Agribusiness in Kazakhstan Scoping Study March 2017, Astana, Kazakhstan
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Contents: IP “Terra Point” 010000 Astana, Kazakhstan 5/1 Zhumabayev Avenue, Apt. 45 Mobile: +7 777 955 19 01; +7 707 808 86 43 Dmitriy Gerassimenko
Introduction ............................................................................................................................................................................................3 I. Breeding Stock ..................................................................................................................................................................................4 II. Seeds ...................................................................................................................................................................................................12 III. Dairy and Beef .............................................................................................................................................................................. 22 IV. Fertilisers ......................................................................................................................................................................................... 27 V. Wool and Hide Processing .....................................................................................................................................................34 VI. Flax Processing ...........................................................................................................................................................................39 Conclusion ............................................................................................................................................................................................46 2
Introduction Agriculture is the priority sector for Kazakhstani economy development. According to the 2015 statistical reports, 18% of the total economically active population is employed in agriculture1. Its share in the GDP of the Republic of Kazakhstan equals to 4.7% in 20162. The diverse climatic conditions of Kazakhstan allow growing a wide range of crops of the mild temperature zone and developing various cattle. At the time, when oil prices are falling and the problems of the financial sector are gaining momentum, Kazakhstan’s agriculture is considered as one of the most promising sectors of the economy, which can really become a key direction on the path to economic development and give a new impetus to the country’s export diversification strategy. Although it is necessary to state that Kazakhstani agriculture has many systemic problems. They vary from lack of proper and adequate equipment to poor development of processing sector.
The Government tries to fix the existing problems with adoption of new legislation, strategic programs and numerous state subsidising schemes. Annually the Republic of Kazakhstan invests significant funding into the agriculture sector (2016 - 228 billion KZT, 2015 - 337 billion KZT, 2014 - 301 billion KZT, and 2013 - 239 billion KZT). This money goes to support agricultural producers in Kazakhstan. This support is provided with subsidies, concessional lending, preferential taxation, provision of services at no charge3. The government does not fund any foreign projects in this sphere directly. This study reviews problems and opportunities in such agricultural subsectors, as cattle breeding, crop farming, crop and livestock processing. The specific attention is given to market promotion, potential customers and key contacts useful for British companies entering Kazakhstani market. This work could serve as a roadmap for British exporters.
1. Analysis of Agricultural Sector of the Republic of Kazakhstan. Almaty Regional Financial Centre’s Rating Agency. 2016. p. 2. 2. Agro-sector share in GDP of Kazakhstan is less than 5%. Total.kz news agency. 29 April 2016. 3. Strategic Plan of the Ministry of Agriculture of the Republic of Kazakhstan on 2017-2021., p. 3.
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I. Breeding Stock 4
Problems In Kazakhstan there is an acute problem of the livestock genetic potential reduction4. This is due to the fact that the share of breeding stock in the Republic is only 10.6% of the total livestock, while the indicators of a country with developed livestock should be from 40 to 50%. For example, the cattle breeding stock in Kazakhstan is 585,000 head of cattle and the total cattle population is 6.2 million5. According to the Strategic Plan of the Ministry of Agriculture of the Republic of Kazakhstan for 2017-2021 the cattle breeding stock should reach 40% till 2021 that means in numbers it should increase to 2.48 million. However, breeding farms cannot grow such large amount of breeding stock. Therefore, the livestock farms in Kazakhstan are forced to resort to the purchase of foreign breeding stock.
The main suppliers of breeding stock to Kazakhstan are countries such as the USA, Canada, Germany, Holland, France, Russia, Austria and Australia. But, despite a wide variety of suppliers, different countries supply the same breeds, namely: Charolais (country of origin: France), Holstein (Holland), Hereford (England), Aberdeen-Angus (Scotland). The Chairman of the Veterinary Control and Supervision Committee, Kabduldanov T. A., mentioned repeatedly that the supplies from the above-mentioned countries often do not correspond to the sanitary-epidemiological norms and the genetic origin of the breeds, as a result of which the import of livestock into Kazakhstan from several of the above-mentioned countries (Russia6, Germany, Belgium, Holland, France)7 was repeatedly prohibited. Therefore Kazakhstan needs new, responsible suppliers of breeding stock.
4. Strategic Plan of the Ministry of Agriculture of the Republic of Kazakhstan on 2017-2021., p. 11. 5. Development of livestock breeding in Kazakhstan. The news website agrotnk.kz. 4 March 2015. 6. Kazakhstan banned the cattle import from Russia. Rbc.ru. 4 August 2016. 7. In Kazakhstan, restrictions have been imposed on the cattle import from Germany, Belgium, the Netherlands and France. Forbes.kz. 7 March 2012.
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Opportunities for Britain Currently several government programs to support cooperatives, farms and large livestock farms operate in Kazakhstan with one common purpose of the agro-industrial complex development. These programs encourage farmers to purchase breeding stock. Any countries, including the UK, could be suppliers under these government programs. Programs are divided into two types: 1. Investment subsidising of the agro-industrial complex through akimats (local governments)8: 1.1. One-time payment for the purchase of breeding bulls in the amount of 154,000 KZT per a head of cattle
2.3. “Kulan” credit program for the purchase of breeding horses under 9.5% per annum. Under these programs Britain can only act as a supplier of breeding stock for breeding farms. Currently because of the unsuccessful experience in funding of foreign projects in Kazakhstan, direct investment in foreign projects is not conducted. Loans are given only to farmers who, in turn, purchase foreign livestock for the received government funding. Direct sales to farmers without the participation of state capital are possible only in relatively small volumes. There is no other private funding in this specific sphere.
