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Post-harvest, storage and

processing facilities assess-

ment and upgrading options

FINAL REPORT

September 2, 2016

This document was prepared by ACDI/VOCA for USAID Agro Horizon Project, generously funded by the

American people through the United States Agency for International Development.

Post-harvest, storage and processing facilities assessment and upgrading options Final Report

Post-harvest, storage and pro-

cessing facilities assessment and

upgrading options

FINAL REPORT

JUNE 16 – SEPTEMBER 2, 2016

CONTRACT NUMBER: AID-176-C-14-00002

COR USAID: LUIS HERNANDEZ

CHIEF OF PARTY: AGNES LUZ

DISCLAIMER

This report is made possible by the support of the American people through the United States Agency for Interna-

tional Development (USAID). The contents are the sole responsibility of ACDI/VOCA and do not necessarily reflect

the views of USAID or the United States government.


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ABBREVIATIONS AC Agricultural cooperative

AHOP Agro Horizon Project

BTI MCA Financial Fund “BT Innovations”

CCI Chamber of Commerce and Industry

CIS Commonwealth of Independent States

CJSC Closed joint-stock company

CU Custom union

EAEC Eurasian Economic Union

EAEU Eurasian Economic Union

EEU Eurasian Economic Union

EU European Union

FAO Food and Agriculture Organization

GDP Gross Domestic Product

GSP + General System of Preferences +

HACCP Hazard Analysis and Critical Control Points

ISO International Organization for Standardization

JSC Joint-stock company

KGS Kyrgyz Som

KR Kyrgyz Republic

KZT Kazakh Tenge

LLC Limited liability company

NSC KR National Statistics Committee of the Kyrgyz Republic

OJSC Open joint-stock company

PE Private entrepreneur

PPC Pilot production clusters

RF Russian Federation


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SPC Service Procurement Center

ULO Ultra low oxygen

UNDP United Nations Development Programme

UNECE The United Nations Economic Commission for Europe

USAID U.S. Agency for International Development

USD United States dollar

USDA United States Department of Agriculture

USSR Union of Soviet Socialist Republics

VC Value chain

ZOI Zone of Project’s influence


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CONTENTS

I BACKGROUND ........................................................................................................................... 4

II METHODOLOGY ...................................................................................................................... 5

III MARKET REVIEWS ................................................................................................................ 11

VC fruits (apricots, apples, plums, peaches, cherries) - fresh, dried, puree, juices and other processed forms .......... 11

VC milk an dairy products ........................................................................................................................................... 21

VC meat – fresh, frozen and processed…………………………………………………………………………………..27

VC Corn and corn containing (as a main component) products ................................................................................ 38

VC Potato – Fresh and Processed ............................................................................................................................... 43

IV COMPARATIVE ANALYSES OF POST-HARVEST ENTERPRISES IN KYRGYZSTAN AND NEIGHBORING COUNTRIES…………………………………………………………….40 V RECOMMENDATIONS ON UPGRADING AND DEVELOPMENT OF POST-HARVEST

FACILITIES IN KYRGYZSTAN…………………………………………………………………..46

Recommendation area 1 – Markets ................................................................................................................................... 54

Reccomendations area 2 – Quality and security of products .......................................................................................... 55

Reccomendations area 3 – Equipment and technologies................................................................................................ 50

Reccomendations area 4 – Personnel and entrepreneurship skills ................................................................................. 60

Recommendations area 5 – Before-harvest activities (raw materials) ............................................................................ 62


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1 BACKGROUND Agriculture is the one of the most important economic sectors in the country. 718,442 people were employed in agriculture (including forestry, fishery and hunting) in 2014, equivalent to about of 31.6 % of the working popula-tion.1 The contribution of agriculture (including forestry, fishery and hunting) to GDP in 2015 was 14%. 50.3 % of the total value of agricultural production derives from the cash crop sector, 47.6 % from the livestock sector and the remaining 2.1% comes from forestry, fishery and hunting. In 2015, agriculture accounted for about 24% of total exports worth about USD 406 million. Of the total land area, 56.2% is classified as agricultural land and only 1.411 million ha or 7.3% as arable land, of which 1.072 million ha or three quarters is irrigated. Of the total agricul-tural land, 87% is pastures. On average, one ha of arable land feeds four people. The most important agricultural area is the Fergana Valley, and the Chui and Talas Valleys in the north. There are three types of producers in agri-culture (i) households and small farms, (ii) medium size farms and cooperatives, and (iii) agricultural enterprises, the latter comprising in turn the remnants of the old collective units. About 90 % of production in the sector is produced by more than 300,000 small farms and households. On average a rural household consists of 5 people, but in the South of Kyrgyzstan the average is 62. In almost all southern rural households there is (at least) one la-bour migrant working in Russia or Kazakhstan. Agro Horizon Project (AHOP) is a key component of USAID Kyrgyzstan overall economic development pro-gram designed to accelerate the growth of diversified and equitable economic growth in the Kyrgyzstan. The goal of the AHOP is to increase agricultural productivity and output in value chains, increase nutritious foods available to agricultural producers, increase employment in the agricultural sector, and increase the market share of crops in value chains in both domestic and foreign markets. As a result, national GDP growth rate should increase above recent trends while income distribution as measured by a Gini-coefficient will broaden. The zone of AHOP’s influence (ZOI) includes Naryn, Jalal-Abad, Osh, and Batken oblasts. With focus on these four regions, the AHOP involves actors from other locations that have market links to production in the target regions or the potential to strengthen competitiveness of the entire value chain for domestic or regional markets. Using a facilitative, market systems approach, the AHOP will:

• Increase agricultural productivity and link producers to markets • Increase productivity and markets for agribusinesses • Improve enabling environment for agriculture sector growth • Improve nutritional status of women and children in the zone of influence

Based on results of preliminary assessment of high potential value chains, the AHOP will focus primarily on fruits & vegetables, milk and meat value chains (target value chains).

1 National Statistics Committee

2 Agriculture in the Kyrgyz Republic. National Statistics Committee


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II METHODOLOGY

ASSIGNMENT OBJECTIVES AND TASKS

This activity will contribute to development of policies and work plan that will help to reduce losses, increase total

outputs of the value chains, and improve Kyrgyzstan’s competitiveness in the AHOP’s priority value chains. Based

on results of preliminary assessment of high potential value chains, the AHOP will focus primarily on fruits &

vegetables, milk and meat value chains (target value chains).

This activity aims to assess existing post-harvest, storage and processing facilities and provide recommendations

(including policy support) to upgrade such facilities for the following:

• Fruit (apricot, apple, plum, peaches, cherries) – fresh, dried, puree & juice and other processed forms

• Milk and dairy products

• Meat – fresh, frozen and processed

• Maize and products with maize as main ingredient

• Potato – fresh and processed

• Niche products – vegetables and berry processing.

In agriculture, postharvest handling is the stage of crop production immediately following harvest, including cool-

ing, cleaning, sorting and packing.

Scope of Work:

• Review relevant reports, studies and other background information.

• Develop workplan showing detailed and efficient approach to carry out the tasks and achieve the delivera-

bles in a timely manner building on information from existing literature and AHOP data.

• Carry out assessment of existing facilities and identify gaps benchmarking on market requirements and fa-

cilities of competing suppliers of similar products in other countries. The parameters to be assessed should

include efficiency, profitability; and main sources of inefficiency and lack of competitiveness should be

identified.

• Recommend feasible options to address inefficiencies, including policy and donor support.

• Recommend next steps.

METHODS OF ASSESSMENT CENTERS OF CONSOLIDATION/

HARVESTING, STORAGE AND PROCESSING FACILITIES OR

GENERAL APPROACHES

The assessment study of small-medium enterprises and development of recommendations and proposals was unu-

sual in several respects. First of all the assessment of the competitiveness of the harvesting, storage and processing

facilities was carried out on 5 VCs. If we consider that survey was conducted in all 7 regions of Kyrgyzstan and 4

CIS countries (Russia, Kazakhstan, Tajikistan and Belarus), actually 55 VCs were examined for harvesting, storage

and processing facilities. Second of all, in-depth interviews were conducted by the structured for all countries ques-

tionnaire. The approach proposed by MCA Financial Fund “BT Innovations” (BTI) allowed "to have a look" at

the enterprises of the Kyrgyzstan and compare them with similar companies in other countries.

Evaluation of harvesting, storage and processing facilities was based on the following approaches:

1. Study the competitiveness of harvesting, storage and processing facilities.


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2. Identification of gaps in market requirements and competing suppliers of similar products in other coun-

tries.

3. Defining the main reasons of competitiveness inefficiencies and barriers for Kyrgyzstan.

To evaluate the consolidation / collection, storage and processing facilities following methods were used:

1. Conducting desk research

2. Conducting field work

3. Data processing and analysis

4. Development of recommendations and proposals

5. Writing of the report

DESK RESEARCH

BTI carried out desk research by performing consecutive events:

1. Collection of information available in the open access related to the scope of work. The main sources of sec-

ondary information were (complete list of information is attached):

• The statistics of the National Statistical Committee of the Kyrgyz Republic (NSC KR).

• The statistics of the State Customs Service of the Kyrgyz Republic.

• Industry surveys and statistical data provided by other organizations (international donor organizations,

business associations, government agencies, etc.).

• Data provided by local experts.

• The information available on the Internet.

Secondary information obtained during desk research formed the basis for:

• Development of research instruments - questionnaire for in-depth interviews and focus group discussions.

• Mapping of harvesting centers, storage and processing facilities.

• Development of action plan indicating a detailed and effective approach for the timely performance of

tasks and results achievement based on the information from the existing literature and project data.

• Analytical review of harvesting centers, storage and processing facilities on the selected value chains and

development of recommendations and proposals for the AHOP.

• Development of recommendations and proposals for the AHOP.

2. Development tools for conducting in-depth interviews and focus group discussion (attached).

Both questionnaires were tested and the interviewers were given instruction on carrying out in-depth interviews

and focus group discussions. Interviewers were provided with topic-guides for focus group discussion (attached).

3. Mapping of harvesting centers, storage and processing facilities.

BTI sent an official letter to the government agencies, donor community, business associations, and various ex-

perts to provide lists of entities of the consolidation centers, storage and processing facilities on 5 VCs. Then the

list or mapping was made on the basis of information obtained via written request as well as information available

on the Internet.

In general, BTI made a list of consolidation/collection centers, storage and processing facilities at all 5 VCs of

more than 200 companies. However, due to the lack of contact information or not functioning phone numbers,

the list was shortened and amounted to 140 enterprises (Provided).


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Mapping of consolidation/collection centers, storage and processing facilities was gathered in Excel form and

listed the following:

a) Name of business

b) Date of establishment

c) Name, sex and age of owner

d) Name, sex and age of manager

e) GPS coordinates of the location of business

f) Industry/Value chain

g) Type of facility (consolidation, processing, storage)

h) Number of employees

i) Annual sales turnover

j) Annual cost/expenses

k) Other businesses and/or source of income

Mapping included facilities located outside of Osh, Jalal-Abad, Batken and Naryn oblasts but also in Chui, Issyk-

Kul and Talas oblasts involved in the flow of goods from these four oblasts going to the end markets including

exports.

4. Development of detailed action plan indicating a detailed and effective approach for the timely performance of

tasks and results achievement based on the information from the existing literature and project data (attached)

that was attached to the Inception Report.

CONDUCTING FIELD WORK Field work was carried out in all 7 regions of Kyrgyzstan and CIS countries, three of which are members of the Customs Union (CU) and the Eurasian Economic Union (EAEU): the Russian Federation (RF), Belarus, Kazakh-stan and Tajikistan. The subject of the study was post-harvest, storage and processing facilities of the 5 VCs. In-depth interviews and focus group discussions were conducted during the field work on post-harvest, storage and processing. BTI has done tremendous work in a short time: the composition of the lists of respondents for in-depth interview, negotiating the date and time of the interview with them, conducting in-depth interviews; arrangements for the focus group discussions, recruitment of participants for focus group discussions and holding discussions. Partner companies of BTI (equipment producers) organized meetings in the Russian Federation and Belarus to conduct interviews. Chamber of Commerce(CCI) of the KR helped to reach the business associations to organize the meetings in the Tajikistan and Kazakhstan. BTI and interviewers have also used their personal connections and contacts in the CIS countries. All respondents were given a letter on behalf of BTI explaining the purposes of the study. Interviews were conducted by five teams composed of 2 people in the each team. Each interviewer worked, at least in two areas or in two CIS countries, and some interviewers even more. BTI interviewers conducted 130 in-depth interviews, including more than 97 in-depth interviews in all seven ob-lasts of the Kyrgyzstan and 32 in-depth interviews in the Tajikistan, Kazakhstan, Russia and Belarus. Total of 20 focus group discussions were carried out in seven oblasts of the Kyrgyzstan. It was decided not conduct focus


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group discussions in the CIS countries due to the short time of study (data base of in-depth interviews and lists of participants of focus group discussions attached). Table 2.1. Information on interviews and visits conducted

Name of the region VC

Fruits (vegetables) Milk Meat Potato Maize

Total in the KR 39 20 19 13 6

Batken 9 0 1 1 0

Jalal-Abad 6 2 2 4 1

Naryn 0 4 4 2 0

Osh 8 3 2 1 1

Issyk-Kul 6 4 2 2 0

Talas 2 2 0 0 0

Chui 8 5 8 3 4

CIS countries 10 7 7 3 5

RF 1 1 1 1 1

Belarus 1 2 2 1 1

Tajikistan 4 2 2 0 2

Kazakhstan 4 2 2 1 1

DATA PROCESSING AND ANALYSIS Information profiles on in-depth interviews were collected into Excel format database and comparative tables by regions on 5 VCs were compiled on the basis of the obtained data. The information obtained in the focus group discussions was processed in accordance with the topic-guides in the form of a narrative report. Moreover, this information became a basis for the post-harvest facilities characteristics (post-harvest).

DEVELOPMENT OF RECOMMENDATIONS AND PROPOSALS Development of recommendations and action plan was conducted by involving stakeholders into the dialogue (stakeholder participation), and on the basis of the secondary and primary data analysis. BTI met with professional business associations (Stakeholders) to discuss the issues of the study, as well as their views on improving the productivity of agricultural raw materials, social connections between producers and mar-kets, improvement the environment for the growth of agricultural sector, etc. In addition, numerous consultations were conducted with interviewers.


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Recommendations and proposals are based on the results of analysis of processed questionnaires and secondary data. Recommendations and suggestions were developed on the basis of the following criteria:

Compliance with the three objectives of the AHOP

Specificity and the possibility of immediate implementation

Scalability

WRITING OF THE REPORT General report on the study is made of 5 separate reports with relevant value chains. Each report consists of two parts: (1) analytical review on the basis of secondary data and (2) a review of consolidation/collection centers, storage and processing facilities on the results of field research. Recommendations and suggestions for the AHOP are common to all 5 VCs.

MAPPING

Within the period of June – July 13, group of experts BTI was collecting information about companies engaged in post-harvest handling, storage and processing activities throughout Kyrgyzstan. Meetings with business associa-tions, donor funded projects and government institutions were undertaken to achieve this goal. As a result, of these efforts large database of 1,300 entrepreneurs was established. However, major part of the information ob-tained was contacts of medium and large farms, which were engaged in a way in post-harvest activities, but not match to criteria of enterprise to be included into database. Therefore, BTI decided to exclude the medium and large farms from database and concentrate on finding the information about rest of about 140 companies, in-volved in processing, storage and trading activities.

Table 2.2. Composition of interviewed enterprises by regions and value chains Bishkek/

Chui*

Issyk-Kul* Naryn Osh Jalal-

Abad

Batken

Maize 7 0 0 1 3 1

Potato 3 1 2 1 1 1

Meat 9 4 3 1 1 1

Milk 0 0 4 3 2 0

Fruits & Vegetables 37 22 0 12 12 17

Total 46 27 9 18 19 20

*Rationale for including companies from Chui/Bishkek and Issyk-Kul is fact that enterprises operating in maize, potato, fruits and vegetables processing/storage and trade are sourcing or potentially can source agricultural production from Osh, Batken, Naryn and Jalal-Abad regions.

Once the information on enterprises was entered into database, written requests to provide with contact infor-mation to regional representatives of Ministry of Agriculture and Ministry of Economy were submitted. After-wards, BTI team undertook phone survey of companies in the list to sort out additional information and include into database. Unfortunately, lack of trust and unwillingness to disclose the information, did not allow us to get all the information, especially sensitive were questions related to business statistics, e.g. annual incomes and costs, information about owners of companies, etc. However, the information into database is being entered, especially


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on those companies, which were interviewed by the ex-pert’s team. Based on established database, expert’s team conducted analyses of the information and below are the main conclusions and findings.

Post-harvest storage and processing infrastructure is concentrated mainly in Chui/Bishkek and Issyk-Kul regions of Kyrgyzstan and therefore AHOP should spread efforts or consider support start-up projects in other regions to the above regions to support up-grade and modernization of the sector.

