2-3 Creating a Marketing Services Center in Tyup rayon Pilot Project (Issyk-Kul Oblast) Project area: Tyup Rayon, including the neighbouring regions and Karakol city
2-3-1 Background and Reasons for selecting the Pilot Project
1) Agricultural produce from Kyrgyzstan is of medium to low quality and low priced. Apart from a handful of progressive farmers, collective experience as independent farmers is still limited and the level of faming know-how and experience of the majority of farmers, who are also far removed from market information, have not fostered the capacity of the farmers to engage in farming that suits a market economy. In regions distant from large markets, such as Bishkek or Osh, the supply of produce exceeds the regional demand and the farmers have to sell to middlemen at prices that they dictate, creating a permanent structure of low selling prices.
2) Many of the processing industries lost their customers with the fall of the former Soviet Union and have gone bankrupt. Of those who survived, many lack the ability to market and are barely in a subsistence state producing juice and dairy products that have not changed substantially over the past 15 years, using obsolete technology.
3) Issyk-Kul Oblast, which is located on a high plain 1650 metres above sea level on the north-eastern shore of Lake Issyk-Kul 400 kilometres from Bishkek in Tyup Rayon, farmers are operating under the conditions described in 1 and 2 above and work extensive farmland and pastures raising primarily potatoes, wheat, fruit and livestock (principally sheep and dairy farming). As they have no ability to independently market, they are prey to the pricing dictates of the middlemen and have not been able to escape from the grasp of low-income farming. Most of farmers don’t pay any attention to improving the quality of their products.
4) The JICA study team has concluded that in order to resolve the above issues and increase the level of incomes among farmers and processing enterprises, the following measures need to be taken.
1) Expand their markets to the neighbouring countries, as well as domestic market and in order to do this implement a professional marketing programme and develop a niche market and implement sales promotion activities for regional produce. 2) As a result of the activities outlined in a), increase exports to Kazakhstan and Russia 3) Take measures to improve quality and delivery to meet the needs of the markets 4) Enhance the level of farming know-how among the farmers and further improve the quality. Change crops and processed goods to products being demanded by the market 5) Independently procure the necessary inputs
5) By implementation of the pilot project, it is expected formulation of economic cycle shown in Figure 2- 3-1.
By implementing a), b) will come about and as a result the management motivation levels of the farmers and enterprises will be raised and attention and efforts towards quality improvements and market orientation will result and further conversion to production that meets market demand will be undertaken, enhancing the farming know-how and experience. The effects of these improvements will
2-57 result in a significant increase in exports and improved income levels of the people in the region, bringing about a benevolent economic cycle.
Figure 2-3-1 Marketing and the Expected Economic Impact
a) Marketing Finding New Markets b) Increased Exports c) Improved Quality, Own Sales Activity (Higher Incomes)
e) Advancement of Market - oriented Knowledge & d) Management Experience
6) Based on the scenario presented in 1) – 4) above, the JICA Study Team, conducted a study of the agriculture, livestock and processing industries in Tyup Rayon during the last half of 2004 and formulated 9 action plans (A/P) and action plan components (AP/C). (See Progress Report (2)).
The Study held a meeting at the Rayon offices on February 21st, 2005 and distributed material to the mayor and other Rayon officials, A/O representatives, farmers, processing enterprises and other relevant parties in the region and explained the A/P and AP/C. Particular emphasis was placed on the need to develop external markets in Russia and Kazakhstan including Almaty and other foreign markets and grow produce that meets the market needs and develop exports utilizing the road via Kegen, a geographic advantage to developing the regional economy in order to develop farming where the local market is limited.
It was unanimously decided that a Marketing Services Centre (MSC) be adopted as the pilot project to be undertaken by JICA. Afterwards, 7 of the more supportive members convened in a separate room and kick-off meeting was held for establishing MSC. After several meetings of these initiators decided on the name for the MSC and have selected a Public Organization (NPO) as the entity and adopted the articles of incorporation, elected officers and auditors and completed registration as an incorporated entity on June 6th 2005 (Registered enterprise number GR Series No. 0032028).
2-3-2 Scope and budget of the P/P
1) Scope of the P/P
The MSC will undertake activities to achieve the objectives as set out in its articles. The JICA (Study Team) will put together an MSC Activity Plan and will hire the necessary staff and will second the staff to the MSC, and at the same time provide equipment and the amount for working expenditure and provide technical assistance for the success of the P/P implementation.
2-58 The main activities of the MSC are:
- data collection about agricultural produce markets in one's own and neighbouring countries and disseminating it to farmers and processing enterprises; - market research and attending markets in Kazakhstan, Russia and other countries; - introducing local agro produce to potential foreign clients via the website; - to help enterprises working with existing similar MSC in the oblast collaborate with local businessmen, group of farms and others who are in contact with the MSC; - devising and advertising a Tyup product logo; - to familiarize farmers and producers with certain market needs and requirements, foreign experience in agricultural husbandry, up to date technology, new grades of crop cultures etc; - assistance to Foreign Direct Investment (FDI) investors; - other objectives, which can help the development of agriculture and the processing industry in the oblast; - representing and defending the interests of the members of the Association; - to provide members of the Association with information and material required in their activities; - collaboration with state, social and other organizations; - other kinds of activity permitted by the legislation of the Kyrgyz Republic;
2) Project budget
JICA has provided an Execution Plan for the implementation of the P/P for the first year (July 2005 to March 2006) as shown in Table 2-3-2.
Table 2-3-2 Budget for implementing P/P “the Marketing Services Centre in Tyup” From July 2005 to March 2006
1-st year 2-nd year Jul 2005-Mar 2006 Apr 2006-Feb 2007 1 Office Repair US$2,000 0 2 Office equipment (PC, Printers, Table etc) 9,540 3,760 3 Website Opening & maintenance, Telephone 3,460 2,520 4 Hiring 4 specialists 15,200 25,850 5 Business trip expenses 4,560 10,300 6 Stationery, literature, printing 2,500 2,060 7 Agents fee 2,400 3,000 8 Others 2,340 1,000 Total US$42,000 US$48,490
2-59 2-3-3 Project Design Matrix
The PDM is given in Table 2-3-3 below.
Table 2-3-3 Project Design Matrix
Verifiable Narrative Summary Means of Verification Assumptions Indicators Overall Goal -To increase income of local residents by Comparison of per increasing exports of regional agro-products capita GRP 2006 -Entrance of Kazakhstan (from US$170,000 in 2003 to US$1,000,000 in Farmers’ Income against 2004 into WTO 2010) -Quality improvement of agro-based products Narrative Summary Verifiable Indicators Means of Verification Assumptions Overall Goal -To increase the incomes of local residents by Farmers’ Incomes Comparison of per - Kazakhstan joins WTO increasing exports of regional agro-products capita GRP 2006 (from US$170,000 in 2003 to US$1,000,000 in against 2004 2010) -Quality improvement of agro-based products Project Aims -To expand the market for agro-based products -Export record: - Statistical data in the - Need to repair the road from the region (US$300,000 in 2008) Karkyra Customs to Kegen -To increase producers' exports, -Import record Office - Clean Customs -To improve the quality of products, (US$100,000 in 2008) Clearance in -Add value where economically viable Kazakhstan, as well as opportunities exist - Increase sales prices by in Kyrgyzstan -To accelerate the adaptation of farmers and more than 10 % - Sales records of processors to the market economy farmers Outputs 1) Increased membership of MSC 1) No. of members 1) Payment of fees 1) Lack of farmers with 2) Increased foreign visitors to the Website 2) No. of website hits by 2) Website programme cash 3) Increased enquiries country 3) Enquiries received 2) Weak accessibility 4) Increased export/import/domestic contracts 3) No. of enquiries 4) Contracts 3) & 4) Widespread and shipments 4) No. and value of illegal export/import in contracts the country and also in neighbouring countries Activities Input (JICA) Input (Local) Pre-condition 1) Preparatory work to create the MSC 1) Technical assistance 1) Active participation 1) Active involvement of 2) Opening the Website by JICA Study Team and sharing of farmers, processors, 3) Collecting market information & operational costs by residents, local disseminating it to farmers 2) Financial support by local residents government including 4) Marketing activity in Kazakhstan, Russia JICA (farmers, processors, financial support and other countries during P/P period Rayon 2) Creating a climate for 5) Business trips to Almaty and Russia administration) legal transactions 6) Assistance to farmers’ procurement of input materials
2-60 2-3-4 Implementation of P/P of 1st year (July 2005 – March 2006)
Due to security issues in Kyrgyzstan, the 5th Local Study initiation was delayed and the creation of the Marketing Services Centre (MSC) in Tyup Oblast did not begin until July 1st 2005 when the study team arrived in Kyrgyzstan. The tasks implemented between July 1st, 2005 and end of March,2006 can be broken down into the following 3 time periods; 1) Period of MSC startup, 2) Opening the MSC and beginning operation, 3) Beginning marketing study.
Fig. 2-3-4-1 Three stages of MSC activity for the period
1 Jul Presence of study team in P/P Presence of study team in KR 10 Feb ▾ 5 Sep 5 Oct ▾ ▾ ▾▾ ▾ MSC Startup Opening the MSC and Begining Marketing study Acquisition of office space and Beginning Operations 1st and 2nd Marketing research trips to Renovation and staff recruitment, Preparatory tasks for opening. Almaty and 3 cities in Russia Sep 5th - Opening Ceremony. Set getting bids for office equipment (Ekaterinburg, Novosibirsk, Omsk), including PCs and their installation up the website and formulate a marketing in the domestic market Bids for the basic design of the business plan. Issue pamphlets, (information gathering, relationship Website. Begin creating the Site. MSC News, public relations activities, building), disseminating information, Appointment of Agents etc recruitment of members, etc cooperation with donors, etc ▴ Registration of MSC 3rd June
As can be seen above, thanks to the dedicated efforts of the staff, the MSC has been able to open the Website, implement concrete marketing studies in the Almaty market and undertake many tasks including market and business environment studies within the Kyrgyz Republic.
1) State of Implementation of the 10 Principle Issues
The state of implementation of the P/P as of 20th September 2005 is shown in Table 2-3-4-1.
Table 2-3-4-1 State of Implementation of the 10 Principle Issues
Achievement Objectives State of Implementation (1) Establishment Incorporate the MSC by the On July 6th 2005 it was registered as a Public Organization in of the MSC arrival of the Study Team Tyup Rayon (Registration No. GR Series 0035028) (early July) and complete registration as an NPO (Public Organization) (2) Recruit 3 Publicly recruit 3 qualified Recruited staff in July and August via the printed press (national dedicated dedicated staff (Study Team and local newspapers) and two TV ads and from the applicants staff will hire and second). hired 3 staff .On 31st July, entered into a Collaboration Implement intensive on the Agreement with each person that defined the division of job training with respect to responsibilities and salaries and they began working from the expected tasks August 1st. It was determined that an IT specialist is essential and one person was temporarily employed from among the MSC members.
2-61 (3) Open the Rent space from the Rayon The space provided was too small and not appropriate for MSC MSC office office and undertake activities and repeated requests were made to the mayor for an necessary renovations alternative space to be provided. On 11th July, a memorandum regarding the pro bono provision of office space and furniture was signed with the mayor (valid till 7/10/2008). On 3rd August renovations were completed.
(4) Launch Launch the bid process for On 7th July, TOR sent to 3 representative companies in tenders for purchasing office equipment Bishkek the office including computers and On 20th July, initiated negotiations with Matrix equipment ordering, installing and On 29th July, placed an order with Matrix putting together the user On 3rd August, all ordered equipment was delivered and environment installed and the LAN established between the PCs and printers and all was equipment in working order th (5) Put in place 1) To open the MSC at the １） The MSC was opened on 5 September 2005 the MSC beginning of Sept. 2005 2) The management organization of MSC was determined operational 2) Put in place the -1 November 8th the new chairman was selected -2 The appointment of a steering committee representative and management system of MSC from the community was temporarily postponed due to management 1) Management enforcement 2) Appoint steering difficulties with the candidate structure committee members -3 The general management structure of the MSC was drawn 3) Formulate MSC up (see Figure 2-3-6-2) management regulations 3) As for the job descriptions, the responsibilities and and rules, obligations of each staff member were described in an 4) Collect information and employment contract signed between each staff member employ 10 agents to and the Study team leader. collect and disseminate 4) 7 agents have been appointed information etc (6) Launch the Prepare and launch the On 18th July TOR for the bid for the Website design and were Website Website by the opening of sent to 3 companies and IKEEN was selected. On 4th August, entered into an agreement with IKEEN and as the MSC (early September) a result of discussions on the concept for the Website design, and begin sending out information about regional the site structure was decided. Began preparing text, collecting agricultural products and photographs and films to be put onto the site, through development potential discussions involving all the staff, and polishing the contents step by step.
On 5th September the Russian version was launched in time for the MSC opening and the English version was completed on November 20th. The number of hits on the site as of February 13th was 3,000. Mutual Sharing of the Banner on the site with the USAID Regional Trade Promotion (RTP) project has been achieved.
(7) Initiate Collect information on From October 5th to 13th, a marketing expert made the first marketing markets in Kazakhstan and marketing trip to Almaty and collected the necessary and search Russia and begin searching information. for strategic for partners and potential The Study Team leader joined up with the MSC marketing nd partners customers. Undertake expert on the 2 marketing trip to Almaty from November 1-
2-62 business trips to Russia to 4th on his way to Kyrgyzstan and negotiated with potential perform marketing in partners and companies. It was generally agreed to enter into a Russia in November basic cooperation agreement between the MSC and the ~December 2005 Kazakh Association of Markets and Entrepreneurs. A lot of valuable information was collected. 14-23rd December 2005 a marketing study was conducted in Ekaterinburg, Novosibirsk and Omsk in Russia. established relations with some institutions for further cooperation.
(8) Issue Provide market information 100 copies of the MSC NEWS (in Russian and Kyrgyz) in A4 newsletters to the farmers and format was issued and distributed to farmers and other relevant (in Kyrgyz processing enterprises in the parties. st and region. To do this, issue 1 issue on September 5th with the main content being the Russian) newsletters in Kyrgyz and opening of the MSC nd Russian. Collect 2 - 25th Oct., on marketing results for the Almaty market rd information and the wants 3 - 25th Nov., introduction of agriculture in Hokkaido, Japan th th of the farmers and 4 - 25 Dec. introduction of Holland seed potato 5th January 2006. on seed potato and berry disseminate them externally
(9) Assist in Assist in setting up a local It was determined that due to several factors, establishing setting up trading company to trading companies using local capital would not be achievable local trading undertake the export and in the foreseeable future. As a result, «Issyk-Kul Agro» a trading company was established on October 10th by 3 MSC companies import of transactions staff with the minimum capital, in order to make offers when a generated by the MSC and specific lead is developed and enable the execution of contracts, enter into a comprehensive placement of orders with farmers and make deliveries. alliance with the trading A General Cooperation Agreement was signed between the company to achieve the MSC and Issyk-Kul Agro on 10th December 2005. objectives Working capital needs to be increased and a specialist trader and credit controller hired to ensure that no credit arises from transactions.
(10) Obtain leads By the end of the year, The MSC received an inquiry from a dealer in Almaty for 15 generate several specific tons of potatoes, but it was declined because it was an leads unprofitable transaction due to the middleman’s illegal delivery. An enquiry was received from a Supermarket in Bishkek for potatoes and apples. A contract has been signed for the supply of washed potatoes packed in 2.5 kg nets. Delivery of the potatoes started on 4th February, but after 3 weeks the contract was temporarily suspended due to unexpectedly large losses as the result of bad quality potatoes supplied by farmers. The contract may be reinstated after potato supplies from farmers have been reorganised. In February 2006 inquiries were received from Russia and Bishkek thanks to the MSC Website
2-63 2) The results of the main activities of the MSC from its opening till March 2006
(1) Main Findings from Marketing in Almaty (a) 1st Almaty Marketing Study, Almaty, Kazakhstan The marketing manager of the MSC went to Almaty from October 5th - 12th and visited the institutions and related parties. In particular, in addition to gaining valuable information, a basis for future cooperation was established with the Chairman of the Kazakh Entrepreneurs' Association, Governor of the Kazakh Market Entrepreneurs' Association, Chairman of the Customs Brokers, Transssistema Co., a transportation company, Professor Irina Leontieva of the Economics University, Krdas-7 wholesale market and others.
(b) 2nd Almaty Marketing Study, Almaty, Kazakhstan The Study Team Leader and the MSC marketing manager visited Almaty between November 1st and 4th and visited the institutions and related parties listed in Attachment 3-2. In addition to the follow up of the results of the 1st Marketing Study by Ms. Ainura Imanalieva, this study had the principal objective of examining marketing conditions in Kazakhstan, the country’s policies toward agricultural product imports from Kyrgyzstan, establishing relationships with potential partners important in building business cooperation in the future, verification of various issues with the Kazakhstan Customs, Kyrgyz import, customs and quarantine controls and the state of the road via KEGEN, which is a principal transport route and the operations in both countries with respect to border Customs and animal and plant quarantine.
(1) Kazakhstan covers a vast area of land but relative to the land there is a scarcity of people. In the northern and desert areas, farming is impossible and urban centres such as Almaty and Astana, the capital, are experiencing rapidly increasing incomes. In order to respond to the market structures peculiar to Kazakhstan and the rapid changes that are taking place, stable imports of high quality agricultural products are needed and with respect to Kyrgyz agricultural products, both the state and the private sector alike are seeking to actively promote and expand imports. With the objective of meeting the increasing need for agricultural produce and achieving stable prices, the Kazakhstan government has adopted and is implementing the following policies with the objective of actively promoting stable imports of agricultural products from Kyrgyzstan and other neighbouring countries. February 18th 2005 Presidential note: Kazakhstan on the way to accelerated economical, social and political modernization March 9th 2005 Government Decision No.217 Questions of conveying goods by individual persons across the borders of the Republic of Kazakhstan May 5th 2005 Government Decision No.430 On some measures for price stabilization in the consumer market of Almaty oblast Government Decision No. 430 was enacted as a specific import promotion measure supplementing Government Decision No. 217 and the limit for applying simplified customs procedures for importing foodstuffs and other daily necessities produced by individual Kyrgyz farmers into the country would be doubled from 2 to 5 tons in the case of vegetables and fruit, while for other products it was expanded from 200 kg to 2 tons. At the same time certain tax reductions, including value added tax were introduced. (1)
(1) The MSC (and the study team) obtained the Kazakhstan Taxation Code and the main rules including Government Decision 217 from the Director of the Almaty Oblast Customs
2-64 The Kazakhstan Government, to promote the imports of fruits and fresh vegetables from neighboring countries (principally Uzbekistan and Kyrgyzstan) has expanded the summary custom clearance quota for importation of vegetables and fruits by individual farmers from neighboring countries the Government Decision No. 285 dated April 18, 2006 to 10 tons.(2 )
(2) With the above as a background, a Protocol of Intent was entered into between the Issyk-Kul Oblast government and the Almaty Oblast government on July 4th 2005 with the objectives of regional development, cooperation in near border areas and fostering and strengthening small and medium sized enterprises based on compliance with the laws of both countries. Cooperation was declared in the smooth conveyance of goods across the border and the future development of economic and trade relations between neighbouring regions, protection of the rights and interest of parties involved in trading, further simplification of Customs and other procedures as well as computerizing Customs related operations, including using the Internet.
(3) With respect to agricultural products from Kyrgyzstan, the quality of the produce is variable and vulnerable to insect infestation and in some cases damaged produce is mixed in with the shipments. Based on the Memorandum dated July 4th 2005 between the Issyk-Kul and Almaty Oblast governments, it was pointed out by the procurement and collection agency of the Almaty Oblast government that in shipments of potatoes, apricots, and black berries since July 2005 via Kegen some had contained garbage. In addition, at the time of exporting from Kyrgyzstan and importing by Kazakhstan, required documentation such as producer area certificate and quality certificate were not attached and no preparations had been made to pay Kazakh value added tax (the buying company did not have enough cash to pay the taxes)(3)
(4) Nematode and fall webworm (Hyphantria cunea) was found in potatoes shipped to Kazakhstan by various routes originating from the Issyk-Kul, Talas, Chui, and Naryn oblasts and unknown regions and an emergency measure was put in force that required an inspection certificate (to certify that the potatoes are not contaminated with the above insect) issued by the Almaty Plant Quarantine service based on sampling of each delivered lot.(4)
(5) The road improvements between Kazakhstan and Tyup (Kyrghyz) committed to in the memorandum entered into by the Issyk-Kul Oblast government and the Almaty Oblast government have been completed between Almaty and the Kegen Village on the Kazakh side and it is now possible to average 100 kilometres an hour between Almaty and Kegen enabling the trip to be completed in 3 hours. Only the road from Kegen village to the border was not repaired in 2 places with length 2 km each. On the Kyrgyz side between Karkyra and Tyup, improvements have not yet been completed and it took two and a half hours to traverse the 75 kilometres of bad road.
(6) The Kazakhstan border control, Kegen Border Customs and the animal and plant quarantine post were neat and kept in good order and the staff appeared to have the knowledge to perform their jobs and
(2) In the government decision, various facilitation measures to enable the carriage of goods to the destination by a one-stop custom clearance quarantine at the border were decided. (3) As this was a well publicized delivery, consideration was paid to the relationship between the two countries and the Kegen Customs did not collect the value added tax (4) An inspector from the Kegen Border Quarantine Post will accompany the purchaser to the Almaty Inspection Station. Nematode is referred to as a cancer of potatoes and it lives in the soil for 10 years. Once contaminated, production declines substantially. Its ability to reproduce is high and with wind and rain the contamination can quickly spread over wide areas. There are no means of eradication.
2-65 worked in an orderly manner. The Customs post was equipped with an automatic computerized weighing machine. Issues that arose with respect to the conveyance of Kyrgyz agricultural products into Kazakhstan were as follows. ‐ Lack of or incomplete necessary documentation needed for import customs clearance, such as producing area and quality certificates ‐ Under-reporting of prices and weights ‐ Lack of appreciation of the need to pay value added tax ‐ False reporting (the report lists apples but underneath the apples, honey was found)
(7) At Karkyra on the Kyrgyz side of the border there was no telephone or electricity in the office and at the entry control office there was no stamp to prove entry or exit to and from the country. The Customs officer appeared not to be ready to perform his duties and there was no plant and animal quarantine officer stationed here.
(8) Several deliveries of agricultural products to Kazakhstan by truck convoys arranged by the Issyk-Kul Oblast government’s purchasing company were made. Due to some of the farmers lacking the basic understanding of quality and some less than forthright practices, the products delivered to Kazakhstan were poorly perceived and tarnished the image of Kyrgyz products(5) and the purchasing company felt that it would be difficult to make a profit.(6)
3) Development of smuggling and barriers to the development of legal trade (1) Development of smuggling
It is widely known that there has been widespread smuggling of Kyrgyz agricultural produce to Kazakhstan. In particular, recently the smuggling has been well organized and official exports have declined substantially. High ranking officials of the Issyk-Kul Oblast government and oblast office of the Customs acknowledge that 80 – 90% of the oblast’s agricultural produce exports to Kazakhstan is via the TOKMOK Route through smuggling. The way the organized smuggling works is as shown below in Diagram 2-3-4-2.
(5) In cases of shipments of potatoes and apples, there were many farmers who packed products of good quality on the outside but inside where it was not readily visible, packed damaged or insect ridden or small potatoes and apples. (6) Because this was an operation that used state government budget funds, there was an obligation to provide an explanation to the oblast residents about the operations, including the profitability.
2-66 ① Middleman A (or Driver) calls middleman Middleman C ④ B working in Ken-Bulun village who has good relations with the relevant authorities. Baryz Wholesale market ② Truck with agricultural products passes In Trudovik Village freely through the Kyrgyz and Kazak ③ Customs and Quarantine office without any documents and payment ② Customs office in RK ③ Truck goes into the market “Barys”. The agri-products are to be sold (through Custom office in KR middleman B) to Kazakh middleman C. Middleman A ④ After paying for the produce in cash the ⑤ ? agri-products are reloaded onto the Kazakh ① Truck and Middleman B receives from A a fee for arranging it. The cargo becomes Middleman B Kazakh produce by getting from Kazakh Ken-Bulun Village authorities proof certifying the produce was grown in Kazakhstan Tokmok City ⑤ Appreciation for kind cooperation
Fig. 2-3-4-2 Scheme of illegal exports through the Tokmok route
According to information collected from several reliable sources (middlemen in Issyk-Kul Oblast, truck drivers, middlemen in Ken-Bulun Village), taking as an example potatoes purchased by a Kyrgyz middleman A from a farmer (early November 2005 at 4.5 – 6 som/kg) in 10 ton loads on a truck (15 tons if a KAMAZ truck) arrives at Ken-Bulun Village. 9,500 som (7) are paid to middleman B in the village and led by this middleman it gets free passage through the border, customs and quarantine services of both countries. The potatoes are sold to a Kazakh middleman C at Baryz Market about 1 kilometre away. This is a convenient scheme for the Kyrgyz middleman A or the truck deliver contracted by him as there is no burden, cost or time associated with it. Many middlemen who come from Kazakhstan to Kyrgyzstan use this route. The potatoes thus sold, are given a certificate from a corresponding authority as being potatoes grown in AA Village and are then distributed domestically.
(7) Since July 2006, with the import restrictions on Kyrgyz agricultural products imposed by Kazakhstan, potatoes have been reloaded to a Kazakh truck at Ken Bullak and passed the Kazakh border. The going commission for the smuggling jumped from 9,500som to 15,000 som.
2-67 (2) Barriers to the development of legal trade
The cost of transporting 15 tons of potatoes from Tyup via Kegen and sold through the wholesale market in Almaty can be estimated as follows:
Table 2-3-4-2 Cost Estimate for exporting of 15 tons of potatoes through Kegen Unit: Kyrgyz som Item Legal entity Individual person Smuggling Trade 1 Potatoes 15 ton at @ 5 som/kg 75,000 75,000 75,000 2 Total expenses 67,445 67,064 34,500 -1 Plant protection Certificate 300 300 0 -2 Certificate of origin 480 124 0 -3 Certificate of quality 740 715 0 -4 Loading cost onto Truck 800 800 800 -5 Transportation*1 35,000 35,000 19,000 -6 Customs clearance fee in Karkula*2 1,125 1,125 0 -7 Customs clearance fee in Kegen 2,000 2,000 0 -8 Fee for Customs broker 1,200 1,200 0 -9 VAT at Kegen (20% x (Value + Transp.) 24,000 24,000 0 -10 Expenses in Kurdas-7market *3 1,100 1,100 1,100 -11 Policemen & inspectors on loading*4 700 700 0 -12 Payment to middleman B in Ken-Bulun 0 0 10,000 -13 Commission for middleman B*5 0 0 3,600 3 Sales in Kurdas 7 market (8 som/kg) 120,000 120,000 120,000 Profit on transaction (3-(1+2)) -22,445 -22,064 10,500
*1 Smuggling route: Tyup→Tokmok→Baryz market (330km) *2 0.15% of the total value of the goods. Based on a potato price of 5 som/kg *3 Supposed to be the same condition *4 100 som x 7 times (stops by policemen/inspectors in Kazakhstan (a “facilitation fee” instead of a penalty for overloading, excess speed, lack of documentation, technical defects of the Truck, etc) *5 According to Fig. 2-3-4-2. Estimated amount based on a commission rate of 3%.
The above Table 2-3-4-2 shows that if an enterprise or farmer in TYUP exports using regular channels via Kegen, unless the potatoes are purchased at 3.50 soms per kilo it cannot break even and in the case of a farmer, his income would be 3.53 soms per kilogram. In such a case it would be better for the farmer to sell it to middlemen quoting 5 soms per kilogram. As a result, many of the potatoes produced in the Issyk-Kul, Naryn and Chui oblasts are exported to Kazakhstan via TOKMOK. Middleman B obtains an intermediary commission separately (Item 2-13), thus, we would surmise that the 9,500 – 10,000 soms paid by Middleman A (item 2-12) is paid as consideration for being able to pass through the border freely.
The MSC with the member farmers examined the feasibility of legal exports of potatoes via Kegen but as seen in Table 2-3-4-2, it was clear that it would not be profitable and potato exports have been suspended for the time being.
4) Selling washed and packed potato to a Supermarket
This supermarket is the largest supermarket chain in Kyrgyzstan having 14 outlets (8) in Bishkek.
(8) Number of outlet was increased to 22 as of November, 2006
2-68 MSC proposed to supply packed in plastic net with 2.5 kg of sorted and washed potato. The company has shown great interest in the proposal of MSC and has agreed to it and wished to initiate deliveries as soon as possible.
The MSC has begun to study ways of mobilizing farmers, performing quality control and the delivery format in addition to undertaking technical collaboration with the newly established trading company, Issyk-Kul Agro. It was necessary to resolve issues relating to collecting, sorting, washing, packaging and transporting to Bishkek at constant temperatures, arranging storage and daily delivery to 14 shops, all of which were new experiences for the MSC.
The quality level of potatoes procured from the farmers were in such a bad state that not only before washing but after washing defects that were not visibly detectable (decomposition, bruises, holes, wpr,- holes and the like) were exposed. Consequently, only 10 – 20% of the items meeting the quality standards to be deliverable to supermarkets, mistakes in estimations, inadequate negotiations with the supermarket exacerbated by the rapidly rising prices on a daily basis of the purchase price of potatoes all conspired to force Issyk-Kul Agro to experience rapidly expanding deficits. Sales, on the other hand, reflecting the favorable response of the consumers increased daily. In order to stem the bleeding, 3 weeks subsequently, with the acknowledgement of Narodnyi Co., the purchases were temporarily suspended. The sales volume during the period was 1,666 packages (4,165 kg).
Potato supplied to MSC by farmers Potato supplied to Supermarket by MSC
5) 1st Almaty Marketing Study for Russia (Yekaterinburg, Nobosibrsk and Omsk) The marketing manager of the MSC went to Yekaterinburg, Nobosibrsk and Omsk during the period 13- 23 December 2005 and visited wholesale and retail markets, transportation companies, the custom brokers, trading companies, cheese manufacturing and wholesale companies and established business relations with them for further cooperation. There were interest for purchasing cheese (Ak-Jalga), products of beekeeping (honey, propolis, wax), apple and apricot from Issyk-Kul region.
6) Cooperation with donor project
(1) USAID RTP Programme
An agreement of collaboration between the MSC and the USAID Regional Trade Promotion (RTP) have signed.
2-69 MSC became able to link up to the RTP network and gather various information regarding trade with Central Asian countries. In addition, by creating a banner on the mutual websites, a increase in hits to the MSC website from potential users heretofore unknown to MSC became possible.
(2) TACIS (Karakol)
A friendly relationship has been established with the organization. The MSC and 2 member companies participated in an exhibition of principally agricultural processed products held by TACIS in the Cholpon- Ata at their expense.
(3) Issyk-Kul State Purchasing Company
The Issyk-Kul Oblast government based on its agreement with the Almaty government has established a state purchesing company (SPC) with a staff of 20 to deliver agricultural produce from Issyk-Kul to Almaty. The company wishes to establish an affiliation with the MSC and MSC is planning to cooperate with the company through an exchange of information. It has proposed posting its information on the MSC website.
2-3-5 Implementation Summary for April to August 2006
(1) Marketing and Sales Promotion Activities
The following operations were implemented.
