06/2016
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2 K A Z A K H s ta n Agriculture Finance Bulletin Ministry of Agriculture to Establish Milk Collection Network KazAgro Disbursed KZT 65.3 Billion During Spring Sowing UN and EU to Help Kazakhstan Transition to Green Economy 1st Kazakhstan International Exhibition of Animal Husbandry and Poultry Breeding was Held
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Agriculture Finance Bulletin Edition #2, June 2016
Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8)
Ministry of Agriculture to Establish Milk Collection Network ......................................................... 2 Kazakhstan to Benefit from Dutch Agricultural Technology ........................................................... 2 KazAgro Allocates KZT 2.65 Billion to Microfinance Institutions ..................................................... 2 Automated Grain Warehouse Receipt System to be Introduced .................................................... 2 Irrigation and Agricultural Labor Productivity to be Increased ....................................................... 3 KazAgro Disbursed KZT 65.3 Billion During Spring Sowing .............................................................. 3 Parliament Concerned KazAgro Disbursing Loans at Market Rates ................................................ 3 Farmers in Atyrau to Receive KZT 114 Million in Subsidies ............................................................. 3
Foreign Aid ................................................................................................................. 4 9) 10) 11) 12)
Kazakh Grain Market Information Platform Unveiled by FAO and EBRD ........................................ 4 FAO Recommends “Conservation Agriculture” Techniques in Kazakhstan .................................... 4 UN and EU to Help Kazakhstan Transition to Green Economy ....................................................... 4 FAO Discusses Potential Areas it can Support Agricultural Development ...................................... 5
Private Sector.............................................................................................................. 5 13) Agribusiness Employee Numbers Drop by More than 30% in 5 Years ............................................ 5 14) 1st Kazakhstan International Exhibition of Animal Husbandry and Poultry Breeding was Held .... 5 15) Share of Agricultural Machinery in Nationwide Leasing Drops ....................................................... 5
Note: The Agriculture Finance Bulletin presents a monthly roundup of headlines and news stories related to investments and financing flows to Kazakhstan’s agricultural sector. This bulletin is prepared by Business & Finance Consulting—a Swiss-based development finance consulting company with a long history of working in Eastern Europe, Central, South and South East Asia and North Africa.
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BFC Agriculture Finance Bulletin
State Initiatives 1)
Ministry of Agriculture to Establish Milk Collection Network
June 28th, 2016, http://www.dailynews.kz/economics/minselhoz_rk_predlagaet_zagruzit_molokozavody_do_proektnoj_moschnosti
The dairy industry will be developed through a network of milk collection centers, announced Minister of Agriculture Askar Myrzahmetov. Roughly 75-80% of total milk production comes from private farms. The collection infrastructure, however, is poor, leaving processing facilities at only 60% of capacity, said the Minister. Of Kazakhstan’s 152 dairy processors, 93 have agreed to purchase milk from small scale producers which, combined, have an output of 1.3 million tons of milk. KazAgro will lease the necessary equipment, including tankers and auxiliary devices. Roughly 160,000 small scale producers will participate in the program, which will create 2,100 permanent jobs, concluded Myrzahmetov.
2)
Kazakhstan to Benefit from Dutch Agricultural Technology
June 24th, 2016, http://24.kz/ru/news/economyc/item/126278-agrarii-niderlandov
Following the visit of Dutch Prime Minister Mark Rutte to Kazakhstan last November, the countries agreed to share their agricultural expertise. The possibility of joint projects was also muted at the summit. The introduction of Dutch technologies and breeding methods should significantly improve livestock conditions and production levels in Kazakhstan. Kazakhstan hopes to tap the fast growing markets of Asia and the Eurasian Economic Union (EEU). The Netherlands is a globally significant producer of dairy and poultry products.
3)
KazAgro Allocates KZT 2.65 Billion to Microfinance Institutions
June 20th, 2016, http://www.dailynews.kz/economics/v_rk_nachalos_kreditovanie_mikrofinansovyh_organizatsij_po_programme_dkb_2020
The Financial Support for Agriculture Fund will receive KZT 2.65 billion per annum until at least 2019, announced KazAgro – the state agency responsible for the implementation of national agribusiness development policies. As part of the Business Road Map 2020, the fund will capitalize microfinance institutions (MFIs). MFIs are to lend to small businesses only. Individual MFIs may borrow up to KZT 350 million at interest rates of 4% per annum. MFIs may disburse loans at real interest rates of no more than 4.5% per annum and nominal rates of no more than 12% per annum. Loan maturity for both MFIs and end borrowers will be 54 months, and 36 months for working capital loans. Since 2006, the fund financed 23,000 micro-loans via MFIs worth KZT 10.23 billion.
