04 BFC Kyrgyzstan Agriculture Finance Bulletin

06/2014

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4 K y r gy zsta n Agriculture Finance Bulletin Kyrgyzstan Should Not Neglect Agricultural Research Who Has Priority for Machinery Leasing Under the EDB Loan?

Potential Export of Yak Meat to Belorussia Depends on Phytosanitary Improvements Organic Farmers Suggest Alternative to Mineral Fertilizer Plant

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Agriculture Finance Bulletin Edition #4, June 2014

Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8) 9)

Kyrgyzstan Should Not Neglect Agricultural Research .................................................................... 2 Seminar on Drip Irrigation Held in Issyk-Kul Region ........................................................................ 2 Parliament Approves Law Banning GMO products ......................................................................... 3 Israeli Company to Build Agricultural Logistics Centers .................................................................. 3 Minister of Energy and Industry Calls for Investment in the Textile Industry................................. 3 Government to Purchase 10,000 Tons of Sugar from Azerbaijan ................................................... 3 Deputy Prime Minister Urges Agrarian University To Prepare For a “Greenhouse Boom” ............ 3 Government Intends to Direct 80% of Agricultural Export to Custom Union ................................. 4 Reform Bill for Veterinary System Submitted to Parliament .......................................................... 4

Foreign Aid ................................................................................................................. 4 10) 11) 12) 13) 14) 15) 16)

Parliament Approves 32 million USD for Livestock Development .................................................. 4 International Development Association to Allocate 2.8 million USD Grant for Seed Banks ........... 4 ICCO to Launch Training Program on Principles of Organic Production ......................................... 5 KyrSEFF Program Saves More Than 30,000 Megawatt-Hours ........................................................ 5 Who Has Priority for Machinery Leasing Under the EDB Loan? .................................................... 5 GIZ Held Seminar on Developing Farm Tourism.............................................................................. 6 Agribusiness Competitiveness Center Tests Early Weather Warning System for Farmers............. 6

Private Sector.............................................................................................................. 6 17) 18) 19) 20) 21) 22) 23) 24) 25)

Jeti-Oguz District to Host Annual Fruit and Berry Festival "Karagat" .............................................. 6 Farm Loans Frequently Misused...................................................................................................... 7 First Tractors Assembled in Kyrgyzstan ........................................................................................... 7 Potential Export of Yak Meat to Belorussia Depends on Phytosanitary Improvements................. 7 New Mongolian Sugar Refinery to Shake the Monopoly of “Kaindinski” ....................................... 7 Lack of Vets and Vaccines Leaves Livestock Vulnerable to Plague.................................................. 8 Bai Tushum and Kompanion Receive Smart Certification ............................................................... 8 Organic Farmers Suggest Alternative to Mineral Fertilizer Plant .................................................... 8 Farmers of Chui Region Face Problems Watering Crops ................................................................. 8

Note: The Agriculture Finance Bulletin presents a monthly roundup of headlines and news stories related to investments and financing flows to Kyrgyzstan’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 Kyrgyzstan. Currently, BFC is implementing the Rural Finance Programme for the Kyrgyz Ministry of Finance and KfW. Read more » BFC Max-Högger-Strasse 6 CH-8048 Zurich, Switzerland

Phone: +41 44 784 22 22 Fax: +41 44 784 23 23

info@bfconsulting.com www.bfconsulting.com

BFC. Agriculture Finance Bulletin.

State Initiatives 1)

Kyrgyzstan Should Not Neglect Agricultural Research

June 23rd, 2014, http://www.vb.kg/277728

Vyacheslav Anikin, columnist at Vecherniy Bishkek, has criticized the Ministry of Agriculture for spending only 20 million KGS annually on agricultural research and development, out of a budget of 1.7 billion KGS which pays for some 5,400 employees.

Anikin noted regretfully that consecutive governments (starting under Akayev and Bakiyev) closed agricultural research centers, reduced academic veterinary staff, and diminished the budget for agro research. The consequences, he argues, can be witnessed today: the country lacks a clear strategy over whether to support cooperatives or smaller-structure farms; farmers have difficulty accessing the market; the humus content of the soil has fallen dramatically (from 2.3% to 1.2% or less) and cattle diseases like brucellosis, smallpox, and foot and mouth disease persist.

