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BY 2009 MACEDONIA WILL OBTAIN FROM THE EU PRE-ACCESSION FUNDS 19 MILLION EUROS AND ADDITIONAL 12, 5 MILLION IN 2010. THE MECHANISM FOR FINANCICNG THE IPARD PROJECTS IS ESTABLISHED IN SUCH A MANNER THAT ONE HALF OF THE INVESTMENT WILL BE PROVIDED BY THE APPLICANT AND THE OTHER HALF FROM THE BUDGETS OF EU AND RM, MORE PRECISELY FROM THE TAX PAYERS OF THE EU AND RM IN RATIO 3:1 The agricultural sector in R. Macedonia in the next period will be a dynamic area where intensive reforms and restructuring will be conducted. In this industry will be invested significant resources from the EU Pre-accession funds with the objective to include the Macedonian agriculture in the modern producing trends. This was the occasion for our interview with Mr. Toni Dimovski, Director of the Agency for Financial Support of the Agriculture and the Rural Development, more familiar in the public as the Paying Agency. AGRO INFO: How far are the recruitment and the accreditation process of the Paying Agency? Dimovski: The accreditation of the Agency for Financial Support of the Agriculture and the Rural Development is a top priority. At the moment, the procedures, the Manuals and in general, the acts necessary for managing the funds from the pre-accession assistance for rural development are in final stage of completion and are subject to harmonization with the EC Directorate for Agriculture.

According to the Annual Training Program, the Agency’s employees are trained to apply the already established procedures in their work assignments, developed according the experience and the practice from the Paying Agencies in the Region.

The second condition for accreditation – the recruitment of human resources is underway and is conducted according the plan. The procedure for new employments will continue in the following year and we expect that we will have an optimal capacity necessary for the accreditation process i.e. the transfer of the management and responsibility of the IPARD funds for R. Macedonia from the EC to the Agency for Financial Support of the Agriculture and the Rural Development.

Agro Info: The Agency will manage the money from the EU pre-accession assistance. Have you developed a strategy where you will allocate the money and which areas and users will have the priority? Dimovski: The EU pre-accession funds that will be allocated according the priorities defined in the IPARD Program of R. Macedonia – Strategic Document of the Government of R. Macedonia in the area of the agriculture and the rural development 2007-2013.

This document, several months ago, was sent to Brussels for an overview and comments. Regarding the finalization of the Program, we have established communication with the EC Directorate for Agriculture and for more details for the final version you will have to contact the Ministry of Agriculture, Forestry and Water Economy. However, on this occasion for AgroInfo, I will briefly elaborate on the priority sectors i.e. the measures from the first Priority Axis. - Improvement of the market efficiency and implementation of the Community standards. The Priority Axis envisages measures or investments in: agriculture holdings, orchards, vineyards, gardening, breeding cattle for milk production i.e. dairy cattle, sheep, goats as well as fattening of pigs and poultry for meat production. The users will be individual farmers, agriculture companies, agriculture cooperatives, trade companies established from Associations of agriculture producers and legal entities specialized for farming. In addition, the Priority Axis envisages measures for investments in the agro-processing industry which includes the following sectors: wine production, fruits and vegetables processing, the slaughter and the milk industry.

In summary, the IPARD Program of R. Macedonia is available and will be presented to the public. The Program is expected to be finalized in the first several months of 2008 and thus we will have the key document, on the basis of which the accreditation of the Paying Agency will be based, so that shortly after can be initiated the use of the funds from the IPA Fifth Component. Agro Info: Does Macedonia have the capacity to use the EU funds properly? We are witnesses that in the past, part of the international loans remained unused due to the insufficient capacities of our Institutions which are constantly criticized by Brussels. Dimovski: Decisive in this matter is to establish good flow of information, activities for informing the public on the IPARD Program (the activity is underway); the procedures for applying for financial support in the agriculture, activity which is projected via promotion of Manuals and significant technical assistance for training the users – as well as the manner by which the applicants will submit the projects for financial support. The successful building of this mechanism will be a guarantee for high percentage realization of the EU pre-accession funds and at the end, good absorption of the funds from the IPA Fifth Component. The Paying Agency in collaboration with the Ministry of Agriculture will continually inform on the activities for the process of applying for the IPA funds by the farmers. Agro Info: Which is the weak point that might be an obstacle to the process for using the money from the European Union? Dimovski: The highest risk is the potential information blockage, lack of transparency and the lack of knowledge by the applicants regarding the financing method of the IPARD funded projects. The lack of technical assistance for training the applicants for financial resources is also a potential weak point. The lack of funds for initiating the projects is probably another weak point. We have established communication with the banking community which carefully follows the progress in this area and most probably is in a process of preparing some package offer for the farmers.

Users will be the small and the medium enterprises i.e. the assistance will be provided to the economically sustainable legal entities registered for relevant agro-business in compliance to the new Law on trade companies.

