 EXECUTIVE SUMMARY Background information This document represents the ex-post evaluation report on the implementation of the Agriculture and Rural Development Plan for the period in the Republic of Croatia, within the framework of the Special Accession Programme for Agriculture and Rural Development (hereinafter referred to as the SAPARD Programme). The ex-post evaluation report has been prepared by Knowledge Power (hereinafter referred to as the Evaluator), for the Sector for Managing EU Rural Development Programmes of the Ministry of Agriculture, Fisheries and Rural Development (hereinafter referred to as the MAFRD). The SAPARD Programme was a special pre-accession programme of the European Union (hereinafter referred to as the EU) through which candidate countries were provided assistance in their preparations for EU membership. The Republic of Croatia submitted its request for EU membership on 21st March 2003, and was granted candidate status on 18th June Based on this, the SAPARD Programme was implemented in the Republic of Croatia during the period. Legal framework The Government of the Republic of Croatia and the European Commission on the behalf of the European Union signed the Multi - Annual Financing Agreement (hereinafter referred to as MAFA) on the 29th December This Agreement regulated the technical, legal and administrative framework within which the SAPARD Programme was carried out in the Republic of Croatia. MAFA came into force on 6th April SAPARD Programme Priorities and Measures Based on the Strategy for Development of Agriculture and Fisheries (Official Gazette 89/2002), the Ministry of Agriculture, Forestry and Water Management (hereinafter the MAFW) identified the following priority areas for the SAPARD Programme implementation: - Priority 1: Development of rural economy - Priority 2: Improvement of market access - Priority 3: Development of rural infrastructure The main instruments MAFRD envisaged in the SAPARD Programme for achieving these priorities were:measure 1 - Investments in agricultural holdings, Measure 2 - Improving the processing and marketing of agricultural and fishery 9

10 products,measure 3 - Improvement of infrastructure in rural areas and Measure 4 - Technical assistance Ultimately, out of the four planned Measures, conferral of management was received only for Measure 1 and Measure 2. The budgetary allocations for the implementation of Measure 3 and Measure 4 were re-allocated to Measure 1 and Measure 2. Financial framework Within the SAPARD Programme an assistance fund was established with the total value of ,33 HRK. The total value of EU financial contribution amounted to ,00 HRK ( 25 million), while the additional financial support from the Croatian national budget amounted to ,33 HRK ( 8,33 million). The total amount of paid assistance was ,63 HRK. Based on the fact that the final level of the SAPARD Programme funds usage was 46.41%, the financial efficiency of the SAPARD Programme can be evaluated as low. Administrative Framework The SAPARD/IPARD Programme Managing Authority was established in 2006 within the Ministry of Agriculture, Forestry and Water Management, as part of the Directorate for Rural Development. The DMSSA was accredited by the European Commission for the SAPARD Programme implementation on 26th September The National Fund for the SAPARD Programme which was responsible for the management of the SAPARD Programme funds in the Republic of Croatia operated within the Ministry of Finance. The SAPARD Program Monitoring Committee was established 14th November with members representing relevant Government institutions, the business sector and NGO s. Within its work, the Monitoring Committee approved the Annual and Final reports on the SAPARD Programme implementation. SAPARD Programme evaluation The Ministry of Agriculture, Fisheries and Rural Development, in accordance with the MAFA, was obliged to organize the ex-ante and ex-post evaluations of the SAPARD Programme. The ex-ante evaluation of the SAPARD Programme was completed in 2005, prior to the SAPARD Programme implementation. The ex-post evaluation of the SAPARD 10