2. Credit programs of JSC “Agrarian Credit Corporation”9: 2.1. “Sybaga” credit program for the purchase of breeding stock under 4% per annum 2.2. “Altyn Asyk” credit program for the purchase of breeding small ruminants under 6% per annum.
8. Q&A Section. Agroinfo.kz. 17 March 2017. 9. Credit programs. “Agrarian Credit Corporation” JSC. Kazagro.kz. Official website.
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Key contacts First point of contact for entering the Kazakhstani market and presenting available foreign products: Department of International Cooperation and Economic Integration under the Ministry of Agriculture. Director of the Department is Kussainova Aina Birzhanovna, (Кусаинова Айна Биржановна, reception: +7 (7172) 555 895).
Second point of contact: Veterinary Control and Supervision Committee. The Chairman of the Committee is Kabduldanov Tursyn Aitmukhametovich (Кабдулданов Турсын Айтмухаметович, reception: +7 (7172) 555 815). This Committee provides information on the registration procedure and the veterinary and epidemiological criteria of the breeding stock acceptable in Kazakhstan. Also depending on the biological adaption capacities of livestock, the Committee will make recommendations on regions favourable for the distribution of this particular breeding stock.
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Market Promotion Project Scheme 1. British Breeding Stock - Entering the Kazakhstani Market. Sequence of Necessary Steps & Main Stages.
British Breeding Stock
Breeding Stock Registration in the Ministry of Agriculture
Market Promotion of Breeding Stock through Financial Institutions
Breeding Stock Sale to Ultimate Customer
Market Promotion of Breeding Stock through District Akimats
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Registration The registration process is carried out by the Veterinary Control and Supervision Committee, but in case it is the Hereford breeds, the registration process will be held by the Hereford Chamber at the Ministry of Agriculture by means of document submission and by a stage-by-stage agreement with the Committee or Chamber. The main document when submitting an application for registration is a sample of a Pedigree Certificate or equivalent document, which reflects the basic characteristics of livestock, including its genetic origin.
Detailed information on the registration of livestock can be found in the document: “On approval of the Regulations on the procedure for the recognition of a pedigree certificate or equivalent document issued for imported breeding production (material) by the competent authorities of exporting countries�, Order of the Minister of Agriculture of the Republic of Kazakhstan as of December 11, 2015, No. 3-2 / 1078. After receiving the approval of the Pedigree Certificate, it is possible to import and sell breeding stock on the territory of the Republic of Kazakhstan.
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Next steps 1. To request by an official letter a list of contacts of all livestock farms in Kazakhstan from the Veterinary Control and Supervision Committee. Then you can send out commercial offers to attract customers. Special attention should be paid to large leading livestock companies, such as “Rodina”, “Ice”, “FoodMaster”, and “Aray-Holding”. 2. In addition the Committee can get the contacts of the agricultural departments of the district akimats (local governments). These departments can recommend farms that are ready to buy breeding stock. It should be noted that stall dairy farming is mostly spread in the north of Kazakhstan, beef farming - in the central and southern Kazakhstan, which is conditioned by larger number of grazing lands and a small supply of succulent forage.
3. The next option is to contact “Agrarian Credit Corporation” JSC, its Managing Director, Kabylova Azhar Utegenenovna (Кабыловой Ажар Утегеновне, reception: +7 (7172) 559 991). This organization lends to farmers and keeps records of existing suppliers of breeding stock. When a new foreign company applying Corporation can note its contacts and further recommend to farmers who purchase livestock and are getting loans from this Corporation. 4. There are several customers mentioned below, who are ready to buy breeding stock directly.
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Table 1. List of Potential Customers for British Breeding Stock
No. 1.
Full name Daku Kuanysh Даку Куаныш
2.
Rakhimberlin Sayat Baltabayevich
Name of Farm and Scope of Activity
Need
Address
Ak Zhol LLP. Director. Cattle Breeding and Crop Production.
Breeding Cattle for Beef Production
Karaganda Region Osakarovskiy District Telman Village +7 (777) 162 75 40 akzhol.daku@mail.ru
Burabai Farm. Head of the Farm. Cattle Breeding and Crop Production.
Breeding Cattle for Beef Production
Karaganda Region Shetskiy District Aksu Village +7 (777) 629 14 39
Zvezdniy LLP. Director. Cattle Breeding and Crop Production.
Breeding Horses
Karaganda Region Osakarovskiy District Zvezda Village 5/1 Mira Street +7 (777) 073 00 73
Spektr Farm. Head. Cattle Breeding and Crop Production.
Breeding sheep farming
Karaganda Region Osakarovskiy District Zvezda Village +7 (777) 651 92 86 ded-igor@yandex.kz
Volskoe LLP. Director. Cattle Breeding and Crop Production.
Breeding Cattle for Beef Production
Karaganda Region Osakarovskiy Distrcit Volskoe Village +7 (777) 627 49 00
Рахимберлин Саят Балтабаевич 3.
Kobjanov Nurlan Saifiddinovich Кобжанов Нурлан Сайфиддинович
4.
Dedurenko Igor Mikhailovich Дедуренко Игорь Михайлович
5.
Koziyakov Juriy Jurievich Козьяков Юрий Юрьевич
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II. Seeds 12
Problems One of the main problems of the agricultural sector in Kazakhstan is the inefficient use of arable land10. The main factors of inefficient use are: lack of crop rotation, monocultural farming, non-use of fertilisers, extensive cultivation technology. But a special place among these problems is taken by the monocultural farming. The total area of crop land in Kazakhstan is 21.6 million hectares (2016
Diagram1. Crop Land Structure
data), of which 15.4 million hectares are devoted to cereal crops (71% of the area), 3.6 million hectares - forage (16.9%), and 2 million hectares - oil crops (9.4%)11. These data shows that monocultures dominate in Kazakhstan, namely wheat and barley (Diagram 1).
