IJERD – International Journal of Environmental and Rural Development (2015) 6-2

Research article
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Relation Between Rural Diversification and Governance: Some
Insights from Bosnia, Montenegro and Serbia
HAMID EL BILALI
Mediterranean Agronomic Institute of Bari (CIHEAM-MAIB), Valenzano, Bari, Italy

SINISA BERJAN*
University of East Sarajevo, East Sarajevo, Bosnia and Herzegovina
E-mail: sinisaberjan@yahoo.com

ADRIANA RADOSAVAC
Faculty of Agriculture, University of Novi Sad, Novi Sad, Serbia

ALEKSANDRA DESPOTOVIC
University of Podgorica, Podgorica, Montenegro

SNEZANA JANKOVIC
Institute for Science Application in Agriculture, Belgrade, Serbia

NOUREDDIN DRIOUECH
Mediterranean Agronomic Institute of Bari (CIHEAM- MAIB), Valenzano, Bari, Italy
Received 19 January 2015

Accepted 16 October 2015(*Corresponding Author)

Abstract Rural areas in the Western Balkans are experiencing two profound changes i.e.

increased diversification of the rural economy and new governance models and arrangements.
The paper aims at providing some insights into linkages and interdependences between rural
livelihoods, diversification, and rural governance in Bosnia, Montenegro, and Serbia (BMS). In
particular three different conceptual frameworks were used to analyze governance-ruraldevelopment, governance-rural livelihoods and governance-rural economy diversification
linkages. Input data to substantiate the conceptual frameworks in the rural contexts of BMS
were the results of surveys dealing with rural governance and rural livelihoods diversification
performed in the period 2011-2013. There is a linkage between agricultural and ruraldevelopment governance and coordination, and exploitation of the full potential for rural
livelihoods and economies diversification. Governance is relevant for rural livelihood
diversification and rural development both as process and structure. Governance - comprising
institutions, policies, and processes - affects access to and use of livelihood assets with impacts
on diversification. Diversification is also affected by a set of sectoral policies that go beyond
agriculture. Government policies can act as a stimulus to the diversification of economic
activities of rural households. Governance - as actors and institutions - also affects
diversification. Governance arrangements determine the range of actors involved in policy
design. Depending on actors involved and their interests the policy character and architecture
are defined. Meanwhile, also diversification has impacts in terms of governance in rural areas.
In fact, changes that happen in rural areas, thanks to diversification, influence also rural
governance and policy. Many new rural actors are consulted about rural development which
was not the case in the past. Diversification affects the typology of actors that are involved inpolicy design which has implications in terms of priority policy measures definition. These
insights should be taken into consideration to redesign rural development policy.
Keywords rural areas, diversification, governance, Bosnia, Montenegro, SerbiaⒸISERD140

