#32 Kyrgyzstan Agriculture Bulletin, BFC

10/2016

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32 K y r gy zsta n Agriculture Bulletin Farmers in Cooperatives will Benefit from Privileges Training on Improving Kyrgyz Honey Exports and Competiveness Held Sweden Allocates USD 2 Million for Continuing Agricultural Project German Businesses Interested in Kyrgyz Agricultural Investments

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

Kazakhstan Removes Phytosanitary Posts along Kyrgyz‐Kazakh Border......................................... 2 Workshop on Agricultural Export Promotion Held in Bishkek ........................................................ 2 Budget Support Provided for New Laboratories and Cattle Identification ..................................... 2 Kyrgyz MP Appeals to Find Funds for Agricultural Loan Subsidy Program ..................................... 2 Kyrgyzstan Intensifying Efforts to Export Meat, Dairy and Fish to China ........................................ 3 Farmers in Cooperatives will Benefit from Privileges ..................................................................... 3 Ministry of Agriculture to Recommend which Crops to Grow by Region ....................................... 3 EEU and Kyrgyz Agricultural Products to be Treated Equally in Kyrgyzstan .................................... 4

Foreign Aid ................................................................................................................. 4 9) 10) 11) 12) 13) 14)

Training on Improving Kyrgyz Honey Exports and Competiveness Held ......................................... 4 Russian‐Kyrgyz Development Fund Approved KGS 10 Billion in Financing ..................................... 4 USAID Helps Connect Kyrgyz Agricultural Producers with Buyers .................................................. 4 Sweden Allocates USD 2 Million for Continuing Agricultural Project ............................................. 5 Russian‐Kyrgyz Development Fund Reviving Kyrgyz Sugar Industry ............................................... 5 New Veterinary Laboratory to be Constructed in Osh .................................................................... 5

Private Sector .............................................................................................................. 6 15) 16) 17) 18) 19)

Nearly KGS 4.2 Billion in Preferential Loans to Kyrgyz Farmers in 2016 ......................................... 6 German Businesses Interested in Kyrgyz Agricultural Investments ................................................ 6 Greenhouses can Improve Kyrgyz Agriculture ................................................................................ 6 Kyrgyz Dairy Industry in Danger of Disappearing ............................................................................ 6 Farmers Need an Analysis of Agricultural Market Dynamics to Thrive ........................................... 7

Note: The Agriculture Bulletin presents a monthly roundup of headlines and news stories related 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 Bulletin

State Initiatives 1)

Kazakhstan Removes Phytosanitary Posts along Kyrgyz‐Kazakh Border

October 28th, 2016, http://kyrtag.kg/economy/kazakhstan‐snyal‐karantinnyy‐fitosanitarnyy‐kontrol‐na‐granitse‐s‐ kyrgyzstanom/

Kyrgyzstan has received notification from the Ministry of Agriculture of the Republic of Kazakhstan that, as of October 27, 2016, the Republic of Kazakhstan has removed its phytosanitary posts along the border with Kyrgyzstan. This means that Kyrgyz agricultural products can now be exported into the Eurasian Economic Union (EEU) with the standard EEU export certificate.

2)

Workshop on Agricultural Export Promotion Held in Bishkek

October 26th, 2016, http://www.fao.org/europe/news/detail‐news/en/c/449493/

A workshop on agricultural export promotion was held in Bishkek with the goal of boosting the agricultural and food elements of Kyrgyzstan’s Export Development Plan for 2015‐2017. More than 70 individuals participated, representing the public and private sectors, academia, and international organizations in Kyrgyzstan. Experts also came from Kazakhstan, Switzerland, Ukraine, and the European Union Delegation to the Kyrgyz Republic.

Topics explored included competitiveness of agrifood products, diversification of exports for different products and markets, agricultural finance and investments, utilization of trade agreements and unilateral preferences and instruments, and institutional arrangements for trade promotion. In their discussions, participants identified several key areas for bolstering exports, including stronger sanitary and phytosanitary systems and certification in Kyrgyzstan, better access to trade information for all value chain participants, and improved trade logistics that correspond to the needs of local producers and exporters. A recurring theme in the discussions was the need for improved knowledge and skills among value chain participants and public sector representatives.

The workshop was part of the Food and Agriculture Organization’s (FAO) Regional Initiative on Improving Agricultural Trade and Market Integration and was jointly organized by the FAO, the Ministry of Agriculture, and the Ministry of the Economy.

