Policies for the Future of Farming and Food in Croatia

Assessment and recommendations

Assessment

Croatia’s economic and social progress has been remarkable, although challenges remain

Over the course of three decades, Croatia has leapt from a war-damaged centrally planned economy to a high-income and very high human development country. It is a member of the European Union (EU) and it is well-integrated in the global economy. Accession to the European Union in 2013 promoted socio-economic development and helped to strengthen institutions and policies, and to build domestic capacities. Croatia’s 2023 entry into the Eurozone and the Schengen area is a recent milestone attesting to this progress and a further step towards economic convergence. Croatia has successfully recovered from recessions in the 2010s and during the COVID-19 crisis. Progress in employment, poverty reduction, environmental quality, public service availability, and laws and regulations have seen Croatia achieve similar levels as many OECD Members.

Important challenges remain nonetheless. In particular, the population decline driven by emigration has created a gap in the labour market, with a pronounced urban-rural divide across many dimensions, including income, employment, poverty, and access to public services. The disadvantages prevalent in rural areas motivate emigration to cities and abroad, triggering a cycle of depopulation and land abandonment that further aggravates its socioeconomic situation and undermines the maintenance of valuable ecosystems.

While agriculture and food policies are driven by the European Union, the Croatian government is responsible for strategic planning and implementation

Most policies and regulations that affect the agro-food sector – in particular the EU’s Common Agricultural Policy (CAP) – in Croatia are decided at the European level and implemented at the national level. The new delivery model of the current CAP gives increasing responsibility to Member States on strategic prioritisation and policy choices. This is reflected in Croatia’s 2023-27 CAP Strategic Plan and the national Agricultural Strategy until 2030.

The OECD recently reviewed policies for farming and food in the European Union and made 15 high-level recommendations concerning payments, regulations, innovation, data strategies, and environmental services (OECD, 2023[1]).

Croatia has the potential to achieve sustainable agricultural productivity growth even as further structural transformation continues

Agricultural productivity growth is relatively high and output has increased without an increase in GHG emissions

Despite the challenges, Croatia is on a solid path towards achieving sustainable agricultural productivity growth decoupled from greenhouse gas (GHG) emissions. After several years of low or moderate growth, agricultural production has recently increased, supported by improved yields. Productivity has been the primary driver of output growth: despite a deceleration with respect to the previous decade, in 2011-21 the average annual total factor productivity (TFP) growth of 2.4% was more than twice the average of the OECD (0.85%) and higher than the EU average of 1.2%.

Productivity gains in the sector have helped increase output without an associated increase in GHG emissions. Emissions from agriculture have followed a declining trend over the last three decades. While the reduction in emissions decelerated in 2011-21, Croatia still performed better than the EU and OECD averages in terms of reductions in emissions intensity thanks to higher productivity increases. Other agri-environmental trends show a mixed picture, however, with lower-than-average pesticide sales but above average use of synthetic nitrogen and phosphorus fertilisers, and a recent increase in ammonia emissions. 

The sector is undergoing intensive structural transformation, with farmer income yet to converge with the EU average

Since the breakup of Yugoslavia and the war for independence, Croatia’s agriculture has been subject to an intense process of structural adjustment. The transition from socialism involved changes in land ownership, the phasing out of subsidies on fertiliser use, the abolition of numerous forms of state intervention in agriculture and food markets, and a significant decrease in the size of the livestock herd.

The Croatian agricultural sector is still undergoing a structural transformation, with important declines in its share of GDP and employment. This process is reflected in the declining number of farm holdings and the increase in the average farm size from 5.8 to 8.6 hectares between 2010 and 2020. That said, the average farm size in Croatia remains almost half the EU average, and average farm economic output in 2020 was the second lowest in the European Union. While farm income has improved since Croatia’s accession to the European Union in 2013, it remains well below the EU average.

Small family farms continue to be the backbone of Croatia’s rural areas: 97% of all registered farms are family-run. As in other countries, farm structure is characterised by extremes: over 70% of farms have less than 5 hectares and account for only 15% of the country’s agricultural area.

Despite structural barriers, more young farmers and women are entering the sector

In contrast to many EU countries, young people are increasingly entering the sector in Croatia. Over the last decade, both the number of holdings managed by young farmers and their share in all farm holdings have increased, despite the level of emigration and the negative demographic trend. This increase is expected to improve the economic performance of the sector because younger managers have a higher level of professional training, and their holdings are more competitive and efficient. That said, farmers continue to face constraints in access to finance and land ownership.

