#42 Kyrgyzstan Agriculture Bulletin, BFC

08/2017

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42 K y r gy zsta n Agriculture Bulletin Government plans to create new irrigation infrastructure World Bank project to help develop dairy industry Korean university to help Kyrgyz greenhouse developmen Agricultural production reaches KGS 82 billion

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

EEC distributes quotas for imports into the EEU ............................................................................. 2 Government plans to create new irrigation infrastructure ............................................................. 2 KGS 1.5 billion in loans for farmers so far in 2017 .......................................................................... 3 Kyrgyz dairy industry has enormous potential ................................................................................ 3 Cattle identification to be completed by year’s end ....................................................................... 3

Foreign Aid ................................................................................................................. 4 6) 7) 8) 9)

World Bank project to help develop dairy industry ........................................................................ 4 Korean university to help Kyrgyz greenhouse development .......................................................... 4 First tranche of Kazakh technical assistance sent ........................................................................... 5 RKDF financed 761 projects so far in 2017 ...................................................................................... 5

Private Sector.............................................................................................................. 5 10) 11) 12) 13) 14) 15) 16)

Kyrgyzstan closer to satisfying domestic sugar demand ................................................................. 5 Agricultural product prices experience growth in 2017 .................................................................. 6 Report highlights growth in drip irrigation, greenhouses ............................................................... 6 Agricultural production reaches KGS 82 billion ............................................................................... 6 Swiss company buys Dairy Spring brand ......................................................................................... 7 Nearly half a million tons of wheat harvested ................................................................................ 7 Agricultural exports and imports show increase over 2016............................................................ 7

Note: The Agriculture Bulletin presents a monthly roundup of headlines and news stories related 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 »

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BFC Agriculture Bulletin

State Initiatives 1)

EEC distributes quotas for imports into the EEU

August 19th, 2017, https://24.kg/english/60542_EEC_distributes_quotas_for_various_types_of_agricultural_products_between_EEU_/

The Eurasian Economic Commission (EEC) has distributed quotas for various types of agricultural products between Eurasian Economic Union (EEU) countries. Quotas are distributed in relation to various types of products imported into the EEU and allow for a reduced customs duty rate. In particular, Belarus will receive 20,000 tons of pork, 10,000 tons of chicken meat and 900 tons of turkey.

Kyrgyzstan will receive quotas for 3,500 tons of cattle and pork meat and 58,000 tons of poultry meat, while Kazakhstan will have quotes for 21,000 tons of cattle meat and 140,000 tons of poultry meat.

Russia will have quotas for 570,000 tons of cattle, 430,000 tons of pork, 364,000 tons of meat and 15,000 tons of milk whey.

Additionally, Russia and Belarus will share a quota for certain types of long-grain rice from Vietnam as Kazakhstan and Kyrgyzstan are expected to fully cover their own rice demand and Armenia will have its own zero duty rate for rice in 2018. Under a free trade agreement between the EEU and Vietnam, 10,000 tons of rice can be imported to countries of the union without any duty. For rice imported in excess of the quota, there will be a 10% customs duty imposed which is not less than EUR 0.03 per kilogram.

The EEC has also extended a zero duty rate for the import of certain types of cocoa products until December 31, 2019 and has applied a temporary (1 year) zero duty rate for a number of components needed to produce bicycles.

2)

Government plans to create new irrigation infrastructure

August 17th, 2017, http://knews.kg/2017/08/irrigatsiya-pravitelstvo-kr-vyhodit-na-novyj-vitok-razvitiya/

Irrigation canals are clogged with deposits of dirt, mud and other debris, reducing the throughput by 1525%. Additionally, the technology intended to support networks is also worn out and unsuitable for operation. This leads to water loss and an overall reduction in crop irrigation. In fact, according to some estimates, nearly 70% of collector-drainage networks in the Issyk-Kul region are in a deplorable situation; in the Batken region, it’s 57%; and in the Osh region, it’s 47%. This means that water loss from intake to the fields exceeds 40% in many areas of the country.

