Policies for the Future of Farming and Food in Croatia

Executive Summary

Key Messages

• Croatia’s agricultural policies and objectives have evolved significantly over the past decades, with important reforms undertaken pursuant to its membership in the European Union and the World Trade Organisation. At present, EU policies, plans and strategies provide the main policy context and orientation for Croatian agriculture.

• Croatia’s national vision for the sector emphasises productivity and competitiveness, promoting environmental sustainability and resilience, encouraging innovation, and improving rural areas. These objectives were also highlighted by OECD Ministers of Agriculture in their 2022 Declaration on Transformative Solutions for Sustainable Agriculture and Food Systems.

• Accession to the OECD can help Croatia improve the effectiveness of its agricultural policies with a view to developing stronger and more integrated food systems, strengthening the enabling environment for sector growth, promoting environmental sustainability and resilience, and making innovation work better for the sector.

• This report provides a series of recommendations to improve the productivity, sustainability, and resilience of Croatia’s agriculture. Recommendations include: reforming agricultural support policies to orient them towards stated priorities on productivity; increasing inter-institutional co-ordination and stakeholder involvement in policymaking; exploring improvements to policies for food systems; creating opportunities for farmers including through taking advantage of all state-owned land; monitoring agri-environmental impacts and reducing environmentally harmful measures; strengthening climate adaptation and risk management; developing an agricultural innovation strategy; and investing in skills and in farmers’ innovation capacity.

Croatia’s policy and legal framework for agriculture has evolved significantly over three decades. Accession to the World Trade Organization (WTO) and to the European Union (EU) drove important reforms: the introduction of new models of agricultural support decoupled from production; the phasing out of measures with more distortive impacts; and the broadening of the vision for agricultural policy to include the rural development dimension. The agri-environmental policy and legal framework has also evolved to include a more comprehensive consideration of environmental impacts and climate protection, in line with EU priorities. Croatia adhered to the OECD-FAO Guidance for Responsible Agricultural Supply Chains in 2019 and established a National Contact Point (NCP) for Responsible Business Conduct, through which it has conducted awareness raising activities. While not a signatory of the 2016 Declaration on Better Policies to Achieve a Productive, Sustainable and Resilient Global Food System, Croatia has indicated that the goals of the Declaration are an integral part of its national legislation governing the sector. Croatia signed the 2022 OECD Declaration on Transformative Solutions for Sustainable Agriculture and Food Systems, which reiterates the commitments of the 2016 Declaration.

Croatia has developed strategies in consultation with stakeholders that set out key objectives for the agricultural sector. Croatia’s national Agriculture Strategy until 2030 and Common Agricultural Policy (CAP) Strategic Plan for 2023-27 seek to address economic, social and environmental issues, foster innovation in the sector, and promote a better life in rural areas. These strategies benefitted from broad consultation with sector stakeholders, which helped to identify and prioritise the country’s needs and to direct policy interventions towards addressing them.

Croatia is also active in addressing several of the wider challenges in food systems. It has, for example, implemented policies in areas related to the functioning of the agro-food value chain, the prevention and management of food waste, and the promotion of healthy diets.

Policies in Croatia could benefit from the experience of OECD Members in better targeting the sector’s priorities. Its current approach could benefit from more inter-institutional co‑ordination for more effective interventions in specific policy areas and a more holistic consideration of the food system. While there is good stakeholder engagement in the development of national regulations, this could be strengthened in the context of Croatia’s participation in the regulatory process at the EU level. There is also scope for further efforts to optimise support policies to help farmers, to improve both the situation in rural areas and the business environment, and to create more opportunities for producers.

The agro-food sector is performing relatively well, having undergone major structural transformation, although some challenges remain

Recent trends in the sector are encouraging. Agriculture is still undergoing a structural transformation; farm economic output and income have increased significantly, even if they remain below the EU average. The number and share of holdings managed by young farmers have increased in the last decade, a development at least partially driven by policies that encourage their participation in this sector. There has been a promising increase in farm ownership by women, although the share of female farm managers is still relatively low. Agriculture and food from Croatia have also increased their participation in global value chains over the last decade. Exports have accelerated over the last three years, although the sector continues to be characterised by a persistent and growing trade deficit.

Improving the enabling environment will require maximising the use of existing policy levers. A large area of unallocated state-owned agricultural land represents a significant untapped potential for further developing agricultural production, increasing efficiency and economies of scale, and attracting farmers with new skills by providing greater access to land and finance. Croatia could also devote an increasing share of CAP funding to innovation, productivity and rural infrastructure, and reform national level policies that are potentially production- and market-distorting. Croatia could also consider ways to make better use of the room for manoeuvre in the CAP and is invited to take account of relevant recommendations in the OECD review of policies for farming and food in the European Union. Encouraging more farmers to join forces via associations or co-operatives could strengthen their market opportunities and contribute to better functioning value chains. A well-articulated vision to promote exports and market diversification, targeted to the sector’s specificities, could create opportunities for farmers and help achieve the key objective of increasing market diversification for Croatia’s agriculture and food.