0,6 Rest
Area (mln hectares)
2 Oil crops
3,6 Fodder
15,4 Cereal crops 10. Strategic Plan of the Ministry of Agriculture of the Republic of Kazakhstan for 2017 – 2021, p. 12 11. In 2016 Kazakhstan enlarged its crop lands. www.kazbanks.com. 19 September 2016
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Monocultural farming has a number of negative trends, namely: it leads to the accumulation of pathogens, pests in the soil; a decrease in soil fertility because of removal of certain groups of microelements by grains. Cereal crops have a low price in relation to the other crops, and as a result low economic profitability (Table 2). In addition Kazakhstan is overproducing wheat. So, in 2015, 14.6 million tons were threshed, with a need of 3.7 million tons and export of 8 million tons. As a result 2.9 million tons of wheat was sold out only in 201612.
In such conditions Kazakhstani farmers need to diversify crop production. But they, in their turn, face a problem of a small number or absence of domestic seeds and are forced to purchase them from such foreign companies as Rapool (Germany), Limagrain (France), Monsanto (USA), and from a number of research institutes in Russia. But even here, Kazakhstani agrarians are facing new challenges: Rapool, Limagrain, Monsanto sell mainly hybrids and GMOs, from which seeds cannot be obtained, and the Russian seed market hardly meets its own needs.
Table 2. Prices for agricultural crops in 201713 No
Name of crop
Price of commercial product Price of seed material (KZT per 1 ton) (KZT per 1 ton)
1
Wheat
55 000
75 000
2
Barley
40 000
65 000
3
Corn
75 000
175 000
4
Sunflower
110 000
300 000
5
Flax
95 000
110 000
6
Rape
150 000
250 000
7
Lentils
180 000
250 000
8
Potatoes
70 000
90 000
12. Why Kazakhstani farmers are forced to reduce a number of wheat plantings? Forbes.kz. 17 February 2017 13. Specific Advertisement Online Board. Flagma.kz
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Opportunities for Britain First type of subsidies Subsidies are paid to farmers who used high-quality stock seeds and F1 hybrids for sowing, as well as to seed farms that used high-quality stock seeds and F1 hybrids of their own production (Table 3). All seeds imported from neighbouring countries and beyond, as well as from other regions of the country, fall under this type of subsidy in line with the Kazakhstani legislation in the field of seed production.
In order to reduce land area devoted to wheat and develop alternative, high-yield crops, the Ministry of Agriculture of Kazakhstan provides support to agricultural enterprises through two types of subsidies. The payment of subsidies is made by akimats (local governments) directly to a local agricultural producer.
Table 3. Standards of budget subsidies per 1 ton of seeds in 201614 Crop
Amount of subsidies (up to), KZT
No
Crop
Amount of subsidies (up to), KZT
1
Soft Wheat
24 160
13
Soybean
29 838
No
2
Hard Wheat
25 200
14
Rape
187 500
3
Barley
18 850
15
Safflower
40 000
4
Malting Barley
19 875
16
Flax
50 000
5
Millet
23 000
17
Sunflower: high-quality stock seeds
312 144
6
Oats
18 850
18
Sunflower: F1 hybrids
166 286
7
Winter Rye
24 160
19
Mustard, other oil crops
125 550
8
Rice
65 000
20
Cotton plant
177 014
9
Buckwheat
26 400
21
Sugar beet
1 581 225
10
Corn: intermediate and 112 500 late crop
22
Potatoes
69 400
11
Corn: early crop
142 500
23
Annual grasses
230 538
12
Pulses
29 087
24
Perennial legumes
387 425
14. State Support to Crop Production. Agroinfo.kz. 8 January 2016.
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Second type of subsidies A “per-hectare” subsidy is paid upon the fact of sowing a particular crop (Table 4) to a farmer after an event called “Acceptance of crops”, which is carried out by specialists of the agricultural departments of the district akimats (local governments).
Both types of subsidies imply higher payments for: oil crops, pulses, forage, vegetable and technical crops, thus the state encourages farmers to work with them. And since there are few seed producers in Kazakhstan, Britain could become a seed supplier.
Table 4. “Per-hectare” subsidy in 201615 No
Crop
Payment (KZT/1 hectare)
1
Soft Wheat
300
2
Hard Wheat
800
3
Oats, barley, buckwheat
1 500
4
Pulses
2 000
5
Sunflower, flax
6 000
6
Rape
4 500
7
Potatoes
40 000
8
Vegetables
50 000
9
Forage
5 000
15. Kazakhstan: They found out... and shed tears. Kazakh-zerno.kz. 28 July 2016.
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Key contacts In the Ministry of Agriculture seed questions are managed by the Seed Production and Seed Testing Unit under the Department of Crop Production and Processing. The Head of the Unit is Bashirova Zulfira Sadyrovna (Баширова Зульфира Садыровна, office tel.: +7 (7172) 555 915). This Unit could consult on registration and seed material plantation procedures. Also this Unit has information about all crops, cultivated in Kazakhstan, and their variety.