4)
Automated Grain Warehouse Receipt System to be Introduced
June 17th, 2016, http://pm.kz/en/news/8/v-kazahstane-zapuskajut-elektronnuju-sistemu-zernovyh-raspisok-msh http://mgov.kz/en/operatsii-s-elektronnymi-zernovymi-raspiskami-mozhno-budet-provodit-cherez-mobilnoe-prilozhenie
On July 23, an automated grain warehouse receipt system will be introduced in Kazakhstan, announced the Ministry of Agriculture’s Deputy Director of Crop Production and Processing Lyazzat Kupanova. Automated grain accountancy will be introduced at grain elevators and data managed on a digital platform. The new legislation will increase transparency while reducing production costs, said Kupanova. In particular, it will prevent abuses by ensuring enterprises cannot state grain receipts beyond the capacity of their warehouses, added the Deputy. The measures will provide a stronger basis through Page 2
BFC Agriculture Finance Bulletin
which to provide collateral to banks. From 2002-2015, grain producers received KZT 1.5 trillion through second-tier banks, noted Kupanova. Meanwhile, the Information and Cost Center launched a mobile application - dubbed “E-grain” – that enables electronic grain receipt based trading, announced Chairman Zhanasyl Ospanov. With the high use of mobile phones and internet access in all areas where grain enterprises operate, the application will allow instant remote dealing, said Ospanov. All that is required is a digital signature, concluded the Chairman.
5)
Irrigation and Agricultural Labor Productivity to be Increased
June 17th, 2016, http://www.inform.kz/eng/article/2915641
Increasing irrigation and agricultural labor productivity are top priorities for the coming years said Prime Minister Karim Massimov. Kazakhstan has a large land mass but little of it is irrigated, he added. The irrigation project will be financed through joint public-private partnerships, with the European Bank for Reconstruction and Development (EBRD) expressing its willingness to support the project, said the Prime Minister. The comments came during parliamentary discussions on the 2016-2019 budgets.
6)
KazAgro Disbursed KZT 65.3 Billion During Spring Sowing
June 15th, 2016, http://www.dailynews.kz/economics/653_mlrd_tenge_napravil_na_posevnuju_natsholding_kazagro
During spring sowing this year, KazAgro financed 2,800 producers to the tune of KZT 65.3 billion and, through its leasing programs, supplied 1,140 units of agricultural machinery worth KZT 18.5 billion, according to an Inform.kz report.
7)
Parliament Concerned KazAgro Disbursing Loans at Market Rates
June 9th, 2016, http://www.kazakh-zerno.kz/novosti/agrarnye-novosti-kazakhstana/228545-kreditnaya-politika-kholdingakazagro-budet-peresmotrena-glava-mskh
The interest rates offered by Kazagro – a joint-stock holding responsible for implementing national agroindustrial development policies – are to be reviewed, announced Minister of Agriculture Askar Myrzahmetov. As part of its mission, the holding disburses loans at preferential rates. Members of parliament, however, raised concerns KazAgro was lending at market rates. In 2016, KazAgro received KZT 60 billion in direct funding. It received a further KZT 100 billion from a state pension fund and another KZT 25 billion from a special government fund.
8)
Farmers in Atyrau to Receive KZT 114 Million in Subsidies
June 9th, 2016, http://khabar.kz/ru/news/ekonomika/item/57436-zemledeltsy-atyrauskoj-oblasti-poluchat-114-millionovtenge-subsidij
The Atyrau region will receive KZT 114 million in subsidies for potato, melon and vegetable crops. The funds may be used for petrol, lubricants, pest control, fertilization and irrigation. Farmers planting drip irrigated potato crops may receive KZT 70,000 per hectare. Cultivated area in Atyrau totals 7,200 hectares of which 2,000 hectares are potato crops.
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BFC Agriculture Finance Bulletin
Foreign Aid 9)
Kazakh Grain Market Information Platform Unveiled by FAO and EBRD
June 23rd, 2016, http://www.fao.org/europe/news/detail-news/en/c/420883/
The Agriculture Market Information System (AMIS) was unveiled by the Food and Agriculture Organization (FAO) and the European Bank for Reconstruction and Development (EBRD). AMIS is an inter-agency information platform designed to increase transparency and decrease uncertainty and volatility in Kazakhstan’s increasingly significant grain market. At 4-5% of global wheat exports, the country is the world’s 8th largest exporter, shipping 6.5 million tons in 2015. Average annual revenues from grain exports total USD 1.3-1.8 billion. Kazakhstan’s participation in AMIS would work towards improving global grain market transparency and create a better investment environment domestically, said Branko Bulatovic, Head of the FAO’s Partnership and Liaison Office in Kazakhstan. The system was created as part of a joint FAO-EBRD project dubbed “Enhancing grain market transparency in Kazakhstan for informed market prospects and investment decision making”.