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INTRODUCTION
Agriculture plays an important socio-economic role in the Western Balkan (WB) in general and Bosnia,
Montenegro, and Serbia (BMS) in particular. The share of agriculture in GDP amounts to 7.4% in
Bosnia (EC, 2013a), 9.5% in Montenegro (EC, 2013b), and 10.1% in Serbia (EC, 2013c). Agricultural
sector employs 20.6% of the total labor force in Bosnia (ASBiH, 2012), 5.7% in Montenegro (EC,2013b), and 21% in Serbia (EC, 2013c). Rural areas lag behind in terms of socio-economic
development and still face many problems. The share of rural population is 61% in Bosnia (UNDP,
2013), 38% in Montenegro (Arcotrass et al., 2006), and 43% in Serbia (RDNS, 2010). Rural areas in
BMS are experiencing two profound changes i.e. increased diversification of the rural economy andnew rural governance models. Sustainable development of rural areas cannot be based only on
agricultural development, rural economies should also be diversified by developing off-farm and nonfarm income-generating activities.
Diversification means exploiting all the multifunctional functions of agriculture while introducing
new off-farm and non-farm income-generating activities. Households’ income can be increased byadopting many livelihoods strategies (Chambers and Conway, 1992). In terms of agriculture, theconcept of diversification is often taken to mean a shift away from the production of surplus
commodities to those which may be expanded – a focus on the diversification of output – withemphasis placed on diversification into other agricultural products. Alternatively, it is used to describe
the strategy of utilizing excess capacity of farm production factors, involving the use of farm resources
for non-agricultural activities – a focus on diversification of resources. A third sense of diversification– a focus on the location of the activity – is also considered (OECD, 2009).
Agricultural and rural development (ARD) processes in general and farm activity diversification
initiatives in particular should be well governed in order to yield expected outcomes and impacts.
Governance comprises mechanisms, institutions and processes of decisions making andimplementation through which persons and groups articulate their interests, exercise their legal rights,
meet their obligations, and mediate their differences (Cheema, 2005). Governance analysis focuses on
the actors involved in decision-making and implementing the decisions made and the structures thathave been set in place to arrive at and implement decisions (Sheng et al., 2007).
The paper aims at exploring relations and interdependences between rural livelihoods
diversification and rural governance in BMS.
METHODOLOGY
The paper is based on an extended secondary data analysis and different surveys. Three different
conceptual frameworks were used to analyze governance-rural development, governance-rural
livelihoods and governance-rural economy diversification linkages. The conceptual framework
developed by IFPRI highlights linkages between governance and rural development. It shows why
governance decentralization and rural service delivery are so important for sustainable ARD (IFPRI,
2007; IFPRI, 2007b). The second conceptual framework of Shtaltovna (2007) focuses on relations
between governance and diversification. It shows how and in which way governmental support should
be targeted in order to contribute to rural development. In particular, it highlights how governancearrangements in local rural areas can influence the diversification of rural economy through theirimpact on household assets (Shtaltovna, 2007). The rural livelihood framework of the UK Department
for International Development (DFID) was used for getting insights into linkages between governanceand livelihood strategies. This conceptual framework shows how governance structures and processes
influence livelihoods. The framework highlights as well how livelihood strategies – including
diversification – are affected by a number of governance structures and processes (Satgé et al., 2002).

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Input data to substantiate the conceptual frameworks were the results of surveys dealing with rural
governance and rural livelihoods diversification. As for ARD governance, questionnaires were sent via
email to 120 actors in Bosnia and Herzegovina (BiH) in winter 2011, to 50 in Montenegro in winter2012, and to 120 in Serbia in summer 2013 (Berjan et al., 2014). Respondents included purposively
selected representatives of public, civil society and international organizations. Concerning rural
livelihood diversification, the field questionnaire surveys were carried out in winter 2012 with 104
randomly chosen households’ heads in south-eastern Bosnia (Berjan et al., 2013), with 50 households
in autumn 2013 in northern Montenegro and in spring 2013 with 99 households in south-western
Serbia.
RESULTS AND DISCUSSION
Analyzing linkages between rural governance and rural livelihoods diversification is about studying
policies that are put in place to foster diversification, as well as the stakes of the different involved
rural actors and how they have evolved over time with the increasing pace and level of diversification.
It goes without saying that there are differences among the three countries but there are also somecommonalities. From this point of view, it is very interesting to take a stock of the experience of othercountries, whose rural areas have been engaged in the process of diversification for many years, inorder to get insights about what policies should be enacted, as well as what are the implications of rural
economy diversification in terms of ARD policy. This is particularly the case of many OECD countries.
Creating an improved environment for farm activities, diversification requires the efforts of many
actors. The roles of government actors are often critical for facilitating, catalyzing, and mediating
initiatives taken by other private and civil society stakeholders (IFAD, 2010). Local governments aswell as civil society and the private sector have an important role to play in the provision of
infrastructure and public services in rural areas with a special emphasis placed on agricultural services
governance (IFPRI, 2007b). The system of governance of rural development policies has witnessed theprogressive coming into play of several levels (national, regional, intermediate and local); many more
actors than before; and new instruments and approaches (Mantino et al., 2010).
Governance arrangements in rural areas can influence the diversification of rural economy
through their impact on household assets. In fact, governance arrangements can influence effectivenessand efficiency of different activities that are performed by governmental institutions in rural areas.
They affect governance as a process i.e. partnerships, networks and cooperation agreements.
Governance arrangements also affect the modus operandi, visions and missions of local governancestructures, i.e. institutions and organizations, that deal with RD in general and rural livelihood
diversification in particular (cf. Shtaltovna, 2007).
Despite recurrent discourses about participation and bottom-up approaches in governance andpolicy arena, the spectrum of actors involved in the different stages of the policy cycle in the three
countries remains limited. In particular, the involvement of the private sector and civil society
organizations in rural policy design and formulation is generally still marginal. This is particularly trueat central level (i.e. entity level in BiH) while the situation is much better at local level. However, sincethese countries are still largely centralized the funds at disposal of local councils and administrations
are very low which limits their maneuvering space and the scope of their interventions.
Insufficient institutional capacities at the local level hinder economic diversification development
and it is necessary to further strengthen local structures seen as key drivers for diversification of rural
economy. In order to face this challenge, about a third of municipalities in Bosnia established funds for
local economic development and support small and medium sized enterprises (SMEs) (FAO-ROECA,
2012).
Governance surveys results show that many actors have a stake in rural economy diversification.
These stakeholders have various backgrounds but share a similar goal which is the socio-economicⒸISERD142