Milk processing companies are located in Chui/Bishkek, Issyk-Kul and Talas oblasts and there-fore milk post production activities in AHOP target re-gions require considering support of start-up projects in milk processing. Taking into account that milk pro-duction is concentrated in small farms and households, it would be difficult to ensure consistency in quality of raw milk, and therefore one of the options for pro-cessing would be cheese, dry milk and butter produc-tion. (e.g. products that have long shelf life).

Maize and potato processing almost does not exist in the country and therefore one of recommendations would be development and implementation learning program for public and private institutions on best prac-tices in maize and potato processing, organizations of study tours and attending equipment and machinery trade fairs.

Only 2 out of 44 storage and logistics centers were built using the modern technologies and therefore it is recom-mended to organize a special event for large farmers and processors on business model of modern storage and logistics centers with invitation of companies oper-ating in the same sphere from neighboring countries (Ta-jikistan, Kazakhstan and Belorussia). Practical part of the seminar can be organized on basis of Agroproduct Asia company which is the only one using modern technologies in storage. Implementation of this event can be done in partnership with Ministry of Agriculture, which has large experience in organization of similar event, focused on other business models.

33.1%

19.4%12.9%

14.4%

13.7%

6.5%

Bishkek

Yssyk-Kul

Osh

Batken

Zhalal-Abat

Naryn

Figure 2.1. shows that 52.5 % of compa-

nies engaged in post-harvest handling,

storage and processing activities is con-

centrated in Chui/Bishkek and Issyk-Kul

regions.

297

2

2

4 6Chui

Yssyk-Kul

Talas

Figure 2.2. Milk processing companies

Logistics center “Agroproduct Asia”, Sokuluk

village, Chui oblast


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III MARKET REVIEWS

VC FRUITS (APRICOTS, APPLES, PLUMS, PEACHES, CHERRIES) -

FRESH, DRIED, PUREE, JUICES AND OTHER PROCESSED FORMS

FRUIT MARKET OVERVIEW (APRICOTS, APPLES, PLUMS, PEACHES, CHERRIES) - FRESH,

DRIED, PUREES, JUICES AND OTHER PROCESSED FORMS (DESK RESEARCH)

PRODUCTION OF FRUITS IN KYRGYZSTAN

According to the NSC KR the total sown area under fruits and berries amounted to 51,175 hectares in 2015, of these, 24.7% of the total area is located in Batken oblast; 18.3% - in Osh oblast; 17.5% - in Chui oblast; 15.8% - in Issyk-Kul oblast; 14.3% - in Jalal-Abad oblast; 6.9% - in Talas oblast; 0.5% - in Naryn oblast; and in the Cities of Bishkek and Osh - per 1% (Table 3.1.). As it seen from Table 1, the data on the sown area does not match with crop harvesting area. Most likely this is due to the presence of young orchards that are not fruit-bearing yet. In 2015 the total yield of fruits and berries amounted to 209,233.7 tonnes, an average crop yield - 42.5 centner/ ha. By the oblasts the crop yield looks as follows: the highest yield of fruit and berries was in Talas oblast (66.8 c / ha), then in Issyk-Kul oblast (59.9 c / ha), followed in Jalal-Abad oblast (50.4 c / ha) and Osh oblast (47.4 c / ha). De-spite the fact that the Chui oblast ranks third by the amount of sown area, yield of fruit and berries amounted only to 18.6 c / ha. Table 3.1. Fruits and berries (area under crop - hectares, total yield in initial weight –

tonnes, crop yield – centner per hectare)

Area under crop Total harvesting

area Total yield Crop yield

Kyrgyz Republic 51,175 49,230 209,223.7 42.5

Batken Oblast 12,661 12,194 44226.1 36.3

Jalal-Abad Oblast 7,331 7,329 36,961.5 50.4

Issyk-Kul Oblast 8,070 8,068 48,316.1 59.9

Naryn Oblast 273 273 533.7 19.5

Osh Oblast 9,359 8,798 41,700.2 47.4

Talas Oblast 3,514 3,017 20,145.0 66.8

Chui Oblast 8,932 8,623 16,035.8 18.6

Bishkek City 504 446 55.4 1.2

Osh City 531 482 1,249.9 25.9

*Data source: NSC KR Overall, in the country there is gradual stable expansion of the area under fruit and berry plantations. From 2010 to 2015, the total area of fruit and berry plantations increased by 10% (Table 3.2.), which led to an increase in the total yield and a slight increase in the crop yield (in 2015 the crop yield was lower than in previous years due to late frosts). According to expert estimates, in the whole country half of the orchards in Kyrgyzstan are older than 30 years, with tall trees. Average crop yield of fruits from 2010 to 2015 was about 46 c / ha, which is almost 10 times lower than the world productivity level (398 c/ha - 424 c/ha). Orchards with a high planting density of bushy vari-eties ensure the high productivity, and these orchards are called “super intensive orchards”.


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Table 3.2. The dynamics of fruit and berry plantations from 2010 to 2015

2010 2011 2012 2013 2014 2015

Total area of plantations

(thousand hectares)

44.6 45.6 46.3 48.7 49.7 49.2

Total yield (thousand tonnes) 193.1 215.1 222.7 233.6 237 209.2

Crop yield (centner/ hectare) 41.8 47.2 48.1 48 47.7 42.5

*Data source: NSC KR Fruit and berry plantations are owned by different entities. Throughout the country, the area of fruit and berry plantations of the personal subsidiary plots of citizens is amounted to 31,622 ha or 60.9% of the total number of fruit and berry plantations. The area of fruit and berry plantations of peasant (farmers) farms is 16,091 hectares (32.2%). The area of fruit and berry plantations of the state farms is 2,834 hectares (5.4%). The area of fruit and berry plantations of collective farms is 628 hectares (1.5%) (Table 3.3.). The composition of distribution of fruit and berry plants among different entities within each oblast has its own specifics, but, nevertheless, in all oblasts of the country most of the fruit and berry plantations are located in the personal subsidiary plots of citizens. According to the agricultural population census, the number of personal sub-sidiary plots of citizens amounted to about 600 thousand households. Of these, about 550 thousand households have at least per 2-3 trees3. Small sizes of fruit and berry plantations of personal subsidiary plots of citizens do not motivate farmers to improve the quality and productivity of their orchards.

Table 3.3. Areas of fruit and berry plantations of various entities

TERRITORY

State farms Collective farms Peasant (farmers)

farms

Personal subsidi-ary plots of citi-

zens

Area under crop

Total harvest-ing area

Area under crop


Area under crop


Area under crop


Total for KR 2,834 2,320 628 627 16,091 15,340 31,622 30,943

Batken 7 - - - 6,413 6,038 6,241 6,156

Jalal-Abad 447 447 11 11 1,134 1,134 5,739 5,737

Issyk-Kul 9 9 133 133 2,249 2,247 5,679 5,679

Naryn - - - - 4 4 269 269

Osh 261 206 47 47 1,792 1,689 7,259 6,856

Talas 649 209 22 22 1,147 1,105 1,698 1,681

Chui 1,431 1,419 405 404 3,186 2,965 3,910 3,835

*Data source: NSC KR Post-harvesting activities. Immediately after harvesting, the fruits are sorted and sent to either for domestic consump-tion or for sale, or storage, or processing. More often, sorting is made right in the orchard. Depending on the de-gree of commercialization of the entities of fruit and berry plantations, on the area of the fruit-and-berry planta-tions, on the geographical location of the orchard, on the periods of harvesting, the fruits are sold either immedi-ately from the orchard, or are sent to storage or for further processing. Post-harvesting activities are carried out both by the fruit producers and resellers / pickers, dealers, and processors. According to expert estimates, 27% of grown harvest of apples is used for internal consumption by households; 36% of apples available for sale on the markets (domestic market, export); only 4% of the grown harvest of apples

3 Agricultural population census in Kyrgyzstan. National Statistical Committee, 2004.


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is available for processing; 12% of fresh apples are exported to Kazakhstan and Russia (99% of all exported apples are delivered to these two countries); the rest of the harvest is lost. As for the apricot, 4% is used for domestic consumption of households; 7% - is sold fresh on the local market; 21% - is exported in fresh form; 5% - is sold in dried form on the local market; 37% - is exported in dried form; less than 1% - is sold for further processing; 25% - is lost / decayed4. Large losses of fruits are due to several reasons. The reasons include wrong harvesting; the existing varieties of fruit are not intended or are not stored for a long time; the lack of processing enterprises in the region or they are located far from the place of growth. Therefore, often for farmers it is more profitable to feed livestock with windfalls, because the costs of sales of windfall fruit can be higher than the income received from their sale. Loss of fruits can be reduced by improving skills of proper practice of collecting, transportation, and packaging of fruits; improving the grade of fruit quality and introduction of modern methods of planting and care after the or-chard; introduction of modern storage technologies. STORAGE

Some fruits belong to the crops that can be stored for a long time, subject to observance of the conditions of stor-age. Historically, the types of warehouses depend on the entity that owns the fruit and berry plantation. Since most of the orchards are located in personal subsidiary plots of citizens, the harvest is stored in homemade cellars. The state and collective farms are mainly use warehouses that inherited from the times of the Soviet Union, which are already out of date both physically and morally. However, many entities of fruit and berry plantations began to build modern warehouses equipped with cooling chambers or equipment to regulate the temperature and humidity. For example, the first logistics center in the country was built in Chui oblast, in which the apples will stay fresh for several months due to the climate control. The temperature and humidity in the rooms can be adjusted. The first logistics center is designed for 12 thousand tons of agricultural products. Whatever modern the storehouse is, the quality of raw material put for the storage is very important. Apple is the fruit, which can be stored for a long time, but this requires strictly observing the storage technology (temperature regime, ventilation, and air composition) and storage of apples of the special varieties. In the framework of this research, we visited industrial warehouses with the modern system in Tajikistan and Ka-zakhstan.

EXPERIENCE OF STORAGE OF FRUIT AND VEGETABLES IN TAJIKISTAN

In Tajikistan, in Hissar Rayon of Durbat Jamoat, there is industrial refrigerator that is owned by LLC “Sitabr Agro”. The owners of industrial refrigerator are members of one family. The industrial refrigerator with intensive orchard is located on the territory of 10 hectares. The storage building is made of sandwich panels manufactured in Belarus. The industrial refrigerator was commissioned in 2015. The cost of industrial refrigerator is $ 3 million USD.

4 Analytical report “Analysis of value added chain in Kyrgyzstan: apples, apricots, walnuts, kidney beans, strawberry and raspberry”, Bishkek,

2014, pages7, 28.


14

The entire inner space of the industrial refrigerator is divided into two zones: for fruits and for vegetables. Refrig-erator consists of 14 cooling chambers: 10 gas-tight cooling chambers with ULO atmosphere, of these, 2 chambers are for storage at a temperature -1ºC, where you can store pears; 8 chambers for storage at a temperature of +1ºС for storage of apples; 4 chambers for storage of vegetables at +1ºС - +7 ºС . The capacity of refrigerator is 3,000 tons: 10 cooling chambers per 100 tons and 4 chambers per 500 tons. The effective area of cooling chambers used is 70%. All equipment is made in Germany. Industrial refrigerator has 2 sorting shops: one for sorting of fruits, one for vegetables. Industrial refrigerator has a calibration line of the Dutch firm Grafo for 6 sizes: 50, 60, 70, 80, and 90 millimeters. Industrial refrigerator is controlled by a computer.

Outside view of the industrial refrigerator, July 2016 Intensive orchard of the LLS “Sitabr Agro”, July 2016

Chamber for fruits with ULO per 80m² or 512m³ Chamber for vegetables per 216m² or 1,490.4m³

Single-leafed sliding doors, manually operated in

ULO chambers

Sectional gates for cooling chambers and corridor


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The industrial refrigerator was built by the famous German company PLAWID, which is the second best company in the construction of storage facilities. Experience of LLC “Sitabr Agro” indicates that the technological process of storage of fruit should start from the orchard, from fruits. Therefore, LLS first created super intensive orchard of 10 hectares in 2013, where they plant-ed apples of the special varieties, and only after 3 years they built the industrial refrigerator. Seedlings were import-ed from France and Italy. All the care after the orchard, fertilization and watering is carried out through a comput-er. Cost of planting of the super intensive orchard was 1 million.

In order to ensure full utilization of cooling chambers, “Sitabr Agro” carries out a lot of work with rayon farmers: carried out training seminars and recommend on cultivation and care after the fruit trees, proper collection and transportation of fruits.

EXPERIENCE OF VEGETABLE STORAGE IN KAZAKHSTAN

Asar SPC (Service Procurement Center) is located in 10 km from the Shymkent City in Asar micro-district in South Kazakhstan oblast. Storage facility was built in 2013 and is designed for 10 tons. Storage area: length - 239 meters, width - 21 meters. The total area of facility is 8 hectares. There are: 14 refrigerators - 188 m² and 1 freezer - 450 m². Cooling chambers are cooled by water by the GEEPLOFS compressor; freezer is cooled by freon. Vege-tables and fruit are stored at a temperature from 0 to 5 Сº degrees. Meat - up to minus 18 Сº. Equipment is made in Spain. Cooling and freezing chambers are equipped with racks and pallets. SPC is supplied with equipment for washing and sorting of fruit and vegetables, with trucks, and generators. SPC provides services for storage of fruits, vegetables, and meat. Rent fee is calculated by square meters: 1 m² - 3,191 KZT per 1 month. Funds for construction of SPC have been received from the “KazAgroFinance” Bank in the framework of the State program for 5 years. Annual turnover of the enterprise annually amounts in average 100 million / month. Similar with “Sitabr Agro” in RT, at first SPC has organized greenhouse and then built the warehouse. SPC works based on the Spanish technology of cultivation of vegetables in greenhouses. Similar with “Sitabr Agro”, SPC car-ries out a lot of work with the farmers living in this region: advising on the construction of greenhouses, technolo-gy of cultivation of vegetables in greenhouses. Farmers both store their vegetables in the storage refrigerator and sell their products to SPC.

storage - outside view storage - inside view


16

EXPORT AND IMPORT OF FRESH AND PROCESSED FRUIT

According to the State Customs Service of the Kyrgyz Republic, Kyrgyzstan exports fresh and processed fruits (Table 3.4.). Kyrgyzstan mainly exports fresh fruits to Kazakhstan, Russia, and Tajikistan. Table 3.4. Dynamics of export of fresh fruit from 2012 to 2015

2012 2013 2014 2015

Tons Thous.

$ Tons Thous.

$ Tons Thous.

$ Tons Thous.

$

Fresh Fruits 75 714 42 832 71 747 38 320 52 700 17 747 13 833 3 719

Fruits processed

2 948 3 586 696 1 200

*Data source: Internet-resource of the State Customs Service of the Kyrgyz Republic Export of fresh fruits decreased by 5.5 times from 75,714 tons in 2012 to 13,833 tons in 2015. Export of pro-cessed fruits decreased from 2,978 tons in 2014 to 696 tons in 2015. Decrease in the total yield due to weather conditions has played an important role in reducing the export of fresh fruits in 2015, as well as Kyrgyzstan's entry into the EAEU, as the production of local enterprises do not meet the requirements of the EAEU and CU. Since January 1, 2017, implementation of HACCP becomes mandatory for all food industry enterprises. Along with the export of fresh fruits and processed fruits, in Kyrgyzstan there is import of fresh fruits and pro-cessed fruits. Table 5 shows the data of the State Customs Service of the Kyrgyz Republic on the amount of im-ported fresh fruit and processed fruits in the Kyrgyzstan.

GEERLOFS Compressor for cooling of chambers for stor-

age of fruit and vegetables

Greenhouse. All equipment of greenhouse is Spanish

Greenhouses of SPC Greenhouses of farmers


17

Table 3.5. Imports of fresh fruit and processed fruit

2012 2013 2014 2015

Tons Thous.

$ Tons Thous.

$ Tons Thous.

$ Tons Thous.