11 Programme was carried out during the period 1st September 20th October The goal of the ex-post evaluation of the SAPARD Programme is to provide information on relevance, coherence, efficiency, effectiveness and quality of the SAPARD Programme implementation. The ex-post evaluation report has been written in accordance with the Guidelines for the Evaluation of Rural Development Programmes supported by SAPARD. In order to collect relevant data, the Evaluator reviewed relevant documentation, carried out interviews with representatives of all key stakeholders, and distributed a SAPARD Questionnaire (through which information was received from 90% of total number of beneficiaries whose project proposals were assisted). Implementation results of the SAPARD Programme During the SAPARD Programme implementation a total of 37 projects were cofinanced (19 for Measure 1- Investment in agricultural holdings and 18 for Measure 2 - Improving the processing and marketing of agricultural and fishery products). Implementation of Measure 1 The goal of Measure 1 was to assist the implementation of the Common Agricultural Policy through: improvement of product storage conditions and quality, decrease of farm production costs, and establishment of farms complying with EU standards in terms of hygiene animal welfare and environmental protection. The target number of projects for Measure 1 was 110 supported projects in the meat and milk, fruit and vegetables and cereal/oilseed crops sectors. During the SAPARD Programme implementation a total of 84 project proposals were received that requested Measure 1 assistance out of which a final of 19 were supported ( total value of the SAPARD Programme assistance amounting to ,04 HRK). Given the realization of only 17% of the total number of planned projects, the 23.62% share in the total SAPARD Programme paid assistance, as well as non-utilization on the majority of Croatian territory, the overall effectiveness of Measure 1 can be evaluated as very low. Implementation of Measure 2 The goal of Measure 2 was to assist food processing enterprises in their efforts to improve technological standards and competitiveness through: compliance with Croatian and EU standards in terms of hygiene, food safety and product quality, introduction of new, and environmentally friendly technologies. 11

12 Through Measure 2, the plan was to assist 51 projects in fruit and vegetables processing and marketing, processing and marketing of fish and shellfish, in treatment of animal by-products in slaughterhouses and in milk processing. During the SAPARD Programme implementation a total of 53 project proposals were received that requested Measure 2 assistance out of which 18 projects were supported (with the total value of the SAPARD Programme assistance amounting to ,59 HRK). With 55% utilization of SAPARD Programme funds allocated for Measure 2 and realization of only 35% of the total number of planned projects, the overall effectiveness of Measure 2 can be evaluated as low. Constraints for the SAPARD Programe implementation The low utilization of the SAPARD Programme funds reflects the influence of constraints such as: - unsolved structural problems of the agricultural sector - unfavourable administrative framework for investors - unpreparedness of administration and potential beneficiaries - parallel implementation of national rural development programmes that provided investment grants (Capital investment model and Measures 10*10) - complicacy and high costs related to collecting needed documentation - financial performance indicators set by the SAPARD Agency - lack of an organized system for provision of consultancy assistance The magnitude and complexity of constraints for the SAPARD Programme implementation is reflected in the fact: - that in 8 out of 21 Croatian counties there were no contracted SAPARD Programme projects - that only 37 out of the total 139 received project proposals received the SAPARD Programme assistance - that ultimately conferral of management was received for only two out of the four planned Measures Key determinants of the SAPARD Programme implementation Efficiency of the SAPARD Programme Regarding the evaluation of the SAPARD Programme efficiency, data was requested from the PAAFRD on the annual budget expenditures and on number of employees working on the implementation of the SAPARD Programme. 12

13 Through meetings with DMSSA-SAPARD Agency representatives it was established that internal monitoring system, which would establish a relationship between the financial inputs (DMSSA-SAPARD Agency annual budget) and a set of output indicators, did not exist. Therefore, it is not possible to complete the evaluation of the SAPARD Programme efficiency. Effectiveness of the SAPARD Programme Taking in account realization of only 17% of the total number of planned projects for Measure 1 and realization of 35% of the total number of planned projects for Measure 2, the effectiveness of the SAPARD Programme implementation can be evaluated as low. Coherence of the SAPARD Programme The evaluation of the SAPARD Programme indicates strong internal coherence between Measure 1 and Measure 2. SAPARD Programme contribution towards sustainable adaptation SAPARD Programme implementation had a profound impact in regards to administrative capacity/organizational strengthening which is reflected in the establishment and accreditation of key institutions needed for implementation of future EU programmes and the creation of educated/trained administrators familiar with the aquis communautaire and the functioning of the European Commission. SAPARD Programme also had a positive impact on the level of beneficiary agricultural holdings by supporting their efforts to improve their competitiveness and compliance with EU standards. Given the significant population exodus from Croatian rural areas, the creation of 125 new jobs (47% more than planned) through the SAPARD Programme support is a important contribution towards sustainable rural development. Aknowledgments The Evaluator would like to express his gratitude to the personnel of the SAPARD/IPARD Managing Authority, Croatian Agricultural Chamber and Croatian Chamber of Economy (hereinafter referred to as CCE) for their exceptional support during the preparation of this Report. The Evaluator would also like to express his gratitude to all representatives of the business sector for their invested time and provided valuable information. 13