1) Procurement of Seed Potatoes
Because potatoes are principal agricultural produce for the Tyup Oblast and due to the strong desires of the farmers, MSC made a brad examination of the possibilities for the procurement of see potatoes that is suitable for the region. Although foreign seeds and elite seeds are the best, the purchasing power of the region’s farmers are inadequate and purchase of DRAGA, Dutch grown seed from farms in the Osh oblast Nokat rayon as a relatively good quality and inexpensive seed was decided and the target was expanded to include those that are not members of MSC and distributed provisional purchase applications. Provisional applications were received from 30 farmers and it was decided to place an order for a volume equivalent of a 13-ton truckload and began to negotiate with the seed farm. Governor of the Osh oblast provided active support. 30 non-members were required to pay in advance as MSC has no budget to undertake operations for the above objective. On April 2nd, a truck from Karakol with the representative of the farmers on board left for Osh and on April 6th, delivery was made in front of the Tyup rayon offices to each farmer who placed an order. The scene was broadcast in detail over the local television. Even after the completion of delivery, there were many inquiries from farmers from various regions who had gotten air of the transaction. The cultivation of these seeds is going well and already favorable results are being expected. A different farm located in Nokat rayon of Osh oblast who cultivating a German seed potatoes has developed some interest in expanding sales routes in Issyl-kul oblast in the future and proposed providing 100 kg of elite seed potatoes for pilot cultivation and MSC has accepted the proposal. 25 kgs of these seeds were distributed to 4 farmers, including 1 MSC staff member on the condition that a prescribed cultivation records would be submitted. The cultivation results have been favorable.
This year in the Tyup rayon there was an outbreak of Colorado gold beetles during the months of May into June and the potato farmers strained to extermination. Even spraying agricultural chemicals it is washed
2-70 away by the late-afternoon showers, thus, farmers who are highly motivated have enlisted the entire family including children to get on their hands and knees in the field to pick the beetles and their eggs.
Cololad gold beetles and their eggs. Children on their hand pick them into a bottle
2) Cooperation with A Company, a Dried Fruit Manufacturer
A Company had newly installed 2 vacuum dried fruits manufacturing lines in their plant outside of Bishkek and was in preparation for beginning of production from this summer. As they had not yet secured a source of fruits, their raw materials, they had come to request MSC for facilitating purchases of materials by regions, help arrangements with farmers and cooperation in the collection. MSC looked upon this as an important groundbreaking cooperative project and prepared a draft contract and undertook several negotiations. The initial target item for collection was blueberry leaves. For the farmers, blueberry leaves had never been objects of commercial activities, many of the farmers showed interest. After obtaining expert opinions with respect to the extent to which the leaves could be picked without affecting the cultivation of blueberries, the price per bag (about 7 kgs) were decided with consultations with farmers. Ultimately, A was not able to consummate the sale to a Russian buyer, which it had planned upon and, as a result, this project still remains pending and unrealized as of August 15th. There was, then, a request for cooperation for harvesting of blueberries and a shipment organization was put together mobilizing the farmers in the region. To a query by MSC with respect to confirming the collection date, “we will respond tomorrow morning” was given repeatedly. Ultimately, it was discovered that A Company procured the blueberries in another region. (Due to the manufacturing line malfunctions) it turned out that blueberries were no longer needed and MSC work had all gone for naught.
3) Cooperation with B Company, a Dried Fruits Manufacturer
There was a request for cooperation for collection of 20 tons of blueberries and MSC concluded a contract with B Company on July 20th. On the day of the collection, farmers gathered from early in the morning with buckets full of blueberries to collection locations in the region designated by MSC. In XXX Village alone, approximately 2 tons were collected by 8 in the morning and many farmers awaited the arrival of the cars. At 9 o’clock the President of B Company telephoned to relay that the driver has taken ill and there will be no collection that day. MSC staff and agent, then, ran around the collection points to notify that
2-71 planned collection trucks would not be coming. Even during this time, blueberries continued to arrive and the faces of the farmers who gathered were stern and an ominous mood pervaded the air. MSC staff, in order to resolve the crisis, quickly went out into the roads to find trucks belonging to agents who are not collecting and asking favor of an agent who is an old acquaintance brought the agent to the locations and shipped most of the blueberries.
Message from the president of B Company was received the next day that collection would be made the following day. The responsible staff at MSC, fresh from their bitter experience of having to run around until late into the night the night before, decided that they would wait and not request for collection to the farmers until a confirmation was received that the trucks would really be coming. On morning of the day, the president notified that the truck had left Bishkek and would arrive at the site before 2 o’clock and requests for shipment were made to the villages. Truck came, however, at 5:30 (said had been held up by collections along the way) but the truck broke down just as it arrived at the site and could not get the engine started. MSC staff towed the truck to the yard at his house for repairs and used his own truck to go around the village to make collection but turnout of farmers, with their memory of the bitter experience of the prior day, was poor and collection of only less than a ton was completed by sundown and the remainder left until the following day. The next morning the truck that had been repaired, despite the pleading of MSC staff went back to Bishkek. President of B Company expressed over the telephone of his dissatisfaction with the collection results and that he would cancel the contract. In order that the president of B Company was correctly aware of the facts, MSC dispatched a letter to the President, which contained the history of events as they transpired. The revenue obtained by MSC from this first self-generated project under this contract was $12.
4) Dialogue with the Farmers
The Study Team and MSC held meetings in 3 regions to hold dialogue with the farmers with the objective of the farmers gaining understanding of MSC activities, encourage participate and utilize actively, obtain the requests of the farmers and pass on the experiences of Japanese farming, particularly providing introduction to apple cultivation technology with the hope that they would use such information as reference. The meeting held in Kosor Village of Jet-Ogug rayon was a response to a request to the Study Team made by the resident support measures group for Kumtor, a gold mining joint venture between a Canadian firm and the Kyrgyz government.
While most of the farmers showed interest in MSC activities, at Kuturgu Village, the influential persons commented, “I am satisfied with purchasing by intermidiates. There is no need for quality check or sorting and I don’t want be bogged down in troublesome tasks. intermidiates take all including faulty produce and give us cash on the spot. That is fine”. On the other hand, in Aral Village, the most elder person was the quickest to understand and apropos and was discussing with those in attendance, “we are lagging behind in all aspects and if we stay the course it will not lead to success. We need to learn and make efforts”. In Tosor Village, an opinion of a woman, “unless we have our own capability to sell and escape from the dependence on agents there will be no progress or prosperity” led the entire group. Variety of desires of farmers was collected. Photographs introducing the apple cultivation and sales situation at a coop store drew the admiration and sighs of all attendees.
2-72 5) Cooperation with the “Almaty Sauda” a Municipal Retail Market”
The market was opened by the City of Almaty with the objective of stably providing good quality food to consumers at prices lower than general stores to curb the rapidly rising prices for food.
Through meetings with a group of Almaty business representatives that had been visiting Issy-Kul in June and a follow-up visit to the market by MSC marketing staff, a basic agreement was reached with regard to cooperation between MSC and the market. As the first project, 3 tons of apricots for which MSC had been requested for cooperation in sale in Jet-Oguz 郡 were selected as the test sale. It was agreed in principle that farmers would assume responsibility for collection, assumption of price risk, and quality while various services including securing of selling location, arranging packing, transport, customs clearance and selling at the market would be undertaken by MSC. Outlook for positive profitability after detailed cost calculation was obtained but just prior to the implementation in early July, it was determined from Kazakhstan that as of June 25th all imports of agricultural produce from Kyrgyz was prohibited by Kazakhstan(9) and the implementation of this project had to be suspended. The cooperative relationship with the market continues and preparations were begun to resume as soon as the import ban is lifted with apples, pears, vegetables and others after September.
With the lifting of the import ban imposed by Kazakhstan on August 15th, the cooperative relationship with the market was reconfirmed and specific preparations are being made to implement sale of apples and other Issyl-lul produce in the market. 1st shipment from the region and sales at the market will be made 15th September.
6) Selling washed and packed potato to a Supermarket (2-nd round) Operations were reopened after 3 months after a rebuilding of the entire procurement process and undertaking a reforecast. The washed potatoes due to the heating and lighting in the supermarket began to germinate and returns arose causing suspension of delivery in 4 weeks. During the time, the prices of purchased potatoes continue to rise significantly and placed pressure on the planned profits (there is a 2- week time-lag built-into the negotiation with the supermarket). The sales volume during the period from 4 to 26 April was 1,151 packages (3,128 kg) and the profit was symbolically positiv
7) The 3rd Marketing research of Kazakhstan cities: Astana, Pavlodar, Karaganda and Almaty The 3rd marketing research of Kazakhstan was conducted from 1st to 12th July 2006. The objectives of research were Astana, Pavlodar, and Karaganda cities. Expert on marketing visited wholesales markets, trade companies, seed selling company, processing company and others. As a result of this research was established partnership with above mentioned organizations and collaboration about future cooperation. Also was known that wholesale market “Shygys” is an agricultural base for north regions of Kazakhstan and part of the product delivers to south of Russia, in Omsk, Tomsk, Novosibirsk and other. During this research expert on marketing got agreements with 2 entrepreneurs of wholesale market “Shygys” who work their more then 10 years, on delivery of apple from Issuk-Kul region, one of them are ready to take products on terms of EXW. There is an agreement with one of the kazak processing company “Alina” who is producing juice and jams, about delivery of apples, apricots and currant bush as a raw materials for production.
(9) With respect to this measure to ban imports by Kazakhstan was never reported by the government let alone mass media including newspapers or television.
2-73 8) The 2nd Marketing research of Russian cities: Novosibirsk and Ekaterinburg The leader of JICA Study Team jointed to expert of marketing during 2nd marketing research and visited together Novosibirsk and Ekaterinburg from 28 of July to 5 of August. During staying in that cities were visited wholesale and retail markets, supermarkets, transportation companies, customs dealers, quarantine offices, trade companies and enterprises which are specialized in wholesale trade on agricultural products. On meetings there was agreements with most of above mentioned organizations about future cooperation with MSC. As a result of marketing research was known that Yekaterinburg is becoming more European city, where agricultural products presented by producers from Europe, Argentine, Brazil and other countries of South America and from other countries. Market requirement for quality is very high and Supply of agriproducts from Kyrgyzstan will be very limited due to quality and high cost of transportation. (possibly apricot by illegal supply) In these case agricultural markets of Novosibirsk, which is 3rd biggest city in Russia, is more free and there is a possibility for agricultural products from Kyrgyzstan to enter because of not so strong quality requirement in the market. As for products more competitive products from Issuk-Kul could be only apples, other products could not be competitive because of price or quality. MSC will study a possibility of apple sales in November in order not to compete with Krasnodar and Chinese apple that are supplied in September-November in big volume supplied by rail way. The terms of potential partners – delivery of products on terms of DDP.
9) Identification of Hyphantria Cunea Problem and Related Situations In early May hyphantria cunea emerged in mass numbers in Chui oblast and Bishkek and, at the same time, propagation around the border boundary regions, including Almaty, spread. Representatives from the quarantine agencies of the 6 neighbouring countries, including Russia, held a meeting to discuss counter- measures in Almaty and examined the damage and eradication measures. As June rolled around hyphantria cunea showed further increase and the Kazakhstan Government, on June 25th, issued a measure banning import of all agricultural produce from Kyrghystan that had not been heat- treated. At the end of July, quarantine specialists from both Kazakhstan and Kyrgyz gathered in Bishkek and as a result of a study by Kyrgyz of the state of the eradication measures and at the request of Kazakh side, a plant quarantine station were established by Kyrgyz at 《Kordai and Ak-Jol》 and 《Kara-Su – Kelek》, major borders with Kazakhstan. This led to the lifting of the ban on imports as of August 15th. This was a combined result of Kazakhstan giving consideration of the rapid rise in vegetable and fruit prices in Kazakhstan, Kyrgyz making honest efforts to eradicate the problem and measures to prevent the spread of damage to Kazakhstan in the future. MSC, in their MSC NEWS No.10, compiled a special issue on the problem of hyphantria cunea including the Kazakh import ban and its lifting. And distributed the issue widely among the farmers in the regions and received messages of appreciation from the farmers.
10) Nematoda Problem
In a wide area of Kyrgyz the farmlands were polluted with Nematoda and, as a result, Kazakhstan’s import ban on Kyrgyz potatoes was further strengthened10. For regions that depended on potatoes as their primary crop, this was a major problem but the oblast government or the Ministry of Agriculture do not appear to show much sense of urgency or to be taking serious steps to examine or implement measures toward the
(10) This was made clear from a response by the Almaty oblast plant quarantine station against an inquiry by MSC. As this was breaking news, it was distributed to the Issyk-kul oblast government and rayon offices
2-74 lifting of the ban (prohibition of farmlands in polluted regions, implementation of eradication measures and the like). This problem was raised the previous year by Kazakhstan and sought radical measures to the Kyrgyz government but no progress was seen and it is likely that the Kazakhstan quarantine authorities, feeling a sense of urgency, took the drastic step of banning imports.。 In reality, as noted in pages 72 – 73, the reason for non-action on the Kyrgyz side may lie in the fact that smuggling is so rampant that there was actually little damage to Kyrgyz. During July to August of this year, it was apricot season in Issyl-kul but in spite of the import ban by Kazakhstan, prices did not suffer a fall and most were shipped to Kazakhstan and Russia by agents of smuggling trade. In addition to a thorough eradication measures for farmlands suspected of being polluted with Nematoda, serious response including adoption of high quality seeds, prevention of continuous planting and soil improvements are needed.
2-3-6 Implementation Summary for September to November 2006
1) Marketing, Sales Promotion and Quality Improvement
During the period from September to November, focus was placed on the preparation and implementation of practical application of the following items that had been planned. a) Direct Sales of Issyk-Kul Oblast Agro-Produce in the Municipal Almaty Sauda Market
After completion of prior needs and price surveys, an appeal was made to the farmers in Jeti-Oguz District, arrangements were made for wooden crates etc. and in the afternoon of September 23rd, 2 tons of two varieties of apples, 1 ton of carrots, 1 ton of cabbage, 500 kg of red beets, and 100 kg of garlic were loaded on to a medium-sized reefer truck(11) accompanied by 2 MSC staff and 1 farmers' representative, departed for Almaty with all necessary documents in hand. In order to avoid paying bribes, (stopping cars at will to extort bribes) by policemen while passing through Kazakhstan it was arranged for the Director of the Almaty Sauda Market to meet us at the Kegen Border crossing Customs point. In spite of having paid the Kazakh VAT and customs fees as stipulated, there was a long delay in the issuance of a transit permit and darkness fell before we were able to cross the mountain. A 6000 Tenge (approximately ¥5,500) bribe was demanded without which we would not be allowed passage and on the advice of the Director of Almaty Sauda Market that it would be better not to create a stir, 6,000 tenge was paid and we passed across the Kazakh border. From the point of view of the customs officer, it probably meant that a precedent that “if it is legal a bribe is unnecessary” could not be set (as this would result in reducing their income).
It was difficult for the accompanying 3 staff during the sales process in the Almaty Sauda Market. The quality of the produce brought to the market was, at best, comparable and most was slightly inferior to that produced locally in Kazakhstan. A bumper crop of apples had been grown near Almaty and the price was low while the carrots had been washed before bringing them to the market and, because they were packed before they were completely dry due to lack of time, there were several problems including starting to rot.
Due to the small size of the market, produce was trucked to other wholesale markets and after a week everything had been sold. This experience taught several important lessons regarding the markets, including that red beets that sell well are those that are small, the key selling points for apples are variety and appearance and only unwashed carrots will last. The trip made a slight loss (including the cost of MSC staff
(11) MSC Chairman provided the truck at a rate that was 3000 som lower than going rates
2-75 travel expenses). The officials at the Almaty Sauda market, from the Director down, were extremely cooperative. During the period, proposals were received from large Kazakh intermediaries for future association with the MSC.
Based on the above initial experience, preparation for the second round were made from late October but, in the end, there was a shortage of agricultural produce in Issyk-Kul that was competitive in terms of quality and price (legally exported), a shortage of potatoes the import ban on which into Kazakhstan had been lifted and retention of produce awaiting price increases in the new year. In addition, it was decided that Director Ainula, the person in charge, would go to Japan for training, thus, resulting in a decision to postpone the second round. Sales of Issyk-Kul agro-produce at the market Almaty Sauda b) Sales of Potatoes to the Narodniy Supermarket Chain
Trial sales of bagged, washed potatoes to the supermarket chain after strict screening for size and quality and packaging into 2 kg plastic nets took place in February and April, and the MSC (Issyk-Kul Agro) had gained sufficient know-how of how to operate without incurring losses. The ownership of the supermarket changed from Russian to local Kazakh ownership but the proposal by MSC to reinstate the sale of potatoes was welcomed and a basic agreement regarding supply was concluded at the end of November.
With respect to sales, the following structure for procuring and selling potatoes after taking into account the fact that in Issyk-Kul, there was already a dearth of potatoes among farmers except for those farmers and storage operators identified as holding out for high prices and the quality risk is extremely high, a lesson learned from past experience and one that definitely should not be assumed.
Partner A (Wholesale Market Intermediary)-procure, select, wash, reselect, Procure, Order dry, package, Payment labeling Narodnyi Issyk-Kul Agro Returns Take delivery of (Sales through (Procure, sales to and products from A settlement with 22 outlets) Narodniy) Partner B
(Delivery to supermarket) Delivery Instruction of Take delivery of packaged volumes to each outlet potatoes from A and deliver to supermarket Delivery in the name of AI outlet
Fig. 2-3-6: Procurement and Sales Structure for Potatoes 2-76
By establishing the above structure, IA was able to take care of its most important issue of quality risk by contracting the quality assurance to a professional at inspecting potatoes working in the wholesale market. Partner A has already established a track record of working with AI in delivering produce in March and April and AI has a degree of confidence in A. When produce is returned by Narodniy, if the return to A is within 3 days, it will be the responsibility of A. A will incorporate this risk into its pricing. Partner B will be requested to deliver to 22 of the supermarket outlets and B will carry 1 person as a backup. IA has already secured the services of a self-employed driver with his own lorry as a backup. Normal practice for Narodnyi for small deliverers is to make cash settlements against delivery slips 1 week after delivery but we had this changed to a bank transfer. (It will free us from having to line up at the Narodnyi head office window). The delivered price was accepted as presented by IA and delivery began on December 11th. c) Sale of Gift Packaged Apples to Narodniy Supermarket
In Kyrgyzstan, the sale of apples is mainly at the roadside in 1 kg lots. Apples are sold in supermarkets and food stores, most of which are damage, rotten or infested with worms. The intent behind proposing to Narodnyi the sale of a dozen quality apples of uniform size packaged in a box as a gift was: - it is almost impossible for consumers to select and buy only good apples - it is the custom of Kyrgyz people to get together on many occasions such as visiting relatives, celebrating birthdays and other celebrations and each time it is the custom to bring an item (often vodka) but the variety of gifts or good fruit when visiting the sick are limited. - in Bishkek, the middle class is growing and the class of people who are willing to spend more for good quality is growing rapidly - apples are a gift for any occasion (when visiting the sick, vodka is generally not suitable). Apples packaged in an attractively decorated box are also easy to carry.
Narodnyi agreed immediately consent and accepted the price proposed by IA and requested early delivery. This project involved a multi-faceted preparation period including finalizing the shape and dimensions of the box and the production and printing of the box lid, foam-plastic netting (skirt), procurement, selection and boxing of high quality apples and in order to meet the yearend sales preparations were begun in late August.
D, a joint venture with a Chinese enterprise and located in Bishkek is the only one capable of manufacturing cardboard boxes and in spite of many meetings, a sample product was only available after a month and delivery would be next year making the product useless for this particular project. It was discovered that E, a printing company, had also begun producing cardboard boxes and a meeting was held with its president who said that it was technically possible and could be delivered on December 14th. However, as he had no cardboard supplies, he requested that cardboard be supplied. After a thorough search a source was found, although the quality was slightly below what was desired but acceptable and it was taken to B and the design to be printed on the box cover was sent by email. The company was to prepare a sample within 2 days and upon approval, begin production. In parallel with preparing the boxes, a supplier of high quality apples in Issyk-Kul was sought. Although there was an apple farmer (second son) who had supported the project and had stored good quality apples, the eldest son had sold the apples to a broker during his absence and we were forced to seek a new supplier.
2-77 The apples being stored in the oblast was limited and we were not able to find good quality apples. Fruit farmers refused to let good quality apples be selected. There was a suggestion Chinese grown apples , which were of much higher quality than Kyrgyz apples, be used, but as this could lead to local local fruit farmers misunderstanding the purpose of the MSC and IA, this suggestion was dropped and it was decided to search among dealers in Bishkek that had large supplies of stored apples. After several days, E came back saying that they were not able to manufacture the model as they had no experience and there were no technicians who could design and build the model. Chinese manufacturers were also asked but due to the small order (10,000 boxes), no one showed much interest. In Kyrgyz only A can manufacture simple cardboard boxes and implementation of this project on which a lot of energy had been devoted in 2006 had to be stopped. d) Import and Sale of SANTE Elite Dutch Grown Seed Potatoes
Potatoes are the main agricultural produce of Issyk-Kul but due to several factors the quality of the potatoes is quickly deteriorating. As part of quality improvement measures, as noted in (1) -1) in 2-3-6-1, the MSC had arranged for the purchase of 13 tons of seed potatoes (2nd generation) from “N” in Osh and distributed the seed potatoes to farmers. Generally, this was well received by the farmers but in reality 3 or more varieties had been mixed and a mixture of 3rd generation seeds was suspected. As a result, the desire for procuring Dutch grown elite seeds heightened among farmers and the MSC undertook a survey of farmers’ wants and confirmed that there was a high level of need. In addition to initiating negotiations for imports with G, the Kyrgyz agent for F, which is one of the largest seed potato producers in Holland, a campaign was waged with farmers. On November 28th, IA signed an import agreement for 18 tons of Elite Glass SANTE with G (the agreement was as we drafted it). Disseminating information about the sale and preparation of purchase requests and agreements required some thought, taking into account various risks. Taking into account spreading the seeds among as many farmers as possible, providing benefits for the MSC members and ensuring a profit for IA, an upper limit was set for purchases by any single farmer and the price for MSC members was discounted by 2 som per kilogram as shown in the sales conditions noted in Table 2-3-6 below. Orders were taken from November 23rd and due to the large area of distribution, 3 delivery locations were set up in, Tyup Village, Karakol, and Kuizy-Su.
Table 2-3-6 Price Setting for Dutch Grown Seed Potatoes SANTE (Elite)
Purchase Volume Price per kg Purchaser per Farm (prepayment) Obligation Max Min. If 100% If 50% 5% of MSC Member 800 kg 100 kg 48 som 49 som harvest to be provided to MSC General Buyer 500 kg 100 kg 50 som 51 som free of charge* * In the agreement with the farmers, the specific volume was stipulated. MSC would earn by selling these 1st generation seeds to use as part of operating costs of MSC.
MSC and IA in anticipation of not being able to sell all 17 tons, are considering several options, including securing several safe and secure storage locations and undertaking joint operations with motivated farmers and cooperatives. As regards seed potato sales, a broker who had been selling 1st and 2nd generation seeds produced in Russia or Kazakhstan purporting that the country of origin had been Holland and claiming in Jeti-Oguz that IA’s
2-78 price was high but if they purchased from him the cost would be 30 soms per kilo, resulted in a large number of farmers who had made preliminary purchase commitments cancelling their orders. As of December 15th, the sales volume for which advance payments had been made totaled 2.2 tons (14 farmers) indicating a delay in the tempo of sales. e) Exports of Apples to Kazakhstan and Russia In Kazakhstan, there were some inquiries but due to a bumper crop of apples in Kazakhstan the local prices were low and no transactions were concluded. An inquiry from a fruit trading company in Semiparatinsk for a reefer truckload (18 tons) had progressed but just before a contract was concluded the farmer sold the produce to a broker from Bishkek who had offered a higher price. The farmers seem to have a low level of resistance to brokers who come by truck and approach them with cash. With respect to Russia where the level of demand for quality is rising, even among Issyk-Kul apples that are considered by farmers to be of good quality, it is reckoned that only 1 in 30 are of export quality while on the other hand, farmers do not readily accept product screening and it proved impossible to organise any exports. f) Sales of Cheese There was a request from Ak-Jalga (the largest cheese manufacturer in Issyk-Kul) for the MSC and IA to collaborate with the company in selling cheese in Bishkek. A person who is already selling cheese to end retailers in Bishkek was introduced to the company. A basic agreement was reached and a tri-partite agreement with IA being the prime distributor and the person being the seller was concluded. Because another company currently employs this person, the business will be initiated once he has terminated his employment and obtained a patent (a tax payment document). Under this agreement, MSC will receive 2% of sales as a commission from AK-Jalga. g) Cooperation with Donor Project and the Local Administration
g-1) RAS (Switzerland, others) A request for cooperation in a farmer awareness survey in the Issyk-Kul eastern shore region was received from RAS Bishkek Headquarters, who had decided the MSC was the best qualified. A questionnaire to farmers regarding land rights to be conducted twice a year on a fee basis would be good for the MSC including using agents, generating income and establishing relationships with farmers and it was decided to work with RAS.
g-2) Apple Project (Mercy Corps USA) This project was engaged in providing cultivation technical guidance to apple growers in Jeti-Oguz and provided support in purchasing seedlings and repairs to a storage warehouse (350 tons) that had been abandoned and was in ruins. MSC has established a close working relationship with the project and introduced Japanese apple cultivation methods to the fruit farmers involved in the project. Unfortunately, the project with Mercy Corps will terminate in February 2007. The expectations from MSC support in marketing apples on the part of the farmers involved are high. Farmers understand the need for improved cultivation methods and quality and have begun to make efforts but the current quality of apples lacks value as a commercial product.
2-79 g-3) SECO Project (EBRD) This project has the objectives of improving management and supporting increased sales by Kyrgyz enterprises and calls for providing half of the technical assistance expenses related to specific management improvement projects. The MSC is in the process of registering as a consultant at the recomendation of the Project Director. There has been an expression of support for a project that has been conceived by the MSC that says, “This item is one that has a content that is most appropriate for the project and full support will be provided and we would like to see its implementation”. As there are components that cannot be performed solely using MSC resources, the project will be implemented after next spring with the cooperation of a qualified consultant located in Bishkek. Agreement in principle has already been reached with the consultant.
g-4) Farmer to Farmer Project (Winrock, USA) MSC received a request from Winrock for cooperation in determining target fields and regions for several experts to be sent to Issyk-Kul next spring by Winrock to provide farming improvement support. MSC, feeling that the themes targeted for support as proposed by Winrock were not necessarily consistent with the needs in the district, made its own proposals and farmers meetings were organized in Tyup, Ak-Suu, and Jeti-Oguz rayons on October 16th and 17th and discussions were held with farmers and representatives from Winrock. As a result of the meeting, the support target themes (areas of expertise of the experts to be sent by Winrock) were determined as follows. Tyup Region - potato cultivation, Akusui Region – vegetable cultivation, Jeti Oguz Region – apple cultivation. It was decided that Winrock would send an expert (farmer) for each theme, a total of 3, from next March.
g-5) ABCC (Agro-Business Competitiveness Centre, IRBD) MSC has a mutual information exchange and amicably cooperates with the Centre concerning mutual business objectives. ABCC highly regards the activities of the MSC and is very interested in cooperation with MSC. ABCC and MSC have agreed to establish close cooperation relation in field of information exchange, training and export marketing and sales promotion.
g-6) Other Donor Projects There have been many visits or contacts with other donor projects including the local market development project (Helvetas), RAS, GTZ and many others and information and experience exchange contacts have been established for the future.
g-7) Cooperation with Local Administrations - Tyup Rayon Agriculture Council In September, the Akim of Tyup established the Agricultural Development Advisory Committee to discuss the country’s agricultural policies with a small number of people and the MSC has become a member.
- Issyk-Kul Colleagues' Meeting The Governor of Issyk-Kul asked the Director of MSC to attend the oblast Colleagues' Meeting, which is held twice annually for oblast administration leaders, rayon mayors, village mayors (mayors of Ail- Okmotus), heads of related oblast government organs and representatives of large enterprises.
2-80 - Issyk-Kul Oblast Administration The Study Team Leader and the Director of MSC were asked by the Governor of Issyk-Kul to expand the geographical coverage of activities from just around Tyup to include the entire Issyk-Kul oblast and to change the name of the Tyup MSC to Issyk-Kul MSC.
The new governor, who took office in late November, in addition to appreciating and the MSC and IA’s policies and past achievements, really wants to expand and strengthen their activities and promised all possible support (a conversation in Bishkek between Governor Isaev and the Study Team Leader).
2-3-7 Technology Transfer
(1) Period from August 2005 to June 2006
Taking into account the difficulties facing MSC activities, the demand for a high level of implementation capabilities, the dearth (or lack of) marketing or business experience among the 4 staff who have been hired since August 2005, the technology transfers made by the Study Team from August 2005 to August 2006 were focused on the 4 staff learning marketing and business knowledge and gaining experience.
In particular, (1) a strategic approach to problems and issues, (2) learning business knowledge and tools, (3) speed and accuracy in tasks, and (4) risk management and the mutual inter-relationships between the above 4 items were stressed in the guidance.
Transfer of knowledge and experience in the above items were made principally through on-the-job training (OJT) using dialogue, discussions and exchanges of electronic mail with respect to the various issues arising in the course of daily business activities. In addition, a text specifically written by the Study Team Leader for this purpose (in Russian 102 pages) was used as teaching material in lectures and examinations to impart international knowledge for trade transactions.
With respect to the strategic approach referred to in (1), the 4 staff learned a systematic method of thinking that approaches the essence of the problem in the shortest amount of time, formulates multiple alternative solutions and prioritizes them. The gaining of knowledge of what is needed in preparing a business plan was also included as a theme in this segment.
With respect to the learning of business knowledge and tools in (2), marketing methods were faced in reality during the second Almaty market survey in which the Study Team participated. What should be researched, where should be visited, preparatory survey, whose cooperation should be obtained, what should be discussed with whom and what should be elicited, how to raise the other party party's in areas where we intend to work, what are the principle impediments, which are the high probability targets, how to wrap up discussions quickly, what should be done in order to leave a favourable impression, what should be extracted and emphasised from the survey results and how to compile them into a document were all topics that the marketing specialist who accompanied the team gave the staff using concrete practical illustrations. 2 letters addressed to the Narodnyi Supermarket Chain eventually involved all the staff (after two prepared the draft and explained why such proposals were inadequate). The submitted letter completely achieved the objectives that each had intended. Of prime importance is that in business, the achievement of results supersedes any actions, issues need to be examined from all aspects beforehand, being well prepared and the need to resolve everything in one letter or one meeting was understood.
2-81 With respect to (3), that in business both speed and accuracy are needed and for this, one needed to be versed in how to think precisely and without losing the opportunity, doing the least favoured tasks first and speed of decisions and action is needed, were well understood.
However, in practice, particularly regarding telephone conversations, there were instances where unpleasant items were not said when they should have been and as a result the other party took advantage making subsequent negotiations difficult and this lesson was given repeatedly.
The problem that arose from delivering potatoes to Narodnyi that led to withdrawing from the primary transaction provided teaching material with respect to (4). Concrete knowledge based on first hand experience with respect to first having to stop the bleeding, lock in the loss (not allow further losses), thinking of ways to reduce losses and taking quick and aggressive actions, quickly informing the customers and gaining his understanding (the need for concise but adequate explanation that can gain the understanding and not cause problems for the customer), isolating the root of the problem, taking to heart that it is not to be repeated and at the same time beginning preparations for resuming business, examining expense estimate amounts and appropriateness and providing information at appropriate times to Narodnyi were learned by the 4 staff in how to respond when there is a financial risk in a transaction or when trouble occurs.
(2) Period from June to November 2006
During this period, training with the emphasis on acquisition of the practical knowledge needed to function in business was provided by the Study Team using OJT with respect to the various problems that actually arise in the course of business. Training was implemented with the emphasis on how to prepare strategic business correspondence, how to prepare and negotiate agreements, how to prepare implementation plans for projects and steps for their implementation (an example is attached).
