Central Asia Trade Forum: Improving Export Potential of Wheat Flour
in the Central Asian Republics, Afghanistan and Pakistan
Panel summary
29 October 2015
The Rixos Hotel, Almaty, Kazakhstan
Introduction
GAIN has been invited to co-host a panel at the Mission's 5th Central Asia Trade Forum
(CATF) - the region's largest annual gathering of exporters - that was held in Almaty on
October 28-29, 2015. This two-day event brought together more than 1000 technical
experts, opinion shapers, top-managers of private businesses, government officials, trade
promotion agencies, business associations, international organizations and diplomatic
missions from around the world to develop trade, expand export capacity, increase
competitive advantage, exchange experience, present business development tools analyze
the rapidly changing trade environment in Central Asia, and conclude trade deals.
Over the course of the two-day Trade Forum, participants discussed the current state of
trade development in the countries of Central Asia and the broader region, factors
influencing trade relations and regional cooperation, transport and logistics, competitiveness
of export products, women's entrepreneurship, trade finance and other issues.
At the CATF exhibition, GAIN and other registered participants displayed their products and
networked with other participants to promote their companies and establish new business
contacts.
As a result of the Trade Forum, participants identified barriers and solutions to advance
trade and economic cooperation, developed partnerships and signed trade contracts and
Memoranda of Cooperation valued at $45million for supply of goods and business services.
A panel on improving export potential of wheat flour
At the CATF, the Global Alliance for Improved Nutrition (GAIN) held a panel on Improving
Export Potential of Wheat Flour in the Central Asian Republics, Afghanistan and Pakistan to
discuss wheat flour market flows in the region; impact of policy shifts on transit and market
access; implications of regional fortification efforts on the wheat processing industry and its
response to changing market environment; sources of quality premix for food fortification at
affordable prices, and business development services to improve the flour milling industry
competitiveness and export potential.
The panel co-organized by USAID and a local flour milling association brought together a
number of CATF delegates including 50 invited participants from 6 countries representing
regulatory bodies, millers associations, academia, the private sector and two
parliamentarians from Pakistan and Tajikistan.
The panel agenda is provided in Annex 1, and the full list of invited participants is in Annex
2. A summary of the presentations is below.
A networking session that followed deepened participants' understanding of the issues,
helped strengthen existing and establish new partner relationships, and set a stage for
several regional wheat and wheat flour trade deals, and new premix supply options for the
region.
The feedback of the participants (via an online survey) was very positive: 100% of the
respondents indicated that the session had met their expectations, 38% reported making
business deals at the event, 93% will act on the information learned during the session.
Opening speeches
Evgeny Gan, President, Union of Grain Processors of Kazakhstan opened the panel
discussion and presented the organizers, donors, goals and objectives of the session. Mr.
Gan also presented the speakers and moderated the whole session.
Khadijat Mojidi, Regional Health and Education Office Director, USAID/CAR welcomed
the participants and presented the USAID regional program on fortification of wheat flour and
edible oil that creates public-private partnerships to promote trade and export in the region
and to address the public health problem of micronutrient deficiencies that are so prevalent
in the region. Ms. Mojidi encouraged participants to have a very active dialogue and become
champions to promote fortification.
Presentations and discussion
A detailed overview of the presentations and discussions is given below:
Current Flows of Wheat Flour in Central Asia, Afghanistan, and Pakistan Geraldine Baudienville, Director, Altai Consulting
Altai Consulting has been commissioned by GAIN to conduct a regional trade flow analysis
of wheat grain, wheat flour and edible oil in the Central Asia Region (CAR), Pakistan and
Afghanistan to inform and help plan the regional program. The research included a review of
existing published and grey literature, analysis and reconciliation of data from different
sources/databases, and fieldwork (interviews) in Kazakhstan, Pakistan and Afghanistan. Key
findings are as follows: Afghanistan is a major importer of wheat flour (25% of its current
needs) and is likely to remain one in the coming years as the country’s milling capacities are
not likely to significantly evolve, at least
not enough to match the growing
demand. Kazakhstan is a major wheat
grain producer and holds grain reserves
which are of major strategic importance
for the region as it is a major source of
grain supply for the region but also for
Kazakhstan itself as these reserves are a
major source of revenues for the country.