To overcome this crisis, the state has directed considerable funds, including foreign investments. KGS 58.8 billion are envisaged for the construction of new water facilities, the reconstruction of irrigation canals and the renovation, modernization and overhaul of equipment. The development of the irrigation system will be broken into three stages. In the first stage, 12 projects worth KGS 4.9 billion will be implemented. In the second stage, 17 projects are planned, with negotiations underway for investments and the state planning to allocate KGS 800 million. 12 projects are planned for the third stage; no funding has yet been planned for this stage. The state is also considering the possibility of constructing a hydroelectric power station.

The result of the program will be an increase in the area of irrigated land, which will undoubtedly lead to the growth of the agricultural sector, the development of the processing industry and the creation of a fodder base for livestock. The creation of a new irrigation infrastructure will also improve the social and economic situation, ensure the development of the regions, create new jobs and help reduce poverty.

According to the calculations, the share of irrigated lands in GDP will amount to KGS 2 billion.

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BFC Agriculture Bulletin

The development of irrigation and water use systems is a central component of the National Sustainable Development Strategy for 2013-2017 as well as the new country strategy until 2040. Moreover, the revitalization of the irrigation system is closely linked to other state programs that the government is actively implementing such as increasing the fertility of lands, developing regions and supporting agricultural producers.

3)

KGS 1.5 billion in loans for farmers so far in 2017

August 9th, 2017, http://novosti.kg/2017/08/v-etom-godu-fermeram-predostavleno-kreditov-na-poltora-milliarda-somov/

Prime Minister Sooronbai Jeenbekov has simplified the procedure for granting loans to farmers, making it easier for farmers wanting to increase their number of livestock or wanting to open an enterprise for processing agricultural products to receive loans in a timely manner and in the full amount.

So far this year, farmers have been granted loans worth KGS 1.5 billion. It is planned that this amount will increase in 2018.

4)

Kyrgyz dairy industry has enormous potential

August 9th, 2017, http://vesti.kg/index.php?option=com_k2&view=item&id=47352:molochnaya-otrasl-kyirgyizstana-mozhetkonkurirovat-s-lyubyim-gosudarstvom&Itemid=79

In a recent interview regarding the measures needed to ensure the success of Kyrgyz goods in foreign markets, Prime Minister Sooronbai Jeenbekov noted that it is necessary for the country to direct funds for the development of competitive industries. During the interview, the Prime Minister discussed the process through which this happened. At first, a priority was placed on determining which industries could be the most competitive. It was found that the milk and dairy industry holds much promise as it has demonstrated growth in production volume the last six months. The Prime Minister then called for a greater focus on the industry, stating that dairy plants should be in all regions of the country. He also called for the creation of a system that would be able to support the process of buying milk from small family farms.

The government has also taken a number of measures to support the development of the key industries, including making loans available for three to five years at 6% per annum and increasing the total available amount for such loans by KGS 2 billion in 2018. The government is also working to make long-term loans for small- and medium-sized enterprises easier to obtain.

5)

Cattle identification to be completed by year’s end

August 2nd, 2017, http://novosti.kg/2017/08/identifikatsiya-krupnorogatogo-skota-budet-zavershena-do-kontsa-goda/

According to Kalysbek Zhumakanov, director of the State Inspectorate for Veterinary Security, the cattle identification project in the Kyrgyz Republic is expected to be completed by the end of the year. The identification project involves attaching ear tags to all cattle for quick and easy identification, allowing for easier prevention of the spread of epidemics.

The project was implemented in all regions of the country except the Issyk-Kul region.

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BFC Agriculture Bulletin

Foreign Aid 6)

World Bank project to help develop dairy industry

August 30th, 2017, http://kabar.kg/news/issyk-kul-skikh-fermerov-nauchili-pol-zovat-sia-elektro-pastukhami/

Dairy production in Kyrgyzstan has a promising potential, especially given Kyrgyzstan’s reputation for delicious natural products from ecologically clean high-mountain pastures. Despite this, however, there are still a number of challenges the sector must overcome. To this end, the World Bank and the Kyrgyz government are implementing an initiative to increase the quantity and quality of milk, increase the export potential of dairy products and accelerate the growth of local economies.