$

Fresh Fruits 20 331 14 680 28 849 27 583 2 543 4 175 1 857 539

Fruits pro-cessed

6 695 11 943 3 926 7 579

*Data source: Internet-resource of the State Customs Service of hte Kyrgyz Republic As can be seen from Table 5, the volume of imported the fresh fruits and processed fruits is also reduced. But un-like the exports, more processed fruits are imported to Kyrgyzstan than fresh fruits. This is primarily due to the fact that the country has enough of its own fresh apples; taste preferences of local consumers are more inclined to favor of local apples compared to Chinese apples, and cost of Polish apples is higher than cost of local apples. PROCESSING OF FRUITS According to the NSC KR, there are 21 active plants for processing of juices of fruits and vegetables and 11 com-panies producing other forms of processed fruits and nuts in the country. Geographically, the plants are located as follows (Figure 3.1.): *Data source: NSC KR

Figure 3.1. Number of enterprises for processing of fruits and vegetables by regions However, this is not a complete list of the fruits processing enterprises in the country because some processing plants/shops registered as agricultural or commodity and service cooperatives in the National Statistics Committee of the Kyrgyz Republic. For example, there are Agroplast, Mol Tushum, Akchechek, Alysh-Dash, and other coop-erativres in Batken oblast. According to expert estimates, in the country there are more than 325 mini-shops and self-employed businesses engaged in processing of fruits and vegetables. With effective use of installed capacity, all businesses can process up to 100 thousand tons of fruits and berries5. Processing plants differ by technical equipment and the technology used. Some enterprises continue working on the equipment aged more than 25 years or more; another group of enterprises has been able to modernize partially its production by installing some modern lines or equipment; also there is a group of enterprises with new equip-ment and using modern technologies such as aseptic lines, technologies of low vacuum temperature for drying of

5 Internet-recourse: article of Abdiev M. Zh. “Problems of production and processing of fruit-and-vegetable products in KR”.

www.journals.manas.edu.kg/reforma/oldarchives/2011-1-49/14_1018-3931-1-PB.pdf

8

2

45

221

32

3

0123456789

Issyk-Kuloblast

Djalal-Abadoblast

Osh oblast Chuy oblast Bishkek

Juices

other forms


18

fruits, new technologies for bottling and packaging, etc. The majority of processing enterprises in Kyrgyzstan is characterized by extensive use of Chinese equipment. Only few enterprises have the equipment manufactured in Europe. There are many different shops in the country, which process fruits by artisanal methods. Processing plants work on local raw materials only. Businesses buy raw materials through various channels: directly from the farmers through their procurer, collection points, its own internal enterprise personnel, or the company has agreements with large farms that supply raw materials directly to the plants. The range of processed forms of fruits and berries is quite wide and can be divided into 4 groups: fruit juices, fruit puree; compotes; preserves, marmalade, jams; dried and other processed forms of apples. Apple juice is the most popular apple product. According to the National Statistical Committee (Table 3.6.) in 2015 it was produced 8,656.1 thousand liters of fruit juice in the amount of 357,179.1 thousand KGS. As seen from the Table, there is a reduction in the quantity of fruit juices. In 2015 production of fruit juices was less for 64.4% than in 2013. Such a reduction in the production of fruit juices is associated with entry of KR into the EAEU, because Kyrgyz companies do not comply with regulations applicable to the Customs Union and the EAEU. In 2015 the monetary term of produced fruit juices made up 357,179.1 thousand KGS. Table 3.6. Dynamics of production of fruit juices

2014

2015

On the basis of quantities

(Thousand liters)

In monetary terms

(Thousand KGS)

13,035.1 11,734.3 8,656.1 357,179.1

*Data source: NSC KR. Production of fruit juices is concentrated mainly in the north of the country. As can be seen from Figure 3.2, 63% of the juice is produced in Bishkek; 19.3% - in Chui Oblast; 10.7% - in Issyk-Kul Oblast; 5.4% - in Osh Oblast; 1.6% - in Jalal-Abad Oblast. This is due to the fact that many processing plants located in the regions produce products under the brand of companies located in Bishkek and Chui Oblast. Figure 3.2. Dynamics of fruit juices production by Oblasts (in thousand liters).

*Data Source: NSC KR The enterprise sells the finished product through various channels: some processors deliver directly to retailers, omitting the wholesale distributors. Others sell their products through wholesale or retail dealers.

825.4

57.5

446

2344

9362.2

1144

55.7

365.7

1632.7

8536.2

923.9

135.2

471.4

1668

5456.8

0 2000 4000 6000 8000 10000

Issyk-Kul oblast

Djalal-Abad oblast

Osh oblast

Chuy oblast

Bishkek

2015

2014

2013


19

Processing companies use established production capacity only by 25-30%. The main reason for this situation is the difficulty with the sale of produced products. Companies produce only the volume they can sell. In addition, processor is afraid to take credit for modernization / expansion of production, because he is not sure of his prod-uct sales. As a result, many companies have no real possibility to introduce new technologies and equipment, which adversely affects the competitiveness of output goods. The lack of permanent links between processors and producers of raw materials complicates the activity of pro-cessing enterprises. Often there are the facts, when farmers may refuse to supply harvest to the local agency for processing if dealers will offer a better price or a farmer prefers to feed crop to livestock rather than to sell at the price offered by the processing plants. Kyrgyzstan’s entry into the Customs Union area and joining the EAEU significantly affected the activity of pro-cessing enterprises. In Kyrgyzstan, as it became a full member of the EAEU, introduction of the food safety sys-tem (HACCP) becomes mandatory for the food industry enterprises.

STATE SUPPORT AND SUBSIDIES TO FRUITS AND VEGETABLES PRODUCING, STORAGE

AND PROCESSING IN KAZAKHSTAN

There is the following complex of measures to support production, storage and processing of fruits and vegeta-

bles:

1. Subsidy of the agricultural producers costs on establishing and cultivation (including restoration) of per-

ennial plants of fruits and grapes. The State support horticulture and viticulture sector is provided since

2007 by subsidizing up to 40% of the costs of farmers in establishing and cultivation of perennial planta-

tions of fruits, berries and grapes.

2. Subsidy on establishment of mother perennial plantations of fruit crops and grapes and maintenance of

unfinished production of mother perennial plantations of fruit crops and grapes (in the framework of seed

support program). The ratio of budgeted subsidies for the establishment of mother perennial plantations

of fruit crops and grapes per 1 hectare is 1 323 723.4 tenge maintenance of unfinished production of

mother perennial plantations of fruit crops and grapes - 1126 047.2 tenge.

3. Subsidy of the prices of herbicides and fertilizers. Subsidy rules of the costs of fertilizers (except organic)

approved by Government Resolution #574 as of May 29, 2014. The volume of subsidies is the following:

1) purchase of herbicides and fertilizers of domestic production paid up to 50% of their value; 2) purchase

of herbicides and fertilizers of foreign production paid up to 30% of their value.

4. Subsidy on depreciation of interest rates on agricultural machinery loans (lease).

5. As the program administrator the Ministry of Agriculture provides subsidies to reduce interest rates on

loans (leasing) of agricultural machinery in the framework of budget program “Development of crop pro-

duction and food security” sub-program “Reduction of interest rates on loans (leasing) of agricultural ma-

chinery”. Subsidized part of the fee for leasing equipment for the cultivation of corn, soybeans, cotton,

rice, vegetable, fruit and berry and melon crops. The size of subsidies is 7% of the total rate reimbursed by

the State. The final rate on leasing of agricultural equipment and machinery in "KazAgroFinance" taking

into account subsidies is 5.8% for the lessees.

Investment subsidies

As part of the investment subsidy programs on "intensive gardening" and according to the subsidy rules on reim-

bursement of part of the investments costs incurred by the subject of agro-industrial complex, there are subsidies

for the following types of capital expenses: seedlings purchase, tapestries purchase, drip irrigation system install-

ment. The ratio of subsidies is 40% of the actual costs.


20

Table 6.4. costs calculation for apple juice

production (direct extraction), seasonal fig-

ures/2 months of functioning

Expenditures Cost Value

Raw materials, meat 3,746,250.00 46.3

Other production costs 153,311.34 1.9%

Labor 282,600.00 4.1%

Packaging 3,862,000.00 47.7

Total costs

Total production cost

for 1 liter of apple juice

is 19.37 som

100%

The priority areas for investment subsidies on the sector are: - Installment and expansion of irrigation systems; -

Creation and expansion of enterprises for grain, fruits and vegetables storage; - Creation and expansion of enter-

prises to grow vegetables and fruit; - Creation and expansion of enterprises for fruits and vegetables processing

and storage.

COSTS ANALYSES FOR FRUITS AND VEGETABLES PROCESSSING

Cost analyses for meat processing showed that sig-

nificant share of costs is referred to raw materials

and packaging. Table 6.4 and graph below shows

that 46.3 % of costs and 47.7 % in apple juice pro-

duction are costs of apple and packaging according-

ly. Based on that, BTI team suggests interventions at

processing and production levels as having the high-

est costs component which is likely to produce high-

est impact in this value chain. Calculations are based

on annual financial information provided by medium

fruits processor

As an additional tool for prioritization of rec-

ommendation, experts conducted sensitivity

analyses and find out that:

Sensitivity analyses by price of raw materials

showed that processers key financial indicators

does not affect seriously from increase of prices

of apples. This means that processors have

margins of safety, but at the same time prices

for raw apples can hardly change as usually pro-

cessors sources drops and low quality apples.

Fruits and vegetables processing is quite sensi-

tive on sales of production. If company sells

less than 80 % of its production this leads to negative effects in profits and cash flows. Therefore, recommenda-

tions that facilitate better marketing are quite relevant.

Based on above experts team suggest the following top 3 priority recommendations as having higher im-

pact on the whole meat post-harvest activities

Sensitivity by sales 100% 90% 80%

Incomes 22,582,500 14,255,325 12,671,400

EBIT 8,807,531 2,804,635 1,220,710

Net profit 7,136,852 1,133,956 (449,969)

Net cash flow 129,761 20,617 (8,181)

Sensitivity by price of raw materials

7.5 soms 15 soms 20 soms

Incomes 22,582,500 22,582,500 22,582,500

EBIT 8,807,531 5,061,281 2,563,781

Net profit 7,136,852 3,390,602 893,102

Net cash flow 129,761 61,647 16,238

Raw materials

46,3% Packaging

47,7%

Labor 4,1%

Other production costs 4,1%


21

Provide post-harvest companies with marketing support, including facilitation of b2b linkages, studies and

assessments for identification of market requirements, support to post-harvest enterprises in participating

in promotional activities like trade fairs and etc.

Introduce comprehensive measures for intensified crop production, which includes introducing high-

productive varieties and nurseries; facilitating purchase of modern agricultural machinery for increasing

productivity and reducing losses; introducing drip and other alternative irrigation systems; and providing

farmers with training and extension services for obtaining critical skills required for applying intensified

crop production, including introducing of good agricultural practice principles

Provide technical support to establishing of logistics and storage facilities as assessment conducted

showed that major part of losses at production level refers to lack of good storage facilities. Additionally,

support processors in modernization of enterprise which can potentially lead to increase of functioning

capacities or introduce processing of those fruits and vegetables which are absent at the moment.

VC MILK AN DAIRY PRODUCTS

MILK PROCESSING MARKET OVERVIEW (DESK STUDY)

UNPASTEURIZED/ RAW MILK PRODUCTION

In 2015, Kyrgyzstan produced 1,484.1 thousand tons of unpasteurized milk, which is 2.6% higher than in 2014. During last 5 years, unpasteurized milk production increased by 9%. According to the data of NSC KR, there are over 400 enterprises-producers of raw milk in the dairy sector, of which 70% are private entrepreneurs and the remaining 30% are legal entities. Around 50 companies are medium and large enterprises, but the majority actors are small businesses. The main milk producers are Chui, Osh and Jalal-Abad oblasts. Their share is 66% of total milk production vol-ume. Table 3.7. Unpasteurized milk production with a breakdown by oblasts, thous. tons6

Index 2011 2012 2013 2014 2015

TOTAL in the KR, thousand tons 1,358.1 1,382.4 1,408.2 1,445.5 1,481.1

Chui oblast 341.9 347.4 353.3 362 372.5

Osh oblast 269.7 275.2 280.2 286.8 292.7

Jalal-Abad oblast 273.9 279 286.7 298.3 306.6

Issyk-Kul oblast 181 187.2 192 200.6 208.7

Naryn oblast 117.1 117.2 117.7 117.7 120.4

Batken oblast 92.3 93.5 94.5 95.4 96.3

Talas oblast 74.8 75.6 76.3 77 76.2

Bishkek city 0.84 0.5 0.9 0.9 0.8

Osh city 6.54 6.6 6.7 6.8 6.9

6 Data from the website of the National Statistics Committee of the Kyrgyz Republic: http://www.stat.kg/ru/statistics/selskoe-hozyajstvo/ (file – Milk Produc-

tion)

http://www.stat.kg/ru/statistics/selskoe-hozyajstvo/


22

Milk production increased during 2011-2015 due to increase of cow population in the farm households and private households by 73,266 units or by 10.7%. Now, the farm households share of total milk production is 48%, milk yield of the households is 51%. Table 3.8. Cow units as of the year end and milk yield per one cow7

Indicator Description 2011 2012 2013 2014 2015

Average annual milk yield from 1 cow, kg 2 030 2 023 2 011 2 009 2 028

Cow population, units 684 157 699 339 718 516 744 336 757 423

Growth rate (chain)

2.22% 2.74% 3.59% 1.76%

Average productivity index per one cow is still low compared with the index in other countries, such as Belarus – 4.5-4.6 thousand kg, Russia – 3.9-4 thousand kg, and Kazakhstan – 2.2 thousand kg. Average productivity index per one cow in different countries is as follows:

MILK PROCESSING

During the last three years, annual milk production in the country is over 1.4 million tons of unpasteurized milk, and only up to 4% of total unpasteurized milk is processed. Around 96% of all unpasteurized milk is not pro-cessed or exported. The main types of the products (% of total volume) are as follows:

Processed milk – 56%

Kefir – 19%

Cheeses – 6%

Ice-cream – 6%

Sour cream – 5%

Butter – 4%

Cream – 4%

7 Data from the website of the National Statistics Committee of the Kyrgyz Republic: http://www.stat.kg/ru/statistics/selskoe-hozyajstvo/ (file – Livestock and

Poultry Productivity in the Kyrgyz Republic)

Milk yield per 1cow, in 2012 (ton)

USA

GB

Germany

France

Australia

China

Russia

Turkey

Kazakhstan

Brazil

India

Figure 3.3. Average productivity per 1 cow

Processing of milk, PE Tolonov B.,

Kochkolrvillage, Naryn oblast, June

2016

http://www.stat.kg/ru/statistics/selskoe-hozyajstvo/


23

Milk processing is done by large dairy milk processing plants, legal entities and physical persons. It should be not-ed, that only around 30% of processing plants have modern milk processing equipment. A lot of processing plants use old Soviet time equipment or equipment manufactured in Russia after 1991. Small milk producers use com-mon or slightly improved raw milk processing technologies. Average daily milk demand for processing needs according to the designed capacity of enterprises is around 1,670 tons. On the average, processing capacity of the large processers is 50 tons a day, and the capacity of medium and small processing enterprises varies from 0.5 to 35 tons. Industrial milk processing is mostly located in the Chu valley, Issyk-Kul and Talas oblasts. According to the data from the Ministry of Agriculture and Melioration, Kyrgyzstan has 34 dairy milk processing plants, the majority are located in the Chu valley — 14, no such enterprises are located in Batken oblast. Below is a list of 5 largest milk processing enterprises below:

1. “Bishkek Sut” OJSC. The company is an affiliate of the Russian Holding “Wimm-Bill-Dann Foods”. Product family of dairy and juice products manufactured by “Bishkek Sut” OJSC includes over 50 names, in particular, traditional dairy products, such as packed milk, kefirs, fermented baked milk, cottage cheese, alongside with the dessert products, such as yogurt drink, sweet cream yogurt. The enterprise products are manufactured and sold under the national “Wimm-Bill-Dann” brands - "Jolly Milkman", "House in a vil-lage", "Wonder", "Frugurt", "BioMax", "J7", " Favourite Garden".

2. “Shin Line” LLC. Major product of this enterprise is ice-cream, seasonal goods produced by the enter-prise include: rolled-in dough, pelmeni or ravioli, dry milk/ milk powder, butter, condensed milk. The company produces 14 tons of ice-cream on a daily basis.

3. “Kant Sut” LLC. The enterprise processes whole-milk products, produces condensed milk, butter, casein. 4. “Sut Bulak” CJSC. The company was established on January 5, 1996 following implementation of the

Kyrgyz-Swiss Intergovernmental Dairy Programme. Main activities is production of cheese and other products under Dairy Spring trademark. The enterprise designed processing capacity is 70 tons of milk per day.

5. “Ak Jalga” CJSC. Major enterprise activity is milk processing and dairy production. The Company was es-tablished in 1994. The designed capacity is 50-100 ton of milk per day.