Kazakhstan is also a major exporter of
wheat flour although the government does not consider flour’s strategic importance to be as
crucial as grain’s; the country supplies the CAR and Afghanistan with high quality flour
although not fortified, but suffers from a lack of price competitiveness, a major drawback on
a price-sensitive market such as Afghanistan. Pakistan is the other major wheat flour
producer in the region: as opposed to Kazakhstan, production volumes are rather stable but
because of the country’s large domestic needs, its export capacities are limited: it only
exports surpluses and the government of Pakistan regularly intervenes on the market to
protect its own population’s food security situation. Some CAR such as Uzbekistan are
building up their milling capacities and although exports to Afghanistan are currently
anecdotal, they are likely to increase in the coming years. Other wheat flour producers may
also seize opportunities, as is the case of Russia which started exporting to Afghanistan
following the recent devaluation of the Ruble which makes its products competitive.
In Afghanistan and Pakistan, the vast majority of the edible oil consumed is vegetable ghee
made out of transformed palm oil, conversely to CAR where edible oil is mostly consumed
under the form of liquid oil. Most of edible oil trade flows in the region occur between
Pakistan and Afghanistan: the latter imports almost 90% of its edible oil needs as its
domestic production is largely insufficient to cover the country’s needs. Pakistan is the
largest producer of vegetable ghee in the region and one of Afghanistan’s major suppliers:
one third of Afghanistan’s edible oil imports come from Pakistan. The country imports raw
palm oil, mainly from Malaysia and Indonesia, and transforms it domestically into ghee for
local consumption as well as exports. Exports are encouraged by the Government of
Pakistan which subsidizes exports to Afghanistan through a tax refund mechanism. Malaysia
and Indonesia are also significant suppliers of vegetable ghee (and to a lesser extent raw
palm oil) to Afghanistan: access to raw material domestically produced (as opposed to
Pakistan) enable them to export quality products at competitive price, thus competing with
Pakistani products on the Afghan market.
The main recommendations of this study are as follows:
Support production of fortified products in Afghanistan as well as in the country’s
main suppliers: Pakistan and Kazakhstan.
Consider integrating Indonesia in the regional program as the country is a major
supplier of ghee to Afghanistan.
Establish partnerships with other countries such as Uzbekistan which are building up
their wheat flour production (and export) capacities and likely to become suppliers of
Afghanistan.
Build demand in Afghanistan to pull production of fortified products in Pakistan,
Kazakhstan, and other countries
Build an enabling environment to favor trade of fortified products, notably import of
fortified products to Afghanistan
Regional Policy Shifts: Impacts on Transit and Market Access
Shoukatullah Khurram, Deputy Team Leader Trade Facilitation, Chemonics International,
USAID Afghanistan Trade and Revenue (ATAR) Project,
on behalf of Mozammil Shinwari, Deputy Minister of Trade, Ministry of Commerce and
Industries, Afghanistan.
There have been a number of major
policy events that affected
Afghanistan's trade in the region: 1)
Afghanistan is joining the WTO and
will soon be a full member of the
organization; 2) Pakistan ratified the
UN International Road Transport
(TIR) convention; 3) as a result of
the Iranian Nuclear Deal Iranian
ports will become politically viable
alternatives to Karachi, Gwadar and
Port Qasim.
Afghanistan's accession to WHO is expected in 2016. Among other benefits, the
membership gives countries unequivocal transit rights and access to the most cost efficient
routes without restrictions. This is an important milestone for Afghanistan's regional
integration since landlocked countries are at disadvantage due to higher transportation costs
for imported raw materials, inputs and equipment and for exporting finished goods. In
addition, coalitions of WTO members can resolve issues through the WTO dispute
settlement process.
UN's TIR is a multilateral treaty to simplify and harmonize the administrative formalities of
international road transport. The TIR Convention establishes an international customs transit
system with maximum facility to move goods in sealed vehicles or containers; from a
customs office of departure in one country to a customs office of destination in another
country; without requiring extensive and time-consuming border checks at intermediate
borders; while, at the same time, providing customs authorities with the required security and
guarantees. Pakistan's TIR accession becomes effective in January 2016. Other regional
members include Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey,
Turkmenistan, and Uzbekistan.
The Iran nuclear deal is a preliminary agreement reached between Iran, the permanent
members of the UN Security Council and the EU. According to the deal, Iran would redesign
and reduce its nuclear facilities. The implementation of the agreement (expected in mid-
2016) will be followed by lifting of all the UN Security Council sanctions as well as all
economic and financial embargoes by the US and the European Union imposed on Iran's
banks, insurance, investment, and all other related services in different fields. The deal
opens up new politically viable transit routes for Afghanistan.
