24 BFC Kyrgyzstan Agriculture Finance Bulletin

02/2016

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24 K y r gy z s ta n Agriculture Finance Bulletin Ministry of Agriculture Preparing for Potentially Difficult Summer Russia Permits 15 Kyrgyz Enterprises to Supply Meat, Dairy, and Fish EBRD Loan in Local Currency to First MicroCredit Bai-Tushum Bank Launches a New Financing Facility for Beet Growers

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Agriculture Finance Bulletin Edition #24, February 2016

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

Ministry of Agriculture Preparing for Potentially Difficult Summe ................................................. 2 KGS 3 Billion Set for Agriculture and Land Reclamation Lending in 2016 ....................................... 2 First Vice Prime Minister Offers Harsh Critique of Ministry of Agriculture ..................................... 2 Agriculture Financing 4 Project Approved for 2016 ........................................................................ 3 State Material Reserves Fund to Purchase Wheat in 2016 ............................................................. 3 Russia Permits 15 Kyrgyz Enterprises to Supply Meat, Dairy, and Fish ........................................... 3 Iran Expressed Interest in Kyrgyz Beans .......................................................................................... 4

Foreign Aid ................................................................................................................. 4 8) 9)

EBRD Loan in Local Currency to First MicroCredit........................................................................... 4 Russian-Kyrgyz Development Fund to Change Credit Terms for Gardening Development ............ 4

Private Sector.............................................................................................................. 5 10) 11) 12) 13)

JerAzygy Hosts 12th Annual International Agriculture Expo ........................................................... 5 German Assessment Mission Set to Visit Kyrgyzstan ...................................................................... 5 Bai-Tushum Bank Launches a New Financing Facility for Beet Growers ......................................... 5 Issyk-Kul Farmers Deliver Organic Valerian Root to Europe ........................................................... 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

info@bfconsulting.com www.bfconsulting.com

BFC. Agriculture Finance Bulletin

State Initiatives 1)

Ministry of Agriculture Preparing for Potentially Difficult Summe

February 29th, 2016, http://www.eng.24.kg/economics/179465-news24.html

The Ministry of Agriculture is predicting a difficult summer with possible droughts announced Minister of Agriculture and Land Reclamation Turdunazir Bekboev. He further noted the government’s preparation for such an event, stating, “Water reservoirs have 310 million cubic meters of water.

Everything is under control; we will be able to fulfill our obligations to water users."

The Minister also asked for additional support to ensure 2016 is a successful year for agriculture in the country: “In order to support agriculture, it is necessary to increase funding. Farmers are being asked to decide on priority crop species for this year. Now Governors are negotiating on the supplies of agricultural products abroad. The work will be completed in the near future, and then we can say what crops to grow. If we get it, we will be able to show an increase not smaller than 2015’s.”

2)

KGS 3 Billion Set for Agriculture and Land Reclamation Lending in 2016

February 27th, 2016, http://www.eng.24.kg/economics/179474-news24.html

Economy Minister Arzybek Kozhoshev announced that the total amount of agriculture and land reclamation lending for 2016 is KGS 3 billion at 10 percent per annum when he met with activists from the Osh region. He noted that 2015 maintained the positive direction for economic growth with a GDP of KGS 423.6 billion.

“The main task of the government is to maintain positive growth and achieve a targeted 5.2% increase this year” said Kozhoshev. The situation in Kyrgyzstan's economy is developing quite well, but there are risks that significantly affect the macroeconomic indicators in 2016. The Minister also believes that the accession of Kyrgyzstan into the Eurasian Economic Union will not only determine economic development, but also long-term development prospects for the country.

3)

First Vice Prime Minister Offers Harsh Critique of Ministry of Agriculture

February 12th, 2016, http://www.agro.kg/ru/news/8233/

First Vice Prime Minister Karashev offered criticism at a recent government meeting: “The Ministry of Agriculture failed.” According to Karashev, January saw government leaders get involved in the management boards of ministries and departments, and almost every time, state authorities would talk about achievements in reports, but deliberately omit information about any shortcomings.

Karashev explained a number of shortcomings regarding work on the development of newly irrigated lands (leaving the land unused for this agricultural season), the use of uncertified and poor quality seeds, and a trade and logistics center for agricultural production that hasn’t yet opened. He argued that even if there are financial resources available, they are not being used to maximum benefit.

