16 BFC Kyrgyzstan Agriculture Finance Bulletin

06/2015

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16 K y r gy z s ta n Agriculture Finance Bulletin Farmers and Agri-business Receive Almost KGS 2.55 Billion in Preferential Loans IDB to Loan USD 9 Million to Fight Rural Poverty World Bank to Invest USD 35 Million in Dairy Production Development in Issyk-Kul Tayirbek Sarpashev: Results of the Exhibition “Ayil Agro-2015” Exceeded all Expectations

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Agriculture Finance Bulletin Edition #16, June 2015

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

Farmers and Agri-business Receive Almost KGS 2.55 Billion in Preferential Loans ........................ 2 Government to Purchase 20,000 tons of Wheat............................................................................. 2 Temir Sariev Seeks Improvement in Seed Quality........................................................................... 2 PM Plans to Increase Processing of Agricultural Output to 90%..................................................... 2 Kyrgyzstan to Import up to 100,000 tons of Duty-Free Cane Sugar per Year ................................. 3

Foreign Aid ................................................................................................................. 3 6) 7) 8)

Half of Kyrgyz-Russian Funding Applicants to Invest in Agriculture ................................................ 3 IDB to Loan USD 9 Million to Fight Rural Poverty............................................................................ 3 World Bank to Invest USD 35 Million in Dairy Production Development in Issyk-Kul..................... 3

Private Sector.............................................................................................................. 4 9) 10) 11) 12) 13) 14) 15) 16)

8 Dairy Companies to Trade Freely in EEU ...................................................................................... 4 200 Greenhouses to be Built in Jalal-Abad ...................................................................................... 4 Millers Unable to Compete after Accession to EEU, According to Union ....................................... 4 In 2015, Agricultural Output Increased by 1.8% Year-on-Year........................................................ 5 Effectiveness of Preferential Agro-Loans Questioned..................................................................... 5 Kyrgyzstan to Develop Fish Farming ................................................................................................ 5 Kyrgyz farmers offered leasing on Kyrgyz-Chinese tractors ............................................................ 5 Tayirbek Sarpashev: Results of the Exhibition "Ayil Agro-2015" Exceeded all Expectations .......... 6

Note: The Agriculture Finance Bulletin presents a monthly roundup of headlines and news stories related to investments and financing flows to Kyrgyzstan’s agricultural sector.

This bulletin is prepared by Business & Finance Consulting—a Swiss-based development finance consulting company with a long history of working in Kyrgyzstan. Currently, BFC is implementing the Agricultural Lending Programme for KfW. Read more »

BFC Max-Högger-Strasse 6 CH-8048 Zurich, Switzerland

Phone: +41 44 784 22 22 Fax: +41 44 784 23 23

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BFC. Agriculture Finance Bulletin.

State Initiatives 1)

Farmers and Agri-business Receive Almost KGS 2.55 Billion in Preferential Loans

June 26th, 2015, http://www.eng.24.kg/economics/176273-news24.html

As of June 25, farmers and agri-businesses were issued a total of 6,936 preferential loans totaling almost KGS 2.55 billion through the “Financing Agriculture 3” program. Of the total, KGS 2.06 billion were allocated to animal husbandry, KGS 307 million to crop production and KGS 188 million to processing enterprises.

2)

Government to Purchase 20,000 tons of Wheat

June 19th, 2015, http://kyrtag.kg/economy/pravitelstvo-zakupit-u-fermerov-20-tys-tonn-pshenitsy

The government is to purchase 20,000 tons of wheat in 2015, said Prime Minister Temir Sariev.

The purchase price will be determined in conjunction with the Antimonopoly Authority, said Sheraly Abdyldaev, chairman of the State Agency for Procurement and Material Reserves. However, he does not expect the price to be lower than last year’s KGS 15 per kilo.

3)

Temir Sariev Seeks Improvement in Seed Quality

June 19th, 2015, http://www.agro.kg/ru/news/7061/

To help combat low productivity and cultivation area, farmers must be provided with quality seeds, stressed Prime Minister Temir Sariyev. New avenues in improving the quality of seeds must be explored, he added.

Buckwheat is gaining popularity amongst farmers in the Kochkor district, to ensure farmers are provided with quality seeds, Sariyev suggested certification standards must be improved.

4)

PM Plans to Increase Processing of Agricultural Output to 90%

June 12th, 2015, http://www.vb.kg/doc/316441_premer:_kyrgyzstan_doljen_pererabatyvat_do_90_svoey_selhozprodykcii.html

While presenting the government’s export strategy, Prime Minister Temir Sariev said that, even though most of the population is engaged in agriculture, only 15% of the agricultural output is processed domestically, while the rest is exported raw.

Since the export of processed goods is far more profitable, the government plans to increase the figure to 90%, according to the Minister, adding the government is to provide assistance to ventures through preferential loans.

