1. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 11 – Agriculture and rural development Bilateral screening: Chapter 11 PRESENTATION OF MONTENEGRO Brussels, 11 – 13 December 2012

2. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 11 Agriculture and rural development Poglavlje 25 Nauka i istraživanje Bilateral screening: Chapter 11 Presentation of Montenegro Brussels, 11 - 13 December 2012 Chapter 11: Agriculture and rural development

3. Chapter 11: Agriculture and rural development State Aid Poglavlje 25 Nauka i istraživanje Chapter 11: Agriculture and rural development Džemil Kalač Advisor in the Sector for Payments of the Ministry of Agriculture and Rural Development dzemil.kalac@mpr.gov.me M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union

4. OUTLINE Poglavlje 25 Nauka i istraživanje CONCEPT OF STATE AID STATE AID RULES SPECIFIC FEATURES OF STATE AID RULES FOR AGRICULTURE APPLICATION OF EU STATE AID RULES TO MONTENEGRIN AGRICULTURE Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

5. LEGAL FRAMEWORK Poglavlje 25 Nauka i istraživanje  Stabilisation and Association Agreement between the European Communities and their Member States of the one part, and the Republic of Montenegro, of the other part  Law on State Aid Control (“Official Gazette of Montenegro”, No. 74/09 from 13 Nov. 2009, 57/11 from 30 Nov. 2011)  Law on Agriculture and Rural Development (“Official Gazette of Montenegro”, No. 56/09)  Law on Budget of Montenegro for 2012 (“Official Gazette of Montenegro”, No. 66/11)  Decree on conditions, method and the pace of implementation of measures of agricultural policy for 2012 – Agro-budget (“Official Gazette of Montenegro”, No. 36/12) Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

6. Stabilisation and association agreement Poglavlje 25 Nauka i istraživanje Article 73 paragraph 1, item iii of the Agreement The following are incompatible with the proper functioning of this Agreement, insofar as they may affect trade between the Community and Montenegro: “...any State aid which distorts or threatens to distort competition by favouring certain undertakings or certain products”. Paragraph 9 of the aforementioned Article mentions a derogation, i.e. paragraph 1 (iii) shall not apply for the products listed in Chapter II of Title IV (Agricultural and Fishery Products) Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

7. Law on State Aid Control Poglavlje 25 Nauka i istraživanje Art. 2 of the Law on State Aid Control (Law) State aid shall mean expenditures, reduced revenues or reducing assets of the State or municipality that distort or may distort free competition in the market and that may affect the trade between Montenegro and the European Community or a member state of the Central European Free Trade Agreement (CEFTA) by conferring a more favourable market position on certain economic entities, products or services. Article 1 paragraph 2 defines that this Law shall not apply to the purposes regarding the promotion of the agricultural and fishing development; Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

8. State aid in the agricultural sector Poglavlje 25 Nauka i istraživanje Upon a proposal of the Ministry of Agriculture and Rural Development, the Government of Montenegro adopts each year the Decree on conditions, method and the pace of implementation of measures of agricultural policy for the current year – Agro-budget. Based on: - Law on Agriculture and Rural Development - Law on Budget of Montenegro for the current year Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

9. Agro-budget measures – state aid in the agricultural sector Poglavlje 25 Nauka i istraživanje Risk management in agriculture Support to establishing producers’ organisations Promotion of agricultural products and agriculture Beekeeping improvement programme Fight against animal and plant diseases Subsidizing interest rates Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

10. Risk management in agriculture Poglavlje 25 Nauka i istraživanje - co-financing of costs of insurance against crop and livestock damage (up to 50% of the total insurance amount) -reimbursement of a part of the damage caused by wild animals (depending on the type and amount of damage) -financial support in case of damage from weather elements and other significant damage (the amount of reimbursement can be a maximum of 20% of the damage caused) In exceptional situations, for individual damage of a larger extent, damage is reimbursed according to the level of the actual damage done In case of damage that a farmer could have been insured against in the regular insurance system, but failed to do so, the farmer can be reimbursed to a maximum of 10% of the damage caused Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

11. Support to establishing producers’ groups Poglavlje 25 Nauka i istraživanje The support is given for the first 5 years from the day of establishing in the form of annual grants for: - covering costs of founding - administrative expenses of a producers‘ organisation operation. The fixed expenses include : - costs of adaptation of its members production to market conditions - costs of marketing of products, which involves preparation and organisation of sale - provision of common rules and information about production, quality and demand Operation of the Confederation of Cooperatives of Montenegro are supported Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

12. Promotion of agricultural products and agriculture Poglavlje 25 Nauka i istraživanje The measure is implemented by subsidising different kinds of promotional campaigns: - organisation of and participation in local and international fairs, exhibitions and other events - advertising through different communication channels - informative and educational activities aimed at consumers The advantage is given to promotional and informative activities under the registered quality schemes that highlight products‘ specific features with respect to their quality, production methodologies and their contribution to the reduction in harmful effects on the environment Co-financing on the basis of the submitted activity programme Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

13. Bee-keeping development programme Poglavlje 25 Nauka i istraživanje Bee-keeping development is supported in the fields of: - production of selected bee queens - quality of bee products and health of bee communities - improvement of competitiveness through automatisation of some phases of the work, improvement of sanitary conditions in production and storage of bee products (the support in the amount of up to 50% of approved investment for supply of specific and deficient bee keeping equipment, supply of which would substitute imports (equipment for production of wax for bee hives, etc.) - support to young and inexperienced bee-keepers (refers to supply of three formed bee communities for a bee-keeper not younger than 18 and not older than 30, obliging him to stay in bee-keeping for the next 5 years and to become member of the Confederation of Bee-keepers Organisations) - professional skills of bee-keepers Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

14. Fight against animal and plant diseases Poglavlje 25 Nauka i istraživanje Aid for the damage incurred due to the fight against and eradication of particularly dangerous infectious and other diseases The compensation is paid in the amount of market value of the animal on the day of the damage Aid to plant keepers for the damage incurred due to the fight against and eradication of quarantine harmful organisms The compensation is paid in the amount of market value on the day of the damage Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

15. Subsidizing interest rates Poglavlje 25 Nauka i istraživanje Reasons for support: - difficult access to favourable credits for agriculture development - high interest rates - unfavourable conditions for mortgages, particularly with regard to land and facilities owned by farmers The support is given up to 50% of interest rate Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

16. Tax-policy measure aimed primarily at the agricultural sector Poglavlje 25 Nauka i istraživanje VAT at the reduced rate from 17% to 7% for: - basic products for human consumption (bread, flour, milk and dairy products, baby food, fat, oil, meat and sugar) - medicines used for veterinary medicine - fodder, fertilizer, devices for plant protection, reproduction seeds, planting material and breeding stock The aim is to support the agricultural production in Montenegro. (Law on Value Added Tax (Official Gazette of the Republic of Montenegro, No. 65/01, 12/02 (corrections), 38/02, 72/02, 21/03, 76/05, 16/07) Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

17. Application Poglavlje 25 Nauka i istraživanje Montenegro's state aid rules will have to be address as part of the accession negotiations In time will have to be brought in line with EU legislation Chapter 11: Agriculture and rural development M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 11: Agriculture and rural development

18. Thank you for your attention! QUESTIONS