The share of female farm managers is still relatively low: women make up less than 30% of farm holders, even if they represent more than half of the farm family workforce. Recent data point to promising increases in farm ownership by women and in the average area of agricultural land held by female farmers. These developments may improve the gender balance and the situation of rural women, still marked by traditional gender roles and regional disparities in access to services.

Organic farming has expanded rapidly, driven by supportive EU policies

The area devoted to organic farming quadrupled between 2011 and 2022, and its share of the utilised agricultural area grew from 2% to 9%. The number of organic producers and processors and the size of the domestic market also increased, including in small segments such as aromatic and medicinal herbs, potential niche markets for Croatia.

The development of organic agriculture has been driven by supportive policies and significant CAP funding, and responds to European and national objectives and priorities. The impact of the expansion of organic agriculture on Croatia’s agri-environmental performance warrants monitoring and evaluation. At the same time, the data suggests that the addition of new areas converted to organic agriculture has slowed following a peak in 2016.

The sector is increasingly integrated into global value chains through the European Union

Croatia’s participation in global value chains in the agriculture and food sector intensified between 2000 and 2020. The importance of the sector in the country’s total exports has increased, although not sufficiently to prevent a further increase in the trade deficit that has characterised the sector for decades. Croatia’s export profile has evolved towards increased specialisation in cereals and oilseeds, with other export products losing importance, particularly following the collapse of the domestic sugar sector following the 2017 abolition of the EU sugar quota. Agriculture and food trade with other EU Member States expanded considerably after EU accession, becoming more dynamic alongside a widening gap with extra-EU trade, which since 2013 has reduced its share in total trade.

The policy and regulatory environment could be more conducive to sector growth

Policies and regulations have increased in scope and complexity…

Croatia’s post-independence path of integration into the multilateral trading system and strengthened ties with the European Union drove a rapid evolution in its policy and legal framework, with important implications for the sector. The phasing out of guaranteed prices and input subsidies was required for accession to the World Trade Organization (WTO), while new models of producer support were required for alignment with the EU CAP. Preparations for accession to the European Union also widened the policy vision for the sector, driving Croatia to include a rural development dimension. Together with other international environmental and climate protection commitments, EU accession prompted an expansion of the agri-environmental policy and legal framework. Croatia has made significant progress in strengthening its regulatory policy framework and promoting a whole-of-government approach for regulatory quality.

… requiring stronger inter-institutional co-ordination

The larger scope and complexity of policies responding to the food systems’ “triple challenge”1 require greater co-ordination amongst the agencies responsible for policy design and implementation. Like most OECD Members, Croatia does not have a co-ordination body or mechanism to comprehensively cover food systems policies. Multiple arrangements regulate horizontal co-ordination for specific topics or policy areas.

Inter-institutional co-ordination is an area where Croatia could improve its performance. At present, the 2022 Sustainable Governance Indicators show a weak performance by Croatia in terms of the quality and frequency of inter-institutional co-ordination (Bertelsmann Stiftung, 2022[2]).

Notwithstanding the significant benefits of EU membership, the growing policy complexity is testing Croatia’s administrative capacity

For the agro-food sector, EU membership has meant the opportunity of full integration into and access to the large EU Single Market; access to important sources of funding; higher environmental standards; and numerous opportunities for network-building and collaboration to promote innovation.

Croatia’s top national priorities for the sector are of an economic nature: improving the sector’s productivity, value-added and competitiveness; increasing farmers’ incomes; and creating jobs. However, the priorities of the European Union focus on minimising the sector’s environmental impacts. This mismatch is reflected in EU-funded projects under the European Innovation Partnership for Agricultural Productivity and Sustainability (EIP-AGRI), which often focus on promoting sustainable farming practices but rarely tackle the challenge of increasing productivity and adding value to production.

Croatia is a small player in EU agriculture: it represents less than 1% of EU agricultural output and value added and receives around 1% of CAP expenditures. While public servants are, on average, more highly educated than their private sector counterparts across Croatia’s economy, skill shortages still constitute a barrier to delivering public goods and services or implementing reforms, and the public administration faces difficulties in retaining specialised staff (OECD, 2023[3]).

The growing number and complexity of EU regulations and requirements is stretching the capacity of Croatia’s administration, however. Managing and controlling CAP expenditures demands an increasing number of staff at the Paying Agency in Agriculture, Fisheries and Rural Development (APPRRR). The public agricultural advisory service is also increasingly absorbed by administrative tasks. Demands from the requirements and rules of the EU and the CAP instruments take up an important share of its capacity, leaving limited scope for providing expert guidance to farms and bridging the gap between research and the adoption of innovation.