The Central Asia Regional Economic Cooperation (CAREC) Program is an Asian
Development Bank (ADB) supported initiative which was established in 1997 to encourage
economic cooperation among countries in the Central Asian region including Afghanistan,
China, Kazakhstan, Kyrgyz Republic, Mongolia, Pakistan, Turkmenistan, Tajikistan, and
Uzbekistan. As a member, Afghanistan is entitled to new sources of funding and other
benefits of this development partnership. For example between 2001 to 2011 CAREC
provided $5.1 billion in loans and grants mostly for infrastructure development. New
transport corridors (nearly 10,000 km railways and more than 10,000 km of roads) are being
built that will connect Afghanistan to its regional partners reducing trade bottlenecks and
boosting commerce.
During 2014 Afghanistan imported 1.53 million tons of wheat flour, and Iraq, for example,
imported 1.57 million tons of wheat and 1.05 million tons of flour. If the above WTO and TIR
measures are implemented and enforced, wheat and wheat flour could move from
Kazakhstan to Iran and Iraq via Afghanistan must faster and cheaper, and once Kazakh
wheat is at Iranian or Pakistani seaports it can be shipped anywhere in the world changing
trade dynamics beyond the region, and Afghanistan will be able to benefit from this
development as well.
Demand for Fortified Wheat Flour: Implications for Businesses
Sajjad Imran, Pakistan Country Manager, GAIN on behalf of
Asim Raza, Chairman, Pakistan Flour Millers Association (via skype)
Pakistan is a major producer of wheat flour. In 2013, 18.5 MT of flour was produced. More
than half of this amount was produced at 1200 commercial mills of the country. Pakistan’s
domestic consumption of flour was 17.5 MT, and 0.7MT of wheat flour was exported to
Afghanistan. Pakistan has established a number of formal and informal trade channels with
Afghanistan. Pakistan’s exports to Afghanistan are directly linked to the amount of fortified
wheat flour demanded. The country's flour milling industry is ready to respond to meet the
demand and address the alarming situation of malnutrition in the region. There will be
implications for Pakistani businesses, of course. The top one is additional cost to purchase
premix, dosifiers, and to improve the industry human resource capacity. There will also need
a need for increased regulatory monitoring and licensing, investment in quality assurance
and quality control (equipment, personnel capacity, running costs), labelling, packaging.
There may also be issues due to the difference of technical standards. Nevertheless, it is
very important that the industry fortifies wheat flour to meet the consumer demand. Key
advantages include keeping the current business and opening new business opportunities,
adopting today's market culture, and the overall business and industrial process
development. Of course, incentives for the industry may boost these efforts. Going forward
we recommend to simplify procedures and make regional trade policies friendly, address the
issue of high premix and equipment import taxes and duties, harmonize standards as per the
WHO guidelines, harmonize labelling and packaging, and hold regional trade forums for
improved coordination. The industry needs to be supported in building capacity, acquiring
equipment, with incentives to offset the cost of fortification and with respective policy
changes.
Access to Quality Vitamin and Mineral Premix at Competitive Prices
Christophe Guyondet, Senior Associate, GAIN Premix Facility
Fortification helps restore the
micronutrients that are lost
during processing of wheat flour.
This is done by adding a mix of
different micronutrients -
vitamins and minerals (premix)
to flour during the manufacturing
process. Food fortification is an
important public health
intervention globally because
micronutrients are important for
growth and development of
children and health of all people.
Fortification impacts everyone in the wheat flour supply chain: millers, traders, policy
makers. GAIN's Premix Facility (GPV) facilitates procurement of premix - the key ingredient
used in the fortification process by ensuring appropriate quality, low cost and providing
extended credit to purchasers.
There are currently 3 countries In the region that mandate fortification of wheat flour:
Kazakhstan, Kyrgyzstan and Uzbekistan. Eventually other countries of the region (Tajikistan,
Afghanistan and Pakistan) will mandate it too. Premix composition differs between various
countries, which means that exporters need to use different premixes to meet consumer
needs. It is difficult to deal with 6 different products, so regional harmonization of standards
is important. Currently the cost of premix ranges from $6 to $8 per kilogram. The impact of
import taxes and duties in all countries of the region is very high, as high as 71% in Pakistan
for example, so we need to advocate for the governments to lower these taxes to improve
global health.
