Dragan Pusara Managing Director

2. Wholesale markets’ influence on increasing the export of domestic agricultural products DraganPusara Managing Director Belgrade April 2013

3. PRESENTATIONOUTLINE • KEY DATA AND ECONOMIC INDICATORS OF SERBIA • GENERAL AG DATA: PRODUCTION, TRADE, CONSUMPTION • PRESENT POSITION OF TRADE CHANNELS FOR WS GOODS • FACTS, INTENTIONS AND PLANS FOR BELGRADE WSM

4. Key Country Data • Official Name: Republic of Serbia • Area: 88,361 km2 • Population: 9.5 million • Official Language: Serbian • State Form: Democratic Republic • Capital: Belgrade (1.6 million) • Currency: Serbian Dinar (RSD) • GDP (2007): $40.42 billion • GDP pc (2007): $5,476

5. After the 90s’ Serbia has developed into a stable democratic country, with fast growing market economy that is recognized as a premium SEE investment location

6. GDP Growth rate and GDP per capita, 2000 – 2008

7. Unemployment Rate, 2000– 2008 * Unemployment rate of 14.7% is the result of the harmonizing the methodology with EU standards. If old methodology was used, the unemployment rate would have been 17.5% in 2008.

8. Official Reserves 2003 – 2009 (bil.EUR)

9. Public Debt, 2000 – 2008 (in % of GDP)

10. Private Sector Borrowing Abroad 2000 – 2008, mil US$(mid-term and long-term borrowing)

11. Serbia offers stability and to potential investors and many international companies have located their operations in Serbia:Coca-Cola, Nestle, Salford, AbInBev, Carlsberg...

12. Foreign Direct Investments: 2000 – 2008 (mil US$)

13. Foreign Direct Investments: by investor (2000 – 2009)

14. Top Five Manufacturing Destinations in the World Source: The PricewaterhouseCoopers EM20 Index, July 2008

15. Investment Incentives • Special Financial Incentives for large investments of over 200 million Euro and 1.000 new employees in the following sectors:

16. Unique Export Potential • CEFTA • SAA • Russia and Belarus • Negotiations with: • Turkey • Iran • EFTA EU Member States EFTA Countries CEFTA Countries Negotiations underway Initiative to start negotiations

17. EU integration processes imply further progress • EU integration process • Implementation of SAA • Access to EU investment funds • Introduction of high production standards • Serbia’s accession to WTO • Decrease of import tariffs • Specialization of producers and development of market chains • Willingness and pressure for change by: • Management of Belgrade City Markets • Producers and beneficiaries of BTM

18. Serbia has grown into a regional leader in production of fruit and vegetables and the world leader in raspberry production. Other key fruits are apples, plums, grapes and cherries

19. Serbia produces over 3.3 mil. tons of fruit and vegetables annually Average, 2006-2008 Production of vegetables in Serbia and EU countries (average, 2004-2008) Productionof fruit in Serbia and EU countries (average, 2004-2008) Proizvodnja povrća u Srbiji i zemljama EU (prosek 2004-2008)

20. Serbia is among top EU producers in select products Plums Cabbage Raspberries Onion

21. Foreign trade in the agricultural sector in Serbia 2002 – 2008 Exports are continuously growing at the rate exceeding imports. Fruit and vegetable consumption is on the rise.

22. Serbia characterized by dynamic foreign trade in fruit and vegetables Share of fruit and veggies makes 16.47% of total Ag imports, i.e.19.7% of exports. Import of Ag produce into Serbia Export of Ag produce from Serbia

23. Huge trade increase The experience of all new EU countries proves that trade of fresh Ag produce grows both ways upon liberalization and especially after entering the EU Average annual export increase in 12 new EU members Index of total trade increase in fresh Ag produce 2000-2008

24. In spite of voluminous production, Serbia still has: • undeveloped market chain, • low storage capacity, • low trade activity in existing • wholesale/truck markets

25. Sales trends indicate inevitable change in market operations Low share of produce marketed through Belgrade Truck Market (BTM) Total sales volume at BTM Around 1% of sales through BTM. Drop in sales volume at BTM • Remaining 99% is self consumption or trade through other channels: • Garden sales • Local green market • Other truck wholes markets • Specialized stores • Supermarkets • Direct Exports • ... High seasonality of sales due to lack of storage capacity Market chain – fruit & vegetables

26. The existing Belgrade truck market failed to have a more significant role in the development of market chain and in the provision of services to customers Sales in Belgrade truck market are small especially when compared to the market potential it has and to the opportunities that a modern wholesale market could provide to its beneficiaries (farmers, merchants and customers)