Anikin has appealed to the Minister of Agriculture, Taalaibek Aidaraliev, not to exacerbate the existing problem by pursuing plans to merge the four remaining research centers into one, as this would further increase competition for scarce financial resources and for academic degrees and awards. He argues that Russia boasts 127 specialized agricultural research institutes, Kazakhstan 27, Uzbekistan 25, and Tajikistan 12 and that in consequence yields in Kazakhstan are 40 quintals of grain per hectare, 50 in Russia, but only 25 in Kyrgyzstan.

In conclusion Anikin believes that the only way to save Kyrgyz agriculture from ruin is to intensify production methods, providing farmers with high-quality seeds and highly productive animals, measures only possible with adequate scientific research.

2)

Seminar on Drip Irrigation Held in Issyk-Kul Region

June 18th, 2014, http://www.gazeta.kg/3726-news.html

Farmers and heads of regional administrations from all over Kyrgyzstan participated in a national seminar on drip irrigation in Balykchi. The technique is currently used in 80 greenhouses in the Chui region, on 300 ha of beans in Talas, and on 85 ha of apricot, apple, and pear orchards belonging to the cooperative "NARS" in the Ton district. Deputy Prime Minister Tayirbek Sarpashev, who attended the workshop, mentioned two more pilot projects on 10 ha in the northern Chui region and in Bishkek’s Ata-Turk Park, where underground water is pumped by solar energy.

The installation of a drip irrigation system for one ha costs around 50,000 KGS (1,000 USD). The Deputy Prime Minister announced government support for farmers who open up new agricultural land using this method. He pointed out that drip irrigation saves water at the same time as increasing yields. The Minister of Agriculture, Taalaibek Aidaraliev, reported that a drip irrigation workshop was also held in the Osh region and that further regional seminars are planned in Chui (Sokuluk district) and Talas (Karabuura district). Earlier this month Emilbek Kaptagaeva, government representative of the Issyk-Kul region, visited the Farmers Association of Chelan County, Washington (USA). The Association’s President, Hank Manriquez, is ready to cooperate with the Issyk-Kul region to provide farmer training in advanced drip irrigation technology. The Association is also interested in sharing experience in the field of farm tourism.

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3)

Parliament Approves Law Banning GMO products

June 11th, 2014, http://kyrtag.kg/news/detail.php?ID=271660

The draft law “On Prohibiting the Cultivation, Importation and Sale of GMO Products in the Kyrgyz Republic” was validated after its third reading in Parliament. It will come into force in 2015.

4)

Israeli Company to Build Agricultural Logistics Centers

June 9th, 2014, http://kabar.kg/rus/economics/full/77850

The Ministry of Agriculture and the Israeli company Emi Technologies \u0026 Financing signed a memorandum of Cooperation relating to the construction of agricultural logistics centers throughout the country. The centers should allow local farmers to increase the volume and quality of exported agricultural products. Emi Technologies \u0026 Financing provides a full range of agribusiness services and currently implements projects in more than 50 countries on five continents.

5)

Minister of Energy and Industry Calls for Investment in the Textile Industry

June 7th, 2014, http://aif.kg/novosti/obschestvo/7308-kyrgyzstan-s-2010-goda-prekratil-proizvodstvo-shelka-ihlopchatobuzhnoy-tkani.html

Osmonbek Artykbaev, Minister of Energy and Industry, has reported that no silk or cotton fabric has been produced in Kyrgyzstan since 2010. He announced regretfully that of the 100,000 t of raw cotton produced in the country each year, 90% is exported because domestic textile companies are unable to process it. He said that the owners of private textile companies like the Tokmok spinning mill for woolen yarn and the silk and cotton mills in Osh have failed to modernize production lines to keep up with quality standards. Aside from the Tokmok mill, these factories now lie almost idle. The Minister called for investment in various business forums to attract the 50 million USD estimated to be necessary to modernize the Kyrgyz textile industry.