14 1. INTRODUCTION 1.1 General information on the SAPARD Programme SAPARD Programme goals The SAPARD Programme was a special pre-accession programme of the European Union through which assistance was provided for the development of agriculture and rural areas in the Republic of Croatia. The SAPARD Programme for the Republic of Croatia was officially approved by the decision of the European Commission on 8th February 2006, based on Regulation (EC) No. 301/2006. The SAPARD Programme was implemented during the period The overall goals of the SAPARD Programme, defined by Regulation (EC) No. 1268/1999, were to: - assist the preparations for the implementation of the EU acquis within the field of the Common Agricultural Policy through legal, administrative and institutional capacity building - contribute to the solution of problems regarding structural adjustments in the agricultural sector and rural areas in order to strengthen their competitiveness in regards to the EU market and improve the quality of living in the rural areas SAPARD Programme priorities Based on the Strategy for Development of Agriculture and Fisheries (Official Gazette 89/2002), the Ministry of Agriculture, Forestry and Water Management (in 2008 as part of Government reform transformed into the Ministry of Agriculture, Fisheries and Rural Development) identified the following priority areas for the SAPARD Programme implementation: - Priority 1: Development of rural economy - Priority 2: Improvement of market access - Priority 3: Development of rural infrastructure SAPARD Programme measures Within the SAPARD Plan, which was the basic document for the SAPARD Programme implementation, the MAFRD envisaged the implementation of following Measures defined by Regulation (EC) No. 1268/1999: 14

15 - Measure 1 - Investments in agricultural holdings : with goals such as improvement of product quality, reduction of production costs, increased competitiveness, modernization of production systems, reduction of environmental pollution and improvement of hygiene, veterinary and environmental standards on agricultural holdings - Measure 2 - Improving the processing and marketing of agricultural and fishery products : with goals such as modernization of enterprises for processing of agricultural and fishery products, improved management of animal waste, strengthened competitiveness and compliance with EU hygiene, environmental and animal welfare standards - Measure 3 - Improvement of infrastructure in rural areas : with goals such as development and improvement of basic infrastructure to encourage economic and social activities in rural areas and improvement in regards to rural depopulation - Measure 4 - Technical assistance : with the goal to ensure technical assistance for the SAPARD Programme implementation by engagement of external experts and by implementation of informational and promotional activities, as well as by provision of seminars, study tours and other needed educational inputs SAPARD Programme funds The total value of the SAPARD Programme funds for the Republic of Croatia amounted to ,33 HRK. The share of the EU financial contribution was ,00 HRK ( 25 million), whilst the share of the Croatian national budget contribution amounted to ,33 HRK ( 8.33 million) SAPARD Programme implementation results Out of the four planned Measures, finally conferral of management was received only for Measure 1 - Investments in agricultural holdings (hereinafter referred to as Measure 1) and Measure 2 - Improving the processing and marketing of agricultural and fishery products (hereinafter referred to as Measure 2) which were then implemented. The budgetary allocations for the implementation of Measure 3 - Improvement of infrastructure in rural areas (hereinafter referred to as Measure 3) and Measure 4 - Technical assistance (hereinafter referred to as Measure 4) were re-allocated to Measure 1 and Measure 2. 15

16 Within the 4 calls for applications of the SAPARD Programme 139 project proposals were received of which: - 84 project proposals for Measure 1-53 project proposals for Measure 2-2 project proposals could not be classified During the implementation period 37 project proposals received the SAPARD Programme financial assistance (19 for Measure 1 and 18 for Measure 2). The total value of the SAPARD Programme paid assistance amounted to ,63 HRK. Out of this, the value of paid assistance for Measure 1 amounted to ,04 HRK and for Measure 2 amounted to ,59 HRK. The total utilization level of the SAPARD Programme funds in the period amounted to 48.2% (taking in account one beneficiary who had to return received funds in the amount of ,00 HRK, the final absorption of SAPARD Programme funds is 46.41%). Table 1 - SAPARD Programme funds allocations and utilization for Measure 1 and Measure 2 (in HRK with exchange rate 1Euro = 7.3 HRK) Measures Total EU assistance Total Croatian assistance Total public assistance Public assistance paid to beneficiaries Share of EU assistance in paid public assistance Total declared eligible beneficiary project costs Measure , , , , , ,74 Measure , , , , , ,51 Total , , , , , ,25 Source: Directorate for Rural Development SAPARD/IPARD Managing Authority, 2011 The SAPARD Programme provided crucial assistance to the Republic of Croatia in regards to legislative, administrative and institutional capacity building for the implementation of the EU acquis relevant to agriculture. Without SAPARD Programme assistance two main institutions, the SAPARD/IPARD Managing Authority and the Paying Agency would not have been established and accredited by the European Commission. These institutions are crucial for the implementation of IPARD and future post-accession funds in the Republic of Croatia. The SAPARD Programme assistance has also enabled a number of beneficiaries to prepare for the EU common market. The result of their activities are: - strengthened agricultural holding/enterprise competitiveness, 16

