12 BFC Kyrgyzstan Agriculture Finance Bulletin

02/2015

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12 K y r gy z s ta n Agriculture Finance Bulletin Ministry of Agriculture Gives Export Estimates to Russian Market for 2015-2016 USAID Launches USD 22 Million Agriculture Development Program China Grants USD 15 million for Greenhouse Purchases Kyrgyz Agro-Products to Struggle against Belorussian Competitors

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Agriculture Finance Bulletin Edition #12, February 2015

Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8)

Kyrgyzstan Negotiates Duty-Free Sugar Cane Import Quota with Customs Union......................... 2 Water Shortages Reduce Agriculture Output in 2014 ..................................................................... 2 Water Resource Estimates Announced ........................................................................................... 2 Fruit and Vegetable Cultivation to Increase by 4,000 Hectares ...................................................... 2 USD 20 Million Logistics Centre to Be Built in Osh .......................................................................... 3 Ministry of Agriculture Gives Export Estimates to Russian Market for 2015-2016......................... 3 Wheat Cultivation to Decrease by 27,000 Hectares in 2015 ........................................................... 3 Law on Compulsory Enrichment of Flour Passed ............................................................................ 3

Foreign Aid ................................................................................................................. 4 9) 10) 11) 12) 13) 14)

USAID Launches USD 22 Million Agriculture Development Program.............................................. 4 Russia to Grant USD 26 Million for Veterinary and Phytosanitary Upgrades ................................. 4 Turkey to Held Development of Kyrgyz Bean Exports ..................................................................... 4 China Grants USD 15 million for Greenhouse Purchases ................................................................ 5 UNDP Helps Cultivate 3132 Hectares of Land in Naryn .................................................................. 5 IDA Provides USD 8 Million for Irrigation Facilities and Water Resource Management ................. 5

Private Sector.............................................................................................................. 5 15) 16) 17) 18) 19) 20) 21) 22) 23) 24)

Preferential Agro-Lending Postponed ............................................................................................. 5 Kyrgyz Agro-Products to Struggle against Belorussian Competitors ............................................... 6 Roughly 100,000 ha of Arable Land Uncultivated ........................................................................... 6 Only 3 Categories of Basic Foodstuffs Meet Domestic Demand ..................................................... 6 Association of Organic Producers Holds Negotiations with Russian Suppliers ............................... 6 56,000 Tons of Meat Imported from China in 2014 ........................................................................ 7 Meat, Milk and Egg Production Increases in 2014 .......................................................................... 7 Wheat Cultivation and Harvest Declines in 2014 ............................................................................ 7 Agriculture GDP Share and Crop Yields Halved since 1992 ............................................................. 7 60% of Kyrgyz Agro-Products Are Organic ...................................................................................... 7

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

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BFC. Agriculture Finance Bulletin.

State Initiatives 1)

Kyrgyzstan Negotiates Duty-Free Sugar Cane Import Quota with Customs Union

February 17th, 2015, http://www.vb.kg/doc/303320_kyrgyzstan_polychil_kvoty_v_tamojennom_souze_na_besposhlinnyy_vvoz_trostnika.html

Kyrgyzstan continues to pursue its sugar production and export plan. Despite objections from Belarus, a duty-free Brazilian sugar cane quota was negotiated with the Customs Union, announced Deputy Minister of Economy Daniel Ibraev. While Kyrgyzstan traditionally grows sugar beets, sugar cane is more profitable, said Ibraev, adding the plan will be fully implemented by 2018.

2)

Water Shortages Reduce Agriculture Output in 2014

February 13th, 2015, http://www.vb.kg/doc/303129_minekonomiki:_yrojaynost_po_itogam_2014_goda_snizilas_iz_za_malovodia.html

In 2014, agricultural output totalled KGS 194.4 billion, while production fell 0.6% in real terms compared to an increase of 2.7% in 2013, said Minister of Economy Temir Sariyev. The decrease was attributed to water shortages, resulting in a 4.6% reduction in crop yields. Agriculture’s share of GDP totalled 14.8%, down 0.1%, said the Minister.

Meat production totalled 369,000 tons (live weight), an increase of 13,800 (3.9%) year-on-year; milk production totalled 1,445,500 tons, an increase of 37,300 tons (2.7%); and egg production totalled 445.8 million, an increase of 23.5 million (5.6%), according to Sariyev.

3)

Water Resource Estimates Announced

February 13th, 2015, http://www.vb.kg/doc/303060_minselhoz_otchitalsia_o_gotovnosti_k_vesennemy_vegetacionnomy_periody.html

The Department of Water Resources and Irrigation provided estimates of rainfall, river and reservoir water levels, and water infrastructure capacity for the coming spring. Deputy Prime Minister Abdyrakhman Mamataliev instructed the Ministry of Energy and Industry and the Ministry of Agriculture and Land Reclamation to integrate the estimates in development planning.