6)

Government to Purchase 10,000 Tons of Sugar from Azerbaijan

June 5th, 2014, http://kabar.kg/rus/economics/full/77725

The Deputy Prime Minister, Tayirbek Sarpashev, announced that the Government has signed a contract with the Azerbaijani government for the purchase of 10,000 t of sugar which will be will be transferred to the Fund Gosmatrezervov and resold on the Kyrgyz market for 45 KGS per kilo. This initiative is intended to prevent a sharp increase in sugar price on the domestic market, of up to 60-70 KGS per kg.

7)

Deputy Prime Minister Urges National Agrarian University To Prepare For a “Greenhouse Boom”

June 2nd, 2014, http://www.vb.kg/275325

In a meeting with students and staff at the Skryabin National Agrarian University, Deputy Prime Minister Tayirbek Sarpashev underlined the need for more specialists in greenhouse agriculture and for the artificial insemination of livestock. He stressed that the Government intends to promote large-scale development in both sectors. Tax incentives and a Government call for investment in the greenhouse sector has already started to attract funds: Sarpashev announced a 25 million USD agricultural loan from China of which 15 million USD will be leased through the RSK bank to farmers for developing greenhouses. He also drew attention to the Islamic Development Bank’s project for the creation of seed farms with a budget of almost 1.5 million USD, in addition to loans from Poland and the EurAsEC Anti-Crisis Fund (40 million EUR and the 20 million USD respectively) available for the purchase of agricultural equipment.

Sarpashev also warned that more than half of today’s veterinarians are of retirement age and need replacement. According to the Rector of the University of Rysbek Nurgaziev, 132 students will be recruited for veterinary training this year, to enter the profession within 5 years.

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8)

Government Intends to Direct 80% of Agricultural Export to Custom Union

June 2nd, 2014, http://www.vb.kg/275308

During parliamentary hearings on the reorganization of the Ministry of Agriculture and Land Reclamation, Deputy Prime Minister Tayirbek Sarpashev noted that the lack of veterinary medicine, chemicals, and agricultural machinery must be addressed, if plans to increase exports to the Custom Union are to be met.

9)

Reform Bill for Veterinary System Submitted to Parliament

May 28th, 2014, http://www.vb.kg/274586

The submitted draft law on "On Veterinary Medicine" introduced by Member of Parliament Talantbek Uzakbaev proposes to decentralize and privatize parts of the veterinary system, in accordance with global practice. The plan includes the creation of a Veterinary Chamber, greater responsibilities for livestock owners, and compensation for vets working in areas where certain diseases break out. Decentralization plans would also divide the country into sub-districts: in the case of outbreaks of disease quarantines and export bans would be imposed by area and not, as now, for the whole country. The draft also provides for the creation of private laboratories for the certification of agricultural products.

Foreign Aid 10) Parliament Approves 32 million USD for Livestock Development June 26th, 2014, http://www.knews.kg/econom/51680/

The Jogorku Kenesh validated an agreement between the Government and the International Fund for Agricultural Development, under which the IFAD will provide 22 million USD for the project "Livestock and Market Development� to be implemented in the Osh, Batken, and Jalal-Abad regions. 11 million USD will be given as a grant and a further 11 million USD given as a 40-year loan at a preferential interest rate (0.75%, with a grace period of 10 years).

In addition, the Adaptation of Smallholder Agriculture Program (ASAP) has allocated a grant of 10 million USD and the Kyrgyz Government has co-financed the project with 700,000 USD to cover local tax payments. These Funds will be used over 5 years to improve the management of community pastures and veterinary medicine, to help open centers for milk collection and cooling, and to provide commercial support for small-scale farmers working in milk and meat processing.

11) International Development Association to Allocate 2.8 million USD Grant for Seed Banks June 25th, 2014, http://www.knews.kg/econom/51681

Parliament has ratified a grant agreement with the International Development Association providing 2.8 million USD for the project "Support for community seed funds". 71,000 USD will be allocated to pay consultants, and remaining funds will be used to purchase seeds, equipment, and fertilizers, and to create community seed banks.