A key seed-trial ground in Kazakhstan is the Barayev Scientific and Research Institute (Nauchniy village). Here various crops could be tested and there is an opportunity of direct cooperation with this Institute. The Director of this Institute, Kaskarbayev Zheksenbai Aytoshevich (Каскарбаев Жексенбай Айтошевич, reception: +7 (71631) 2 30 29), for a long time cooperates with Canadian and German Institutes, is always in search for new partnerships, open to them with the aim to bring new opportunities for the Kazakhstani science.
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Market Promotion Project Scheme 2. British Seed Material - Entering the Kazakhstani Market. Sequence of Necessary Steps & Main Stages.
British Seed Material
Laboratory Tests of Seed Lot
Seed Testing at Quarantine Garden
Market Promotion through Barayev Scientific & Research Institute
Market Promotion through Seed Farms
Market Promotion through District Akimats
Seed Material Sale to Ultimate Customer 18
Tests Any crop seeds imported to Kazakhstan should have an “Approbation Certificate” or a similar document reflecting a brief description of seed lot and their varietal purity. Further, foreign seeds upon arrival in Kazakhstan are obliged to undergo two mandatory procedures in local licensed organisations: 1. Laboratory testing of seed sowing qualities and purity of seed lot. This testing is carried out by JSC “Kazakhstan Agricultural Expertise”, a single number for consultation: +7 (7172) 397 647 (Astana). It is this organization that provides the “Seed Sampling Certificate” after seed material testing.
2. Seed variety testing on quarantine diseases and pests. This type of testing is conducted in the State Institution “Republican Plant Introduction and Quarantine Garden” on the basis of the Barayev Scientific and Research Institute. Chief specialist is Bulgakova Irina Nikolaevna (Булгакова Ирина Николаевна, tel.: +7 (702) 407 09 30). In this Garden, crops are sown with subsequent phytosanitary observations, followed by a phytosanitary statement. Upon receipt of the above mentioned documents it is possible to import and sell seeds on the territory of the Republic of Kazakhstan.
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Next Steps 1. In the Department of Crop Production and Processing, the Ministry of Agriculture, you can take a list of agricultural enterprises and seed farms which are interested in diversifying the crop sector. It is not recommended to cooperate with the following large agricultural holdings: “KazExportAstyk”, “Ivolga”, “Alibi”, “TransAuto”, as these companies have large debts to banks and could declare bankruptcy this year. 2. Also in the Department of Crop Production and Processing you can ask for contacts of the agricultural units of the regional akimats (local governments). These units often receive applications for the purchase of seeds from farmers.
3. The Barayev Scientific and Research Institute also receives a large number of applications for seeds, and, in its turn, provides advice on the purchase of certain seeds, referring to the concrete suppliers. In general, cooperation with this Institute, namely the testing of seed products on the Institute fields, can serve as an additional advertising for agricultural producers visiting these fields. Moreover, there is an opportunity for joint projects of the Institute and a foreign supplier. 4. List of farms in need of seeds.
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Table 5. The list of potential buyers of seeds Full name
1
Dedurenko Igor Mikhailovich Дедуренко Игорь Михайлович Koziyakov Juriy Jurievich
2 Козьяков Юрий Юрьевич Karmanov Timur 3 Карманов Тимур
4
5
Kobjanov Nurlan Saifiddinovich Кобжанов Нурлан Сайфиддинович Shovalu Abuevich Umarov
Name of Farm and Scope of Activity
Need
Address
Spektr Farm. Head. Cattle Breeding and Crop Production.
Lentil seeds: red and green, Sudanese herbs, chickpeas.
Karaganda Region Osakarovskiy District Zvezda Village +7 (777) 651 92 86 ded-igor@yandex.kz
Lentil seeds
Karaganda Region Osakarovskiy Distrcit Volskoe Village +7 (777) 627 49 00
Mustard
Akmola Region Arshaly District Turgen Village +7 (702) 295 70 78 karmanov.timoha@rambler.ru
Lentils, forage crops
Karaganda Region Osakarovskiy District Zvezda Village 5/1 Mira Street +7 (777) 073 00 73
Lentils
Karaganda Region Osakarovka District Molodezhniy Village +7 (705) 588 30 41
Lentils, forage crops
Karaganda Region Osakarovskiy District Telman Village +7 (777) 162 75 40
Pulses, forage crops
Karaganda Region Shetskiy District Aksu Village +7 (777) 629 14 39
Jurik Farm. Director. Cattle Breeding and Crop Production.
“Agrofirma Poisk” LLP, Chief Agronomist, Crop Production
Zvezdniy LLP. Director. Cattle Breeding and Crop Production.
Bakham LLP, Production Director. Crop Production
Шовалу Абуевич Умаров 6
Daku Kuanysh Даку Куаныш
Ak Zhol LLP. Director. Cattle Breeding and Crop Production.
7
Rakhimberlin Sayat Baltabayevich Рахимберлин Саят Балтабаевич
Burabai Farm. Head of the Farm. Cattle Breeding and Crop Production.
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III. Dairy and Beef 22
Problems In Kazakhstan more than 70% of meat and 80% of milk are produced in private farm households, in other words the main producers of strategic products are ordinary rural residents16, who have a lot of problems. They include:
organization of meat transportation to the processing units.
1. Livestock is not fully covered by veterinary and preventive health services.
2. Targeted export policy.
The main tasks of the Law: 1. Agricultural cooperation for more than 500 thousand farmers and private households.
