«Despite the active government support, significant problems still remain in Kazakh agriculture», – notes Kazakh researcher Nailya Almukhamedova in her article, specifically written for analytical platform CABAR.asia.
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Summary of the article:
- The agricultural industry of Kazakhstan is considered to be the basic component of the domestic economy, while its share is insignificant in the GDP structure – 4.2%;
- One of the main tasks of the Government of the Republic of Kazakhstan is increasing the competitiveness of the agro-industrial complex;
- Currently, the State program for the development of the agro-industrial complex of the Republic of Kazakhstan for 2017-2021 is being implemented; great attention is paid to the state support of agrarians;
- Despite this, the labor productivity index in agriculture remains one of the lowest in the economy of Kazakhstan for many years;
- A number of other system problems hamper the development of the agricultural sector.
Agriculture is considered one of the most important areas of the economy, which largely ensures the food security of the country. Over the past decades, several programs for the development of the agro-industrial complex have been developed and the methods of financing agrarians have been changed for the formation of the agrarian sector to the leading sector of Kazakh economy. But why impressive results cannot be achieved in the industry?
The answer to this question lies in the fact that the problems of low productivity, the effectiveness of state support mechanisms, the remoteness of agricultural science from business, as well as underdevelopment of marketing systems and storage of agricultural goods remain to this day. Current situation The agricultural industry of Kazakhstan has always been considered as a basic component of the national economy. The basis of this situation is a number of advantages that the republic has:- Availability of a huge territory. Kazakhstan ranks second in the world in terms of arable land per capita.
- Accession to number of large grain and flour exporters;
- Growing demand for food products among neighboring countries (China, Central Asia, the EEU and the CIS).
For 12 months of 2018, the share of agriculture, forestry, and fisheries in the country’s GDP structure was 4.2%. It should be noted that this figure was 8–9% in the late 1990s.[1]
At the end of last year, the cumulative output has been increased by 3.4%. The share of plant cultivation accounted for 53% of agricultural gross output (services), and livestock – 47%[2]. About 1,226.7 thousand people or 14% of the employed population work in this industry, while about 42% of the total population lives in rural areas.[3] Graph 1. Index of physical volume of agricultural gross output (services) !function(){“use strict”;window.addEventListener(“message”,function(a){if(void 0!==a.data[“datawrapper-height”])for(var t in a.data[“datawrapper-height”]){var e=document.getElementById(“datawrapper-chart-“+t);e&&(e.style.height=a.data[“datawrapper-height”][t]+”px”)}})}(); It can be seen from graph 1, the growth in the gross output volume over the past 10 years has had an unstable trend, which is partly explained by the industry’s dependence on natural and climatic conditions. For example, a sharp increase in gross output volume in 2011 is due to a record harvest of grain. At the end of 2017, a significant output share in plant cultivation in terms of value accounted for cereals (excluding rice), legumes crops and oilseeds, as well as vegetables and melons, root crops and tuber crops. Spring wheat, oats, barley are grown in the northern regions. Vegetable growing, melon-growing and a number of industrial crops such as sunflower, crown flax, tobacco, and others are developed. In turn, cotton, sugar beet, yellow tobacco, rice, orchards, and vineyards grow in the south of the country.[4] Graph 2. Gross output of plant cultivation for 2017, in% !function(){“use strict”;window.addEventListener(“message”,function(a){if(void 0!==a.data[“datawrapper-height”])for(var e in a.data[“datawrapper-height”]){var t=document.getElementById(“datawrapper-chart-“+e)||document.querySelector(“iframe[src*='”+e+”‘]”);t&&(t.style.height=a.data[“datawrapper-height”][e]+”px”)}})}(); In general, the gross harvest of oilseeds, sugar beet and vegetables, both hardy and nonhardy has been increased, and tobacco production has been decreased over the past few years. On one hand, the change in the volume of crop production is due to weather conditions; on the other hand, it is due to adjustments in the structure of cultivation areas of the republic. For the last 5 years, the cultivation area of crops was about 21 million hectares and did not change much. The main changes were noted in its structure. Previously, the principal of cultivation areas were designated for growing wheat, but as a result of the state crop diversification policy, wheat plantings have been decreased by almost 2 million hectares since 2011. Instead, the cultivation areas of barley, oats, corn, oilseeds, forage crops, vegetable and melon crops have been increased.[5] By the end of 2017, the main share in the gross output was the breeding of dairy breed and other breeds and buffaloes in the structure of livestock production. Horse and poultry breeding show significant and positive dynamics growth in terms of value. Graph 3. Gross livestock output for 2017, in% !function(){“use strict”;window.addEventListener(“message”,function(a){if(void 0!==a.data[“datawrapper-height”])for(var e in a.data[“datawrapper-height”]){var t=document.getElementById(“datawrapper-chart-“+e)||document.querySelector(“iframe[src*='”+e+”‘]”);t&&(t.style.height=a.data[“datawrapper-height”][e]+”px”)}})}(); For many years, the state has been paying great attention to the development of the agro-industrial complex. Currently, the competitiveness increase of the agro-industrial complex, as one of the key drivers of the national economy is one of the main tasks of the Government of the Republic of Kazakhstan. Thus, ten policy documents have been developed since the beginning of independence in Kazakhstan. Basing on them, the state policy in the field of agriculture is being implemented. In addition, the National Holding “KazAgro” was created in 2006 in order to improve the system of state support for the industry; it includes branch organizations that provide state support in agriculture. Today, Kazakhstan is implementing the State program for the development of the agro-industrial complex of the Republic of Kazakhstan for 2017-2021. The main goal of the program is to increase labor productivity in the agro-industrial complex and export processed agricultural products at least 2.5 times compared with 2017. The total expenditures for the implementation of the state program amount to 2,774.6 billion Tenge, 90% of which are budgetary funds.[6] What hampers agriculture?
