21 BFC Kyrgyzstan Agriculture Finance Bulletin

11/2015

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21 K y r gy z s ta n Agriculture Finance Bulletin Kyrgyzstan Issues KGS 3.5 billion to Farmers thus far in 2015 World Bank to Provide USD 16.11 million in Support of Forest Management Chinese Company Considering New Factory in Kyrgyzstan Khabarovsk Region Interested in Kyrgyz Produce

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Agriculture Finance Bulletin Edition #21, November 2015

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

Kyrgyzstan Issues KGS 3.5 billion to Farmers thus far in 2015 ........................................................ 2 Sariev: Credit for Agricultural Producers Needs Sped Up ............................................................... 2 Kyrgyz Government to Explore a Price Increase for Beans ............................................................. 2 Kyrgyz-Ukrainian Business Forum Sees New Partnership Plans ...................................................... 3 Agriculture in Kyrgyzstan is Developing Well .................................................................................. 3

Foreign Aid ................................................................................................................. 3 6) 7)

World Bank to Provide USD 16.11 million in Support of Forest Management ............................... 3 Turkish Businessmen Ready to Support Kyrgyz Bean Farmers ....................................................... 4

Private Sector.............................................................................................................. 4 8) 9) 10) 11)

Kyrgyzstan Needs a Comprehensive Rural Development Strategy ................................................. 4 Chinese Company Considering New Factory in Kyrgyzstan ............................................................ 5 Khabarovsk Region Interested in Kyrgyz Produce ........................................................................... 5 Investors are Wary of Investment in Kyrgyz Food Production ........................................................ 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)

Kyrgyzstan Issues KGS 3.5 billion to Farmers thus far in 2015

November 20th, 2015, http://www.azernews.az/region/89925.html

The Kyrgyz Finance Ministry has allocated concessional loans in the amount of KGS 3.5 billion (over USD 48.3 million) for farmers since early 2015. Of the total amount, KGS 2.79 billion have been issued for livestock farmers with KGS 369.44 million for tribal and agricultural cooperatives and KGS 347.12 million for crop production — benefiting 9,143 farmers so far in 2015.

Agriculture is a leading sector of Kyrgyzstan's economy (approximately 24 percent of GDP). About 64 percent of the country's population live in rural areas and 14 percent work in the agricultural sphere. For comparison, this figure in developed countries is only 1-3 percent. Thus, Kyrgyzstan's agriculture has not only economic, but also social and political importance.

Kyrgyzstan's entrance into the EEU is also expected to favorably affect the development of agricultural production by improving technologies and trade relationships, making Kyrgyz agricultural production quite competitive within the EEU.

2)

Sariev: Credit for Agricultural Producers Needs Sped Up

November 13th, 2015, http://ru.sputnik.kg/economy/20151113/1020075407.html

Prime Minister Temir Sariev held a meeting regarding the issues of agricultural support and ordered that the granting of credit from Russian-Kyrgyz Development Fund (RKDF) to support agricultural producers be sped up.

In addition, the head of government has also requested the Ministry of Agriculture and Land Reclamation and "Aiyl Bank" explain and raise awareness to the general population about concessional loans.

Currently, the projects aimed at supporting agriculture are implemented through two state banks and the Development Fund. Sariev noted that the managers of these commercial organizations should become a benchmark of quality service to the population in the sphere of agricultural business support.

3)

Kyrgyz Government to Explore a Price Increase for Beans

November 13th, 2015, http://www.vb.kg/doc/328362_sariev:_pravitelstvo_rassmotrit_vozmojnost_povysheniia_ceny_na_fasol.html

Prime Minister Temir Sariev met with local population in the Talass region and remarked that the government will consider the possibility of a price increase for beans while also noting that the world market exerts a great influence over the price.

"For farmers, it is very important that their labor is valued. From our side, we will consider the possibility of a price increase for beans. But due to the current situation, farmers should also put efforts together with the relevant state authorities to find efficient sales channels for beans," said Sariev.

To explore the issue of a price increase for beans, the organization of a committee that will consist of state authority representatives and members of the local population was suggested. In the conclusion of his speech, the Prime Minister reminded everyone that it is very important for the state to do everything in proper order.

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4)

Kyrgyz-Ukrainian Business Forum Sees New Partnership Plans

November 13th, 2015, http://www.agro.kg/ru/news/7887/

First time for the past 10 years of economic and trade relations between the Kyrgyz Republic and Ukraine, a Kyrgyz-Ukrainian business forum was held in Kiev in November. The business mission from Kyrgyzstan arrived for a week-long business visit and included members of the Agrarian Platform Kyrgyzstan Association who produce and process agricultural products.

