10 BFC Kyrgyzstan Agriculture Finance Bulletin

12/2014

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10 K y r gy z s ta n Agriculture Finance Bulletin Kyrgyz Prime Minister Proposes Deeper Organic Agriculture Cooperation with Turkey Ajibekov Kasmaliev: Land inventory to be completed by 2019 Poland to Provide EUR 40 Million Preferential Agricultural Loan Farmers should be Given Preferential Loans and Adequate Technology and Irrigation Systems

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Agriculture Finance Bulletin Edition #10, December 2014

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

Kyrgyz Prime Minister Proposes Deeper Organic Agriculture Cooperation with Turkey ................ 2 9 Food Testing Laboratories to be Upgraded .................................................................................. 2 Draft Law on Nationwide Flour Enrichment Discussed ................................................................... 2 Ajibekov Kasmaliev: Land inventory to be completed by 2019 ...................................................... 3 Livestock Census Announced .......................................................................................................... 3 200,000 tons of Mineral Fertilizers to be Imported from Uzbekistan............................................. 3 Wheat Supply Secure, according to State Material Reserves Fund ................................................ 4

Foreign Aid ................................................................................................................. 4 8) 9) 10) 11) 12) 13)

EDB Provides USD 20 Million Loan for the Leasing of Agricultural Machinery ............................... 4 Poland to Provide EUR 40 Million Preferential Agricultural Loan ................................................... 4 Chinese Investors Demand Government Guarantees Regarding Fertilizer Plant Construction...... 5 KICB and EBRD Disburse USD 4 million Loan for the Construction of Flour Mill ............................. 5 Naryn Honey to be Exported to Japan............................................................................................. 6 Kyrgyz Delegation Participate in Agriculture Training in South Korea ............................................ 6

Private Sector.............................................................................................................. 6 14) Farmers should be Given Preferential Loans and Adequate Technology and Irrigation Systems, says President Atambayev ............................................................................................................... 6 15) 37% of Pasture Land Severely Deteriorated.................................................................................... 6 16) Role of Entrepreneurs in the Facilitation of Customs Union Accession to be Explored ................. 7 17) Fodder Yield Decreases by 235,200 tons in 2014 ............................................................................ 7

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 Agricultural Lending Programme for KfW. Read more »

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BFC. Agriculture Finance Bulletin.

State Initiatives 1)

Kyrgyz Prime Minister Proposes Deeper Organic Agriculture Cooperation with Turkey

December 26th, 2014, http://www.vb.kg/doc/298139_dlia_selhozprodykcii_iz_kyrgyzstana_poishyt_potrebitelia_v_tyrcii.html

At the 8th meeting of the Kyrgyz-Turkish Intergovernmental Commission for trade and economic cooperation, the Prime Minister of Kyrgyzstan, Tayirbek Sarpashev, said Turkey’s dynamic and constantly evolving market is highly attractive for Kyrgyz products.

The Prime Minister highlighted Kyrgyzstan’s promotion of sustainable agriculture and organic farming and good relations with its neighbouring countries as key factors in the country’s agricultural product export potential. Sarpashev proposed further cooperation with Turkey in organic agriculture ventures.

2)

9 Food Testing Laboratories to be Upgraded

December 24th, 2014, http://www.vb.kg/doc/297973_v_kyrgyzstane_moderniziryut_9_laboratoriy_po_ispytaniu_pishevoy_prodykcii.html

Berdimamat Adanbaev, head of the technical regulations department at the Ministry of Economy, announced the upgrade of 9 food testing laboratories. A laboratory in each region will be upgraded, plus an additional two in Bishkek and Osh. Part of the multi-million dollar upgrade will be funded by Russia and Kazakhstan.

There are 86 testing laboratories and 14 certification centres in Kyrgyzstan. A draft resolution will eventually bring laboratories in line with international veterinary standards, said Adanbaev. Currently there are no laboratories in Kyrgyzstan which meet the standards.

Kyrgyzstan currently has 52 hygiene and safety regulations, while the Customs Union has 34, of which 26 are common to both.

In Kyrgyzstan, compliance with regulations is confirmed with a certificate. However, according to Customs Union regulations, manufacturers or importers must declare conformity themselves, after having taken supervised laboratory tests. Certification is then given by a third party.