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BFC. Agriculture Finance Bulletin

4)

Agriculture Financing 4 Project Approved for 2016

February 11th, 2016, http://www.vb.kg/doc/334076_v_kr_rasshirilsia_kryg_polychateley_lgotnyh_kreditov_na_selskoe_hoziaystvo.html http://www.eng.24.kg/economics/179268-news24.html

The Finance Ministry has reported that farmers will get concessional loans in the amount of KGS 2.7 million in 2016.

The government has approved the rules of the Agriculture Financing 4 project, and it is expected that commercial banks will issue loans for the development of plant growing and livestock production for three years at 10 percent per annum. The range of potential borrowers has expanded this year with an emphasis being placed also on processing and the construction of greenhouses, slaughterhouses and logistics centers.

The project works by the government covering the costs of commercial banks for the allocation of soft loans and has a planned KGS 400 million for this purpose in 2016. Participation in the project has been confirmed by five commercial banks: Aiyl Bank JSC, RSK Bank JSC, KICB CJSC, Commercial Bank Kyrgyzstan JSC, and Bakai Bank JSC.

5)

State Material Reserves Fund to Purchase Wheat in 2016

February 10th, 2016, http://www.eng.24.kg/economics/179240-news24.html

The State Material Reserves Fund will purchase up to 20,000 tons of wheat from farmers in 2016, the head of the Agriculture Complex and Ecology Department, Almaz Zheenaliev, announced. While the purchase price for the wheat has yet to be finalized, Zheenaliev assured farmers that they would be notified of the price in advance.

The Fund purchases grain for the purpose of state support to agricultural producers. In 2015, it also purchased 20,000 tons of wheat at a price of KGS 16.5 per kilogram. The main criteria for the grain is quality (grain stocks are tested for pests and disease) and quantity of gluten (a minimum of 23% is required).

6)

Russia Permits 15 Kyrgyz Enterprises to Supply Meat, Dairy, and Fish

February 10th, 2016, http://www.eng.24.kg/evraziasoyuz/179248-news24.html http://kabar.kg/eng/economics/full/15202

As of February 8, 2016, 15 Kyrgyz companies received the right to export meat, milk and fish into the territory of the Russian Federation. Prior to this move, Kyrgyz enterprises only had the right to export to border areas of Kazakhstan.

After lengthy negotiations, the Ministry of Agriculture and the Federal Service for Veterinary and Phytosanitary Control of the Russian Federation sent a letter, permitting the supply of finished meat, dairy products that have undergone hot processing, and fish products to the Russian market. Speaking at a press briefing, Deputy Prime Minister Pankratov noted that “it is access to a large Russian market.

The decision is not a panacea, but an opportunity. It all depends on the activity of our entrepreneurs in moving and finding a niche.�

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BFC. Agriculture Finance Bulletin

7)

Iran Expressed Interest in Kyrgyz Beans

February 7th, 2016, http://ru.sputnik.kg/economy/20160207/1022178254.html

Iranian authorities have indicated their readiness to buy Kyrgyz colored bean at a price of KGS 50 – KGS 60 per kilogram. Currently, Kyrgyzstan produces an insufficient amount of this bean as Iranians are interested in at least 20 tons. Ministry of Agriculture and Land Reclamation press secretary Sulaymanov noted that “if the contract is made, then we will need to advise farmers to grow colored bean. Now, farmers grow the ‘spade’ variety, which sells for KGS 28 – KGS 33 per kilogram.”

The contract, if signed, is believed to provide a more convenient outlet for buyers and sellers due to Irans geographical proximity to Kyrgyzstan.

Foreign Aid 8)

EBRD Loan in Local Currency to First MicroCredit

February 25th, 2016, http://www.ebrd.com/news/2016/ebrd-loan-in-local-currency-to-first-microcredit-kyrgyz-republic-.html

The European Bank for Reconstruction and Development (EBRD) is stepping up its support for small businesses in the Kyrgyz Republic with a new loan in local currency to First MicroCredit Company (FMCC). The three-year loan, equivalent to USD 1 million, will allow FMCC to expand its local currency lending, especially in rural areas where access to finance remains limited and local currency funding is constrained. Borrowing in local currency, rather than in dollars, will help small businesses and farmers who do not have income in hard currency avoid foreign exchange risk.

FMCC CEO Stefan Martiniak expressed his optimism for the end result of the loan: “We will be using the loan to fund our MSME clients, including those in primary agriculture, with the wider aim of supporting economic growth and poverty alleviation.”