3)

Budget Support Provided for New Laboratories and Cattle Identification

October 24th, 2016, http://www.eng.24.kg/vlast/182528‐news24.html

Prime Minister Jeenbekov, while speaking at a meeting of the National Budget Committee, announced that at least KGS 67 million has been allocated for new phyto‐veterinary laboratories and the identification of cattle in Kyrgyzstan. This support will help domestic products enter into world markets.

4)

Kyrgyz MP Appeals to Find Funds for Agricultural Loan Subsidy Program

October 20th, 2016, http://knews.kg/2016/10/v‐parlamente‐prizyvayut‐pravitelstvo‐najti‐sredstva‐na‐vydachu‐kreditov‐ fermeram‐pod‐7‐godovyh/

Member of Parliament Mirlan Zheenchoroev is appealing that the government make moves to find funding to support subsidies for farmers that would enable them to obtain agricultural loans with an interest rate of no more than 7%. Kyrgyz neighbors like Russia and Kazakhstan are finding success with Page 2

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agricultural products in Kyrgyzstan at the expense of locally produced products thanks to the subsidy support from their countries. It is estimated that KGS 100—150 million would be necessary to reduce the effective interest rate from 12% to 7% in Kyrgyzstan.

Ekmat Baybakpae, another Member of Parliament, has suggested establishing an excise tax on beer to fund the farmer loan subsidy program.

5)

Kyrgyzstan Intensifying Efforts to Export Meat, Dairy and Fish to China

October 13th, 2016, http://www.eng.24.kg/economics/182375‐news24.html

Kyrgyzstan is working to intensify efforts with China that would enable Kyrgyz meat, dairy and fish products to be exported in mass to China. Following initial talks, Kyrgyzstan is expecting Chinese assistance in implementing projects on the creation of agriculture and agro‐industrial technological parks, and the sides are working to create Bishkek‐Beijing and Osh‐Kashgar flights to help solve product transportation issues.

To date, China has provided an estimated USD 295 million in grants and technical and economic assistance to Kyrgyzstan. Kyrgyzstan is actively working towards the establishment of a Kyrgyz‐Chinese Investment Fund which would see continued Chinese investment in the country in the near and medium terms.

6)

Farmers in Cooperatives will Benefit from Privileges

October 10th, 2016, http://www.agro.kg/ru/news/9769/

Minister of Agriculture Turdunazir Bekboev, in a move to increase export potential and production of the agricultural sector, announced that Kyrgyz farmers integrated in cooperatives will benefit from privileges. In particular, farmers who are integrated into cooperatives will be eligible for preferential loans, have leasing priority, and have better sales outlets to factories. Currently, the Ministry is negotiating with Kaindy‐Kant factory as part of this effort, and, next year, Koshoy sugar factory is also expected to join.

Bekboev noted that integration of farmers in cooperatives should be maintained as strictly voluntary.

7)

Ministry of Agriculture to Recommend which Crops to Grow by Region

October 10th, 2016, http://kabar.kg/society/full/112249

The Prime Minister of Kyrgyzstan has approved three projects of the Ministry of Agriculture for crop and animal production and their processing. As part of the development of the projects, the Ministry analyzed which crops are most profitable in each region and will consult with farmers on the results of that analysis prior to next year’s planting season. The Ministry also plans to consult with farmers on which crops to plant to help ensure that prices of the harvested products remain relatively stable following the excess production of potatoes recently leading to a massive drop in price.

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8)

EEU and Kyrgyz Agricultural Products to be Treated Equally in Kyrgyzstan

October 7th, 2016, http://www.eng.24.kg/evraziasoyuz/182275‐news24.html

The Board of the Eurasian Economic Commission has decided to provide equal conditions for goods from members of the Eurasian Economic Union (EEU) in regards to their taxation in Kyrgyzstan. Food and some other goods produced from local agricultural raw materials are exempt from value added tax (VAT) in Kyrgyzstan; however, similar goods produced from agricultural raw materials of other union members are subject to 12 percent VAT when being sold in Kyrgyzstan. This is contrary to Article 71 of the EEU Treaty.