In the 2023-27 CAP, EU Member States have more flexibility in their national implementation of the common policy. Croatia opted not to use certain instruments for the redistribution of support to minimise the associated administrative costs. The OECD recently recommended that the European Union focus its environmental conditionality on fewer practices that are monitorable at a large scale so as to limit the administrative burden on Member States and farmers (OECD, 2023[1]).

There is space to better use support policies to enhance productivity and improve the situation of rural areas…

The CAP Strategic Plan (CSP) for 2023-27 under the new delivery model represents an opportunity for Croatia to prioritise needs in the agro-food sector. The sector will have access to EUR 3.7 billion of EU and national funds. Of this budget, direct payments and sectoral interventions (Pillar 1) receive 52% of the funds, and rural development measures (Pillar 2) receive 48%.

Despite the additional freedom provided to Member States, many of the policy choices Croatia made for the new CAP period follow the pattern of the previous period (2014-22) rather than changing in line with newly identified priorities, such as improving productivity. Rural development support focuses on investments to improve the sector’s productive and processing capacity. However, a transfer of funds from the rural development Pillar 2 to direct payments under Pillar 1 will take place again for this programming period and Coupled Income Support (CIS) linked to production will be used up to the maximum share allowed. Some adjustments were made to improve the distribution of support and to better target small and middle-sized farms, in line with recommendations of a prior assessment of spending for the sector (World Bank, 2019[4]). Croatia continues to implement policies to attract young people to the sector through direct payments and rural development measures. In line with an increased ambition at the EU level, environmental and climate objectives are promoted via both pillars, which include eight new voluntary eco-schemes.

The Croatian Recovery and Resilience Plan (RRP) is an additional source of funding, with EUR 131.7 million of EU funds for financing investments in 2021-26 to improve the logistics infrastructure for the fruit and vegetable sector, to accelerate the restructuring and consolidation of agricultural land, to promote the digital transformation of agriculture, and to improve the food donation system.

Beyond the CAP, Croatia uses the space allowed by the EU legal framework to support the sector with national funds, in particular small-scale (de minimis) state aid for farming, which exempts payments below EUR 25 000 per beneficiary for a three-year period from state aid notification under EU rules. This type of support is used to provide coupled payments in addition to, or for sectors not covered by, the European Union’s Coupled Income Support Scheme: dairy cows, breeding sows, sugar beet, olive oil, and tobacco. Coupled support seeks to maintain production in these sectors, all of which are considered extremely sensitive. However, it might not create incentives for enhancing productivity and sustainability.

…and to allocate EU and national funding more in line with identified priorities

Given the priorities and needs identified at the national level, Croatia should make the most of the funding available to further develop the sector and promote its transformation. There is scope for Croatia to optimise the use of the funds as well as to use the available flexibility to target more support towards promoting productivity gains and innovation for sustainability and resilience. In particular, the relatively high share of support linked to production, including for emission-intensive sectors, deserves attention.

Rural development support has been found to have a higher impact than direct payments on Croatia’s overall output, value added and job creation (World Bank, 2019[4]). However, the transfer of funds from this pillar to direct payments continued in 2023-27. In the 2014-22 CAP, the utilisation rates of measures to promote knowledge transfer and innovation and to support farmers’ participation in organisations were very low. There is potential to continue improving the design of support policies to increase the uptake and adoption of these measures.

Strengthening producer organisation and promoting exports could create new opportunities...

The level of co-operation and organisation amongst Croatian farmers is low. There are few recognised producer organisations, and they contribute little to key sectors such as dairy and fruits and vegetables. Many farmers are reluctant to join co-operatives and other associations or groupings due to the negative connotations of such bodies from the Socialist era. In 2019, co-operatives covered only 0.2% of farmers.

Joining forces through associations or co-operatives, however, could help farmers profit from economies of scale for innovation and investment, strengthen their position in the market, and contribute to better functioning value chains. It could also help farmers access EU funds, as CAP sectoral interventions for the fruit and vegetable sector are channelled through recognised producer organisations.

The 2023-27 CSP includes EUR 5.3 million to support the establishment and operation of producer organisations, an amount slightly lower than in 2014-22, when only 20% of the budget for the rural development measure to support producer groups and organisations was spent. Given the small size and the fragmentation of Croatia’s farming landscape, gaining critical mass is particularly important to improve small farms’ linkages to markets. The low uptake of existing available support warrants further attention so as to improve policy design.