A complete list of dairy milk processing plants in Kyrgyzstan8: # Enterprise Name

Issyk-Kul oblast 1 “AK-Jalga” CJSC 2 “Sut Bulak” CJSC 3 “Ak-Bulak” CJSC 4 “Ice Queen – Karakol” LLC 5 “Issyk-Kul Sut” OJSC 6 “Ak-Jalga Karakol” LLC

Jalal-Abad oblast 7 “Ak Tilek” LLC 8 “Irtysh” LLC 9 “Ak Bulak” JSC 10 “Yman Ata” LLC

8 Ministry of Agriculture of Kyrgyz Republic


24

Naryn oblast 11 “At Bashi Sut" LLC 12 “Shamshi Ata” SH

Osh oblast 13 “Alai Aktyk” LLC 14 “Osh Sut” OJSC

Talas oblast 15 “Arashan” OJSC 16 “Ejigey” LLC 17 “Emilia” LLC 18 “Talas Sut” CJSC 19 “Torokulova N.” PE (Private Entrepreneur) 20 “Tuuganbaev B.” PE

Chui oblast 21 “Shin Line” LLC 22 “Milk Master” LLC 23 “Kant Sut” LLC 24 “Umut and Co” LLC 25 “Bio Tonus” LLC 26 “Ursus” CJSC 27 “Ak Sut” LLC 28 “Aktan” CJSC 29 “Elet Sut” LLC 30 “Ice Queen” LLC 31 “ElWest” CJSC 32 “Bishkek Sut” OJSC 33 “NurSut” LLC 34 “Tooton Sut” LLC

MILK AND DAIRY PRODUCTS EXPORT

In 2015, around 13,479.33 tons of milk and dairy products for the total amount of 9,970.91 thousand US Dollars were exported. Table 3.9. Milk and Dairy Products Export9

Export 2011 2012 2013 2014 2015

In kind, (ton) 26,863.40 26,935.90 14,111.30 23,464.81 13,479.33

By value (thousand US Dollars) 31,168.10 27,811.60 17,673.00 20,867.60 9,970.91

9 Data for 2011-2013 received from the website of the National Statistics Committee of the Kyrgyz Republic:

http://www.stat.kg/ru/statistics/vneshneekonomicheskaya-deyatelnost/ (Files – Export of main types of goods in kind, Export of main types of goods (thousand

US Dollars)). Data for 2014-2015 received from the database of the State Customs Service of the Kyrgyz Republic

http://www.stat.kg/ru/statistics/vneshneekonomicheskaya-deyatelnost/


25

Figure 3.410. Dairy products export from Kyrgyzstan for the period from 2001 to 2015

(thousand US Dollars)

In spite of a relatively low growth (by 2.6%) in milk production in the local market, dairy products export had a sharp decrease in 2015 compared to 2014 - by 52%. Export decrease caused by the Kazakh prohibition on dairy products import from the Kyrgyz Republic. Kazakhstan share in exported dairy product from Kyrgyzstan is 99.9%. Later, the embargo was partially withdrawn. At the present time, dairy products export to EAEU is allowed only for 7 Kyrgyz enterprises: “Ak Jalga” CJSC, “Kant Sut” LLC, “Bishkek-Sut” OJSC, “Ursus” CJSC, “Umut and Co” LLC, “Sut Bulak” CJSC, “Ak Sut” OJSC. There is a temporary restriction in reference to other enterprises. Table 3.10. List of the Main Export Products11

Description of Goods

2015

Net Weight (ton)

thousand US$

Milk and cream, not condensed without sugar or any other sweeteners 10,029.18 4,935.10

Milk and cream, condensed with sugar or any other sweeteners 1,141.83 2,354.42

Butter milk, clotted milk and cream, yogurt, kefir and other fermented or cultured milk and cream, condensed or not condensed, laced with or not laced

1,851.67 1,354.65

Milk whey, condensed or not condensed with sugar or any other sweeteners or without them; products from natural components

107.2 65.87

Butter and other fats and oils, produced from milk; dairy pastes 349.45 1,260.87

Total milk and dairy products 13,479.33 9,970.91

Cheese and cottage cheese 1,015.25 2,050.97

10 Internet-resource of the State Customs Service of the Kyrgyz Republic

11 Data is received from the database of the State Customs Service of the Kyrgyz Republic

0

5000

10000

15000

20000

25000

30000

35000

40000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


26

* Data from the database of the State Customs Service of the Kyrgyz Republic As we see from Table 3.10., the main export product is raw/ unpasteurized milk.

MILK AND DAIRY PRODUCTS IMPORT

In 2015, Kyrgyzstan imported 5,864.34 tons of dairy products. Kyrgyzstan imports mostly yogurts, cream, pro-cessed milk.

Table 3.11. Dairy product import12

Import 2011 2012 2013 2014 2015

In kind, (ton) 8 748,60 11 420,20 11 033,30 8 266,47 5 864,34

By value (thousand US Dollars) 14 365,30 20 539,10 18 461,70 12 005,69 6 407,12

Table 3.12. List of main imported products13

Description of Goods

2015

Net Weight (ton)

thousand US$

Milk and cream, not condensed without sugar or any other sweeteners 540.21 667.17

Milk and cream, condensed with sugar or any other sweeteners 2,609.75 2,455.66

Butter milk, clotted milk and cream, yogurt, kefir and other fermented or cultured milk and cream, condensed or not condensed, laced with or not laced

2,620.14 3,191.14

Milk whey, condensed or not condensed with sugar or any other sweteners or without them; products from natural components

93.6 90.89

Butter and other fats and oils, produced from milk; dairy pastes 0.64 2.26

Total milk and dairy products 5,864.34 6,407.12

Cheese and cottage cheese 397.2 1,343.96

VALUE CHAIN

Dairy products value chain includes:

Production

Collection and transportation of unpasteurized milk

Processing

Distribution and sale

Consumption

12 Data for 2011-2013 received from the website of the National Statistics Committee of the Kyrgyz Republic:

http://www.stat.kg/ru/statistics/vneshneekonomicheskaya-deyatelnost/ (Files – Import of main types of goods in kind, Import of main types of goods (thousand

US Dollars)). Data for 2014-2015 is received from the database of the State Customs Service of the Kyrgyz Republic

13 Data is received from the database of the State Customs Service of the Kyrgyz Republic



27

PRODUCTION

Over half of the total unpasteurized milk volume in the country is produced by small households who keep cattle. Some unpasteurized milk is used for personal consumption by the households, the remaining part is sold to enter-prises – milk processers. At this section of the value chain, productivity of milk cattle and the quality of the pro-duced milk will directly depend on:

Quality of the breeding stock. According to academic data in order to get high milk yield it is necessary that the stock included at least 40% of brood cows. It should be noted, that artificial insemination ad-vantages are not sufficiently used due to inappropriate level of infrastructure development.

Milk cattle management. The farmer who is interested in his milk cattle productivity and the milk quality increase should provide ‘decent’ conditions for the cows, keep them healthy, and prolong the productivity period.

Feeding: the quality and availability of fooder supply, water supply. More than half of expenses in dairy husbandry goes to fodder.

High quality veterinary service. Inadequate veterinary service does not allow thoroughly and timely track animal infections.

Fulfillment of sanitary and hygiene requirements during milking operations and primary milk processing. As a rule, farmers and small farm households do not use mechanized milking operation or refrigerating units. It is necessary to exclude a possibility of primary milk contamination that may happen during me-chanic (manual) milking operation. The following milk processing stages depend on 'cleanness’ of this process. Observance of the conditions restricting bacteria outer during manual milking operation is a criti-cal factor.

COLLECTION AND TRANSPORTATION OF UNPASTEURIZED MILK

Milk collection from private and farm households is done either directly by milk producers who send their trucks on the established routing or through resellers. In their turn, resellers incur extra charges on processers. At this stage of the value chain, the quality of the supplied raw materials will de-pend on:

Availability of refrigerating units with the farmers in order to keep milk refrigerated before collectors are coming;

Availability of transportation means with refrigerating equipment with collectors and resellers.

Availability of collection points with refrigerating units in the re-gions aiming at making the process of collecting unequal milk vol-umes from the private and farm households easy.

MILK PROCESSING

Processing is done by relatively large dairy milk processing enterprises, le-gal entities and physical persons. The number of processing enterprises is 34. It should be noted, that only about 30% of processing enterprises have modern raw milk processing equipment. The majority of enterprises use Soviet time equipment or equipment manufactured in Russia after 1991. Small milk producers use common or slightly improved technologies of raw milk processing. At this stage of the value chain, the following factors will affect the quality and the cost of product:

Availability of modern equipment and technological lines

Application of modern and efficient production technologies

Availability of qualified personnel/ technicians at the enterprise

Cheese drying “At-Bashy Sut”, At-

Bashy village, Naryn oblast,

July 2016


28

Table 3.13. costs calculation for milk pro-

cessing. 637 tons of raw milk annually


Raw materials, milk 5,474,343.1 79%

Packaging 148,698.8 2.1%

Labor and production costs 690,898.7 10%

Administrative and marketing

costs

618,374.0 8.9%

Total costs

100%

Availability of quality control system

DISTRIBUTION AND SALE Distribution of dairy products is done via 4 channels:

Via large wholesale, sales and buying companies

Via sales/ marketing agents

Finished product is delivered to the companies’ stores or sales points.

Finished product is sold by producers in settlements, near market areas.

STATE SUPPORT AND SUBSIDIES TO MILK PRODUCERS IN KAZAKHSTAN, RUSSIA AND

BELARUS

The assessed countries provide direct and indirect state support. Belorussia, Kazakhstan and Russia subsidize every

kilo (liter) of milk for processing, carries out breeding work, depreciates investments costs. However, the amount

and mechanisms of support differ in each country. Raw material subsidizing. For example, in 2015 in Belorussia

the amount of subsidies per one ton of the processed milk is about 18 USD (equivalent ), in Kazakhstan – 50-130

USD (depending on the productivity of the dairy cattle), in Russian Federation in average it equals to 35 USD by

regions (taking into account the payments of the federal and regional budgets). In Kazakhstan agricultural produc-

ers receive additional revenue through a high level of guaranteed procurement prices of raw milk approved by the

Government, while the additional cost of purchase of raw materials are subsidized to the processing enterprises.

There was a pilot project in 2014 - a subsidy program of the processing enterprises in 8 oblasts: Akmolinskay, Al-

matinsksys, Estern Kazakhstan, Jambylskaya, Karagandinskaya, Kostanaiskaya, Pavlodarskaya and Northern Ka-

zakhstan. For example, in Pavlodar oblast in 2015 the subsidized normative of the purchased milk for deep pro-

cessing for butter, hard cheese and milk powder set at 16, 20 and 15 tenge per kilo (liter) accordingly (80-105 USD

per 1 ton). The support of breeding in dairy cattle in Republic of Belarus is estimated at 0.5 USD per 1 ton of pro-

duction (in 2013), the Republic of Kazakhstan - 9 USD, Russian Federation -3 USD. Investments support. In Bel-

arus, investments support in the dairy sector is carried out by subsidizing interest rates (up to 100% of the refi-

nancing rate) for loans aimed at construction, reconstruction and modernization of dairy farms. In 2013 about 0.7

billion USD was aimed at the reduction of all loans for agro-industrial complex. One ton of produced milk in the

Republic can be estimated by 50 USD State’s budget participation. The Republic of Kazakhstan has interest rates

subsidy programs as well as investment costs subsidy programs, financial improvement of subjects of agrarian and

industrial complex procedures. The Russian Federation subsidizes interest rates on investment loans and also pro-

vides support for economically important regional programs for the development of dairy cattle (0.14 bln. USD in

2013).

COSTS ANALYSES FOR MILK

PROCESSING

Cost analyses for milk processing showed that

major share of costs is referred to raw materials.

Table 3.13 and graph below shows that 79 % of

costs in milk processing is costs of raw milk.

Based on that, BTI team suggests interventions

in production of milk as highest costs compo-

nent which is likely to produce highest impact


29

in this value chain. Calculations are based on annual financial information provided by small milk processing com-

pany which has comparatively large variety of production.

As an additional tool for prioritization of recommendation, experts conducted sensitivity analyses and find out

that:

Milk processing is quite sensitive on sales of

production. If company sells less than 90 %

of its production this lead to negative effects

in profits and cash flows. Therefore, recom-

mendations that facilitate better marketing of

post-harvest enterprises in milk processing

are quite relevant

Sensitivity analyses by price of raw milk

showed that increasing the prices for 1 som

only, could lead to problems with cash flow,

while increasing the prices for 3 soms will

result in negative profit indicators for pro-

cessing company. This re-confirms that in-

terventions at production level are quite im-

portant for post-harvest enterprises in milk

value chain.

Sensitivity analyses by functioning capacity

shows that having this indicator less than 70

% could lead to serious problems with cash

flow and profits, which means that sufficient

supply at raw milk market is critical for processing company.


pact on the whole milk value chain

Introduce comprehensive measures for intensified milk production at farms level, which includes support

in purchase of high-productive animals; introducing artificial insemination for breed improvements and

softening seasonality in milk production, and providing farmers with training and extension services for

obtaining critical skills required for applying intensified milk production, including introducing of good ag-

ricultural practice principles at farms which is critical for traceability at processors level.

Provide support to modernization of milk farms, including support in purchase of small milking machin-

ery, milk quality testing equipment and introduce other technical solutions for modern small farm model

(cooling equipment, small fodder producing machinery, tractors and special attachments)


Incomes 23,800,425 21,420,383 19,040,340

EBIT 1,964,915 (415,127) (2,795,170)

Net profit 1,100,878 (1,041,160) (3,183,198)

Net cash flow 569,720 (1,810,323) (4,190,365)


17 som per liter

18 som per liter

20 som per liter

Incomes 23,800,425 23,800,425 23,800,425

EBIT 1,964,915 950,165 (1,079,335)

Net profit 1,100,878 187,603 (1,638,947)

Net cash flow 569,720 -445,030 (2,474,530)

Sensitivity by func-tioning capacity

100% 70% 50%

Incomes 23,800,425 17,872,800 13,921,050

EBIT 1,964,915 329,255 (761,185)

Net profit 1,100,878 (371,216) (1,352,612)

Net cash flow 569,720 (1,065,940) (2,156,380)

Raw milk

79%

Packaging

2,1%

Labor and produc-tion costs

10%

Administrative and marketing costs

8,9%


30

Provide milk processing post-harvest companies with marketing support, including facilitation of b2b

linkages, studies and assessments for identification of market requirements, support to post-harvest enter-

prises in participating in promotional activities like trade fairs and etc.

VC MEAT – FRESH, FROZEN AND PROCESSED MARKET REVIEW-FRESH, FROZEN AND PROCESSED MEAT (DESK STUDY)

STATUS OF BREEDING SUBCOMPLEX For January-March 2016 the gross output of agriculture, forestry and fisheries, all types of farms of the Republic was in the amount of 22.3 billion KGS. The growth rate for January-March 2015 amounted to 101.5%, including livestock -101.5% (21.6 billion KGS). Contribution to GDP from agriculture is estimated at 0.13 percentage point, the share of which in the structure of GDP production amounted to 8.5%. Growth in gross agricultural output in the January-March of the current year is due to an increase in livestock pro-duction at 1.5%. The share of animal husbandry in total volume of agricultural output was 97.0%.14 At the beginning of 2015 the cattle stock has increased by 54.2 thousand (3.9%) in comparison with January 2014 onwards. For the period 2010-2014 the cattle population has increased by 180.3 thousand heads (14.1%).15

According to the NSC KR, the leading regions by the number of cattle are Osh, Jalal-Abad, Chui and Issyk-Kul oblasts: Table 3.13. Number of cattle in Kyrgyzstan

14 According to the brief information on key indicators of socio-economic development of the Republic in January-June 2016 (based on preliminary data of NSC KR) http://bit.ly/2alLyhc 15 Beef market overview of the Member States of the Eurasian Economic Union for 2010-2014. Department of agro-industrial policy, 2015.

Figure 3.5. Cattle stock (thousand heads)

Slaughter house “Naryn-Et”, Naryn city, June 2016

http://bit.ly/2alLyhc


31

2011 2012 2013 2014 2015

Batken Oblast 119800 122164 123493 127123 129118

Jalal-Abad Oblast 266614 273136 286313 294557 302659

Issyk-Kul Oblast 184907 191974 199978 209948 212816

Naryn Oblast 133518 136552 138623 141950 145687

Osh Oblast 308488 314647 321239 340891 351601

Talas Oblast 65353 66291 66896 67061 67243

Chui Oblast 248886 251824 256603 265882 272242

Bishkek 1053 1065 1058 873 734

Osh 9046 9123 9275 9471 9831

Special Account 918 690 690 621 586

Domestic cattle breeding is the basis of livestock production in Kyrgyzstan. According to estimates, there are around 6,000 livestock producers (households) working in the sector, of which more than 70% have just a few heads of cattle. Manufacturers in the mountainous areas use large areas of irrigated land for grazing. Manufacturers who live in low-lying areas are engaged in an intensive production by fattening stall. There are approximately 9,2 million hectares of grazing land in Kyrgyzstan, and the producers who use the pas-tures, depend on three seasons for grazing. In the winter the animals are kept in barns or grazed near homes. In the off-season the cattle is grazed on the near-by pastures, and in summer it is driven for herding in the remote mountain pastures. During January-June 2016 all categories of economic entities of the Republic made 171,0 thousand tons of meat in live weight, which is 2518 tons or 1,5% more than in the corresponding period last year. 16 According to the NSC KR for the year 2015 the economic entities of all categories of the republic made 285,5 thousand tons of meat in live weight. Table 3.14. Economic entities of all categories of meat

2011 2012 2013 2014 2015

Population, thousand people 5 477,6 5 551,9 5 663,1 5 776,6 6 019,5

Meat production, tons 227 395,0 239 885,0 245 788,0 259 117,0 258 501,0

The calculation for 1 person, kg * 41 513,6 43 207,7 43 401,7 44 856,3 42 943,9

The main producers of meat in live weight are Chui, Osh and Jalal-Abad oblasts. Their share is 66% of the total meat production. Table 3.15. Meat production (in slaughter weight) by oblasts, in thousand tons17