The project began in the Issyk-Kul region and aims at a holistic and integrated development of the entire milk supply chain, including issues related to improving product safety and attracting investments as well as improving the regulatory and regulatory framework and access to finance. The ultimate goal of the project is to have Kyrgyz dairy products recognized on a global level and take the main position in the country's exports.

Perhaps the most difficult task for the project to accomplish is persuading Kyrgyz producers to abandon traditional and not-always-correct practices of milk production throughout the production chain and adopt new, more cost-effective methods. This has already started with specialists teaching the basics on such issues as the animal maintenance, feeding and diet, fodder preparation, health and breeding and pasture management. Already, positive results are being seen. In the first months of using the right diet, milk yields doubled and remained above the milk yield in the control group throughout the production cycle. By the end of the first year, milk productivity increased from 15% to 100%, and expenditures were on average 20% lower. At the end of this year, it is expected that the World Bank project will begin to widely disseminate these tested methodologies to households throughout the country.

7)

Korean university to help Kyrgyz greenhouse development

August 23rd, 2017, http://www.agroprod.kg/index.php?newsID=497

Professor Cho Yang-hi, director of the University of Dankuk (Republic of Korea) arrived in Kyrgyzstan as part of a working visit to help local farmers. During the working trip, Professor Yang-hi met with Zhanybek Kerimaliev, Deputy Minister of Agriculture. In the course of the meeting, Professor Yang-hi proposed assisting in the cultivation of vegetables on protected ground in the Kyrgyz Republic through the introduction of innovative Korean technologies. He also suggested organizing seminars on theoretical and practical training for Kyrgyz farmers.

In order to move forward with the professor’s plan, the parties developed a protocol of intent, which was signed on August 18, 2017. Under the terms of the protocol, three seminars will be held in the Alamudun and Issyk-Ata districts of the Chui region. Each seminar will be led by 3-4 researchers from Dankuk University and will include testing using several varieties of tomato, cucumber and strawberry at different stages of development. This testing will not only facilitate a knowledge exchange between the Korean researchers and Kyrgyz farmers but will also allow for the creation of microclimates which are specifically adapted to Kyrgyz greenhouses.

The first seminar is scheduled for September 15th of this year.

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BFC Agriculture Bulletin

8)

First tranche of Kazakh technical assistance sent

August 23rd, 2017, http://kyrtag.kg/economy/kazakhstan-napravil-kyrgyzstanu-pervyy-transh-v-41-mln-v-ramkakh-pomoshchidlya-integratsii-v-eaes-

The first tranche of USD 41 million in Kazakh assistance to Kyrgyzstan has been sent. This first tranche is aimed at modernizing customs, veterinary, phytosanitary and quarantine services in Kyrgyzstan. USD 22 million of this amount is specifically targeted for equipping and upgrading the veterinary and quarantine services of the Kyrgyz Republic, which will ensure veterinary and phytosanitary security in Kyrgyzstan and throughout the Eurasian Economic Union (EEU).

In December 2016, Kazakhstan and Kyrgyzstan signed an agreement for the development of economic cooperation within the framework of integration with the EEU. As part of this agreement, Kazakhstan agreed to allocate a total of USD 100 million to Kyrgyzstan for technical assistance. The technical assistance includes modernization and development of custom border infrastructure, improvements to veterinary, phytosanitary and quarantine systems in accordance with international standards, and training for Kyrgyz specialists. The assistance will allow Kyrgyzstan to adapt its economy to the requirements of the EEU in a shorter timeframe.

