#29 BFC Kyrgyzstan Agriculture Finance Bulletin

07/2016

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29 K y r gy zsta n Agriculture Finance Bulletin New Amendments to Land Code Help Greenhouses and Drip Irrigation KGS 39.5 Million in Borrowed Funds Allocated for Agriculture Kyrgyzstan and WFP to Launch New Agricultural Education Program Agricultural Exports Increased by 43% since the Beginning of the Year

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Agriculture Finance Bulletin Edition #29, July 2016

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

New Amendments to Land Code Help Greenhouses and Drip Irrigation ....................................... 2 Proposed Law for a 10% VAT Rate for Grain and Flour Import ....................................................... 2 Prime Minister Visits Agricultural Processors, Stresses Government Support ............................... 2 KGS 39.5 Million in Borrowed Funds Allocated for Agriculture ...................................................... 2 EEC Board Considers Deepening Agricultural Integration and Strategies ....................................... 2 KGS 2.6 Billion in Preferential Loans to Kyrgyz Farmers thus far in 2016 ....................................... 3 Kyrgyzstan Dried Apricots Look to Gain UNECE Standard Status .................................................... 3

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

Kyrgyzstan and WFP to Launch New Agricultural Education Program ............................................ 3 Potato Farmers Achieve Record Profits in USAID Agro Horizon Project ......................................... 4

Private Sector.............................................................................................................. 4 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20)

Drip Irrigation Systems Cost from USD 1,500 per Hectare .............................................................. 4 Agricultural Exports Increased by 43% since the Beginning of the Year ......................................... 4 Agricultural Production Up 2.9% in the First Six months of 2016 ................................................... 5 Ministry of Agriculture Seeks to Further Develop Exports to Russia .............................................. 5 Agricultural Machinery Leasing Conditions Change ........................................................................ 5 Animal Identification Project Under Way........................................................................................ 5 EEU Project Gives Kyrgyz Agricultural Producers a Chance to Shine .............................................. 5 Sixth Annual Central Asian and Caucasus Microfinance Forum in Bishkek ..................................... 6 Cultivated Area Consistently Increasing in Kyrgyzstan .................................................................... 6 Kyrgyz Products to Profit from Global TV and Internet Marketing Effort ....................................... 6 2017 Agricultural Sector Volume Expected to be KGS 222 Billion .................................................. 6

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

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BFC. Agriculture Finance Bulletin.

State Initiatives 1)

New Amendments to Land Code Help Greenhouses and Drip Irrigation

July 28th, 2016, http://www.tazabek.kg/news:1194857

Kyrgyz President Almazbek Atambayev has signed into law amendments to the Land Code that will create the necessary infrastructure to develop and support greenhouse construction and drip irrigation systems on agricultural land. The Land Code defines the legal definition of land issues in Kyrgyzstan, including how land is to be used.

2)

Proposed Law for a 10% VAT Rate for Grain and Flour Import

July 25th, 2016, http://www.vb.kg/doc/343935_zakonoproekt_o_vvedenii_nds_v_10_na_import_zerna_vynesli_na_obsyjdenie.html

A proposed law has been introduced that will establish a VAT rate of 10% for the import of grain and flour into Kyrgyzstan. Drafters of the proposed legislation hope the law will increase food security, reduce the national deficit, save the grain processing industry, safeguard the interests of the rural population, preserve state control of food security, save money from family budgets, and add to the national budget.

3)

Prime Minister Visits Agricultural Processors, Stresses Government Support

July 22nd, 2016, http://kabar.kg/eng/regions/full/16495

As part of a one-day working trip, Prime Minister Zheenbekov visited a potato processing plant in Talas and a cheese factory in Kyzyl-Adyr (Kara-Buura region). Speaking at the potato processing plant, the Prime Minister noted the importance of agricultural processors not only in providing employment and making profit, but also as an outlet for local producers to sell their raw materials and for the development of regional small- and medium-sized enterprises. The Prime Minister stressed the government’s support for export-oriented enterprises and his confidence in Kyrgyzstan’s potential in foreign markets.