2. Low forage supply.
3. Enhancement of state regulation of the agro-industrial complex.
3. Difficulties with the delivery of raw materials to the processing units.
4. Creation of an effective system of agricultural technologies transfer.
4. Low productivity of livestock.
5. Effectiveness and accessibility of state support.
5. A small proportion of breeding stock17. In connection with these difficulties the President of the Republic of Kazakhstan signed the Law “On Agricultural Cooperatives” as of October 29, 2015. The purpose of the law is to create new structural units from private farm households on the principle of cooperatives, which can solve a number of problems of animal husbandry, as well as increase the indicators of the agro-industrial complex. The creation of cooperatives implies merging of private households in order to create: a joint feeding station, a milk receiving station, the
6. Increase in efficiency of livestock production by 40%. 7. Increase in the share of processing by 30%. 8. Increase in efficiency of crop production by 30%18. At this stage in Kazakhstan only 157 cooperatives have been established with 15,000 private households’ reach19, this indicates that the Law is just beginning to be implemented and needs the introduction of technologies and equipment.
16. The Ministry of Agriculture of Kazakhstan recalled the private farm households. Alau.kz. 14 July 2016. 17. Strategic Plan of the Ministry of Agriculture of the Republic of Kazakhstan for 2017-2021. p. 11. 18. A new course is a reliance on cooperation. “Agrarniy Sector” journal. December 2016. 19. More than 400 agricultural cooperatives will be established in 2017. Inform.kz. 3 March 2017.
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Opportunities for Britain The Kazakhstani government places great hopes on cooperatives and creates many conditions for them: introduction of a simplified taxation and accounting regime, creation of specific preferential credit programs for the purchase of agricultural processing equipment, for the construction of feeding stations and slaughterhouses, for the purchase of machinery and breeding stock. But, most of the equipment is not produced in Kazakhstan, so there is an opportunity for Britain to become a supplier. Moreover, the
Kazakhstani government invests in the development of cooperatives through one-time payments for equipment to cooperatives (Table 6). The Agrarian Credit Corporation also provides lending services to agricultural producers for the purchase of processing equipment. And the state, in turn, compensates 7.8% on the loan interest rate. Thus, agricultural enterprises in Kazakhstan can purchase foreign equipment and receive significant subsidies from the state.
Table 6. Purchases funded by the state20 No
Project names
Reimbursement amount (up to)
1
Purchase of equipment for milk receiving stations with a capacity of 1 ton of milk per day
50%
2
Purchase of portable milking machine
50%
3
Purchase of vehicle for milk transportation
50%
4
Purchase of equipment for slaughterhouses with a capacity of 5 heads per hour
50%
5
Purchase of vehicles for agricultural products transportation
50%
20. Investment subsidising in the agro-industrial complex – Government has taken new rules. Kazagromarketing website. Kazagro.kz. 13 March 2017.
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Key contacts In the Ministry of Agriculture there is the Department of Livestock Production and Processing, headed by Akhmetov Yerkebulan Kartaevich (Ахметов Еркебулан Картаевич, reception: +7 (7172) 555911). This Department
has information about all types of livestock processing. Also this Department provides information on registration of processing equipment.
Market Promotion Project Scheme 3. British Equipment - Entering the Kazakhstani Market. Sequence of Necessary Steps & Main Stages. Market Promotion through “Agrarian Credit Corporation” JSC
British Equipment
Market Promotion through Ministry of Agriculture
Equipment Sale to Ultimate Customer
Market Promotion through District Credit Societies 25
Next Steps 1. For the supply of milk and meat receiving equipment no special certifications and registrations are required. 2. The Ministry of Agriculture of Kazakhstan is interested in developing the livestock processing industry and can potentially contribute to this equipment promotion, as the Ministry is facing the task of exporting Kazakhstani products.
4. Recently organised agricultural cooperatives are potentially the main customers for such equipment purchase. Information about them can be obtained from the Department of Livestock Production and Processing. Information about large enterprises that plan to re-equip or increase the production capacity could also be found at the same Department.
3. “Agrarian Credit Corporation” JSC could also be useful in market promotion of the equipment, as this body has an extensive database of farmers and agrarian enterprises – potential customers for British equipment. The same information could be requested at the district credit societies in relation to specific districts.
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IV. Fertilisers 27
Problems In Kazakhstan, there is an intensive decline in soil fertility. So, for the last 25 years the area of land with higher concentration of humus has decreased from 1.6 million hectares to 255.1 thousand hectares21. There are a lot of reasons for this: wind erosion, alkalinisation, pollution with pesticides, but the main reason is the low level of fertilization in the soil. In agronomy there is a “law of return”, which states that in order to maintain the soil fertility, it is necessary to replenish the reserves of nutrients removed by the harvest. But Kazakhstani agrarians save on fertilization. So, in 2016 the volume of introduced mineral fertilisers was 260.9 thousand tons22. With the fertilizer application rate in 60 kg per hectare and the area of fertilized soil in 4,350 thousand hectares it equals to less than 20% of the arable land in Kazakhstan.
Several fertilizer plants exist in Kazakhstan: “KAZFOSFAT” LLP (Almaty), “KAZAZOT” LLP (Aktau), “KosAgroKommertz” LLP (Almaty). Theoretically these plants could cover most of the fertilizer needs, and the Ministry of Agriculture helps to achieve this goal by allocating subsidies for the purchase of mineral fertilisers produced in Kazakhstan23. When purchasing domestic fertilisers from a production plant, the farmer pays 50% of the cost of fertilisers; the second half of the amount is paid by Akimat (local government). But with the opening of a subsidy program for local fertilisers, the price of basic mineral fertilisers has risen sharply. So, the cost of ammonium nitrate rose from 57,000 KZT to 68,000 KZT, and ammophos from 90,000 KZT to 131,000 KZT24. Thus, despite state subsidies, mineral fertilisers remain not affordable to most farmers.