In particular, during the period from September to November 2006, during the course of making preparations to deliver potatoes and boxed apples to the Narodniy Supermarket, preparing to sell apples, cabbages, carrots and the like in the Almaty public market, setting of selling terms and preparing an agreement, OJT was continuously given that provided guidance on daily situational analysis, daily target achievement and methods, how to negotiate with the other party, preparation of agreements, writing correspondence and telephone responses. While the Study Team was away, email and conferences via Skype and telephone were implemented and there was no break in the training.
For the MSC staff, save for the delivery of potatoes to the supermarket, all were first time experiences and furthermore they were projects with significant risks attached and as a result, the staff and the Study Team both experienced heightened concentration and enhanced implementation capability of the above items.
While accurate understanding is quick when an actual example is presented and explained, when the staff is confronted with actually having to prepare agreements or correspondences on their own, it is not so easy to achieve the desired level and training was repeated in the environment of actual live experiences. As a result, when preparing agreements and order forms, they have attained the level where they can be given an 80% mark.
Guidance e-mails (in Russian) given by the Study Team while not on site numbered more than 10 on busy days. (We are considering attaching an annex (200 pages) compiling extracts of emails to the Russian version of the Report. JICA (Bishkek) has also received suggestions for separate printing).
2-82 (3) Summary on Technology Transfer
For technology transfer, adequate knowledge and experience relating to technology and proficiency in methods of transferring and implementing capabilities and having a passion about transferring knowledge are sought by technology providers and, on the part of the recipients of technology transfer, basic knowledge and motivation and to be in situations where such knowledge and experience are required, are necessary conditions.
Because of the limited time of 1.5 years, it was necessary to concentrate various learning experiences into a short period. In respect of creating opportunity, due to the understanding of JICA, it was possible to implement concentrated marketing to Kazakh and Russian markets several times within this short period. In the second year, it was a significant plus that there was the necessary budgetary backing for the operations with all 4 staff having PCs and mobility. The availability of the opportunity for the two key staff to obtain training in Japan was a substantial plus in the maturing of the staff and implementation of operations.
There was an instance where a staff member, without any consultations or reports, took action on their own and entered into a business in which the loss was obvious. When several people become involved in a business, there will always be a risk associated with commitments or transactions that have not been cleared organizationally. The incidence of this type of problem requires enormous energy and time to resolve and takes away from being able to engage in other forward looking business, creating a double negative for the organization.
Those who act on their own without consulting superiors exist, in great numbers, in any sphere. In many cases it reflects the psychological weakness of the person. They are not able to negotiate firmly with those who are stronger than they are, yet they have a strong desire to express themselves and they fear that if they approach their superiors, their weak response would be pointed out and they would not be able to do as they had hoped. Thus, for those who wish to do it their way, a special set of rules is needed to point out their weaknesses and enable them to understand the need to overcome this.
Experience of failure is also necessary for future success. For early growth, it would be desirable to accumulate many failures that incur small losses at an early stage. Failure is also said to be the mother of success. It is heartening to be able to say that the MSC staff, whilst having experienced failures has, in a short time, been steadily developing. With a certain amount of innate abilities, motivation is the priority factor. In terms of motivation, the staff member in question undoubtedly has it and it is certain that he will in the future develop into a core manager of the MSC and IA.
Due to such a short period, there were only a limited number of cases that could be used as OJT tools and many risks still remain within the MSC and IA. That they have generally become able to prepare agreements and order forms has been a major accomplishment given the level of immaturity at the start. Several sample agreements and volumes of correspondence and letters have been accumulated electronically. This will be the future starting point for development.
Much still has to be learned regarding negotiating skills and correspondence and the staff still have a tendency to give away information first. Giving information should be kept to a minimum and only as a means of obtaining information. Once information has been provided, there is little else that can be done. Key information should never be provided. Weakness in business means softness in profits and an outflow of information or not being able to obtain information that needs to be obtained.
2-83 Correspondence cannot yet be said to be first class. This touches on the essence of doing business, but the fact that they have not fixed their eyes on the counterpart and business environment is at the root of their immaturity but repeated OJT has led to substantial improvements and are on the development track. Business relies on experience.
The above-mentioned issues were stressed repeatedly and strict OJT was given. From where they started, all of them can be said to have made great progress.
For the development of agriculture in Issyk-Kul, improvements in quality along with having the ability to sell are essential and the fostering of resources that are able to undertake marketing and sales cannot be achieved overnight and even with the right raw material requires time, expense and experience. In addition, a specialist who can provide appropriate guidance will also be needed.
MSC staff members were able to go through in 1.5 years what normally would have taken at least 3 years. They have already become a precious resource for the oblast. It is an accomplishment achieved only because it was a JICA project.
The opinions of the Study Team were given to MAWRPI, local governance bodies, local farmers and enterprises and the issues were pointed out without any reservations. These opinions and issue identifications were significantly different from the thinking and awareness that had normally been accepted in Kyrgyzstan and likely acted as a certain stimulus by pointing out the essence of the current state and issues in Kyrgyz agriculture as seen by an outsider. By the latter part of 2006, the number of people who had begun to share the views of the Study Team and issues identified, had grown. It can be considered to be a part of technology transfer.
2-3-8 Products of Project Implementation
The MSC, since its opening on September 5th 2005 till end of November 2006 implemented various activities despite various obstacles.
MSC activities were significantly impeded by a series of events that included smuggling that was rampant when exporting goods to Kazakh and Russian markets (goods exported formally could not compete with smuggled goods in price), suspension of sales of apricots to Almaty immediately before execution due to a total ban by Kazakhstan on imports of Kyrgyz agricultural produce from June 25th to August 15th, a ban on on imports of Kyrgyz grown potatoes to Kazakhstan, which is still in force, a ban by Russia on imports of Kyrgyz livestock and meat and related products introduced in August, are some of the import bans on the major agricultural produce of the region.
There is yet to be a conspicuous success story that can be recorded but the 8 items noted below may be considered as certain results of the activities undertaken by the MSC.
1) A proposal made to the Narodniy supermarket chain was turned into reality and the supply method adopted for potato which were selected, washed and packed into 2.5 kg plastic drew a favourable response from some consumers. Narodniy asked for an early resumption of deliveries and a structure was set up that would make aprofit and in early December delivery of 2 kg packages resumed. From December, much time and energy were spent in preparing sales of gift packs of 4 and 12 selected apples, a project that eventually was postponed due to the inability to source boxes. In the process of the preparations, the low quality of Issyk-Kul apples (most were non-standard, damaged and worm ridden and if the good apples were sorted into the same size, only 3 out of 100 could be sorted) was
2-84 driven home and MSC was made aware of the weakness of the industrial base when it was discovered that a simple cardboard box could not be manufactured in Kyrgyzstan. Relationships with apple farmers were established. The level of awareness by farmers also began to change somewhat and the foundations for implementation next year have been laid.
2) Almaty Sauda, the public market in Almaty and MSC have concluded a cooperation agreement relating to the sale of Issyk-Kul grown agricultural produce and from September 23rd, the first trial sale of Issyk-Kul grown apples, cabbages, carrots, beets and garlic has been implemented. MSC became well aware of the fact that the quality falls below those that are being sold in Almaty and that to show a profit from legal exports, a substantial amount of ingenuity and improvements in quality and assortment are needed and some campaigning farmers willing to participate need to be found. We were able to establish a basis that through implementing second and third sales and accumulating know-how it will be possible to sell and make a profit. Through these sales, relationships with several large buyers in Almaty were established and there is some anticipation that a path has been laid to enable large transactions to be made in future seasons.
3) The MSC website is establishing itself as being effectively the sole source of information dissemination from the region. By providing important news, including accurate market information and information on measures to combat disease and insects through MSC NEWS, the news bulletin and agents, it is becoming an important source of information not only for farmers but also for government administrations, regional mass media, and many other institutions.
4) In response to the desires of the region’s farmers, 13 tons of seed potatoes (2nd generation) were introduced from the N seed farm in Osh and local farmers were appreciative. From the same district, 100 kg of German seeds were introduced and on 4 farms the crop yields were favourable.
5) 18 tons of SANTE (ELITE) seed potatoes were imported from Holland and sold. We feel it will make a significant contribution to improving the quality of Issyk-Kul potatoes whose quality level is deteriorating drastically
6) MSC expanded its area of activity from just in Tyup to include other rayons and undertook a campaign for various farm management improvements. It began in September 2005 with a membership of 7 but now has 35 members as of December 1st. Considering that the annual dues of 500 soms are not cheap for the farmers in the region, it can be seen how highly farmers rate MSC activities.
7) Good relationships have been established with donor projects, government administrations and various other institutions.
8) As noted in 2-3-7 Technology Transfer, MSC has accumulated know-how from their experience from surveys, successes and failures and the level of knowledge and experience of the staff have been enhanced substantially. The basis on which future contributions can be expected has been formed.
2-85 2-3-9 Ensuring the Sustainability of MSC Activities After the P/P (pilot project) ends
(1) Establishment of Issyk-Kul Agro
MSC has collected a lot of information during the one and a half years since it began and has become well versed in the issues facing the region’s agriculture. Through marketing, niche markets, which the region’s farmers can access, are being developed and at the same time, they are making important contributions with respect to quality improvement of farming techniques and produce. MSC NEWS has become an accurate source of information for people in the region involved in farming. The project will end as a pilot project for the JICA Study in this period (February 2007). There are many who would like MSC activities to continue. How to secure sustainability for MSC activities is an extremely difficult issue given the fact that many donor projects become effectively extinguished or dysfunctional within a year of their involvement ceasing. The Study Team, from the stage of planning for the implementation of the P/P have examined how the MSC can be run after the P/P ends. In October 2005 Issyk-Kul Agromarket, whose function it is to play the role of the Profit Centre executing the sales projects developed by MSC was established as an organization to secure revenue to make such management possible. In December 2006, it was reorganized and reregistered as Issyk-Kul Agro. The shareholders are MSC Staff and a few others but they are expected to increase over time. The division of roles between MSC and IA are as shown in Fig 2-3-9.
MSC Issyk-Kul Agro
Information & PR Service Joint Work Proposals, Negotiations, (Website, MSC NEWS) Finding Buyers Concluding Sales & (Sellers) Procurement Contracts, Marketing, Organization Proposals, Shipment, of farmers, Consulting. etc Negotiations Payment/Collecting Bills
Commission
Fig. 2-3-9 Division of Roles between the MSC and Issyk-Kul Agro
AS shown in the above diagram, management of MSC is assumed by beneficiaries of MSC services and IA transactions. The total expenses for March to December 2007 after completion of the P/P are estimated to be USD22,600 and a joint management plan as shown in (2) below has been prepared.
The plan is nothing more than a plan and there are no assurances that things will go as planned but at this point in time there are already several projects that have the potential to produce profits and projects are increasing in number. If MSC and IA fully utilize the knowledge and experiences gained from the JICA P/P and implement appropriate risk management, the plan would not be unachievable.
If JICA is able to provide support through sending specialists, the likelihood of achieving it would be further enhanced.
2-86 As shown in the management plan, MSC will expand its activity coverage to the entire Issyk-Kul oblast and will become more business oriented and engage in businesses that will bring about many concrete benefits to the beneficiary.
(2) Management Plan for 2007 – 2008 for MSC and Issyk-Kul Agro
1) Basic Management Policies
- In the period 2007 to 2008, MSC will pursue its own business objectives while securing its own revenue sources and Issyk-Kul Agro will finalise the transactions developed by MSC and secure revenue thereby establishing the foundation for their existence.
- Issyk-Kul Agro, based on the benefits for the region, will closely collaborate with the MSC and develop into a sustainable and profit generating enterprise supporting the MSC management
2) Mana Jet-Ogug rayon gement Plan - Management Indicators: 2007 – breakeven operations and achieve current profit of $5,300 during 2008 business year Management Indicators 2007 (Mar – Dec) 2008 (Jan – Dec) MSC IA Combined MSC IA Combined Operating Profit $7,200 $15,400 $22,200 $8,800 $28,000 $36,800 Gross Expenses $7,170 $14,875 $22,045 $8,700 $22,800 $31,500 Current Profit $30 $525 $555 $100 $5,200 $5,300 The contracts of the 7 MSC agents will be continued with expenses borne by MSC and the 2008 IA expenses include sufficient amount for office rent.
2-87 Выпуск № 10 Июнь 2006 г Выпускается Новости ЦМУ ежемесячно
с. Тюп, ул Боронбая 53, Тел: (03945) 2-11-68,Факс: (03945) 2-11-68, Эл. почта: [email protected], Web: www.marketing.tyup.org.kg © При перепечатке материалов ссылка на ЦМУ обязательна.
Информационный бюллетень Тюпского центра маркетинговых услуг
Введение карантина в Республике Казахстан на кыргызскую сельхозпродукцию и нынешнее состояние
С июня месяца 2006 года по настоящее время в Чуйской области и городе Бишкек складывается сложная фитосани- тарная обстановка в связи с широким распространением опасного карантинного вредителя—американской белой бабочки (АББ). Этот вредитель появился в Кыргызстане еще в 2004 году, но отсутствие информации и незнание широкого насе- ления о вреде, приносимом АББ, способствовало быстрому и широкому распространению вредителя. В целях взаимного предохранения территорий Кыргызской Республики и Республики Казахстан, предотвращений распро- странения карантинных объектов на территории Республики Казахстан американской белой бабочки, Министерством сель- ского хозяйства РК был введен запрет на ввоз из Кыргызской Республики на территорию Казахстана всей термически не обработанной сельскохозяйственной продукции с 25 июня 2006 года ( письмо Министерства СХ Республики Казахстан Ми- нистерству сельского, водного хозяйства и перерабатывающей промышленности Кыргызской Республики от 23 июня 2006 г. под №10-1-4-9/102 ). Для решения возникшей проблемы Правительством Кыргызской Республики были приняты меры по обнаружению и локализации очагов поражения. Сотрудники государственного Департамента химизации, защиты и карантина растений выявляют в Бишкеке и Чуйской области очаги поражения и проводят их обработку. Для борьбы с вредителем были выде- лены средства: Правительством КР—2 млн. сомов, мэрией города Бишкек - 800 тыс. сом, а также в городе Алматы было выделено дополнительно около 1 млн.долларов. Государственной карантинной службой РК также проводится комплекс мероприятий по обнаружению и уничтожению пораженных очагов АББ. Также для решения данного вопроса в конце июле текущего года была создана двухсторонняя комиссия карантинных служб Кыргызстана и Казахстана. Специалисты соответствующих служб РК приезжали и в течении недели ознакомились с мероприятиями, проводимыми их коллегами по борьбе с АББ и нынешним состоянием дел. По мнению казахских каран- тинных служб, меры, принимаемые кыргызской стороной по борьбе с АББ, проводятся в достаточной мере, очаги пораже- ния выявляются и локализуются. 29-30 июля 2006 года были проведены совместные контрольные обследования пригра- ничные территории Жамбыльской области РК и Чуйской области КР. Комиссией установлено, что на приграничной терри- тории КР по первому поколению вредителя, зарегистрировано 1500 га зараженных участков. Проводятся мероприятия по локализации и ликвидации объектов. Лечение пораженных очагов проводится препаратами Димилин 48% и Пикет 100г/л в смеси, что дает высокую эффективность и вызывает массовую гибель вредителя. На территории РК был обследован Кор- дайский район, где тоже были выявлены очаги заражения и тоже были проведены обработки на площади 109,2 га. Карантин, введенный в связи с появлением АББ, возможно будет в ближайшее время отменен, при соблюдении нижеследующих условий, требуемых казахской стороной. Комиссией, было предложено несколько предложений, реализа- ция которых будет способствовать скорейшему снятию запрета: 1. Создать Министерством СВХиПП КР приграничные фитосанитарные (карантинные) посты на автопереходах «Кордай-Акжол» и «Карасуу– Ак-Келек» 2. В связи с отрождением второго поколения гусениц АББ, провести детальное обследование прилегающих пригранич- ных территорий и организовать мероприятия по локализации и ликвидации вновь выявленных очагов вредите- ля. 3. Организовать соответствующим пограничным постам по карантину растений тесное взаимодействие с целью опе- ративного решения организационных и иных вопросов. 4. Своевременно информировать о фитосанитарном (карантинном) состоянии, особенно приграничных территорий 5. Оказывать взаимопомощь по своевременной локализации и ликвидации очагов карантинных и особо вредных ор- ганизмах 6. Все грузы растительного происхождения сопровождать фитосанитарными(карантинными) сертификатами, заверен- ными подписью инспектора по карантину растений, удостоверяющего фитосанитарное состояние экспорт- ных—импортных подкарантинных грузов и печатью установленного образца Работа комиссии была осуществлена в целях реализации Соглашения о сотрудничестве в области карантина растений между странами СНГ, принятое 13 ноября 1992 года в Москве, Соглашения между Правительством РК, КР, Республики Таджикистан и Узбекистан. Решение этих предложений способствовало тому, что 15 августа 2006 года запрет был снят в отношении АББ, но ограни- чение остается в силе на картофель в связи с болезнью – золотистой нематоды и на животноводческую продукцию. Для провоза картофеля необходимо с провозимой партии провести анализ продукции в Государственной карантинной службе Казахстана и только при получении необходимых результатов, возможен ввоз продукции.
2-88 Выпуск № 10 Июнь 2006 г Выпускается Новости ЦМУ ежемесячно
с. Тюп, ул Боронбая 53, Тел: (03945) 2-11-68,Факс: (03945) 2-11-68, Эл. почта: [email protected], Web: www.marketing.tyup.org.kg © При перепечатке материалов ссылка на ЦМУ обязательна.
Информационный бюллетень Тюпского центра маркетинговых услуг
Американская белая бабочка
Американская белая бабочка АББ (Hyphantria cunea Drury) повреждает около 300 видов древесных, кустарниковых и травянистых растений. Наиболее излюб- ленные среди них шелковица, клен американский, яблоня, слива, груша, айва, че- решня, вяз, бузина, грецкий орех, ива. Дефолиация насаждений, вызванная гусени- цами АББ, приводит к ослаблению и гибели отдельных растений, особенно при многократном повреждении. В результате снижается защитная, декоративная и эстетическая функция лесных насаждений и декоративных культур, ухудшается обитание фауны и сокращаются рекреационные площади. Гусеницы являются пи- щевыми конкурентами тутового шелкопряда. Волоски гусениц могут вызвать аллер- гические реакции у человека. При поедании гусеницами деревьев резко снижается урожайность последних, а то и вовсе отсутствует. К примеру, повреждение кроны на 20% приводит к потере 5-10% плодов, а уничтожение половины зеленого покро- ва чревато собственно уменьшением урожайности наполовину. Бабочки этого вида чаще всего белоснежные, с шелковистым отливом, реже с черными или темно-коричневыми точками на крыльях; размах крыльев - 25-35 мм. Вылет бабочек из куколок происходит в основном с наступлением сумерек. Самки откладывают яйца в один слой, как правило, на нижнюю сторону листьев, чаще по краям кроны деревьев. Яйцекладки (0,5-3,5 см2) содержат 200-2000 и более зеле- ных, желтовато-зеленых шаровидных яиц размером 0,5-0,6 мм. Оптимальными условиями для развития яиц являются температура плюс 23-24 градуса С и относи- тельная влажность воздуха 75%. Только что отродившиеся гусеницы светло-желтые, длина их 1-1,5 мм, взрос- лых 30-40 мм. Тело густо покрыто щетинками и волосками, на спине у гусениц стар- ших возрастов оно бархатисто-коричневое, с черными бородавками, по бокам жел- тые полосы с оранжевыми бородавками. Гусеница имеет шесть-семь возрастов. Гусеницы выделяют паутину, которой оплетают вначале 1-3 листа, а затем большее число, образуя паутинное гнездо. По мере развития, в конце 5-го возраста гусениц, гнездо увеличивается от верхушки к основанию ветви, нередко достигая 1- 1,5 м. В этом же возрасте гусеницы покидают гнездо и расползаются по всему де- реву. Количество возрастов зависит от условий обитания и колеблется от 6 до 8. При температуре +19,5о С гусеничная стадия протекает за 38 дней, при +23о С - за 28 дней. Перед окукливанием гусеницы активно передвигаются в поисках укрытия. Зимует куколка в рыхлом сером коконе из волосков гусеницы в трещинах под корой деревьев, сухих листьях, растительном мусоре на земле, трещинах зданий, заборов, в почве. Основная часть куколок в почве находится на глубине 3-5 см, отдель- ные особи обнаруживаются на глубине 15 см. Некоторые гусеницы летнего поколения окукливаются на листах в кроне. Часть куколок (до 10-15%) впадает в диапаузу, то есть выход бабочек из них произойдет только через год. Бабочку-вредителя выявляют визуально в процессе обследования насаждений. Для этого внимательно осматривают отдельные ветви и периодически их встряхивают. Потревоженная бабочка слетает и через 5-6 м садится. Можно отлавли- вать бабочку ночью на свет или УФ-ловушку, а также на опытные образцы синтетического полового ферромона. Отлов производится в период, когда температура воздуха поднимается выше 15о С. Гусениц находят по характерным для амери- канской белой бабочки паутинным гнездам. Куколок обнаруживают при почвенных раскопках, в ловчих поясах и различного рода укрытия. Основной путь распространения - транспортными средствами при перевозке сельскохозяйственной продук- ции и промышленных грузов. Возможен пассивный перенос на значительные расстояния воздушными потоками. Средняя скорость распространения в стране составляет 30-40 км в год. При обнаружении поврежденных растений или бабочек, гусениц или куколок, просим вас немедленно связаться с инспекцией по карантину растений по адресу: г Каракол, ул Лизы Чайкиной, 18, тел. (03922) 5-97-77, Иссык-кульская служба по карантину растений
2-89 Chapter 3 Master Plan
3-1 Proposal for a Master Plan for 3 Target Study Areas (Osh, Naryn and Issyk-Kul oblast)
As seen in Chapter 2, the Study Team following up on Phase 1 prepared 31 items of action plans as issues for Kyrgyz agriculture of which the following 3 items have been chosen as high priority issues for pilot projects. Over a period of one and a half years an experiment was implemented to show that, with a small investment of capital and careful management, issues facing Kyrgyz agriculture could be solved or at least improved. Mady Cotton Exhibition Farm (Osh Oblast Kara-Suu County Mady A/O (ayil okmotu)) Sheep Fattening Experiment (Naryn Oblast, Naryn Rayon, Min-Blak A/O) Creation of a Marketing Services Center (Issyk-Kul Oblast, Tyup Rayon with neighbouring regions)
The Master Plan relating to promoting Kyrgyz agriculture that the Study Team will propose in this chapter is a master plan that presents the promotional measures in the agricultural sector based on the results of the study with particular emphasis on the various information and experiences of discovery, failures and successes gained when implementing the above 3 pilot projects.
In preparing the plan, the following points were emphasized.
－ Fully digesting the current Kyrgyz social and economic conditions and resolving the fundamental issues facing agriculture (including the processing industry) － Restructuring the roles of state institutions and local governance bodies, management and awareness reform, and the development and utilization of human resources － Ensuring food safety in the agricultural and livestock products produced － Effective utilization of resources, improving farming methods and enhancing quality － Fostering and enhancing sales capacity in the region including marketing, storage, sales, and transportation － Awareness, efforts and capacity development and the burden of the parties engaged in farming, including farmers and those engaged in enterprises, administrative institutions and the like － To address resolving issues based on own efforts without relying on donor support
The Master Plan does not address Kyrgyz agriculture in its entirety but it will present possible ways to resolve or improve some of the major issues confronting Kyrgyz agriculture without having to commit large sums of money and it will further present specific promotional measures. As to the issues taken up by the Plan and the main Implementing Agency, oblast or rayon administration which is based on deep involvement and close interest in the promotion of agriculture has been chosen as the main implementing unit. Principally in the 3 oblasts (rayon) where the Pilot Project was implemented, and the other 2 rayons (Suzak, Jalalabad oblast and Kara-Bura, Talas oblast) which were included as target study areas are noted.
3-1 This entire chapter will be the Master Plan and individual policy recommendations will be in the form of an action plan (A/P), and specific proposals based on the recommendations or project implementation will be an Action Plan Component (AP/C).
3-1-1 Objective for preparing the Master Plan and Underlying Awareness
During the period from the implementation preparation period from July 2005 to the project implementation in November 2006, the Study Team encountered various issues being faced by agriculture in the region. Most of the issues were not limited only to the P/P implementation region but are common to all agriculture in the Kyrgyz Republic.
Many of the issues are rooted in the breakdown of the socialist supply system in the former Soviet Union and the lack of funds faced by the government since independence. Lack of farm machinery, fertilizers and agricultural chemicals, irrigation system breakdowns, replacement of obsolete facilities and shortage of funds and most of the themes for requests for support made to the donor are for these needs. These are certainly some of the important issues that need to be resolved for Kyrgyz agriculture to develop but the Study Team believes that more than the lack of such production tools, there is a more fundamental issue that has arisen with respect to future agricultural development the resolution of which is of a higher priority.
One of these issues has been the emergence of many novice farmers who obtained farmland, livestock and pastures under the land reforms. Most of these farmers have not had the opportunity to learn the necessary knowledge or gain the necessary experience of farming and even today, to put it bluntly, are lackadaisically engaged in farming.
The distribution of farmland provided many residents who were without work with a place to work and source of income and for the state, provided significant benefits in securing a source of staple foodstuffs. The reform has produced a certain number of excellent farmers. On the other hand, 10 years have elapsed without any examination having been made of the potential problems that may arise by relying on agricultural output by people without any knowledge or experience of farming and what measures can be taken at state level to ameliorate the incidence of such issues. As a result, it is the view of the Study Team that serious issues exist that are fundamental to the future development of agriculture in Kyrgyzstan.
The Study Team, in the process of implementing operations intended for the Marketing Services Center (Tyup, Issyk-Kul Oblast), was confronted with various realities and issues. Some of these are discussed below.
The Master Plan will be prepared using Issyk-Kul and Naryn oblast as a case example for some of the issues with the intent of enabling oblast agriculture to provide safe and high quality agricultural and livestock products to consumers and develop with an eye to the future resulting in higher incomes for oblast residents.
The Master Plan is based on the following thinking
3-2 1) Kyrgyzstan has been blessed with natural and climatic conditions suited to agriculture and livestock industries and there is a significant potential for the development of such industries but not only is the potential not being exploited, but also the faming environment is quickly deteriorating and in some areas serious problems are occurring. The various conditions existing in agriculture and the social environment noted in previous sections are emphasized as reality.
2) Of the issues that exist, measures to solve fundamental problems will be given priority. Therefore, issues of shortages of farm machinery or fertilizers and agricultural chemicals and other shortages of goods will not be dealt with in the Plan.
3) There will be no quantitative target setting. We feel that it would be meaningless to discuss the expansion of production, introduction of superior livestock breeds or increasing the number of head without first solving the roots of the various problems that are impeding the development of Kyrgyz agriculture. Thus, the Plan will not deal with setting quantitative targets as to what and how much to cultivate and by how many sheep flocks should be increased.
4) Many of the issues are thought to be principally of the making of the farmers themselves against the background of dysfunctional state administrative machinery. Farmers who have created the issues are not themselves aware of this. Donors or third parties cannot solve the problems that have been created or are being created by the farmers. The issue is that there is no other way other than having those who created the issues, in other words, the farmers and their representatives and those who failed to take measures to address the issues, i.e. the administration, tackle and resolve the issues. Donor organizations can only assist their efforts.
5) The aim will be to produce high quality agricultural and livestock products and processed goods and to establish an oblast brand that will be accepted by consumers. Actions will be planned to resolve those issues that are impeding achieving this.
6) With the oblast administration’s initiative, development and utilization of the region’s human resources and efforts and work of the residents and farmers, emphasis will be placed on actions that can resolve the problems without the need for funds.
7) Although different themes are taken up for each oblast, this does not suggest that the proposal is meant only for that oblast because many of the issues are common to other oblasts and by incorporating the features peculiar to each oblast, the Master Plan mostly will be equally useful for other oblasts.
3-3 3-1-2 Composition of the Master Plan
In this Master Plan following Action Plans (A/P) and A/P components are proposed.
Ref. No Action Plan Ref. No Action Plan Component Osh oblast AP/C 1-1 Cotton Industry Development Policy A/P-1 Cotton Growing Assistance Plan AP/C 1-2 Institutional Capacity Building Plan
Naryn oblast A/P 2-1 Establishment of State Livestock AP/C 2-1 Establishment of State Livestock Experiment Station Experiment Station A/P 2-2 Project for Proper Utilization of AP/C 2-2 Appropriate Grazing land Use Plan Pastures A/P 2-3 Sheep Fattening Promotion and Breed AP/C 2-3 Sheep Fattening Promotion and Breeding Improvement Project Improvement plan Issyk-Kul oblast Reform of the Oblast Administration’s AP/C 3-1-1 Formulation of the oblast administration's Mission and role mission and role A/P 3-1 - Reform and Strengthening of State AP/C 3-1-2 Setting up an Issyk-Kul Farming Agricultural Related Departments- Improvement Center - Use of the Mass Media to Educate AP/C3-1-3 Farmer education and enlightenment and Enlighten Farmers campaign Securing the Safety of Agricultural AP/C 3-2-1 Harmful Weed Elimination Project A/P 3-2 Produce, Meat and Processed Products AP/C 3-2-2 Technical Support to Apple Growers and improvement quality of produce AP/C 3-2-3 Establishment of an Oblast Agricultural Testing Center Promotion of Processing Industry and AP/C 3-3-1 Priority Processing Enterprise Support A/P 3-3 Support to Processing Enterprises Strengthening marketing and AP/C 3-4-1 Implementation of marketing using the
development of private sector related MSC to cover the entire oblast sales and logistics AP/C 3-4-2 Support of Fostering of a Trading - Strengthening Marketing Company A/P 3-4 - Fostering of a Trading Company - Opening a Retail Outlet in Bishkek AP/C 3-4-3 Organization of an Issyk-kul Agricultural to Sell Issyk-kul Agricultural Produce Retail Outlet in Bishkek Produce AP/C 3-4-4 Support for Establishing Transportation / - Fostering of Logistic Enterprises Warehousing Company - Fostering Management and AP/C 3-4-5 Holding a Management and Entrepreneur Entrepreneurs Development Development Seminar
3-4 3.2 Cotton Growing Assistance Plan (A/P-1)
3-2-1 Background to the Plan (1) World Cotton Trend World cotton production has been constantly expanding since the 1950s. About 7million tons of lint were produced in 1950/51 and about 25million tons in 2006/7, about 3.8 times that of 1950/51. This trend of increasing cotton production comes from a combination of increased yields (1.2 times) and expanding planted areas (3.1 fold increase) as shown in Table 3-1-1. Fig. 3-1-2 and Fig. 3-1-3 below.
Table 3-1-1 World Cotton Production Year Area Fibre Yields Production ha x 1,000 kg/ha ton x 1,000 50/51 28,537 (100) 233 (100) 6,645 (100) 60/61 32,445 314 10,201 70/71 31,778 369 11,740 80/81 33,667 411 13,831 90/91 33,050 574 18,978 00/01 31,766 612 19,457 01/02 33,396 644 21,500 02/03 29,872 646 19,297 03/04 32,021 647 20,714 04/05 35,332 744 26,290 05/06 34,252 723 24,752 06/07 34,924 (122) 725 (311) 25,323 (381) Source: ICAC, Cotton World Statistics, May 2006, 05/06 and 06/07 data are estimated
Source: ICAC, Cotton World Statistics, May 2006 Source: ICAC, Cotton World Statistics, May 2006 Fig. 3-1-1 World Cotton Lint Production Fig. 3-1-2 World Cotton Area
Source: ICAC, Cotton World Statistics, May 2006 Fig. 3-1-3 World Cotton Lint Yields
3-5 (2) Lint Price Trend Lint price trend of the international market: Standard - Liverpool Cotton Outlook-Index A from 1990/91 is shown in Fig.3-1-4. After the price reached 91.77Cent in 1994/95, it has shown a downward trend till now. This trend is similar to the price trends of other international crops. The factors affecting price are volumes of lint production, consumption and international lint reserves.
