Банкеръ Weekly

Briefs

WINE EXPORT: GOD HELPS THOSE WHO HELP THEMSELVES

It's for nobody a secret that in the last few years Bulgarian producers of agricultural goods are not in a position to utilize the negotiated quotas for duty-free import in the EU countries. In some sectors the reasons for that are connected with the parcelled out land of agricultural farms, while in others the obstacles are chiefly the various non-tariff barriers in the EU, such as the licensing of import and import prices. Nevertheless, experts from the Ministry of Agriculture and Forestry claim that commerce with the EU is constantly increasing. Both the gradual revving up of the sector and the development of the European Association Agreement in the direction of liberalization of the trade in agricultural products contribute to that, Verginiya Mincheva from the Integration Policy Directorate with the Agriculture Ministry, said in front of the BANKER weekly. This process is an important element of our preparation for accession to the EU and is aimed at the adaptation and integration of Bulgarian production to the requirements of the unified market. As a result, about 50% of the trade in agricultural goods with the European countries is carried out at zero customs and unlimited quantities.The export of goods at preferential tariff quotas changes each year. According to Agriculture Ministry experts, only the export of frozen vegetables, mushrooms, honey, goose liver, fresh peppers, apricots and morello cherries, is relatively constant and competitive. The quotas for the export of these goods are utilized fully or partially. Thanks to those products, the balance of trade in agricultural goods with the EU went up more than twice within the 2001-2002 period. In 2002 alone it amounted to USD239.9MN. But the utilization of quotas for the export of other products, such as eggs, meat, fresh potatoes, tomatoes, cucumbers, grapes and canned fruits, has been practically trifling for years on end. Ms. Mincheva pointed out that the EU-applied regime of import prices impede the export of some goods, and for others the restrictive factors are the veterinary, phytosanitary and hygiene requirements. However, she is adamant that the degree of quotas utilization has no relation to the pre-accession negotiation. In several consecutive issues the BANKER weekly will try to reveal the reasons for which Bulgarian agriculture is not in a state to fully utilize the duty-free limit for import to the EU countries. Sparkling wines are outlined as the only export commodity, whose quota may turn out insufficient within the framework of the European Association Agreement, effective as of 1995. This is the stance of the National Chamber of Viticulture and Wine-production. The problem in this case is that in 2003 only 31.97% of it was utilized according to data of the Agriculture Ministry, i.e. Bulgaria exported to the EU countries only 576 hectolitres out of the agreed duty-free export of 1,800 hectolitres. The figures of the branch chamber are even more modest. According to its statistics, 18.51% of the quota was utilized, but nevertheless the chamber's members believe that the limit should be increased to 2,500 hectolitres at least after the ten new members join the EU in May 2004. In some of them (Poland, Lithuania, Latvia and Estonia) our country has so far exported approximately the same quantity of 1,800 hectolitres. The issue is extremely ticklish (it is yet to be decided how reasonable such a requirement would be) considering the fact that CEFTA's current members will get a direct access to the European market after May. And there Bulgarian wines compete with oversupply in the same price category with producers from Chile, Argentina and Australia. And Bulgaria will be hardly able to rely only on the habbits of Latvian and Polish consumers, who fancy our sparkling wine. A report of the Economic Policy Directorate with the Agriculture Ministry shows that the quotas for broached wine were the ones best utilized last year - 63.66 per cent. From January to December 124,135 hectolitres were forwarded to the EU countries out of the agreed 195,000 hectolitres. At the expense of that, the utilization of duty-free import quotas for bottled wine is quite unsatisfactory - hardly 34.97% of the set limit of 485,000 hectolitres.Unfulfilled export reflects the real state of the viticulture and wine-producing sector. There are multiple examples of how we lost out market positions abroad, but the chamber's secretary Liliya Stoilova points out the English market as the most indicative case: The British market is very prestigious and it was hard for us to win the image of one the major importers. In the 1996-1997 period 35,000,000 litres of Bulgarian wine were sold there. Within four years alone the export dropped to 11,000,000 litres (for 2001) and only 8,000,000 litres were exported in 2002. Her colleague from the Regional Chamber of Viticulture and Wine-production in Plovdiv Konstantin Madjarov gives another example: 17 years ago Bulgaria had 2,100,000 dca of vineyards (as compared to 1,100,000 dca now) and exported 1 billion bottles of wine to the Russian market alone. The reasons for the drastic decrease of export are complex. First comes the deplorable state of the vineyards as a result of the unsuccessful land reform which lead to the appearance of a huge number of land-owners, Ms. Stoilova points out. Vineyards are small but they require huge production costs. The owners do not have at their disposal the necessary funds for the fulfilment of agricultural and technical measures and this has an extremely negative effect on the state of vineyards and the quality of inputs. Let alone that scientific achievements are not put into practice. In order to overcome the parcelled out land of farms and the consequences of it, the State should undertake urgent legislative measures for land consolidation, and also encourage the market of agricultural real estates, experts believe. Another essential problem, according to them, is that fearing theft the farmers gather the grapes early, before it has reached technological ripeness and this is compensated by adding sucrose. According to the oenologist Bogdan Mandjukov, who is a consultant at the National Research Institute of Wine and Spirits, that is why Bulgarian wines do not have a permanent quality, which is one of the main requirements of the EU market. The lack for years on end of aggressive and focused advertising of Bulgarian wines on the global markets should not be underestimated either. Amendments to the Wine and Spirits Act were passed recently and published in the Official Gazette, Issue 16 of February, 2004. They will eventually solve this problem. According to the legislative changes the Bulgarian Wine Fund will be set up. It will finance special ads campaigns, participation in fairs and exhibitions, and all activities for popularisation of Bulgarian wine in the country and abroad. The money in the fund will be gathered from voluntary annual instalments from wine-producers, proceeds from the National Chamber of Viticulture and Wine-production, and annual subsidies from the Agriculture State Fund. The only positive trend that could be observed in the sector is that big wine-producers, such as Festa Holding, SIS Industries, and Peshtera Winery, pay more and more attention to the quality of grapes. In order to control the input the companies have undertaken large-scale investments in the creation of new vineyards. More than BGN76MN has been invested in wine-production over the last four years under the SAPARD programme. Regretfully, the companies lay the priority on the modernization of wineries, rather than on planting new vineyards. In order to encourage vine-growers, the Agriculture Fund has increased the subsidy from BGN100 to BGN170 per decare of new vineyards. The aim is that Bulgaria enters the EU in 2007 with a quota of 1,300,000 dca of vineyards (up from the present 1,100,000 dca). Mr. Mandjukov, however, is sceptical as to how attainable that target is. Almost 60-70% of the vineyards should be replaced as they do not bear fruit anymore.

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