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12) ICCO to Launch Training Program on Principles of Organic Production June 25th, 2014, http://kabar.kg/rus/society/full/78803

From June 2014 farmers and agricultural experts will be trained on the principles of organic and fairtrade production, Muratbek Ismailov, deputy regional manager of the ICCO Cooperation Fund for South and Central Asia, has announced.

In addition to demonstrating the positive impact of organic production on the environment, the soil, health, and farmers’ businesses, the training includes information on certification (including local private certification provided by the Association "Bio-KG”), on the functioning of organic communities (organic aimags) and on market requirements for product quality.

The ICCO has been involved in developing organic agriculture in Kyrgyzstan since 2004, supporting projects like "Organic Cotton" and related organizations like the public fund "Bio Service", the "Organic Farmer" cooperative, and the Organic Movement Federation.

13) KyrSEFF Program Saves More Than 30,000 Megawatt-Hours June 20th, 2014, http://www.vb.kg/277875

Since beginning in April 2013, the Sustainable Energy Finance Program of Kyrgyzstan (KyrSEFF) has implemented energy savings of more than 30,000 megawatt-hours per year, the national program manager, Nurzat Abdyrasulova, has announced. The program is financed by the EBRD, which has made available 20 million EUR of credit facilities and by the Investment Fund of the European Union in Central Asia (IFCA) providing a 6.8 million EUR grant, provided by the). The program has a motivational bonus system, whereby each loan is accompanied by a grant of up to 35% of the total sum. This has attracted businesses from the manufacturing, tourism, and agricultural sectors to invest in energy saving measures like insulation and the low energy equipment.

14) Who Has Priority for Machinery Leasing Under the EDB Loan – Individual Farmers or Cooperatives?

June 18th, 2014, http://vesti.kg/index.php?option=com_k2&view=item&id=28380:komu-dostanetsya-selhoztehnika-vlizing?&Itemid=79#ixzz35YTqN44a

This question was raised during the parliamentary readings approving the 20 million USD loan from the Eurasian Development Bank (EDB) for the purchase of agricultural machinery. To date there has been no clear decision on whether priority should be given to individual farmers or to cooperatives in allocating machinery purchased from the loan. What is clear is that the leasing period is up to 7 years at an interest rate of 9% per annum. Initially, farmers will pay 20% of the equipment cost, but no additional collateral is required. Under the agreement with the EDB, the equipment must be purchased in the EurAsEC countries (i.e. Russia, Kazakhstan, Belarus and Tajikistan).

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BFC. Agriculture Finance Bulletin.

15) GIZ Held Seminar on Developing Farm Tourism June 6th, 2014, http://vesti.kg/index.php?option=com_k2&view=item&id=28163:prizhivetsya-li-v-kyirgyizstaneagroekoturizm?&Itemid=80#ixzz35YCIjhPk

As part of its "Promotion of Sustainable Economic Development" Program, the German Society for International Cooperation (GIZ) organized a seminar on developing farm tourism in Kyrgyzstan, held in Bishkek on June 9th. The workshop was attended by representatives from the Ministry of Culture, Information and Tourism, the Ministry of Economy, the administrations of the Issyk-Kul and Naryn regions, the Association of Travel Agencies, as well as donors, international organizations, educational institutions, and potential households, farmers, and cooperatives. During the workshop representatives planned activities for 2014 and identified funding opportunities to support rural tour-ism in the Issyk-Kul and Naryn regions.

16) Agribusiness Competitiveness Center Tests Early Weather Warning System for Farmers June 5th, 2014, http://www.vb.kg/275881

As part of the World Bank Project "Promotion of Agricultural Productivity" the Agribusiness Competitiveness Center conducted interviews with farmers in selected pilot areas in the Issyk-Kul region. So far 278 farmers in the regions of Chui, Talas, and Issyk-Kul have subscribed to 3-day weather forecasts and storm warnings provided via sms by the Kyrgyzhydromet weather agency. The interviewers found that, while farmers are satisfied with the speed and accuracy of the service, they need further training on how to interpret forecasts and how to respond appropriately. So far the program has trained a team of 22 coaches, from all regions of the country, on the use of meteorological information and on measures to be taken in adverse weather conditions.

