Final Report Almaty-Bishkek Economic Corridor Kazakhstan National Wholesale Market Master Plans and Wholesale Distribution Center Development Strategy Prepared by: Steve Allen December 2018 This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. 1 Acknowledgements This report was prepared by Steve Allen, assigned by Asian Development Bank as International Wholesale Markets Development Specialist and Team Leader. With technical support from the local wholesale market specialist in Kazakhstan, Aiman Tursynkhan (Kaz). Further support has been provided by international specialists Anders Frigaard, Value Chain specialist and David Michael, policy and regulatory expert. Other contributors include Asian Development Bank in Kazakhstan and Kyrgyz Republic – By Almas Baitenov (KAZ) - and by ADB Operations Coordination Division, Central and West Asia Department (CWRD) and its Economist, Kristian Rosbach. ABBREVIATIONS ACC – Agrarian Credit Corporation AIFC – Asian International Finance Centre BCP – border-crossing point BCI – border-crossing infrastructure BRC – British Retail Consortium OICMR – Officer in Charge of Market Rules PNAC – Producer Nominal Assistance Co-efficient SPK – Social Price Corporation WSDC – wholesale distribution center WDC – wholesale distribution center DATA SOURCES The main sources of statistical data for this study were official information resources: 1) World Trade Organization Trade Statistics Database www.trademap.org 2) Portal of the Eurasian Economic Commission www.eurasiancomission.org 3) Statistical portal and databases of the UN Food and Agriculture Organization http://www.fao.org/faostat/en, http://www.fao.org/economic/ess/countrystat/en/ http://statistics.amis-outlook.org/data/index.html 4) Specialized sections of the portal of the Committee on Statistics of the MNE RK on agriculture http://stat.gov.kz/faces/wcnav_externalId/homeNumbersAgriculture?_afrLoop=39365309 2 82850268#%40%3F_afrLoop%3D3936530982850268%26_adf.ctrl- state%3D1cr3othu1f_50 domestic trade http://stat.gov.kz/faces/wcnav_externalId/homeNumbersDomesticTrade?_afrLoop=3936 631506602816#%40%3F_afrLoop%3D3936631506602816%26_adf.ctrl- state%3D1cr3othu1f_158 on foreign trade and on mutual trade of the member countries of the Customs Union http://stat.gov.kz/faces/wcnav_externalId/homeNumbersCrossTrade?_afrLoop=3936669 983208555#%40%3F_afrLoop%3D3936669983208555%26_adf.ctrl- state%3D1cr3othu1f_210 transport http://stat.gov.kz/faces/wcnav_externalId/homeNumbersTransport?_afrLoop=393684926 6787813#%40%3F_afrLoop%3D3936849266787813%26_adf.ctrl- state%3D1cr3othu1f_262 5) Indicators of foreign trade of the Customs Control Committee of the Ministry of Finance of the Republic of Kazakhstan http://kgd.gov.kz/ru/exp_trade_files 6) Indicators of tax revenues of the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan http://kgd.gov.kz/ru/services/taxpayer_search Additional alternative data sources were the results of quantitative research in the form of interviews with the received answers from 526 agribusiness entities in Kazakhstan. The online questionnaire, along with responses from respondents, is available at: https://docs.google.com/forms/d/1bBdpFTIXdYmMZFDyqfAohzGKTj8tiwZsftRdEu3rMY8/edit #responses 3 Contents 1 Executive Summary .......................................................................................................... 6 Recommendations:............................................................................................................ 6 2. Development Principles .................................................................................................... 9 3. Wholesale Markets and Wholesale Distribution Centres Current Situation ...................... 11 3.1 Existing Wholesale Markets ....................................................................................... 12 3.2 Current WSM and WDC Locations ............................................................................ 15 3.3 Aggregation Points by Market .................................................................................... 16 3.4 Consumption by Main City and Aggregation Points by Market ................................... 17 3.5 Average Population Statistics .................................................................................... 18 3.6 Business Sector response to Preferred WSM Location and Business support needs – survey 19 4. The Functions and Characteristics of the Value Chain .................................................... 20 4.1 Wholesale markets .................................................................................................... 20 4.2 Wholesale Development Centers and Trade Logistics Centers ................................. 21 4.3 Wholesale market impact .......................................................................................... 22 4.4 Aggregation ............................................................................................................... 22 5. Regulatory Position Recommendations ........................................................................... 23 5.1 Recommended Changes to Trade Law and Regulation: ............................................ 23 5.2 General Policy Recommendations ............................................................................. 24 5.3 WSM Ownership Options .......................................................................................... 24 5.4 Harmonization and Coordination ............................................................................... 24 6. Development Models for the WSM Infrastructure ............................................................ 25 6.1 Proposed Locations and Rationale for WSM Development ........................................ 25 6.2 WSM Development Objectives .................................................................................. 38 6.3 Design Concept for Full Service WSM (7- 25-hectare model) .................................... 41 7. Development Options for an Alternative and more competitive Supply Chain to support WSM Sites and Infrastructure ............................................................................................. 43 7.1 The regional competitor Uzbekistan - a benchmark analysis ..................................... 43 7.2 Target and growth markets for horticultural products ................................................. 43 7.3 Alternative Supply Chain Creation - Recommendations ............................................. 44 8. Early-Stage Interventions - Digital Trading Platform Kazakhstan ..................................... 44 8.1 Supermarkets ............................................................................................................ 45 8.2 Organic Production .................................................................................................... 46 8.3 Processed fruits and vegetables ................................................................................ 47 8.4 Potential export markets ............................................................................................ 47 9. The Suggested Way Forward – National Wholesale Market Masterplans ....................... 49 9.1 Master plan Development Scenarios: ........................................................................ 49 10. Financial Models, Recommended Structure and Delivery Options ................................ 52 10.1 Revenue and Development Costs ........................................................................... 52 10.2 Suggested Financing Model .................................................................................... 52 4 10.3 Investment Benefits ................................................................................................. 52 10.4 Recommended Delivery Structure and Recommended Stakeholder Structure/PMU 52 10.5 Specific Regulatory Model Requirement .................................................................. 53 11. The Regional Context – Bishkek - the Kyrgyz Republic ................................................. 54 APPENDICES ..................................................................................................................... 55 Appendix A: Legislation & Regulations Characteristics Matrix ......................................... 55 Appendix B Regulation of All Activities Occurring on the Wholesale Market Land ........... 58 Appendix C: Master Plan Data Analysis, Charts and Statistics Report............................. 60 Appendix D Feedback on the Proposals of the Draft Master Plan .................................. 170 5 1. Executive Summary The purpose of this Master Planning report is to assist the Kazakhstan government and the Ministry of Agriculture to plan for the development of several new agricultural wholesale markets (WSM’s) and Wholesale Distribution Centers (WDC’s) across the country (Definitions in Section 6). The following analysis has been undertaken based on existing documents and country consultations: i. The existing WSMs, their infrastructure, supply chains, trans-logistics and re-export routes ii. The WSM function in the supply chain of fresh produce iii. The Financial and operational management structures iv. The WSM regulatory framework – food safety and traceability v. The planned WSM investments, agreements and financial models – private and public sector vi. The WSM value chains in terms