KZBlog

Caravan, the weekly newspaper, has an article on the agricultural business in Kazakhstan, which is in serious crisis [RU]. In a follow-up interview with Kazakhstan Today, Anatoly Popelyushko, head of the Union of Food Producers in Kazakhstan, says thatprices in Kazakhstan are higher than prices in Europe [RU] for food. The articles are both in Russian so I’ll outline a few of the key points here as to why the agricultural industry is in serious trouble.

• Domestic agriculture “is not developing. In fact, the opposite,” Popelyushko said to Kazakhstan Today. Government investments are either misguided or ineffective. For example, the Development Bank of Kazakhstan invested $ 130 million in ethanol plants which use grain that can be sold abroad at a higher profit than the bio-ethanol. He also notes that, “Eight sugar refineries were built; only three are producing, and at only half their capacity. The rest can be taken down for scrap metal: they are unprofitable.” Regarding government actions to regulate and stabilize the wheat industry, Popelyushko says it was a failure. The system put into place had no effect on the market and while there was a bumper-crop of wheat, the price did not go down. It is unclear where any profits went, especially regarding companies that were created by the government. Furthermore, Caravan states that government subsidies for farm products are eaten up by the high price of imported goods.
• Furthermore, Popelyushko claims that the government deliberately does not do enough to regulate prices and that many products cost two to three times more than in Europe. Many of our products in Kazakhstan, cost two to three times more than in “expensive” Europe.
• Small-scale farming is simply not profitable because it depends on outsiders. The majority of farms in Kazakhstan are owned by private individuals or small companies and they cannot produce enough to make self-processing profitable. In fact most farms are too small to even practice crop-rotation because they don’t have enough land to rotate! Meanwhile landowners view real-estate as an investment so land is held to be sold to developers, not farmers. Greater urbanization and unbalanced development of cities, not villages, also contributes to a lack of workforce for farms.
• Agriculture is an unprofitable business due to interference by outside agencies. Popelyushko gave an example of trying to start an agricultural enterprise in Shimkent where the utilities companies ended up getting 360 million tenge just to connect to the power grid, on top of energy charges. They paid an additional 2 billion tenge for the right to use sewage and railroad services. By contrast, when he worked in Ghana he found a special economic zone in place and straightforward business conditions. In Kazakshtan, “the entrepreneur, especially one who is just starting production, is seen as a victim today. As soon as the company is registered, and is just beginning to walk, all those who can – from the police to the veterinarians – all are looking for violations and they all ask for money.”
• The export-oriented nature of the market guarantees high prices at home, lack of investment in domestic infrastructure and dependency on imported goods. According to Caravan citing the UNDP, “Agricultural yield in Kazakhstan has dropped by almost a third, and livestock production by half. Livestock production also fell by more than 50%. In 2006, the country imported 58% of the vegetable oil consumed in the country, 49% of the sugar, 46% of the sausage, 55% of candy, and more than 80% of fish and fish products. Almost 100% of meat, fruit and vegetable preserves as well as cheese is imported.” And 80% of corn and animal hides are sent abroad to be processed due to a lack of processing facilities here. The refined products are then sold back to Kazakhstan at a higher price. All of this despite the fact that domestic production is growing, albeit slower than consumption: “Overall, imports exceeded domestic production by 290%.” CIS countries and nearby China are obviously large-scale exporters but the US, Europe, New Zealand and Brazil also export large quantities of agricultural products to Kazakhstan.

  I can add another reason why the domestic market can’t grow. Consumers prefer foreign goods. While domestically produced pasta is half the price at the supermarket, many prefer Italian pasta. Kazakhstan-produced milk and mayonnaise “do not taste good and I think the quality is low,” according to one acquaintance of mine. Personally we buy only Kazakhstan-produced staple goods because I suspect it is hard to make low-quality milk or pasta or mayonnaise or sour cream. So perhaps Kazakhstan can use the financial crisis and overall lowering of world prices to boost its domestic market. Something like the “Buy American” or “Crafted with Pride in the USA” campaigns of the 80s and 90s in the US.

  To appeal to patriots, we could use: “Buy Kazakhstan or the Economy Will Fail!”
  To appeal to snobs: “Made in Kazakhstan: Seriously, It’s Just Flour and Eggs, How Bad Can It Really Be?”
  How about you dear readers, how do you feel about Kazakh agriculture and are you shocked to learn that Kazakh meat is not really Kazakh meat?