10) FAO Recommends “Conservation Agriculture” Techniques in Kazakhstan June 9th, 2016, http://www.fao.org/europe/news/detail-news/en/c/418086/
A report published by the Food and Agriculture Organization (FAO) outlines how conventional soil tilling and other practices in Kazakhstan, Uzbekistan and Azerbaijan have led to a loss of soil fertility and lower yields. The report recommend raised-bed cultivation, zero-tillage technologies, weed control, crop rotation, laser-assisted land leveling, crop residue retention and other techniques to restore fertility and yields. The report was financed by the FAO-Turkey Partnership Programme and implemented by the FAO in cooperating with the International Centre for Agricultural Research in the Dry Areas (ICARDA). The FAO has been introducing “conservation agriculture” techniques in Central Asia since 2011. Agriculture is an important part of the region’s economies and is essential to food security.
11) UN and EU to Help Kazakhstan Transition to Green Economy June 1st, 2016, http://astanatimes.com/2016/06/undp-eu-support-kazakhstans-move-to-green-economy/
The United Nations (UN) and the European Union (EU) are to cooperate on a project entitled “Supporting Kazakhstan’s transition to a green economy model”, according to a UN press release at the Astana Economic Forum (AEF). At the forum, Cihan Sultanoglu – the United Nations’ Director of the Regional Bureau for Europe and the Commonwealth of Independent States – applauded structural reforms undertaken to diversify the country’s economy, adding that the sovereign wealth fund Kazakhstan capitalized through its oil proceeds can catalyze green growth initiatives. Kazakhstan launched a green economy transition strategy in 2013, with the aim of diversifying the economy, creating sustainable jobs and protecting the environment, said the press release. The country aims to become one of the 30 most developed nations by 2050.
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12) FAO Discusses Potential Areas it can Support Agricultural Development May 25th, 2016, http://www.fao.org/europe/news/detail-news/en/c/416221/
The agricultural sector can make a significant contribution towards Kazakhstan’s goal of diversifying its economy, according to Director of the Food and Agriculture Organization (FAO) Partnership and Liaison Office with Kazakhstan Branko Bulatovic. The country’s strategic shift from commodity exporter to more value-added production creates ample room for cooperation with the FAO, said Bulatovic. Organic agriculture – including related legislation, certification, branding and marketing – is a promising area in which the FAO can provide its expertise, he noted. Pasture management, education and extension services, cooperative formation, climate change mitigation measures, and technology financing instruments are other potential areas of cooperation, said Bulatovic. The Director highlighted the following challenges for Kazakhstan’s agriculture sector: integrating growers, advisory bodies, suppliers, procurers and retailers; shaping consumer patterns and demand; rapid urbanization; adding value through processing; developing cooperatives and finding new ways to link markets; agricultural diversification and improving nutrition; and modern production methods and their effect on climate change. The FAO Partnership and Liaison Office with Kazakhstan was inaugurated in April this year.
Private Sector 13) Agribusiness Employee Numbers Drop by More than 30% in 5 Years June 29th, 2016, http://agroinfo.kz/chislennost-personala-na-selxozpredpriyatiyax-umenshilas-na-30/
Over the past 5 years, the number of small agribusiness employees, and medium to large agribusiness employees decreased by 33% and 30%, respectively. This is a documented effect of increased efficiency. In 2015, small agribusinesses posted average profits of 8.7%, up from 7.5% a year earlier. By contrast, large and medium agribusinesses averaged a loss of 7%, down from average profits of 7% a year earlier.
14) 1st Kazakhstan International Exhibition of Animal Husbandry and Poultry Breeding was Held June 8th, 2016, http://www.kazagro.kz/holding?p_p_id=newsportlet
The 1st Kazakhstan International Exhibition of Animal Husbandry and Poultry Breeding “Agrianimals.kz” was held in Astana from the June 23-25. The event is the only exhibition specialized in livestock and poultry in Kazakhstan, according to KazAgro. The exhibition provides a platform for foreign and domestic companies to auction livestock, present technological innovations and specialized equipment, and exchange expertise and make deals. Participants include the Minister of Agriculture as well as other state body representatives, the directors of numerous livestock and poultry enterprises, veterinarians, academics and other specialists in the field.
15) Share of Agricultural Machinery in Nationwide Leasing Drops June 2nd, 2016, http://www.kazakh-zerno.kz/novosti/agrarnye-novosti-kazakhstana/
The share of agricultural machinery in nationwide leasing volumes has dropped from 61% to 42%, according to the International Group of Rating Agencies (RAEX). While KazAgro Finance remains the leading lessor, its 57% share marks a significant decrease in its dominance, RAEX reports. DBK Leasing and Kazakhstan Ljara Company come 2nd and 3rd, respectively. Page 5
Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com In this bulletin, BFC provides extracts from articles that have been published by others and as a result cannot be held responsible for such content. The articles do not necessarily reflect the opinions of BFC, its staff, its associates or its partners. Copyright of articles is retained by their authors.