4)

Fruit and Vegetable Cultivation to Increase by 4,000 Hectares

February 11th, 2015, http://novosti.kg/2015/02/kyrgyzstan-nameren-v-etom-godu-uvelichit-ploshhadi-zemel-dlya-posadkiovoshhej-i-fruktov/

Following Kyrgyzstan’s accession to the Eurasian Economic Union, fruit and vegetable cultivation will increase by 4,000 ha, said the Ministry of Agriculture’s Zhigitaly Zhumaliev. The expansion is due to an expected hike in export volumes following accession, he added.

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BFC. Agriculture Finance Bulletin.

5)

USD 20 Million Logistics Centre to Be Built in Osh

February 7th, 2015, http://kabar.kg/eng/economics/full/12163

Construction of a USD 20 million logistics centre is planned in the Kara-Suu district of Osh, announced First Vice Prime Minister Tairbek Sarpashev. The state-of-the art centre will be built on 33 hectares of land and include modern storage facilities. Funding will come from an undisclosed investor.

The Minister promised to support the local government in the centre’s implementation, adding that further drip irrigation and greenhouse agriculture projects were under consideration.

6)

Ministry of Agriculture Gives Export Estimates to Russian Market for 20152016

February 5th, 2015, http://www.eng.24.kg/economics/174372-news24.html

The Ministry of Agriculture announced estimated export volumes to the Russia for 2015-2016: 30,00035,000 tons of meat and meat products; 1500 to 2000 tons of dairy products; 50,000-60,000 tons of potatoes; 15,000-20,000 tons of onions and 60,000-70,000 tons of other vegetables; 5000 tons of watermelon and cantaloupe; 200,000-250,000 tons of canned vegetables; 3000-3200 tons of fresh grapes; 200,000 -250,000 tons of dried fruit; 60,000-65,000 tons of fresh fruit; 100,000-120,000 tons of nuts; 45,000-50,000 litres of alcoholic beverages; and 150,000-200,000 litres of mineral water and soft drinks.

The Ministry added that, with respect Kazakhstan, only 8 of 34 milk processing plants are permitted to export their products, whilst there is still a total ban on meat and meat product exports. Kyrgyzstan produces roughly 500,000 tons of the latter.

7)

Wheat Cultivation to Decrease by 27,000 Hectares in 2015

February 5th, 2015, http://kyrtag.kg/en/news/detail.php?ID=340762

In 2015, wheat cultivation will decrease 27,000 ha to 313,500 hectares, while, said Minster of Agriculture Taalaybek Aydaraliyev. This is a consequence of Kyrgyzstan’s accession to the Eurasian Economic Union (EAEU), with cheap wheat being imported from Russia and Kazakhstan, said the Minister.

Instead, forage crop cultivation should be expanded to reduce prices and accommodate the increase in livestock, said Aydaraliyev.

8)

Law on Compulsory Enrichment of Flour Passed

February 5th, 2015, http://kyrtag.kg/en/news/detail.php?ID=340816

Parliament passed a law on the compulsory enrichment of all flour types.

Millers in breach of the legislation face a sales ban and a penalty of KGS 50,000. Sales and delivery companies in breach will be fined KGS 5,000 and 10,000 respectively.

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BFC. Agriculture Finance Bulletin.

Foreign Aid 9)

USAID Launches USD 22 Million Agriculture Development Program

February 25th, 2015, http://www.vb.kg/doc/304346_usaid_zapystil_proekt_po_razvitiu_mnogootraslevogo_agrarnogo_sektora.html

The United States Agency for International Development (USAID) is to launch a 4-year, USD 22 million project – dubbed “Agro Horizon” – to accelerate the development of agriculture in Kyrgyzstan. The project will be implemented by ACDI/VOCA in partnership with Helvetas Swiss IC. The project – focusing on Osh, Jalal-Abad, Batken and Naryn – aims to increase the income and nutrition of small-scale farmers by providing support with the implementation of new technologies, business planning and management know-how, and increased access to domestic and foreign markets. The measures aim to improve competitiveness, productivity and food security.

10) Russia to Grant USD 26 Million for Veterinary and Phytosanitary Upgrades February 18th, 2015, http://www.eng.24.kg/economics/174583-news24.html

The Ministry of Economy announced USD 200,000 will be allocated to educating veterinary and phytosanitary inspectors on compliance with Eurasian Economic Union (EAEU) regulations.

The funding is part of a Russian grant; a further USD 1,607,000 was allocated to equip 7 veterinary border checkpoints; USD 6,533,300 to equip veterinary laboratories; USD 100,000 to overhaul the Ministry of Agriculture’s plant quarantine facility; USD 250,000 for the construction of a plant quarantine facility in Osh; and USD 18.5 million for IT systems, equipment and material for animal tracking and labelling.