17 - increased income of primary producers, - creation of new employment opportunities in rural areas - adoption of aquis related EU standards Such achievements are an important contribution towards achieving sustainable rural development in the Republic of Croatia. The relatively low utilization of the SAPARD Programme funds reflects the influence of constraints such as: - parallel implementation of national assistance programmes for rural development - unsolved structural problems of the agricultural sector - unfavourable administrative framework for investors - unpreparedness of the bureaucracy and potential beneficiaries The magnitude and complexity of constraints for the SAPARD Programme implementation is reflected in the fact: - that in 8 out of 21 Croatian counties there were no contracted SAPARD Programme projects - that only 37 out of the total 139 received project proposals received the SAPARD Programme assistance - that ultimately only two out of the four planned Measures received conferral of management from the EC 1.2 Agriculture and rural development overview Geographical location The Republic of Croatia is located in the south-western part of Europe, connecting Central Europe with the Mediterranean region. The total land area of the Republic of Croatia is km 2. According to the last population census (2011), the Republic of Croatia has residents Administrative organization The Republic of Croatia is administratively divided into 21 counties (including the City of Zagreb having a special status), which consist of 556 self-government units (124 towns and 426 municipalities). 17

18 Map 1 - Counties of the Republic of Croatia Source: Economic context The period was characterized by significant economic growth of the Croatian economy, with an average annual GDP growth of about 4%. However, since 2008 the Croatian economic situation has been greatly influenced by the global economic crisis,resulting in a drastic drop of GDP. Such developments also had a strong impact on the level of investments in sectors the SAPARD Programme planned to support. Table 2. Main Macroenomic Indicators Indicator GDP (in million EUR, current price) GDP annual growth rates (in % constant prices) GDP per inhabitant (in EUR) GVA of primary sector (% of GVA) GVA of secondary sector (% of GVA) GVA of teritiary sector (% of GVA) Source: State Statistical Bureau (SSB), ,9 5,1 2,2-6,0-1, ,18 4,87 5,18 5,42 5,51 28,10 27,49 27,89 26,35 25,68 26,06 25,19 24,96 22,79 22,83 18

19 1.2.4 Rural area The Republic of Croatia, as a whole country, is characterized by a high degree of rurality. According to the OECD definition of rural areas (150 inhabitants/km 2 ), 91.6% of the territory of the Republic of Croatia can be classified as rural. The majority of counties (14 out of 21) can be classified as predominantly rural (with more the 50% population living in rural areas). During the last decades there has been a constant decrease in the share of rural population. In 1991 within the rural areas included inhabitants (45.7% of total population), whilst in 2001 this number fell to inhabitants (44.4% of total population). In 2011, the latest population census has been carried out. Despite the fact that the newest results still haven t been published, it is expected that they will reaveal a further decline in the share of rural population Agricultural regions The Republic of Croatia, in regards to agriculture, can be divided into the following regions: - Pannonian region (marked as P1-P4 on Map 2), - Mountain region (G1-G2) - Mediterranean region (J1-J3). Map 2 - Agricultural regions and sub regions of the Republic of Croatia Source: SAPARD Plan , MAFRD 19