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development of their territory. Each single actor contributes to new activity formation and support
assets. In particular, stakeholders recognize the true value of assets, especially the human and social
capital, as new possibilities for diversification of their local rural economies. It was also noticed thatthe emergence of new participatory governance structures and arrangements allow mobilization of
local assets and resources as well as diversification of rural activities in the non-farm sector.
The larger share of the surveyed households believes that local and national governments (also
entities’ governments in the Bosnian case) should make more effort in helping them compared to what
they have done until now. Disproportion in help demand and help delivery by local councils and state
institutions in south-eastern Bosnia and western Serbia is huge and Bosnian and Serbian rural
households feel that primary responsibility lies on local and state/entity level governments while itseems that the surveyed Montenegrin rural population is quite satisfied with local and state authorities’
engagement in the development of rural areas.
Another key factor explaining why respondents in south-eastern Bosnia and western Serbia shareopinion that authorities do not take adequate care about rural areas is also the lack of trust in them. The
capacity of local NGOs, beside capacity of municipalities, is important to support economic
diversification. Willingness of NGOs and local authorities to work together is also important. However,it seems that civil society organizations yet do not have enough developed capacities to cope with thesituation in rural areas (FAO-ROECA, 2012). Effective local institutions that deliver goods andservices must be in place in rural areas to sustain positive rural livelihood outcomes. These institutional
structures condition livelihood outcomes through community capacity-building and institutional
strengthening (Frankenberger, 2001).
Government intervention is among the main factors that influences the diversification of farmhouseholds into non-farm activities. If governments want to foster diversification, they need to makesure that policies are in place, whether sectoral or broad, and do not put unintended obstacles in theway of such diversification (OECD, 2009b). For rural policy to be more effective, small fragmented
programs should be replaced by an integrated rural development policy, that rural farm and non-farmhouseholds can benefit from, which requires a strong horizontal coordination effort at all governancelevels.
Rural development policies should stimulate development of diverse income-generating activities
outside agriculture. Many of the elements of rural development policies, such as improvements ininfrastructure and the provision of local services, are crucial for economic and social sustainability inrural areas (OECD, 2010). As highlighted by IFPRI (2007b), it is important to improve the ability of
the rural population to demand services and hold service providers accountable. It is also crucial toincrease the capacity and effectiveness of local service providers. This is also related to politicaldecision-making processes with respect to the formulation of rural development strategies andagricultural policies.
The survey on rural household livelihoods diversification showed that adequate access of all rural
people to services and structures (including infrastructure) necessary to engage in diversification
endeavors was far from optimal. This is in part explained by the fact that the survey – especially in BiH
and Montenegro – was performed in remote rural areas. However, the quality of rural services and theperformance of structures in charge of service delivery was a problem in most of rural areas in thethree countries.
A number of policy measures designed to encourage diversification, have been introduced incertain OECD countries. These include vocational training and business development schemes (OECD,2010). Human capital strengthening and rural dwellers’ capacity-building efforts must focus on service
delivery as well as risk-management skills (Frankenberger, 2001).
Weak human capital is a problem in the three studied rural regions. What is alarming is that it
seems that the situation is getting worse because of migration of most of well-educated young rural
people to cities or even abroad. This undermines one of the most important endogenous assets andresources of rural areas that can be exploited in the diversification journey. In fact, it is well-knownⒸISERD143