Croatia has the potential to achieve sustainable agricultural productivity growth. Productivity is high and output has increased without an associated increase in greenhouse gas (GHG) emissions. The sector is well below the emission reduction objective set for 2030, and Croatia has performed better than the EU and OECD averages in reducing the emissions-intensity of production. While forests have an important role to play in supporting Croatia’s mitigation efforts, 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 objectives of increasing Croatia’s carbon sink would require a revision of logging plans. At the same time, 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.

Environmental pressures from agriculture are relatively low in a country that benefits from rich natural resources. Croatia has some of the richest ecosystems in Europe and abundant water resources, as well as a high share of protected terrestrial areas. Groundwater reserves remain of good quality and sales of pesticides have seen a strong decline over the past decade. Nonetheless, some areas deserve attention, such as surface water quality and ammonia emissions, which are affected by pressures from agricultural production. Nutrient surpluses are also above average. Data for some agri-environmental trends is limited, however; better data could help improve the monitoring and assessment of performance and policy impacts.

The agricultural knowledge and innovation system requires a more focused vision and stronger linkages. Croatia is developing its agricultural knowledge and innovation system (AKIS), which has strong foundations but would benefit from stronger linkages among actors and a higher involvement of the private sector. Encouraging innovation requires overcoming important structural challenges, such as a lack of critical mass and economies of scale resulting from the relatively small size of Croatia’s agro-food sector. A sector-specific strategy for innovation would improve the identification of priorities and the design of measures that make better use of the available policy instruments, in particular through European networks.

Summary of recommendations

 

Area	Assessment	Recommendations
More effective policies for supporting the sector and making policies for food systems	The National Agriculture Strategy until 2030 and the Common Agricultural Policy (CAP) Strategic Plan for 2023-27 seek to address economic, social and environmental issues, foster innovation, and promote rural development. Many recent policy choices follow the pattern of the past. There is scope to better use support policies to enhance productivity and improve the rural situation. Increased policy scope and complexity require strengthened intra-governmental and stakeholder co-ordination. Domestic food markets functioning well, with moderate to low market concentration. Market regulation and competition in the sector are in line with EU regulation. Policies in place to encourage healthy food choices, but overweight and obesity rates are above average and increasing. Limited capacity to treat food waste, which contributes to relatively high levels of GHG emissions from waste. Further action could be taken to promote use of the OECD-FAO Guidance for Responsible Agricultural Supply Chains.	Strengthen the use of rural development support. Investigate and remedy reasons for the low uptake of rural development measures. Rethink national policy choices that result in high levels of support coupled to production. Promote inter-institutional co-ordination for a holistic food system approach. Strengthen stakeholder engagement in EU regulatory processes. Explore further actions to encourage healthier food choices. Improve the management of food waste. Strengthen efforts to promote the implementation of the OECD-FAO Guidance for Responsible Agricultural Supply Chains.
Promoting the enabling environment for agro-food sector growth	There is untapped potential in unallocated state-owned agricultural land. More young farmers and women are entering the sector despite structural constraints. Low level of farmer organisation. Agriculture and food increasingly integrated into global value chains. Their share in total exports has increased. Increasing market diversification is a key priority, but there is no sector-specific export strategy.	Assess the status of land ownership, the use of state-owned land, and the procedures for farmers to access it. Develop a plan to use state-owned land for land consolidation and structural transformation. Encourage the participation of women in farming. Explore innovative ways to encourage the organisation of farmers. Improve the sector’s export orientation and market diversification.
A sustainable and resilient agro-food sector and effective climate action	There is a comprehensive agri-environmental policy and legal framework. The sector has the potential to achieve sustainable productivity growth, with low agricultural GHG emissions. It has already met its 2030 GHG reduction objective. Relatively low environmental pressures from agriculture. Some areas (e.g. nutrient balances, water quality, ammonia emissions) require attention and data. That said, the sector’s energy consumption has increased in recent years. High reliance on fossil fuels. Subsidy on diesel for agricultural use. More detailed forest management plans are necessary to ensure a path for achieving the multiple objectives for the sector. The national climate change adaptation strategy includes measures for agriculture and forestry. There is potential to enhance adaptation and improve risk management and resilience.	Improve data collection and assessment of agri-environmental impacts. Reform the fossil fuel subsidy for agriculture. Develop a comprehensive forestry management strategy. Prioritise climate adaptation in strategic planning and monitor progress. Build the risk management capacity of farmers.
Strengthen the agricultural knowledge and innovation system	Innovation performance is improving but is still relatively low. A more strategic vision of innovation for the sector is needed. Strong agriculture research community, but the linkages amongst actors could be stronger. Public agricultural advisory services are well-established but face resource constraints. Farmers have low levels of training.	Develop a long-term innovation strategy for the agro-food sector. Promote greater engagement by the private sector in innovation processes. Address the capacity constraints confronting advisory services and provide a stable institutional framework for public and private extension services. Invest in an education and skills strategy for the sector.