9)

RKDF financed 761 projects so far in 2017

August 21st, 2017, http://kabar.kg/eng/news/kulmatov-in-2016-rkdf-financed-637-business-projects-worth-175-million/

Through the first seven months of 2017, the Russian-Kyrgyz Development Fund (RKDF) has financed 761 projects with USD 246 million. The portfolio of projects for the period is: 26% for the agro-industrial complex, 13% for the transport and logistics sector, 12% for the tourism infrastructure, 11% for the construction industry, 9% for trade infrastructure, 8% for the processing industry and 2% for communications and information technology, mining and metallurgy, engineering, health infrastructure and other areas. 70% of the projects financed are located in Bishkek (235 projects), the Jalal-Abad region (123 projects) and the Chui region (115 projects).

Private Sector 10) Kyrgyzstan closer to satisfying domestic sugar demand August 25th, 2017, http://vesti.kg/index.php?option=com_k2&view=item&id=47527:v-kyirgyizstane-nablyudaetsyatendentsiya-dostizheniya-polnoy-obespechennosti-saharom&Itemid=79

In 2017, 17,500 hectares of land were used for the cultivation of sugar beet, a 6,200 hectare increase over 2016. Such an increase may lead to Kyrgyzstan being able to fully satisfy its domestic sugar demand, especially with Koshoi and Kaindy-Kant sugar processing plants undergoing modernization efforts which are expected to be completed in October of this year.

The modernization of both plants was made possible by USD 15.5 million in preferential loans provided by the Russian-Kyrgyz Development Fund (RKDF) in October 2016. USD 10 million was used by Koshoi to restore equipment, while the other USD 5.5 million was used by Kaindy-Kant. The interest rate on the loans to both companies is 4% per annum.

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BFC Agriculture Bulletin

11) Agricultural product prices experience growth in 2017 August 25th, 2017, http://vesti.kg/index.php?option=com_k2&view=item&id=47526:chto-provotsiruet-rost-tsen-na-selhozproduktsiyu?&Itemid=79

Over the first seven months of this year, producer prices for agricultural products have increased 15.6% as compared to the prices in 2016. More specifically, the price grew for potatoes by 2.4 times, for vegetables by 1.5 times, for milk by 6.9%, and for wheat by 0.7%. Prices decreased for meat (in live weight) by 5.1% and for eggs by 0.9%. The rise in overall price is due to demand for the products domestically as well as in Russia, Kazakhstan and the recently opened-up market of Uzbekistan.

The increase in prices is a positive for many villagers and a good indicator for the country as a whole.

The increased prices have led some to the conclusion that the country now needs to consider increasing public sector wages and pensions so that the Kyrgyz citizens are more solvent and are able to buy products at existing prices without having to sacrifice from their family budgets.

12) Report highlights growth in drip irrigation, greenhouses August 24th, 2017, http://kabar.kg/news/v-kyrgyzstane-v-tri-raza-uvelichilos-chislo-khoziaistv-primeniaiushchikh-kapel-noeoroshenie/

A new report on agriculture has been delivered to the Kyrgyz government and highlights the growth of drip irrigation systems and greenhouses in the country. So far, drip irrigation systems have been introduced to 671 economic entities in Kyrgyzstan, a 3-fold increase since 2015. Additionally, 706 greenhouses have been opened since 2015, doubling the number of greenhouses operating in the country. At present, there are 1,541 greenhouses operating on an area of 163.1 hectares.

In addition, the identification of animals in pilot regions has been completed, with 679 thousand cows being identified. This includes the 624 thousand cows that were included in a database for the identification and tracking of animals. The program for the construction of machine and tractor stations is also making progress, with 32 such stations opened in 2016.

The government is also stepping up efforts to provide rural commodity producers with high-quality certified seeds and planting material by allocating state subsidies to seed farms in the amount of KGS 155 million in 2018. The government also has taken measures to support agricultural processing enterprises through a reduction in the interest rate of loans for agricultural processing to 6%. This year, KGS 1.5 billion was provided for such loans, and KGS 3.5 billion is planned for 2018.