The time-consuming administrative procedures for providing the necessary documentation as a support to the projects submitted to the Paying Agency could be another weak point; however with the reforms underway in this direction combined with development of data bases with relevant agriculture data, I sincerely hope that this weakness will be resolved. Agro Info: What are the expected outcomes in the agriculture as a result of using the pre-accession funds? Dimovski: I expect establishment of a system for financial support of the farmers and the rural development according the model of the EU member countries. This would modernize the agriculture production and improve the competitiveness of the Macedonian agriculture producers, and as a result of the above-mentioned would be introduced higher standard for the farmers and in general, there would be socially provided and prosperous rural area. Agro Info: What is the exact amount that will be contributed? Dimovski: According the Multi Annual Financial Framework of the Instrument for Pre-Accession Assistance (IPA), the European co-financing for rural development (IPARD), defined according the absorption capacity of the agriculture and the rural economy for 2007-2009 for Republic of Macedonia, is 19 million Euros. The pre-accession funds are only a beginning and will be projected proportionally to our capacity for using them. The updated indicative Multiannual Financial Framework for IPA also includes 2010, for which the projected amount for support of the rural development is higher and is an amount equivalent to 12, 5 million Euros. Therefore, we are talking about development of a system for financing the agriculture producers and the rural area, where after the successful implementation of the pre-accession assistance will flow significantly higher amount of funds for this specific purpose, which is the experience of the other countries.

I expect establishment of a system for financial support for the farmers

and the rural area according the model of

the EU member countries

Agro Info: There are rumors that the pre-accession funds will be available only to the financially more viable companies, while for the normal procedures they would not be accessible. Dimovski: In order to obtain an answer to this question, it would be more adequate that you contact the Ministry for Agriculture, Forestry and Water Economy. However, bearing in mind the great interest for this issue, I would give you an answer to this question. Namely, the IPARD Program defines the users – both per types and size. The European Union is interested to provide support to the prosperous, sustainable agriculture capacities and most often these are the larger companies but the decision for the final target groups will be subject to negotiation and argumentation with the European Commission. During the preparation of the Program are taken in consideration the specifics of our modest agriculture sector and with adequate adjustments which have been made, it was possible to include wider scope of agriculture producers via the criteria adapted to the users. As a supporting fact is that the scope of financial support is between 5. 000 and 400. 000 Euros with the objective the investments funds to be available to both the larger and the smaller farmers. Agro Info: Under what terms would the money be allocated and how would the farmers apply? Dimovski: The access to the IPARD funds will follow after the approval of the adequately submitted projects which have met the defined criteria. This phase will be elaborated in detail and presented to the farmers after the completion of the IPARD Program. The users will be informed of the IPARD Program. The users will be informed with the application criteria on-time, via the User’s Manual, which will be promoted for this purpose. Agro Info: Will the European money assist our agriculture sector to become competitive and can the Macedonian agriculture impose itself on the European markets, which by far are hardly accessible? Dimovski: I have already partly answered this question in the part regarding my anticipations from the use of the pre-accession assistance. The support from these funds, among the other things, is in service of meeting the European standards for agriculture production and processing, and as a result of this will be introduced higher quality and competitiveness of the Macedonian agriculture products. Thus, our widely renowned agriculture products will finally have access to the great and picky European markets. We are aware and familiar with the experiences of the other states and we hope that they will be confirmed in our case as well. Agro Info: It is a well known fact that Macedonia lacks products with added value i.e. finalized and packed according the European standards. Would this type of production be prioritized and its share increased in the total production?

Dimovski: The assistance will be available by accepting-approving the projects for financial support, both for production and processing facilities. Namely, the already mentioned first IPARD Priority Axis comprises investments, which means investments for restructuring and upgrading the farms, support to group of producers and investments in the processing capacities according the EU standards, as well as marketing of the agriculture products. Thus, the European consumers can become familiar with the Macedonian final products via marketing activities, which besides the confirmed quality can offer more attractive design.

Agro Info: The majority of the Macedonian farmers are not registered. Will they automatically be excluded or can they apply for financial support under the IPA funds? Dimovski: Building of a modern system for financial support of the agriculture per se assumes development of data bases in service of the adequate allocation of the funds in the agriculture, more sophisticated follow-up of both the progress and the problems which the farmers confront. Therefore, the registration of the farmers is a precondition for existing basic records, on the basis of which will be conveyed the modern support of the agriculture. Actually, the EU practice in these fields is a well-known, as well as the conditions for using financial support from the European Union. Agro Info: Who will guarantee for the money that the farmers will obtain from IPA? Who will be responsible for repaying the debt if the farmers do not return the money? Dimovski: The establishment of a European system for providing financial support in the agriculture per se guarantees specific allocation of the funds in sustainable projects. The investment of the farmer will be co-financed by the EU and R. Macedonia. The mechanism for financing the IPARD Projects is established in such a manner that ½ of the investment will be provided by the applicant and the remaining half by the budgets of EU and RM in ratio 3:1.

The establishment of a European system for providing financial

support in the agriculture per se

assumes specific use of the funds in sustainable

projects

The applying for financial support assumes submission of larger documentation, which besides the fact that it offers identification of the farmer’s profile it is also a guarantee for proper allocation of the funds and successful project implementation. The assistance funds will be available after the project approval, the performed administrative controls, on-the–spot controls, the follow-up trough the registers. The implementation of the allocated funds for this objective is subject to national and EU audits within a five year period after the completion of the investment. The individuals responsible for the provided IPARD funds are the users – the farmers, the Agency for Financial Support of the Agriculture and the Rural Development and the Government via the Budget of R. Macedonia. The procedures for providing financial support, which are in development stage at the Agency, are already established and operative in the systems for financial support in the EU candidate countries i.e. the EU member countries.