100.00 90.00 91.77 82.90 85.61 80.00 78.59 70.00 70.59 72.21 69.19 63.04 57.04 60.00 57.69 58.89 57.20 55.71 53.52 50.00 52.84
US/lb 40.00 41.81 30.00 20.00 10.00 0.00 1990-1991-1992-1993-1994-1995-1996-1997-1998-1999-2000-2001-2002-2003-2004-2005- 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Cotton Outlook -Index A Source: www.cootlook.com
Fig. 3-1-4 Cotton Lint Market Price Trend for 1990-2006
Up till recently the declining lint price in the international market resulted from the following factors: ○ Since cotton growing is subsided and locally produced cotton lint prices are subsidised in the USA and Europe, farmers in these regions have expanded cotton growing; ○ Because of incomes guaranteed by cotton subsidies, farmers have been able to purchase expensive farm inputs, for example, they have borne the high cost of genetically modified seeds that were bred by giant seed companies to introduce insect and herbicide resistant genes into cotton varieties; ○ These technological development help cotton farmers in developed countries attain high yields; ○ In order to sustain higher production costs and avoid environmental pollution, Integrated Pest Management (IPM) was invented, resulting in low chemical costs even in unfavourable weather conditions, leading to larger cotton growing areas and more cotton; ○ Fibre materials, including manmade fibres, for the textile industry were diversified after World War II and as a result the proportion of cotton fibre against total fibre consumption fell to less than 50%, as cotton consumption was negatively affected by the comparatively cheap manmade fibres; and ○ In developing countries that are located in arid and semiarid zones, residents continue cotton growing even with low net incomes. This is because no other alternative cash crops have been easily identified to replace cotton.
(3) Production, Consumption and Exports in Major Cotton Countries Cotton lint prices are significantly influenced by changes in cotton chain related policies in textile industry countries. For example, the total cotton production increased by 183% from 13.8million tons in 1980 to 25.3million tons in 2006, a period of 25years, On the other hand, Chinese production increased by 226% from 2.7million tons to 6.1million tons.
3-6 Table 3-1-2 World Cotton Production in the Major Cotton Producing Countries
1980 1985 1990 1995 2000 2005 2006 Total Production in the 13,831 17,461 18,978 20,330 19,457 24,752 25,323 World China Mainland 2,707 4,146 4,508 4,768 4,417 5,770 6,187 USA 2,422 2,924 3,376 3,897 3,742 5,204 4,780 India 1,322 1,964 1,989 2,885 2,380 4,051 4,287 Pakistan 714 1,216 1,638 1,801 1,816 2,110 2,265 Uzbekistan 1,671 1,728 1,593 1,254 975 1,230 1,107 Brazil 623 793 717 410 939 1,061 1,160 Others 4,372 4,689 5,158 5,315 5,188 5,327 5,538 Source: ICAC, Cotton World Statistics, May 2006
Chinese consumption shown in Table 3-1-3, increased by 330% from 3.3million tons in 1980 to 10.9million tons in 2006. The lint production and consumption trend of the country influences the world cotton lint price.
Table 3-1-3 World Cotton Consumption
1980 1885 1990 1995 2000 2005 2006 Total Consumption in the World 14,215 16,589 18,574 18,405 19,842 24,984 25,766 China 3,300 4,117 4,225 4,350 5,197 9,800 10,907 India 1,371 1,564 1,958 2,576 2,924 3,600 3,816 Pakistan 461 533 1,343 1,540 1,764 2,387 2,530 EU, C. EUR & Turkey 3,942 4,458 4,180 2,336 2,361 2,175 2,110 East Asia/Australia 1,832 2,029 2,482 2,160 2,075 1,789 1,756 USA 1,283 1,396 1,885 2,318 1,929 1,306 1,208 Brazil 556 692 723 818 873 870 870 CIS 0 0 0 441 657 711 721 Others 1,459 1,619 1,779 1,865 2,062 2,345 2,367 Source: ICAC, Cotton World Statistics, May 2006
While China does not play a substantial role in world cotton exports as shown in Table 3-1-4, Chinese exports are closely correlated with international lint price fluctuations as indicated in Fig. 3-1-5.
Table 3-1-4 World Cotton Fiber Exports
1980 1985 1990 1995 2000 2005 2006 Total Exports in the World 4,414 4,479 5,073 5,999 5,881 9,370 9,371 USA 1,290 427 1,697 1,671 1,472 3,701 3,661 CFA Zone 185 336 495 614 756 988 1,039 Uzbekistan 0 0 0 940 800 981 858 Australia 53 255 329 308 849 665 631 Brazil 21 78 167 22 68 460 500 Greece 13 16 86 275 270 360 298 Mainland China 0 607 202 5 97 0 0 Source: ICAC, Cotton World Statistics, May 2006
3-7 Fig. 3-1-5 Parallel Movements in Cotton Prices and net Exports from China
Source: UNCTAD secretariat (Data: International Cotton Advisory Committee - ICAC)
(4) Cotton Lint Price in 2005/2006 The Cotton Lint Price (Index A (NEx)) in 2005/2006 fell to US$52.0/lb in August 2005 and peaked at US$62.0/lb in February 2006 and stayed high even after February 2006.
Fig. 3-1-6 Cotton prices in 2005/2006
Source: 62nd Plenary Session of the ICAC, Gdansk
3-8 (5) Lint Price in 2006/2007 The lint price in 2006/2007 is forecast to stay at a high level due to reduced USA cotton production and the lower international cotton reserves in 2006 as shown in Table 3-1-5 (ICAC, September 2006 report).
Table 3-1- 5 World Cotton Lint Stock at the Beginning of the Crop Year (May)
1980 1985 1990 1995 2000 2005 2006 Total in the World 5,512 10,247 6,146 7,561 10,381 10,827 10,594 Mainland China 299 4,377 989 2,881 4,084 1,552 1,659 USA 653 893 653 557 852 1,230 1,433 Net Exporter 2,768 3,515 3,254 3,034 3,119 6,095 5,815 Net Importer 2,385 6,732 2,892 4,524 7,262 4,732 4,779
Source: ICAC, Cotton World Statistics, May 2006
(6) Cotton Lint Price in the Past Table 3-1-6 shows cotton lint production, consumption, reserves and exports in the world every five years from 1980 to 2005. All have increased year by year, but production and consumption have mostly remained equal. These facts could not explain the trend of cotton lint prices in the past however it is evident that while consumption increased by 176% from 14,215 tons in 1980 to 24,984 tons in 2005, the reserves increased by 196% over the same period. Accordingly, it seems that increased international reserves negatively affect the price trend.
Table 3-1-6 World Cotton Trend
1980 1985 1990 1995 2000 2005 1980/2005 1.79 Production 13,831 17,461 18,978 20,330 19,457 24,752 1.76 Consumption 14,215 16,589 18,574 18,405 19,842 24,984 1.96 Reserve 5,512 10,247 6,146 7,561 10,381 10,827 2.12 Export 4,414 4,479 5,073 5,999 5,881 9,370 Source: ICAC, Cotton World Statistics, May 2006
3-2-2 Cotton related Issues in Major Cotton Producing Countries (1) Cotton in CAF, Former French Colony in West African Countries Cotton is cultivated in the rain-fed area called the Savannas where annual rainfall ranges from 900mm to 1200mm. The region exported only 185 thousand tons of cotton lint in 1980, being 4.3% of total world cotton exports. In 2006, the region exported 1,039 thousand tons of cotton lint, 11.1% of total world exports, (Table 3-1-4). The rapid increase in cotton exports resulted from drastic expansion of cotton growing areas. As shown in Fig. 3-1-7, in spite of the expansion of the cultivated areas, the lint yield stagnated at about 400kg per hectare.
3-9 Fig. 3-1-7 Cotton Trend in Franco-phone Countries 3000
2500 1980 2000 1985 1990 1500 1995 2000 1000 2005 2006 500
0 Planted Area (1000 x ha) Lint Yield (kg/ha) Production (1000 x ton) Source: ICAC, Cotton World Statistics, May 2006
The colonial ruler introduced cotton growing to CAF countries after World War II and the French national cotton company managed the cotton chain from preparing the cotton production plan, distribution of inputs materials, collection of seed cotton, operating and maintaining ginneries to exporting lint. After the CAF countries got their independence in the 1960s, the French national cotton company was converted to African national companies in which the French national cotton company became a minor shareholder. All the cotton chain services were taken on by the national companies, which contributed to ensuring hard currency income for national budgets and international trade for African countries. However, after the collapse of the international cotton price in 1996, the national cotton companies have run up deficits and become heavy financial burdens on small countries. As a result, the IMF/World Bank advised CAF countries to privatise the cotton sector to improve the efficiency and effectiveness of the cotton chain. The IMF/World Bank demanded that CAF countries submit cotton sector privatisation plans as a condition for these countries getting IMF funds to fill the financial gaps in these countries. To a greater or lesser degree, the governments initiated sector privatisation. Meanwhile, CAF governments stood up at the Agriculture Committee of the WTO trade negotiations to accuse developed counties of unfair cotton subsidies and trade. CAF countries complained that these developed countries called for full trade liberalization with developing countries while the developed countries keep protecting their own agricultural sector. In the countries where capitalist systems are not yet fully functional, after cotton liberation was implemented, in many cases, the management of the cotton chain was not well managed by the private sector, or in some cases, even if the governments asked for tenders for privatisation, bidders were not local but former colonial ones. This drastic privatisation might bring about the collapse of the cotton sector in these regions. Moreover, given global warming, rainfall on the Savannah is decreasing and its annual and seasonal rainfall patterns are becoming unstable, which might create difficulties in continuing rain-fed cotton growing.
(2) Cotton in Australia In this country cotton is cultivated in irrigated and rain-fed areas, which recorded one of the highest lint outputs of about 2.3ton on irrigated land. Australian cotton faces limited water resources and saline soil. Therefore, even though it has high yields, harvested areas could not expand easily on arid and semi-arid land to more than the present area. As Table 3-1-4 shows, exports grew from 53 thousand tons in 1980 to 849 thousand tons in 1995, but fell to 631 thousand tons due to low international lint prices and limited water resources in the country. Fig. 3-1-8 indicates that the planted area reached a peak in 2000 and is declining. On the other hand, lint yield per hectare has increased from 1,110kg in 1980 to 1,800kg in 2005, which compensates for the decrease in production caused by the reduction of the planted area.
3-10 Fig. 3-1-8 Cotton Production in Australia
2000 1800 1600 1980 1400 1985 1200 1900 1000 1995 800 2000 600 2005 400 2006 200 0 Planted Area (1000ha) Lint Yields (kg/ha) Production (1000 ton) Source: ICAC, Cotton World Statistics, May 2006
The increasingly high yield per hectare can be attributed to ceaseless improvement of cotton field management on sunny land with low precipitation, along with the introduction of new cotton technologies, such as the introduction of high yielding varieties and IPM. However, except for government support programmes on constructing main irrigation canals, there are no subsidies on production and trade. Moreover, as production and living costs are higher than in developing countries, farmers are obliged to improve their productivity and reduce production costs. Otherwise, farmers would have to leave the cotton sector.
(3) Greece The EC Council Regulation No.1782/2003 adopted in September 2003 introduced a new subsidy scheme called, ‘Single Farm Payment’ to guarantee farmers income levels in place of traditional subsidy schemes directly linked to production. However, the EU is continuing a direct subsidy scheme called ‘Direct Payments’ for less competitive crops cultivated in remote areas of EU member countries. Regarding the cotton sector, 65% of the subsidy is distributed via ginneries and the remaining 35% is paid based on the area harvested, but, the Direct Payments will gradually decrease year by year from 2005 to 2012 and will be finally absorbed in the ‘Single Farm Payment’ scheme. The eligible countries are Greece, Spain and Portugal, backward EU member countries, in which 440 thousand hectares of cotton farms receive subsidies, of which 370 thousand hectares are located in Greece (Table 3-1-7). Up to 300 thousand hectares, one hectare receives a subsidy of 594 Euros and from 300 thousand to 370 thousand hectares 342 Euros per hectare.
Table 3-1-7 EU Cotton Direct Subsidy Total Greece Spain Portugal Area（ ha） 440,000 370,000 70,000 360 Aid/ha, Euros For less than 300,000ha：594 1,039 556 300,000 to 370,000ha: 342.85 Sources: http://europa.eu/scadplus/leg/ Agriculture: General Farm
Greece joined the EU (European Union) in 1981 and enjoyed generous agriculture protection polices and as a result, as shown in Fig. 3-1-9, cotton growing expanded from 1980 to 1995. However, farmers made no efforts to enhance yields of lint due to the hefty subsidy scheme. Since a number of new members have joined the EU since 1995, the burden of subsidies grew for EU member countries and consequently the EU reduced agricultural subsidies. Therefore, Greek farmers stopped extending cotton-growing areas and
3-11 attempted to increase yields through improving cotton growing systems. Accordingly, even though the cultivated area shows clearly decreasing trends from 1995, lint production has not declined.
Fig.3-1-9 Greek Cotton Production
1400 1200 1980 1000 1985 1990 800 1995 600 2000 400 2005 200 2006 0 Harvested Area Yield Kg/ha Production 1000t 1000ha
Source: ICAC, Cotton World Statistics, May 2006
(4) Cotton in the USA In 2006 lint exports from the USA reached 3,661 thousand tons, being 39.1% of the total world export of 9,371 thousand tons (Table 3-1-4). The USA is the biggest cotton lint exporter, however, a number of cotton related issues make the cotton sector in the USA uncertain in the future.
Fig. 3-1-10 USA Cotton Trend
7000 6000 1980 5000 1985 1990 4000 1995 3000 2000 2000 2005 1000 2006 0 Harvested Lint Yield/ha, Lint Lint Lint Export, Area 1000 ha Kg Production, Consumption, 1000 x ton 1000 x ton 1000 x ton
Source: ICAC, Cotton World Statistics, May 2006
Firstly, the USA cotton chain is supported by huge subsidies, which are now the subject of great dispute at the Agriculture Committee of the WTO. African cotton countries strongly accuse the USA of operating highly integrated subsidies. The USA has ignored demands for more than 10 years, but now it is uncertain that the USA can keep its previous position. Anyhow, even if subsidies were only partially cut off, many cotton farmers would face serious difficulties growing cotton. Secondly, there are two types of growing, namely irrigated one and non-irrigated. In the western part of the country, water is supplied from the Colorado River, which is suffering declining water flows because of the need to convert irrigation water to domestic use. In mid western states, the ground water table is falling due to pumping more from fossil aquifers than can be replaced naturally. Therefore, cotton grown in these irrigated areas will have water appropriation issues. Thirdly, higher crude oil prices might affect cotton production due to the expansion of
3-12 corn planting in place of cotton. This is because the USA government intends to substitute 40 % of gasoline with ethanol, which will be produced from corn. Cotton growing will compete against corn in many cotton- growing areas. In the event of continuing high oil prices, growing areas for corn for ethanol will be expanded at the cost of cotton.
(5) Cotton in India Of the total world cotton growing area of about 33million hectares, about 9.1 million hectares are cultivated in India, about 28% of the total and 5% of the total cultivated area of India. Therefore, India has the largest cotton growing area in the world. It is said that India and Pakistan are historically the origin of cotton growing and have been growing cotton since ancient times. The traditional domestic cotton species are Gossypium arboretum and Gossypium herbaceum. Gossypium arboretum is short fibre cotton used for mattresses, canvass, etc., which is called Asian cotton. At present Gossypium herbaceum is seldom planted in India. During the British colonial period along with the Industrial Revolution, the cotton fibre processing industry developed in England using steam power, for which American Upland cotton, Gossypium hirsutum and long fibre cotton, Gossypium barbadense were introduced to supply a wide range of different types of cotton lint. However, the cotton lint production amounts to only 4.1million tons, which is third after China of about 5.8million tons and the USA of about 5.2million tons (Table 3-1-2). This figure is attributed to a low cotton lint yield of 465kg per hectare (Table 3-1-8), which is remarkably lower than other leading cotton producing countries, except for CAF countries. This is because not only high yielding upland cotton but also rather low yield Asian cotton is cultivated in northern India along with low yield long fibre cotton to satisfy the varying demands of clients in the countries of the former colonial rulers (Table 3-1-9). Moreover, the cotton is cultivated in different geographical zones of nine States from North and Central to South, which have different natural conditions and production infrastructures. In three States in the North, more than 90% of cotton farms are irrigated and in the Central State of Maharashtra, rain-fed cotton is grown. On average, in India, the irrigated cotton rate is only 34%, which is one of the main reasons for the low yields. India produces about 90 thousand tons of ultra long or long fibre cotton, fourth in the world after the USA, Egypt and China. These factors cause low yields of cotton lint. However, the diversified quality of lint production ensures the development of the textile and fibre industry in India in local markets and increased exports depending on the diversification of demand in the world market.
Fig. 3-1-11 Cotton Trend in India
10000 9000 1980 8000 1985 7000 6000 1990 5000 1995 4000 2000 3000 2000 2005 1000 2006 0 Harvested Lint Yield/ha, Lint Consumption, Lint Export, Area 1000Xha Kg Production 1000xTon 1000xTon 1000xTon
Source: ICAC, Cotton World Statistics, May 2006
3-13
Table 3-1-8 Cotton Production Trend in India
1980 1985 1990 1995 2000 2005 2006 Harvested Area (1000 x ha) 7,824 7,533 7,440 9,063 8,578 8,873 9,139 Lint Yield/ha (Kg) 169 261 267 318 278 467 477 Lint Production (1000 x Ton) 1,322 1,964 1,989 2,885 2,380 4,148 4364 Consumption (1000 x Ton) 1,371 1,564 1,958 2,576 2,924 3,600 3,816 Lint Export (1000 x Ton) 140 63 255 121 24 600 894 Source: ICAC, Cotton World Statistics, May 2006
Table 3-1-9 Area of Irrigated Cotton in India: 2000-2001 by State
Region State Irrigated Cotton Area (1, 000 x ha) Irrigated Cotton Area (%) Southern Andhra Pradesh 192 18.8 Karnataka 73 13.4 Tamil Nadu 65 38.3 Central Gujarat 631 39.0 Madhya Pradesh 144 29.4 Maharashtra 131 4.3 Northern Haryana 554 99.7 Punjab 721 99.6 Rajasthan 496 97.3 India 3,007 34.3 Sources: Statistical Abstract India, 2003, Central Statistical Organization, Ministry of Statistics and Programme Implementation, Govt. of India. Fertilizer Statistics 2003-04, The Fertilizer Association of India
Table 3-1-10 World Extra Long and Long Staple Cotton Output (in tons)
Country 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
United States 146,812 84,717 152,943 147,683 94,122 150,981 Egypt 229,677 207,723 313,171 286,347 225,500 280,666 Sudan 11,705 18,535 23,959 45,186 53,000 60,000 Uzbekistan 9,800 11,200 17,000 16,500 17,000 14,000 Tajikistan 7,800 10,000 18,000 33,000 17,000 28,000 Turkmenistan 17,000 20,000 30,000 24,000 27,300 25,000 India* 100,000 85,000 80,000 60,000 70,000 90,000 Peru 9,596 1,2537 6,000 3,600 4,048 8,000 China 16,700 61,600 97,100 70,000 113,500 98,100 Israel 9,950 8,000 19,000 16,500 7,300 10,000 Australia 4,850 3,300 7,945 1,362 114 1,500 Others 5,000 4,000 3,000 4,000 4,000 4,000 Total 568,890 526,612 768,117 708,177 632,884 770,247 Note: * =Comprises DCH-32, together with MCU-5 from some areas and bunny from 2004-05. Sources: Cotton outlook, 2004-05
3-14 (6) Cotton in Pakistan The origin and development of cotton growing are almost the same as in India. However, in Pakistan annual rainfall is less than in India, where cotton cannot be cultivated without irrigation. Therefore all cotton is cultivated on irrigated land, yielding more than India at 500kg of lint per hectare (Fig.3-1-12). In recent years, the textile and fibre industry has shown rapid growth decreasing exports of cotton lint due to increased local consumption.
Fig. 3-1-12 Cotton in Pakistan
3500 3000 1980 2500 1985 1990 2000 1995 1500 2000 1000 2005 500 2006 0 Harvested Lint Production, Export, Area, 1000 Yield/ha, Kg 1000ton 1000ton ha
Source: ICAC, Cotton World Statistics, May 2006
(7) Cotton in China China has the second largest cotton harvested area, its lint yield exceeds 1.0 ton and it produces the most lint in the world at about 6.2million tons. Based on an abundant supply of raw material and cheap, high quality labourers, the textile and garment industry has developed rapidly. Cheap clothes from the state owned companies are taking over the markets in developing countries. Chinese private companies supply cheap but high quality products to supermarkets and clothes chain stores in developed countries. Meanwhile, famous brand names are setting up joint ventures with Chinese enterprises to produce high quality clothes. The various textile materials are supplied not only from local supplies but also from outside China, such as Japan and Italy. As mentioned above, the Chinese textile and clothes industry can supply any kind of product from cheap underwear for developing countries and low and middle class products for developed countries to expensive high quality branded products. In order to supply this huge volume of clothes worldwide, China consumes more than 10 million tons (Fig.3-1-13) of lint annually, which will convert China to a net lint importing country in the near future. China has improved its lint yield from 500kg/ha in 1980 to more than 1,000kg in 2005 by means of introducing genetically engineered disease resistant varieties and IPM. While the cotton growing area has not expanded due to industrialization in the cities and urbanization in rural areas, total cotton lint exceeded 6 million tons however rapidly expanding local consumption absorbs its cotton lint export capacity. If these trends continue, China could be a net cotton importer soon. In fact, Kyrgyz ginneries have been contacted by Chinese traders to assess their export capacity.
3-15 Fig.3-1-13 Cotton in China
12000
10000 1980 1985 8000 1990 6000 1995 2000 4000 2005 2000 2006 0 Harvested Lint Yield/ha, Prodution, Consumption, Export, Area 1000xha Kg 1000xton 1000xton 1000xton
Source: ICAC, Cotton World Statistics, May 2006
3-2-3 Cotton in Central Asia (1) General Cotton growing in Central Asia was recorded in the 18th Century. After the Soviet Union was established in 1917, the centrally planned economic system intended to supply all its requirements within the Soviet Union, which also included self-supply of cotton lint in Central Asia to all over the Soviet Union and after World War II even to COMECON member countries. After World War II, the Central Committee of the Soviet Union initiated large irrigation projects in the deserts of Central Asia, which intended to convert the deserts to irrigated arable land for cotton and rice with water from the Amu Darya and Syru Darya that originated in the from high mountain areas of the West Tien Shan Mountains covering Kyrgyzstan, Tajikistan and Afghanistan. Both rivers originally flowed into across the desert into the Aral Sea, a landlocked lake. The irrigation projects created about 2million hectares of irrigated farmland in Kazakhstan and Uzbekistan by using all the water of the two rivers. As a result, the rivers disappeared before reaching the Aral Sea hence, at the beginning of the 1990s, the Aral Sea dried up, creating an environmental disaster in and around the Aral Sea, Cotton data for the 1980s have not been released except for those on Uzbekistan. In Table 3-1-11, cotton data on five republics are shown. All the republics had decreased their cotton production until 1995, however, after that, two different trends have been observed, namely, the group such as Uzbekistan and Tajikistan that have been unable to stop declining cotton production and the second group (Kazakhstan, Kyrgyzstan and Turkmenistan) that has stopped its decline.
Table 3-1-11 Lint Production in Central Asia Unit: 1000xTon 1980 1985 1990 1995 2000 2005 2006 Uzbekistan 1,671 1,728 1,593 1,254 975 1,210 1,143 Kazakhstan 102 78 85 138 140 Turkmenistan 256 130 187 215 210 Tajikistan 437 235 106 138 146 Kyrgyzstan 25 24 27 36 37 Total 2,413 1,721 1,380 1,735 1,676 Source: ICAC, Cotton World Statistics, May 2006.
3-16 (2) Uzbekistan Uzbekistan is the biggest cotton producing country in Central Asia (Table 3-1-12 and Fig.3-1-14). The cultivated area reached about 2 million hectares in 1988 but decreased rapidly after 1990. Except for CAF and Central Asian countries, all other cotton-growing countries have improved cotton lint yield during the past 30 years. Moreover, cotton yields in Central Asian countries have stagnated for the last 10 years. Consequently, cotton production has decreased from 1.7 million tons in the 1980s to 1.1 million tons in 2006. Even though Uzbekistan has suffered from declining production, it is still ranked as the fifth largest cotton producing country and the second largest cotton exporting country after the USA. In 1998, foreign currency earnings amounted to US$5billion, about 41% of total commodity exports. The poor performance of the cotton sector resulted from changes in industry due to the collapse of the Soviet Union. In the past, all produced cotton had been procured by a state agency of the Soviet Union. However, after independence, barter with COMECOM member countries ceased and instead, international trade has been introduced based on international currencies, mainly the US dollar. This has created confusion in trading (while cotton could be exported in dollars, modernizing ginning machinery and facilities should also be done in dollars, but for buyers, sometimes dollars are not available on time). Moreover, water resources have become depleted and increasingly saline soil limits cotton growing. The most important factor affecting cotton production is state owned farms. Uzbekistan has not adopted quick liberalization policies in its economic structural reforms and the government also intended to achieve self-sufficiency in staple food within the newly created framework of the Republic. Therefore, farmers have been forced to cultivate the crops decided by the government and while cotton was the bird that delivered golden eggs, the bird was not fed enough and instead subsidies went to wheat and corn production to maintain self-sufficiency. Hence, cotton farmers lost their dedication to cotton farming, resulting in low productivity. After the government accepted the advice of the IMF/World Bank on liberalizing foreign currency exchange, a liberalized policy has been gradually implemented, even in the cotton sector. The policy reforms and the cotton production trend should be watched.
Table 3-1-12 Cotton Production Trend in Uzbekistan 1980 19851990 1995 2000 2005 2006 Harvested Area (1000 x ha) 1,878 1,990 1,830 1,496 1,441 1,432 1,426 Lint Yield/ha (Kg) 890 868 870 836 676 845 800 Lint Production (1000 x ton) 1,671 1,728 1,593 1,254 975 1,210 1,143 Consumption (1000 x ton) 169 189 205 141 220 175 175 Export (1000 x ton) 876 683 327 940 800 1,000 991 Source: ICAC, Cotton World Statistics, May 2006
3-17 Fig.3-1-14 Cotton Trend in Uzbekistan
2500
2000
1500
1000
500
0 Harvested Area (1000ha) Yield/ha, Kg Production (1000ton) Export (1000ton) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: ICAC, Cotton World Statistics, May 2006
(3) Turkmenistan Cotton growing in Turkmenistan mainly depends on water from the Amu Darya via the Karakum Canal. The cultivated area has recovered to the level of 1990, however, the lint yield per hectare has stayed at about 50% of the 1990 figure, about 350kg, which could be partially explained by increases in low yielding long staple cotton species of 25,000 tons, 10% of total production. However, another reason could be saline soil and the low procurement price of cotton produced on State Farms destroy farmers' interest in cotton farming,
Table 3-1-13 Cotton Data in Turkmenistan
1980 1985 1990 1995 2000 2005 2006 Harvested Area 1000xha 623 572 491 600 600 Lint Yield/ha, Kg 701 411 381 358 350 Lint Production, 1000 427 235 187 215 210 ton Consumption, 1000 ton 7246590 92 Export. 1000 ton 383 216 122 125 118 Source: ICAC, Cotton World Statistics, May 2006
Contrary to other countries in Central Asia, local consumption has risen from almost zero to 90,000 tons, which meant that to use the long staple fibre, the dictatorship introduced a local textile and garment industry, which might not be economical. As a result, only 120 thousand tons of lint has been exported (Table 3-1-13).
3-18 Fig 3-1-15 Cotton Trend in Turkmenistan
800 1980 700 600 1985 500 1990 400 1995 300 2000 200 2005 100 2006 0 Harvested Lint Yield/ha, Lint Consumption, Export, 1000 Area 1000xha Kg Production, 1000 ton ton 1000 ton
Source: ICAC, Cotton World Statistics, May 2006
(4) Kazakhstan The cotton trend in Kazakhstan differs from that in Tajikistan and Uzbekistan in that the yield has not stagnated. Along with the expansion of cultivated areas, lint production has increased by 1.4 times from 102 thousand tons in 1990 to 140 thousand tons in 2006 and local consumption has fallen from 50 thousand tons in 1990 to 18 thousands ton in 2006. However, exports increased by 30% during the same period (Table 3-1-14).
Table 3-1-14 Cotton Data in Kazakhstan
1980 1985 1990 1995 2000 2005 2006 Harvested Area 1000xha 120 110 149 204 194 Lint Yield/ha, Kg 850 702 570 670 720 Lint Production, 1000 102 78 85 138 140 ton Consumption, 1000 ton 50 16 12 18 18 Export. 1000 ton 93 70 93 140 128 Source: ICAC, Cotton World Statistics, May 2006
In Fig. 3-1-16, planted area, yield, production, consumption and export are shown, which shows a similar tendency to the cotton sector of Kyrgyzstan. This means that Kazakhstan adopted a liberalized economic policy after Kyrgyzstan. Instead of introducing an inefficient small-scale textile industry that could not compete in the market due to a limited, narrow range of products, cotton lint has been exported to Russia.
Fig. 3-1-16 Cotton Trend in Kazakhstan
900 800 1980 700 1985 600 1990 500 400 1995 300 2000 200 2005 100 2006 0 Harvested Lint Yield/ha, Lint Consumption, Export. 1000 Area 1000xha Kg Production, 1000 ton ton 1000 ton
Source: ICAC, Cotton World Statistics, May 2006
3-19 (5) Tajikistan Cotton production data is shown in Table 3-1-15. Output fell by 15% from 300 thousand tons in 1990 to 280 thousand tons in 2006 and yield by 50% from 843kg in 1990 to 406 kg in 1995 but after that the yield has shown a clear tendency to recover in the 2000s. This meant that political stability returned in the 2000s and a liberalized economic system has been introduced. In 2006, lint production amounted to 150 thousand tons, only 58% of the 1990 figure, reflecting an upward trend. Local consumption reached 18 thousand tons while exports were about 126 thousand tons, 63% of total production.
Table 3-1-15 Cotton Data in Tajikistan
1980 1985 1990 1995 2000 2005 2006 Harvested Area (1000 x ha) 304 273 242 255 260 Lint Yield/ha (Kg) 843 406 436 542 560 Lint Production (1000 x ton) 256 130 106 138 146 Consumption (1000 x ton) 32 16 12 18 18 Export (1000 x ton) 200 100 110 135 126 Source: ICAC, Cotton World Statistics, May 2006
Long staple fibre production was 30 thousand tons, 20% of total production, of which almost all were exported.
Fig. 3-1-17 Cotton Trend in Tajikistan
900 800 700 1980 600 1985 500 1990 1995 400 2000 300 2005 200 2006 100 0 Harvested Area Lint Yield/ha, Lint Consumption, Export. 1000 1000xha Kg Production, 1000 ton ton 1000 ton
Source: ICAC, Cotton World Statistics, May 2006
************Cotton Trend in Tajikistan
3-20 (6) Kyrgyzstan ○ Currently Of the five republics in Central Asia, Kyrgyzstan produces the smallest volume of cotton. The total cultivated area is 45 thousand hectares, producing 37 thousand tons of lint (Table 3-1-16). However, compared to cotton data in other countries, the following remarkable differences can be seen: ¾ The cultivated area decreased until 1993 after which it has recovered and in 2005 reached 150% of the cultivated area in 1990; ¾ The lint yield also declined until 1995 but since 2000 the yield has exceeded 900kg/ha, the highest of the five republics in Central Asia; ¾ All varieties are American upland cotton and no long staple cotton is cultivated; ¾ The 25 thousand tons of lint produced in 1990 had increased to 40 thousand tons in 2004 ¾ Local consumption went down from 26 thousand tons in 1990 to 3 thousand tons in 2000.