21. The fertility of soils is declining in Kazakhstan. Svetich.info. 3 April 2015. 22. Agrarians save on fertilisers in Kazakhstan. Svetich.info. 6 March 2017. 23. On Approval of Fertilizer Types. Egov.kz. 27 October 2016. 24. The price of fertilisers has increased by 40-50%. - Union of Farmers of Kazakhstan. Agrosektor.kz. 5March 2016.
28
The introduction of only mineral fertilisers to inhibit the processes of degradation and soil restoration is not enough. Along with the mineral fertilisers, it is necessary to introduce nitrogen of biological origin, i.e. cow manure, green manure, bird droppings, humates. As with the introduction of only basic mineral fertilisers, soil alkalinisation occurs, and this also leads to soil degradation. But this is already a problem of agronomic literacy of agricultural producers.
From all of the above, it follows that there is a shortage of fertilisers in the Kazakhstani market, which directly affects yield throughout the whole country, and is one of the main problems that must be overcome in accordance with the Strategic Plan for 2017202125.
Opportunities for Britain Subsidies in the amount of 30% from the market value are envisaged for foreign mineral fertilisers in Kazakhstan. Subsidies are paid directly to the supplier. But in order to receive such subsidies state registration is required and the concentration of more than 50% of minerals in the product.
into the soil, and ignore other types of fertilisers and methods of their application. This is a very narrow view on the ways how to increase productivity. Therefore, for British companies there is an opportunity to bring to the Kazakhstani market the following types of fertilisers:
Scientific institutions of Kazakhstan in their recommendations mainly mention only the basic mineral fertilisers that are introduced
1. Humates are water-soluble salts of humic acids, extracted from brown coal, peat, sapropel and wood. They increase productivity,
25. Strategic Plan of the Ministry of Agriculture of the Republic of Kazakhstan for 2017-2021. p. 12.
29
relieves stress in plants. They are to be introduced through spaying over plant leaves. 2. Stimulants of growth - auxins (growth hormones) of organic or synthetic origin. They accelerate development; ensure isogonic growth and maturation of plants. They could be applied directly to the seeds at the time of their treatment or by spraying over plant leaves. 3. Rhizosphere microorganisms are a kind of bacteria that synthesize in the soil nitrogen, available for plant nutrition. It is applied directly to the soil or to the seeds at the time of their treatment.
4. Micro-fertilisers - a complex of microelements based on emulsion or suspension. They replenish the deficiency of microelements in plants. They could be applied directly to the seeds at the time of their treatment or by spraying over plant leaves. At the moment these types of fertilisers are supplied to Kazakhstan from Russia, Ukraine, Turkey, often have weak scientific justification, low quality of production, weak marketing. In this regard, they cannot take a stable position in the market of Kazakhstan.
Key contacts Issues related to fertilisers are redistributed between the two Ministries. Therefore, first of all it is necessary to address the Department of International Cooperation and Economic Integration under the Ministry of Agriculture. Director of the Department is Kusainova Aina Birzhanovna (Кусаинова Айна Биржановна, reception: +7 (7172) 555 895).
Secondly it is necessary to meet the Committee for Industrial Development and Industrial Safety under the Ministry of Investments and Development. Nurashev Timur Bekbulatovich is the Deputy Chairman of the Committee for Industrial Development and Industrial Safety (Нурашев Тимур Бекбулатович, +7 (7172) 754 849). This Committee deals with the registration of chemical products, including fertilisers. 30
Market Promotion Project Scheme 4. British Fertilisers - Entering the Kazakhstani Market. Sequence of Necessary Steps & Main Stages.
British Fertilisers
Registration at the Ministry of Investments and Development
Market Promotion through Agro-chemistry Unit, Barayev Scientific & Research Institute
Market Promotion through Well-Established Dealers
Market Promotion through District Akimats
Fertilisers Sale to Ultimate Customer 31
Registration In Kazakhstan, it is not required to register humic fertilisers and growth stimulants. Only mineral fertilisers and micro-fertilisers are subject to registration. Registration involves obtaining permission for trade and application of fertilisers at the territory of Kazakhstan.
Registration implies submitting an application and a product safety passport in two languages (in ​​ Russian and Kazakh). Registration can be done by applying through the Front Office of the Ministry of Investment and Development, or through E-government website (egov.kz).
Next Steps 1. District akimats (local governments) annually gather applications on fertilisers needs among local farmers. Therefore after registration it is recommended to approach district akimats and request such information. 2. While entering Kazakhstani market it is advised to contact the Barayev Scientific and Research Institute and provide them with a small sample of brought fertilisers on a free basis. This Institute usually holds different demonstration tests for farmers, so, the provided fertilisers could be potentially used in them. Such demonstrations are popular among farmers and serve as a good advertising.