20 The Pannonian region encompasses around 47% of the total area and 64% of total population of the Republic of Croatia. Based on favourable climate, abundant water and rich soils, this region has the largest potential for agricultural production out of the 3 listed above. The majority of Croatian agricultural production of cereals, industrial crops, livestock, as well as fruits and vegetables production is located in the Pannonian region. Besides, family farms, the region is characterized by existence of large scale primary production and processing companies (ex-state owned Kombinats). Based on well developed primary agricultural production, most Croatian food processing enterprises (oil, meat, sugar, cereals) are also located in this region. The Mountain region encompasses the central part of the Republic of Croatia. This region is characterized by the Dinaric mountain chain karst terrains characterized by prevalance of karst terrain. The agricultural areas are limited to smaller karst valleys. The climate is characterized as mountainous with high amounts of precipitation and short vegetation periods. Due to such limitations, the Mountain region is characterized by a low population density (5.8% of total population of the Republic of Croatia), as well as strong de-population trends. Agricultural production is based on small family farms which mainly produce some types of crops adapted to such harsh production conditions (corn, rye and oats, potatoes, vegetables and some fruits). Due to plentiful and rich mountain pastures, the Mountain region also has a strong livestock production tradition (mainly cattle and sheep). The Adriatic region encompasses the coast and islands stretching from Istria in the north to the Konavle area in the south. This region encompasses 30.2% of the total population of the Republic of Croatia. Due to the influence of the Mediterranean climate, this region has a mild climate which is favorable for the development of subtropical fruits, vegetables, olives, as well as vineyards production. Based on abundant pastures, goat and sheep production has a long tradition. Since the coastline of the Republic of Croatia is very long, fishing and fish processing are an important segment of the local economy Agriculture and food industry Based on the natural resources, and traditionally strong role of agriculture and food industry in the Croatian economy, the Government of Croatia views these sectors as strategic. The total GDP of the Republic of Croatia in 2007 was 318,3 billion HRK, of which the share agriculture and food industry sectors amounted to 7.2%. Out of the total number of employed in the Republic of Croatia in 2010, these two sectors encompassed 5.2%. 20

21 Agriculture According to the the data from 2009, the total arable land area in the Republic of Croatia is hectares. Out of this 83,5% ( hectares) is owned by family farms. The remaining hectares is owned by entreprises. Out of the total arable land, some type of crop or livestock production is carried out on hectares. Out of this area hectares are used by family farms, while other businesses use hectares. Table 3 - Agricultural area of the Republic of Croatia according to usage (2009) Category Area (hectares) Total arable land area Utilized arable land Of which: Crop land and gardens Orchards Vineyards Meadows and pastures Kitchen gardens Olive groves Nurseries 579 Source: State Statistical Bureau (SSB), 2010 In 2009 there were family farms listed in the Farm Registry. The average family farm size was 5.4 hectares. Agricultural production of the Republic of Croatia is characterized by the prevalence of cereals and industrial crops, which are mainly produced in the Pannonian region. Production of other crops such as potatoes, fruits and vegetables is carried to a much lower extent. 21

22 Figure 1 - Structure of agricultural production in the Republic of Croatia Source: SSB, Livestock production participates with 45.4% in the total value of agricultural production of the Republic of Croatia. Dynamic market changes, coupled with war destruction, have resulted in the underdevelopment of this sector in regards to adoption of EU standards in terms of food safety, animal welfare and environmental protection. Table 4 - Livestock in the Republic of Croatia (in 000 ) Categor y Cattle Swine Sheep Poultry Source: SSB,

23 Food Industry The food industry of the Republic of Croatia in general can be divided into a group of larger enterprises which were established before the war (1991) and a group of SME enterprises founded after the war. Fruits and vegetables processing is one of the least developed segments of the food industry in the Republic of Croatia. In 2009 this sector had a total of 51 registered enterprises for this type of business activity, out of which 50 were SME s. In 2009 the total amount of processed vegetables was 24,000 tonnes and 9200 tonnes of fruit. The main processed vegetable products were pickled vegetables (57% of total), tomato puree, sauerkraut, peas, whilst regarding the fruit category these were various types of fruit jams, marmalades and jellies. In 2005 in the area of milk processing, a total of 37 enterprises were registered. Out of these, the two largest processed 64% of total raw milk, the reminder covered by SME dairy processing plants. Given the underdevelopment of raw milk production and collection systems, only 30% of the processed milk fulfilled EU quality standards. In 2009 the number of registered milk processing enterprises had risen to 48. As a result of a sustained educational campaign of dairy farmers and their investments, the percent of processed milk that fulfilled EU quality standards milk standards rose to 80%. Regarding the meat processing sector, in 2009 the Republic of Croatia had a large number of registered slaughterhouses and meat processing enterprises (196 slaughterhouses for hoofed animals, 74 slaughterhouses for poultry and 318 meat processing enterprises). Most of these enterprises had the need for significant investments in order to comply with relevant EU standards. Fish processing in the Republic of Croatia has a strong tradition based on the long Croatian coastline. The annual marine fish catch in the Adriatic Sea ranges from 37,000 to 53,000 tonnes, mostly consisting of small pelagic fish (90%). The pelagic fish catch is primarily used by the fish processing industry and tuna farms. In 2009 there were 119 companies registered in this sector, with an annual production of 16,000 tonnes of processed products Trade balance of agricultural and food products The Republic of Croatia traditionally is an agriculture and food products importer. Croatian exports are mainly cereals, sugar, fishery and tobacco products. 23