Foreign Aid 9)

Training on Improving Kyrgyz Honey Exports and Competiveness Held

October 28th, 2016, http://mineconom.gov.kg/index.php?option=com_content&view=article&id=6788&catid=63&lang=ru

A training on improving the competiveness of and ensuring the export of apiculture products to Eurasian Economic Union (EEU) countries was held at the Kyrgyz Accreditation Center by the Kyrgyz Ministry of Economy within the framework of a project supported by the German Physical‐Technical Institute. The training covered issues connected with the export of honey to EEU countries, an analysis of measures needing to be taken to further enhance the Kyrgyz honey industry, and the preliminary activities necessary to facilitate the sale of honey outside of Kyrgyzstan.

In addition, a working group was established at the training which will be devoted to helping to solve issues related to honey exports from Kyrgyzstan. Members of the working group will include representatives of the national quality infrastructure and the State Inspectorate for Veterinary and Phytosanitary safety.

10) Russian‐Kyrgyz Development Fund Approved KGS 10 Billion in Financing October 24th, 2016, http://novosti.kg/2016/10/rkfr‐dobril‐finansirovanie‐proektov‐na‐summu‐svyshe‐10‐ti‐mlrd‐somov/

In total, the Russian‐Kyrgyz Development Fund has approved financing projects totaling more than KGS 10 billion. More than 500 projects for small, medium and large business development have been approved by the Fund directly as well as by banks. The funds have been allocated for agriculture, processing, light industry, and building material production.

The Russian‐Kyrgyz Development Fund was established in 2014 to maximize adaptation of the Kyrgyz economy to the Eurasian Economic Union (EEU) and to implement investment projects in Kyrgyzstan.

11) USAID Helps Connect Kyrgyz Agricultural Producers with Buyers October 20th, 2016, https://bishkek.usembassy.gov/pr_usaid_helps_to_connect_kyrgyzstani_agricultural_producers_with_buyers.html

From July 2016 through September 2016, the United States Agency for International Development (USAID) has been working through its Agro Horizon project to sponsor a series of business growth events to help connect Kyrgyz agricultural producers with local and international buyers. Large forums organized in the Batken, Jalal‐Abad, Naryn and Osh oblasts as well as hundreds of smaller meetings have helped create new opportunities worth an estimated USD 5.4 million for Kyrgyzstan. The events Page 4

BFC Agriculture Bulletin

attracted 16 suppliers and 27 buyers from the Kyrgyz Republic, Kazakhstan, Mongolia and other neighboring countries. The parties signed contracts and memoranda of understanding to provide both processed and fresh products, including vegetables, fruits, juice, tomato paste, pickles, sauces, vegetable salads, puree jam, meat and dairy products.

These business growth events are a part of USAID’s broader efforts to grow smallholder farmer and agricultural producer incomes by increasing productivity, improving product quality and expanding markets for agricultural goods. Agro Horizon participants have doubled or, in some cases, even tripled yields and have improved their marketing and pricing practices since the project began.

12) Sweden Allocates USD 2 Million for Continuing Agricultural Project October 13th, 2016, http://knews.kg/253536/shvetsiya‐vydelila‐2‐mln‐na‐realizatsiyu‐selhozproekta‐na‐yuge‐strany/

Sweden has allocated USD 2 million for continued funding of the Rural Women’s Economic Empowerment project following Swedish Ambassador Christian Camille’s review of the project. The project has already provided 1,700 women in 45 villages in the Osh, Jalal‐Abad and Batken regions with trainings on social mobilization, leadership, agricultural technologies and other disciplines in additional to helping the women procure seeds.

The project was launched by the Food and Agriculture Association of the United Nations, the International Fund for Agricultural Development and the United Nations World Food Program.

13) Russian‐Kyrgyz Development Fund Reviving Kyrgyz Sugar Industry October 4th, 2016, http://www.eng.24.kg/economics/182226‐news24.html

The Council of the Russian‐Kyrgyz Development Fund has approved a USD 15.5 million project supporting two sugar factories in the Chui region: Kaindy‐Kant JSC and Koshoy JSC.

Kaindy‐Kant JSC will use the funds to expand production as it is currently the only sugar refinery operating in Kyrgyzstan, meeting only 50% of domestic demand. Koshoy JSC plans to use the funds to restore and upgrade a plant closed in 2008. Following the upgrades, it is expected that Kyrgyz sugar producers will be able to fully meet domestic demand and even begin export into the Eurasian Economic Union (EEU). It is also expected that the number of farmers growing and supplying sugar beet for refinery will increase from 20,000 to 50,000.