Croatia’s agro-food exports mainly go to the EU market or to neighbouring countries. Increasing the market diversification for agricultural and food products is a key priority for the government, but there is no strategy for export promotion and export market diversification designed specifically for the sector. Public institutions and private sector organisations perform a range of export promotion activities, such as providing information and advice to potential exporters and promoting the participation of Croatian companies in international events.

Efforts on export diversification could be combined with attracting foreign investment in the agro-food sector, building on OECD recommendations for the implementation of a supply chain development programme, and an investment prioritisation framework for the Croatian economy (OECD, 2023[5]).

…as could improving the legal and institutional environment, including by increasing the involvement of farmers in regulatory processes

Laws and regulations related to the sector – e.g. the Agricultural Land Act – have been subject to numerous amendments. In addition, many relevant institutions have been reorganised, with significant shifts in responsibilities over the last decades. For example, the agricultural advisory service was transferred to the Croatian Chamber of Agriculture in 2010, reinstated as an independent agency in 2012, and absorbed by the Ministry of Agriculture in 2019.

Frequent changes to the legal and institutional framework may result in a lack of predictability for producers. Reducing the complexity of the legal framework and the frequency of amendments would make Croatia’s legal system more efficient and transparent. This could help improve the business environment for farmers, particularly for the numerous smallholdings and family farms.

Thanks to its advanced framework for public consultations, Croatia performs relatively well regarding stakeholder engagement in developing laws and regulations. The recent processes for Croatia's national 2023-27 CAP Strategic Plan and Agricultural Strategy up to 2030 included stakeholder consultation and engagement. That said, stakeholder engagement for proposed EU regulations is more limited: unlike other EU Member States, Croatia does not systematically inform its stakeholders about consultations at the EU level, nor does it conduct consultations to define its negotiating position.

The disposal of state-owned land remains a missed opportunity for land consolidation and attracting new talent to farming

Addressing the high fragmentation of privately-owned agricultural plots is an ongoing and unfinished task in Croatia. Past efforts helped to improve the registration of plots and the accuracy of land registry records, but the results in terms of actual land consolidation were modest. Croatia recently stepped up efforts in this area: as part of the reforms promoted by the Recovery and Resilience Plan, Croatia approved a legal reform setting the terms and rules for consolidation processes, and launched projects to consolidate at least 18 000 hectares of agricultural land.

An estimated one-third of agricultural land in Croatia is state-owned, and most commonly managed through the conclusion of lease contracts with farmers. Local governments provide maintenance for land that has not been disposed of as the law requires that such land be kept suitable for agricultural production.

Croatia has an untapped potential of almost 300 000 hectares of agricultural land that the private sector could use to further develop agricultural production and increase efficiency and economies of scale. Selling or leasing this land would bring revenue to the state, regional and local governments, and offer a pathway to land ownership for many farmers. This represents an opportunity for farm consolidation and to attract skills and talent to the sector through the more stable and predictable business models enabled by land ownership, as well as access to key sources of funding, including CAP payments and private finance.

The Agricultural Land Act, which regulates the disposal of state-owned land, has been amended numerous times. The most recent reform in 2022 seeks to accelerate the process of disposal with a scoring system that gives additional points to young farmers and women, organic producers, and members of producer organisations. The system also favours dairy and other livestock activities. However, lease agreements concluded between 2018 and 2022 covered only 3.7% of the land available for disposal, which suggests that administrative bottlenecks remain.

Croatia is tackling some challenges in food systems with well-functioning markets, but waste treatment capacity remains limited and performance on nutrition choices is weak

Domestic food markets are functioning well. Market concentration is moderate to low across the value chain. Market regulation and competition in the sector are in line with EU regulations. The OECD Product Market Regulation Indicators show that Croatia’s overall product market regulation is in line with most OECD Members in terms of supporting competition. The promotion of Responsible Business Conduct (RBC) is underpinned by Croatia’s 2019 adherence to the OECD-FAO Guidance for Responsible Agricultural Supply Chains. While Croatia has undertaken efforts to disseminate the Guidance among its stakeholders, further action is needed to promote its use by actors along the value chain.

There has been significant progress in measuring and preventing food waste, and complying with EU standards for reporting and measurement. Recent developments include an improved framework for food donations and the creation of county-level food banks. However, capacity to treat food waste remains limited and this contributes to the relatively high levels of GHG emissions from the waste sector.

Croatia has developed a mix of policies to encourage healthy food choices. This includes demand-side interventions, voluntary collaborations with the food industry (such as a front-of-pack nutritional label), regulations, and fiscal measures. Yet overweight and obesity rates are above the EU average and increasing at a faster pace, and fruit and vegetable consumption is declining in adults aged 15-34. These trends suggest there is space to explore further policy actions to promote healthier food consumption.