3)

Draft Law on Nationwide Flour Enrichment Discussed

December 15th, 2014, http://www.vb.kg/doc/296867_stoimost_meshka_obogashennoy_mineralami_myki_bydet_doroje_na_4_soma.html

The Parliamentary Committee on Agrarian Policy, Water, Environment and Regional Development, recently debated a draft law on flour processing. It would require all flour milled in Kyrgyzstan to be enriched with vitamins and minerals.

The Committee estimates the price of a bag of high quality flour will increase by only 4 KGS. The President of the Association of Producers of Processed Flour and Bread, Shefner Alexander, said that current technical regulations require enterprises to monitor the enrichment process themselves, adding that he estimates the nutritional premix approved by the Ministry of Health to be sufficient.

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4)

Ajibekov Kasmaliev: Land inventory to be completed by 2019

December 10th, 2014, http://www.agro.kg/ru/news/5915/

If proposed funding levels continue, the Land Inventory program will be completed by 2019, said Ajibekov Kasmaliev, Director of the State Design Institute of Land Management "Kyrgyzgiprozem".

The program – launched in March this year – was allocated KGS 24 million for 2014 and 2015. Deeming the sum insufficient, Kasmaliev requested parliament increase funding to KGS 55 million.

In the Chui region, where the inventory has already been completed, there was an increase in arable land. In Sokuluk, 2000 hectares previously registered as pasture land are now arable; in Chui proper, there was an increase of 870 ha; in Panfilov, an increase of 5000 ha; and in Alamudun, an increase of 1900 ha, according to Kasmaliev.

In part, the inventory is taking place to combat corruption engendered by the illegal transformation and distribution of arable land, added Kasmaliev.

5)

Livestock Census Announced

December 5th, 2014, http://www.vb.kg/doc/295929_v_kyrgyzstane_podschitaut_kolichestvo_skota_i_domashney_pticy.html

A livestock census will take place from the 10th-25th of December, reported the National Statistical Committee.

The event will be organized by local authorities in collaboration with the Ministry of Agriculture, the National Statistical Committee and the State Inspectorate for Veterinary and Phytosanitary Security. The National Statistical Committee trained local staff in census techniques.

The results of the census at household level allow an estimation of livestock product output at national level (e.g. meat, milk, eggs and wool). Livestock products account for 47% of gross agricultural production.

Recent censuses have shown a general increase in the livestock numbers. In 2013, cattle totalled 1,404,000 thousand heads, an increase of 2.7% year-on-year; goats and sheep totalled 5,641,000, an increase of 4%; horses totalled 407,000, an increase of 2.2%; and poultry totalled 5,385,000, an increase of 6.1%.

The largest share of cattle are found in Osh (22.9% of the total herd), followed by Jalal-Abad (20.45%) and Chui (18.3%). The largest share of sheep and goats are found in Jalal-Abad (21.4%), followed by Osh (18.3%), Naryn (17.3%) and Issyk-Kul (14.8%).

6)

200,000 tons of Mineral Fertilizers to be Imported from Uzbekistan

December 1st, 2014, http://kabar.kg/rus/economics/full/87128

Kyrgyzstan will import 200,000 tons of Uzbek mineral fertilizers pending the conclusion of negotiations, said Deputy Chairman of the State Material Reserves Fund, Rustam Karakulov. This year 60,000 tons of mineral fertilizers have been imported, bringing down domestic prices, said Karakulov, adding that the price of a kilogram of nitrate decreased from KGS 25-28 in 2013 to KGS 17 this year.

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7)

Wheat Supply Secure, according to State Material Reserves Fund

December 1st, 2014, http://novosti.kg/2014/12/net-povoda-dlya-bespokojstv-po-obespechennosti-pshenitsej-i-mukoj/

Rustam Karakulov, Deputy Chairman of the State Material Reserves Fund, said there is no need for concern regarding flour supplies. This year’s wheat harvest fell by 200,000 tons year-on-year due to water shortages. However, so far 80% of demand has been met, according to Karakulov. The remainder will be met through imports from neighbouring countries; namely 150,000 tons from Russia and Kazakhstan, said Karakulov.

Foreign Aid 8)

EDB Provides USD 20 Million Loan for the Leasing of Agricultural Machinery

December 19th, 2014, http://www.vb.kg/doc/297448_v_2015_gody_ejemesiachno_v_lizing_bydyt_vydavat_sto_edinic_selhoztehniki.html

Kyrgyzstan leased 19 "Belarus 82.1" tractors, one "Field Effect SK5" combine and a baling machine.

The equipment was purchased through a USD 20 million loan from Eurasian Development Bank (EDB), provided for the leasing of more than 1000 units of agricultural machinery.

