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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

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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 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.
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