Environmental conditions are relatively good, but further action is needed to maintain the sustainability and climate resilience of agriculture

Environmental pressures from agriculture are relatively low, but some areas require attention

Croatia is endowed with some of the richest ecosystems in Europe and abundant water resources. It has taken action to mitigate environmental pressures by designating 38% of its territory as protected, well above the Kunming-Montreal target of 30% by 2030. Groundwater reserves remain of good quality and pesticide sales per hectare are half that of the rest of the European Union. Decreases in livestock numbers and the abolition of input subsidies in the early 2000s have helped reduce nutrient surpluses from agriculture.

There are nevertheless specific challenges linked to pressures from agricultural production. The quality of surface water remains affected by agricultural activities due to relatively low nutrient use efficiency. While the lower application of synthetic fertilisers has helped reduce nitrogen and phosphorus imbalances, nutrient surpluses are still above the EU average. Ammonia emissions have recently increased and, on current trend, are not aligned with the 2030 national target. Biological and landscape diversity are also affected by habitat loss and fragmentation.

Effective monitoring of environmental impacts requires more and better data

In line with the higher environmental and climate ambition of the 2023-27 CAP, Croatia’s CSP assigned substantial funding to environmental and climate objectives. This budget includes almost EUR 1 billion over five years for new voluntary eco-schemes and agri-environmental rural development measures. Within these measures, special emphasis is placed on promoting crop diversification and organic farming to mitigate and prevent environmental impacts.

Assessing agri-environmental trends and impacts is complicated by the lack of data across some environmental domains. This includes data on agricultural water use, data for biodiversity monitoring through the Farm Bird Index and the Forest Bird Index (available only since 2016), and data on the status of soils, which is dispersed and not systematically collected. Croatia recently began improved monitoring of agricultural soils as part of the Recovery and Resilience Plan, but the availability of data in other areas remains limited.

Agricultural GHG emissions are low, but effective climate action requires additional efforts

Agricultural GHG emissions have strongly declined since the early 1990s, a trend linked to the decrease in the size of the livestock herd. The sector is meeting the emission reduction objective for 2030 set under the European Union’s Effort Sharing Regulation. Croatia also performed better than the EU and OECD averages in reducing emissions intensity (emissions per unit of output) between 1992 and 2021, notwithstanding a deceleration in emissions reduction over the last decade. While emissions from livestock – which accounts for 60% of agricultural GHG – are at a historical low, soil emissions have been increasing since 2014.

Despite its low direct emissions, the sector’s energy consumption increased between 2015 and 2020, and petroleum products still represent 81% of the energy sources consumed by the sector, encouraged by a subsidy in the form of a tax exemption on diesel for agricultural use. As part of the 8^th Environment Action Plan for the European Union, Member States report these subsidies with harmful environmental effects and Croatia is engaged with the European Union to adapt its national policy in line with this process.

Forests play an important role in supporting Croatia’s mitigation efforts. However, the carbon sink from land use, land-use change and forestry (LULUCF) has declined over the past decades as more forest has been put into production. Meeting the objective for 2026-29 set in the EU LULUCF Directive for increasing Croatia’s carbon sink would require a significant revision of logging plans, while the EU Renewable Energy Directive incentivises the use of solid biomass for bioenergy. More detailed forest management plans are necessary to ensure a path for achieving the multiple objectives for the sector.

There is potential to enhance adaptation and improve the sector’s risk management and resilience

Both agriculture and forestry are highly exposed and vulnerable to climate change, notably through the increasing number and intensity of droughts. Croatia has defined a National Strategy for Adaptation to Climate Change by 2040 with specific measures for both sectors. Monitoring and measuring progress towards adaptation has proven challenging, however, due to the difficulty of establishing indicators of progress, although a first set of indicators for this purpose has now been defined.

Croatia developed a country-level approach to the prevention and management of disaster risks through the 2016 establishment of the Disaster Risk Reduction Platform and the 2022 adoption of the Disaster Risk Management Strategy until 2030. Policies for the sector focus on subsidies for agricultural insurance financed by CAP funds. Other risk management interventions in the 2023-27 CSP, including support for investment for risk prevention and for restoring agricultural potential damaged by natural disasters and catastrophic events, have more limited scope and less funding.

The authorities have identified agricultural risk management as an area where more progress is needed, including using risk management instruments more and more efficiently. This is particularly evident given the numerous instances in recent years where the government has granted crisis response aid to the sector, while farmers’ uptake of insurance and investments in prevention remain relatively low.