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BFC. Agriculture Finance Bulletin.

5)

Kyrgyzstan to Import up to 100,000 tons of Duty-Free Cane Sugar per Year

June 4th, 2015, http://www.vb.kg/doc/315492_kyrgyzstan_smojet_piat_let_besposhlinno_zavozit_trostnikovyy_sahar_syrec.html

Kyrgyzstan may import duty-free cane sugar not exceeding 100,000 tons for 5 years starting from the day Eurasian Economic Union (EEU) comes into force. Fedor Chernitsyn, head of Kyrgyzstan’s EEU accession team, said the quantity should cover demand 1.5-2 times over.

Foreign Aid 6)

Half of Kyrgyz-Russian Funding Applicants to Invest in Agriculture

June 22nd, 2015, http://www.knews.kg/econom/65729_okolo_20_kompaniy_kyirgyizstana_pretenduyuschih_na_poluchenie_sredstv_kyirgyizsko -rossiyskogo_fonda_namerenyi_napravit_ih_na_razvitie_selskogo_hozyaystva/

Out of 40 domestic applicants to the Kyrgyz-Russian Foundation, 20 intend to use the funds for agricultural projects, according to spokesman Kuban Sagynbek. The applications are in consideration, though not all have been properly completed, he added.

Loan applications should be between USD 3 - 25 million and repaid within 5 years, whilst the borrower must contribute with 20% of total investment. However, the board retains some discretion with regards to the criteria.

The fund was created to promote Kyrgyz-Russian economic cooperation, modernization of the Kyrgyz economy, maximizing mutual benefits arising from the European Economic Union.

7)

IDB to Loan USD 9 Million to Fight Rural Poverty

June 8th, 2015, http://www.vb.kg/doc/315750_kyrgyzstan_polychit_ot_ibr_9_mln_na_borby_s_bednostu_v_selah.html

The Islamic Development Bank is to provide a USD 9 million loan to the state-run “Sustainable development of villages in Kyrgyzstan” program.

According to the Deputy Minister of Finance Mirlan Baygonchokova, the government formally requested the loan, which will have a maturation period of 25 years – including a 7 year grace period – and an interest rate of 0.75%. Kyrgyzstan will provide USD 2 million in co-financing.

The program aims to reduce rural poverty by improving health care, education, water and sanitation, agriculture, rural infrastructure, business development and access to finance.

8)

World Bank to Invest USD 35 Million in Dairy Production Development in Issyk-Kul

June 5th, 2015, http://www.eng.24.kg/economics/176008-news24.html

The World Bank is to invest USD 35 million in dairy production development in Issyk-Kul over the next 5 years, announced Country Director Mr. Jean-Michel Happi.

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BFC. Agriculture Finance Bulletin.

The bank has proposed a development plan along the entire value-chain, from animal health to the final product, meeting all the standards of the Eurasian Economic Union – with dairy products being available from Almaty in Kazakhstan to Moscow and St. Petersburg, said Happi. The plan envisages turning “IssykKul” into a dairy brand, standing for impeccable quality, added Happi.

Issyk-Kul was chosen for its strong tradition in animal husbandry and its mountainous geography – which facilitates livestock identification and health monitoring, said Happi. Moreover, there are 4 milk processing plants, with a capacity of 40,000 tons a year – though these are operating at a quarter of capacity due to certain issues, added Happi.

Private Sector 9)

8 Dairy Companies to Trade Freely in EEU

June 29th, 2015, http://kabar.kg/eng/economics/full/13411

"Only eight dairy companies can trade freely on the territory of the EEU, the rest are yet to be inspected," mentioned head of veterinary-sanitary inspection department Almaz Sharshenbekov.

2 Kyrgyz companies producing honey and 8 enterprises specialized on dairy products have been inspected. Other enterprises will be inspected in order to have access to free movement of goods.

EEU membership does not mean full freedom of movement for agricultural products. There is a common set of sanitary, phytosanitary and veterinary standards that companies must comply with before promoting their products in the EEU, according to Sharshenbekov. Read More »

10) 200 Greenhouses to be Built in Jalal-Abad June 19th, 2015, http://kyrtag.kg/economy/v-zhalal-abadskoy-oblasti-planiruetsya-vvesti-v-ekspluatatsiyu-okolo-200-teplits

According to government envoy Zhumagul Egemberdieva, 200 greenhouses will be built in Jalal-Abad.

A planned 29 hectares of land will also be fitted with drip irrigation technology, she added.

11) Millers Unable to Compete after Accession to EEU, According to Union June 18th, 2015, http://kyrtag.kg/economy/posle-vstupleniya-v-eaes-kyrgyzskikh-mukomolov-zhdet-razorenie-soyuzpredprinimateley

Upon accession to the Eurasian Economic Union, many flour millers may lose their jobs, said Union of Entrepreneurs of Kyrgyzstan spokesman Rustam Zhunushev, as the removal of import duties will make domestic flour uncompetitive.

