December 2019 Highlights Kazakhstan Agricultural Sector
Ministry of Agriculture of Kazakhstan proposes to stop the construction of meat plants and dairy plants. Agricultural insurance in Kazakhstan moves from compulsory to voluntary. Dutch Farm Frites plans to build a French fries plant in Kazakhstan. West Kazakhstan region plans to build greenhouse for 61 billion tenge. You will find below more details on these news of Kazakhstan Agricultural sector introduced in December issue of the Economic Newsletter which is prepared by the Economic Section of the Embassy of the Kingdom of the Netherlands in Kazakhstan.
Ministry of Agriculture of Kazakhstan proposes to stop the construction of meat plants and dairy plants
The Ministry of Agriculture proposes to stop building new dairies and abolish subsidies for cattle meat, eggs, koumiss, shubat, rice and cotton. “We plan to exclude subsidies for cattle meat, egg, koumiss and shubat, rice, cotton, because these products have a level of self-sufficiency. At the same time, the released funds will remain in the industry. That is, they will not decrease and will not go anywhere, but will be redistributed to such priority directions, such as the purchase of breeding stock, as well as subsidies only for import dependent items, are milk, poultry, sugar beets,” the head of the department Saparkhan Omarov said.
In addition, he said, subsidized areas of the industry will be reviewed. “For example, the norm of subsidies for wells for irrigation of pastures will be reduced from 80% to 25%. A passport for elevators will be excluded, since storage capacities are already sufficient, as well as for an egg poultry farm. With this approach, a business can certainly invest in these areas investments, but without state support,” he said.
It also discusses the cessation of construction of new meat plants and dairies, continued Omarov. “After all, the processing capacities are already enough, and they are only 40% loaded. You can only leave the direction for reconstruction or partial modernization. For example, for potatoes we now have a good harvesting shaft, we need to solve the storage infrastructure problem, then the market will become stable, without seasonal price fluctuations,” the minister said.
Thus, by optimizing investment passports, the Ministry of Agriculture plans to redistribute about 20 billion tenge. The money will go to such areas as updating agricultural machinery and equipment, meat poultry farms, orchards, greenhouses, infrastructure for storing fruits and vegetables, etc.
Omarov said that now the list of socially significant goods includes 19 goods, of which only six goods have import dependence in the amount of $505 million.
In particular, this is poultry meat in the amount of 191.6 thousand tons, or 49% of domestic consumption; sausages in the amount of about 30 thousand tons, or a import share of 39%; cheeses and cottage cheese in the amount of 21.9 thousand tons, or 46.5% of total consumption; apples in the amount of 101 thousand tons, or the share of imports is 31.5%. As well as sugar in the amount of about 250 thousand tons, the import share is 57.3%, fish at 30.6 thousand tons, or the import share is 72%.
“In general, the task of import substitution can be implemented in the medium term until 2024. For milk, there is a clear plan for introducing at least 25 industrial dairy farms each year. For import substitution of poultry meat, additionally enter poultry farms with a capacity of 200 thousand tons, now We are already at the design and implementation stage there are 12 projects for 155 thousand tons of poultry meat. Total for import substitution of apples we need to additionally set up orchards on an area of 12.5 thousand hectares, which will make it possible to produce 105 thousand tons of apples. To saturate the domestic market with sugar, it is necessary to build two new factories and modernize the three existing sugar factories, as well as to increase the cultivation of sugar beets,” the head of the Ministry of Agriculture said.
He believes that the implementation of these import substitution measures will allow saturating the domestic market to 80% and 100% with domestic products by 2024, attracting about 770 billion tenge of investments in fixed assets to the sector, LS reported.
Agricultural insurance in Kazakhstan moves from compulsory to voluntary
Agriculture is a very important socio-economic sector in Kazakhstan. The Government of Kazakhstan introduced a national system of compulsory crop insurance in 2005 to provide grain producers and other farmers with a minimum level of protection against catastrophic climate events.
In January 2020, the Law on Compulsory Insurance in Crop Production will lose its force, and according to amendments introduced at the initiative of the Ministry of Agriculture, Kazakhstan will switch from a compulsory form of insurance to voluntary insurance of risks in the field of crop production and animal husbandry.