More work is needed to build awareness by farmers about the instruments available and, beyond increasing the uptake of insurance, developing skills in holistic risk management, including investing in prevention. As severe weather events become more frequent and serious, policy should promote farmers’ preparedness and adaptation, enhancing their role and responsibility in managing their risks and adapting to a changing climate.

Croatia is starting to build its agricultural knowledge and innovation system

A more strategic vision of innovation for the sector as part of the European AKIS is needed

Croatia’s innovation performance is improving but is still relatively low and faces important urban-rural disparities. Encouraging innovation in the agro-food sector is an important strategic objective for the government but faces structural challenges, such as low levels of public and private investment in agricultural research and development (R&D), a lack of critical mass due to the small size of the country, and an urban-rural gap in access to high-speed internet.

While the authorities recognise the importance of innovation to achieve their strategic goals for the sector, Croatia does not have a specific strategy for innovation in agro-food. Sector-specific policies to promote private research, development and innovation (R&D&I) activities are also limited. Providing strategic direction to find where research can support Croatia’s comparative advantages, and granting incentives to stimulate applied research and boost adoption should be government priorities.

Being a member of the European Union offers an opportunity for Croatia to integrate into larger Agricultural Knowledge and Innovation System (AKIS) networks. Croatian stakeholders currently make limited use of the available EU funds, which underscores that the availability of financial support by itself is not sufficient. Additional efforts are needed to boost collaborative innovative processes of learning and adoption. More effective use of international partnerships and EU networks would enhance the benefits of Croatia’s global engagement more broadly.

Croatia has a strong agriculture research community, but linkages among actors could be strengthened

Croatia has a rich and experienced research community, with strong scientific and academic institutions. However, they operate in a fragmented environment with uncoordinated connections within the AKIS. The Croatian AKIS is also largely driven by the public sector and there is untapped potential for increasing the private sector’s role.

More co-operation between AKIS stakeholders and knowledge platforms is needed to connect research actors with farmers, advisors, and rural businesses. A key effort in this area has started with the creation of an AKIS Coordination Body, which will bring together stakeholders to strengthen the connection and integration amongst actors and ensure more efficient information and knowledge flows.

More effective advisory services could help innovation reach farmers

Croatia’s public advisory service is well-established and accepted by farmers. However, it suffers from resource constraints, with too few advisors mostly occupied with fulfilling EU administrative requirements. This limits its capacity to effectively respond to farmers’ innovation needs. The government recently began to involve certified private advisors in an effort to expand the range of services available to farmers, increase competition, and relieve the administrative burden on public advisors.

Croatian farmers – in particular older farmers – have, in general, low levels of education and training. Various ongoing initiatives seek to better align the education system with labour market needs for new entrants to the sector, often younger and with higher levels of professional training. Until these reforms have a real impact, vocational training and extension services must be strengthened so that existing farmers can acquire the basic capacities needed to adopt innovative practices and new technologies.

Policy recommendations

This Review proposes recommendations on how Croatia could improve its policies and practices in the sector and make better use of the flexibility available in the CAP to adjust its current national policies to its stated priorities to enhance productivity and economic development in rural areas. This Review does not evaluate the policy and regulatory frameworks established by the European Union. Key recommendations are set out below.

More effective policies for supporting the sector and making policies for food systems

Further orient agricultural support policies towards stated priorities on productivity

Strengthen the use of rural development support. Croatia should maintain the high percentage of support provided through Pillar 2 on rural development, focusing this expenditure on transformative investments that can have a broader impact beyond agriculture, including access to and use of digital technologies, and the generation and transmission of knowledge and skills. The percentage of funds transferred from the rural development budget to direct payments could thus be further reduced or reversed.

Investigate and remedy the reasons for the low uptake of rural development measures. Despite their potential, some rural development measures have not been well-perceived by end-users, which has resulted in low absorption rates. The experience gained in the first CAP implementation should be valuable in assessing and remedying the reasons for this low uptake.

Rethink national policy choices that result in high levels of support coupled to production. While a large share of the support provided to producers is decoupled, Croatia continues to provide the largest allowed share of support as payments linked to production, complementing CAP Coupled Income Support (CIS) with similar programmes financed from the State budget. These programmes seek to help sensitive sectors to survive, several of which (e.g. sugar beet) have been in decline for years for reasons external to Croatia. Croatia should consider eliminating this type of payment given their market distorting and potential detrimental environmental effects, and reorient this support to investment in knowledge, skills and transformations that lead to new market opportunities. Croatia could also consider how to make better use of the room to manoeuvre in the CAP and is invited to take account of the relevant recommendations in the OECD review of the European Union (OECD, 2023[1]).

