#28 BFC Kyrgyzstan Agriculture Finance Bulletin

06/2016

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28 K y r gy zsta n Agriculture Finance Bulletin Guarantee Fund Set Up to Support Smalland Medium-sized Businesses KGS 131 Million Allocated for Cattle Vaccination in 2016 New Agricultural Value Chain Financing Program Launches in Kyrgyzstan Exports of 6,000 Types of Goods to European Union will be Duty-Free

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Agriculture Finance Bulletin Edition #28, June 2016

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

Guarantee Fund Set Up to Support Small- and Medium-sized Businesses ..................................... 2 Kyrgyz Agricultural Products Can Cross into Russia without Hinderance ....................................... 2 Four Banks Selected for MSME Rural Lending Deposit Auctions .................................................... 2 Kyrgyz Parliament Doesn’t Authorize 7% Agricultural Loan Bill ...................................................... 2 Gradual Farmer Insurance Increase Proposed ................................................................................ 3 Four Veterinary Laboratories to Be Built in Kyrgyzstan .................................................................. 3 KGS 131 Million Allocated for Cattle Vaccination in 2016............................................................... 3

Foreign Aid ................................................................................................................. 3 8) 9)

Prime Minister Meets with Secretary General of the EEAS ............................................................ 3 New Agricultural Value Chain Financing Program Launches in Kyrgyzstan .................................... 4

Private Sector.............................................................................................................. 4 10) 11) 12) 13) 14) 15) 16)

New Buffer Zone Created for Breeding Pedigree Bees ................................................................... 4 Two New Factories to Open in Chuy Oblast .................................................................................... 4 Exports of 6,000 Types of Goods to European Union will be Duty-Free ......................................... 5 Food and Agricultural Product Export Volume to Russia has Doubled ........................................... 5 Naryn Farmers Planting Buckwheat ................................................................................................ 5 79 Thousand Hectares of Potatoes have been Planted .................................................................. 5 KGS 207 Million in Preferential Loans for Talas Farmers ................................................................ 5

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 »

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)

Guarantee Fund Set Up to Support Small- and Medium-sized Businesses

June 30th, 2016, http://kyrtag.kg/economy/v-kyrgyzstane-sozdan-garantiynyy-fond-v-podderzhku-malogo-i-srednego-biznesahttp://www.timesca.com/index.php/news/16829-kyrgyzstan-sets-up-guarantee-fund-to-support-small-and-medium-business

Kyrgyzstan has created the JSC Guarantee Fund to support small- and medium-sized businesses that have a hard time obtaining bank loans due to a lack of collateral. In these cases, the Fund will step in and guarantee loans for banks. The main goals of the Fund are to support small and medium businesses in their access to finance, support SMEs in rural areas, help create new jobs, boost the development of the country’s regions, reduce internal migration, increase the share of SMEs in the GDP, and support women entrepreneurs.

KGS 72 million has been provided for the Fund from the national budget, and the Asian Development Fund is allocating approximately USD 3 million. Another USD 10 million is currently being negotiated with the Kyrgyz-Russian Foundation.

2)

Kyrgyz Agricultural Products Can Cross into Russia without Hinderance

June 27th, 2016, http://www.vb.kg/doc/342388_kyrgyzskaia_selhozprodykciia_mojet_peresekat_granicy_rossii_bez_proverok.html

As a full member of the Eurasian Economic Union (EEU), Kyrgyzstan is now free to export agricultural products to other countries in the Union. Despite this, some carriers have reported some issues and delays when crossing into Russia due to Russian concerns over a lack of phytosanitary documents; however, transportation of perishable goods crossing the border will no longer be detained as Rosselkhoznadzor (the Russian Federal Service for Veterinary and Phytosanitary Surveillance) has taken appropriate actions to resolve the issues.

3)

Four Banks Selected for MSME Rural Lending Deposit Auctions

June 24th, 2016, http://www.minfin.kg/ru/novosti/novosti/rezultaty-otbora-bankov-4-bankov-sootvetstvuyut-kr.html

The Kyrgyz Ministry of Finance has announced that four banks (JSC Bank of Asia, JSC Bank Kompanion, JSC BTA Bank, and OJSC Optima Bank) have met the established selection criteria for participation in the public targeted deposit auction on the placement of repayable funds within the framework of Kyrgyz Republic and KfW programs. After signing cooperation agreements which provide for the use of funds exclusively for MSME lending in rural areas, the banks will be allowed to participate in the auction.