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that, in contrast with agricultural activities, non-farm activities require a range of new skills that mostof rural people do not have. This highlights the importance of the role of extension and advisory
services as well as of other institutions dealing with capacity building and human capital strengthening
in rural areas. These actors should work together and coordinate their activities in order to address thischallenge. Coordination with international development agencies dealing with business skills
development is also crucial.
Different factors regarding livelihoods interrelate and affect each rural household quality of life.
Governance structures and processes directly influence livelihoods. Human, physical, social, financial
and natural capital in different combinations are affected by a number of governance structures andprocesses and how people use their capital in order to achieve desired livelihood outcomes throughdeveloping different livelihood strategies (Satgé et al., 2002) such as diversification (Goodrich, 2001).
Governance decentralization and rural service delivery are so important for sustainable ARD.
Decentralized political system would better answer needs of local communities. Strengthening andimproving service providers’ capacities will directly affect the supply and quality of services (IFPRI,
2007). A vibrant service sector is both vital for a prosperous local economy and crucial for meeting theneeds of the rural population (OECD, 2010b).
Some regulations governing tax, social security, land zoning, and labor markets may complicate
diversification in countries where agriculture is not treated the same as other sectors. The impact oflabor regulations and the social security and tax systems on diversification essentially depends on how
agriculture is defined under national regulations/systems. When a narrower definition is applied,
diversification activities increase the administrative requirements and complexity of the farm operation(OECD, 2009). In some countries access to other forms of support (e.g. income support), may belimited if farmers earn too much income from non-agricultural activities (OECD, 2010).
While there are references to diversification in national agricultural and rural legislation of thethree countries - which is mainly the outcome of the process of alignment with the EU acquis in ARD what is missing is a concrete long-term strategy to promote diversification on the ground as well as afavorable institutional and legal environment to foster diversification.
Harnessing farm diversification especially in the non-farm economic activities requires improving
the environment, thus strengthening incentives and reducing risks for the actors involved. This
involves improving rural infrastructure and services, as well as governance and the business climate toencourage private investment by providing business development and financial services suited to thesmall rural entrepreneurs’ needs (IFAD, 2010).
CONCLUSION
Promoting rural development through farm activity diversification poses numerous policy andgovernance challenges because it requires coordination across sectors, across levels of government,
and between public and private actors. There is a need of a paradigm shift in the approaches of thethree countries to accommodate such important challenges. Farm activity diversification initiatives andprocesses should be well governed in order to yield expected impacts. Governance is relevant for therural livelihood diversification and rural development for both process and structure.
Governance (cf. policies and processes) affects access to and use of capitals with impacts ondiversification. The pace of diversification depends on whether regulations are favorable fordiversification or not. Governance (cf. actors and institutions) affects diversification. Governancearrangements determine the range of actors that are involved in policy design. Depending on actors
involved and their interests, the policy character and architecture are defined. For rural policy, to be
more effective, it is of paramount importance that all actors, including also the civil society and rural
dwellers, are engaged in preparing a common approach to rural economy diversification.

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Meanwhile, changes that happen in rural areas, thanks to diversification, influence also rural
governance and policy. Many new rural actors are consulted about rural development, which is not thecase in the past. In fact, diversification affects the typology of actors that are involved in policy design
which has implications in terms of definition of priority policy measures. This change in rural actor
landscape represents a dramatic change in the rural policy arena with respect to some decades ago
when mainly agricultural actors are involved in rural policy formulation.
The insights provided by this paper should be integrated in rural policy in order to effectively
unlock the growth potential of rural areas in Bosnia and Herzegovina, Montenegro and Serbia. Thatbeing said, the main weakness of this study is that, it is to a large extent of quantitative and empirical.
Therefore, further quantitative studies are needed to better elucidate and understand relations andlinkages between diversification and governance in rural areas in the three countries.
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