The above resulted from the introduction of a liberalized economy. And during the Soviet era, Kyrgyzstan produced cotton only in the areas allocated by the government, which means that cotton-growing areas could be expanded to areas where currently no cotton is being grown.
Table 3-1-16 Kyrgyz Cotton Data 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 Harvested Area, 1000xha 30 26 22 20 26 33 31 25 33 31 35 38 28 35 46 46 45 Lint Yield/ha, Kg 842 731 682 792 667 719 717 806 812 852 790 923 900 725 862 834 815 Lint Production, 1000 ton 25 19 15 16 18 24 23 20 27 26 27 35 25 25 40 38 37 Consumption, 1000 ton 2226 26 2623181786754 3 3 3 3333 Export. 1000 ton 3 5 5 5 16 14 13 25 25 28 31 25 2535 38 37
Source: ICAC, Cotton World Statistics, May 2006
86 Fig. 3-1-18 Kyrgyz Cotton Trend 87 88 50 89 45 90 91 40 92 35 93 30 94 95 25 96 20 97 98 15 99 10 00 5 01 02 0 03 Planted Area Lint Consumption, Export. 1000 04 1000 ha Production, 1000 ton ton 05 1000 ton 06
Source: ICAC, Cotton World Statistics, May 2006
3-21 Fig.3-1-19 Lint Yield in Kyrgyz 1000 900 800 700 600 500 400 300 200 100 0 86 88 90 92 94 96 98 00 02 04 06 Lint Yield/ha, Kg
Source: ICAC, Cotton World Statistics, May 2006
The production rankings of the main crops in Kyrgyzstan are listed in Table 3-1-17. Cotton production ranks 35th in the world, which is the highest among the three main crops namely, cotton, corn and wheat.
Table 3-1-17 Production of Main Crops in Kyrgyzstan
Production World Ranking Wheat 950,000 t 37 Corn 440,000 t 57 Cotton 41,368 t 35 Sources: USDA Foreign Agriculture Services
Cotton data on the five republics in Central Asia are listed in Table 3-1-18. While the area in Kyrgyz is the smallest, the yield is the highest. This means that Kyrgyzstan has a comparative advantage in cotton production, which suggests there is potential to develop cotton growing in Kyrgyzstan.
Table 3-1-18 Cotton Production Data in Central Asia
Harvested Area (1,000ha) Lint Yield (Kg/ha) Production (1,000 Bales) 2005 2006 2005 2006 2005 2006 Uzbekistan 1,432 1,424 867 780 5,700 5,100 Turkmenistan 700 700 303 303 975 975 Tajikistan 255 255 534 598 625 700 Kazakhstan 200 200 735 735 675 675 Kyrgyzstan 45 45 895 895 185 185 Sources: USDS Foreign Agriculture Services
Currently, 45,000ha of cotton is grown in Kyrgyzstan however it does not mean that no other areas are suitable for. In Soviet times, under the central planning system, Kyrgyzstan was not just assigned the role of a cotton producer. Kyrgyzstan’s main role was as a supplier of livestock products, in particular sheep meat and its by-products. Compared to the other Central Asian countries, Kyrgyzstan has very limited agricultural land, which extends to high altitude slopes. Therefore, it is not known by how much cotton- growing areas could be expanded on the top of the existing cotton-growing area. However, the JICA Pilot Project suggested that with technical innovations, cotton could be expanded to areas above 1,000m above sea level. In Kyrgyzstan, food self-sufficiency was reached on about 1.3million hectares of arable land
3-22 before 2000. Since the total population is about 5million, some of the current arable land used for wheat and corn could be allocated to cotton without fear of food shortages. In Soviet times, cotton collective farms were located in the following regions: ¾ Osh: Aravan, Kara-Suu ¾ Jalalabad: Suzak, Norken, Nazarukogen ¾ Batken: Kadashei, Rerick However, no one has studied the potential cotton area and its production since independence in 1991. Therefore, it is desirable that the government assess the potential of cotton production and study the necessary policy guidelines to ensure that cotton production is assessed in the future.
○ Cotton Growing Master Plan and the JICA Pilot Project The main objective of implementing the JICA Pilot Project was to collect information and data to prepare a Master Plan for cotton production. Cotton production was one of the priority subjects selected in the first half of the JICA Development Study on the Effective Management of Agriculture and the Processing Industry in the Kyrgyz Republic. Through operating the Pilot Project for two years in 2005 and 2006, sustainable cotton farming technologies for small farmers were transferred to the participating farmers on the demonstration farms under the Pilot Project. The Pilot Project was able to contributing to the following: ¾ A sustainable cotton-growing system for small farms based on IPM was successfully introduced and proved to be effective and efficient; ¾ An average cotton lint yield of 1.2 tons/ha was confirmed on participating farmers’ plots (exceeding the Asian record high yields in China); ¾ Field preparations for sustainable cotton growing have already commenced for the 2007 cotton- growing season among JICA Pilot Project participants on their own initiative, even without JICA support; ¾ Improving the growing method (covering sown soil with plastic sheeting) could avoid damage caused by the cold at the early growth stage, proving the possibility of extending cotton growing to higher altitude zones; ¾ A high lint yield of about 1.4 tons/ha was attained on farms that applied compost; ¾ Private extension services were proposed to follow up the Pilot Project in anticipation of no JICA contribution after 2007; ¾ Necessary input supplies were distributed in cooperation with other donors; ¾ No collateral group guarantee financing system was established for small farmers to continue cotton growing; ¾ Tripartite collaboration for sustainable cotton farming was set up between extension, inputs supply and credit providers; ¾ Sustainable cotton farming proved to be contributing to reducing poverty; ¾ The important role of cotton growing for the national economy became evident; and ¾ Cotton growing could be extended to new areas where there is currently no cotton growing.
Based on the above promising results of the JICA Pilot Project on cotton farming, the Master Plan for cotton development in Kyrgyzstan will be formulated below.
3-23 ○ Prospects for Kyrgyz Cotton Development In accordance with the assessment of the experience and lessons learnt from the JICA Pilot and a study of the Kyrgyz cotton industry compared to other cotton countries, in particular the cotton growing countries of Central Asia, the JICA Study Team could see promising prospects for the Kyrgyz cotton sector, therefore, based on the following assumptions, the Master Plan was drawn up: ¾ The Master Plan covers the period: 2007 to 2012; ¾ The Master Plan would be implemented only by technical assistance of donors and policy reforms by the government; ¾ Heavy capital investment by foreign donors would not be expected to achieve the targets mentioned in the Master Plan; ¾ The new cotton growing areas should be extended only to irrigated areas where sufficient water is allocated to cultivate upland crops, avoiding conflicts on water allotment with downstream countries; ¾ Sustainable cotton growing will keep production costs at low levels and avoid environmental degradation; ¾ Increased lint production will be gained by means of expanding the cultivated area and increased yields; ¾ A private extension system would be extended to the three southern regions (Osh, Jalalabad, and Batken); ¾ The Credit Union should be strengthened in terms of the areas its services cover and value of available funds; ¾ The input supply system should be strengthened (area and services covered); ¾ The leadership of farmers should be improved in the cotton chain (growing – harvesting - collection of seed cotton - ginning - lint sales- exports and processing) as much as possible: ¾ Review government cotton policies and introduce new policies as needed.
○ Framework of the Cotton Growing Master Plan
The Plan will be prepared clearly showing cotton stakeholders the importance and future of the cotton sector in Kyrgyzstan. Accordingly, the following framework was considered: ¾ Planning period (2007-2012); ¾ Targeted Production (cultivated areas, yields and production) by region; ¾ Regionally differentiated target production and number of beneficiaries; ¾ Benefit analysis of the target production based on data from the JICA Pilot Project; ¾ Studies on institutional capacity building to meet the target production; ¾ Action Plan to achieve the target production; and ¾ Review and assessment of redrawn cotton development policies.
3-24 3-2-4 Main Tasks and Objectives of the Plan The plan has the following objectives:
(1) Kyrgyz cotton production plan In light of the experience and lessons learnt from the JICA Pilot Project, it should be possible to extend cotton growing to higher altitudes. Based on the available data and information such as altitude, temperature and soil condition, new cotton growing areas should be allocated in irrigated areas. This means that since current crops will be substituted with cotton, cotton could be grown with water already allocated during Soviet times and conflicts on water distribution with downstream countries will not occur through introducing cotton.
(2) Extension and adaptation of sustainable cotton farming technologies; In order to ensure profitability and sustainability on small farmers’ cotton farming, the experience and lessons learnt from JICA Pilot Project will be adopted and extended, for which a new technical assistance should be invited from JICA.
(3) Extension Services During the Soviet period, extension services were implemented based on each collective farm and after the dissolution of the collective farms the services also disappeared. The Agriculture Departments at Oblast, Rayon (district office) and Ayil Okmotu (village office) level are mainly engaged in collecting agricultural statistics and very limited extension services for farmers. Accordingly, since cotton growing needs to adopt new technologies and higher amounts of inputs supply compared to other crops, the available public agriculture officers could do almost nothing for cotton farmers. Therefore, the private extension services, formed by the JICA Pilot Project, should be available for cotton growing areas.
(4) Credit Due to limited available resources in the Kyrgyz financial market, resources are apt to be attracted to quick and safe revolving borrowers, such as the marketing and housing sector in urban areas, more than the agriculture sector. Moreover, farmland is not acceptable collateral for lending institutions and except for housing, farmers have no collateral to borrow money against, which means farmers cannot access commercial funds for farming development. Except for pilot projects delivered by aid agencies, effective and efficient institutional credit does not exist for small farmers’ agriculture development. Regarding cotton growing, middlemen and ginneries offer advance credit for farm inputs and other expenses at annual interest rates of more than 100%. Therefore, so that farmers can secure their share of the profits from the cotton chain, reasonable micro-credits should be established, for which the reserve fund from the JICA Pilot Project could continue micro-financing for cotton growing in 2007. The TES Centre could find fund resources for sustainable cotton growing via Agro-Kredit Plus that seems to have accumulated sufficient funds of more than US$ 150,000, to borrow from existing lending institutions such as the Kyrgyz Agricultural Finance Corporation.
(5) Inputs Supply Necessary inputs such as farm equipment, fertilizer and seeds are not available in local shops in Osh and Karra-Suu, hence, farmers purchase inputs in local markets, but cannot always find appropriate genuine
3-25 inputs, because in local markets, limited items of inputs are on sale without information about quality. These available items are not suitable for intensive, sustainable farming or achieving high yields. In cooperation with USAID/IFDC, genuine inputs should be distributed to cotton growers.
(6) Focal Organization: Vertical integration of society by the communist regime destroyed traditional communities in this country except for blood ties. Furthermore, politically oriented communities, such as collective and state farms were formed by the communist party, which worked as administrative arms at grass roots level as well, so farmers hate the word COOPERATIVES. Given such a mental state of farmers, even if the government and donors intend to introduce cooperatives to enhance farm efficiency, farmers do not trust the role of cooperatives. However, regarding use of farm machinery, inputs procurement and selling cotton products, farmers' organizations could help farmers protect their interests and so organizing themselves is essential for the cotton sector. Private extension services could effectively be utilized as coordinators between extension agents and farmers' organizations. Therefore, in the course of implementing the Master Plan, farmers should be organized to ensure they benefit.
(7) Seeds, Fertilizers and Others The JICA Pilot Project was able to get genuine seeds and fertilizer from Uzbekistan and Turkey via members of AAK (Association of Agriculturists of Kyrgyzstan), which was organized by IFDC under the USAID financed Fergana Valley Input Supply Project. In Kyrgyzstan, cotton variety Kyrgyz-5 was bred in the 1980s and distributed to farmers, however, due to poor propagation and distribution channels for seeds, most farmers use available varieties from Uzbekistan, therefore, the seed distribution system should be strengthened to ensure the use of genuine seeds. The Kyrgyz Cotton Growing Testing Station under MAWRPI has virtually ceased to work on cotton related studies, including breeding. The management of the station should be immediately revamped and retrained to produce tangible outputs in a few years time, for which technical assistance could be required soon. Furthermore, privatized seed farms do not produce the necessary volumes of genuine seeds for replanting. In cooperation with SIDA, the government has a programme on introducing, testing and registering foreign seeds, however, in the fields, farmers do not pay any attention to the government's efforts, leading to confused seed selection and sowing without any legal control.
(8) Irrigation Facilities
The JICA Pilot Project did not take up the rehabilitation of infrastructure for the demonstration farms. The demonstration farms relied upon existing irrigation facilities. If problems occurred in water distribution, the TES Centre contacted the USAID financed Fergana Valley Water Users' Association Project executed by Winrock International to solve the problem. During the implementation period of the Master Plan, the available irrigated areas should be reviewed and if necessary, irrigation renovation plans should be discussed with the Water Resources Department and the Regional Department of Agrarian Policy.
(9) Farm Machinery For cotton growing the machinery required is a sprayer and tractor and its implements. When the project was being designed, farm tractors were not available on time for ploughing, levelling, sowing, cultivating and weeding due to the aging fleet of machinery and inefficient tractor operations, but tractors were available for the two years of the Pilot Project. However, farmers need more efficient seeders and sprayers.
3-26 (10) Government Services While the cotton sector plays two important roles, namely poverty reduction and earning foreign currency in this country, the government does not have a specific assistance programme except for introducing foreign aid programmes. Currently, cotton statistics collection and analysis are its sole function regarding cotton. Over the period of implementing the Master Plan, necessary and realistic government support services would be needed to support the cotton sector.
(11) Reform of Cotton Policy The above are conditions regarding the cotton sector and necessary measures should be taken to explore the potentials, therefore, if the government could revise cotton related polices during the Master Plan period (2007 to 2012), the potentials of the sector could be achieved in the future.
3-2-5 The Goal of the Plan The main goal of the plan is to expand and strengthen cotton growing as a cash crop in Kyrgyzstan to achieve the following: ○ Poverty reduction in rural areas by increasing cotton farmers' incomes and employment opportunities by cotton farming; ○ Revitalization of the regional economy through enhancing the cotton chain (inputs supply, private extension services, seasonal farm credits, cotton harvesting, seed cotton transportation, ginning, oil and oil cake extraction and sales and lint exports); and ○ Rebuilding the national economy through earning hard currency from exporting lint.
3-2-6 Cotton Production Plan (1) Background Prior to extending the Master Plan, the Cotton Production Plan is at first presented for anyone involved in the cotton sector to follow the logic and possibility of cotton development in Kyrgyzstan therefore, the plan submitted here is a sort of draft idea to be refined by anyone interested in cotton development in Kyrgyzstan. The simulation on cotton production was done referring to the experience and lessons learnt from the JICA Pilot Project, and studies and assessments on cotton for the JICA Development Study.
(2) Hypothesis for the Production Plan The production plan till 2012 was prepared considering the following conditions: ○ Cotton growing areas would be extended to irrigated areas below 1,500m; ○ Plastic sheeting mulching would be applied to areas from 1,000m to 1,500m; ○ Since the TES Centre for private extension services is located in Osh, the dissemination of sustainable cotton growing would be most acceptable in Osh; ○ In Batken, local Governance bodies still hold the bulk of public land, which will be given a high priority for cotton growing in groups;
3-27 ○ Low-lying land in Jalalabad used for rice growing would be converted to cotton growing; ○ For the time being until 2012, cotton should be cultivated in the three southern regions of Kyrgyzstan only, amounting to 82,000ha; ○ The feasibility of cotton farming in other regions should be studied during the implementation of the Master Plan. This might be possible by means of introducing early maturing varieties and mulching; ○ Japanese Project-Type Technical Cooperation is expected to improve the technical standards for IPM etc.; ○ The implementation of the Master Plan does not require foreign loans to strengthen the cotton sector at the moment.
(3) Cotton growing Area The cotton planted area of 82,000ha is expected to be extended in irrigated areas of the three regions of Osh, Jalalabad and Batken (Table 3-1-19).
Table 3-1-19: Arable and Irrigated Land by Oblast
Arable Land Total Irrigated Dry land The Kyrgyz Republic 1,306,786 885,398 (68) 421,321 Batken Oblast 74,117 35,257 (48) 38,860 Jalal-bad Oblast 168,458 103,702 (62) 64,756 Isyk-kul Oblast 194,931 141,981 (73) 52,950 Naryn Oblast 123,849 114,032 (93) 9,817 Osh Oblast 190,747 100,215 (53) 90,532 Talas Oblast 117,364 94,182 (80) 23,182 Chui Oblast 435,863 294,593 (68) 141,270 Bishkek 1,456 1,435 (99) 22 Sources: Results of the First Agricultural Census of the Kyrgyz Republic of 2002, The First Phase, Publication 1, National Statistical Committee of the Kyrgyz Republic, 2003 Note: Unit: ha ( ): Percentage of Irrigated Arable Land against Total Arable Land
In consideration of the present cotton cultivated areas, the cotton growing area ratios against irrigated areas and irrigated areas in the three regions (Table 3-1-19 and Table3-1-20) and the cotton growing area by region in 2012, were estimated by the Study Team. In order to achieve the target cotton planting levels during the period covered by the Master Plan, several ancillary matters, in particular, technical assistance and institutional rejuvenation should be taken up, which will be explained in the following chapters.
3-28 Table 3-1-20 Irrigated Land and Cotton Growing Areas in the Three Regions
Irrigated Land (ha) Cotton Area (ha) in 2005 Cotton Area (ha) in 2012 Batken 35,257 1,196 7,000 (590) Jalalabad 103,702 30,101 45,000 (150) Osh 100,215 13,824 30,000 (217) Total 239,174 45,121 82,000 (182) Sources: NSC, Note: Cotton Areas in 2012 estimated by the Study Team ( ) Increased Cotton Area Ratio against the cotton area in 2005
(4) Participants The government has no effective development polices regarding small farmers growing cotton and all farmers are engaged in cotton growing using their own resources and at their own risk. For example, farmers can use cottonseed from previous crops, from relatives or friends and local markets. Few farmers get seed from privatized State Seed Farms. Due to a lack of fertilizer and chemical dealers in towns, farmers need to purchase them in local markets. In other words, farmers, resulting in inefficient use of inputs in Kyrgyzstan, could utilize extension services offered by dealers in developed countries. One exceptional case is credit at extremely high interest rates from ginneries or middlemen, given to cotton farmers as payments in advance. Therefore, if the Pilot Project had not existed, no cotton development plan could have been drawn up due to a lack of supporting data. Accordingly, this cotton production plan was formulated based on the experience and lessons learnt from the JICA Pilot Project, which defines the role of each stakeholder as follows: ○ JICA Pilot Project Cooperating NGOs - TES Centre: ¾ Application of a sustainable cotton growing system (Crop Rotation, Compost, Mulching, IPM and Farm Management); ¾ Private Extension Services; ¾ Organizing cotton farmers; and ¾ Effective utilization of funds through micro-credits (JICA offered funds for inputs supply) ○ Assistance from Foreign Aid Agencies:
¾ Project Type Technical Assistance (Multi-disciplined team of experts, overseas training, training for extension staff, strengthening NGOs management, and preparing cotton policies): JICA; ¾ Genuine Inputs (Seed, Seeder, IPM materials, etc.): USAID/SIDA; and ¾ Funds for Micro-credits: USAID/GTZ (On a project basis, funds will be provided by a credit union. After the funds are recovered from the beneficiaries, all recovered funds could be used for cotton growing, because, on completion of the projects, the funds are at the disposal of the credit union.) ○ Local NGOs: ¾ Cooperation with the TES Centre: Jalalabad Rural Advisory Services (JRAS that could cover Jalalabad); ¾ Distribution of Agriculture Inputs: AAK; and
3-29 ¾ Management of micro-credit funds: Agro-Kredit Plus ○ Local Governance Bodies: ¾ Preferential priority for cotton farming on publicly held land; and ¾ Coordination of irrigation issues ○ Ministry of Agriculture, Water Resources and the Processing Industry: ¾ Introduction and promotion of technical assistance from foreign aid agencies; ¾ Seed certification and distribution; ¾ Introduction of strict regulations on seeds (Intellectual property right); ¾ Identification of cotton growing areas; ¾ Review and revision of taxes along the cotton chain; ¾ Registration of lint exporters and specifications of their duties
(5) Cotton Production Based on a cultivated area of 45,000ha in 2005, it is forecast that the cultivated area for the year 2008 would be 55,000ha and 82,000ha in 2012. Along with the expansion of cotton growing areas, sustainable cotton farming expands with its central focus on Osh. The seed cotton yield per hectare reaches 3.1 tons in 2008 and 3.6 tons in 2012. Consequently, seed cotton production of 117,000 tons in 2005 would increase to 171,000 tons in 2008 and 291,000 tons in 2012 (Table 3-1-21). In 2012, Batken would produce 181,000 tons, Jalalabad 153,000 tons and Osh 120,000 tons.
Table 3-1-21 Cotton Production Estimate
2005 2008 2012 Area Yield Production Area Yield Production Area Yield Production Batken 1,196 1.1 1315.6 2,000 2 4,000 7,000 2.6 18,200 Jalalabad 30,101 2.6 78262.6 32,000 3 96,000 45,000 3.4 153,000 Osh 13,824 2.7 37,324.0 21,000 3.4 71,400 30,000 4 120,000 Total 45,122 2.6 116,903.0 55 3.1 171,000 82,000 3.6 291,200
Sources: ICAC 2006、Note; Area =1,000ha, Yield = ton/ha, Production = ton
(6) Gross Cotton Value Table 3-1-22 is calculated based on cotton and other prices collected in Osh in 2005, excluding price fluctuations, which shows the gross production values at the farm gate in 2005, 2008 and 2012. The gross farm gate value of 2.1 billion Som (US$ 53million) increases to 2.5 billion Som (US $79million) in 2008 and 3.1 billion Som (US $134million) in 2012. It should be noted that the proportion of by-products, namely, cotton oil and oil cake in the gross farm gate value is comparatively high, contrary to expectations. In 2012, the gross production value at farm gate amounts to 673 million Som for cotton oil and 489 million Som for oil cake, being 25 % of the total farm gate value.
3-30
Table 3-1-22 Farm Gate Cotton Values
2005 2008 2012 Weight Value Weight Value Weight Value Seed Cotton 116,903 171,000 291,200 Lint 40,916 1,637 61,560 2,462 107,744 4,310 Broken Lint 2,572 41 3,933 64 7,280 116 Lint Dust 585 9 855 13 1,456 22 Cotton Oil 7,073 248 10,910 382 19,219 673 Oil Cake 45,008 180 69,426 278 122,304 489 Total 2,115 3,199 5,610
Sources: ICAC 2006, Note: Weight = ton, Value = Million Som
(7) Integrated Benefit from the Cotton Chain Table 3-1-23 summarizes the integrated cotton benefits from seed cotton production and ginning to lint export, plus lint, short lint, lint dust, cotton oil and oil cake have commercial value as by-products. Moreover, ginning fees, a portion (about 20%) of transport for exports and export tax are paid by foreign traders. Therefore, these values in total should be counted as the national benefits from the cotton chain. The estimated amount of US $64 million in 2005 will increase to US $96million in 2008 and US $170 million in 2012. Out of the estimated amount of US $170million, the National Bank of Kyrgyzstan gets transactions of US $117million as the sold value of lint, shipping costs and Customs Duty in dollars under official exchange control. All the above three items are paid by foreign traders at the farm gate. The receivable hard currency will be gained without any hard currency investment either from foreign countries or local resources. Receipts are the lint export price of 4.3 billion Som, freight charges of 172 million Som and Customs Duty on lint of 67 million Som, totalling 4,549 million Som (US $117million). However, the receipt of the US $117million should be transacted via the legal banking system, which would ensure increased foreign currency deposits in the National Bank of Kyrgyzstan. If the above could be followed, the deposit of cotton-related currency could cover all the expenses to be incurred for investment in the cotton industry without borrowing from international financial organizations.
3-31
Table 3-1-23 National Benefits from the Cotton Chain
2005 2008 2012 Weight Value Weight Value Weight Value Seed Cotton 116,903 171,000 291,200 Lint 40,916 1,637 61,560 2,462 107,744 4,310 Commission for Ginnery 205 308 539 Broken Lint 2,572 41 3,933 64 7,280 116 Broken lint Traders' Commission 5 8 15 Lint Dust 585 9 855 13 1,456 22 Commission for Dust trader 1 2 3 Cotton Oil 7,073 248 10,910 382 19,219 673 Oil Traders' Commission 50 76 135 Oil Cake 45,008 180 69,426 278 122,304 489 Oil cake Trader's Commission 22 35 61 Customs Duty 25 38 67 Transport fee for exports 32 48 84 Total 2,455 3,714 6,514 Note: See details at Annex 3-1-20 Commission at Ginnery includes commissions for middlemen. Data on commission and prices are collected by the TES Centre in Osh. Weight: Thousand Tons, Value: Million Som Customs Duty 30,000 Som per Wagon (48.3 ton)
(8) Benefits at Farm Level Benefits at farm level are estimated as follows (Table 3-1-24): ¾ Increased numbers of farmers have benefited from cotton growing; ¾ Enhanced farm incomes from increased yields of seed cotton; ¾ Increased numbers of labourers employed in surrounding areas. ○ Increased numbers of farmers have benefited from cotton growing: MAWRPI estimates that in total, about 1,200 farms and cooperatives are currently growing cotton. In light of small farmers' development policies, all newly joining farmers should be small farmers, holding 0.5ha of cotton growing land on average, so the the numbers of farms reaches 55,000 in 2008 and 82,000 in 2012. ○ Enhanced farm incomes from increased yields of seed cotton: It is assumed that 2.6 tons of seed cotton per hectare in 2005 will increase to 3.1 tons in 2008 and 3.6 tons in 2012 (Table 3-1-24) and gross income of 46,872 Som (US $1,298) and net income of 23,272 Som (US $600) per hectare in 2005 increases to 6,709 Som (US $1,462) and 26,800 Som (US $691) in 2008 and 68,415 Som (US $1,763) and 38,615 Som (US $995) in 2012 respectively. However, this simulation is based on the assumption that farmers sell their products (lint, lint by-products, cotton oil and oil cake) themselves after ginning factories separate the lint from the seeds and oil is extracted from the seeds. In reality, various types of seed cotton processing and selling it are found in the field but in order to assess the maximum achievable benefits from cotton farming for farmers, the above suppositions are discussed here. ○ Increased number of employed labourers in surrounding areas:
3-32 It is estimated that 313 million Som (about US $8million) worth of employment will grow to 552million Som (about US $14million) in 2012. The demand for labourers is highest when picking seed cotton from September to October.
Table 3-1-24 Summary of Benefits at Farm Level 2005 2008 2012 Numbers of Farmers 1,200*1 20,956 74,956 Harvested Area (ha) 45,122 55,000 82,000 Production (ton) 116,903 171,000 291,200 Yield per Hectare 2.6 3.1 3.6 Gross Farm Gate Values (Million Som) 2,115 3119 5610 Farm Gate Value (Som/ha) 46,872 56,709 68,415 Production Costs (Som/ha) 23,600 26,800 29,800 Net Farm Income (Som/ha) 23,272 29,909 38,615 Total Hired Labour Cost (Million Som) 313 390 552 Sources: *1 MAWRPI Others are estimated by the JICA Study Team based on data collected by the TES Centre
3-2-7 Action Plans The Action Plans, for the most important and urgent requirements in implementing the Master Plan, contribute to reducing poverty and enhancing the national economy through establishing and extending sustainable cotton production. Upon reviewing the accomplishments and issues raised by the JICA Pilot Project along with a huge variety of stakeholders concerned with the cotton chain in Kyrgyzstan, the Master Plan target can be achieved, for which, the following action plans are submitted: ¾ Implementing sustainable cotton growing on public land in Mady Ayil Okmotu; ¾ Introducing advanced sustainable cotton technology focussing on IPM; ¾ Implementing Private Extension Services and ¾ Preparing a cotton industry development policy
○ Implementing Sustainable Cotton Growing on Public Land in Mady Ayil Okmotu: The Ayil Okmotu highly rated the JICA Pilot Project, expressing an interest in introducing sustainable cotton growing on about 400ha of public land. As soon as possible, negotiations should commence with the Government to assess how to implement the proposal, along with the studies below: ¾ Survey of the proposed areas, their location and distribution, altitude, land use, soil fertility and structure, irrigation, land ownership, etc.; ¾ Management of cotton growing ( responsibility and role of the Ayil Okmotu and TES Centre); and ¾ Implementation plan (targeted area, implementation period, business plan, cost and benefit analysis, and long-term cooperation plan)
○ Introducing Advanced Sustainable Cotton Technology Focussing on IPM: In accordance with the results of the JICA Pilot Project, MAWRPI intends to extend sustainable cotton growing in the three
3-33 Southern Regions, for which the Ministry has submitted to the Embassy of Japan in Kyrgyzstan a request for Project Type Technical Assistance. The outline of the proposal is as follows: ¾ Project Period: 3 years from 2007 to 2009; ¾ Executing Agency: Ministry of Agriculture, Water Resources and the Processing Industry; ¾ Implementing Agency: Osh Biological Laboratory and Osh Department of Agrarian Policy under the Ministry and the TES Centre; ¾ Expected Goal: Introduction of advanced technology for sustainable cotton farming (IPM, Compost preparation, Farm management, etc.), Institutional Capacity Building, Strengthening Farmers' Organizations, Preparation of a Cotton Development Policy; and ¾ Necessary experts: Cotton Policy Expert, IPM Specialist, Organic Fertilizer Specialist, Farm Management Specialist, Institutional Expert However, the Government of Japan has not yet agreed to the proposal. If it is not acceptable, individually recruited experts should be sent to Kyrgyzstan in the order of priority of the required specialities.
○ Implementing Private Extension Services: Due to a lack of official extension services, private extension services will play a vital role in establishing sustainable cotton growing. Therefore, in order to follow up the efforts made by the JICA Pilot Project in 2007 and after, Private Extension Services would be implemented. The outline for their implementation is written as below however, the details could be formulated in consultation with the beneficiaries. Therefore, the mode of implementation could be modified: ¾ Area: JICA Pilot Project participating farms in Mady; ¾ Funds: JICA provided fund of US$30,000 kept in a Credit Union; ¾ Funds required: US $400 per hectare; ¾ Total area: 75 hectares; ¾ Extension service fee: US $100/ha; and ¾ Total fee for services: US$7,500
○ Preparing a Cotton Industry Development Policy: in the course of the JICA Development Study, it was proved that it was possible to expand the area of sustainable cotton growing beyond areas currently used. In order to do so, cotton industry development policies should be reviewed and reformulated with the assistance of a foreign aid programme. Based on the revised cotton industry policies, practical cotton development measures should be drawn up in anticipation of donor investment. It would be advisable to invite a cotton policy specialist from the countries that will not be direct competitors because of no cotton growing in their own countries. Japan, Germany and Canada could be potential countries for the technical assistance. Of course, Australia is the most suitable country due to its liberal cotton policies, but it could not deliver aid to Kyrgyzstan. The possibility would be assessed in due course, but the policies should be prepared by 2009.