First Deputy Prime Minister Tayirbek Sarpashev said no less than 100 units of machinery will be leased every month, adding that the government aims to upgrade 60% of agricultural machinery during the next 3 years.

9)

Poland to Provide EUR 40 Million Preferential Agricultural Loan

December 13th, 2014, http://www.eng.24.kg/economics/173700-news24.html

The EUR 40 million loan was announced by the Honorary Consul of the Republic of Poland in Kyrgyzstan Alexander Zlatkin.

The funds will be used to develop the system of registration and identification of animals, the construction of a modern laboratory and also disbursed as loans to farmers for the purchase of machinery and fertilizers. The funds will be allocated in KGS, while loans to farmers will be issued through Aiyl Bank.

According to the Polish Embassy, Poland's trade turnover with Kyrgyzstan from January to September 2014 totalled more than USD 26 million. Polish exports amounted to USD 24 million, while imports amounted to more than USD 2 million. Chemical products amounted to 40% of total exports; paper and cardboard to 23%; food and agriculture 13%; and equipment 11.5%. Jet fuel amounted to 55% of total imports, ferrous and non-ferrous metal waste products to 23%; kidney beans 9%; and base metal products 10%.

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10) Chinese Investors Demand Government Guarantees Regarding Fertilizer Plant Construction December 11th, 2014, http://www.vb.kg/doc/296593_kitaycy_otkazalis_stroit_zavod_ydobreniy_bez_pravitelstvennyh_garantiy.html

Chinese investors have suspended cooperation on the construction of the Tegene mineral fertilizer plant (in Jalal-Abad) pending further government guarantees, said the Ministry of Agriculture.

Negotiations with Chinese companies regarding the construction of the plant near the Tegene coal mines have been on-going over several years. A feasibility study concluded the plant could produce 320,000 tons of fertilizer per year, including 120,000 tons of carbamide and 200,000 tons of ammonium nitrate. Construction costs and duration are estimated at USD 480 million and 46 months respectively.

The project hinges on the redevelopment of the coal mine, estimated at USD 99.3 million. Prospective coal output is estimated at 900,000 tons, of which 500,000 tons is earmarked for the production of fertilizer; the remaining 400,000 tons will be sold on the domestic market. The plant will employ 890 staff. Return on investment is estimated between 5 and 10 years.

However, the state currently lacks the funds to implement the project, said the Ministry, leading to the Chinese investors’ refusal to cooperate further unless guarantees are given.

Kyrgyzstan currently imports fertilizers from neighbouring countries, meeting only 30% of demand.

However, considering ample coal resources, the construction of the fertilizer plant would fully satisfy domestic demand, said the Ministry.

11) KICB and EBRD Disburse USD 4 million Loan for the Construction of Flour Mill December 3rd, 2014, http://www.akipress.com/news:552513/

The European Bank for Reconstruction and Development (EBRD) and the Kyrgyz Investment and Credit Bank (KICB) are to issue a USD 4 million loan to Elnur Dan LLC – the country’s third largest flour producer – for the construction of a flour mill in Jalal-Abad in southern Kyrgyzstan. The mill’s machinery will be imported from Turkey. Elnur Dan’s existing mill in Bishkek produces 38,000 tons of flour and 4,000 tons of pasta annually.

Currently, the south depends partly on flour supplies from the north, resulting in price increases due to transportation costs. The new mill will produce up to 170 tons of flour a day, compared to a maximum 225 tons of flour a day at the Bishkek mill.

The loan is being issued through EBRD and its partner banks’ small and medium enterprise (SME) financing facility.

The joint EBRD- EU SME Finance Facility for Central Asia was created in 2012 to support direct lending to SMEs and indirect financing of SMEs via local banks in Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan. The Elnur Dan mill is one of 20 projects in Central Asia financed through the program.

To date, EBRD has invested over EUR 510 million in 117 projects in the Kyrgyzstan.

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12) Naryn Honey to be Exported to Japan December 2nd, 2014, http://novosti.kg/2014/12/narynskij-med-budut-eksportirovat-v-yaponiyu/

Naryn honey will be exported to Japan, said the Plenipotentiary of the Naryn region, Amanbay Kaiypov.

A Japanese company is to build a processing plant for the honey, he added. Dozens of entrepreneurs are engaged in beekeeping. However, honey is currently only traded domestically.