4)

KGS 39.5 Million in Borrowed Funds Allocated for Agriculture

July 15th, 2016, http://kabar.kg/economics/full/108606

The Government of Kyrgyzstan allocated KGS 39.5 million of borrowed funds for use in agriculture. The funds will be used for spring sowing (KGS 11.5 million), agriculture machinery (KGS 27.5 million) and artificial insemination (KGS 500,000).

5)

EEC Board Considers Deepening Agricultural Integration and Strategies

July 14th, 2016, http://www.eurasiancommission.org/en/nae/news/Pages/14-07-2016-3.aspx

At the 11th session of the Advisory Committee for Agroindustrial Policy of the Board of the Eurasian Economic Commission (EEC), committee members considered questions concerning deepening integration and cooperation in the agroindustrial sector.

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Among the topics discussed and reviewed were: compensation payments from one member state to another in the event of a breach of obligations, procedures for conducting negotiations and consultations on agreed policy implementation, further developing exchanges for agricultural products, and revised calculations for supply and demand forecasts used in the Eurasian Economic Union (EEU).

The Committee also approved the Joint Forecast for Agroindustrial Complex Development Supply and Demand of EEU Member States for agricultural products and foodstuff for the 2016 – 2017 season as well as supported the proposal of EEC Minister Sergey Sidorskiy to further review issues of implementation of agreed agroindustrial policy in EEU member states at the next joint meeting of Ministers of Agriculture.

6)

KGS 2.6 Billion in Preferential Loans to Kyrgyz Farmers thus far in 2016

July 8th, 2016, http://www.minfin.kg/ru/novosti/novosti/ayyl-charbany-karzhyloo-4-dolbooru-boyuncha-26-mlr.html

Kyrgyz farmers have received KGS 2.6 billion in 7,559 preferential loans since the beginning of the year as part of the Financing of Agriculture-4 project. The project was established by the government for early spring field work and the further development of animal husbandry, crop production, agricultural processing, and agricultural services. The Ministry of Finance covers all expenses of commercial loans by subsidizing the difference in interest rates.

The target audience for the preferential loans is set to expand to other actors involved in the processing of agricultural products and other services in the field of agriculture.

7)

Kyrgyzstan Dried Apricots Look to Gain UNECE Standard Status

July 6th, 2016, http://knews.kg/2016/07/06/v-zheneve-dogovorilis-izmenit-standarty-kyrgyzskogo-sushenogo-abrikosa/

In an effort to boost dried apricot exports, Kyrgyzstan's Ministry of Economy is seeking to have the country’s dried fruit product awarded the UNECE standard. In a meeting of a working group on agricultural quality standards of the UNECE in Geneva, Kyrgyz representatives proposed revision of the standards used for dry and dried produce that would allow for Kyrgyz apricots to be awarded the international standard, greatly reducing trade barriers. Due to the distinctive features of the climatic zone in the southern region of Kyrgyzstan, the existing UNECE Standard requirements for dried apricots are extremely difficult, if not impossible, for Kyrgyz producers to meet.

The final draft, including amendments favoring Kyrgyz apricot producers, will be sent for approval to the Center for Standardization and Metrology (CSM) in November for approval, after which it will be published and distributed for adoption as a national standard in member countries.

Foreign Aid 8)

Kyrgyzstan and WFP to Launch New Agricultural Education Program

July 27th, 2016, http://www.timesca.com/index.php/news/16924-kyrgyzstan-and-wfp-launch-skills-training-for-food-security

The Government of the Kyrgyz Republic and the United Nations World Food Program (WFP) have signed a memorandum of understanding to develop training courses and coaching services related to techniques in agriculture and improving the knowledge, livelihoods and food security of the poor and vulnerable across the country. Under the agreement, the government and the WFP will work with Page 3

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partners to design 64 courses focused on such areas as improved agricultural techniques, food processing and preserving methods, and climate-change resilience activities.