2011 2012 2013 2014

TOTAL around the republic* 190,40 192,35 193,25 202,70

Batken Oblast 14,8 15,1 15,1 15,2

Jalal-Abad Oblast 26,8 27,3 27,8 29,2

Issyk-Kul Oblast 24,1 24,9 25,1 26,3

Naryn Oblast 23,1 23,4 23,3 23,5

Osh Oblast 40 40,3 40,5 42

Talas Oblast 12,6 11,2 11,1 11,4

Chui Oblast 47,8 49,1 49,3 54,1

16 http://www.stat.kg/media/publicationarchive/cf4b8e10-7eb1-4e21-b0e4-3e237cb1e3c4.pdf 17 National Statistics Committee

http://www.stat.kg/media/publicationarchive/cf4b8e10-7eb1-4e21-b0e4-3e237cb1e3c4.pdf


32

Bishkek 0,349 0,2 0,2 0,2

Osh 0,849 0,849 0,849 0,8

The increase in meat production in the period 2011-2015 is caused by an increase in the number of cows in the peasant (farmer) farms and domestic households by 73,266 heads, or by 10.7%. In total, 30 companies operate in the meat market of Kyrgyzstan and 127 physical entities produce meat products. Issyk-Kul oblast18 1. LLC "Toshtuk Karakol" 2. OJSC "Shumkar" 3. LLC "Suusar" 4. OJSC "Kelechek" 5. LLC "Aykuma" 6. LLC "South Ode" Chui oblast 7. LLC "Riha" 8. LLC "Caspian Plus" 9. LLC "Kaindy Meat Plant" 10. LLC "Novopavlovsk sausage" 11. LLC "Tokkozh" 12. CJSC "Manas Management Company" 13. LLC "Muscat Service" 14. LLC "Sultanov International" 15. LLC "LORD" 16. LLC "Nuristan" 17. LLC "Sher Inc." 18. LLC "Andora" 19. LLC Kyrhgyz Hejiu Eurasian Industry Co. Ltd / «Ltd. Xinjiang Euro-Asian Trading Company" Hentszyu " 20. LLC "Dinmuhamed" 21. LLC "Kyrgyz Casing" 22. CJSC "Imfiko" 23. LLC "Barkad" 24. LLC "Ak Kuu" 25. JSC "Bishkek meat-packing plant" 26. LLC "Bojan" 27. LLC "Emperor" 28. LLC "LOTUS" 29. LLC "Tunuk" 30. LLC “Fresh”

MEAT PROCESSING

Meat processing is the fastest growing part of the meat sector. About 500 enterprises and 5000 small shops con-vert one third of the volume of meat produced into the processed products, and more than 25% of this volume is exported. Most of the companies are small and unorganized, they are mainly located in Bishkek and in the Chui Valley. Processing plants are divided into three categories: the first category is selling products without the brand, of not a constant quality and at a low price. The second category are those who work in the old Soviet enterprises

18List provided by Ministry of Agriculture

Processed meat, “Toshtuk Karakol”, Karakol city,

Issyk-Kol oblast, July 2016


33

with obsolete equipment. The third category is represented by newly established companies, using modern tech-nology and having developed branding and marketing strategies.

Table 3.16. Production of main types of industrial products (in kind), tons19

2010 2011 2012 2013 2014 2015 2016 (Jan-June)

Meat and edible offal of bo-vine animals

6492,5 6317,1 6394,7 12867,6 8342,8 18902 5190,8

Meat and edible offal of poul-try

166,2 180,3 849,8 706,4 714,8 2530,8 387,2

Sausages 2381,2 2907,9 2911,2 3617,6 3332 3056 1483,5

EXPORT OF MEAT AND MEAT PRODUCTS

157.14 tons of meat and meat by-products worth of 58,709,990 soms were exported in 2015. Table 3.17. Export of meat and meat products20

Export 2012 2013 2014 2015

In kind (in tons) 1,18 18,1 235,0 157,14

In terms of value (in thous. soms) 172,1 543,0 123823,9 58709,99

An average physiological consumption norm for meat and meat products (in terms of meat) is 61.3 kilograms per

year. In 2014, at the expense of its own production meat and meat products provision in the Republic amounted

to 56.2%, the provision at a rate based on exports and imports amounted to 71.5%, while per capita consumption

based on the volume of own production amounted to 34.4 kilograms per year, per capita consumption based on

the volume of the domestic market amounted to 43.8%.

19 National Statistics Committee

20 Internet-resource of the State Customs Service of the Kyrgyz Republic

Figure 3.6.Exports of meat and offal from Kyrgyzstan for the period

from 2001 to 2014 (in thous. KGS)


34

In 2014 the republic exported 390,4 tons of meat and meat products, including 233,3 tons of meat of bovine ani-

mals to Russia, 51,1 tons of meat of cattle to the United Arab Emirates, 40,1 tons of meat and offal of cattle to

Turkey, 35,3 tons of meat and offal of bovine animals to Mongolia, 20,7 tons of meat of cattle to China. But ex-

port of meat products from Kyrgyzstan is very difficult due to the unfavorable epizootic situation in the country,

as well as a small volume of production of the existing companies. Kyrgyzstan's potential for meat production in

excess of domestic demand, generates attractiveness of the industry for growth and export development.

To date, the export of meat products in EAEU countries is allowed for only 1 Kyrgyz enterprises - LLC "Riha".

The main problems in the export of meat and meat products: unfavorable veterinary situation; lack of animal iden-tification systems; weak capacity of laboratories that define security settings for meat; lack of deep processing of meat in accordance with the requirements of the EAEU and CU (slaughterhouses, meat processing plants); lack of assessment of the quality of meat and products to comply the requirements of the CU, EAEU, international stand-ards (laboratories); the planned audit of the veterinary control system of CU and EAEU - consequences; lack of logistics centers; lack of awareness of both local producers and investors (information system); lack of modern marketing and management in the sector (the possibility to capacity building of the local livestock associations); low productivity of livestock. Table 3.18. List of main export products

Name of goods

2015

Wight -netto (tons)

Thousand som

Meat of bovine animals, frozen:

Meat and edible offal, poultry as indicated in the trade position 0105, fresh, chilled or frozen:

24 2527,35

Meat and edible meat offal, salted, in brine, dried or smoked; food flours and meals of meat or meat offal:

Guts, bladders and stomachs of animals (other than fish), whole and pieces thereof, fresh, chilled, frozen, salted, in brine, dried or smoked:

Fats of bovine animals, sheep or goats, except fat indicated in the posi-tion 1503:

Sausages and similar products of meat, meat offal or blood; food prepara-tions based thereon:

Prepared or preserved meat, meat offal or blood: 133,14 56182,64

In total 157,14 58709,99

* Data from the database of the State Customs Service of the Kyrgyz Republic As seen from the table, the main export product is ready or preserved meat and meat offal.

IMPORT OF MEAT AND MEAT PRODUCTS In 2015, about 6 888.34 tons of meat products were imported to the territory of the Kyrgyz Republic. Kyrgyzstan imports mainly meat and edible offal of poultry and fresh, chilled or frozen meat products:


35

Table 3.19. Import of meat products21

Import 2011 2012 2013 2014

In kind (in tons) 84283,8 76631,5 60092,0 64945,1

In terms of value (in thous. soms) 3351675,8 3590735,7 4238270,8 5328602,5

Table 3.20. List of main imported products 22

Name of goods

2015

Wight-netto (tons) Thousand USD

Meat of bovine animals, frozen: 22,1 9608,75

Meat and edible offal, poultry as indicated in the trade posi-tion 0105, fresh, chilled or frozen:

6306,06 547104,17

Meat and edible meat offal, salted, in brine, dried or smoked; food flours and meals of meat or meat offal:

Guts, bladders and stomachs of animals (other than fish), whole and pieces thereof, fresh, chilled, frozen, salted, in brine, dried or smoked:

Fats of bovine animals, sheep or goats, except fat indicated in the position 1503: 40,02 1856,17

Sausages and similar products of meat, meat offal or blood; food preparations based thereon: 25,8 2653,35

Prepared or preserved meat, meat offal or blood: 494,36 87665,56

In total 6888,34 648888

* Data from the database of the State Customs Service of the Kyrgyz Republic

There are no modern slaughterhouses in Kyrgyzstan conforming to international standards. In contrary, slaughter-

ing takes place in uncontrolled areas, for example, at the former meat processing plants, in private houses or in the

yards of meat stalls. Meat safety is at risk due to lack of transport refrigeration units.

There are several laboratories in the sector for the production and processing of meat supervised by the State In-

spectorate of Veterinary and Phytosanitary Security, Institute of Veterinary Medicine (from 35 to 47), Department

of Disease Prevention and the State Sanitary-epidemiological Control under the Ministry of Health (46-47) and the

Center of Standardization and Metrology of the Ministry of Economy (10).

Problems in the sector:

- Ineffective management practices in fattening and poor feed quality that lead to lower output volume of meat

per capita in the sector;

- High mortality in the sector because of the uncontrolled reproduction cycles and undeveloped industrial and

technological base of enterprises;

21 Data for 2011-2013 are taken from the swebsite of the National Statistical Committee of the Kyrgyz Republic: http://www.stat.kg/ru/statistics/vneshneekonomicheskaya-deyatelnost/ (file –Import of main types of goods in kind, Import of main type of goods (in thous.dollars). Data for 2014-2015 are taken from the database of the State Customs Service of the Kyrgyz Republic 22 Data are taken from the database of the State Customs Service of the Kyrgyz Republic



36

- Frequent outbreaks of animal diseases (such as foot and mouth disease, rabies, brucellosis) reduce the number

of livestock, increase costs and, ultimately, affect the export competitiveness of the sector;

- Poor quality of meat products is the result of non-compliance of slaughterhouses and the slaughter process

with sanitary and veterinary regulations;

- Limited access to finance prevents from the possibility to purchase manufacturing equipment by the compa-

nies;

- Inadequate FDI in Kyrgyzstan prevents the influx of new technologies and best practices in the country;

- Technical skills of workers in the manufacturing sector are outdated and need to be improved;

- It is necessary to implement a change management system in the sector in order to help farmers improve their

farm management skills and take proactive solutions designed to enhance performance;

- Low level of organization and cooperation in the meat production and processing narrows the field for the col-

lective benefit.

Business Environment Issues:

- National Laboratories suffer from low capacity and lack of internationally recognized accreditation, which af-

fects the provision of services;

- Weak market infrastructure leads to the deterioration of production and delays;

- State monopoly on the purchase of medicines and vaccines proved to be ineffective and leads to low enroll-

ment and delays;

- Regulations affecting providers of veterinary services are largely skewed in favor of the public sector and re-

duce incentives for service providers from the private sector;

- Current export procedures are cumbersome and increase the burden on exporters;

- Lack of traceability mechanisms represents a significant barrier to quality management in the sector for the

production and processing of meat;

- Failure to comply with generally accepted international standards prescribed by the Codex Alimentarius Com-

mission affects compliance with best practices.

Problems and opportunities of the access to market:

- Closure of the Kazakh and Russian markets for Kyrgyz meat products introduced uncertainty among exporters

of the sector;

- Access to trade information on non-traditional target markets remains a key barrier to the access of Kyrgyz

companies in the sector on production and processing of meat;

- It is necessary to improve measures for export promotion to the international markets.

- Fast-growing markets such as Iran, Uzbekistan and China as well as the European Union countries are also

attractive destinations for meat production.

STATE SUPPORT AND SUBSIDIES TO MEAT PRODUCERS IN KAZAKHSTAN, RUSSIA AND

BELARUS

The surveyed countries provide direct and indirect state support to meat production.

Product units subsidies

In Belarus subsidies are paid per unit of output of cattle (about 133 USD per ton) and Kazakhstan (540-1620 USD

per ton)

In Kazakhstan when selling bulls for fattening, the subsidy is paid about 126 USD per 1 head (425 -800 USD per 1

ton, depending on the weight of the bull)


37

Table 6.3. costs calculation for meat pro-

cessing. Annual figures


Raw materials, meat 29,491,843.86 56.5%

General and admin costs 8,938,102.22 17.1%

Labor and production costs 7,861,367.88 15%

Marketing costs 5,981,722.14 11.4%

Total costs

100%

Breeding support

In Belarus growing cattle is estimated at 3 USD per ton (in 2013), the Republic of Kazakhstan - 65 USD, in the

Russian Federation - 37 USD.

Investments support

In Belarus the support of investments is carried out by subsidizing the interest rates on the reconstruction of live-

stock buildings.

There are agricultural subsidy programs of interest rates and investment costs for the construction and reconstruc-

tion of livestock facilities in the Republic of Kazakhstan.

The Russian Federation subsidizes interest rate on investment loans.

COSTS ANALYSES FOR MEAT PROCESSING

Cost analyses for meat processing showed that

significant share of costs is referred to raw ma-

terials. Table 6.3 and graph below shows that

56.5 % of costs in milk processing is costs of

meat. Based on that, BTI team suggests inter-

ventions in production of meat as highest costs

component which is likely to produce highest

impact in this value chain. Calculations are

based on annual financial information provided

by large meat processing company and there-

fore general and admin costs are quite high.


that:

Meat processing is quite sensitive on sales of

production. If company sells less than 80 % of

its production this leads to negative effects in

profits and cash flows. Therefore, recommen-

dations that facilitate better marketing of post-

harvest enterprises in meat processing are

quite relevant.

Sensitivity analyses by price of raw meat

showed that processers have margins of safety

and increasing of prices up to 300 soms does

not negatively effect on incomes and cash

flows. This means that farmers can potentially

negotiate with processors and benefit from

higher prices for meat.


Incomes 68586575 61727918 54869260

EBIT 16,308,507 9,449,849 2,591,192

Net profit 16,308,507 9,449,849 2,591,192

Net cash flow 11,490,195 5,317,403 (855,389)

Incomes 4,227,159 (2,598,543) (9,424,245)


240 soms 270 soms 300 soms

Incomes 68586576 68,586,576 68586576

EBIT 16,308,507 14,455,755 12,603,015

Net profit 11,490,195 9,822,718 8,155,252

Net cash flow 4,227,159 2,374,406 521,666

Raw materials 56,5%

Labor and production 15%

Marketing 11,4%

Admin costs 17,1%


38






Introduce comprehensive measures for intensified meat production at farms level, which includes support

in purchase of high-productive animals; introducing artificial insemination for breed improvements, and

providing farmers with training and extension services for obtaining critical skills required for applying in-

tensified meat production, including introducing of good agricultural practice principles at farms which is

critical for traceability at processors level.

Provide support to modernization of meat farms, support in introducing solutions for modern small farm

model (small fodder producing machinery, tractors and special attachments). Medium, large farms or pro-

cessors can be technically supported in construction of modern slaughterhouses, as this stage in value

chain requires serious modernization to respond market requirements and technical regulations.

VC CORN AND CORN CONTAINING (AS A MAIN COMPONENT)

PRODUCTS

CEREAL PRODUCTION Annual world cereal production is about 2.5 billion tons. Main kinds in the structure of the world cereal produc-tion are corn, wheat and rice (all together make almost 90%). In the past 20 years the growth of corn production outpaced growth in wheat production at 4.7 times. By 2024, FAO forecasts growth of world cereal production at the expense of 14% increased yields in 2012-2014 (wheat-12% increase or 86 million tons, coarse grains -15% increase or 194 million tons, rice -14% increase or 66 million tons). According to the gross grain harvest Russia is among the top five after the US, China, the EU and India (5% of world production in 2014/2015 season). Russia is the world's first producer of buckwheat, oats and barley. How-ever, Russia and Kazakhstan are the third in the world ranking of wheat producers (in 2013 Russia with 52,1 mil-lion tons was on the 4th place in the world, Kazakhstan with 13,9 million tons was on the 13th place). Russia and Belarus provide almost a third of global rye production. The year of 2014 globally, and in the EAEU countries, in particular, is characterized by record volumes of cereal production – 132,1 million tons, of which the Russian Federation – 103,1 million tons, the Republic of Belarus – 9,0 million tons, Kyrgyz Republic – 2,3 million tons, the Republic of Armenia – 0,6 million tons (Figure3.5.). The corn made 556 thousand tons out of 2,3 million tons of overall cereal production in the structure of cereals of the Kyrgyzstan. Compared to 2013 the volume has decreased by 12 thousand tons. In 2015, a slight decrease in cereal production was expected down to 131,3 million tons for the EAEU. However, there was a growth in Kyrgyzstan, in particular corn harvest increased by 86 thousand tons more than in 2014. *Data source: NSC KR, FAO, USDA


39

*Data source: NSC KR

Among the EAEU countries the highest price level on cereals is observed in Armenia and Kyrgyzstan (Figure 3.9.).