13) Kyrgyz Delegation Participate in Agriculture Training in South Korea December 1st, 2014, http://www.vb.kg/doc/295368_ujnokoreyskiy_opyt_popytautsia_primenit_v_agrosektore_kyrgyzstana.html

A 15 member group – comprising heads of districts and villages, deputies of local councils and representatives of public organizations in Kyrgyzstan – participated in the Saemaeul agricultural technology program in South Korea.

Spanning 10 days, participants got acquainted with South Korea’s 1970s “Saemaeul Undong” program or “New Community Movement”, considered a principle factor in South Korea’s successful rural modernization. In addition to receiving lectures, participants will visit farms and agricultural enterprises.

Participants heard that modern technology, such as drip irrigation, allows Korean farmers to improve productivity and income. For example, a single cabbage greenhouse, where heating and irrigation are controlled automatically, turns a USD 12000 profit. Korean demand for organic products is high, so chemical fertilizers are not used.

At the end of the seminar, participants will receive a “road map”, which will be used to help develop agriculture in Kyrgyzstan.

Private Sector 14) Farmers should be Given Preferential Loans and Adequate Technology and Irrigation Systems, says President Atambayev December 9th, 2014, http://www.cawater-info.net/news/12-2014/09.htm

While visiting Saudi Arabia, the UAE and Qatar, President of the Kyrgyz Republic, Almazbek Atambayev, said farmers should be given access to preferential loans, adequate irrigation systems and technology to increase the competiveness of Kyrgyz agricultural exports. Atambayev said farmers could only prosper in a stable environment adding that if they were unhappy with parliament or the president they should not re-elect them.

15) 37% of Pasture Land Severely Deteriorated December 9th, 2014, http://vesti.kg/index.php?option=com_k2&view=item&id=31421:kyirgyizstan-riskuet-lishitsyapastbisch&Itemid=79

Deputy of the Parliamentary Committee of Agrarian Policy, Water, Environment and Regional Development, Mirlan Bakirov, reported that 37% of pasture land has substantially deteriorated.

According to the National Statistics Committee, pasture land constitutes as much as 40% of total area in Kyrgyzstan.

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Since an increase in livestock grazing has put severe pressure on pasture-land, a more efficient utilization system must be developed, according to Bakirov, adding that responsibility should ultimately lie with local councils.

Former Minister of Agriculture, Torogul Bekov, said pasture land is in a “catastrophic” state. In Kyrgyzstan, 9.2 million hectares of agricultural land are set aside for grazing, according to the former Minister. While pasture land was well managed during the Soviet Union era today it is criminally exploited, he added.

Rather than carefully maintaining pasture land, villagers prefer to move from one pasture to the next; since much of it is already heavily used, this aggravates degradation, said Bekov, adding that Kyrgyzstan risks losing its pasture land altogether if the state does not develop an effective management program.

16) Role of Entrepreneurs in the Facilitation of Customs Union Accession to be Explored December 4th, 2014, http://www.vb.kg/doc/295795_biznesmeny_kyrgyzstana_zadymalis_nad_eksportom_miasa_v_rossiu.html

The Kyrgyz-Russian Economic Council held a meeting which included representatives of the Eurasian Economic Commission (EEC). Economic issues were discussed, including the possible export of meat from Kyrgyzstan to Russia.

Kyrgyz entrepreneurs expressed interest in helping to resolve issues. In response, the Prime Minister of Kyrgyzstan supported the establishment of a special working group consisting business and state agency representatives. The advisory group, in turn, has requested support from the EEC. In response, the EEC will be drawing from experience gained from Kazakhstan and Belarus’ accession to the Customs union.

In order to facilitate the implementation of Kyrgyzstan’s “road map” to Customs Union accession, a functioning model that spells out the scope and limits of private initiatives and what should remain strictly the realm of public bodies needs to be developed, said the Executive Director of the Kyrgyz Russian Economic Council.

17) Fodder Yield Decreases by 235,200 tons in 2014 December 1st, 2014, http://www.eng.24.kg/economics/173471-news24.html

The amount of fodder produced in 2014 has decreased year-on-year, reported the Ministry of Agriculture: forage harvested totalled 3,548,000 tons - 235,200 tons less than in 2013.

This is due to drought and other water shortages, though it should be enough for farmers, said the Ministry. Prices for hay increased twofold, though they also increased across a range of products, added the Ministry.

In 2014, 30% of the 632,000 tons of wheat received and 50% of 219,700 tons of barley was used for fodder, according to the Ministry.

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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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