Private Sector 17) Jeti-Oguz District to Host Annual Fruit and Berry Festival "Karagat" June 24th, 2014, http://www.gazeta.kg/4094-news.html

After holding the successful "Karagat Festival" in the village Bokonbaevo in August 2013, Murat Ramatov, Deputy Akim of the Jeti-Oguz District, plans to organize this year’s festival on August 9 in Kyzyl-Suu (Pokrovka). 3-4,000 local guests and tourists are expected at the fair, which gives farmers the opportunity to present a range of fruits and berries and to establish links with wholesalers and processors. Ramatov noted that of the 40,000 ha of land cultivated in the district about 4,000 ha are used for berries and fruit trees, but despite this, agricultural processing remains poor.

The festival is part of the 3-year project "Karagat +", launched last year by Kumtor and the public fund "AVEP" which aims to assist rural residents in Issyk-Kul by increasing their income through the sale of high quality fruit and berries on the domestic and export market. With an annual budget of 300,000 USD the project provides technology training to local farmers, imports cold-resistant varieties of berries, provides storage facilities, promotes drip irrigation, and helps farmers with marketing strategies.

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BFC. Agriculture Finance Bulletin.

18) Farm Loans Frequently Misused June 23rd, 2014, http://www.vb.kg/278042

During a meeting on amendments to the law "On Banks and Banking Activities in the Kyrgyz Republic" the Head of the Parliamentary Committee on Agrarian Policy, Saidulla Nyshanov, noted that in many cases agricultural loans are spent on other purposes, leaving farmers unable to repay the loans and to remain without land. Nyshanov appealed to farmers to avoid such debt traps. The draft law proposes to reduce the period in which banks and other financial institutions can claim land as collateral for loans from three years to one.

19) First Tractors Assembled in Kyrgyzstan June 17th, 2014, http://www.vb.kg/277363

The company "Dyikan plus" presented its locally produced tractors under the brand TOPOZ (Kyrgyz for “yak”). The first 5 tractors and several pieces of attachable equipment have been released from the line and the company plans to increase production to 100 tractors a month within 2 years. Currently the parts are made in China, but negotiations are underway to arrange production in local factories. For now production is focused on two models of tractor: a four-cylinder, 35-horsepower mini-tractor (TOPOZ 354) and a larger, 90-HP tractor for row crops and other agricultural operations (TOPOZ 904). Sales prices are 9,534 and 22,650 USD respectively. The tractors can be leased through "Ail Bank", KICB, and Bank "Kyrgyzstan". Adamalieva Lancer, director of "Dyikan plus" hopes to increase his staff from 20 employees to 200, depending on demand.

20) Potential Export of Yak Meat to Belorussia Depends on Phytosanitary Improvements June 17th, 2014, http://vesti.kg/index.php?option=com_k2&view=item&id=28354:kyirgyizstan-nahodit-vse-novyie-stranyi-dlyaeksporta-myasa-yaka&Itemid=79

After talks with Amanbay Kaiypov, Government Plenipotentiary in the Naryn region, Belarusian business expressed interest in buying yak meat from Kyrgyzstan, but noted that farmers would need to vaccinate their livestock to prevent diseases. The former Minister of Agriculture, Torogul Bekov, reminds that Kyrgyzstan produces only 64% of the meat it consumes, but nevertheless considers exports necessary to develop the sector. According to Bekov, Kyrgyzstan needs to improve cattle identification, vaccination procedures, and technology for slaughter and frozen meat transportation to remove Kyrgyz exports from phytosanitary blacklists.