Dates and terms of public targeted deposit auctions will be further announced by the Ministry of Finance.

4)

Kyrgyz Parliament Doesn’t Authorize 7% Agricultural Loan Bill

June 21st, 2016, http://24.kg/ekonomika/33751_deputatyi_podderjali_zakonoproekt

Kyrgyz Members of Parliament did not approve a bill which would have set an interest rate of 7% on agricultural loan. The bill aimed to support the agricultural sector but received heavy criticism that it could lead to corruption within the sector. In addition, the Ministry of Finance warned that paying for the bill does not fit into the current budget.

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BFC. Agriculture Finance Bulletin.

5)

Gradual Farmer Insurance Increase Proposed

June 20th, 2016, http://kyrtag.kg/economy/sotsfond-predlagaet-postepennoe-povyshenie-tarifov-strakhovykh-vznosov-dlyafermerov-do-2017-goda

The Social Fund of the Kyrgyz Republic has proposed a gradual increase in farmer insurance rates. For owners of land plots up to 0.05 hectares, the insurance would go from 0.1% of the average monthly salary in 2016 to 1% by 2028, and payments for plots between one and two hectares would see payments rise from 0.5% of the average monthly salary to 5% by 2028.

6)

Four Veterinary Laboratories to Be Built in Kyrgyzstan

June 15th, 2016, http://kabar.kg/eng/economics/full/16182

The Kyrgyz government is prepared to allocate KGS 37.3 million for the first phase of a project to construct four veterinary laboratories in the country. The laboratories are necessary to ensure the epizootic safety of food, consumer goods, the environment and domestic animal health. All laboratories will meet Eurasian Economic Union (EEU) standards and be listed in the EEU registry.

7)

KGS 131 Million Allocated for Cattle Vaccination in 2016

June 13th, 2016, http://www.vb.kg/doc/341504_v_2016_gody_na_vakcinaciu_skota_vydelili_131_mln_somov.html

KGS 131 million has been allocated in the 2016 national budget for cattle vaccination and monitoring, a threefold increase over last year’s allocation. All vaccines meet World Organization for Animal Health standards and are being administered according to international standards.

The last two years saw difficulties in the epizootic situation in Kyrgyzstan due to needed preventative measures not being carried out. The increase in funding means that there are enough vaccines already purchased to last through spring 2017.

Foreign Aid 8)

Prime Minister Meets with Secretary General of the EEAS

June 4th, 2016, http://www.eng.24.kg/economics/180677-news24.html

The Secretary General of the European External Action Service (EEAS), Alain Le Roy, met with the Kyrgyz Prime Minister to discuss issues of bilateral cooperation between Kyrgyzstan and the European Union (EU) in the fields of economic development and investment opportunities. Secretary Le Roy noted the need to increase cooperation in economy and trade and stressed that an official request for assistance in improving laboratory facilities was under consideration. During the meeting, the Prime Minister emphasized the assistance the EU has given through various projects and programs and promised to present a detailed picture of the investment climate to the Secretary General in the near future.

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BFC. Agriculture Finance Bulletin.

9)

New Agricultural Value Chain Financing Program Launches in Kyrgyzstan

May 30th, 2016, http://www.minfin.kg/ru/novosti/byudzhet/byudzhet-razvitiya/mip/gbr-i-minfin-kr-zapuskayut-novuyuprogrammu-naprav.html

Kyrgyzstan’s Finance Ministry is working with the German Development Bank KfW to launch a new Agricultural Value Chain Financing Program which will improve competitiveness and access to new markets. The five-year program will facilitate sustainable production of competitive agricultural products and promote best practice in agriculture in the Kyrgyz Republic. Technical expertise is being provided by Swiss consultancy company Business \u0026 Finance Consulting (BFC). The program will improve the quality of the financial services of banks through the introduction of advanced banking technologies that will reduce the costs of customer service and the costs of borrowing for end customers (producers and agricultural processors). The program also will foster a greater atmosphere of cooperation between banks, farmers and agricultural suppliers and processors.

KfW is allocating EUR 9 million for the first phase of the program, and four banks (Aiyl Bank, Optima Bank, Demir Bank and Commercial Bank KYRGYZSTAN) will participate by receiving local currency funding to loan for investment farm projects, cooperatives and small and medium-sized enterprises processing agricultural products and providing agricultural services.