3-34 3-2-7-1 Cotton Industry Development Policy (AP/C 1-1) Since the country gained independence in 1991, privatisation in all government policies has been introduced and except for foreign assisted projects and programmes, the government has stopped subsidized agriculture related ones due to limited financial constraints. While agricultural output was left to market forces without any supply and demand control, the main staple crops such as wheat, corn and vegetables, soon achieved self-sufficiency levels. Kyrgyz agriculture uses about 1.3 million hectares of farmland, of which 0.87 million hectares are irrigated, for a population of about 5 million. If the total production of a specific crop increases a little bit, the farm gate price slumps drastically, resulting in farms being in debt. For example, high quality seed introduced from the EU caused a drastic fall in the price of potatoes to 1 Som/kg in the markets in 2004 and tomatoes to less than 1 Som/kg in 2006. This is because the local markets have limited absorption capacity and farmers are inclined to plant the same crops as other farmers in the vicinity, based on available high quality seeds without forecasting price trends. Even if some agricultural products are exported to neighbouring countries, the neighbouring countries produce better quality, reasonably priced produce. Moreover, Kyrgyzstan is a double landlocked country, requiring expensive transport costs. Hence, in general, Kyrgyzstan's staple agricultural produce is not competitive in foreign markets at the moment. Accordingly, Kyrgyzstan needs to export reasonably priced cash crops, which cannot be grown in neighbouring countries. Moreover it is preferable that the crops should be international commodities, being always in demand by a number of consuming countries in international markets. Currently, agricultural produce is exported to neighbouring countries through black market deals. Whenever there are surpluses of produce in Kyrgyzstan's rural areas, traders from Russia and Kazakhstan visit farm gates with trucks to buy the produce at rock bottom prices. In order to make reasonable profits from agriculture, high value, competitive cash crops should be exported, of which cotton is one of the most promising. Along with foreign assistance, it is expected that the government should take steps to repair irrigation networks, strengthen the extension system, improve marketing related matters, train farmers, provide micro financing and distribute inputs. However, neither the government nor international donors such as the World Bank and Asian Development Bank prepare crop development policies and crop specific projects and programmes. USAID alone has been engaged in producing and processing tomatoes and apples. The Swiss Government has introduced organic cotton growing. Except for the JICA Pilot Project and the Swiss supported project, the government has not stepped into the cotton chain, leaving the cotton sector to market forces, resulting in the sector being what it is today. Among the government officials concerned with the cotton chain, there is an argument that since Kyrgyzstan is a small cotton producing country, the government can do very little except for seed multiplication and providing farm machinery under foreign aid schemes. However, in light of the experience and lessons learnt from the JICA Pilot Project, the cotton sector in Kyrgyz has reasonable potential in terms of growing areas and production. Consequently, it will contribute to reducing rural poverty and to enhancing national economic development with increased hard currency earnings. Therefore, it is clear that the sector should be reformed and the government should be persuaded of the potential of the cotton chain, focussing on cotton growing. That is why the government needs to reform the cotton policies as below: ¾ Review and assess crop development policies; ¾ Formulate development policies on cash crops; and
3-35 ¾ Prepare cotton sector development policies After reviewing the current Kyrgyz cotton sector and assessing the cotton trend in the international market, the sector industry policies should be prepared to give guidelines on how to improve the cotton industry, which should include the cotton chain of growing-harvesting-seed cotton transportation-ginning-lint export. The new cotton policies should clarify the role of the private and the public sectors in cotton sector development. This is because in Kyrgyzstan, cotton has evolved through the efforts of individuals directly concerned in growing cotton at their own risk. In other words, since independence in 1991, the government has had no cotton development supporting programmes except for financial support for three biological laboratories and the Kyrgyz Cotton Farming Testing Centre. However, cotton has a significant role in poverty reduction and earning hard currency, after gold. In particular, cotton is only available and sustainable crop earning hard currency on a continuous basis. Therefore, it is desirable that the government spell out its regulatory role in the cotton industry policies to support the private sector. It is expected that the JICA Project-Type would provide a cotton development policy expert who will assist the government in formulating the national cotton policies related to all levels of the cotton chain. The contents of the policies are as follows: ○ Cotton Planted Area Expansion Policies: In the three Southern Regions (Batken, Osh and Jalalabad), irrigated areas below 1,500m should be identified to assess cotton-planting potential by each Regional Department of Agrarian Policy. The cotton priority planting policies should be studied regarding the publicly owned land of about 14% of the total cultivated area in the region. In anticipation of cotton planting in new areas, implementation policies should be assessed and agreed by the stakeholders concerned at national level. Cotton incentive policies such as, land tax exemption for cotton, should be considered in consultation with Parliament. ○ Arranging Marketing Channels for Inputs Supply: In light of the achievements and issues raised with the USAID/IFDC Fergana Valley Input Supply Project, the government should assess the basic direction of input supply in the country. In particular, the cooperation between the TES Centre and IFDC for the JICA Pilot Project should be carefully evaluated to improve inputs delivery in Batken and Jalalabad where AKK has not yet established inputs delivery networks. In light of the assessment, the government should hold meetings with IFDC and the TES Centre to prepare an input supply policy and its implementation plan. ○ Selection, Multiplication and Distribution of High Quality Seed: In accordance with the assessment of the SIDA supported seed project, the government should prepare cotton seed policies regarding the introduction of foreign varieties, adaptability tests, registration and distribution. In order to protect foreign varieties, including genetically modified varieties, intellectual property right protection measures should be legally enforced. ○ Micro-Credit support programme: The government should decide on a rural finance policy, with which, the foreign donated funds of micro credits for the agriculture sector should be assigned for cotton growing on a preferential basis upon completion of its first committed project term. ○ Strengthening Farmers' Organizations: In collaboration with the GTZ supported Promotion of Trade and Services project, the TES Centre will review and assess the current and future functioning of the farmers' group under the JICA Pilot Project, based on which the government will formulate polices on organizing cotton growers. This is because small farmers’ cotton growing requires group activities to enhance their productivity and profits.
3-36 ○ Private Extension Services Policy: In consultation with the TES Centre, the government should prepare policies on private extension services. ○ Supporting policies for downstream entities in the cotton chain: processing (ginning, oil extraction, etc.) and marketing (lint export, lint by-products, cotton oil and oil cake) should be studied and assessed in order to formulate appropriate supporting policies. According to the World Bank Agriculture Policy Update, November 2004, Kyrgyz farmers received US $450 per ton in 2003, compared to US $550 for Kazakh farmers. This meant that in Kyrgyzstan, there is room for rationalization in processing and marketing to enhance farmers’ percentages. Moreover, the downstream chain should also be restructured hence, the downstream policies should be reformulated. ○ Preparation of Investment Policies: According to the JICA Development Study, the estimated cotton area of 82,000ha will produce 291,000 tons of Seed Cotton, making profits of US $170million in 2012 against US $64million in 2005 (Table 3-1-21). These calculations were based on technical and institutional improvements without any capital investment. However, now it is apparent that even if the cotton sector receives investment, the capital invested could be recovered from the cotton sector itself. Upon completing the restructuring of the cotton industry policy, the government could ask foreign financial institutions such as the Japan Bank for International Cooperation and Asian Development Bank to consider cotton investment loans, which could be used for: ¾ Establishing a permanent organization for introducing, testing and registering genuine high quality seeds; ¾ Extending regular renewal of genuine seeds to farmers; ¾ Renovating and modernizing the regional Biological Laboratory and ancillary technical assistance; ¾ Arranging cotton growing infrastructure (renovating irrigation/drainage systems and building and rebuilding roads); ¾ Institutional support for private extension services, facilities and equipment and transport with their technical assistance）; ¾ Strengthening farmers' organizations (institutional capacity building); ¾ Providing funds for farmers to introduce on-farm storage, transport for products and farm machinery and funds for micro-financing; ¾ Providing funds for the private sector for ginning, oil extraction, marketing and export to modernize or introduce facilities, equipment and machinery and transportation; ¾ Providing operational funds for private sector entities in charge of cotton processing and marketing; ¾ Institutional support for the Cotton Development Section of MAWRPI; ¾ Institutional support for the Regional Department of Agrarian Policy of MAWRPI; ¾ Establishing a cotton price stability fund, Participants: NGOs, Farmers' Organizations and Private Industry
3-37 3-2-7-2 Institutional Capacity Building Plan (AP/C 1-2) (1) Background In 3-2-6 Cotton Production Plan, cotton development until 2012 is simulated to show the possibility of cotton development and its economic contribution to participating farmers and the country. This simulation is based on the experience and lessons learnt from the JICA Pilot Project, but to guarantee the implementation of the simulation above mentioned, institutional capacity building and renovation are pre- requisites for stakeholders involved in the cotton chain.
(2) Ministry of Agriculture, Water Resources and the Processing Industry Since the country became independent, the government has accepted economic guidance from the IMF/World Bank, which introduced liberalized economic policies, a balanced government budget and decentralization. In light of such changes, MAWRPI has scaled down its scope of work and number of staff. Therefore, the Ministry always relies upon assistance from foreign aid agencies to implement any requests from the field. MAWRPI is currently engaged in: ¾ Researching and reporting on agricultural issues raised by Parliament and the President; ¾ Reviewing and revising agricultural policies; ¾ Collecting and arranging agricultural statistics; and ¾ Coordinating with foreign donors With respect to cotton related matters, cotton officers are assigned to the Department of Agriculture. In each region, there is a Regional Department of Agrarian Policy, a branch office of the Ministry. Biological Laboratories are affiliated agencies in Osh, Jalalabad and Issyk-Kul to supply biological pest control material for IPM. IPM is one of the most important services in the Ministry in ensuring the economic and financial viability of cotton growing. The function of the Bio-Labs should be upgraded and range of their services extended to support the implementation of the Master Plan. Regarding cotton research, the Kyrgyz Testing Station on Cotton Farming is engaged in breeding, but has almost ceased to function. Without management reforms, it won't be able to function even with additional funding. Given the above-mentioned conditions, the Ministry requires the following institutional reform and capacity building: ○ The main office of the Ministry should add the function of collecting contemporary data on cotton in the international market and to disseminate them to cotton stakeholders, in particular cotton farmers;
○ Practical cotton policies should be formulated and the Ministry should be given policy implementation functions and capacity to make adopted policies effective in the field; ○ Kyrgyzstan should have a bilateral agreement with a cotton growing country that has similar geographical conditions to introduce their experience and cotton growing technology; ○ Technical assistance should be introduced from developed countries such as Japan, to secure the most advanced cotton related technology, such as IPM; ○ The three Regional Departments of Agrarian Policy in Osh, Jalalabad and Batken should have the capacity to prepare cotton development plans in Ayil Okmotu (Village or Town) in collaboration with the Rayon (District) Department of Agrarian Policy based on data such as land use, location of irrigable areas, altitude, etc. This exercise would also require technical assistance;
3-38 ○ For the above, according to the plan, Cotton Development Planners should be assigned to the Regional Departments of Agrarian Policy in Osh, Jalalabad and Batken. The appointed Cotton Development Planners will prepare Ayil Okmotu Cotton Development Plans. When considering the plans, the most appropriate NGOs should be selected to assist Ayil Okmotu offices in implementing the cotton plans; ○ In order to strengthen the services of the Biological Laboratories, the facilities for preparing biological pest control material and trucks and transport for field staff to deliver this material, should be reformed as soon as possible. Moreover, the labs should receive the most advanced IPM technology, such as pheromone traps devised in developed countries such as Japan, for which overseas staff training and field training by foreigners would be essential to continue the sound and effective operation of the labs. The Ministry should find donors to assist the bio-labs.
(3) NGOs for Extension Services The NGOs that undertook cotton projects are the TES Centre for JICA Pilot Project and the Jalalabad Rural Advisory Services for the Swiss supported organic cotton project. Since no official extension system exists, strengthening NGOs in charge of extension services is an essential precondition for extending cotton growing to new areas. In particular, the capacity of the TES Centre, the sub-contractor for the JICA Pilot Project, which executed the demonstration farms on behalf of Deloitte Touche Tohmatsu, should be improved. The Centre was established by Osh State University and GTZ to look after foreign aid agricultural projects. Because of its high quality of professional services and its transparent management, it has a very good reputation among donors. In addition to the services in Osh, it has been commissioned to operate foreign aid projects in Jalalabad, Batken, and Tajikistan, which are financed by not only GTZ but also other agencies such as USAID, the Swiss, ADB, Aga Khan Foundation, etc. While the Centre has limited funding as an NGO, it is eager to continue offering extension services for cotton even after the completion of the JICA Pilot Project. Therefore, continuing and expanding cotton extension services offered by the TES Centre in the three southern regions should be assessed and supported by technical assistance from donors such as Japan, as follows: ¾ Upgrading the level of sustainable cotton farming focussing on IPM; ¾ Improving capacity of cotton farm management; ¾ Introducing private extension services; ¾ Strengthening farmers’ organizations;
¾ Expanding the area covered by cotton extension services; ¾ Strengthening coordination capacity regarding cotton related services, inputs supply and provision of credit with other stakeholders such as AAK; and ¾ Improving the managerial capacity of the Centre
○ Upgrading sustainable cotton farming focussing on IPM: The available IPM technologies were devised either by the Soviet Union, China or Uzbekistan. The most advanced IPM technology developed in Western countries such as Japan has not been introduced to cotton farming in Osh. Therefore, including biological pesticides and pheromone traps that were invented by the private sector in Japan, the new western technology should be transferred to the following sectors: ¾ Integrated Pest Management;
3-39 ¾ Application and preparation of compost; and ¾ Introduction of high yielding varieties
○ Improving capacity of cotton farm management: In order to enhance the efficiency and effectiveness of sustainable cotton growing, small-scale cotton growers will be organized into farmers' groups, applying IPM that will ensure more effective pest management. Joint management of cotton farms should include crop rotation, compost application, and, mulching sown soil, for which, the Centre needs to acquire management skills to train participating farmers to an advanced level. Since the total inputs cost of cotton growing is higher than traditional crops such as wheat and maize, farmers need to look for financial resources to continue. Therefore, net income per hectare is not always the sole determining factor for farmers selecting crops for their available land. Sometimes, even though some crops have lower net income per hectare than cotton, farmers are inclined to cultivate crops other than cotton due to the cost and level of available resources. Now therefore, the TES Centre needs to offer general farm management extension services instead of just crop-based extension services that have been executed at donors’ requests so far. For that purpose, the TES Centre needs to accept technical assistance on improving farm management.
○ Application and preparation of compost: Since independence, in the rural areas of Kyrgyzstan, the supply of cheap natural gas and coal has stopped and any combustible materials are used for cocking and heating. Animal dung is dried and used for cooking. After crops are harvested, all remaining crop residues, including roots, are removed from fields to be used for cooking. Moreover, due to low rainfall, available biomass is limited in Kyrgyzstan. Hence compost, which improves soil fertility and structure, supporting sustainable farming with nominal chemical fertilizer use, is seldom applied in this country. The more tractors plough soil, the more soil structure is destroyed. Minor element deficiency occurs with this type of farming and in the end low land productivity becomes common. Even though farmers do not have sufficient materials for compost, the TES Centre should introduce effective compost preparation and application manuals. Through demonstrating the efficiency of compost, farmers need to be trained on how to make compost and how compost is effective in improving production (Already, the JICA Pilot Project has demonstrated the efficiency of compost application on limited areas of the cotton farms).
○ Introduction of High Yielding Varieties: Except for Africa and Central Asia, cotton productivity has increased substantially in the last 20 years, one reason for which was the exploitation of high yielding pest and disease resistant varieties. Moreover, in the USA, genetically modified varieties have been released, contributing to high cotton yields in Australia and China. The Kyrgyz Cotton Farming Testing Station should be involved in cotton breeding, but due to its inactivity because of lack of funds, no new local varieties have been released. Hence, in consideration of the present level of fertilizer application, NGOs need to advise MAWRPI of the desired characters of cotton varieties (SIDA has a team for seed introduction, adaptability, and registration). For this purpose, the TES Centre should directly contact the SIDA mission to get staff training. At the same time, NGOs should ask MAWRPI to strictly enforce the law on intellectual property rights, to ensure the introduction of high quality seed.
3-40 ○ Organizing Farmers: Organizing farmers is desirable not only to gain bargaining power when selling seed cotton, but also to continue effective sustainable cotton growing. In partnership with the GTZ supported Cooperative Development Project, organizing cotton farmers should be investigated in the JICA Pilot Project Area, where a progressive farmer expressed his interest in forming a formal farmer’s organization based on the experience and lessons learnt from the JICA Pilot Project. NGOs need to form a specialist farmers' organization.
○ Expanding the area covered by cotton extension services: The TES Centre extended its services in Karasuu and Aravan in Osh for the JICA Pilot Project. At the first stage, the TES Centre should expand its services to other areas in Osh and at the second stage it should cover Jalalabad and Batken. The basic direction for its extension services is a paid extension service, called the Private Extension Services System proposed at the time of the JICA Pilot Project. A number of cost recovery patterns are being considered with the TES Centre. For example, upon recovery of the principal of seasonal credit from borrowers, extension service fees would be included as interest. A Credit Union could pay a services fee for finding clients, field supervision and collecting interest. Services agencies such as inputs suppliers, would pay the cost of services incurred by farmers. Anyway, an acceptable cost recovery scheme should be proposed to farmers and be discussed between the TES Centre and farmers. Pre-conditions to introducing private extension services are that firstly farmers should accept the principle of paid extension services, secondly, inputs materials should be available, and thirdly credit is also available for farmers to purchase inputs with.
○ Strengthening coordination capacity: Cotton growing needs to secure inputs and credit for inputs, however, since independence, neither are available in the market, because private dealers in farm inputs and credit agents have not yet been set up in towns. The TES Centre is obliged to assess the inputs requirements and coordinate with other agencies such as AAK, the arrangement of inputs supplies. As such, staff of the TES Centre should be trained to be not only extension specialists but also field coordinators for cotton production.
○ Ayil Okmotu Cotton Plan: On behalf of Ayil Okmotu Offices, enabling NGOs should prepare a cotton development plan including beneficiaries, location of farms, costs, and benefits. The beneficiaries or assistance from foreign donors should cover the cost of the NGOs services.
○ Strengthening Management Capacity: Most NGOs financially rely upon the aid programs of foreign aid agencies, executing fixed term aid projects and programmes. Therefore, when the aid ceases NGOs face financial difficulties in continuing to employ staff. Highly paid English speaking staff (about US$500-800 per month against less than US$100 for government officials) move to other aid projects. Consequently, the experience and lessons learnt from the aid programmes are accumulated by individual experts but not in NGOs. Considering the importance of cotton growing and non-availability of public extension services, NGOs' technical, financial and managerial capacities should be strengthened so that they become permanent entities. For this purpose, technical assistance should be introduced to NGOs to overcome the following issues:
3-41 ○ Reasonable salaries: The present monthly salaries of the TES Centre including the Chief Executives and professional staff vary between US $300 to US $150. Therefore, a lot of young staff are apt to leave for other NGOs after they gain experience in the TES Centre. If wages were higher there would be lower levels of staff leaving to go to NGOs resulting in the NGOs ceasing to exist unless other donors bring in new programmes. The desire for high salaries is general but a high salary does not necessarily ensure high quality work and dedication of the staff. Accordingly, it is desirable that salaries should be reasonable in terms of sustainability of entities and acceptable to employees to maintain reasonable living standards. In addition to cash payment, incentive schemes should be introduced to motivate staff. The incentives could be classified into four groups, firstly, through pre- employment training and regular staff training, the objectives and significance of the services to be rendered by the staff are clearly defined and staff understand their mission, which would enhance their dedication. Secondly, staff should be given chances to develop their careers, such as short-term overseas study tours, overseas on-job training and overseas degree scholarships, which could not be easily given by other NGOs. These would enable staff to fulfill their dreams, resulting in a new life style acceptable in the 21st Century instead of the prevailing one inherited from the Soviet Era. Thirdly, the TES Centre should introduce incentive systems, such as annual bonuses based on personal evaluations and financial rewards linked to the profit and loss of undertaken projects, which would increase their dedication to their given task. Fourthly, staff welfare programmes should be introduced to get staff mentally involved in the Centre. During the Soviet period, integrated social services covered basic human needs even at a minimum level, but now all social networks have deteriorated and cannot satisfy people’s needs. Therefore, in-house welfare systems including pensions, insurance, scholarships, staff loans, etc. should be established based on the accumulated profits to nurture an esprit de corps among the staff. As a result, the sense of belonging and psychological wellbeing would increase, making staff more content and not keen to leave and improve the quality of services to donor clients and beneficiary farmers.
○ Independent financial resources: In addition to the contracts commissioned by aid agencies, the TES Centre has income from managing guesthouses and renting out offices and a conference room, which accrue as independent financial resources. These ancillary revenue resources help it retain regular staff even when there is no revenue from contracted services. Enhancing the independent resources reduces the dependence on foreign aid agencies, which would give it a chance to adopt self- motivating agricultural services resulting in it becoming a permanent entity serving local communities outside the mandates forced on it by aid agencies. For the above, it should create the TES Centre Fund, which is set aside from the profits from not only contract work, but also from its own activities. The fund will also serve to enhance staff motivation and welfare. Donations from anybody, including foreigners, who respect the mission and activities of the TES Centre would be highly appreciated in building up the fund.
○ Extension of Income Generating Activities: The TES Centre executes a range of different aid projects and programmes, cultivating project management capacities and so has acquired technology and management know-how on generating cash from agriculture projects for farmers. However, due to a lack of institutional decision-making, the TES Centre itself has not so far taken up income- generating activities. Selected, self-initiated income generating activities should be engaged in from now on. Agriculture has dual objectives, namely, as a means of social networking to reduce poverty in
3-42 rural areas and as an industry, which has highly competitive markets. For example, the TES Centre has quite a lot of experience in producing sun dried tomatoes and cotton production. In consultation with Ayil Okmotu Offices, production, processing and marketing projects for cash crops could be extended onto public land, enabling them to get higher land rents and surrounding farmers could also earn cash from working on them. In the case of the TES Centre, operational income and net profits could be kept in the aforementioned fund. Through the experience and lessons learnt from its own income generating projects, a sense of private business promotion and management would be created within the Centre. The cost of projects would be mainly covered by the internal reserve and borrowings from the Credit Union.
3-43 3-3 Action Plan and its Components for Naryn and Issyk-Kul oblasts
3-3-1 Action Plan for improvement of Animal Husbandry, in particular Sheep breeding in Naryn
Sheep are kept throughout Kyrgyzstan, but the degree that the regional economy depends on sheep is covered in this plan. Therefore, Naryn Oblast was taken as an example of the harsh natural conditions and conditions of sale
1) Conditions of Agriculture in Naryn Oblast
1) Current state of Agriculture in Naryn Land suitable for agriculture in Naryn is located in the highlands from 1,700 m to 2,300 m above sea level. During Soviet times, Naryn was a livestock-breeding base and only pasture grass was cultivated. During the economic difficulties after independence in 1991, potatoes, barley (for feed, beer) and wheat (for bread, noodles) were planted as captive consumption crops and berries (raspberry, blackcurrant), garlic and carrots have also been grown in farmhouse gardens and/ or on an adjacent farm for home-consumption.
As a result of agricultural reforms after independence, an average household that raised 5-10 sheep, 5-7 dairy cows and a horse, suddenly received 80~90 head of sheep, 2~3 dairy cows and 3~4 horses, but didn't know how to raise so many farm animals.
Cattle sheds and feed were in short supply and farmers sold their livestock at low prices and became impoverished because there were no veterinarian services or drugs to cure livestock diseases and large numbers of livestock died in epidemics because farmers knew nothing about diseases.
In recent years, as a result of experience learned, livestock numbers have increased and in Naryn Oblast there are currently (as of 01 January 2006) 114,995 cattle, 89,138 horses, 7,499 yaks, 142,682 goats and 519,341sheep (includes 388,159 (74%) ewes). (Statistics as of January 1, 2006). In the peak lambing season from February to March, the total number of sheep will reach a little less than 900,000 assuming litter rates of 1.1, some 400,000 heads are born and approximately the same number of sheep is slaughtered each year as are reared.
Assuming a dressed carcass weighs 50% of a live weight of 50kg, (25kg) nearly 10,000 tons of mutton is produced, but when own consumption is included then 17,457 tons is produced.
In 2006 an epidemic killed a lot of livestock, but because it was not officially reported, exact numbers are unknown, but 300 sheep died in Naryn rayon alone from pastuela according to a news article.
Most farms tend to graze their livestock on easy to reach pastures to avoid having to pay to transport them to remote pastures and so the local pastures become degraded and unable to regenerate.
For Naryn Oblast that lacks any other industries, pasture management, livestock breeding and in particular, sheep breeding, are top priority matters, which should be solved.
Considering the above situation, the following action plans are proposed.
3-45 A/P 2-1 Establishment of a State Livestock Experiment Station
Purpose of the Establishment:
To promote the livestock industry in Naryn and undertake scientific & practical research and experiments and disseminate information.
Like the after-mentioned A/P 2-3 it should improve breeds of dairy cattle and sheep through AI, develop safe and effective livestock rearing methods, improve feed, grass and pastures, develop epidemic control measures, study parasitic worm eradication measures, conduct experiments and raise the awareness of farmers. All the results will be passed on to farmers.
The main aim is to produce delicious, safe food that will be demanded by consumers.
AP/C 2-1 Project Summary
Project Name Establishment of an State Livestock Experiment Station Rearing Excellent Breeds, Most Suitable Rearing Methods, Feed Improvement, Anti-Epidemic & Parasite Measures, AI Support, Objectives R & D on Livestock Industry Promotion (including Foreign Study trips) and Support to Farmers Implementing Agency Oblast Administration (in cooperation with MAWRPI, Existing Research Institute) Beneficiary Stock Rearing Farmers, Processors, Consumers
Required Equipment Oblast Administration chooses (in cooperation with MAWRPI, Existing and Materials Research Institute)
Project Cost $3,000,000 (Asking for part as a Grant) $300,000 (Repair of Existing Building, Wiring, Lighting, Plumbing etc.)
Expected Results Support & Promote the Livestock Industry from the bottom up
A/P 2-2 Project for Proper Utilization of Pastures: Evaluation of Pastures and Proper Use of Resources
According to the grassland balance estimated by Nzaid, in Naryn rayon the fodder biomass could support twice the current numbers of livestock. 44 % of grassland is in remote areas, 100 to 250 km from villages, 27 % in the middle distance and 29 % near villages. 16 % of remote pastures are used, against 100 % of nearby pastures. Although there is twice as much grass biomass as needed by current numbers of livestock, its use should be planned properly.
Since the collapse of the Soviet Union, the number of sheep and yaks has dropped sharply and the number of goats bred for their wool has increased significantly. The numbers of goats should be controlled, as they will cause land degradation, making farmers’ efforts to produce fodder using crop rotation, useless.
3-46 AP/C 2-2 Project Summary
Project Name Appropriate Grazing land Use Plan To Maintain a Sustainable Balance of Pastures To Prepare For Increased Objectives Livestock Numbers
Implementing All farmers in the rayon and A/O and region Rayon and A/O Beneficiary Farmers Project Cost None (Assisting Farmers based on an appropriate Action Plan) Expected Results Increased Awareness of Local Farmers of the importance of the livestock industry as a key industry and pasture ecology & sustainable balance by arranging suitable use of pastures and the sustainable development of the livestock industry
A/P 2-3 Sheep Fattening Promotion and Breed Improvement Project
In Naryn rayon, crop farming is not sustainable due mainly to the harsh climatic conditions. The livestock industry depends solely on natural grass and also has the problem of securing fodder for winter to increase the number of livestock.
After the collapse of the Soviet Union, farmers in Naryn rayon have been cultivating, on a subsistence basis, such crops as wheat, potatoes, barley, and leguminous grass using a crop rotation system. This system enables farmers to produce crops without adding any chemical fertilizers and is considered a cultivation method suitable for the climatic conditions in this area.
The proposed Sheep Fattening Promotion Project is based on a mixed farming system of crop production and livestock breeding. It is aimed at expanding the breeding of sheep using sheep and fodder raised by the farmers themselves and gradually improving the fattening skills acquired during the pilot project stage. The system will enable farmers to breed sheep sustainable, regardless of price fluctuations for fodder in the market. However, stable breeding of livestock has not been possible due to unforeseen events, such as the export ban on live animals to neighbouring countries such as Kazakhstan, because of livestock quarantine problems. In order to continue the proposed project in the future, it will be necessary to improve the livestock hygiene environment. Such measures will enable Naryn farmers to develop a reputation as stable and reliable suppliers of livestock.
Apart from the cooperative farmers in the pilot project, other farmers' groups who are members of RAS have also started a mixed farming system of crop production and livestock breeding, including sheep fattening. In order to further promote the new farming system, Naryn RAS will hold seminars and distribute the manual on sheep fattening techniques and arrange the opening of a special account for the farmers to use the income obtained from the sale of the fattened sheep during the pilot project stage. The account will enable farmers to purchase superior breeds of sheep such as Gessar that are fast growing with bigger bodies. By crossing Gessars with ewes owned by the farmers, better quality sheep will be bred, possibly leading to a new 'Naryn' breed.
Procedure for Implementing the Action Plan In this Action Plan, repeat the steps described below and expand the project
3-47 First step: Selection of Farmers (10 farmers/year within the Oblast) Selection Criteria: Farmers’ Livestock Breeding Experiment interested in the Project, having at least 20 ewes, agreeable to releasing a stud ram to other farmers after a year, select target area and farmers by criteria and implements the Action Plan fairly and transparently Second Step: Train Farmers (done by a RAS Advisor) Train selected farmers using the Manual Main Subject: Characteristics, Breeds, Pasture & Fodder standards, Bookkeeping, Sales & Marketing Third Step: One year's hire of an Improved Stud Ram A farmer, who receives a Stud Ram, will take care of it and after breeding, pass it on to another farmer Fourth Step: Advice and Support on Sales/ Marketing/Weekly Market Price Fifth Step: Report on the Project Results, Analysis by a RAS Advisor
AP/C 2-3 Project Summary
Name of project Sheep Fattening Promotion and Breeding Improvement plan Purpose Improve sheep rearing in Naryn Oblast and the planned introduction of superior breeds (Stud Rams), spreading fattening techniques, raising the quality of livestock by using home-grown fodder and expanding the sale/marketing of high added value livestock products and contributing to improving the incomes of livestock breeders and reducing poverty. Make use of the results of the sheep fattening pilot project and make a fattening plan for livestock breeders using a combination of reasonable priced fodder for fattening.
Summary In addition to that shown above, *Disseminate breeding information. To increase the profits and sustainability of small farmers, disseminate all livestock breeding information, not just fattening - related technical information. *Sales & Marketing of livestock: Provide information about an effective & efficient sales system and a weekly bulletin with the meat selling prices in each rayon. *Training to raise the capacity of Technicians/Advisors RAS Instructor to raise the capacity of technicians/advisors
Implementation Naryn RAS (in cooperation with the Oblast Local Administration)
Equipment & Materials Utilize existing Equipment, Materials and Machine parts Beneficiaries Stock rearing farmers and consumers Project Cost $ 3,000 Stud Rams cost $ 1,600 ($ 160/ head x 10 head) RAS Administrative costs $ 1,400 (for one year) Results Increased fattening by hybrid sheep Improved knowledge of farmers on livestock breeding Acquisition of fattening techniques for using self grown feed Improved knowledge of livestock breeding in general Lessons on Sales / Marketing of Livestock products A Naryn brand name has been established Strengthen Farmers' groups, Promote livestock breeding expansion through a farmers' organization
3-48 3-3-2 Action Plan for improvement of Agriculture and Processing in Issyk-Kul oblast
(1) Current state and Issues for Issyk-Kul Agriculture
In spite of the high elevation (over 1650 metres above sea level), due to the effect of the lake, on the plains in Issyk-Kul the temperature in the winter is not so cold but spring comes late and autumn early, thus the time available for seeding and harvesting is short. It is suitable for growing wheat, barley and potatoes, apricots, pears, apples and berries and apiculture is also popular. Recently, the growing of vegetables including carrots and cabbage has also begun. It has vast pastures and natural and climatic conditions suitable for the livestock industry. Some 63.9 thousand head of horses, 140 thousand head of cattle, 587 thousand sheep and goats and 13.3 thousand head of pigs are being raised. Some yaks also live in the high mountainous areas. There are some 504 thousand poultry (chicken, ducks and turkeys). Most of the farmers are engaged in both farming and livestock breeding and cultivating wheat, potatoes, vegetables and fruit, as well as raising horses, dairy cattle, sheep and poultry. There are only a few farms dedicated solely to livestock.