21) New Mongolian Sugar Refinery to Shake the Monopoly of “Kaindinski” June 16th, 2014, http://vesti.kg/index.php?option=com_k2&view=item&id=28329:kyirgyizstanu-neobhodim-esche-odinsaharnyiy-zavodot-mongolov&Itemid=79#ixzz35YXswjJm

At a meeting with Deputy Prime Minister Tayirbek Sarpashev, the Vice Prime Minister of Mongolia Dendeviyn Terbishdagva announced the intention of Mongolian businessmen to build a sugar refinery in Kyrgyzstan. An additional sugar factory is much needed, as the local monopolist “Kaindinski” produces only 25,000 of the 146,000 tons required for the domestic market. Additionally, Kaindinski dictates low commodity prices leaving farmers reluctant to plant sugar beet.

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22) Lack of Vets and Vaccines Leaves Livestock Vulnerable to Plague June 13th, 2014, http://www.agro.kg/ru/news/4278

Kyrgyzstan lacks veterinary specialists, the Director of the State Inspectorate for Veterinary and Phytosanitary Security, Samir Osmonoliyev, has warned. Countrywide, 5.5 million head of cattle are treated by only 2,500 vets.

In face of 922 recent cases of cattle death caused by pasteurellosis, Osmonoliyev urged the Ministry of Finance and local authorities to provide funds for the timely purchase of vaccines. These funds are later refunded by livestock owners during the vaccination period.

23) Bai Tushum and Kompanion Receive Smart Certification June 5th, 2014, http://www.microcapital.org/microcapital-brief-opportunity-bank-serbia-mdo-arvand-of-tajikistan-bai-tushumkompanion-of-kyrgyzstan-receive-smart-campaign-client-protection-certification/

The Smart Campaign, a consumer-protection initiative launched in 2010 by the US-based nonprofit company Accion, granted for the first time its “Smart Certification” to Kyrgyz financial institutions: Bai Tushum and Kompanion Kyrgyzstan were certificated as socially responsible lenders after passing a comprehensive review of 95 different indicators measuring 7 principles of responsible lending (avoidance of over-indebtedness; transparency of pricing; adequate debt collection methods; employee adherence to business ethics; customer complaints management; confidentiality of customer information; conformity of products and sales channels with consumer-protection principles). Both, Bai Tushum and Kompanion offer agricultural loans.

24) Organic Farmers Suggest Alternative to Mineral Fertilizer Plant June 2nd, 2014, http://ekois.net/VOZMOZHNOST-RAZVITIYA-PROIZVODSTVA-ORGANICHESKIH-UDOBRENIJ-VKYRGYZSTANE/#MORE-14869

In response to the planned construction of a Chinese mineral fertilizer plant in Tegene in the Jalal-Abad region, members of the Federation of Organic Movement “Bio.KG” suggested that government should instead encourage the production of organic fertilizers. Federation member Usubali Bazaraliev, himself a farmer in the Jalal-Abad region, underlined the negative impact of chemical fertilizers on the environment and the health of consumers. Furthermore he notes that the proximity of the plant site to the Naryn River could lead to its pollution with waste from the plant. He appeals to the government to use imported mineral fertilizer only as a temporary solution and to provide funds to teach the population how to produce safe organic fertilizers. Bazaraliev suggests that such an initiative would help Kyrgyzstan be recognized on the international market as a producer of environmentally friendly organic products.

25) Farmers of Chui Region Face Problems Watering Crops May 30th, 2014, http://www.vb.kg/275066

The Director of the State Inspectorate on Seeds, Vyacheslav Rudenko, warned that insufficient water resources threaten more than 7,000 ha of sown wheat, especially in the districts of Kenbulunskogo, Krasnorechensk, and Ivanovo. He identified two causes: first the dry and prolonged winter, resulting in insufficient mountain water to feed irrigation systems. Second, and more worryingly, human factors: Farmers with plots close to irrigation channels refuse to join Water User Associations and water their fields without waiting for their turn. Water is also retained in poorly maintained channels and reservoirs which are sometimes used as fish ponds rather than for regulating the flow of irrigation water. The Minister of Agriculture, Taalaibek Aidaraliev, urged local authorities to quickly bring all irrigation systems to full alert and to observe irrigation schedules strictly.

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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.

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