The official opening of the program occurred at the end of May when BFC team presented the overall concept of the program as well as the basic elements of how it works and an action plan for program implementation.

Private Sector 10) New Buffer Zone Created for Breeding Pedigree Bees June 28th, 2016, http://www.timesca.com/index.php/news/16822-kyrgyz-beekeepers-start-breeding-pedigreed-bees

Beekeepers in the Sary-Be canyon of southern Kyrgyzstan are excited about a recently created buffer zone for the development of bee breeding. Importing other honey bees, bee colonies and/or queen bees of unknown origin within a 20 kilometer radius (the zone) is prohibited in order to help the development of breeding to improve marketability and preservation of bee products and species. Six beekeepers operating in the zone work to produce honey as well as sell pure-bred queen bees to other in Kyrgyzstan, providing Kyrgyz honey producers with quality bees at an affordable price.

The buffer zone was opened this spring as part of an effort to build and strengthen the value chain for honey in Kara-Kuldzha and is a joint achievement of the United Nations Development Program’s Trade Support project, the non-governmental organization AgroLead, and the Too Baly community unit. While this is the first such buffer zone in Kyrgyzstan, other, similar buffer zones are being planned in other areas of the country which will concentrate on breeding different types of bees.

11) Two New Factories to Open in Chuy Oblast June 15th, 2016, http://kabar.kg/eng/economics/full/16196

Two new factories are being constructed in Chuy oblast: a canning factory for tomato products and a textile factory. The completion of the plant for the production of tomato products is expected in July and will employ 240 people while supplying Russia, Belarus and Kazakhstan with products. The textile factory will employ an additional 150 people and is scheduled to begin operations in September.

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BFC. Agriculture Finance Bulletin.

On a one-day working trip to the region, Prime Minister Sooronbai Zheenbekov took time to visit the construction works of the two factories and stressed his commitment to helping create all the necessary conditions for development of small- and medium-sized businesses.

12) Exports of 6,000 Types of Goods to European Union will be Duty-Free June 9th, 2016, http://novosti.kg/2016/06/kyrgyzstan-smozhet-eksportirovat-6-tysyach-vidov-tovarov-v-evrosoyuz-bez-poshlin/

Deputy Minister of Economy Eldar Abakirov announced that Kyrgyz producers will now be able to export more than 6,000 types of goods (including some foods and agricultural products) into the European Union duty-free, helping reduce costs for entrepreneurs in the future. Previously, Kyrgyz exporters paid customs duties of up to 14.5% for certain fruits and vegetables.

13) Food and Agricultural Product Export Volume to Russia has Doubled June 7th, 2016, http://novosti.kg/2016/06/obemy-eksporta-prodovolstviya-i-selhozproduktsii-iz-kyryzstana-v-rossiyu-vyrosli-v2-raza/

Sanctions imposed on Russia by a number of European countries have led to increased opportunities for Kyrgyz producers, and the result is a doubling of the export volume of food and agricultural products from Kyrgyzstan to Russia.

14) Naryn Farmers Planting Buckwheat June 6th, 2016, http://novosti.kg/2016/06/fermery-narynskoj-oblasti-perehodyat-na-vyrashhivanie-grechihi/

Farmers in the Naryn region have started planting buckwheat. They plan to utilize the buckwheat processing centers in the Jumgal district and are actively participating in forums to attract investors to help develop the buckwheat industry in the region.

15) 79 Thousand Hectares of Potatoes have been Planted June 6th, 2016, http://kabar.kg/society/full/107040

Deputy Agriculture Minister Janybek Kerimaliev announced that 79 thousand hectares of potatoes have been planted in Kyrgyzstan so far (compared to 85.6 thousand last year). Ministry officials expect a similar end result as last year’s potato harvest: 600,000 tons consumed domestically and 500,000 tons exported. The Deputy Minister also announced that the city of Ufa, Russia has expressed a desire for earlier potato imports and that this matter is currently under consideration.

16) KGS 207 Million in Preferential Loans for Talas Farmers June 2nd, 2016, http://www.turmush.kg/ru/news:297946

698 farmers in Talas region of Kyrgyzstan were issued KGS 207 million in preferential loans as part of four agricultural development projects. Interest in the preferential loan program is high among farmers, and consideration for additional preferential loans for harvesting and autumn crop cultivation is now under consideration. The loans are currently provided to farmers at a 10% per annum interest rate.

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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.

The articles do not necessarily reflect the opinions of BFC, its staff, its associates or its partners.

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