To date, the EBRD has invested over EUR 560 million in over 135 projects in the Kyrgyz Republic. Small business support is one of the Bank’s strategic priorities in the country.

9)

Russian-Kyrgyz Development Fund to Change Credit Terms for Gardening Development

February 9th, 2016, http://www.eng.24.kg/economics/179217-news24.html

The Russian-Kyrgyz Development Fund will change their credit terms for those who want to engage in the development of gardening. Chairwoman of the fund's board, Nursulu Akhmetova, announced the change as part of the fund trying to apply a comprehensive approach to lending for both large enterprises and small and medium-sized businesses.

Fund representatives visited different regions and studied the local business environments. "We try to finance projects that will give a multiplier effect. For example, we now consider the development of gardening as promising. We have good gardens, but they need help. Realizing the importance of this area, the fund has decided to provide loans to this sector and to improve our financing conditions for those who will be engaged in this sector. We have listened to the entrepreneurs," Akhmetova said.

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BFC. Agriculture Finance Bulletin

Private Sector 10) JerAzygy Hosts 12th Annual International Agriculture Expo February 25th, 2016, http://www.kabar.kg/eng/regions/full/15326

The 12th Annual International Agriculture Expo, Silk Road 2016, was held February 25 - February 27 at the Osh National Drama Theater. The JerAzygy Association of Agro Businessmen of Kyrgyzstan organized the expo with support from USAID. The event featured a variety of seminars on new agro technologies and best practices as well as six sessions, introducing the USAID Agro Horizon Project’s support to the onion, apricot, nursery, maize, and potato and berry value chains.

The expo aims to boost agricultural production and promote trade through exchange of ideas and technologies. Agro Expo Silk Road 2016 is one of the biggest events in the agricultural sector in Central Asia. It brings together agriculture producers, agribusinesses, machinery, and input suppliers from Kyrgyzstan, Russia, Kazakhstan, the Netherlands, Turkey, Germany, Switzerland, Finland, France, India, China, Japan, Pakistan, the United States, Spain and other countries. Last year, the event resulted in over KGS 6.9 million in contracts between farms and agribusinesses.

11) German Assessment Mission Set to Visit Kyrgyzstan February 11th, 2016, http://kabar.kg/eng/economics/full/15214

The Import Promotion Desk (IPD), a German platform for the promotion of imports from small and medium-sized players from selected developing countries and emerging nations, will be traveling to Kyrgyzstan on an assessment mission in early May 2016.

The mission will visit several enterprises, and mission specialists will study the possibility of supplying Germany with Kyrgyz beans. The Kyrgyz Minister of Economy believes that Kyrgyz beans can be a demanded product in German markets, especially for the production of canned beans.

12) Bai-Tushum Bank Launches a New Financing Facility for Beet Growers February 8th, 2016, http://kabar.kg/eng/business/full/15161

In February, Bai-Tushum Bank launched another financing facility for sugar beet farmers under a partnership agreement with Kaiyndy-Kant OJSC factory. The Bank provides finance to clients, who have concluded agreements for the purchase of seeds and supply of harvest with Kaiyndy-Kant OJSC factory.

The Sweet Harvest loan provides for the financing of a complete beet growing cycle: the purchase of seeds from the factory, fertilizers, pesticides, payment for weeding, irrigation, sugar beet harvesting, and transportation services. Financing is granted to farmers in tranches, which enables a reduction in loan costs associated with the payment of loan interest. In addition, the loan approval process takes 1-2 days, and the agreement concluded with Kaiyndy-Kant OJSC serves as 50% collateral for the loan. There is also a 1% discount for farmers who complete training under the GIZ program, and farmers who obtain a loan can also qualify for discounts from other partners for fertilizers, pesticides and other agrotechnical services.

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BFC. Agriculture Finance Bulletin

13) Issyk-Kul Farmers Deliver Organic Valerian Root to Europe February 2nd, 2016, http://www.eng.24.kg/community/179091-news24.html

Over 400 farmers from the Issyk-Kul region of Kyrgyzstan have been trained in the cultivation of organic valerian roots for delivery to the German Schwabe Company. Over the past two years, the German pharmaceutical company has purchased 18 tons of valerian roots from Kyrgyz farmers, and farmers hope to provide a harvest of 20 tons this year.

The grown, raw product is processed and dried by local pharmaceutical companies and provides IssykKul farmers with an opportunity to supply certified organic products at the agreed and fixed in the contract price.

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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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