As indicated above, the state takes a set of measures for the timely resolution of issues in the agro-industrial sector and its improvement. The statistics show a gradual and positive trend in this area, including an increase in gross production output, the formation of new agricultural facilities, and etc. However, the existing measures are not enough, as a number of serious barriers hamper the further qualitative provision of the industry development:
- First of all, the issue of low labor productivity in the industry remains pressing. According to statistics, the lowest labor productivity in 2017 (with the exception of education) in the republic’s economy was observed precisely in agriculture – 5 thousand USD a year per employed person. It should be taken into consideration that significant amounts of subsidies are annually allocated to the agrarian sector, government support measures are taken and a significant part of the employed population works. It should be noted that the same indicator in developed countries reaches 90-100 thousand USD.
The main reasons for such a low indicator include issues of insufficient technical equipment, implementation, and transfer of efficient agricultural technologies and their availability for small and medium-sized households. For example, the machinery and equipment deterioration rate in agriculture amounted to 45.7% in 2017. Kazakhstan significantly lags behind other countries in terms of the number of agricultural tractors.
Thus, there is 1 tractor per 1 hectare of agricultural land in Kazakhstan, compared with 27 in the United States, 16 in India and 11 in Brazil. At the same time, the operating life of most tractors and combines in the country exceeds the normative period of 17 years. In turn, the use of deteriorated and obsolete equipment increases the cost of repairs and lubricants by an average of 20% and in the long run, leads to a decrease in harvesting.[7]- A weak interaction between agricultural science and the business community is another important issue affecting both labor productivity in agriculture and ensuring the country’s food security. The Ministry of Agriculture of the Republic of Kazakhstan provided indicative data showing that only 8% of the results from scientific and technical activities are being introduced into agricultural production[8]. The major part of research and development is funded by the state without the active participation of business, which could identify its specific interests and requests during the development process. Hence the commercialization and technology transfer problems occur. Scientific research annually covers more than 6,000 households, which is only 3% of registered subjects of the agro-industrial complex[9].
At the same time, domestic agrarians desperately need efficient technology implementation. For example, in the field of plant cultivation, it is necessary to use long-term cultivars of various types of vegetables that could be stored for a long time. As a result, it would provide the domestic food market with own products all year round without the need to import goods, which eventually leads to an increase in consumer prices. Therefore, it is necessary to choose the optimal format of interaction between the two parties – the scientific community and business, including the small one, to solve this paradoxical situation. No big effects should be expected until this aspect is resolved.
It is worth emphasizing the staffing problem. According to local executive bodies, about 80% of the subjects in the agro-industrial complex have a critical need for specialists. It should be noted that a sufficient number of educational grants are annually allocated for training in agricultural disciplines. However, only half of the graduates of agricultural universities are afterward employed in rural areas. Some of them work only formally, in fact, they are employed in other areas.- Special attention is given to the issue of subsidies distribution. For example, at present, the expert community and farmers quite actively discuss the issue of the financial support mechanism under the “Sybaga” program. According to the terms of the program, purchased cattle must be imported only from foreign countries. The presence of such strict requirements makes this program inaccessible and disadvantageous for small and medium-sized households. This is due to the fact that only large enterprises can afford the purchase of breeding cattle from abroad since the cost of such cattle is quite high, and also require expenditures for shipping, customs clearance and placement of cattle for 1.5-month quarantine in the quarantine zone. In addition, there are also risks of mortality and delivery of epizootic diseases together with cattle.
At the same time, the country has its own breeding farms. However, under the terms of the program, domestic farms cannot participate as a supplier for the purchase of livestock, which discriminates them in comparison with foreign breeding farms. According to the data for 2018, there are 1,044 breeding farms in the country, the number of pedigree beef strain amounts to 282.4 thousand animal units. These farms were financed through subsidiaries of “KazAgro” Holding” JSC in the period 2007–2017 in the amount of 46.2 billion Tenge to create 103 multiplying farms. The total number of imported pedigree livestock amounted to 70.9 thousand animal units[10].