3. Fertilizer is not a sustainable product; therefore it requires a lot of work with customers. The best way to do it is to find a local company that sells plant protection products and fertilisers. So, only in Astana there are more than fifteen such companies. They have extensive databases and a large number of regular customers. It makes sense to grant dealer rights to one of these companies (Table 7). 4. Another way of equipment promotion at the Kazakhstani market is to request information about large agrarian enterprises from the Department of Crop Production and Processing and send out commercial proposals among them. 32
Table 7. List of potential dealers No
Name of company
Contacts
1
“Alem Agro” LLP, Karaganda
Samat Yermekov (Самат Ермеков), Regional Manager, +7 (701) 027 34 48, s.yermekov@alemagro.kz
2
“First Agrochemical Company” LLP, Astana
Sagat Ishmukhambetov (Сагат Ишмухамбетов), Chief Specialist, +7 (701)745 88 36, saga28@mail.ru
3
“Agroexpert – Petropavlovsk” LLP, NorthKazakhstan Region, Novoishimskoye village
Baiganzhe Nurikenov (Байганже Нурикенов), Chief Specialist, +7 (775) 182 33 60, agroexpertpetropavlovsk@mail.ru
33
V. Wool and Hide Processing 34
Problems In Kazakhstan, according to 2016 data, there are 17.8 million heads of small cattle26, the bigger part of them goes to the meat production industry. The question of the wool and hide processing sector’s development remains in the background. Despite the fact that in the southern regions of Kazakhstan, due to the specific climate, it is possible to breed fine-fleece and semifine-wool sheep, whose wool is highly valued in the European markets. The problems of wool processing sector can be divided into two groups: I. A small number of wool and hide collection points. That leads as a result to a problem of raw materials loss. So, after sheep and goats slaughtering, some hides are burned, and the others are sold at a cheap rate to wool and hide buyers. The wool and hide buyers, most often individuals, regularly travel around set-
tlements and buy hides and wool at a cheap rate. After that they forward the bought materials to China, Kyrgyzstan, and Turkey. In turn, these countries export products made from the Kazakhstani wool and leather back to Kazakhstan, increasing its cost in multiple times27. II. A small number of processing enterprises. So, according to the Ministry of Agriculture in Kazakhstan, there are only 32 enterprises for primary and final wool processing, those, in their turn, complain about the lack of raw materials. In some areas there are no processing enterprises at all. For example, in the Karaganda region with a population of 1.1 million heads there is no any single processing unit28.
26. Sheep and Goat Stock in Kazakhstan has moderately decreased in 2015. Kazakh-zerno.kz. 26 January 2016. 27. “The Golden Fleece” under your feet. Kzvesti.kz. 25 January 2014. 28. List of wool processing enterprises. Mgov.kz. 2016 year.
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Opportunities for Britain Having the rich experience in the fields of sheep breeding and wool, hide and skin processing, Britain can start bringing its technologies to Kazakhstan, i.e. processing equipment. The fact that Kazakhstani government allocates subsidies to agricultural producers for the purchase of equipment for wool and hide processing plays in favour of this particular industry development. These subsidies are divided into two groups:
I. The allocation of funds to agricultural cooperatives for the purchase of equipment for wool collection points, in the amount of 50% from the equipment cost. II. The allocation of funds to agricultural enterprises, farmers for the purchase of equipment for the primary wool and hide processing in the amount of 30% from the equipment cost.
Key contacts In the Ministry of Agriculture there is the Department of Livestock Production and Processing, headed by Akhmetov Erkebulan Kartaevich (Ахметов Еркебулан Картаевич,
reception: +7 (7172) 555 911). This Department has information about all types of wool and hides processing.
36
Market Promotion Project Scheme 5. British Equipment - Entering the Kazakhstani Market. Sequence of Necessary Steps & Main Stages.
British Equipment
Market Promotion through “Agrarian Credit Corporation� JSC
Market Promotion through District Credit Societies
Equipment Sale to Ultimate Customer
37
Next Steps 1. To sale wool and hides processing equipment in Kazakhstan no specific registrations are required in the Ministry of Agriculture or any its subsidiaries. 2. “Agrarian Credit Corporation” JSC could be useful in market promotion of the equipment, as this body has an extensive database of farmers and agrarian enterprises – potential customers for British equipment. The same information could be requested at the district credit societies in relation to specific districts. Moreover agricultural enterprises could purchase the equipment through these financial bodies.
1. Agricultural cooperatives could be potential customers for purchasing of equipment on primary wool and hides processing (small cattle), since the government provides these cooperatives with large subsidies. Information and contacts of cooperatives can be requested from the Ministry of Agriculture, the Department of Livestock Production and Processing. 2. Farmers specializing in small cattle breeding, breeding farms, as well as operating processing enterprises with the aim of capacity increase.
3. Potential customers:
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VI. Flax Processing 39
Problems In recent years flax cultivation has become very popular among Kazakhstani farmers. This is due to the fact that more than five years ago, Europe imposed a trade embargo on the Canadian flax. The reason for this was the use of genetically modified seeds29. Russia and Kazakhstan have taken this place and became flax suppliers, as the agro climatic conditions of these countries are ideal for cultivating this crop. Flax has a number of advantages: 1. Does not require high soil fertility. 2. The yield of flax is at the level of wheat, but the selling price per ton is twice as high. 3. Flax is unpretentious to soil preparation (fallow, fall-plowed land, stubble field) 4. Flax well combines with wheat in crop rotation.
But, along with the advantages, flax also has significant disadvantages associated with seed processing. The thing is flax in Kazakhstan is cultivated mainly as raw materials, and is sold to Russia, Belgium, Germany and Latvia. There are no processing enterprises. Only in the second half of 2017 in the Kostanay region there is a plan to launch the agro-industrial complex “Basis Alatau” LLP specializing in deep flax processing, this will be the first and only large enterprise in Kazakhstan of such kind30. Also farmers faced the problem of stubble residues of flax. Flax straw has a high concentration of cellulose; therefore the flax fibres are very strong and very slowly rot. This creates problems with tillage. That is why farmers resort to radical measures - burning of flax straw directly on the fields. This also leads to soil degradation, by destroying soil microorganisms.
29. Prospects of niche crops development in Kazakhstan: flax, safflower, rice. Apk-inform.com. 15 Novermber 2015. 30. Oil flax – discovery for Kazakhstan. Apk-inform.com. 15 December 2016.