The WFP will provide approximately USD 100,000 to develop and test course curricula in two pilot districts (Bazar-Korgon and Kochkor) later this year, with national roll-out following. Kyrgyz government funding will be used to launch the new courses which will also be included into the national vocational education system.

The initiative will contribute to sustainable food security, nutrition and resilience among the poorest and most food-insecure groups by developing agricultural skills and capacity and providing them with tools to manage natural disaster and climate change risks.

9)

Potato Farmers Achieve Record Profits in USAID Agro Horizon Project

July 11th, 2016, http://kabar.kg/eng/regions/full/16371 http://www.cawater-info.net/news/07-2016/11.htm

Since independence, Kyrgyzstan has received more than USD 8 billion in foreign aid from international financial institutions via 354 loan and grant agreements. The funds have been used for projects in the social sphere and in the various sectors of the economy: health, education, transport, agriculture and energy. Significant funds have also been spent to maintain the budget and to reduce the negative impact of international crises and risks.

The financing of social and manufacturing infrastructures is seen as the next key challenge for the government in the medium-term, and use of international assistance will likely focus on these areas in the near future in order to achieve practical results to improve the lives of people.

Private Sector 10) Drip Irrigation Systems Cost from USD 1,500 per Hectare July 28th, 2016, http://knews.kg/2016/07/28/sistema-kapelnogo-orosheniya-obhoditsya-ot-1-5-tysyach-za-gektar/

Speaking at a presentation of the Water is the Source of Innovation project in Bishkek on July 28, Consulting Manager of MCA Financial Fund BT Innovations, Maria Rakhmanova, discussed drip irrigation systems and the conditions necessary for farmers to be able to finance their implementation. Drip irrigation systems are designed to be 5 - 7 year projects and estimated to cost at least USD 1,500 per hectare, depending on the system. Lending rates for such systems are currently between 15% and 18% with flexible repayment schedule options.

11) Agricultural Exports Increased by 43% since the Beginning of the Year July 25th, 2016, http://kabar.kg/economics/full/108998

Kyrgyz exports of agricultural products have increased by 43% since the beginning of 2016, according to unofficial data. Economist Jumakadyr Akeneev noted that the discrepancy between official data and real data is a problem, citing that 20 tons of product is frequently written as 2 or 3 tons. He further noted that export potential is booming as Kyrgyz markets are opening in the Eurasian Economic Union and Europe as well as in Asian markets like China.

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12) Agricultural Production Up 2.9% in the First Six months of 2016 July 21st, 2016, http://www.eng.24.kg/economics/181271-news24.html

Agriculture Minister Turdunazir Bekboev announced that agricultural production grew by 2.9% for the first six months of 2016, amounting to a gross output of KGS 55.5 billion. The increase is believed to be largely due to early adoption of government regulations which allowed for KGS 2.6 billion in loans and increased education among farmers on new technologies, techniques and better quality seed use. There have also been changes that now allow for small greenhouses to be more easily built.

13) Ministry of Agriculture Seeks to Further Develop Exports to Russia July 21st, 2016, http://www.eng.24.kg/economics/181272-news24.html

Kyrgyz agricultural products are finding success in the Russian market. As part of an effort to further develop this market, Agriculture Minister Bekboev announced that phytosanitary laboratories are planned to be put into operation in the Issyk-Kul and Talas regions.

14) Agricultural Machinery Leasing Conditions Change July 21st, 2016, http://www.turmush.kg/ru/news:305435

Conditions for the leasing of agricultural machinery (as provided by the Kyrgyz Government and "Aiyl Bank") have changed to better favor Kyrgyz processors. Previously, leasing for machinery required an own contribution of 10% to 30% of the total cost to get a 7-year lease at 9% per annum. Now, the own contribution has been significantly reduced, and harvesting machinery may now be leased for up to 10 year at 6% per annum.