*Data source: NSC KR, FAO, USDA

1.6 1.6 1.4 1.8 2.3 2.30.3 0.4 0.5 0.5 0.6 0.5

6.7 8 8.8 7.2 9 8.711.7

26.8

12.918.2 17.1 17.1

59.6

91.7

68.7

90.4

103.1 102.7

0

20

40

60

80

100

120

2010 2011 2012 2013 2014 2015

KyrgyzstanArmeniaBelarusKazakhstanRussia

95299 91899 92010 10234994856 91902 91982 102348

578294 568186 556141

641944

2012 2013 2014 2015

Seeding (ha) Harvest (ha) Ingathering (tns)

Figure 3.7. Volume of cereal production in EAEU

Figure 3.8. Kyrgyzstan. Corn ingathering


40

CEREAL PROCESSING

Deep cereal processing, which is the extraction and use of its components, has been a major global manufacturing industry for a long time. About 145 million tons of corn – of 36% of the total harvest is subject to deep processing in the United States. For Kyrgyzstan, it is a relatively new trend, which is capable of rapid development. Two pro-jects on the construction of deep cereal processing plant are at various stages of implementation. Development of deep cereal processing in Kyrgyzstan will produce high-tech products, and the demand in the world market is growing every year. Accordingly, the development of this sector in the nearest future can be a tool to attract investments and become a source of income. Further development of processing towards the production of biotechnological products with high added value will solve the problem with sales markets: amino acids and feed are demanded in Russia, and there is a growing need in ecological bioplastics in Europe, while emerging mar-kets in Asia are interested in biochemistry products such as biobutanol. In the primary stage of developing initiatives in deep cereal processing it is advisable to manufacture cereals, flour and their derivatives. The rump is an important food product with high nutritional value. It contains essential amino acids, vitamins and mineral salts. Cereals are widely used in cooking a variety of first and second courses, and in the food industry - for the manufacture of canned food and food concentrates. The chemical composition depends on the type of cereals and production technologies. Cereals contain from 60 to 85% of carbohydrates. Carbohydrates of cereals are mainly in starch, a small amount of sugar and fat. The volume increase while cooking cereals and porridge consistency depend on the nature or quantity of starch. The highest starch content is in rice, wheat and corn. Grains contain an average of from 7 to 13% proteins. Proteins in cereals are mainly high-grade and easily digesti-ble. Legumes have the highest protein contain among other grains. Grains are divided into varieties (millet, rice, buckwheat, oats), numbers (pearl barley, barley, wheat, corn, oat flakes “Extra”) and brand (semolina).

256.9

388413.8

444.6423.7

319.3

402.6380.4

408.8

333.3

119.3 153

188.9

222.3195.1

146.5190

176.1193.9

171.5130.7177.9

205.8213.6

173.4

0

50

100

150

200

250

300

350

400

450

500

2010 2011 2012 2013 2014

Kyrgyzstan

Armenia

Belarus

Kazakhstan

Russia

Figure 3.9. Cereal prices in EAEU


41

Corn (maize) grains. Polished corn grits, popcorn, corn flakes and crunchy corn sticks are on sale in the markets.

STATE SUPPORT AND SUBSIDIES TO MAIZE PRODUCERS IN KAZAKHSTAN, RUSSIA AND

BELARUS

State support for grain and maize production in the country is carried out in the framework of national govern-

ment programs.

Support measures not distorting effect on trade. There are government procurements of grain reserves in order to

ensure Food Security in Belarus due to no distorting effect on trade measures in EAEC. Russia has also reimburs-

es the costs of complex land reclamation and agro-technology works raising the level of ecological safety of agri-

cultural production. Russia and Kazakhstan provide support to agricultural producers based on 1 he of the culti-

vated area.

Investments

Kazakhstan. There is an effective formation of the state grain reserves system (at the expense of the republican

budget), which include food reserve funds, feed and seed grain and grain funds to "stabilize the market". National

JSC "Food Contract Corporation" serves as the agent of the government and is is responsible for creating, updat-

ing and use of these funds.

Russia. On annual basis they establish the bottom guaranteed level of the purchase prices based on world market

prices. Purchasing interventions are carried out if market prices at agricultural products fall below a specified level.

Commodity intervention are carried out in case of agricultural products shortage on the market and increase mar-

ket prices above the level established to conduct trade interventions. Russia makes interventions through trading

on the stock exchanges.

Seeds procurement

Belorussia. Support of elite seed.

Kazakhstan. Reimbursement up to 50% of the total price of the purchased seeds of the first reproduction and up

to 30% - the first hybrid generation (wheat, barley, millet, oats, winter rye, rice, buckwheat, maize (hybrid)) and

wheat seeds and the second (or) third reproduction, but not exceeding the budget subsidies norms per 1 ton.

Russia. Costs reimbursement of purchasing tons of elite seeds (grains, including oats, cereals, including sorghum,

rice, corn).

Equipment and machinery procurement

Belorussia. Leasing of agricultural machinery and equipment at certain reduced rates.

Kazakhstan. Reimbursement of the interest rates on leasing on agricultural machinery and equipment in the

amount of 7% in tenge and 5% in foreign currency.

Russia. It provides subsidies agricultural machinery in the amount of 25% to producers. There are also available

agricultural subsidies to agricultural producers in the amount up to 15% of the value of agricultural machinery.

Leasing lending

Belorussia. Preferential loans in the amount of ½ of the refinancing rate of the National Bank increased by no

more than 3 percentage points are provided on loans aimed at field work and harvest.


42

Table: 6.5 costs calculation for maize culti-

vation, 30 ha, drip irrigation, annual figures


Raw materials, seeds,

fertilizers etc 702,508.38

21.6 %

Agromachinery services 658,120.00 20.2%

Labor 454,000.00 13.9%

Equipment costs (drip

irrigation)

660,219.00 20.3 %

Drying and storage ser-

vices

781,200.00 24 %

Total costs 100%

Kazakhstan. Preferential lending on construction and purchase of fixed assets, working capital, spring sowing and

harvesting.

Russia. Reimbursement of the costs in the amount of 80% of the refinancing rate for: 1) short-term loan agree-

ments - for the purchase of fuel and lubricants, spare parts and materials for agricultural equipment repair, fertiliz-

ers, plant protection products, and other material resources to carry out seasonal work; for the purchase of seeds

(except for the elite); the payment of insurance premiums; 2) loan agreements concluded for a period of 2-8 years -

for the purchase of agricultural machinery and equipment used in crop production; for the purchase of products

the automotive industry using natural gas as a motor fuel used in crop production.

COSTS ANALYSES FOR MAIZE PRODUCTION

Due to the fact that maize processing does not ex-

ist in the country, for costs analyses, expert’s team

selected a farm cultivating maize. Analyses showed

that almost all expenses distributed equally in costs

of production. Interesting figures are costs related

to drying and storage services (24 %) and raw ma-

terials (21.6 %) which have the highest value in

costs. Equipment costs in this particular company

appeared as they purchased drip irrigation system

and currently charges amortization to recover in-

vestment made. As a result of cost analyses BTI

team suggest three areas for interventions as poten-

tially having higher impact: raw materials, agrom-

achinery services and drying and storage facilities.

For maize farm sensitivity analyses was not con-

ducted as not relevant and not providing any valu-

able information




productive varieties; facilitating purchase of modern agricultural machinery for increasing productivity and

reducing losses; introducing drip and other alternative irrigation systems; and providing farmers with train-

ing and extension services for obtaining critical skills required for applying intensified crop production, in-

cluding introducing of good agricultural practice principles

Provide technical support to establishing of drying and storage facilities for grain as assessment conducted

showed that especially ZOI of AHOP project suffers from lack of such facilities.

Raw materi-als

21,6%

Agromachinery services

20,2%

Labor 13,9%

Equipment costs

20,3%

Drying and stor-age

24%


43

VC POTATO – FRESH AND PROCESSED

POTATO MARKET REVIEW (DESKTOP REVIEW)

GLOBAL PRODUCTION OF POTATO

Global potato production increased by 1.4 times in the last 50 years and in was 385 mln. tones in 2015. The larg-

est producers of potato are China - 96.1 mln. tones (25 % of global production), India – 46.4 mln. tones (12 % of

global production), Russia – 31.5 mln. tones (8 %), and Belorussia – 6.3 mln. tones23.

PRODUCTION OF POTATO IN KYRGYZSTAN

On consumption of potato Kyrgyzstan occupies first place in Central Asia and second place after Belarus among

countries of the CIS. Potato is the second most important culture to ensure food security in Kyrgyzstan However,

production of the potato has significant difficulties such as small scaled production, small sizes of farms, low soil

fertility, high ration of vermin, large share of handwork, absence or

limited access to fertilizers, limited number of storage facilities and

almost no processing enterprises. In 2014, 1085 thousand tons of po-

tato was produced in Kyrgyzstan24. Almost half of potato production

is concentrated in Issyk-Kul oblast. Average yield of potato in Kyr-

gyzstan is about 160-170 centner per hectar, It is 2-3 times lower than

World and European yield level (280 – 480 c/ha)

In 2015 in Kyrgyzstan only 1.2 % of share of potato production were

produced by collective and state farms, 67.9 % were produced by

farms and the rest of 30.8 % were produced on homestead plots. This

proportion is remaining the same for the last 5 years and considering

the sizes of farms in Kyrgyzstan we can conclude that potato produc-

tion in the country is concentrated in small scaled

farms. Almost 1/3 of produced potato on home-

stead plots is used for household consumption

and hence actually not appealed at potato market.

Low levels of potato yields can be explained by

the fact that small farms cannot afford themselves

invest in high-intensive methods of potato pro-

duction, which are effective and profitable only

on large areas of land.

Post-harvest activities include sorting and clean-

ing. Wholesalers are not carrying out grading-

23 Review of potato and vegetables market in countries members of Eurasian Economic Union for 2010-2014

24 24 Data from National Statistics Committee

Potato field in At-Bashy region, Naryn oblast,

June 2016

33791.6 120853.6

499527.3

80856.8

180160.9167850.4

Figure 3.10 Production of potato by

regions in 2014

Batken

Jalalabad

Issykkul

Naryn

Osh


44

potatoes of all sizes sold in the same area. The commercial potato growers generally sell their produces immediate-

ly after harvest. Post-harvest operations like curing, grading, packaging are not performed by the commercial

growers, but the small farmers who sell their products in the market generally carry out this function before bring-

ing it to the market. In other cases the trader/assemblers carry out these post-harvest operations (grading, weigh-

ing, and packaging) before transporting it to the market generally at farmers’ premises.

Losses: At the farm level the losses are caused by improper harvesting (cuts) and post-harvest handling (lack of

curing). The average loss at the farm level is about 4 - 5%. At the marketing stage the losses occur during retailing

(5%). The losses can be reduced if the harvest and post-harvest practices are improved at the growers’ level.

STORAGE OF POTATO

Most farmers have no storage facilities for harvested potatoes thus making them dispose them off as fast as possi-

ble which leads to post-harvest glut and subsequent low prices. Some groups of the interviewed farmers had stor-

age facilities. Since potatoes are consumed all year long and harvested only twice a year, it has to be stored in spe-

cialized facilities. This is mostly done by large farmers and

wholesalers involved in the process of procurement and sale of

potatoes. The problem with maintaining high crop quality is very

important. During the research, many households mentioned

they lost a lot of the crop in storage. Losses during storage are

high: on average 30-40% of the crop is lost during harvesting,

transportation and storage; sometimes the losses can be as high

as 60%. Losses during storage are a major component in total

loss of harvest. Often these losses are caused by the farmers

themselves – as they do not treat the premises with chemicals

between storage periods, use them for household needs, then

clean up the garbage and place the new crop. This poses the risk

of contamination or disease of the potatoes. Potatoes often in-

fected while still in the field. In this case, they will rot very quick-

ly if stored. Another cause of crop damage is frequent calibration of seed tubers conducted in autumn. This can

damage the potatoes and pass the infection from bad tubers to healthy ones. One more important factor affecting

storage life of potatoes is maintaining differentiated temperature modes in different periods of storage, considering

the quality of tubers. However, due to frequent blackouts in winter it is not always possible to ventilate the storage

facilities properly. Potatoes are often stored in the ground.

POTATO MARKET

According to data of the State Customs Services the monetary value of potato export has decreased 8 times in

comparison with 2012, which proves the fact that access to traditional export markets (Kazakhstan and Uzbeki-

stan) for Kyrgyz potato has significantly reduced within the last 3 years. In most cases, it is connected with political

decisions of government of these countries (Ministry of Agriculture of Kazakhstan temporarily abandoned import of potato

from Kyrgyzstan on May 4, 2016. Authorities explained that, in recent months there were a lot of cases of import of infected potato

from Kyrgyzstan). However, according to agreements with Customs Union, Kazakhstan should remove phytosanitary

control from borders, and therefore it was purely political decision of Kazakhstan to reduce import of potato from

Kyrgyzstan.

Potato storage, Ak-Suu village, Issyk-Kul oblast,

July 2016


45

Table 3.21. Volume of potato export and import25

Potato 2012 2013 2014 2015

thous. tons

thous.$ thous. tons

thous.$ thous. tons

thous.$ thous. tons

thous.$

Export 60,87 10,370.6 44,29 6,794.6 33, 89 3938.95 19,99 1321.36

Import 156.6 58.9 360.9 216.1 470.58 62.35 367.25 73.01

At the same time, import of potato to Kyrgyzstan remains stable for the last 3 years and this is connected to fact

that only early and seed potato is imported. And therefore volumes of potato import are stable

STATE SUPPORT AND SUBSIDIES TO POTATO PRODUCERS IN KAZAKHSTAN, RUSSIA AND

BELARUS

In all countries, except Kyrgyzstan, governments adopted and currently being implementing state programs aimed

to support potato production. In Belarus, within 2011-2015, state comprehensive program of developing potato,

fruits and vegetables production had been implemented. The aim of the program was to substitute import of fresh

and processed potato, fruits and vegetables, as well as developing competitive export oriented production26. Within

the program it was foreseen to establish large-scale production and integrated facilities on production, processing,

storage and sales of potato, fruits and vegetables, support existing potato post-harvest facilities. Additionally, in

Belarus, potato storages and seed potato production are subsidized.

Within the framework of Union State of Russia and Belarus, program on developing potato production for the

period of 2013-2016 was adopted. Program aims to conduct technological modernization of the production,

based on developing unified effective methods of seed production, innovative technologies of potato production

and storage, develop and implement an innovative complex of agricultural machinery for cultivation and harvest-

ing of potatoes, effective in different climate conditions; to develop a high-effective technologies for potato pro-

cessing, to develop and adopt new industrial standards for the production of a new generation of multicomponent

healthy food using potato as main ingredient.

In the Russian Federation in the framework of the state program of agricultural development and regulation of

markets of agricultural production for 2013-2020 is scheduled to accelerated import substitution in respect of field

and greenhouse vegetables, seed potatoes, increasing the share of Russian production of potatoes in 2020 to

98.7%. As a result of the implementation of the Program it is expected to: increase in potato production in agricul-

tural organizations, peasant (farmer) farms, including. At the expense of the Russian Federation federal budget

provided funding for the subprogram "Development of the production of seed potatoes and field vegetables." The

Russian Federation is the state support the potato industry in the provision of agricultural producers: subsidies to

compensate for 20% of the costs for the construction and modernization of vegetable stores and potato storage;

subsidies for the construction and (or) modernization of seed centers (up to 20% of the estimated cost of the pro-

25 Internet recourse of State Customs Services

26 State complex program of development of the potato, vegetable and fruit growing in 2011-2015, approved by the Council of Ministers of

Belarus of 31.12.2010 № 1926


46

Table 6.1. costs calculation for starch produc-

tion per 1 kg


Raw materials, potato 31.25 80%

Packaging 0.60 2%

Labor and production costs 3.63 9%

Amortization of equipment 1.49 4%

Transportation costs 2.00 5%

Total costs 38.97 100%

jects); decoupled support in the field of production of seed potatoes (10 thousand rubles / ha..); subsidies for the

development of elite seed in the form of reimbursement of the cost of acquisition of elite seeds.

There are such available subsidies in the Republic of Kazakhstan in the framework of the state support of small

and medium-sized crop businesses: to reduce the price to 50% of the cost of domestic production of fertilizers

and to 30% of the foreign proceeding; to reduce the price to 50% of the cost of herbicides and 40% of the biolog-

ical agents (entomophags), biological products; to reduce the price to 40% of the cost of fuels and lubricants; the

cheapening of the value of irrigation water from 20 to 90%. Investment subsidies are paid for the projects put into

operation and for the purchase of new machinery and equipment.

POTATO PROCESSING

Potato processing does not exsist in Kyrgyzstan. Experts team

were able to find only two companies engaged in potato

processing, the one in Issyk-Kul oblast – producing potato starch,

and one in Chui oblast – producing potato cheaps. Cheaps

producer, Kirbi company, has own production of potato and

almost does not sourscing it from farmers anywhere. Starch

producer, KSA company owned and run by Coreans, sources

potato from Issyk-Kul farmers. Potato, in general sold as fresh and

majority of production is sold on local markets. With regards to

export there are non-tariff barriers, mainly connected with

necessity to receive certificates from phytosanitary laboratories. At

the moment in Kyrgyztsan, there are 2 such labaroties, but their

equipment does not allow them to conduct a number of analyses.

Thus there is a serious need to create new and equip the

existing phytosanitary laboratories.

COST ANALYSES FOR POTATO PROCESSING

Cost analyses for potato processing showed

that major share of costs is referred to raw

materials. Table 6.1 and graph below shows

that 80 % of costs in potato starch produc-

tion is costs of raw potato. Based on that,

BTI team suggests interventions in produc-

tion of potato as highest costs component

which is likely to produce highest impact in

this value chain


that:

Potato processing is quite sensitive on sales of production. If company sells less than 80 % of its production this

lead to negative effects in profits and cash flows. Therefore, recommendations that facilitate better marketing of

post-harvest enterprises are quite relevant.