Increase co-ordination and stakeholder involvement in policy design and implementation

Promote inter-institutional co-ordination for a holistic food system approach. A co-ordination body and information-sharing mechanisms can help identify synergies and trade-offs in policies related to the different aspects of the triple challenge and lead to more effective policymaking. They could also contribute to the development of a food systems vision that considers the interaction of agriculture and food with other key economic activities such as tourism.

Strengthen stakeholder engagement in EU regulatory processes. Croatia should continue promoting inclusive stakeholder involvement in the development of policies and regulations relevant for the sector. To promote stronger engagement of domestic stakeholders in the development of EU regulations, Croatia could consider conducting regulatory impact assessments and stakeholder consultations for major EU directives and regulations, and systematically informing stakeholders about consultations at the EU level.

Continue exploring improvements to policies for food systems

Explore further policy actions to encourage healthier food choices. Given the growing health risks, Croatia could consider additional measures to encourage healthier food choices and tackle overweight and obesity. There are opportunities to learn from the experience of OECD Members.

Improve the management of food waste. Improving the monitoring and measurement of food waste, in line with the National Plan for the Prevention and Reduction of Food Waste for 2023-28, would help to inform and underpin further efforts. Ensuring the separate collection of bio-waste and investing in sorting and treatment infrastructures would be important steps in waste management. This could be complemented by measures to encourage composting by households.

Strengthen efforts to promote the implementation of the OECD-FAO Guidance for Responsible Agricultural Supply Chains. In addition to awareness and dissemination efforts, Croatia could consider further actions to promote the use of the Guidance by stakeholders along the value chain. For example, other adherents promote the Guidance by referencing it in domestic regulation, incentivising its use in company management systems, or by conditioning participation in public procurement on its demonstrated implementation.

Promoting the enabling environment for agro-food sector growth

Take advantage of all state-owned land to create opportunities for new and existing farmers

Undertake an in-depth assessment of the status of land ownership, the use of state-owned land, and the procedures for farmers to access land. This assessment should identify the reasons for current bottlenecks in disposing of land and propose pragmatic solutions to make this land accessible to farmers.

Develop an ambitious plan to use state-owned land for land consolidation and structural transformation. Use the above assessment to identify and undertake the necessary reforms to address the current impasse in the conclusion of contracts, make access to land easier for farmers, and improve the avenues for farmers to own or lease land. Develop an ambitious plan to facilitate an agile and dynamic process of land consolidation and attract new farmers and new talents to rural areas.

Create more and better opportunities for farmers

Encourage women’s participation in farming. In future CAP cycles, policies could also be oriented towards increasing female participation. For example, Spain’s CSP increases the payment for young farmers if the beneficiary is female and owns or co-owns the farm, and women are prioritised in grants for investments in the processing, commercialisation, and development of agricultural products (OECD, 2023[6]).

Explore innovative ways to encourage co-operation amongst and organisation of farmers. The low uptake of previous measures to encourage the development of farmer organisations merits a deeper assessment of the causes and of possible avenues to improve their implementation. The government could also take action to improve awareness of the benefits of participating in associations and groupings, and to dispel misconceptions about co-operatives.

Improve the sector’s export orientation and market diversification. Define an export promotion and export market diversification strategy for the sector that promotes the co-ordination of export promotion activities by different actors to exploit their synergies. Explore ways to foster the linkages of small and medium enterprises with exporting companies to develop deeper export supply chains. An example from an OECD Member is Costa Rica’s DESCUBRE programme, which grants seed funding and technical assistance to help small producers become providers to larger exporting companies in selected agro-food value chains (OECD, 2023[7]).

A sustainable and resilient agro-food sector and effective climate action

Monitor agri-environmental impacts and reduce environmentally harmful measures to improve policy performance

Improve data collection and assessments of agri-environmental impacts. A valuable effort has begun to systematise the collection of data for soil monitoring. This could be extended to other environmental issues, such as ammonia emissions. Further investment is also required in using these data to monitor and analyse policy performance.

Develop a comprehensive forestry management strategy to ensure that the sector can effectively meet the potentially conflicting objectives of increasing its role as a carbon sink and enabling increased use of energy from biomass.

Reform the fossil fuel subsidy for agriculture. Adapt and prepare the sector for the progressive elimination of the subsidy to agricultural diesel, in line with the plans to remove fossil fuel subsidies spelt out in the updated Integrated National Energy and Climate Plan for 2021-30.