The Kyrgyz Commerce and Trade Chamber representative in Ukraine underlined that Ukraine has a high technological potential, especially in the agricultural sector. An attitude of cooperation was struck as scientists of the Agrarian Institute of Ukraine shared their observations that the climate of Issyk-Kul is ideal for the development of potato production and both the Agrarian Platform Kyrgyzstan Association and Kara Oruk Association invited Ukrainians to cooperate in the production of dried fruit for European markets.

The Forum resulted in signing of a bilateral memorandum between Kyrgyz businessmen and the Ukrainian Commerce Chamber on the development of trade and economic relations and the increase of investment attractiveness of Kyrgyzstan for the external business environment.

5)

Agriculture in Kyrgyzstan is Developing Well

November 6th, 2015, http://www.eng.24.kg/economics/177884-news24.html

Zhumabek Asylbekov, head of the Food Safety Policy and Agricultural Marketing of the Ministry of Agriculture, noted at a round table that Kyrgyzstan has exported about 300,000 tons of vegetables to the EEU countries since the beginning of 2015. According to him, about two thousand tons of vegetables have been exported to EEU countries every day since the opening of customs borders.

"The agricultural sector of the Kyrgyz Republic is developing well; soft loans are being allocated. But their volume only covers 10 percent of financial needs with no possibility of increase. The fourth program of concessional lending for 2016 is being developed. The construction of greenhouses, the introduction of drip irrigation systems, and slaughterhouses are planned. Most likely, the project will be financed by the Russian-Kyrgyz Development Fund” according to Asylbekov.

Foreign Aid 6)

World Bank to Provide USD 16.11 million in Support of Forest Management

November 25th, 2015, http://kabar.kg/eng/economics/full/14509

The World Bank will allocate USD 16.11 million – including a USD 6.6 million concessional loan and USD 5.4 million grant – to Kyrygzstan’s 5-year Integrated Forest Ecosystem Management Project (IFEMP). The Global Environment Facility (GEF) will grant USD 4.11 million towards its implementation. The project aims to improve sustainable ecosystem management through ecosystem restoration, improved infrastructure and management planning at national and leskhozes (local forest management entity) – levels.

Roughly 2.4 million people (41% of the population) rely on Kyrgyzstan’s 1.1 million hectares of forest for timber, fuel wood, pastures, fodder, nuts, fruits, mushrooms and medicinal plants. The World Bank has identified public management of scarce natural resources as a priority in addressing poverty. The project will support the implementation of a Forest Management Information System, which aims to provide Page 3

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nationwide access to data on baseline forest resources, land tenure and degradation, and supply and demand levels required for implementing effective management plans.

Institutional reform will be conducted at national, leskozes and community levels, ensuring the involvement of the latter in decision making. The IFEMP program will involve 12 target leskhozes (of roughly 10,000 people each) and benefit 120 rural municipalities, improving the management of over 700,000 hectares of forest and pasture type landscapes.

7)

Turkish Businessmen Ready to Support Kyrgyz Bean Farmers

November 16th, 2015, http://www.vb.kg/doc/328788_biznesmeny_tyrcii_gotovy_okazat_sodeystvie_fermeram_kr_v_voprose_fasoli.html

A meeting was held in November between Ibrahim Zhunusov, the Ambassador Extraordinary and Plenipotentiary of Kyrgyzstan in Turkey, and Ozdemir Kachadzhak, governor of the Mersin province in Turkey, to discuss future development and bilateral cooperation in economic, trade and tourism industries.

Zhunusov stated that the main purpose of visit, however, was to negotiate with Turkish companies specializing on exporting/importing Kyrgyz beans. Under the direction of the Prime Minister and Foreign Minister of Kyrgyzstan, Zhunusov reported about the economic situation in the country, specifically that regarding the export of beans to Turkey. The Mersin governor stated his willingness for cooperation between Kyrgyz farmers and the Mersin Board of Trade and local businessmen.

During the meeting, Turkish companies pointed out that the price for agricultural products, including beans, is not set by Turkey only but by taking into account the global economic situation. At the same time, numerous Turkish companies reached the view that it is necessary to support Kyrgyz farmers, and they are ready to increase the purchase price by SOM 35 in an effort to establish equal conditions for business in Kyrgyzstan.

Talass region recently saw a protest of local farmers who were dissatisfied with beans prices. According to different estimates, about 500 people took part in the protest. They requested the authorities solve the situation with beans prices and assist farmers.