24 Table 5 - Croatian trade of agriculture and food products ( ) Coverage imports EXPORTS IMPORTS BALANCE exports % 000 USD of by Source: CCE and SSB, Implementation framework of the SAPARD Programme Legislative framework of the SAPARD Programme The SAPARD Programme was initiated in 1999 based on Regulation (EC) No. 1268/1999. The SAPARD Programme goal was to provide assistance for preaccession measures for agriculture and rural development in the applicant countries of central and Eastern Europe. The SAPARD Programme implementation rules were defined by Regulation (EC) No. 2759/1999 last amended by Regulation (EC) No. 2278/2004. The Republic of Croatia officially submitted its request for EU membership on 21st February The Republic of Croatia gained the official candidate status for EU membership on 18th June The Plan for agricultural and rural development in the Republic of Croatia. (hereinafter the SAPARD Plan) was officially approved by the European Commission on 8th February 2006 based on the Commission Decision EC (2006) 301 and in accordance with Article 4, paragraphs 5 and 6 of the Regulation (EC) No 1268/1999. With this approval, the SAPARD Plan became the basic document for the implementation of the SAPARD Programme in the Republic of Croatia. The Government of the Republic of Croatia and the European Commission on the behalf of the European Union signed the Multi - Annual Financing Agreement (hereinafter referred to as MAFA) on the 29th December This Agreement regulated the technical, legal and administrative framework within which the SAPARD 24

25 Programme was carried out in the Republic of Croatia. MAFA came into force on 6th April The DMSSA, as the SAPARD Programme implementing body was given the conferral of management for Measures 101 and 102 by the European Commission on 26th September SAPARD Programme modifications During the SAPARD Programme implementation period two SAPARD Programme modifications were carried out. The request for the first amendment of the SAPARD Programme was submitted by the Republic of Croatia on 19th September 2007, and the formal approval for these changes was granted by the Commission Decision of 19th October 2007 based on the Commission Decision EC (2007)1371. The approved amendments concerned the exclusion of food processing establishments with the EU export number as eligible to receive the SAPARD Programme support under Measure 2, as well as corrections of minor editorial nature. Based on the fact that the MAFRD decision not to implement the planned Measure3 and Measure 4, the request for the second amendment of the SAPARD Programme was formally submitted by the Republic of Croatia on 25 June The formal approval for these changes was granted by the Commission Decision of 14th August 2008 based on the Commission Decision EC (2008)4530. The approved amendments were concerned with the reallocation of funds initially allocated to above mentioned Measures 3 and Financial framework of the SAPARD Programme SAPARD Programme funds In accordance with MAFA, the European Union secured ,00 HRK ( 25 million) for the SAPARD Programme implementation in the Republic of Croatia. Additional financial support which amounted to ,33 HRK ( 8,33 million) was secured from the Croatian national budget. Thus, the total value of the SAPARD Programme funds amounted to ,33 HRK. The final period for payment of approved Project proposals was 31st December In accordance with Regulation (EC) No. 1268/1999, the share of SAPARD Programme public assistance was: 1) Measure 1 and Measure 2 - Public assistance amounted to 50% of value of the approved investment (out of which 75% financing was secured by the EU 25

26 and 25% through the national contribution of the Republic of Croatia). The remaining 50% of financing for the completion of the submitted project was secured by the beneficiary. 2) Measure 3 - Public assistance amounted to 100% of the value of the approved investment (out of which 75% financing was secured by the EU and 25% through the national contribution of the Republic of Croatia). 3) Measure 4 - Public assistance amounted to 100% (out of which 80% financing was secured by the EU and 20% through the national contribution of the Republic of Croatia). Figure 2 Planned budgetary allocations of the SAPARD Programme Source: SAPARD Plan , MAFRD Re allocation of SAPARD Programme funds Since the Republic of Croatia officially decided not to implement Measure 3 and Measure 4, the SAPARD/IPARD Managing Authority submitted to the European Commission the request for reallocation of funds programmed for their implementation. Amendments to the SAPARD Programme with the reallocation of funds were approved by the European Commission on 14th August 2008 based on the Commission Decision EC (2008) In line with this Commission Decision, the re-allocation of funds for the two Measures that did not receive conferral of management, was carried out in the following ratio: Measure % and Measure %. 26