On average, fortification increases the cost of one ton of flour by $1.5 (0.22-0.61% in
different countries) - a small cost for the huge positive impact of fortification. The GPF was
established to support national fortification programs and make premix procurement more
effective. The GPF has certified more than 20 producers of premix to guarantee the highest
quality, the facility's competitive procurement processes helped drive down the cost of
premix, and it offers extended credit since micronutrient costs represent a high proportion of
ongoing fortification costs and some projects struggle to finance their purchases upfront.
Price competitiveness is one of the pillars of the GPF strategy and the GPF is constantly
looking at ways of reducing the cost-burden of premix procurement for its customers: GPF
pools together the volumes from several different producers globally, to leverage low pricing
obtained through large, competitive tenders; by combining volumes, suppliers are able to
produce large batches and thus reduce the unit cost of production through economies of
scale; suppliers are then able to deliver the goods to multiple factory locations if required
The potential benefit to GPF customers is that premix price may be significantly better than if
premix was sourced for their own requirements individually.
As part of the GAIN Premix Facility model, a global Revolving Fund (valued at $5.5M) has
been established to allow tailored credit arrangements. GPF pays suppliers for premix on
standard payment terms (using the money from Revolving Fund). Food Producers pay for
premix on extended credit terms to GPF (reimbursing the Revolving Fund). GPF can offer
extended credit terms of up to 180 days.
As an example of a successful cooperation in Central Asia, in Kyrgyzstan the GPF helped
set up a local distribution partner to facilitate access to affordable, quality micronutrients for
small scale food producers.
Business Development Services for Improving Export Potential and Competitiveness
in the Wheat Processing Industry and Flour Trade
Svetlana Dubovskaya, Director, Business-Adapt, LLC, EBRD Business Consultant and
Expert, Kazakhstan
Among other clients, Business Adapt LLC
that specializes in management consulting
helps flour producers with the capacity of
100-800MT / day increase their export. Very
often a failure to grow business is
determined by internal issues within a
company rather than external circumstances,
the issues that have not been timely
identified and dealt with. Ms. Dubovskaya
presented business management techniques
such as the Theory of Constraints and the
Critical Chain Project Management developed by an Israeli business management guru
Eliyahu Goldratt. The theory of constraint is a management paradigm that views any
manageable system as being limited in achieving more of its goals by a very small number
of constraints. There is always at least one constraint, and the theory uses a focusing
process to identify the constraint and restructure the rest of the organization around it by
adopting adopts the common idiom "a chain is no stronger than its weakest link." This
means that processes, organizations, etc., are vulnerable because the weakest person or
part can always damage or break them or at least adversely affect the outcome. Critical
chain project management is a method of planning and managing projects that emphasizes
the resources (people, equipment, physical space) required to execute project tasks. It
differs from more traditional methods that derive from critical path and project evaluation and
review algorithms, which emphasize task order and rigid scheduling. A critical chain project
network strives to keep resources leveled, and requires that they be flexible in start times.
The Kazakhs milling industry is a mature one that is facing a risk of stagnation. Mobilization
strategies of milling companies in the mature industry include optimization of optimization of
organizational structure, adoption of online data processing information systems,
development of multiple production lines, decentralization and diversification. Successful
companies carry put changes in the organizational structure based on the systemic need,
use contemporary staff motivation systems, use a system approach to improving business
practices, automate business processes, use dominant financial management tools, carry
out constant staff training and knowledge management, actively manage and monitor sales,
adopt long-term marketing goals. Champion strategies for sales growth include product
innovation, reduction of product price while retaining the same efficiency of competitive
parameters, formation of a strong emotional attachment of clients. For the milling
companies, effective export strategies may include flour premix innovation, development of a
Kazakh brand, and price reduction via creation of production sites at the border with
imploring countries, establishment of representation offices in importing countries, building
capacity to scale up, merger and acquisitions, and vertical diversification, from bottom to top.