Private Sector 8)

Kyrgyzstan Needs a Comprehensive Rural Development Strategy

November 22nd, 2015, http://www.timesca.com/news/16007-kyrgyzstan-needs-a-comprehensive-rural-development-strategy

Kyrgyzstan has declared itself as an agrarian country, yet, since independence, Kyrgyzstan has not developed any program to solve the problem of food security in the country and only supports 10% of the needs of agriculture in the country. Of the nine basic foods, only vegetables and milk are produced in volumes enough to meet the national demand.

Data shows that Kyrgyzstan only provides for 70% of its meat needs. The area of irrigated, arable land has declined by nearly 100 thousand hectares since 1990 when land was split into small farms and farmers began sowing only what suited them, often not in compliance with agronomic rules. Further compounding the agricultural difficulties have been a halving of vineyard hectares and the ceasing of silk and cotton textile production (only raw cotton is now exported).

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Recent entrance into the EEU hasn’t served to solve any of the agricultural woes as a lack of an ability to meet EEU standards (e.g. only 8 Kyrgyz milk processing centers meet EEU requirements) and cheaper goods imported from other EEU countries has almost killed the domestic flour and sugar industries.

Despite these alarming difficulties, there is reason to hope for the future of Kyrgyzstan’s rural economic development.

Organic farming, an emerging world market, can be widely practiced in the country and organic fertilizers represent a great potential for export to the international community. In addition, nearly 60% of the population lives in villages that are capable of mass production that can be sold domestically and internationally (indeed, markets are currently filled with many domestic products).

Furthermore, the forth program of concessional lending is planned for 2016. This project hopes to help develop greenhouses, drip irrigation systems and slaughterhouses. Much of the financial support of this project will come from the Kyrgyz-Russian Development Fund (KRDF).

9)

Chinese Company Considering New Factory in Kyrgyzstan

November 16th, 2015, http://www.vb.kg/doc/328828_jin_zhong_izychit_vozmojnost_stroitelstva_zavoda_mineralnyh_ydobreniy.html

The Chinese company Jin Zhong is considering the possibility constructing a mineral fertilizer factory in Kyrgyzstan after meeting with Vice Prime Minister Oleg Pankratov.

"Jin Zhong has great experience in the production of power equipment and coal-based mineral fertilizers. Considering this, we suggest their participation in the development of the Kara-Kechinsk coal deposit and construction of a mineral fertilizer factory, the products of which will be sold on domestic and foreign markets, [to be of mutual benefit], " said Pankratov.

Representatives of Jin Zhong replied that they are interested in investment opportunities in the real sector of the Kyrgyz economy, "Construction of a mineral fertilizer factory is a priority for us. In addition, our company is ready to build a plant for the production of modern, environmental-friendly construction materials that will be 20-30 percent cheaper than the materials available on the market right now. Participation in the development of the Kara-Kechinsk coal deposit is a large and interesting project which we are ready to start."

10) Khabarovsk Region Interested in Kyrgyz Produce November 13th, 2015, http://ru.sputnik.kg/economy/20151113/1020062938.html

Khabarovsk Minister of Agricultural Production and Development Alexander Kupryakov and Honorary Kyrgyz Republic Consul Kadyrbek Myrzabaev have agreed to actively cooperate in regards to Kyrgyz produce.

“Agricultural products from Kyrgyzstan have very high quality,” said Kupryakov, “the people of Khabarovsk region need natural products; there’s a demand for fruits and vegetables."

"We can supply cabbage, cherries, onions and apples to people of Khabarovsk. These products you can supply from Kyrgyztan,"said Myrzabaev.

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11) Investors are Wary of Investment in Kyrgyz Food Production November 6th, 2015, http://www.eng.24.kg/economics/177883-news24.html

"Investors are in no hurry to invest in food production in the Kyrgyz Republic," expert Igor Shestakov said at a round table. According to him, Kyrgyzstan has a chance to enter into huge selling markets after its entrance into the Eurasian Economic Union. This is especially true in view of the sanctions imposed against Russia and its rising need for imports; however, it is far from certain that Kyrgyzstan will be able to take advantage of this opportunity.

"Kyrgyzstan is an agrarian country. The country's agriculture is a strategic sector, but we produce only vegetables and milk as needed. We import everything else. Food security is a risk all the time, and we haven't developed any program that addresses these issues. The situation with investments is difficult.

Investors are in no hurry to invest in Kyrgyz food production," Igor Shestakov concluded.

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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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