Strengthen climate adaptation and improve risk management to increase the sector’s resilience

Prioritise climate adaptation in strategic planning and monitor progress based on the proposed group of indicators. As part of this effort, it will be important to enhance information and advice to farmers on the impacts of climate change in Croatia and promote a proactive adaptation of farming practices.

Develop the risk management capacity of farmers. This will require training and awareness-building to enhance their entrepreneurial skills to manage all kinds of risks and to take new opportunities, with an emphasis on prevention and preparedness.

Strengthen the agricultural knowledge and innovation system

Develop an ambitious agricultural innovation strategy in collaboration with the private sector

Develop a long-term innovation strategy for the agro-food sector that provides a vision and stability and which improves AKIS connectivity. An ambitious innovation strategy with strong links to European networks and tools will enable a better definition of priorities and use of available funds to leverage Croatia’s comparative advantage and to promote knowledge and innovation that are necessary for improving the competitiveness of the sector. Strengthen the role of the co-ordination body to integrate public and private actors, and ensure more efficient information and knowledge flows among research, innovation developers, farmers, advisors, and private companies. Promote the use of international partnerships and EU networks to enhance the benefits of Croatia’s global engagement.

Promote greater engagement by the private sector in innovation processes. Improve the targeting of policy instruments to the private agro-food sector and strengthen co-operation amongst private actors and between public and private AKIS stakeholders. Provide sufficient resources and incentives to stimulate applied research, and boost private investments on innovation development and adoption.

Invest in skills and in farmers’ capacity to innovate

Address the capacity constraints confronting advisory services and provide a stable institutional framework for public and private extension services. Strengthen the role of the advisory service in facilitating knowledge flows, establishing a network of innovation brokers and ensuring that sufficient resources are available to engage with farmers frequently and locally. Enhance the involvement of private advisors to help fill gaps, including on administrative tasks, and relieve the bureaucratic burden of the public service to allow them to focus on innovation. Continue the effort to establish a back office with specialised advisors to provide expert support to AKIS stakeholders and train other advisors. Effectively implement the bottom-up approach that is required to ensure higher relevance and efficiency of the Croatian AKIS.

Invest in an education and skills strategy for the sector. Reducing skills gaps, improving access to vocational education and boosting digitalisation should be priorities for the new AKIS co‑ordination body. While waiting for new and upcoming reforms to better align the education system with labour market demands to take effect, enhance vocational training and extension to ensure that farmers today have the basic capacities to allow them to adopt innovative practices and new technologies, including digital technologies.

References

[2] Bertelsmann Stiftung (2022), Sustainable Governance Indicators - Executive Capacity: Interministerial Coordination, https://www.sgi-network.org/2022/Good_Governance/Executive_Capacity/Interministerial_Coordination (accessed on 26 March 2024).

[7] OECD (2023), Agricultural Policy Monitoring and Evaluation 2023: Adapting Agriculture to Climate Change, OECD Publishing, Paris, https://doi.org/10.1787/b14de474-en.

[5] OECD (2023), FDI Qualities Review of Croatia: Advancing the Strategic Framework for Investment Promotion and Facilitation, OECD Publishing, Paris, https://doi.org/10.1787/79b2345b-en.

[3] OECD (2023), OECD Economic Surveys: Croatia 2023, OECD Publishing, Paris, https://doi.org/10.1787/4f945053-en.

[6] OECD (2023), Policies for the Future of Farming and Food in Spain, OECD Agriculture and Food Policy Reviews, OECD Publishing, Paris, https://doi.org/10.1787/a93d26be-en.

[1] OECD (2023), Policies for the Future of Farming and Food in the European Union, OECD Agriculture and Food Policy Reviews, OECD Publishing, Paris, https://doi.org/10.1787/32810cf6-en.

[8] OECD (2021), Making Better Policies for Food Systems, OECD Publishing, Paris, https://doi.org/10.1787/ddfba4de-en.

[4] World Bank (2019), Sector Diagnostic and Analysis of Public Spending in Agriculture and Rural Development, World Bank, Washington, DC, https://doi.org/10.1596/32304.

Note

← 1.  The term “food systems” refers to all the elements and activities related to producing and consuming food, as well as their effects, including economic, health, and environmental outcomes. Food systems around the world face the “triple challenge” of simultaneously providing food security and nutrition to a growing global population, providing livelihoods to those along the food supply chain, and contributing to environmental sustainability (OECD, 2021[8]).