27 Table 6 - Re-allocation of SAPARD Programme funds to Measures 1 and 2 (in HRK with exchange rate 1Euro = 7.3 HRK) Measure Initially planned level of EU assistance Reallocation of EU assistance from Measure 3 and Measure 4 Total available EU assistance Total paid EU assistance Measure , , , ,01 Measure , , , ,43 Total , , , ,44 Source: MAFRD, N+3 Rule In order to ensure better success of the SAPARD Programme, the SAPARD/IPARD Managing Authority in May 2007 submitted the official request for the approval of the N+3 rule. The European Commission approved this request in June 2008 (EC letter FK/D(07)33450), so the deadline for the submission of payment orders by the Republic of Croatia to the European Commission was extended from 31st December 2008 to 31st December SAPARD Programme financial efficiency The total value of the SAPARD Programme paid assistance during the period amounted to ,63 HRK. Out of this, the EU financial contribution amounted to ,44 HRK, whilst the value of the Croatian national contribution amounted to ,19 HRK. Based on the fact that the final level of the SAPARD Programme funds usage was 46.41%, the financial efficiency of the SAPARD Programme can be evaluated as low Administrative framework of the SAPARD Programme Ministry of Agriculture, Fisheries and Rural Development (MAFRD) The Ministry of Agriculture, Fisheries and Rural Development was the Government body responsible for the preparation and implementation of the SAPARD Programme in the Republic of Croatia. The Regulation on Managing CARDS, PHARE, ISPA and SAPARD programs (Official Gazette No. 18/07), designated the Directorate for the Sustainable 27

28 Development of Villages as the SAPARD/IPARD Programme Managing Authority (hereinafter Managing Authority) responsible for managing of the SAPARD Programme. By the same Regulation the MAFRD Directorate for Market and Structural Support in Agriculture (hereinafter referred to as DMSSA) was designated as the organizational unit tasked with the SAPARD Programme implementation SAPARD/IPARD Programme Managing Authority Initially, the Directorate for the Sustainable Development of Villages was established in 2001 as one of the 14 organizational units of the Ministry of Agriculture, Forestry and Water Management. This Directorate was tasked with the implementation of national rural development programmes. The Directorate for the Sustainable Development of Villages consisted of the Department for Cooperatives, Department for Sustainable Development of Villages and Farms, as well as the Department for Ecological Production. Based on the above mentioned Regulation (Official Gazette No. 18/07), starting February 2007, this Directorate was responsible for the management of the SAPARD Programme. As part of the re-organization of the Croatian Government in 2008 (Official Gazette 35/08) the Directorate for the Sustainable Development of Villages was transformed into the Directorate for Rural Development. This new Directorate had a different structure, encompassing the Sector for Rural Development, Sector for Enterprise Development in Villages and the Sector for Management of EU Programmes - SAPARD/IPARD Managing Authority. The newly established Sector for Management of EU Programmes - SAPARD/IPARD Managing Authority consisted of the Department for Management of EU Rural Development Programmes and the Department for LEADER and Agro-environmental Measures. The Sector for Management of EU Programmes - SAPARD/IPARD Managing Authority of the Directorate for Rural Development, assumed the function of the SAPARD/IPARD Programme Managing Authority (hereinafter referred to as the Managing Authority). During the SAPARD Programme implementation the Managing Authority carried out activities such as: promotion of the SAPARD Programme, coordination of all implementation activities within the Republic of Croatia, coordination of cooperation with the European Commission, preparation of proposals for modifications of the SAPARD Programme and preparation of Annual and Final SAPARD Programme reports. 28