The EAEU – which came into force on January 1st, 2015 – includes Russia, Kazakhstan, Belarus and Armenia. Kyrgyzstan will become a full member on the 9th of May.

11) Turkey to Held Development of Kyrgyz Bean Exports February 9th, 2015, http://www.vb.kg/doc/302290_depytat_zarychilsia_podderjkoy_tyrcii_v_eksporte_fasoli_iz_kyrgyzstana.html

According to Ravshan Jeenbekov, leader of the opposition, the Deputy Head of Turkey’s Department for Agricultural Production, Ümit Kutlu, offered to support Kyrgyzstan with new bean cultivating technology, training 15-20 farmers in Turkey. In addition, Kutlu offered marketing support and expertise on the European bean market.

Representatives of the Turkish Ministry of Agriculture and Turkish Association of Cooperatives (TAREX) will visit Kyrgyzstan next month to discuss further bean imports, said Jeenbekov. Turkey is Kyrgyzstan’s largest bean export market.

In 2014, bean prices fell dramatically, with many Kyrgyz farmers unable to sell their produce. In Talas, prices halved, leading to protests. Locals blamed unscrupulous intermediaries, while the government argued that bean prices fell worldwide.

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12) China Grants USD 15 million for Greenhouse Purchases February 4th, 2015, http://novosti.kg/2015/02/15-millionov-dollarov-poluchit-batkenskaya-oblast-na-razvitie-teplichnogohozyajstva/

China is to provide a grant of USD 15 million towards the development of greenhouse agriculture in Kyrgyzstan, said First Deputy Prime Minister Tayirbek Sarpashev. The funds will be loaned to farmers for the purchase of greenhouses, the Minister added.

13) UNDP Helps Cultivate 3132 Hectares of Land in Naryn February 3rd, 2015, http://www.vb.kg/doc/301724_proon:_za_2014_god_v_narynskoy_oblasti_vveli_v_oborot_bolee_3_tys._ga_zemli.html

In 2014, the UNDP helped farmers cultivate 3132 hectares of arable land in the Naryn region, raising the income of 6000 households, according to the UNDP’s representative in Kyrgyzstan, Alexander Avanesov.

In addition, 6 villages now operate mutual-aid organizations providing technical assistance and knowhow, leading to a 20% increase in income for at least 776 households, said Avanesov. The UNDP also increased access to clean drinking water and electricity.

Plans for 2015 include the creation of 50 small processing enterprises in rural areas, creating an estimated 200 jobs and 30% revenue increase for 5000 families.

14) IDA Provides USD 8 Million for Irrigation Facilities and Water Resource Management February 2nd, 2015, http://www.vb.kg/doc/301524_donory_dadyt_kyrgyzstany_8_millionov_na_ylychshenie_irrigacii.html

Deputy Minister of Agriculture Janybek Kerimaliev announced an USD 8 million dollar grant from the International Development Association to improve water resource management and irrigation systems.

The grant will help improve food security and increase export capacity, said the Deputy Minister.

Private Sector 15) Preferential Agro-Lending Postponed February 19th, 2015, http://kabar.kg/rus/economics/full/90264

The issuance of preferential agro-loans has been postponed, according to the Ministry of Economy.

Amongst other parameters, the proposed 10% interest rate is still being debated, said the Ministry, adding it expects all issues to be resolved by the end of the month.

Six banks will participate in the project: Ail Bank; RSK Bank; AKB Kyrgyzstan; KICB; Optima Bank; and Buckeye Bank. Preferential loans worth KGS 6 million will be disbursed.

Farmers were already queuing in anticipation of the launch. This year, in addition to crop and livestock development, loans will be issued for the development of exports.

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BFC. Agriculture Finance Bulletin.

16) Kyrgyz Agro-Products to Struggle against Belorussian Competitors February 18th, 2015, http://novosti.kg/2015/02/produkty-iz-kyrgyzstana-ne-smogut-konkurirovat-s-belorusskoj-produktsiej/

Following accession to the Customs Union, Kyrgyz agriculture products are likely to struggle against Belorussian competitors, said President of the Association of Markets Sergey Ponomarev, citing the higher quality and lower prices of the latter’s products. However, entry into the Union will lead to an increase in agro-exports to member countries, according to Ponomarev.

17) Roughly 100,000 ha of Arable Land Uncultivated February 16th, 2015, http://www.vb.kg/doc/303287_v_kyrgyzstane_degradirovala_polovina_vseh_pastbish.html

Despite low levels of arable land per capita, every year, roughly 100,000-110,000 hectares are left uncultivated, according to a report produced by the 2015-2017 Programme for Food Security and Nutrition in the Kyrgyz Republic.