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Opportunities for Britain Cultivated flax in Kazakhstan belongs to crown flax species. This species is valued for its high oil-bearing qualities. The scope of its application is very wide, from technical paints, engine oils to medicines and cosmetics. There are several ways to produce flaxseed oil (Table 8), each of these methods is applica-
ble for raw materials (flax seeds) produced by Kazakhstani farmers. Flax seeds are varietal (i.e. not GMOs), and cultivated with a minimum presence of pesticides and fertilisers. This suggests that the Kazakhstani flax in most cases is environmentally friendly and applicable for food and medicinal purposes.
Table 8. Methods of Flaxseed Oil Production No
Production method
Production description
Product features
1
Hot pressing
Flax seeds are separated from coarse shells, crushed and compressed with frying.
High oil yield. Has intensive colouring. Specific taste and colour. Due to high temperatures during production, it loses its useful qualities.
2
Cold pressing
Flax seeds are separated from coarse shells, crushed, and pressed without heat treatment.
The oil contains less impurity, more stable in storage. Slightly expressed taste and smell. Saturated with Omega-3 useful substances. It is used in cosmetology, pharmaceutics, and food products.
3
Extraction
Cleared and ground flax seeds are Almost complete separation of fat from raw materials is treated with a solvent and separated by achieved. This oil is suitable for the manufacture of paints, olives distillation. and industrial oils.
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Flax straw has no nutritional value for cattle, but, due to the high content of cellulose, and high density, can be used immediately in two ways. By pressing the chopped flax straw, it is possible to obtain a finishing, heat-insulating material for construction, and pressed biofuel with a high degree of combustion. Kazakhstani flax producers are interested in appreciation of their final products through the production of oil, as well as in an alterna-
tive source of heating workshops, barns, and living accommodations in the winter. Moreover, the state supports the purchase and expansion of equipment and machinery for processing of oil crops through a one-time investment of 30% of the cost of equipment. Therefore there are opportunities for British companies to bring the flax seeds and straw processing equipment correspondent to the above-mentioned methods to the Kazakhstani market.
Key contacts In the Ministry of Agriculture there is a Department of Plant Production and Processing, you should contact the Deputy Director of the Department, Kupanova Lyazzat Kake-
shovna (Купанова Ляззат Какешовна, tel.: +7 (7172) 555 912). This Department has information about all types of plant processing in Kazakhstan.
42
Market Promotion Project Scheme 6. British Equipment - Entering the Kazakhstani Market. Sequence of Necessary Steps & Main Stages.
British Equipment
Market Promotion through “Agrarian Credit Corporation� JSC
Market Promotion through District Credit Societies
Equipment Sale to Ultimate Customer
43
Next Steps 1. To sale flax seeds and straw processing equipment in Kazakhstan no specific registrations are required in the Ministry of Agriculture or any its subsidiaries. 2. “Agrarian Credit Corporation” JSC could be useful in market promotion of the equipment, as this body has an extensive database of farmers and agrarian enterprises – potential customers for British equipment. The same information could be requested at the district credit societies in relation to specific districts. Moreover agricultural enterprises could purchase the equipment through these financial bodies.
3. In the promotion of flax seeds and straw processing equipment it is necessary to focus on farmers already cultivating this crop. Since flax cultivation is a science-intensive process, it requires a well-developed cultivation technology and technical equipment. A short list of such farmers with specific equipment needs is presented below (Table No 8). A full list of farms cultivating flax can be requested from the Ministry of Agriculture.
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Table 9. List of farms No
Full Name Ivan Nikolayevich Oraztsov
1. Иван Николаевич Оразцов Rakhimberlin Sayat Baltabayevich 2. Рахимберлин Саят Балтабаевич
Luschak Pavel 3. Лущак Павел
Dedurenko Igor Mikhailovich 4. Дедуренко Игорь Михайлович
Name of the Farm and Scope of Activity
Need
Address
“Zhenis 2004” LLP. Development Press for flax seeds Director. Crop Production cold pressing
Karaganda +7 (701) 311 40 44 toozhenis2004@mail.ru
Burabai Farm. Head of the Farm. Cattle Breeding and Crop Production.
Press for flax seeds cold pressing
Karaganda Region Shetskiy District Aksu Village +7 (777) 629 14 39
“Naiderovskoye” LLP, General Director. Crop Production
Equipment for processing of flax straw into biofuel Press for flax seeds cold pressing
Karaganda Region Osakarovskiy District Naiderovskoye Village +7 (707) 111 08 75 +7 (701) 111 08 75
Spektr Farm. Head. Cattle Breeding and Crop Production.
Equipment for processing of flax straw into biofuel Press for flax seeds cold pressing
Karaganda Region Osakarovskiy District Zvezda Village +7 (777) 651 92 86 ded-igor@yandex.kz
45
Conclusion • This study clearly demonstrates the existence of a growing need in foreign processing equipment, breeding stock and seed material in Kazakhstan, as it faces the export task, put by the President this year. • The Government welcomes cooperation with foreign companies and allocates subsidies to local farmers for the purchase of foreign products, what makes them more affordable and attractive.
• In spite of presence of such strong players, as Russia, the USA, Canada, and Germany at the Kazakhstani agro-sector, the high quality of British products, the UK’s advanced technologies and its rich experience in the agricultural sector could help British companies to take their place at the Kazakhstani market and gradually make their products wanted among local farmers.
• Cooperation with state and quasi-state bodies, including financial institutions, is not necessary, but desirable for foreign companies in order to guarantee effective and smooth entering the local market, especially if it concerns large sales of processing equipment.
46