Feedback from participants
Approximately 30% of the participants provided feedback via an online survey conducted
after the panel and the networking session. Key results are below:
Topics Proportion of positive
responses
The program was well organized, including all logistics 93%
The session met your expectations 100%
The presentation on current flows of wheat flour in Central Asia, Afghanistan
and Pakistan was useful or very useful
93%
The presentation on regional policy shifts and their impact on transit and
markets was useful or very useful
93%
The presentation on demand for fortified wheat flour and implications for
businesses was useful or very useful
86%
The presentation on premix, and access to quality vitamin and mineral premix
was useful or very useful
93%
The presentation on export potential development and internal challenges of
milling industry was useful or very useful
86%
The topics were relevant 86-93%
The information was new or relatively new 93-100%
Enough time for Q&A after the presentation 71%
Attended the networking session 93%
Were able to network during the networking session or outside 100%
Made business deals with the session participants 38%
Will take action(s) based on what was learned 93%
Below are specific comments on the session: "it was organized really well", " we were able
to find solutions to challenges", "the session responded to our needs", "well organized,
competent experts", "professionally organized", "it would be good to have more space and
more time (an extra day) for networking", "such events should be held regularly".
Here are some examples of the actions the participants will take:
I will try to help the process of food fortification in Tajikistan
I will work on the mandatory legislation
We will follow up with Afghanistan partners to develop business deals
Conclusion
The panel participants reviewed wheat flour
market flows in the region; impact of policy
shifts on transit and market access;
implications of regional fortification efforts on
the wheat processing industry and its
response to changing market environment;
sources of quality premix for food fortification
at affordable prices, and business
development services to improve the flour
milling industry competitiveness and export
potential. A number of ongoing efforts and new
recommendations for improving export potential
have been presented and discussed at the panel
and during the networking session that followed
the event. The networking session also deepened
participants' understanding of the issues, helped
strengthen existing and establish new partner
relationships, and set a stage for several regional
wheat and wheat flour trade deals, and new premix
supply options for the region.
Thirty-eight percent of the evaluation survey respondents reported making new business
deals at the CATF session. Karagandinsky Mill, Al-Bidai Mill and Corona Export LLC have
already reported deals at various stages of negotiation. The amounts and terms were not
disclosed. The GAIN Premix Facility issued a tender for the provision of 5,000 kg of premix
to Kazakhstan. The tender was still open at the time of writing.
Ninety three percent of the evaluation survey respondents expressed their commitment to
act based on the information learned during the session.
In conclusion, this event has turned out to be a good opportunity to strengthen partner
relationships at the industry, academic and government levels and to advance the
fortification agenda and trade in Kazakhstan and the Central Asia region.
Annex 1 - Agenda
Roundtable: Improving Export Potential of Wheat Flour in the Central Asian Republics, Afghanistan and
Pakistan
14:00 – 14:05 Opening Remarks Khadijat Mojidi, Acting Deputy Mission Director, USAID/Central Asia
14:05 - 14:10 Introduction and Overview of the Agenda Moderator: Evgeniy Gan, President, Union of Grain Processors of Kazakhstan
14:10 – 14:25 Current Flows of Wheat Flour in Central Asia,
Afghanistan, and Pakistan
Geraldine Baudienville, Director, Altai Consulting
(France)
14:25 – 14:40
Regional Policy Shifts: Impacts on Transit and Market Access
Shoukatullah Khurram, Deputy Team Leader Trade
Facilitation, Chemonics International,
USAID Afghanistan Trade and Revenue (ATAR)
Project, on behalf of Mozammil Shinwari, Deputy
Minister of Trade, Ministry of Commerce and
Industries (Afghanistan)
14:40 – 14:55 Demand for Fortified Wheat Flour: Implications for Businesses
Sajjad Imran, Pakistan Country Manager, GAIN on
behalf of Asim Raza, Chairman, Pakistan Flour
Millers Association
14:55 – 15:10 Access to Quality Vitamin and Mineral Premix at
Competitive Prices
Christophe Guyondet, Senior Associate, GAIN Premix
Facility (Switzerland)
15:10 – 15:25
Business Development Services for Improving
Export Potential and Competitiveness in the
Wheat Processing Industry and Flour Trade
Svetlana Dubovskaya, Director, Business-Adapt,
LLC, EBRD Business Consultant and Expert
(Kazakhstan)
15:25 – 15:30 Summary and Overview of Networking Session
Moderator: Evgeniy Gan
Evan Meyer, Regional Agriculture Officer, USAID/Central Asia
15:30 – 15:50
COFFEE BREAK
15:50 – 18:00
Networking Session
Station-based networking session with the five
panelists available at the five different stations.
Annex 2 - List of invited participants
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