14) New Veterinary Laboratory to be Constructed in Osh October 4th, 2016, http://vesti.kg/index.php?option=com_k2&view=item&id=42542:rossiya‐vyidelit‐kyirgyizstanu‐pochti‐15‐ milliona‐dollarov&Itemid=79

The Ministry of Agriculture has reported that it will use USD 1.25 million of Russian technical assistance for the construction of a veterinary laboratory in Osh city and the training of Kyrgyz specialists in Russia.

The Kyrgyz Government has also allocated more than KGS 26,000 for laboratories in the Talas and Issyk‐ Kul regions, and the construction of four new laboratories is expected in Batken, Karakol, Balykchy and Talas.

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Private Sector 15) Nearly KGS 4.2 Billion in Preferential Loans to Kyrgyz Farmers in 2016 October 25th, 2016, http://www.minfin.kg/ru/novosti/novosti/zhyl‐bashynan‐beri‐11‐800‐charba‐zhrgzch‐subektke‐.html

Farmers of Kyrgyzstan have received preferential loans amounting to nearly KGS 4.2 billion since the beginning of 2016 as part of the “Financing Agriculture 4” project. According to the Ministry of Finance, most of the loans have been issues by Aiyl Bank and RSK Bank.

As of October 20, 2016, agricultural financing projects have, in total, provided financing to 63,135 agricultural producers in the amount of KGS 17.8 billion.

16) German Businesses Interested in Kyrgyz Agricultural Investments October 17th, 2016, http://kabar.kg/eng/economics/full/17223

In a meeting between a delegation from Germany and Vice Prime Minister Pankratov, Eduard Kinsbruner, regional director of the Eastern Committee of German Economy for Central Asia, announced German interest in establishing contacts in the areas of livestock breeding, livestock identification and certification of finished products as well as the supply of agricultural and special equipment. Following the Kyrgyz Republic’s becoming a full member of the Eurasian Economic Union (EEU), many have come to realize the great investment opportunity for German businesses in using Kyrgyzstan as a launching pad for production with the subsequent delivery of products into the EEU market, especially given that production in Kyrgyzstan is economically more profitable.

For its part, Kyrgyzstan has also made efforts in recent years to improve the investment climate and the legal framework in the field of entrepreneurship and protection of investments to help increase foreign investments in the country.

17) Greenhouses can Improve Kyrgyz Agriculture October 11th, 2016, http://kabar.kg/eng/economics/full/17167

Cold winters and hot summers make certain areas of Kyrgyzstan a challenging climate for producers to grow enough product to ensure everyone is fed. Many believe that greenhouse production offers Kyrgyzstan significant opportunities to become more self‐sufficient, grow better quality produce and use less chemical crop protection. To learn more about the possibilities of greenhouses in Kyrgyzstan, Foreign Affairs Minister Erlan Abdyldaev recently visited Dutch glasshouse builder Dalsem Complete Greenhouse Projects.

18) Kyrgyz Dairy Industry in Danger of Disappearing October 10th, 2016, http://vesti.kg/index.php?option=com_k2&view=item&id=42612:

Following the accession of Kyrgyzstan into the Eurasian Economic Union (EEU), Kyrgyz milk producers hoped that new markets in Russia and Kazakhstan would open up to them, leading to a boom in the industry. This, however, has not turned out to be the case as a lack of the necessary laboratories for obtaining the certifications necessary for export into the EEU has meant that Kyrgyz dairy producers and processors have been unable to legally enter these new markets. Further compounding this situation is the fact that earlier outlets of Kyrgyz dairy (pastry laboratories) have now turned to cheaper Kazakh Page 6

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products. Currently, the sector is so financially strained that it faces potential bankruptcy if the state does not step in and lend support.

19) Farmers Need an Analysis of Agricultural Market Dynamics to Thrive October 5th, 2016, http://www.turmush.kg/ru/news:1334467

Speaking at a regional investment forum in Naryn, the head of Expert Biz, an analytical center, indicated that Kyrgyz farmers do not know the dynamics of the market in which they participate, meaning that these farmers bear additional expenses that they might not otherwise have. Moreover, there are currently no agencies in the country that can consult with farmers on this subject. Because of this, farmers act intuitively instead of based on analyses of current market situations. This can lead to examples like the recent case when farmers planted an excessive number of potatoes, driving the price of the crop down to a point where many farmers suffered a loss.

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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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