13) Agricultural production reaches KGS 82 billion August 22nd, 2017, http://www.tazabek.kg/news:1400417

The gross economic output of agriculture, including fisheries and forestry, for January-July 2017 amounted to KGS 82.15 billion, with an indexed physical volume of 100.8%. The total volume of agricultural production was broken down as follows: livestock – 62.8%, crop production – 33.6%, forestry and fisheries – 0.2% and services – 3.4%. The share of private farms in production volume was 95%.

The growth in gross output of agricultural products was mainly due to an increase in the output of livestock products.

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BFC Agriculture Bulletin

14) Swiss company buys Dairy Spring brand August 22nd, 2017, http://akipress.com/news:595928

Siut Bulak dairy company, whose products are marketed under the brand Dairy Spring, has been sold to a Swiss company. The dairy company was created by the Swiss Agency for Development and Cooperation (SDC) in the mid-90s as part of a cooperation program between Switzerland and the Kyrgyz Republic. It then received an investment from the European Bank for Reconstruction and Development (EBRD) in 2008. It has since become one of the top dairy industry players in the country.

Because the company has now reached a stable profitability level, SDC and EBRD have decided to hand the company over to the private sector. Following a competitive process, Swiss company Spielhofer Swisscheese was selected to take over the company. Additionally, Spielhofer Swisscheese has emphasized the importance of fulfilling social and environmental corporate responsibilities.

Currently, Siut Bulak employs 70 staff members and procures milk from about 2,000 local producers through a network of 50 collecting points.

15) Nearly half a million tons of wheat harvested August 21st, 2017, https://24.kg/english/60596_Almost_half_million_tons_of_wheat_harvested_in_Kyrgyzstan/

As of mid-August 2017, 478,000 tons of wheat have been harvested in Kyrgyzstan from an area of 176,900 hectares, a year-on-year increase of 19,200 tons. The most amount of wheat this year was sown in the Chui regions (99,900 hectares), and the least amount of wheat was sown in the Talas region (5,800 hectares). Last year, Kyrgyz demand for wheat was 706,800 tons.

The sowing area for wheat was reduced in 2017 due to it being unprofitable. In 2016, the average yield was 27 centners per hectare, whereas it was 38 centners per hectare in Ukraine and 29 centners per hectare in Canada.

16) Agricultural exports and imports show increase over 2016 August 2nd, 2017, http://vesti.kg/index.php?option=com_k2&view=item&id=47303:skot-eksportiruyut-zhivem-a-kurinoemyaso-vvozyat-tolko-v-ramkah-kvotyi&Itemid=79

The value of agricultural exports and imports is showing an overall positive trend as compared to 2016.

For the first six months of 2017, Kyrgyzstan has exported agricultural products with a total value of KGS 6.27 billion. This is nearly 30% higher year-on-year. Agricultural imports have also shown growth, but at a much slower pace. For example, May agricultural exports were 23.4% higher year-on-year, while May agricultural imports were only 10.4% higher year-on-year. This shows that Kyrgyz products are becoming more competitive.

For livestock, the numbers were 3 times as much as in 2016, while crop production saw a decrease in total value, mostly due to the devaluation of the national currency against the U.S. dollar. It should be noted that the export of potatoes grew by 4.8%, onions by 45.1% and raw cotton by 11.1%. Additionally, the food processing industry of Kyrgyzstan exported goods valued at USD 41.2 million, almost twice as much as last year's exports.

The total value of imported agricultural goods increased to USD 202 million, a 15% increase over 2016.

This was mostly due to the near doubling of imported livestock as vegetable imports declined from last year’s numbers. The share of imported agricultural products represents 13.8% in total imports and is mostly made up of imported vegetable oil, eggs, citrus fruits and dairy products.

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Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com Articles are taken directly from local sources without any fact-checking; they are provided as a convenience and for informational purposes only. Business & Finance Consulting (BFC)’s editing is limited to providing a short summary in English of the texts, highlighting the main points of the original articles.

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