Note that this law was introduced in the country 15 years ago, and, as time has shown, the compulsory insurance system turned out to be formal, as when an insured event occurred, the payments received did not even cover the minimum production costs of farmers.
The new insurance system also provides instead of a mechanism for subsidizing insurance payments, subsidizing the acquisition of insurance policies. According to the forecasts of the department, this will reduce the costs of farmers and make transparent the processes of insurance and insurance payments.
Also, farmers will be able to use the insurance policy as additional security when applying for loans at second-tier banks.
In the current year, due to the lack of summer rains, Kostanay fields have been significantly affected. In the region, crops of grain crops in the southern districts of the region, including Auliekolsky, B. Maylina, Denisovsky, Dzhangeldinsky, Zhitikarinsky, Kamystinsky, Naurzumsky, Arkalyk, were the most affected, in which from 25% to 70% before harvesting cereal crops were in poor condition.
Against this background, the grain harvest in the main granary of the country amounted to only 3002.7 thousand tons compared to last year’s 5214 thousand tons.
The current insurance mechanism does not provide an adequate level of risk management in the industry. Crop insurance does not even cover half, or 43% in 2018. 70% of insurance coverage is provided by mutual insurance associations. Lack of proper control over them leads to a violation of the law in terms of tariffs, collection of premiums and compensation payments. Thus, it was decided to turn insurance into voluntary.
The Ministry believes that the transition from subsidising payments to subsidising premiums will increase the availability of agro-industrial insurance, since insurance policies can provide loans. But for now, insurance companies are not interested in agricultural insurance.
Experts explain that the lack of interest on the part of insurers is due to the impossibility of identifying risks to livestock. On the other hand, entrepreneurs cannot provide enough exports and protect themselves from natural disasters. Given the growing demand for insurance from large and medium-sized enterprises, the system of interaction between farmers and insurers is ineffective.
Kazakhstan is one of the regions prone to destructive natural phenomena. In Kazakhstan, about 300 thousand people suffer from flooding every year at a cost of GDP of up to $3 billion.
Experts believe that the inconsistency of the current insurance system with modern requirements is associated with low insurance payments, an average of 20% of the farmer’s losses. Also among the reasons for the underdevelopment are the transparency of the system and the interest of the insurer. Currently there are only 1-2 companies in the segment, Kazakh Zerno reported.
Dutch Farm Frites plans to build a French fries plant in Kazakhstan
Netherlands company Farm Frites Beheer B.V. in the next two years, plans to build a plant for the production of French fries in Zhambyl region. “The total cost of the project for the construction of an export-oriented factory for the production of French fries is $145 million. The project will be completed in 2020-2022,” the department said.
The plant’s capacity will be 70 thousand tons of French fries per year. As specified in the Ministry of Agriculture, the products are planned to be exported to Russia and China. Farm Frites Beheer B.V. Is a company founded in 1971 in the Netherlands.
The main activity of the company is the production of frozen and chilled products from potatoes. The company has 40 sales offices and 6 factories in 40 countries. Potato processing is 1.3 million tons per year with export to more than 80 countries, In Business reported.
West Kazakhstan region plans to build greenhouse for 61 billion tenge
Another greenhouse complex with its own 60 MW power plant will appear in Kazakhstan. The project cost is estimated at 61 billion tenge. The facility will be built on the territory of the industrial zone.
“The total cost of the project is 61 billion tenge. It is planned to create 500 jobs,” the regional authority reported. Tomatoes will be grown in the greenhouse; the facility will have a capacity of 40 thousand tons per year. They want to sell finished products in the domestic market, as well as in Russia. The project will be implemented in 2020-2025. At the moment, design estimates are being developed.
The country plans to launch a greenhouse worth 160 million tenge with alternative energy. Cucumbers and tomatoes will be grown in the greenhouse. They plan to supply vegetables only to the domestic market, LS reported.
The full version of the latest Economic Newsletter is available here: https://drive.google.com/file/d/1dxSPJEG_C_KFNxVlMSioc7f-bn2t-exT/view?usp=sharing