KSA, starch-producing company, Ak-Suu village?

Issyk-Kul oblast, July 2016

Raw materi-al

80%

Packing

2%

Labor and pro-duction

9%

Equipment

4%

Transport costs

5%


47

Sensitivity analyses by price of raw potato,

showed that increasing the prices for 1 som on-

ly, could lead to problems with cash flow, while

increasing the prices for 2 soms will result in

negative profit indicators for processing com-

pany. This re-confirms that interventions at

production level are quite important for post-

harvest enterprises in potato value chain

Based on above experts team suggest the

following top 3 priority recommendations as

having higher impact on the whole value

chain


productive varieties; facilitating purchase of modern agricultural machinery for increasing productivity and

reducing losses; introducing drip and other alternative irrigation systems; and providing farmers with train-

ing and extension services for obtaining critical skills required for applying intensified crop production, in-

cluding introducing of good agricultural practice principles




Provide technical support to establishing of storage facilities as assessment conducted showed that major

part of losses at production level refers to lack of good storage facilities. Additionally as alternative, con-

sidering that potato processing is absent in country consider supporting existing or starting potato pro-

cessing enterprises


Incomes 87,750,000 78,975,000 70,200,000

EBIT 15,665,113 7,603,363 (908,387)

Net profit 11,669,113 5,402,363 (3,109,387)

Net cash flow 6,606,613 1,079,113 (7,169,387)


5 soms 6 soms 7 soms

Incomes 87,750,000 87,750,000 87,750,000

EBIT 15,665,113 3,927,613 (8,259,887)

Net profit 11,669,113 1,726,613 (10,460,887)

Net cash flow 6,606,613 -2,859,887 (15,047,387)


48

IV COMPARATIVE ANALYSES OF

POST-HARVEST ENTERPRISES IN

KYRGYZSTAN AND NEIGHBORING

COUNTRIES Within the assignment experts team has conducted assessment of 129 post-harvest enterprises in Kyrgyzstan (97

companies), Belarus (7 companies), Tajikistan (10 companies), Kazakhstan (10 companies) and Russia (5 compa-

nies). Initially, it was foreseen that companies will be evenly distributed by value chains prioritized, but unfortu-

nately due to large value of rejections from interview, experts team was to attend only those companies, which ac-

cepted offer to be interviewed.

During visits to enterprises focus was put on equipment, management practices, sourcing and sales channels, in

order to understand status and comparative advantages of companies.

As a result of visits it has become evident that average sizes of post-harvest companies in assessed countries differs

a lot from each other

Table 4.1. Number of workers in post-harvest enterprises by countries

Kyrgyzstan Belarus Tajikistan Kazakhstan Russia

20-50 500-800 40-60 80-100 500-2000

Sizes of companies in Kyrgyzstan and

Tajikistan comparable to each other,

whilst in Kazakhstan, Russia and Belarus

post-harvest companies are large pro-

cessing enterprises, such large sizes also

can be explained with fact that these

countries were able keep and develop

processing infrastructure inherited from

Soviet period, at the same time in Kyrgyz-

stan and Tajikistan majority of companies

were created by private business after the

collapse of Soviet Union.

As shown in Figure 4.1 smaller size of

companies in Kyrgyzstan resulted in

smaller annual turnover and volumes of

production. Average annual turnover of companies interviewed in Kyrgyzstan is about 8 mln soms, whilst post-

harvest enterprises in neighboring countries has larger annual incomes. It also should be noted that respondents

were not ready to provide exact figures answering the incomes questions, and therefore we had a lot of rejects in

answers.

0

5

10

15

20

25

30

35

Kyrgyzstan Tajikstan Kazakstan Russia Belurussia

Figure 4.1. Annual turnover of post-harvest

companies by countries


49

During the visits team was also as-

sessing the type, age and other tech-

nical characteristics of the equip-

ment used by post-harvest enterpris-

es for production. As a result, it is

clear that majority of Russian and

Belorussian companies completely

modernized park of equipment in

their enterprises, Kyrgyzstan and

Tajikistan has the highest ratio of

using equipment and machinery

older than 20 year (produced dur-

ing the Soviet period). Belorussian

companies have changed 40 % of

their equipment within the last 5

years.

Additionally, as shown in Figure 4.3,

the major supplier of new equip-

ment for Kyrgyz companies is

China, 20 % of companies’

sourced old used equipment pro-

duced during the Soviet Union

when there was a need for purchas-

ing the equipment. At the same time,

Russian, Kazakh and Belorussian

companies were purchasing the

equipment produced either locally,

as these countries have equipment

producers or preferred to buy

equipment from Europe, USA or

Japan as considering it more productive, effective and responding to needs of export markets (especially a

case for Belarus).

Another interesting finding was

identified, while analyzing sources of

investment, Figure 4.4 shows that

Kyrgyz enterprises has the highest

ratio of using own resources for

investment in modernization and

turnover capital. Russian and Belo-

russian companies are using securi-

ties and investments as sources of

capital while Kyrgyz companies have

no access to such alternative sources

of funding. It can be explained by

the facts that: a) smaller sizes of

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

China CIS(mostlyRussia)

Turkey Europe USSR Local Other

Figure 4.3. Sources of equipment companies

use for production (Kyrgyzstan)

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Ownreseources

Credit Investment Securities Grants

Figure 4.4. Financial sources for operation

of companies by country

Kyrgyzstan Tajikstan Kazakstan Russia Belorussia

0%

10%

20%

30%

40%

50%

60%

Kyrgyzstan Tajikstan Kazakstan Russia Belorussia

Figure 4.2. Age of equipment the companies

use for production (in%)

Up to 5 years old 5 to 10 years old 10-20 years old Over 20 years old


50

Kyrgyz companies does not allow them to enter the securities markets; b) investment and securities markets in

general are not well developed in the country. Nevertheless, based on that finding, serious measures to enhance

access to finance should be undertaken to address emerging modernization of post-harvest enterprises in Kyr-

gyzstan.

During the assessment of storage facilities in Kyrgyzstan and neighboring countries it has become evident that

majority of storage facilities in our country has old and obsolete equipment, and were built during the Soviet peri-

od. At the same time in our neighboring countries situation is becoming different.

About 10 new fruits and vegetables storage facilities are built in Kazakhstan every year, in Tajikistan there are 4

storage facilities with ultra-low oxygen technology introduced (at the moment only 1 such storage facility is being

constructed in Kyrgyzstan). Russia and Belorussia has started modernization of storage facilities 5 years ago.

Therefore competitive position of Kyrgyz companies operating in storage is becoming worse. At the same time

farmers have comparatively large losses in production due to absence of proper storage facilities and technologies.

Situation with grain storages is even worse, south of Kyrgyzstan, suffers from insufficiency of grain storages, how-

ever wheat and maize are one of the main cultivating cultures there. Based on that, there is a need to develop spe-

cial government program of developing the storage facilities in Kyrgyzstan. These activities could be a part

of general agro-processing program

As for processing enterprises, majority of companies located in Bishkek and Chui oblasts of Kyrgyzstan, modern-

ized their equipment and at the moment can compete with companies in neighboring countries. It was impossible

for expert’s team to organize visit to milk processing enterprises in Almaty and South Kazakhstan, as they are con-

sidering Kyrgyzstan as a main competitor. At the same time processing equipment in majority of companies locat-

ed in other oblasts of Kyrgyzstan is not most cases low productive and outdated. Based on that finding one of the

recommendations would be developing a state program on modernization of post-harvest processing and

storage enterprises aimed to equip the sector with the latest technologies and innovations.

Kyrgyzstan storage Tajikistan storage

Milk processing companies, Belarussia


51

Post-harvest industry in general is consid-

ered to be a part of food processing industry

and therefore should have serious regula-

tions related to security and quality of pro-

duction. Since 2015, Kyrgyzstan has become

a member of Eurasian Economic Union

(Customs Union) which has unified tech-

nical regulations and standards for produc-

tion. According to CU Technical Regulation

22 on food security, adopted by Kyrgyzstan

in 2015, all companies involved in pro-

cessing of food products should have intro-

duced HACCP and traceability systems at

their respective enterprises. However, inter-

views and further analyses, shows that out of

assessed countries, Kyrgyzstan has the low-

est ratio of introduction HACCP and

traceability systems in prost-harvest enter-

prises (Figure 4.5 and 4.6). Russian and Belo-

russian companies interviewed completed

introduction of the above quality and security

systems. Kazakhstan at state level obligates

all companies involved in food processing

and almost completed the process of intro-

ducing these systems. Even Tajikistan is in

better position although it is not required.

Based on this, one of the areas of recom-

mendations would be implementing a set of

activities aimed to introduce quality and

security systems (in particular HACCP as it is part of CU technical regulation) in all post-harvest enterprises.

Another area of improvement for Kyrgyz

post-harvest enterprises was identified as a

result of costs analyses of few selected com-

panies (several companies have provided ex-

perts with access to internal financial docu-

mentation on condition that BTI will keep

confidentiality). As a result it has become

evident that Kyrgyz companies has highest

ratio of labor costs in total production costs

(Figure 4.7). The reasons for such high ratio

are the following:

1) Low labor productivity as a result of lower automatization of processes in production and hence using a

lot of hand work

0%

20%

40%

60%

80%

100%

Kyrgyzstan Tajikstan Kazakstan Russia Belurussia

Figure 4.6. Traceablity systems by

countries

Yes No No answer

19

38

83

100 100

63 63

17

0 0

19

0 0 0 00

20

40

60

80

100

120

Kyrgyzstan Tajikstan Kazakstan Russia Belurissia

Figure 4.5. Introduction of quality and

safety standards by countries

Yes No No answer

0

5

10

15

20

Kyrgyzstan Kazakhstan Tajikistan Belarus Russia

Figure 4.7. Labour cost share in total

production cost


52

2) Low labor productivity as a result

of lower qualification of personnel

in post-harvest enterprises in Kyr-

gyzstan (Figure 3.8)

Based on this finding one of the areas of

recommendations for post-harvest enter-

prises would be to implement set of

measures aimed to increase labor

productivity at their enterprises. Measures

could include activities aimed to modernize

production and introduce automatization of

processes and at the same time increasing

qualification of personnel.

One of the interesting finding of analyses

done related to fact that Kyrgyz post-

harvest enterprises in milk, meat, maize and

potato value chains have comparatively

high raw materials costs. Figure 4.9 shows

the ratio of raw materials costs in cheese

production by countries, and here one Kyr-

gyz company has 68 % of raw milk cost in

total production costs. The same situation

was observed in Kazakhstan with meat

processor, where the company sources raw

beef meat at price of KZT 1000 (appr.

KGS 200), when Kyrgyz meat processor

sources the same meat at price of KGS 240.

In 2016 in Belarus average price of raw

milk was about KGS 10, at the same time

average price of raw milk in Kyrgyzstan

was about KGS 12. One of the reasons of

comparatively high costs of raw milk in

particular, the fact that out of assessed

countries Kyrgyzstan has the lowest aver-

age yield of milk per cow. While analyzing

the meat post-harvest facilities, we came

with the same conclusion, cost of raw

meat is higher in Kyrgyzstan and at the

same time average animal productivity is

lower. This finding leads us to develop a

number of recommendations aimed

through intensification of agricultural

production in Kyrgyzstan decrease costs of inputs (agricultural production) for post-harvest enterprises.

0

10

20

30

40

50

60

70

80


Figure 4.9: Cost of raw milk value in

total production costs by country

01020304050607080

Figure 4.8. Self-assessment of personnel

qulaification by countries

High

Medium

Low

0

1000

2000

3000

4000

5000


Figure 4.10. Average yeild of milk by

country


53

One of the reasons affecting competiveness of Kyrgyz post-

harvest enterprises are changes in exchange rates of our main

traditional destination markets, e.g. Russia and Kazakhstan

which took place in autumn 2015. For instance, Kazakh tenge

lost 30 % of its value, Russian ruble at the end of devaluation

process became equal to Kyrgyz som. At the same time, Na-

tional Bank of Kyrgyzstan, was attempting to avoid rapid

devaluation of Kyrgyz som through USD interventions to the

currency market. On the one hand, country avoided currency

shocks, but on the other, this process resulted in increasing

the relative prices for Kyrgyz production and led to situation

when imported products from Kazakhstan to large extent,

became cheaper than the ones produced locally. Eventually,

Kyrgyz market in autumn 2015 was dominating by Kazakh

meat, processed fruits and vegetables and etc. Later on, situa-

tion was fixed with fall of exchange rate, but Kazakh and

Russian companies successfully occupied serious share on Kyrgyz market.

http://data.zanoza.kg/image/big/2015-09-15_12-38-57_775386.jpg


54

V RECOMMENDATIONS ON

UPGRADING AND DEVELOPMENT

OF POST-HARVEST FACILITIES IN

KYRGYZSTAN RECOMMENDATION AREA 1 – MARKETS

Modernization of post-harvest facilities should be started with thorough assessment of end markets and clear un-

derstanding of what, where and how post-harvest production will be sold. For these purposes it is required to un-

dertake series of market assessments, including analyses of volumes and capacities of internal and the most prom-

ising export markets for Kyrgyz post-harvest production. Conducted assessment showed that the majority of post-

harvest enterprises managers and owners have limited understanding of requirements and standards for produc-

tion itself and production processes not only those required for exporting to the neighboring countries, but also

for sales in internal market. Therefore it is recommended to conduct aset of activities on informing of entrepre-

neurs and develop/distribute information materials containing key requirements and standards to be followed for

sales at domestic market and export. Additionally Government of Kyrgyz Republic should put efforts on facilita-

tion and securing export training operations of post-harvest enterprises.

Recommendation 1.1

Develop and distribute information materials and brochures on key regulations and standards to match require-

ments of internal market.

Knowledge of the market is the primary driver of business success. Due to the fact that many entrepreneurs do not know the laws of the

market, it is necessary to develop and disseminate materials on regulatory issues and standards that will help entrepreneurs to learn the

market by themselves. The scope and content of training materials can be determined during the meetings with entrepreneurs. These

materials can be distributed in printed form through the various business associations, as well as posted on the Internet resources.

Recommendation 1.2

Conduct and publish analyses of most attractive external market, sort out and formulate key requirements and

standards to be matched to enter and operate on these markets.

In order to enter a new market and stay on it, it is needed to carefully study the foreign market through regular studies. The research

results should be widely discussed online at various sites, or through social networks, as well as posted on the internet resources, where

all the information for potential exporters will be collected.

Recommendation 1.3

Introduce new approaches in organization of trade representatives and trade attaches work– using the model of

Belarusian Trade Houses.

In order to make trading house serve its purpose, it is necessary to enact legislation that will regulate the activities of trading houses.

Public-private partnership or joint-stock company are acceptable forms for the creation of trading houses. The main players in the estab-


55

lishment of trading houses must be the Chamber of Commerce, as well as various associations of processors of agricultural products,

interested in exporting its members. Trade House to be opened in those regions that already know Kyrgyz products, and where they are

in demand. In order to introduce new approaches in the organization of trade representatives and trade on the model of the Belarusian

trading house, it is necessary to conduct a broad awareness through the Chamber of Commerce and the Association of processors of agri-

cultural products among those companies that are interested in exporting their products. It will identify potential participants in future

trade home and get them involved in the organization of the Trading House

Recommendation 1.4

Establish system of legal consultation and protection of export deals of post-harvest enterprises through embas-

sies, trade attaches, business associations and private companies.

It is recommended to apply Belorussian model of Trading Houses, which protects export deals and transaction for post-harvest enter-prises. Activities may include: the full range of activities to inform the entrepreneur to conduct business in another country. This may be as a direct information / consultation, and printed in the form of brochures, etc., as well as the site where it will be possible to place all the necessary information for a potential exporter. However, in order to protect the export business enterprises for processing of agricultural products, it is necessary to protect the export transactions was one of the functions of the activities of embassies, commercial attache, business associations and private companies. This suggests the presence of a certain person who will deal with such matters. In order for this system to work, it is necessary to lobby the issue and the political will of the Government of the Kyrgyz Republic.

RECCOMENDATIONS AREA 2 – QUALITY AND SECURITY OF

PRODUCTS

Special attention should be paid to production quality and security of post-harvest enterprises. As a result of join-

ing Customs Unions, markets of the CU members are formally open for production of Kyrgyz post-harvest enter-

prises. However, due to fact that, integration of quality (ISO)

and security (HACCP) management systems in the post-harvest

enterprises is on the very initial stage, non-tariff barriers on ex-

ternal markets became a serious constraint for export. There-

fore, it is suggested to follow the set of forthcoming recommen-

dations aimed to introduce basic quality and security manage-

ment systems at post-harvest enterprises. This will allow inc rease

competitiveness of production and enterprises and also facilitate

access of Kyrgyz products to external markets. According to

Technical Regulations of Customs Union on Food Security TR

TS 022, adopted in Kyrgyzstan all post-harvest enterprises

should have introduced HACCP system at their respective en-

terprises by August 2017. At the moment, majority of enterpris-

es haven’t started the process of introduction. Within the year

left, it is recommended to implement set of activities described

below which we believe could help post-harvest industry to in-

troduce HACCP.