It is also worth considering that pedigree cattle of local farms have a number of competitive advantages. Firstly, it is lower transportation costs and there is no need for customs and quarantine clearance. Secondly, there is a minimal risk of detecting epizootic diseases. Thirdly, the livestock of local sow farms is already adapted to climatic and natural conditions, which reduces the risk of mortality. As a result, local breeding and multiplying farms are forced to slaughter highly productive pedigree cattle at the price of marketable cattle for meat, which goes against the principle of usefulness and effective output from previously invested funds.- The problems of storage and marketing of agricultural products, which directly affect the level of competitiveness of the agricultural sector, are important. The underdevelopment of the trade and logistics system and the near absence of facilities for pre-sale preparation of goods (washing, packing, drying, calibration and transportation, and etc.) do not ensure uniform supply of quality raw materials throughout the year.
Thus, the warehouse infrastructure for the storage of horticultural and food products is underdeveloped in some regions. In total, there are 21 transport and logistics centers in the country, but the available capacity is insufficient to eliminate the problems since the shortage of storage capacities increases with an increase in the annual average yield of grains and oilseeds.
Despite the growth in the number of retail facilities, the delivery of food to remote areas of Kazakhstan is complicated by the deterioration of the regional and district roads, and the underdevelopment of the railway network for cargo transportation between the regions. In addition, the insufficient level of integration into the sales system hampers the development of domestic production and processing of agricultural products. Often it is due to the fact that the main flows of food products fall on small businesses (81%). As a result, the movement of agricultural products from producers to buyers is made in a spontaneous mode. Conclusions and recommendations Thus, despite the active state support, increasing the scale of agricultural production, meeting the need for basic types of food and participation in world trade, significant problems remain in agriculture of Kazakhstan to the present time. Therefore, the following are necessary for the further qualitative development of agriculture in the Republic of Kazakhstan:- Increasing the level of agricultural productivity by increasing the volume of domestic production on the basis of increasing innovation activity, in particular, by replacing the worn-out and obsolete machinery and equipment, as well as the implementation of modern resource-saving technologies.
- Development of a special action plan or road map on the interaction of the scientific community and business to obtain effective, and most importantly, applied solutions to improve the efficiency in agriculture.
- Continuation of work in the direction of improving living conditions (infrastructure, housing and public utilities, preferences, and etc.) in rural areas in order to involve young promising specialists into work in the agricultural sector.
- Detailed review and assessment of existing measures to subsidize the industry, taking into account all the risks and opportunities, thereby minimizing the impact of various kinds of lobbying.
- Strengthening integration processes between agricultural and processing organizations.
- Improving the infrastructure for the sale of agricultural products, namely, increasing the number of municipal wholesale food markets, concessional lending for the construction of food markets infrastructure.
- Creation of an extensive network of marketing centers in all rural settlements of the republic and remote areas with a high concentration of agricultural raw materials’ sources, and the construction of additional warehouse infrastructure.
Obviously, due to the fact that this industry is quite multiple-vector and branched, it is impossible to immediately solve all the issues, but all interested parties should unite and try to take effective measures for their common good.
This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project implemented with the financial support of the Foreign Ministry of Norway. The opinions expressed in the article do not reflect the position of the editorial or donor.
[1] Gross domestic product by production method for January-December 2018 – Statistics Committee of the Ministry of National Economy of the Republic of Kazakhstan, National Accounts – Integrated Accounts: http://stat.gov.kz/getImg?id=ESTAT297361
[2] Gross output of products (services) of agriculture, forestry and fisheries for 2018-2019. – Statistics Committee of the Ministry of National Economy of the Republic of Kazakhstan, Statistics of agriculture, forestry, hunting and fisheries: http://stat.gov.kz/getImg?id=ESTAT225486 [3] Employed population by main types of economic activity (quarterly data) 2010-2018 – Statistics Committee of the Ministry of National Economy of the Republic of Kazakhstan, Labor: http://stat.gov.kz/getImg?id=ESTAT104800 [4] Agriculture in Kazakhstan: https://www.kazportal.kz/selskoe-hozyaystvo-v-kazahstane/ [5] State agro-industrial complex development program of the Republic of Kazakhstan for 2017-2021: https://egov.kz/cms/ru/law/list/U1700000420 [6] State agro-industrial complex development program of the Republic of Kazakhstan for 2017-2021: https://egov.kz/cms/ru/law/list/U1700000420 [7] Kazakhstan: The agro-industrial complex is not a “black hole”: https://kazakh-zerno.kz/novosti/populyarnye-novosti/242253-kazakhstan-apk-ne-chjornaya-dyra [8] Only 8% of the results of scientific and technical activities are being implemented into production – the Ministry of Agriculture of the Republic of Kazakhstan: https://bnews.kz/ru/news/tolko_8_rezultatov_nauchnotehnicheskoi_deyatelnosti_vnedryautsya_v_proizvodstvo__msh_rk [9] A new Board of Directors of the “National Agrarian Research and Education Center” has been elected: https://online.zakon.kz/document/?doc_id=38209741 [10] The “Sybaga” program lobbies the interests of foreign breeding farms: http://www.matritca.kz/news/61602-programma-sybaga-lobbiruet-interesy-zarubezhnyh-plemennyh-hozyaystv.html