15) Animal Identification Project Under Way July 15th, 2016, http://novosti.kg/2016/07/identifikatsiya-zhivotnyh-v-strane-provoditsya-uspeshno/

A pilot animal identification project is being successfully carried out. 180 experts are currently attaching tags to cattle in the Issyk-Ata, Kara-Buura and Nookat districts, and identification of breeding stock in these areas is expected to be completed before the end of the year.

16) EEU Project Gives Kyrgyz Agricultural Producers a Chance to Shine July 14th, 2016, http://vesti.kg/index.php?option=com_k2&view=item&id=41371:selhozproizvoditeley-kr-priglasili-prinyatuchastie-v-proekte-evraziyskogo-delovogo-soyuza&Itemid=79

Kyrgyzstan’s agricultural and food producers will showcase their products at Moscow’s Food City Center.

The center is planned to be opened in September 2016 and will give producers and exporters from 120 regions in Russia, Eurasian Economic Union (EEU) countries and countries from other inter-nation unions an opportunity to expose their produces to a large market.

The center is part of an EEU project to support small- and medium-sized businesses, agricultural farms and industrial companies as well as to promote cooperation among commodity producers in EEU territories and form a clear commodity distribution system among entities and the union member countries.

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17) Sixth Annual Central Asian and Caucasus Microfinance Forum in Bishkek July 14th, 2016, http://www.microcapital.org/microfinance-event-sixth-annual-central-asian-caucasus-microfinance-forumoctober-27-29-2016-bishkek-kyrgyz-republic/

The Sixth Annual Central Asian and Caucasus Microfinance Forum will be held in Bishkek between October 27 and October 28. The forum will aim to bring together microfinance professionals who work in Asia and in the Caucasus region for discussions and networking. Topics that will be addressed include: suggestions for creating a favorable investment environment in the region, strategies for managing currency risks for investors, increasing financial literacy among low-income borrowers, and ways to promote financial inclusion.

The forum is being organized by Uniglobal, an events management company based in the Czech Republic.

18) Cultivated Area Consistently Increasing in Kyrgyzstan July 12th, 2016, http://knews.kg/2016/07/12/v-kyrgyzstane-stabilno-uvelichivaetsya-posevnaya-ploshhad/

The area of land cultivated in Kyrgyzstan currently amounts to 1,192,400 hectares, a 0.5% increase over last year and the fifth consecutive year of increase; however, Kyrgyzstan has yet to fully return to its 1990s level of cultivation as this year’s cultivated land is still 6.8% lower than 20 years ago.

Cereals, potatoes, oilseed and legumes all saw declines in cultivated land use while feed crops, sugar beet, cotton, rice and melons have all increased.

19) Kyrgyz Products to Profit from Global TV and Internet Marketing Effort July 6th, 2016, http://kabar.kg/eng/economics/full/16374

Products from Kyrgyzstan, particularly agricultural products and textiles, are to be marketed on a global level via television and the internet. The Korean company GS SHOP, which is engaged in commercial shopping, will demonstrate how Kyrgyz products are produced using modern, environmentally friendly techniques without the use of GMOs, which is thought will be a good impetus for the development of export to other countries including China, Europe and other Eurasian Economic Union member states.

GS Shop operates in eight countries around the world and broadcasts in local languages.

20) 2017 Agricultural Sector Volume Expected to be KGS 222 Billion July 1st, 2016, http://knews.kg/2016/07/01/v-2017-godu-obem-selhozsektora-kr-sostavit-222-mlrd-somov/

The volume of the agricultural sector in Kyrgyzstan is projected to reach KGS 222 billion in 2017, a 2.2% increase. Increased availability of agricultural financing, better drip irrigation technology, the removal of veterinary posts along the Kyrgyz-Kazakh border, and new processing plants are all expected to aid in this effort.

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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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