General description of the recommendation area

(1) As urgent activities, within the period of postponement

technical assistance is provided to companies in conducing training activities on sanitary and technical

Meat processing company, Belorussia, 2016

Fruits processing company, Tajikistan, 2016


56

standards and incentives from Government are applied to motivate management of the companies to in-

troduce HACCP at their respective enterprises

(2) Establishment of comprehensive system for introducing of HACCP in all post-harvest enterprises in Kyr-

gyzstan

(3) As next steps system for increasing market competitiveness of enterprises, including introducing of GAP,

traceability systems and ISO 22000 standards is established

Purpose of the implementing recommendations

Post-harvest enterprises will be able to produce products, responding technical standards and market require-

ments, as a result of introducing HACCP principles at all stages of production, as required by Customs Union

technical regulation.

Expected results

(1) A number of post-harvest enterprises is selected for conducting the preliminary assessment, analyzing the

key quality and security indexes and identifying gaps between current indexes and technical standards

(2) Personnel of post-harvest enterprises is trained on Customs Union technical regulations and standards

(3) Managers of post-harvest enterprises is trained on HACCP based production management

(4) System for introducing HACCP is established

(5) Systems for increasing market competitiveness of enterprises is established

Partners for implementing recommendations.

Department of sanitary and epidemiology control under the Ministry of Health, State Inspection on veterinary and

phytosanitary security, Standardization and Metrology Center under the Ministry of Economy, Center of Food

Technologies in Kyrgyz Technical University.

Recommendation 2.1

Complete all required activities and adopt a law on security of food production in the Kyrgyzstan.

Law on food security is under the second reading in the Parliament of Kyrgyz Republic. As this document provides legal framework for

introducing HACCP at enterprises level it is essential to complete the process of adoption. Possible action under this recommendation

could be organization of round tables and hearings to discuss the draft law, and after adoption to conduct information activities to in-

form post-harvest enterprises.

Recommendation 2.2

Conduct nationwide information campaign on introducing HACCP and ISO management systems in all food pro-

cessing enterprises of Kyrgyzstan.

Assessment conducted showed that the relatively large number of managers and owners of post-harvest enterprises are not aware of

HACCP and ISO systems, why and how this could be introduced at the enterprise level. Possible action under this recommendation

would be developing and dissemination of information materials of HACCP and other quality management systems, conducting confer-

ences and seminars of HACCP introduction.

Recommendation 2.3

Develop and approve national unified standards of HACCP documentation

According to CU Technical Regulations TCTP 022, government is responsible to control of introducing HACCP system at enterpris-

es level, however during the interviews with staff of Standardization and Metrology Center, it was found that introduction of HACCP

is self-declared by enterprises and there are no unified standards for HACCP documentation, which would allow authorities to confirm


57

the status of HACCP integration. Therefore it is recommended to develop such unified standards which would be used by authorities.

Possible action could be establishing working and experts groups, developing and adoption of unified standards.

Recommendation 2.4

Prepare and certify a number of HACCP consultants, sufficient for introducing HACCP at all post-harvest enter-

prises.

One of the critical issues in HACCP introducing is sufficient number of industry experts who could technically support the process of

HACCP introduction. However, with existing number of consultants it will be impossible to introduce systems at all enterprises within

a year. Based on this, it is recommended to train and certify HACCP consultants. Possible actions could include, conducting training

for consultants, support the certification of consultants.

Recommendation 2.5

On the basis of Agrarian and Technical Universities and also regional universities organize regular courses on

HACCP and ISO for managers and staff of post-harvest enterprises.

Comprehensive system of HACCP introducing includes availability of regular courses on HACCP for managers and staff of post-

harvest enterprises. This could be resolved through organization of training and seminars in regions, but doing it through universities is

more sustainable. Possible actions could include subsidies for organization of courses at initial level and later on foresee that all costs will

be covered by participant’s fees.

Recommendation 2.6

Through donor funded technical cooperation and technical support projects, ensure consulting support of

HACCP and ISO introduction at all post-harvest enterprises.

At the moment HACCP introduction is supported by GIZ projects and through EBRD consulting subsidies program. As not all

enterprises, especially those, located in south (AHOP ZOI) are clients of the above programs; there is a need to provide tailored tech-

nical consultations for the enterprises. Possible actions could include selection of target enterprises, providing subsides for consultant who

will support HACCP introduction.

Recommendation 2.7

Introduce traceability standards in post-harvest enterprises and good agricultural practices system in farms.

Traceability standards are key for introduction HACCP and ISO standards at enterprises. However, considering that raw materials

are sourced from a large number of small farmers, it is important to introduce Good Agricultural Practices. This will allow providing

the records needed for traceability. Based on this, it is recommended to conduct a number of training aimed to assist farmers and manag-

ers of post-harvest enterprises to keep proper records.


58

RECCOMENDATIONS AREA 3 – EQUIPMENT AND TECHNOLOGIES

As a result of current assessment it has become evident that there is a

serious technological gap between Kyrgyz post-harvest enterprises and

the ones working in Kazakhstan, Belorussia and Russian Fed eration.

Only few enterprises, located mainly in Bishkek and Chui oblast are

using the modern effective technologies and equipment. As a result of

technological gap and due to other reasons, related to government

subsidizes and preferences for agricultural production in neighboring

countries, Kyrgyz post-harvest enterprises are losing positions at inter-

nal market. It was especially clear in autumn 2015 when Kyrgyz post-

harvest enterprises experienced serious problems with sales while

competitors from neighboring countries managed to increase their

shares at Kyrgyz internal market. Thus, there is a strong need for ur-

gent modernization of post-harvest enterprises. Below is set of rec-

ommendations aimed to facilitate technological upgrade and moderni-

zation of post-harvest enterprises. Considering the fact that post-

harvest enterprises are privately owned and managed, Government can

implement only those measures, which create incentives for moderni-

zation and facilitate access to new technologies and to financial re-

courses at affordable costs.

General description of the recommendations area

(4) A number of recommendations proposed facilitates access to knowledge and information about innova-

tive and effective technologies for owners and managers of post-harvest enterprises

(5) Development of special state program focused on modernization of post-harvest facilities and as a main

tool provides access to financial resources at affordable conditions

(6) Additional recommendations aimed to ensure environment friendly modernization

Purpose of the implementing recommendations

Post-harvest enterprises have increased effectiveness of production processes, decrease in costs of production and

introduced new technologies allowing Kyrgyz post-harvest production to match the requirements of internal and

export markets

Expected results

(6) Managers and owners of post-harvest enterprises are aware of latest technology changes and most effec-

tive technical solutions for modernization of the production

(7) Post-harvest enterprises have sources for funding modernization of facilities under the special state mod-

ernization program

Partners for implementing recommendations.

Ministry of Economy, Ministry of Agriculture, public and private financial institutions, business associations,

equipment and services providers

Recommendation 3.1

On regular basis conduct practical and demonstration seminars and workshops aimed to present modern and in-

novative technological solutions and equipment for post-harvest enterprises.

Equipment used in Tajik storage company,

2016


59

Interviews with post-harvest enterprise managers and owners showed that they are not aware of the latest developments in technology of processing and storage of agricultural production. To address this gap it is recommended to continue conducting events, seminars and conferences aimed to demonstrate modern and effective solutions. A number of technology and equipment providers are now present in the region and should be contacted and invited to share knowledge and advice.

Recommendation 3.2

Provide assistance to entrepreneurs on visiting the largest international fairs and events on modern innovative

technologies and equipment

International equipment trade fairs and exhibitions are the powerful source of information on innovative technologies for post-harvest enterprises. Only few managers of post-harvest enterprises, responded that regularly participates or participated in such events. Lack of financial resources was stated as a main constraint for attending such events. Several foundations in the country are providing subsidies for travel and attending similar learning activities, but mainly for students or teachers of universities. It is recommended to establish system of subsidies for owners and managers of post-harvest companies to cover the costs of attending fairs and exhibitions using educa-tional grants model.

Recommendation 3.3

Develop and introduce special state program on financing of post-harvest enterprises, conditions should be fo-

cused on access to loans and technical assistance to implementation of projects under the program.

At the moment Ministry of Agriculture is in process of developing food production development program. Finding, conclusion and rec-

ommendations of present assessment could be introduced to this program. Lack of financial resources was identified as a main constraint

for modernization by the owners and managers of post-harvest enterprises. However, several funding programs and foundation are active

in the country, offering loans at comparatively low interest rates. Based on this, experts concluded that access to finance has becoming a

main barrier for entrepreneurs. Based on above it is recommended to develop and introduce financing program with focus on access to

finance. Prior to developing the program, assessment of access to finance could be undertaken to understand better roots, causes and

possible solution to tackle access to finance constraint.

Recommendation 3.4

Reconsider the duration of existing state agriculture financing programs from 3 years to 6-7 years cycle, extension

is needed because average duration of investment loan is 5-7 years.

Presently Kyrgyzstan has 3 years budgeting cycle. And accordingly all state funded financing programs has the duration of cycle. How-

ever, for post-harvest enterprises an investment in modernization has from 5-7 years period of return, this was one of the reasons why

these companies were not benefiting from sourcing of funds from state funded programs. Therefore it is recommended to extend the dura-

tion of existing programs and ensure long loans under these programs for modernization of post-harvest facilities. Possible actions could

include, conducting lobbying activities and events with Ministry of Agriculture and financial institutions participating in state programs.

Recommendation 3.5

Ensure access of post-harvest enterprises to public and private guarantee funds to resolve lack of collateral con-

straint and facilitate access to finance

Lack of collateral is also one of the barriers for post-harvest enterprises in sourcing of funds for modernization from financial institu-

tions. At the moment Government is considering an option of establishing State Guarantee Fund to tackle collateral issue. Therefore it

is recommended to make sure that post-harvest enterprises will have fair and affordable access to public guarantees.

Recommendation 3.6

Develop and introduce incomes based methodology of business collateral assessment


60

One of the reasons for collateral constraint for entrepreneurs in the country is practice that applied in the most of financial institution

while assessing the value collateral. There are 3 man methods of collateral assessment: costs based, comparative or income based. Risk

management systems established in financial institutions usually recommends that costs based or comparative methods should be applied

in collateral assessment. However, this usually leads to underassessment of business. For example, one client’s business was assessed at

the amount of USD 300,000 by the bank, while according to income based methods it could be assessed at the amount of USD

1,000,000. And accordingly he was offered with loan of USD 250,000, while he needs the amount of USD 500,000 at that mo-

ment. Development and distribution of income based methodology can partially resolve the issue. Of course only in case, banks will start

applying this methodology.

Recommendation 3.7

Recommend financial institutions to develop and introduce special loan products for turnover capital oriented on

needs of post-harvest enterprises

Lack of turnover capital is also one of the reasons why post-harvest enterprises especially those located in remote regions, are not func-

tioning at higher capacities. Based on this, it is recommended to conduct a negotiations with local financial institutions and facilitate

development of special loans for turnover capital for post-harvest enterprises,

Recommendation 3.8

Through business association develop and provide database of recommended equipment suppliers for post-

harvest enterprises

Availability of such database can help post-harvest enterprise to take more effective decision in procurement of the equipment for mod-

ernization. Very often, managers and owners of the enterprises, do not conduct market research and costs comparing due to absence of

information on alternative suppliers of the equipment. Database will also help to identify those suppliers who are not fulfilling their

obligations on quality, post-sale services and maintenance of sold equipment.

Recommendation 3.9

Conduct audit and establish database of donor supported grant projects, funded within the last 5-7 years, including

inventory of equipment and analyses of effectiveness.

RECCOMENDATIONS AREA 4 – PERSONNEL AND

ENTREPRENEURSHIP SKILLS

Qualified manager and personnel are essential elements of modernization and upgrade of post-harvest enterprises.

Therefore, special attention and focus should be put on developing personnel and entrepreneurs skills. As a result

of in-depth interviews and in accordance to previous assessments, majority of post-harvest enterprises experience

lack of management skills and knowledge as well as low qualification of personnel. Many of post-harvest enter-

prises managers attended training and courses organized by donor funded projects, service providers, financial in-

stitutions etc. However, this training is in most cases subsidized standalone activities, and entrepreneurs in most

cases do not understand objectives and content of training.

Post-harvest enterprises have a huge demand in high-qualified and professional staff, consultants and experts, who

can guide and consult them in introducing of new technologies and quality management systems. There is no con-

sistent system of training and education of entrepreneurs and personnel for post-harvest enterprises. Demand and

supply of specialists for post-harvest enterprises do not match.

Another burning issue is language barrier – lot of information and training materials are in Russian, however en-

trepreneurs for better understanding of content demand materials in Kyrgyz.


61

The following set of measures is recommended to develop qualification of personnel and managers of post-harvest

enterprise and other relevant groups (students, experts, consultant, associations and etc.).

Recommendation 4.1

On the basis of Kyrgyz Agrarian and Technical University organize regular course for technologists, specialists and

other staff of post-harvest enterprises

Capacity of middle level managers (technologists and specialist) is considered as critical for modernization of post-harvest facilities. At

the moment system of professional development and training of such specialists which was functioning during the Soviet period has de-

structed. As a result, enterprises suffers from low qualification of personnel and this is also one of the reasons for low labor productivity.

Therefore it is recommended through educational institutions to start activities on re-establishing of professional training system for mid-

dle level managers and specialists in post-harvest enterprises. Possible actions could include subsidies for organization of courses at initial

level and later on foresee that all costs will be covered by participant’s fees.

Recommendation 4.2

Recommend universities to establish cooperation and sign memorandums of cooperation with existing post-

harvest enterprises and large farms to organize apprenticeship programs with further employment and on regular

basis conduct sector thematic meeting of students and business

The objective of this recommendation is to ensure matching between demand and supply of personnel for post-harvest enterprises. A lot of

similar activities happening in other sector, are supported by donor funded projects. Possible action under this recommendation could

include organization of various events with participation of students and enterprises, facilitating dialogue between business and educa-

tional system.

Recommendation 4.3

Develop and introduce qualification upgrade courses and business management courses for managers

Technical knowledge and skills are essential for managers of post-harvest enterprises. Very often, owners manage enterprises by them-

selves. However, they have either good business management skills or technical skills and very rare both. Marketing and financial man-

agement was in top 5 desired topics for training which managers of post-harvest enterprises expressed during the interviews. Therefore, it

is recommended to organize and conducts such courses.

Recommendation 4.4

At Government level organize regular apprenticeship and exchange programs between Kyrgyz post-harvest enter-

prises and the similar ones in Kazakhstan, Belorussia and Russia.

During the visits to neighboring countries experts team saw very interesting enterprises and interviewed the managers. It will be useful to

conduct exchange programs with these enterprises as majority of them, especially in Belarus confirmed the readiness to accept Kyrgyz

companies.

Recommendation 4.5

Recommend, donor funded programs and local service and training providers to develop training and information

materials in Kyrgyz


62

RECOMMENDATIONS AREA 5 – BEFORE-HARVEST ACTIVITIES

(RAW MATERIALS)

One of the main factors of low competitive ness of Kyrgyz post-harvest enterprises is comparatively (comparing

to Kazakhstan – meat, wheat maize, Belorussia – all agricultural products and Russia – wheat, milk ) high raw ma-

terials costs, which eventually resulted in higher costs of national post-harvest production. This situation is the

result of implementation of state subsidies and preferences programs in these countries. However, it should be

noted that current budget situation in Kyrgyzstan does not allow us to undertake the similar measures and through

them achieve decrease of agricultural production costs. Therefore as priority direction in this area it is recom-

mended to select measures focused on intensification of agricultural production. Forthcoming recommendation

were develop ed as a result of interviews with post-harvest enterprises, but at the same time experts suppose that

many of proposed recommendations are already part of various state programs and plans oriented on development

of agriculture and intensification of agricultural production and therefore they are simply listed below.

Recommendation 5.1

Conduct training and information meeting for farmers on standards and requirements of CU technical regulations

and good agricultural practice principles

Recommendation 5.2

Attract buyers and processors of agricultural production to establish ag-

riculture production standards and requirements

Recommendation 5.3

Introduce new varieties of fruits, vegetables and nurseries, introducing of

special varieties oriented either on processing or long term storage

Recommendation 5.4

Conduct breeding work, focused on dissemination of productive cattle,

to increase volumes and quality of milk and meat.

Recommendation 5.5

Increase capacities of veterinary services to match quality and security standards of meat & milk products

Recommendation 5.6

Develop and introduce intensified crop rotation and national orchards upgrading program

Recommendation 5.7

Introduce drip and other alternative irrigation systems and green houses for effective use of limited agricultural

resources

Recommendation 5.8

Support development and upgrade of high value added chains (niche products and etc.)

Recommendation 5.9

Through existing programs facilitate purchase of high productive agricultural machinery for increasing of volumes

of quality of harvest

Tamchy Kench company. Drip irrigation

system. Chui, Kygryzstan. 2016

U.S. Agency for International Development

1300 Pennsylvania Avenue, NW

Washington, DC 20523

Tel: (202) 712-0000

Fax: (202) 216-3524

www.usaid.gov

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