27. Carrot sales at BTM • Serbia offers competitive prices • High competition among producers • Serbia has price peaks • Low storage capacity • High import tariffs Comparative price of carrot in wholesale markets in Serbia and Croatia, 2005 - 2008

28. Onion sales at BTM Serbia has ca. 20,000 tons of ULO storage capacity and ca.60,000capacity for storage of fruit and vegetables that is insufficient for current production level Comparative price of onion in wholesale markets in Serbia and Croatia, 2005 - 2008

29. It IS possible to include small farmers in the market chain Cold chambers ULO storage Build by sate support Up to 2000 tones More then 2000 tones

30. Rationale for low sales in Serbian wholesale markets • High number of small farmers that produce for self-consumption or local green markets that imply an undeveloped market chain • Low producer mobility • Poorly functioning market information system • Undefined quality requirements and production standards • Large buyers and supermarkets directly contract producers due to fluctuating offer in wholesale markets • Undeveloped services to producers by wholesale markets (offer merely a sales spot) • Expensive service fee charged by wholesale markets • Highly profitable (4% of total value of produce on truck) but not consumer friendly

31. Serbia has many small farmers not yet vertically integrated and hindered by a short market chain that ends at home or in the local green market • Biggest challenge to Ag development in Serbia is the integration of a small farmer in the modern market chain that is hindered by these reasons: • High competition in primary production and low in processing • Small households – over 90% of farm households cultivate less than 10ha on average resulting in low efficiency in production and marketing • Majority of market functions: collection, calibration, storage and transport that are needed in each farm household go far beyond the financial capabilities of individual farmers • Demanding and expensive standardization programs • Retailers with a fully developed and vertically integrated market chain • The experience says the process is easier when farmers come together for a common cause – processing, storage, green market, cooperative, etc.

32. vs.

33. WHM prospects Products sold: Fruit & Vegetables Daily customers/visitors: 2500 Overall market size (ha): 5,2 ha Annual tonnage (2008): 115.000 Gross Annual Income: 2.5 mil EUR Method of payment: 4% of total value of Ag produce on truck

34. Location for new Belgrade WSM 9 ha Land designated for WM will be offered to strategic partner 7,1 ha Belgrade City Markets land Present truck market 5,2 ha Belgrade City Markets land Macroandmicrolocationis veryfavorably positioned at the end of urban area of Belgrade, close to the railway,500 m from the intersection of highway Belgrade-Zagreb and Belgrade-Budapest(corridor X) and 5 km from the airport 21,5 ha

35. Detailed analyses have been completed to check the prospects of the future BWM from the perspective of • 1. regional competition, and • 2. potential for positioning in the market chain • Results clearly indicate that new BWM has potential to: • quickly grow into a dominant national and regional leader, and • bring return on investment in less than 7 years as indicated in the feasibility study

36. After finishing all studies and design plans, we have started construction works in the first phase of BWM which includes new facility 10,400m2 for fruit and vegetables and complete infrastructure for two more halls for meat and flowers

38. Who are key players in developing wholesale markets Usually wholesale markets in CEIE countries were developed for merchants who within the EU common market were primarily oriented towards imports as it enabled easier logistics and delivery of produce to supply buyers in regional centers (most typically from Italy, Spain, Turkey, Greece or Holland) This trend caused the so called hello-effect in the markets of all accession countries and resulted in short-term deficits in foreign trade of fruit and vegetables and in the long term, forced local producers to become competitive

39. Lessons learned and next steps • BWM management and policy makers aiming to develop a wholesale market to remain open for imported produce but provide local produce with preferential treatment • aware of the needs for introduction of market support mechanisms for increased trade of local produce • joint survey of all public entities introducing private standards and quality policies to be implemented into national legislation • preferential supply of local produce to public entities

40. Next steps For above reasons, no less than 2/3 of infrastructure is set for public sector investors (local governments, provincial government) who will not be directly present at BWM but will sublease their rights to traders and cooperatives in their area 1/3 is set for companies trading in BWM irrelevant of the origin or traded produce First round of re-capitalization completed and 8 out of 40 units sold to local governments

41. What is the role of local government in development of Agriculture?

42. THANK YOU FOR YOUR ATTENTION! VELETRŽNICA BEOGRAD BELGRADE WHOLESALE MARKET Autoput bb, 11000 Belgrade, SerbiaT: +381 11 7158 480 info@veletrznica.co.rs