Livestock product processing industries, other than dairy processing (mainly cheese) are undeveloped. There are medium and small-scale enterprises engaged in fruit and meat processing, but there are none that meet the food safety or sanitation standards. There are no modern, well-equipped or high tech industries or facilities.
Farming in Issyk-Kul is far removed in many aspects from and lagging behind the way agriculture should be performed. That the farmers are not very aware of this fact is an issue. Specialists who are engaged in plant protection, quarantine and disease prevention for livestock all appreciate the seriousness of the current problems but most of the farmers and residents have no appreciation of the seriousness of the issues facing their farming activities.
Oblast administration officials who are aware of the conditions and the issues appear to be procrastinating, as the issues appear to have overcome their ability to think about or to implement measures.
In the fields and pastures there are more than 25 types of weeds growing unchecked.
Agropyron repens, Avena fatua, Barbarea vulgaris, and Euphorbiahelioscopia are spread across the oblast and have been causing damage to wheat and potato production, the principal crops in the oblast. Pasture areas are overgrown with rumex acctosa in sainfoin (1) fields, reeds and camer pricle grow uncontrolled. Among the wheat fields, there are some that are indistinguishable from fields of weeds due to being overgrown with weeds. By the roadside or where there is water, camer pride grows 2 to 3 metres in height. Farmers have given up the fight as they claim they have no money to buy herbicides. MAWRPI and the oblast administration periodically procure herbicides for distribution to the farmers. In some places it is observed growth injury due to no crop rotation for many years. Continuous cultivation of wheat and potatoes over a 5 – 10 year period has caused damage of farm land. The soil is tired and there are some that is becoming no longer fit for farming. Conditions are becoming ripe for outbreaks of disease causing insects. Seed production is weak. As many farmers repeatedly use home grown potatoes and wheat as seeds, while the outward appearance of the crops shows no abnormalities, the quality is deteriorating each year. As a
(1) Perennial type Bean most commonly used as livestock feed in Kyrgyzstan
3-49 result, wheat grown in Issyk-Kul has a protein content that is substantially below the standard and cannot fetch market prices. The deterioration in the quality of potatoes has accelerated significantly in recent years, due to not using quality seed potatoes. The number of potatoes infested with insects, spoiled or abnormally shaped has increased. There are some excellent farmers in the region, but they are rare (experts estimate less than 5%). These motivated farmers work hard, study, are sensitive to market changes, make profits and continue to buy up other farms or lease farms on long-term leases, acquire a lot of state of the art farm machinery, hire labourers and are rapidly expanding their scale of operations. Naturally, such farmers will not share their know-how with neighbouring farmers. The lack of motivation and inaction of neighbouring farmers are the reasons for their success. Multiple farming using plastic sheeting is nowhere to be seen. In a region such as Issyk-Kul where the coming of spring is late, multiple farming is an extremely effective farming method and is also effective in combating weeds. Save for a farm managed by a Korean using water from a hot spring and geothermal heat, there is no greenhouse cultivation. The lack of a market and capital has been cited as the reasons for this but a market targeting tourists coming to the spas is emerging. Inadequate study of introducing new farming techniques and new crops and the lack of entrepreneurial spirit are the greatest culprits. Korean farmers, from Korea have been successful by engaging in multiple farming and experimental cultivation using a greenhouse and selling produce to restaurants in Bishkek. In Issyk-Kul, apples, apricots and berries are grown. In many areas on the coast of Lake Issyk-Kul, abripikha grows. There are also many herbs growing. In the canyons, there are wild berries but most of these are unexploited. Apple growing is being performed in “primitive conditions” on many farms. Except for a few select farmers and those formers who received guidance under the Apple Project(2) pruning and leaving productive branches is not being performed. Apple trees are left on their own to bear fruit and, as a result, small, watery apples are produced. Tired trees rest the following year without bearing any fruit and the same can be said of pears. In the apple orchards of former kolkhoz the fruit trees are nearing the end of their lives but planting of new seedlings has been delayed. The quality of apples is poor. Again the farmers themselves do not understand that the poor quality of the apples is the problem. Farmers sell all apples, including those that are really not marketable, such as damaged apples, small apples and windfalls (actually these constitute the majority) to intermediaries without any sorting of saleable and damaged apples. Until last year, the farmers were able to get away with this type of operation but this year the intermediaries brought along workers and began to select only those apples that they would accept. The sales environment is beginning to change. What the buyers want is“merchandise” that the consumer will buy and not just what is grown. The farmers need to change their perceptions.
The same can almost be said of apricot growing but as apricot growing areas are limited in Russia, during the season large refrigerated trucks come from Russia and buy up apricots in large volumes, thus, for the time being sales are possible. In Yekaterinburg and Novosibirsk, Issyk-Kul apricots are being sold as being grown in Uzbekistan.
(2) Technical guidance was given on basic techniques of cultivation such as pruning, 5% of the blossoms are left and the others are picked.
3-50 Blueberries from Issyk-Kul taste good but these are products of farmers just planting and letting nature do the rest and the farmers, after planting, do nothing other than harvesting and there is a concern that over time blueberries will follow the course of apples. There are also many problems in the livestock area. With respect to milk, in Tyup rayon and some districts outside, Sut-Bulak provides guidance on the raising of dairy cattle and quality testing of all milk bought from farmers and, as a result, the level of knowledge and experience of dairy farmers have improved compared with other districts. In general, the farmers are interested in how much milk is produced daily by a cow but the level of interest in the quality is low. Selective breeding of dairy cattle is virtually non-existent. There are no fully-fledged breeding farms. In Issyk-Kul, several locations have experienced outbreaks of foot and mouth disease. It is possible that other diseases have struck but as there is no published data, this is not known. The method of raising sheep needs fundamental changes. On many small-scale livestock farms where 20 to 30 heads of mixed breeds are raised with no gender separation mainly for meat, farmers have no concept of nor make any efforts towards quality improvement. Due to the rise of the nouveau riche and a middle class in Bishkek and the appearance of multi-outlet supermarkets, the consumer market is undergoing rapid changes and quality is becoming increasingly sought after. Consumer tastes are also changing towards healthier foods and meat that has less fat and is of good quality. Who in Issyk-Kul is making efforts to meet this need? Selective breeding and improving the quality of meat require a lot of time and by quickly tackling these needs, a comparative advantage vis a vis other regions can be created. For Issyk-Kul, where there are many tourists and visitors to the sanatoria, including foreigners, food, particularly meat, processed meat products such as sausages and milk and dairy products must be safe and of good quality. An environmental tax is collected by Issyk-Kul at the Balykchi Gate from automobiles coming in from other oblasts. The tax gathered annually is a substantial sum but only a part of it is recorded in the oblast accounts, which is a well-known fact. From June to August 2006, more than 60,000 cars entered Issyk-Kul and the tax revenues are recorded as $15,800 but actually, many know that the number of cars that actually entered Issyk-Kul is substantially more than this number3. Many trucks come in from outside the oblast and the country. The oblast administration is seriously debating the merits of bringing in an automatic toll machine to eliminate the possibility of money being siphoned off in mid-stream. In the summer of 2006, the number of tourists and those coming for recuperation increased significantly and sanitaria and resort hotel owners and residents, particularly in areas surrounding Cholpon-Ata flourished, but the oblast coffers did not benefit significantly. Many residents believe that the tax officials are part of the tax evasion and avoidance by taxpayers in return for their own financial gain.
A/P 3-1 New Role of the Oblast Administration under the Market Economy
Oblast administrations in Kyrgyzstan are currently positioned as subsidiary organs of the state government and their role in local government is relatively limited. The reduction of the current three layers of administrative units of oblast, rayon and Ayil Okumots (A/O) to two has already been debated in recent years but this is understood to have the objective of improving administrative efficiency of the overall state administration and expanding self-autonomy in the regions.
(3) The Evening Bishkek newspaper at the end of November (interview with the new governor of Issyk-Kul oblast)
3-51 For the development of Kyrgyzstan, development of regions where the principal industry is farming is essential. The role to be played by the oblast administration is an important one. However, 16 years have already passed since the transition to market economy began but it seems to be that many of the oblast administrative organs are working without a clear understanding of how an administration should function under a market economy or of a clear understanding of the role of the administration.
In the future, the time will likely come where the oblast administrative organs are relied upon to play a significantly larger function as local governance bodies and resolve many issues on their own without help from the state government. Oblast administrative organs and each organization need to prepare to fulfill such roles. Under the market economy the primary role of the oblast administration is to provide services as an administrative organ to the residents of the region.
For Issyk-Kul, the priority policy issue, simply, is to take measures to develop farming and the holiday industry that employ the majority of the region’s residents and raise the level of income of the people and to create an environment in which the people are able to live safely and healthily. This is the theory understood by everybody.
In the case of Issyk-Kul, in order to support the sale of produce of the region’s farmers, several initiatives have been taken by the governor including signing an agreement with Almaty Oblast (in 2006 with the city of Almaty). While the objective of the policy was sensible and sound, its implementation was a continuation of the former socialist practices of the oblast government forming a procurement company under the oblast budget and forming a truck convoy to transport the produce to Almaty to sell it there.
Although this was a MAWRPI initiative, a free trade zone was planned for an area adjacent to the border but ultimately the plan was not implemented.
Although the roles to be played by the oblast in promoting regional agriculture are significant, there is no longer room for former socialist era practices by the administration, including the government setting up a sales company to engage in selling or promoting projects without financial underpinning or that lack economic rationale. The Oblast administration has a limited budget and staff and its ability to implement the region’s policy issues and projects at its discretion and within its budget is limited. Thus, waste must be eliminated from its human and budgetary resources and be directed toward achieving the highest priority items. To achieve this, effective use of regional human resources and finding and developing the needed human resources is of the utmost importance.
Taking into consideration the role that the oblast government needs to play in future regional agricultural development and the importance of its initiative, we recommend the implementation of the following action plan. Furthermore, the oblast government in this context refers to all administrative organizations in both the rayon and Ayil Okmotus.
Farm land tax comprises a certain amount in the oblast budgetary revenues but with respect to expenditures, there are almost no expenditures directed toward farming related areas. Taxes collected from farmers should be used in the improvement and development of farming and it would be desirable to have those funds used in part of funding for the implementation of the following project.
3-52 The following 3 AP/C are proposed.
AP/C 3-1-1 Formulation of the Oblast Administration's Mission and Role By including all staff who is engaged in the oblast administration in making the decisions regarding the mission of the oblast government 10 years in the future, make clear and promote the understanding and sharing of the mission of the oblast government in the transition process to a market economy and democracy. It is important that deciding the mission not be left to the governor and enforced top down as in the past, but be through a process in which all staff, including external agencies, rayons and A/O, participate and through a period of incubation, coming up with proposals and thorough and open discussions to formulate the policies. The governor and the deputy governors need to participate actively in these discussions.
Oblast Governor
Mission Formulation Committee
Ayil-Okmotus Rayon External Agencies, Related Organizations
Fig. 3-3-1 Formulating the Oblast Administration's Mission and Role
The discussions referred to above, should be held at all levels within A/O, between A/O and rayons, within rayon administrations, between rayon and oblast administrations, within external agencies, between external agencies and the oblast administration, in the oblast and at meetings in which all participate and raise the conclusions reached at each level upwards. Taking the case of rayon, missions not only for the rayon administration itself but for A/O and the oblast should also be formulated. The process of getting the mission formulated is important. Ideas that differ from management and are refreshing made by young staff and female staff, who had heretofore not had the opportunity to participate in the planning and decision making of important matters, are anticipated. Holding such discussions unites understanding among the administration's staff and enables a sense of ownership of the mission that the staff had a role in determining and adding vitality to the administration as whole and enhancing task productivity. Once the mission has been determined, discussions will be held on the objectives and roles of each department, task contents and how the staff ought to tackle the tasks and the required level of knowledge based on which a decision would be made. For the debates about deciding the mission, invite a professor from a university in the oblast who is able to act as a moderator/adviser for a fee and can help put together the results of the debates. The final decision will be made by the governor and be put up in the government building and a commitment will be made to the residents. It will be contained in all public relations publications issued by the government. Using this ensures the acceptance of the mission by the residents.
3-53 AP/C 3-1-1 Project Summary
Project Name Formulation of the oblast administration's mission and role Clarify the role and functions to be filled now and in the future by the oblast Objectives administration
Implementing Agency Oblast Administration (oblast, rayon, A/O) Beneficiary Oblast residents, administration staff $4,000 (Moderator's expenses $500 x 6 = $3,000, administrative expenses Project Cost (paper, toner, etc) $1,000
1) By clarifying the tasks' objectives, the quality of the tasks of management and staff will improve 2) Break away from old thinking and task practices, Expected Results 3) Energise the overall organization and improve task efficiency 4) Enable tasks needed by the residents to be performed
APC 3-1-2 Reform and Strengthening of State Agricultural Related Departments - Setting up an Issyk-Kul Farming Improvement Center
1) Reform of Agriculture Related Departments The preceding 3-1-1 and 3-1-3(1) will make clear the responsibilities of the oblast administration, particularly the agriculture related departments. Procurement of farm machinery and fertilizers are the responsibilities of private enterprises and not one that the oblast government should direct. Oblast administration should play a supplementary role in providing credit to farmers. If there is no trading company with suitable capabilities, it should put in place an environment that would facilitate the development of such a trading company. Resolving many of the issues noted in the preceding (1) and (2) lies in the oblast administration fulfilling its rightful role, which includes providing information to and mobilising farmers, providing training to improve farming methods, controlling insects causing damage and livestock diseases, and form structures and systems to improve farming in the region. Management staff unable to make the transition to the above mode should be replaced with those who have such abilities. If no suitable specialists exist in the oblast administration, it will be necessary to recruit one from the outside. Agriculture in Issyk-Kul is the largest industry in the region and is the largest employer providing the principal source of revenue for the majority of the residents and one, which has future development potential. The agricultural department of the oblast administration needs to recruit capable employees who understand these qualities. The same goes for the rayons. Agriculture related departments in the oblast should function as service providers to farmers relating to information and farming improvements and the leader should be somewhat similar to the Commissar during the 1950 – 1960’s.2) 2) As the Implementing Agency, the Issyk-Kul Farm Improvement Center will be formed as a third sector entity outside the oblast administration and will hire specialists in cultivation, pest control, veterinary services, distribution, processing and others who are well versed in the agricultural environment of the
3-54 region. It will be equipped with the minimum necessary equipment. Specialists will be paid incentive laden salaries. This is an important role in forming the foundation for Issyk-Kul agriculture and in order to motivate capable specialists, appropriate salaries will be needed. Oblast administration may propose to the government that an approach first be made to the administration to implement this on a pilot project basis with a budget. In parallel, pursue the possibility of and the extent of carrying this out under the oblast budget and the possibility of obtaining donor support.
AP/C 3-1-2 Project Summary
Project Name Setting up an Issyk-Kul Farming Improvement Center Objectives Farming support to develop Issyk-Kul farming to what it should be Implementing Agency Oblast Administration (oblast, rayon) Beneficiary Farmers $295,000 Personnel (Annual) $54,000 (Average $300 x 15 x 12 months) Project Cost Office equipment, consumables $50,000 (PC x 8, Printer x 2, etc) Analytical equipment etc. $200,000
Healthy development of oblast farming and livestock industries, improved productivity and quality Expected Results Increased sales, increased prices, increased incomes for farmers, increased tax revenue
AP/C 3-1-3 Use of the Mass Media to Educate and Enlighten Farmers The key to improving farming in Issyk-Kul is the speed with which the farmers become acquainted with and adopt correct farming knowledge. So long as this knowledge and motivation level fails to rise, achieving improvements in safety, quality or productivity will not be possible. It will be necessary for regional specialists to continuously run a campaign that is easily understood. For areas in which no suitable specialist exists in the region, money should be spent to recruit from outside the region. The issues that have been discussed above should be the main theme for the campaign in addition to numerous topics, including cultivation methods for various crops, methods of raising livestock, seeds, farmland management, artificial insemination, new crops, and pest control measures, measures to combat diseases in livestock, particularly communicable diseases and foreign experience. Issyk-Kul TV will be utilized. A regular programme will be made (1 – 2 reruns for those who missed the original airing). The new Governor already has these ideas. Have farmers with progressive experience participate. Average potato yield in Issyk-Kul is 10 – 14 tons per hectare but some farmers who excel are able to harvest 35 tons of good quality potatoes per hectare each year. They select their own seeds, and drive their own tractors and plough furrows 35 – 45 cm in depth twice each winter (the sowing depth usually contracted by farmers with contractors is 25 – 30 cm). They are constantly watering, fertilizing and weeding. As a result these farmers have become wealthy. For those farmers who do nothing and cultivate potatoes, a case example of a successful farmer would be useful as a role model.
3-55 The second method is using the region’s newspapers, with a weekly column on a fixed page of papers, discussing the above-mentioned topics. Specialists and progressive farmers who participate in the above campaigns will be financially rewarded. TV stations and newspapers will likely cooperate free of charge.
AP/C 3-1-3 Project Summary
Project Name Farmer education and enlightenment campaign Objectives Distribution of correct (profitable) farming know-how
Oblast Administration Agriculture Division (and the Center to be Implementing Agency established under AP/C 1-2) Beneficiary Farmers Project Cost $4,000 Video camera x 1, PC x1, reporting expenses, appearance support Expected Results Healthy development of oblast farming and livestock industries, improvement in productivity and quality
A/P 3-2 Securing the Safety of Agricultural Produce, Meat and Processed Products and improvement of products quality
(1) Background
Not much has been said about the safety of the agricultural produce produced in Kyrgyzstan. With respect to the government's food safety policies, comments are made regarding self-sufficiency in food but no mention is made of ensuring the safety of each produce itself.
As mentioned in 3-1-1, imports of potatoes have been banned by Kazakhstan since late 2005 due to nematode infestations and mass outbreaks of hyphantria cunea and imports of all farm products from Kyrgyzstan from June 25 2006. These were major setbacks for Kyrgyzstan. The Kyrgyz market is small and limited and Kazakhstan with a significantly larger market and buying power needs imports of farm produce from Kyrgyzstan. Consequently, Kazakhstan has introduced various preferential measures as government orders to expand imports of agricultural produce from Kyrgyz (and Uzbekistan) as stated in 2- 3-4 in Chapter 2. Infestations of hyphantria cunea have not been seen in Issyk-Kul but Issyk-Kul agricultural produce was also banned.
With respect to livestock, Kyrgyz livestock, meat, and processed meat and livestock products are banned from being imported not only by Kazakhstan but also by Russia. This is due to widespread diseases throughout Kyrgyzstan of communicable livestock diseases including foot and mouth disease, brucellosis, anthrax, tuberculosis, and smallpox and livestock being infested with various parasites.
Demand for meat, in particular beef, is large and this import prohibition means that an opportunity to enter this important market is closed for Kyrgyz. It would be difficult to imagine lifting of this import prohibition for quite some time.
3-56 In Kyrgyzstan, on most occasions, issues are not dealt with until a problem occurs. Measures against hypanthia cunea involved establishing a joint committee with Kazakhstan quarantine officers and Kyrgyzstan began to implement a response and Kazakhstan lifted the ban but there is a possibility that the eggs of the source may survive the winter and a recurrence next year cannot be ruled out. This year in Issyk-Kul, there was mass infestations of Colorado potato beetle that caused a lot of grief to potato farmers in getting rid of the beetles.
With the spread of foot and mouth disease and brucellosis, the livestock market in Bishkek was temporarily closed in August 2006 but was reopened 3 weeks later.(4) Why the reopening was possible remains a mystery as brucellosis and foot and mouth disease still exist and have not been eradicated. People in Kyrgyzstan buy and consume meat being sold under such conditions. It is the responsibility of the administration to ensure the safety of the food being supplied to the people and people unknowingly consume the food that is supplied. Among livestock farmers, there are some who do not vaccinate the cattle and sheep that they raise. This is very irresponsible. The cause of the spread of communicable diseases is attributable to such farmers but they are not being punished. It is not clear whether no law exists to punish the farmers or whether even if there is a law, it is dysfunctional. The quality of vaccines is also questionable. As bids for purchases of vaccines are based solely on price, vaccines of questionable quality are imported and we have heard reports of vaccinations causing sickness. During the summer season, Issyk-Kul receives many tourists. Ensuring food safety is important also from this perspective. If a child contracts brucellosis when he visits Issyk-Kul on holiday and if this is reported, foreign tourists from overseas such as Russia and Kazakhstan will decline significantly. Tourists will not visit areas where communicable disease has been reported. As accurate information about livestock diseases is not generally disclosed to the public, there is no information as to the number of livestock that have fallen victim to disease and that accurate information that foot and mouth disease has occurred is unavailable has been officially acknowledged by MAWRPI. It is too late to deal with communicable diseases and pests after the fact. Systematic measures to prevent their occurrence and daily measures taken by the farmers themselves are essential in preventing occurrences. Issyk-Kul is surrounded by mountains and is isolated from other regions, thus, if preventive measures are properly taken, many of the mass outbreaks of communicable diseases in livestock and plant pests could be prevented. It involves incurring expenses but the necessary measures must be taken by somehow coming up with the funds and with the understanding and cooperation of farmers. The implementation of the measures requires some urgency. It would be highly desirable for specialists in related fields in Issyk-Kul to collectively come up with the best practical measures. Below, three Action Plans and AP/C are proposed that the Study Team deems to be the absolute minimum in terms of requirements with respect to dealing with the theme are discussed.
A/P 3-2-1 Removing Harmful Weeds Overgrowing by harmful weeds throughout the oblast is an issue created by the farmers themselves. Farmers are waiting for someone to spray herbicides. Compared with the farmers in the south, some part of
(4) Even when it was closed transactions took place normally outside of the market and no enforcement was made. There are some reports that a child contracted brucellosis.
3-57 farmers in Issyk-Kul (with the exception of a few) has been lax in their efforts. It is hard to believe that farmers would allow weeds to grow unchecked with farmers themselves taking no action whatsoever. The heads of rayons and A/Os have to select a period during June and August when it is not busy and before the weeds have had a chance to seed, to recruit all farmers to cut and pull up all the weeds. It would also be useful to have the children of the farmers, the future generation of farmers, participate as a part of extracurricular activities. It is important not only for the current farmers but also for the future generation of farmers, to realize that weeding is a farmer’s problem and it is a problem that they should solve by their own efforts (farmers who do not fight weeds are not true farmers). In the first year, priority target areas will be the sides of roads where there are waterways, paths through the fields, seed farms and areas where weed damage is greatest. It is hoped that by weeding public places and shared areas, the awareness of farmers would change at least a little. In subsequent years, weeding will be performed starting with areas that are upwind and upstream in the irrigation system and working downstream. If this is continued for 5 years, the harmful weeds will likely be cut by at least half. This activity will be forcibly implemented until the farmers begin to weed voluntarily. For weeds or areas that require herbicides, weeding that had been conducted in the past using state budget funds will also be performed in parallel.
AP/C 3-2-1 Project Summary
Project Name Harmful Weed Elimination Project Improved quality of crops and fodder and change in farmers’ awareness Objectives through eliminating weeds
Implementing Agency All farmers in the rayon and A/O and region Beneficiaries Farmers Project Cost None (Weeds removed by the farmers themselves using their own tools) Awareness that weeding is the responsibility of the farmers themselves, Expected Results improved productivity and quality, communication between farmers through joint work and esprit de corps
AP/C 3-2-2 Fundamental Improvements in Apple Orchards - Production of Issyk-Kul Brand Apple Apple growing in Issyk-Kul, saves for an enterprising minority of farmers, is close to being primitive. Farmers have made no efforts to exploit the endowments of nature to produce good quality apples nor have they made any attempts to acquire knowledge or efforts to manage the orchard, but merely harvest what is grown and to sell them at the highest possible price. A large part of the Issyk-Kul region is suited to apple growing. In order to exploit is naturally endowed environment and grow high quality apples, the current attitudes, efforts, knowledge and experience of growers is totally inadequate. It is necessary to introduce the experiences of countries that are advanced in apple production such as Japan, European countries or China. In Japan, Aomori and Nagano Prefectures (province/oblast) share similar climatic and natural conditions and are regions where world-class apple growers exist. During a 3 year period, at required intervals (about three times a year) a specialist will be invited to thoroughly educate the
3-58 farmers in the fundamental techniques of apple growing, including fostering seedlings, a method of pruning leaving productive branches intact, selecting flowers, providing fertilizers, and measures against harmful insects. It will take 8 – 10 years before growing techniques improve and high quality apples can be produced throughout the region. During the Socialist Era, volume was the overriding goal and farmers did not know high quality apples. An effective method would be for several pilot farms to be designated from among farmers who do not shy away from work and who have a strong desire to produce high quality apples and to those farmers thorough training on improving techniques will be given to create a model orchard to be used as a test bed for teaching other farmers. Furthermore, a request will be made to donor countries for advanced apple producing countries to accept trainee farmers for a full year.
AP/C 3-2-2 Project Summary
Project Name Technical Support to Apple Growers Improving apple growing techniques, acquisition of knowledge and Objectives experience by farmers and changing attitudes, production of Issyk-Kul brand Apple Implementing Agency Oblast Agriculture related Divisions Beneficiary Apple growers Project Cost None (cost of sending specialists will be borne by donors) Change in attitude of farmers towards apple growing, improved quality of Expected Results apples and incomes
AP/C 3-2-3 Establishment of an Oblast Agricultural Testing Center 1) Objective: Agriculture is the foundation of the Issyk-Kul economy and source of income for many of its residents. Without developing agriculture, there will be no development of Issyk-Kul and no improvements in income levels for the residents.
The Center will engage in scientific research, experimental growing, other experiments and education and disseminating to farmers issues essential to the development of agriculture in the oblast, including farming methods to achieve safety, quality and high yields, measures against damage from continuous cropping, seed planting, development and growing and regional adaptation of new crops, measures against harmful weeds, experimental planting of fruit seedlings, technical development of high quality fruit orchards, selective breeding, measures against disease carrying insects and the development of processing technology and education programmes for the farmers. Measures for resolving the existing problems of Issyk-Kul agriculture and those that may arise in the future will also be examined. All of the benefits will revert to the farmers. 2) Facility: A testing and experimental farm will use farm land owned by the oblast and for buildings will use one or more of the vocational schools and agricultural schools that are currently unused, ideally in a location where knowledge can be centralized and Karakol would be appropriate.
3-59 3) Farming Machinery, Experimental Equipment and other Necessary Materials and Tools: A request for donor pro bono fund assistance will be made 4) Existing Research and Experiment Institution: These will be incorporated into this Testing Center, however, staff will be selected anew based on strict standards. 5) Foreign Specialists: A request will be made to a donor to send several specialists on a long term assignment (3 years) In Kyrgyzstan there is a pronounced time lag and shortage in terms of hardware but specialist knowledge, experience and technologies in testing and experimentation are also significantly behind the times. There are not many who can read literature in English. Even if the newest equipment is obtained, it cannot be utilized effectively or efficiently. Improvements in the level of knowledge and technical skills of the staff at the testing Center are essential. Specialists sent by donors will also provide operational and staff training for the testing Center.
In order to obtain the support of donors and the Kyrgyz government, it will be necessary to position the Testing Center as a national pilot project open to the other oblasts.
AP/C 3-2-3 Project Summary
Project Name Establishment of an Oblast Agricultural Testing Center Objectives Scientific and practical research and test plantation, plant improvement among others for the promotion of Issyk-kul agriculture Implementing Agency Oblast administration Beneficiaries Farmers, oblast administration Metallurgical Microscope, Soft X-ray Unit, Computer (30), Incubator (2~3), Biological Microscope with Projector, Differential Interface microscope, Microscope with Camera (3), Phase Microscope, Fluorescence Microscope, Aseptic Box (3-4), Growth Cabinet, Freeze Microtome, Profile Projector, Grain Separator (2), Microtone Knife Sharpener, Digital Camera (3), Low Temperature Incubator (2~3),Draft Camber (2~3) Clean Bench, Required Equipment Refrigerator, Auto Dry desiccator, Ultrasonic Cleaner (2~3), Autoclave, and Materials Spectrophotometer, Sterilizing Fumigation Unit, Explosion-proof Refrigerator, Soil Sterilizer, Ion Exchange Unit, Potenshon Meter Box, TV-Video set, Copy Machine (3~4 including colour), Printer (3-4 including colour), Cultivator (2-3), Pickup-Truck, Hand Tractor (2~3), Incinerator (2~3), Various Chemicals & others (those already existing in current facilities will be used)
Project Cost $3,000,000 (component requested from donors) $300,000 (building repairs, wiring, plumbing etc) + $80,000 (Personnel costs, operating cost)
Expected Results Production of farm products with properties peculiar to the region that are safe and high quality and have improved productivity and timely measures against disease carrying insects
3-60 A/P 3-3 Promotion of Processing Industry and Support to Processing Enterprises
In recent years, several agricultural produce processing enterprises have started working in Issyk-Kul and the entrepreneurial spirit of the owners must be commended. Concrete support measures will be needed to ensure these enterprises continue to prosper and develop in future.
In Kyrgyzstan the need for and the importance of processing industries at state, oblast, rayon and A/O level has been emphasized but in reality no specific action has been taken at state or regional levels. Slogans reminiscent of the Socialist Era such as, “…must establish processing enterprises”, or “only 5% is processed” or “need to be processed and exported” have been repeated. While not negating the above slogans, the issue is that the need for the processing industry has been raised only agricultural produce growers and no one has thought through the issues on the demand or selling side. Processed merchandise needs to be sold somewhere and the sales proceeds must be recovered. “Where to sell” is the most difficult area and there can be no production without sales outlets. Those who spout the above slogans are merely passing on the selling problems of the producers to the processing industry.
In the region, foreign investments and aid are expected. This is because there are no funds in the region and there is a dearth of entrepreneurs. There are no investment incentives and conditions for foreign enterprises who comply with the law, accounting and tax systems amidst an environment fraught with impediments and risks, to enable them to compete against Kyrgyz enterprises that are proficient in underreporting, tax evasion and extortion tactics.
If the state or the region requires foreign investments, those who are the ultimate beneficiaries of foreign investments must also bear some of the risks and expenses. In Kyrgyzstan, this common sense thinking does not exist among politicians, those in the administration or in farming. Therefore, it would be impossible to expect serious foreign enterprises to come to Kyrgyzstan.
Existing processing enterprises also encounter a variety of problems. Technology is obsolete and unhygienic and if one were to take a look at a production site such as juice production, one would lose any desire to buy the product.
Most of the newly established enterprises are small and carry on production in un-hygienic conditions. Due to shortage of funds, small-scale start-up cannot be avoided (in Japan there is a saying, “begin small and make it bigger”) but it is a problem when it is unhygienic. There are no standards for food safety or sanitation that the management must meet in production and without giving it much thought feel that this would be acceptable: this is the problem.
As there is no local market, products need to be sold in Bishkek or Almaty or other foreign market, but the demands of consumers in these markets are likely to become much stricter in the future. Even if the products can be sold in Kyrgyzstan, it is only a matter of time before Russia and Kazakhstan adopt EU standards, in which case most products from Kyrgyz processing enterprises will not be able to be sold in those countries. Newly established enterprises have only a short-term future.