29 Directorate for Market and Structural Support in Agriculture SAPARD Agency The Directorate for Market and Structural Support in Agriculture was established in 2001 as one of the 14 organizational units of the Ministry of Agriculture, Forestry and Water Management. The initial task of DMSSA was the implementation of national assistance measures in agriculture. The national accreditation of the DMSSA for the implementation of Measure 1 and Measure 2 was issued in February Accordingly, the DMSSA took over the role of the SAPARD Agency. As the implementing body of the SAPARD Programme, the DMSSA-SAPARD Agency was responsible for the following tasks: - arrangement of tendering and grant award procedures - publication of calls for applications with terms and conditions for eligibility to recieve SAPARD Programme support - contracting the SAPARD Programme support, making payments and financial recovery from individual beneficiaries - evaluation and approval of beneficiary applications in regards to terms and eligibility conditions - selection and control of beneficiary operations in regards to the criteria and mechanisms defined by the SAPARD Programme, and their compliance with the relevant Community and national rules - definition of the contractual obligations in writing between the DMSSA/SAPARD Agency and the final SAPARD Program beneficiaries - control of compliance with the Agreements signed with the SAPARD Programme beneficiaries - conduction of inspections to ensure that the expenditure declared by the beneficiaries was actually incurred in accordance with applicable rules, and that the products or services have been delivered in accordance with the approval decision, and the payment requests by the beneficiary are correct - provision to the NAO, the National Fund and the Managing Authority of all information that was necessary for their functioning 29

30 The DMSSA was given the conferral of management for Measures 101 and 102 by the European Commission for the SAPARD Programme implementation on 26th September The short period in which preparations for this accreditation were carried out reflects the high motivation and exceptional efforts of DMSSA employees. As part of its preparations for the implementation of the IPARD Programme, in February 2009 by the Law on Establishment of the Paying Agency in Agriculture, Fisheries and Rural Development (Official Gazette No. 30/2009), the DMSSA was transformed into the Paying Agency in Agriculture, Fisheries and Rural Development (hereinafter referred to as PAAFRD) The PAAFRD consists of the previous DMSSA, which became the central office of the PAAFRD, and county Government offices for agriculture (which became regional PAAFRD county offices). On 18th December 2009 the PAAFRD was entered into the Court Registry of the Zagreb Trade Court, and of that date became an independent legal entity SAPARD Programme Monitoring Committee The SAPARD Program Monitoring Committee (hereinafter referred to as the Monitoring Committee) was established 14th November The Monitoring Committee had 23 members which represented relevant Government institutions, the business sector and NGO s. Representatives of the European Commission participated in the work of the Monitoring Committee in an advisory role. The role of the Monitoring Committee was to monitor the quality and efficiency of the SAPARD Programme implementation, in order to ensure the achievement of the programme goals. Within its work, the Monitoring Committee approved the Annual and Final reports on the SAPARD Programme implementation. The Monitoring Committee approved its own Rules of Procedure which were adopted 17th May 2006 at its second meeting National Fund The National Fund was established on 30th September 2004 by the Croatian Government Decision to establish the National Fund within the Ministry of Finance for the implementation of EU pre-accession programmes. This Decision defined the National Fund, as the central treasury entity through which all pre-accession EC funds were to be channeled. The operational tasks of the National Fund were: - financial management of all programmes - submission of requests and receipt of funds from the EC 30

31 - redistribution of funds to the DMSSA/SAPARD Agency - financial reporting to the European Commission The National Fund was under the authority of the National Authorizing Officer (NAO). The NAO was appointed by the Government of Croatia. The NAO was the unique interlocutor for the European Commission for the maintenance of the decentralized implementation system (SAPARD). The duties of the NAO were ensure that the SAPARD rules, regulations and procedures in regards to procurement, reporting and financial management are respected. The NAO also had to ensure that a proper reporting and project information system was functioning in accordance with the stipulations of the MAFA Programmes influencing the SAPARD Programme implementation Preparatory programmes for the SAPARD Programme implementation In order to create conditions for the successful implementation of the SAPARD Programme, during the period the MAFRD implemented the following programmes: - CARDS 2002 Twinning Project ACBF "Operational Capacity Building within the Ministry of Agriculture, Forestry and Water Management". This project began in 2004 and lasted 25 months. - Project CARDS 2003 ACBF Capacity Building of the SAPARD Agency within the Ministry of Agriculture, Forestry and Water Management. This project began in 2006 and lasted 3 months. - PHARE 2005 project "Institutional Capacity Building and Support for Implementation of IPARD Programme". This project began in 2007 and lasted 20 months - PHARE 2005 project "Support to SAPARD/IPARD Agency for Improvement of the SAPARD Implementation Programme". This project began in 2008 and lasted 6 months. - Agricultural Aquis Cohesion Project financed through a World Bank loan. The project started in 2006 and will end in