Kyrgyz flour is likely to be 10-15% more expensive than imported flour, he notes, adding that millers have subsequently asked the government to remove VAT for the purchase of imported wheat. By importing VAT free wheat, local millers will be able to produce flour at competitive prices, said Zhunushev.

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BFC. Agriculture Finance Bulletin.

12) In 2015, Agricultural Output Increased by 1.8% Year-on-Year June 10th, 2015, http://www.vb.kg/doc/316152_rost_proizvodstva_v_selskom_hoziaystve_obespechilo_jivotnovodstvo.html

Gross agricultural output from January-May totaled KGS 41.21 billion, a 1.8% increase year-on-year, according to the National Statistics Office.

Growth is mainly due to an increase in livestock numbers, according to the Office, with live-weight meat production increasing 2.2% and milk 2.5% year-on-year, as a result.

13) Effectiveness of Preferential Agro-Loans Questioned June 9th, 2015, http://www.vb.kg/doc/316035_gosprogrammy_kreditovaniia_fermerov_nazvali_nedostatochno_effektivnoy.html

In order to create jobs, more credit needs to be provided to competitive sectors of the economy, according to Anwar Abdraev, President of the Kyrgyzstan Union of Banks.

He questioned the effectiveness of the preferential loans granted to farmers, suggesting it may be time to re-orientate the loans towards more competitive business sectors capable of competing on the global market.

14) Kyrgyzstan to Develop Fish Farming June 8th, 2015, http://www.vb.kg/doc/315844_v_kyrgyzstane_zapystiat_programmy_razvitiia_rybovodstva.html

People's Republic of China and the Regional Commission for Fisheries and Aquaculture in Central Asia and the Caucasus are to open a research center in Kyrgyzstan. The center will study the potential for the development of fisheries in the region and seek investment.

The Commission acts as an intermediary in the region, predominantly linking China – the world leader in aquaculture – to local players in Central Asia, said the Ministry of Agriculture.

15) Kyrgyz farmers offered leasing on Kyrgyz-Chinese tractors June 4th, 2015, http://www.vb.kg/doc/315478_kyrgyzstanskim_fermeram_predlagaut_v_lizing_kyrgyzsko_kitayskie_traktory.html

To ensure domestic farmers with available technology, the company "Dyikan Plus" launched a joint venture with China's production of Kyrgyz brand TOPOZ tractors, informed the Chamber of Commerce of Kyrgyzstan.

In the past year has been released and implemented the first batch of tractors in two models: the minitractor TOPOZ 354 and a large TOPOZ 904, which are operated in various climatic and regional conditions, including in the high mountains.

"Given that domestic farmers and peasants can not afford to buy much needed equipment in the field, the company has found a partner for the provision of leasing at very favorable conditions for farmers and expanded the range of tractors," - noted in the Chamber.

The cost of the tractors ranges from USD 3,000 to USD 31,200.

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BFC. Agriculture Finance Bulletin.

16) Tayirbek Sarpashev: Results of the Exhibition "Ayil Agro-2015" Exceeded all Expectations June 2nd, 2015, http://www.vb.kg/doc/314996_tayyrbek_sarpashev:_itogi_vystavki_ayyl_agro_2015_prevzoshli_vse_ojidaniia.html

"Results of the III International agro-industrial exhibition "Ayil Agro-2015" exceeded all our expectations," - said First Deputy Prime Minister Tayirbek Sarpashev at the workshop on the introduction of drip irrigation in the country.

It is noted that "Aiyl Bank" has received over 150 applications for the purchase of new agricultural technologies. "In the previous exhibitions held in 2014 and 2013, it was sold only 90 units of the new farm machinery. The results of the third exhibition exceeded all our expectations. In the square were put 140 units. This result was made possible by the quality awareness among farmers who gradually began to introduce modern technology, moving away from the use of outdated technology and irrelevant working methods "- said Sarpashev.

During the exhibition "Ayil Agro-2015", which took place from 20 to 22 May, the main focus was on the issues of irrigation. The exhibition area reached 7,500 square meters, with products of more than 50 companies from 20 countries. For three days the exhibition was visited by more than 7,000 people.

The first exhibition "Aiyl-Agro" was held in May 2013. It was attended by 27 companies from 9 countries. It covering an area of 4 sq. meters and were exhibited up to 55 pieces of equipment.

The second exhibition was held in May 2014 with the participation of 40 companies from 19 countries.

The exhibition area has been increased to 6,000 sq. meters, with 87 pieces of equipment.

By 2019, the organizing committee is planning to increase the exhibition area to 15,000 sq. meters. For these purposes a specialized exhibition center will be built.

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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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