Looking at dairy products, only Sut-Bulak meets international hygiene standards. Ak-Jalga has survived the difficult period thanks to the efforts of its management and employees and, as the region’s largest dairy processor, has made a significant contribution to farmers' incomes and employment but has been lagging in product development that meets modern marketing and market needs. Some of the existing enterprises have not been able to respond to the changes and are facing bankruptcy.
3-61 The oblast administration needs to take account of the significant role played by processing industries in the oblast's economy in terms of both sales and employment in the agricultural and livestock products sector and as a means of ensuring the continued existence and development of ventures in the oblast, select 10 priority enterprises based on certain criteria and take concrete support measures to deal with the most difficult issues confronting these enterprises.
Selection criteria should be: (1) quality of management, (2) product strength, (3) technology, (4) contribution to the region and (5) future potential. In Issyk-Kul there are regional promotion subsidies from the Kumtor Gold Mine and part of these funds would be used as the funding.
The above support will also be open to those entering the market with a meaningful business plan or establishing a new venture. Through this entrepreneurship in the region will be promoted.
AP/C 3-3-1 Project Summary
Project Name Priority Processing Enterprise Support Develop the regional economy through supporting promising processing Objectives enterprises
Implementing Agency Oblast Economics Department, Division responsible for processing Processing enterprises Ultimate Beneficiaries – farmers, residents Beneficiaries (employment), and oblast (tax revenues)
Project Cost $300,000 Subsidies from the Kumtor Mining company Management stability for supply farmers, increased employment and Expected Results income in the region, increased tax revenues
A/P 3-4 Strengthening Marketing and Development of Private Sector related with Sales and Logistics (1) Background
As mentioned earlier, most of the agricultural produce from Issyk-Kul, is bought up by brokers with cash coming from Bishkek and Kazakhstan and transported primarily to Kazakhstan and Bishkek. Depending upon the season and crops, Russian (honey, apricots) and Uzbek (apricots, potatoes) brokers are included. Sales by local entities are small. Some farmers with trucks take produce to Kazakhstan and small numbers of farmers takes small amount of crops and fruit by bus to Bishkek or Almaty and sell them in bazaars and the like. In other words, there are no enterprises engaged in regional selling of agricultural produce. Brokers, through their repeated dealings, have developed their marketing and have accumulated experience and profits and are becoming even stronger.
Dealing in agricultural produce is difficult and entails risks. It is not an area into which novices can easily enter. As a result, the brokers wield great influence and in some regions only producers’ prices that the brokers decide are available. Added value in the selling process is taken outside of the region. This is one of the structural reasons for regional residents not being able to improve their standard of living.
3-62 The sale of agricultural produce according to the above scenario does not take into consideration that farmers are consumers. For the farmers who have no local market, brokers who come to their door with a truck to buy up their produce are the only buyer they can rely on and are their only partner. The farmer’s only concern is how much the broker will pay for his produce. He does not know nor does he care what happens after the produce is sold to the broker. A transaction akin to mutual deception takes place. Farmers pack potatoes into a net bag with the good potatoes visible on the outside and the damaged, insect eaten, deformed, small or spoilt potatoes inside out of sight to make it appear that they are all good potatoes. There are lots of these farmers.
Brokers are aware of this and buy at a cheap price. More difficult brokers will tear the bag open and spread the potatoes on the floor and point out the defective potatoes and drive down the price. Even then, during last year and this year thanks to the surge in prices for potatoes in the market, the farmers enjoyed good incomes.
There are only a few farmers who think about how their produce is accepted by the consumers or the buyers. Therefore, the interest by them regarding quality at the time of production or harvest is low. For any type of business, marketing is the most difficult yet the highest priority issue. In order for the farming and livestock industries and the tourism and resort industries, the principal industries in Issyk-Kul, to raise the level of income for enterprises and residents, a strategic read of the future must be taken and the direction and seeds for business be determined and undertake strategic marketing to uncover niche markets that are deemed to be profitable. Once the direction and business have been decided upon, make all preparations and attack the market. In Issyk-Kul such entrepreneurs are a rarity. In particular, most of the farmers have been tamed by the brokers and abandoned any spirit of challenge long ago.
Although it can be said of all of Kyrgyzstan, farmers have a tendency to shy away from anything that requires effort or money and simply hope that someone else will do it for them. Infrastructure and various basic systems for farming constructed or built in the former Soviet Period have been used by the current farmers for the past 10 years without any maintenance and are becoming worn out and obsolete. Over half the broken irrigation systems are due to residents stealing parts for sale, diverting them for their own use or not undertaking necessary small repairs, resulting in their current unusable state.
Farmers who invest with an eye to the future are definitely in the minority. Those who have paid the price and made investments have succeeded and have expanded and are making profits. If an effort to sell is made, many things will become clear and they will come to understand the need to produce what the market demands and need to make an effort to respond to the quality demands of consumers. In many ways, marketing is an unavoidable path in doing business.
However, for the farmers, marketing is an unknown and one of the most difficult issues. In order to conduct marketing, substantial expenses and time are required and these need specialized knowledge and experience. That being said, if marketing continues to be neglected as it is now, agriculture and processing in Issyk-Kul will forever continue to be at the mercy of brokers from Bishkek or Kazakhstan.
There is no trading company in the oblast that has the capacity to sell their produce and processed products within or outside the oblast or to neighbouring countries. There is also no legitimate transport company and individual operators owning 1 or 2 used trucks are performing most of the transport. In Karakol, there is a “transport bazaar” where these individual truckers gather and in the morning customers go to the bazaar and individually negotiate freight charges with the drivers. This is mutually inefficient. Large volumes of cargoes cannot be conveyed and the most they can
3-63 do is pick up loose cargo. It is not possible for them to compete effectively with transport companies from Bishkek or Kazakhstan or Russia who have many reefer trucks.
In Issyk-Kul, there is a severe shortage of storage warehouses for farm produce and fruit. Current facilities are mainly remnants of the former Soviet Era and are built underground or semi-underground and we could find no temperature or moisture controlled warehouses.
It is necessary to implement as a priority, a policy fostering selling infrastructure with marketing, selling, storage and transportation capabilities so that at least half of the produce is transported and sold by enterprises within the oblast in order to enable them to break out of the above dependence on brokers from outside the oblast. In the following component we will discuss our concrete proposals.
AP/C 3-4-1 Strengthening Marketing utilizing MSC
With respect to marketing, the information, knowledge, experience and network developed in the course of setting up a Tyup Marketing Service Center (MSC) (NPO), a JICA pilot project, will be utilized. The MSC has decided to continue operating even after the JICA pilot project has finished in February this year in close cooperation with Issyk-Kul Agro and other supporting farmers and enterprises.
The Center will be asked to change the name, MSC, to the Issyk-Kul Marketing Service Center and to expand its sphere of activity throughout Issyk-Kul oblast. MSC staff will be expanded and in return for accepting the above request, the oblast administration will bear a part of MSC operating expenses. MSC has only one and a half years of experience under its belt but there is no other specialized marketing organization in the oblast.
If the oblast administration were to establish such an organization from scratch, it would require substantial time and expense and securing marketing specialists within the oblast will be difficult at best. At MSC, JICA experts in marketing and sales who are fully familiar with CIS markets, including Kyrgyzstan, provided training from the ground up and there are no assurances that, without the guidance of specialists with such international experience, such a venture would achieve the level of accumulation of experience that MSC has to date. Taking this into consideration, it would be easier and more efficient for the oblast administration to make some payments towards this. The Oblast governor would become a member of the Steering Committee of the MSC and participate in formulating its management policies.
AP/C 4-1 Project Summary
Project Name Implementation of marketing using the MSC to cover the entire oblast Development of sales markets and methods for farm produce and processed Objectives goods from the oblast
Implementing Agency Oblast governor and MSC Beneficiaries Farmers and processing enterprises Project Cost $8,000/year (Oblast administration portion) $200x3x12=$7,200+expenses Acquisition of market information, increase in sales of farm produce and Expected Results processed goods outside the oblast and to neighbouring countries
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AP/C 3-4-2 Promotion of Setting up a Trading Company As discussed above, over 90% of added value from the sale and transport outside the oblast of Issyk-Kul grown produce goes outside the oblast. It is necessary to increase the region’s income and consumption (which will become income for other residents in the region) by undertaking even just half of the out-of- oblast sales, including exports, by enterprises in the oblast.
The most significant benefit from sales by a local trading company is the direct acquisition of information relating to the market and consumers enabling a quicker response to market changes and converting farmers to producing quality produce. A trading company that can fill this function does not currently exist in Issyk-kul. There are some enterprising farmers who undertake their own sales, but these are in the minority. Enterprises and residents with entrepreneurial spirit and management capabilities should be approached to help set up 2 – 3 trading companies. The oblast will provide support by providing long-term low interest loans and a 5-year tax holiday.
AP/C 3-4-2 Project Summary
Project Name Support to Setting up a Trading Company Sales of agricultural produce and processed products outside the oblast and Objectives country
Implementing Agency Oblast administration Beneficiaries Entrepreneurs, Ultimate Beneficiaries: Farmers and processing enterprises Project Cost Direct expenditure cost is zero Increased sales of agricultural produce and processed products that meet Expected Results market demands outside the oblast and to neighbouring countries
AP/C 3-4-3 Opening a Retail Outlet in Bishkek to Sell Issyk-Kul Agricultural Produce
Creating an opportunity for the farmers themselves to directly sell crops to consumers without relying on brokers is necessary to transform the farmers’ awareness. The Oblast administration will lease and equip a building (or space with a warehouse and working area) in a suitable location in Bishkek and a contracted sales company will actually sell the produce. Farmers will bring crops they would like to sell to the store and 15% of the sales price would be paid to the contractor as a contract sales fee and the rest would go to the farmer. Transport costs from Issyk-Kul to the store arranged by the contracted company will be borne by the farmers. It would be good to have multiple sellers of the same crop and products would be labeled with the producer’s name to differentiate them. For example, if 10 farmers wish to sell potatoes, a sales space labelled with the producer's name, location and variety would be set up to distinguish the farmers and this would make it possible to discern, which variety of potatoes or whose potatoes sold the most and the collection of other sales statistics, which would help accurate marketing. Sales results containing comparative data would be fed back to the farmers and this would be helpful in changing farmers’ awareness.
3-65 In return for providing the retail outlet and equipment, the oblast administration would receive part of the profits after deducting labour and other selling costs. Processed goods would also be included in the programme. A sales contractor would be recruited through an open tender.
This project maybe realized in cooperation with other oblasts as the shop of agriproducts producers.
AP/C 3-4-3 Project Summary
Project Name Organizing an Issyk-Kul Agricultural Produce Retail Outlet in Bishkek Objectives Create a direct link between farmers and consumers Oblast administration (and the contracted sales company that would Implementing Agency implement the operation)
Beneficiaries Farmers, processing enterprises and Bishkek consumers Project Cost $50,000 (Rent, equipment cost) Expected Results Development of user oriented farming and formation of an Issyk-Kul brand
AP/C 3-4-5 Fostering of Logistic Enterprises
In order to increase the out-of-oblast sale of Issyk-Kul agricultural produce and processed products, in addition to a marketing and trading company, logistics are required. Currently, warehouses from the former Soviet Era are being used for the semi-basement storage of potatoes and wheat but there is a complete lack of storage. We have not yet come across an operating temperature and moisture controlled warehouse.
For storing perishable food such as vegetables and fruit, the existing storage facilities are totally inadequate. In addition, as transportation is arranged individually, mainly by individual operators, there are no organized logistics from storage to final shipment in the supply chain of production → storage → transport→ sales market. As a result the storage and transportation process is inefficient and the quality of services provided is low and poses problems for maintaining the quality of crops and fruit.
It is not practical, at this point in time, to consider setting up a modern logistics company, but it is necessary to consider setting up a new transport and storage company that takes into consideration the above-mentioned integrated process. The newly formed transport company, by being linked to warehouse storage, can improve management efficiency. It is not realistic to expect individual operators to unite to form a modern transport / warehousing company. The oblast administration needs to examine ways of implementing such a plan by creating a TOR for a business plan to recruit investors or invite major enterprises, cooperatives or wealthy individuals. Construction from scratch of a storage warehouse will require a substantial amount of funds, thus, existing unused factories or abandoned former kolkhoz buildings will be used.
The oblast administration, in recognition of the importance of logistics for the oblast’s agriculture, will make a partial investment in setting up the company and will work with private banks to provide financing to the company for the acquisition of equipment and used trucks and provide a 5 year tax holiday on taxes over which the oblast has authority. Exemption from taxation may cause some resentment but ultimately it will be accepted by residents as it is essential in promoting agriculture and its contribution to the oblast
3-66 economy is substantial and in 5 years time increased tax revenues can be expected. Ultimately, a warehouse will also be needed in Bishkek.
AP/C 3-4-4 Project Summary
Project Name Support for Establishing a Transport / Warehousing Company Objectives Efficient and quality transport and storage of agricultural produce Implementing Agency Oblast administration Beneficiaries Entrepreneurs Ultimate Beneficiaries: Farmers, processing enterprises $660,000 Breakdown: $150,000 (1,000~1,500m2 building purchase and renovating) Project Cost $200,000 Internal equipment cost $60,000 (Electric Forklift x 2) $200,000 (Refrigerated Truck 20 ton x 3 and12 ton x 2) $50,000 (Labour and operating costs, etc)
Preserving the quality of agricultural produce, processed products, increased Expected Results sales out-of-oblast and to neighbouring countries
AP/C 3-4-5 Fostering Management and Entrepreneurs
As we have already seen, for Issyk-Kul agriculture development, external factors such as nature and the progress made in changing to a market economy are in place, but the key component of local farmers and entrepreneurs have not yet reached a stage where they are able to exploit these conditions. Oblast and rayon administrations and the majority of people working in them still cling to the old ways and compared with the progress being made externally, the pace of change in the region is significantly slower and the gap between the possibilities available and the ability of the region to supply is growing ever wider.
If left as is, the development potential offered by Issyk-Kul will be taken advantage of by foreigners or entrepreneurs from Bishkek and local residents will be left with selling cheap vegetables or managing small bars and cheap restaurants and the vast majority of the added value formed in the region will flow out of the oblast. Even in the case of apples, Kazakhstan and Russia are planning to cultivate their own apples.
Thought must be given to what is the key for economic development in Issyk-Kul and raising residents' incomes. Farmers do not take good care of their land. Compared with the farmers in the south who have been making efforts to use land effectively and engaging in farming that is sensitive to market movements (this is not to say that southern farmers are that far ahead), the lag in Issyk-Kul farming becomes that much more pronounced. In the processing area, enterprises with competitive capabilities in quality and price are not being developed. There is no high calibre management or basic sales infrastructure, such as a trading or transport / warehousing company. Distribution is effectively being controlled by outside brokers. What are most lacking in Issyk-Kul are human resources possessing entrepreneurial spirit. In order to break free from the current conditions and put the oblast economy on a path toward development, the oblast
3-67 administration needs to focus on fostering human resources with entrepreneurial spirit. Furthermore, it must take steps to provide concrete support measures to enable the farmers to raise their awareness. Most of the management personnel of existing enterprises, whether they realize it or not, are becoming less able to keep pace with the changes in the market. Management education and enlightenment are needed. A 5-day seminar with topics focusing on marketing, management strategy, strategic management and control, risk management and human resources management will be held. Attendance per course will be 20 and participants will spend the entire time, including overnight, at the seminar location. Participants will be sought publicly and a target candidate list will be prepared that will include the younger generation who are not currently management but who wish to set up businesses. Expenses will be self-borne in the case of large and medium sized enterprises while for small enterprises and individuals these will be met by the oblast administration. Donor projects will be requested to send instructors. There are many donors that provide training programmes and if requests are made some donors will surely respond. JICA has the Japan – Kyrgyzstan Human Resources Development Center in Bishkek and if a properly prepared request outlining the objectives and the significance were to be submitted, they would probably give it positive consideration. If a request is made to a donor, all expenses relating to sending instructors and teaching materials will be borne by the donors, thus, the oblast's burden would be limited to local instructors' expenses and minor expense items. If the oblast governor is unable to attend then the first deputy governor, would attend the final day of the seminar.
AP/C 3-4-5 Project Summary
Project Name Holding a Management and Entrepreneur Development Seminar Enhanced management capabilities and changing the awareness of Objectives management personnel and entrepreneurs.
Implementing Agency Oblast administration Beneficiaries Managers and entrepreneurs Project Cost $4,500 ($1,500 / seminar x 3 times/ year) Reformed enterprise management, increased profits and increased numbers of entrepreneurs Expected Results As additional benefits, industry-wide exchange between seminar participants resulting in information exchange, and promoting and changing management awareness
3-68 3-4 Action Plan (A/P) for Suzak and Kara-Buura rayons
As mentioned earlier, five rayons have been selected under the Study as Target Areas, of which, some A/Ps are proposed in sections 3-2 and 3-3, based on the Master plan for three the Target Areas of Kara-Suu, Naryn and Tyup rayons where pilot projects were implemented under the Study.
Besides the three Target Areas mentioned above, some A/Ps are also proposed for the remaining two Target Areas. The A/Ps and their components can be summarized as follows.
Ref. No Action Plan Ref. No Action Plan Component Suzak rayon, Jaralabad oblast AP/C 4-1-1 Drainage System Improvement Project A/P 4-1 Improvement of rice/cotton cultivation AP/C 4-1-2 Rice Improvement Project A/P 4-2 Agricultural Products Processing AP/C 4-2 Oil Extraction and Refining Project Kara-Buura rayon, Talas oblast A/P 5-1 Improvement Seed/Wheat Production AP/C 5-1 Seed Farm of Kidney Beans and Wheat A/P 5-2 Strengthening of Cattle Breading Farm AP/C 5-2 State Farm of Cattle Breading Project
3-4-1 Action Plan for Suzak rayon (Jalalabad oblast)
(1) Improvement of rice/cotton cultivation A/P 4-1
In the agrarian sector, the focus is placed on rice and cotton production, which are the main sources of income for local farmers. Based on the constraining factors, development potential and development needs in the Suzak Rayon, the Study Team formulated the action plans listed below, focusing on improving rice and cotton production through improving drainage facilities and revitalising animal husbandry, which is popular in hilly areas.
A. Expanding cotton and rice production: expanding cotton production, which is the main source of income for local farmers through the introduction of high quality seeds and fertiliser, etc. to increase the income of farmers
B. Introducing high quality animals and reviving breeding farms: developing a mechanism by which more productive breeds are introduced to boost production with a view to helping increase the incomes of farmers engaged in animal husbandry.
C. Improving drainage systems: improving inadequate drainage to improve the yield of cotton and amalgamating farmland the small size if which significantly hampers efficient farmers and promoting cooperatives or groups of farmers
To implement the abovementioned A/P, components formulated by the Study Team are as follows. • Yrys Cotton Demonstration Farm Project • Drainage Improvement Project • Rice Cultivation Improvement Project However, the Cotton Demonstration Farm Project component is not described here since it has already been taken up and implemented under the Study in the Osh area.
3-69 AP/C 4-1-1 Project Summary Project Name Drainage System Improvement Project Objectives - To increase the yield of agricultural crops, through improving drainage conditions in the project area, - To organize a community-based association to maintain the drainage system. Outline of project The project assesses the issue of field drainage deterioration, which seems to be a key reason for low productivity in the area. The project intends to improve field drainage over a period of 10 years in light of the present agriculture structure of small-scale landholding and private ownership of land. (1) Evaluation of the degree and extension of field drainage (2) Assessment of the causes of poor field drainage (3) Preparation of a drainage improvement plan (4) Drainage improvement construction works (5) Organize a community-based association and strengthen the institutional capacity of the association (6) O&M and monitoring Beneficiaries Farmers in Suzak and Yrys A/Os Experts required Soil surveyors: 1 Drainage specialist: 1 Designer: 1 Institutional expert:1 Project cost US$ 62,000 Survey of drainage conditions: US$ 12,000 Drainage improvement construction works: US$50,000 Outcome Increased yields, improved crop quality, higher incomes
AP/C 4-1-2 Project Summary Project Name Rice Improvement Project Objective The project intends to improve rice farming over a period of 10 years as a newly emerging crop under the conditions of small-scale landholding and private ownership of land. - To improve rice yields and quality - To introduce an adequate rice farming technology and effective use of irrigation water - To increase the income of rice growers Outline of project (1) Assessment of rice farming conditions (area, technology, water use and harvesting method) (2) Assessment of causes of low yield (3) Proposal for arranging infrastructure (4) Proposal for appropriate rice farming systems (5) Introduction of demonstration farms for sustainable rice farming (6) Introduction of post-harvesting facilities such as threshers and rice mills at village level (7) Assess comparative advantages of rice farming with wheat and cotton as cash crops Beneficiaries Rice Farmers in Atabekov and Yrys AOs Experts required Rice agronomist: 1 Irrigation engineer: 1 Project cost US$51,000 Demonstration farm: US$ 10,000 Training for farmers: US$ 21,000 Machinery and equipment: US$ 20,000 Outcome Increased productivity and higher incomes
3-70 (2) Agricultural Processing A/P 4-2
A. Modernising business management of processing enterprises and increased sales: In the processing sector, many processed agricultural products, which have traditionally been produced by Soviet-style large factories are increasingly being produced by much smaller factories for home consumption. While this trend is to be helped, exports of processed local agricultural products by medium size factories will be promoted through the modernisation of factories and technical guidance. The small-scale processing of agricultural products for home consumption in the rayon or country will be promoted to add value to these products to increase the income of farmers
B. Promoting exports of agricultural products: creation of an industrial zone for exports and a free trade zone to promote exports of agricultural products
C. Promoting inward investment and exports: promoting the introduction of foreign capital in the agrarian sector and exports to earn foreign currencies. A/Ps were proposed as mentioned above, however, some A/Ps were implemented in the pilot project in Tyup rayon. Therefore, considering the characteristics of the regional products, an oil extraction project is proposed.
AP/C 4-2 Project Summary
Project name Oil Extraction and Refining Project Objectives - To get higher incomes for sunflower and safflower growers through adding value to products by processing. - To provide the local population with good quality edible oil produced locally - To improve the quality of oil through using a refinery. Outline of - Farmers' groups will work on oil processing from sunflower and safflower seeds. project - Procurement, installation and use of equipment will be done in cooperation with consultants. - Cotton oil processors who are mainly large-scale sunflower growers can also use the oil refining facility. - Improve processed oil quality through using the refinery and provide better quality edible oil to the local population at a cheaper price. - Running costs of the processing unit will be paid by the farmers' groups. Beneficiaries Farmers' groups of Kogart A/O Experts Agro-processing specialist required Vegetable oil processing specialist Project cost 26,200 USD Quantity Cost (USD) Purchase of Equipment and installation 1 15,000USD Agro-processing specialist 1 6,400USD(8months) Vegetable oil processing specialist 1 4,800USD(6months) utcome Increased oil production, improved oil quality, increased sales and incomes
3-71 3-4-2 Action Plan for Kara-Buura rayon (Talas oblsat)
(1) Improving Seed and Wheat Production A/P 5-1 At present, many farmers use the crop harvested the previous year as planting seeds for the following year, which is why yields are low and overall productivity has been continuously poor, and the incomes of farmers are therefore low. Kidney beans, which are only grown in Talas Province constitute an important strategic crop for earning foreign currency from exports and growing kidney beans should be expanded. A. Establishing new seed farms to produce high quality wheat and kidney beans B. Implementation of measures designed to expand the growing of kidney beans as a special local crop To implement the A/P mentioned above, concrete components of the A/P are as follows.
AP/C 5-1 Project Summary
Project Name Seed Farm for Kidney Beans and Wheat Production Objectives To establish a system for providing high quality seeds from a seed farm to farmers in the rayon. By implementing crop rotation to prevent land degradation the seed farm will produce high quality seeds by using the appropriate agricultural technology and contribute to producing more strategic crops in the rayon. Outline of project (Crop rotation) Seed growing farm with a total area of 100 ha irrigated land to implement crop rotation of kidney beans, winter wheat, sugar beet and perennial grass (Lucerne).
This combined rotation in fields (25 ha each field) will be carried out in the following way: (1) winter wheat, (2) kidney beans, (3) perennial grass (Lucerne) and (4) sugar beet. Then in reverse order of rotation - on the kidney bean field will be sown winter wheat, on the winter wheat field will be sown kidney beans and so on. Thus, each year a new crop will be sown, which will provide crop rotation and in the end prevent land degradation.
(Production of high quality seeds) The farm will produce high grade seeds of kidney beans, winter wheat and sugar beet Ex. 50 ha of kidney bean fields---100 tons of high grade seeds
(Supplying farmers with seeds) The farm will provide the seeds to farmers in the rayon to increase the production of strategic crops. Beneficiaries All farmers and peasants who grow kidney beans and wheat Experts required Local consultant (agronomist) 2 model seed farms (8 farmers) Project cost 25,500 USD 1) Acquiring the status of a seed producing farm and allocating an additional 50 ha of land from the LRF. 2) Procurement of МТЗ-82 10,000 USD. 3) Plough, seeding machine, chisel, mowing machine, 2,000 USD 4) Kidney bean cleaning machine, made in Turkey, 5,000 USD 5) Fertilizers 5,000 USD 6) High grade (superior quality) seeds of kidney beans (to be procured from Turkey), wheat and sugar beet (from Kazakhstan) 3,500 USD Outcome Promotion of crops from Talas, increased exports, revitalization of agriculture in the region
3-72 (2) Strengthening a Livestock Breeding Farm A/P 5-2 One of the few state-run breeding farms in Kyrgyzstan is situated in the Kara-Buura Rayon and efforts will be made to strengthen the production capacity of the breed animals of this farm. In addition, the establishment of private breeding farms will be encouraged to assist in the increased production of high- quality animals, which will lead to higher incomes for farmers. The A/P component is as follows.
AP/C 5-2 Project Summary
Project Name State Farm Livestock Breeding Project Objectives The main objective of the project is breeding fine-fleeced merino sheep on the state breeding farm and distributing these new high quality animals to farmers and peasants in the Kyrgyz Republic. Outline of project The main project direction is selectively breeding and distributing pedigree young sheep using breeders of Fine, Medium and Strong Australian merinos. If the number of fine-fleeced merinos in the region and in the republic increases, it will be a great help towards alleviating poverty in rural areas. Beneficiaries Countrywide, beneficiaries will be all farmers and peasant farms, which breed fine-fleeced merinos Experts required 1 Veterinary, 1 Livestock specialist Project cost $38,000 USD 1) Setting up an artificial insemination station 5,000. 2) Acquiring breeding ewes and young bloodstock 20,000. 3) Organising 200 ha of pastures (sowing perennial grass), sowing 25ha of perennial grass and 25 ha of barley to improve the forage base for breeding pedigree sheep and young bloodstock 10,000. 4) Rebuilding the station to improve wool exports 3,000. Outcome Establishing a Kyrgyz Brand, improving of the quality of meat and wool, promoting the livestock industry country wide.
3-73 Chapter 4 Recommendations
1. With respect to working with donors and implementing efficient and effective aid projects
In November 2006 the Ministry of Agriculture, Water Resources and Processing Industry (MAWRPI) formulated, with the assistance of ADB, the Agricultural Development Strategy 2007 – 2015 and identified the priority issues to be resolved in Kyrgyz agricultural development.
Currently there are about 50 projects being implemented and MAWRPI has identified 7 specific projects with redundant themes and less than optimum efficiency or projects from which no results are being seen.
With respect to duplicating target themes for cooperation, if similar projects are being implemented in the same district at the same time, then it is obviously a waste and such duplication must be avoided. However, if the implementing area differs, the similarity in the theme may not necessarily lead to waste. The same issues may be priority items for another region and again if donors differ the methodology adopted by the consultants differs. There may be some positives in that at the time of distributing the results, the advantages and disadvantages of each can be compared and the essence of the two, or the best of both worlds may be taken to spread them to other regions.
For example, marketing is one of the highest priority items in the above strategy and is a theme that is needed in all parts of the Republic. There are many marketing techniques depending upon the producing location, features of the product, target market and other factors. Simultaneous implementation of multiple projects in different regions will not mean waste.
More importantly, the content of cooperation among donors that can be provided by MAWRPI should be prepared. For example, in the policy bureau assign several staff dedicated to donor projects and hold them responsible for collecting data at oblast or rayon level. Governors of oblasts and heads of rayons prepare reports periodically. Each oblast prepares long-term development plans. These existing data and reports should be translated into English and provided to the donor study teams or projects and at the same time interviews should be arranged with the relevant responsible parties at an early stage. Provide information on particular features and issues faced by each region. All of these are technically feasible.
The active participation of MAWRPI and regional administrations are needed for the study or project to be conducted efficiently.
2. Promotion of the Livestock Raising Industry
In order to deal with the issues arising in today’s livestock industry in the Kyrgyz Republic and to prevent future occurrences of such issues, a review of the existing relevant laws should be undertaken and a new measure introduced that contains the following, with a focus on the rights and responsibilities of farmers raising livestock.
(1) Set out the rights and obligations of livestock farmers, manufactures and sellers of livestock, meat and processed products and the required qualifications for those raising livestock
4-1 (2) Set out the rights and obligations of users of pastures and a framework to prevent indiscriminate breeding on pastures (segregated pasturing of male and female livestock, neutering, AI and the like).1 (3) Introduce a passport system for livestock and the passport would contain the breed of each animal, vaccination status, medical treatment history and the like. For the time being it is impossible to include pedigree but this should be introduced in the near future. Make submission of the passport mandatory at the time of selling and purchasing livestock
(4) Make reporting illness, method of treatment in the event of illness (to be strictly prescribed), prohibiting the sale of diseased livestock or livestock that died of a disease and the method of disposal, mandatory.
(5) Regulate the sale of milk and dairy products and other food products that are sold unregulated in towns through establishing a licensing system. In order to protect the health of the people, prohibit milk and dairy products that have not been tested and have no quality certificate.
(6) Undertake onsite inspection of processing enterprises, review the inspection standards and enforce improvement orders (suspensions and the like) (7) Severely punish offenders and enforce strict anti-corruption measures. (8) Enforcement and the readiness of the controlling organization to oversee compliance with the law and regulations must also be examined. This issue is one that involves the whole country, so MAWRPI and the Ministry of Health, other relevant ministries and agencies will work together on this.
3. Effective utilization of the result from the Pilot Projects and the Establishment of a Kyrgyz Brand for Agricultural Products
Under the three pilot projects implemented, the Cotton Cultivation Project in Osh, Sheep Fattening Project in Naryn and Marketing Service Centre (MSC) in Isyk-Kul under the JICA Study, as described in previous chapters in this report, some obvious results were seen, which are important in improving the management of Kyrgyz agriculture.
The actual results obtained from the implementation of pilot projects are summarized in the following table.
Project Results Effectiveness Sustainable cotton growing system Technology transfer to other areas in the Cotton Cultivation established, increase of yield (3.5t/ha), country, increse of yield and productivity, increase of income increse of foreign currency Transfer the method to other area of the Naryn Proper feeding method and, steady selling Sheep Fattening region, stabilization of selling route, route established, increase of income establishment of Naryn Brand Sustainable management of MSC after the Build-up farmers’ awareness for quality Study, quality improvement of agro products, MSC improvement, increse of members, transfer the function of MSCto the other strengthning relation with foreign markets areas ,etc.
4-2 Based on the experiences and results obtained from implementing the pilot projects as mentioned above, a master plan and various action plans were proposed in the report. The execution and sustainable implementation of those proposals are dependent upon the efforts of MAWRPI, the Central Government, local government bodies and ministries concerned. It is really expected that MAWRPI will take the necessary steps to adopt and begin implementing the proposals as projects as soon as possible so that a national brand of agricultural products will be established and agricultural management and the quality of agricultural products in the Kyrgyz Republic will be improved.
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