Despite state funding for irrigation system rehabilitation, and conservation and restoration of soil fertility, the situation has not improved. Arable land totals 1,201,000 hectares, of which 798,900 is irrigated. Land subject to water and wind erosion totals 5 million hectares – affecting 47.5% of farmland.

Natural pastures total 9.1 million hectares, of which 49% is degraded, according to the report.

Despite current restrictions, the continued use of arable land for construction has reduced the total cultivated area by 37,900 hectares from 2005-2012. Arable land per capita fell from 0.25 ha in 2003 to 0.22 ha in 2012, while irrigated arable land per capita fell from 0.16 to 0.14, according to the report.

18) Only 3 Categories of Basic Foodstuffs Meet Domestic Demand February 16th, 2015, http://www.vb.kg/doc/301930_potreblenie_miasa_kyrgyzstancami_sokratilos_pochti_na_tret_za_22_goda.html

Kyrgystan lacks basic foodstuff self-sufficiency, increasing import dependency, according to a report produced as part of the Ministry of Agriculture’s 2015-2017 Programme for Food Security and Nutrition in the Kyrgyz Republic.

Moreover, from 1990 to 2012, per capita meat consumption in Kyrgyzstan decreased by 29.3%; milk by 19.2%; eggs by 47.5%; fish and fish products by 71.4%; and sugar by 45.9%.

Of the 9 basic foodstuffs on which security estimates are given – bread and bakery products; potatoes; fruits and berries; vegetables and melons; sugar; vegetable oil; milk and dairy products; meat and meat products; and eggs – only 3 satisfied domestic demand: potatoes by 151.7%, fruits and vegetables by 143.5%, and milk and dairy products by 112.6%. Read More »

19) Association of Organic Producers Holds Negotiations with Russian Suppliers February 14th, 2015, http://www.vb.kg/doc/303146_v_moskvy_postaviat_ekologicheski_chistyu_prodykciu_iz_kyrgyzstana.html

The Kyrgyz Association of Organic Producers held meetings with prospective Russian partners at the Prod-Expo food, beverage and raw material exhibition in Moscow, said president of the Association Turusbek Asanaliev. The aim is to facilitate exports to Russia and eliminate intermediaries, added Asanaliev. The association exhibited Batken apricots, Aksy dried prunes and Talas beans. Negotiations were held with several supermarket chains and eco-product suppliers, said Asanaliev. The association brings together a variety of crop and livestock farmers, beekeepers, dried fruit producers and ecotourism businesses.

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BFC. Agriculture Finance Bulletin.

20) 56,000 Tons of Meat Imported from China in 2014 February 10th, 2015, http://kabar.kg/eng/economics/full/12173

Last year, 56,000 tons of meat were imported from China for the production of sausages, said the National Statistic Committee’s Chynarkul Abdrakhmanova.

The total value of meat imports in 2014 reached USD 98.7 million compared to USD 83.7 million in 2013 – a 17.5% increase.

21) Meat, Milk and Egg Production Increases in 2014 February 7th, 2015, http://www.eng.24.kg/economics/174400-news24.html

Meat, milk and egg output increased in 2014, announced Deputy Minister of Agriculture Zhanybek Kerimaliev. Meat production totalled 369,000 tons, a 13,800 ton increase year-on-year; milk production totalled 1,445,500 tons, a 37,000 ton increase; and egg production totalled 445 million, a 23 million increase compared to 2013. The increases are due to the preferential agro-lending scheme, said Zhanybek, adding that all regions except Issyk-Kul experienced growth.

22) Wheat Cultivation and Harvest Declines in 2014 February 7th, 2015, http://www.eng.24.kg/economics/174398-news24.html

In 2014, 340,000 hectares of wheat were sown, a decrease of 6400 ha compared to 2013, while 572,700 tons of wheat were harvested, a decrease of 246,700 tons year-on-year, said Deputy Minister of Agriculture Zhanybek Kerimaliev – though barely, corn and bean cultivation increased.

The National Statistics Committee set a nominal target of 845 kg of wheat per hectare. However, all areas but Jalal-Abad failed to produce as much. The reduction is due to drought and insufficient irrigation capacity, said Kerimaliev.

23) Agriculture GDP Share and Crop Yields Halved since 1992 February 3rd, 2015, http://kyrtag.kg/en/news/detail.php?ID=339884

Agriculture’s share of GDP fell from 34% to 17% since Kyrgyzstan’s independence in 1992, while crop yield fell by more than half, according to ecologist Iskenderbek Aydaraliyev.

24) 60% of Kyrgyz Agro-Products Are Organic February 2nd, 2015, http://kyrtag.kg/en/news/detail.php?ID=339401

According to ecologist Iskender Aydaralyev, 60% of Kyrgyzstan’s agricultural produce is organic – however, many products lack the necessary certification. With many farmers refusing to use chemical fertilizers, an organic fertilizer plan is being built and will be completed within 3-5 years, he added.

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