Kanat TilekeyevResearch Fellow

Institute of Public Policy and AdministrationUniversity of Central Asia

Access to improved seeds and fertilizers and

agricultural productivity in Kyrgyzstan

Outline

1. Agriculture Profile2. Seed Sector Overview3. Fertilizer Sector Overview4. Empirical evidence of fertilizers using impact -

Example of Talas farmers (2011 data)5. Conclusions

Main Facts about Agriculture o Agriculture constantly declined in GDP (34% - 2000, 28% - 2005,

18% - 2011) – low productivity problemo Rural population is dominating, but labor employment in

agriculture decreasing (43%-2003, 34%-2007, 30.7%-2011)o Labor migration to Russia and Kazakhstan (mainly from South regions)

o Limited land resources - 1.1 million hectares of arable land (80% is private land)

o Main crops (2011) by area : grain crops (54%), fodder crops (25%), potatoes, oil seeds, vegetables and cotton (all -19%)o Grain crops mainly concentrated in the North (low labor intensive crops)

o Fruits, vegetables, cotton crops mainly grown in the South (high labor intensive crops)

o Low grain crop productivity: wheat – 2.3 ton/Ha, barley – 2 ton/Ha

Agricultural Transformation - Crop Structure Transformation

o 95% of output in agriculture – small scale farmers (83% of land owners has < 1 ha)

Crop area dynamics in Kyrgyzstan in 1990-2011, %

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1995 2000 2003 2005 2007 2011

Other crops

Cotton

Vegetables

Potatoes

Forage crops

Other grain

Beans

Corn

Barley

Wheat

o Crop structure changed since 2000 after land reform

•Main agricultural production is a small – scale production,•Low growth productivity is a key problem for the sector

Main directions of the productivity improvement:o Small scale mechanization level,o Improve of irrigation techniques,o Rural credit,o Extension services,o Improved inputs – Seeds and Fertilizers

Improved Inputs and Agricultural Productivity

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Seed Sector – Current Status

Number of seed farms in Kyrgyzstan

Arable land in seed farms

year Total State Farms

Private Farms

year thousand ha

1991 46 46 1990 229.1

1997 119 57 62 1995 56.0

2000 175 75 100 2000 102.5

2005 151 43 118 2005 77.9

2009 188 22 166 2009 40 84%

9%

1% 3% 3% 1%

Seed farms specialization by crops

cereals cotton forage grasses potato and vegetables fruits tobacco

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Seed Sector Problems

Seed Policy: Reform of institutional infrastructure and seed value chain (Legislation and organizations were reorganized in 2000-2009)

Main Problems: •Legislative base is strong, but unfinished agenda for royalty and licensing •Seed production based on ‘production-oriented’ seed farms with lack of marketing expertise. •Insufficient support of seed producers: old machinery• Seed producers concentrates on cereals •State interventions in seed sector strong -Seed Distribution Schemes Case•Low potential of profitability of the variety use to the breeder

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Policy Gaps and New Research Agenda

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Policy Case 1 – Seed Distribution Scheme

Seed Distribution Scheme aimed to provide access to the farmers by seeds (grain crops) as subsidized credit from seed producers

State Fund of the Economy Development (SFED) distributes grain seeds for farmers annually – 2-3 thousand tons. Total volume of this support varies from 0.6 to 1.2 million USD. SFED

Farmers

Policy Problems: 1. Program management problem – Aim of the program is

unclear; farmers selection process is not transparent.2. Farmers often not returned credit in time and fully.3. Stakeholders interests conflict: Seed prices was

overestimated (2001-2006), Government changes rule after seeds were distributed (2008-2009 conflict).

4. Local seed producers commercialization incentives are deteriorated due to Government intervention.

Scheme need to be redesigned to increase policy efficiency.

State Material Reserve Fund

Seed producers

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Policy Gaps and New Research Agenda

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Fertilisers Sector

Overall programmatic goal of specific fertilizer policy is to increase crop productivity to overpass hunger and poverty of rural households Fertilizer Policy: 1. Monitoring of import of fertilizers – regulatory activity•Listing, registration and testing of fertilizers, pesticides, herbicides and other chemicals for plant protection for use in agricultural production,•Purchasing of the stock of pesticides from state budget for emergency situations (to prevent and fight with the pests invasions),•Assessment of the fertilizer availability and declaratory control of firms- suppliers of fertilizers and other chemicals,

2. Access to Market Liberalizing •Decrease tax and administrative barriers - no licensing, zero rate on VAT and custom duties (Custom Tariff Law, 2004); since 2008 VAT exemption for domestic and imported fertilizers.

3. Attempts to protect market from re-export to neighbors •(Seasonal export duty, Decision of Government, 2012)

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Policy Gaps and New Research Agenda

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Fertilisers Sector Status

Fertilizers import increased significantly after market opening in 2004. Import declining in 2009-2010 related to fertilizers price boom in 2008 and political instability in Kyrgyzstan in 2010.

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Policy Gaps and New Research Agenda

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Policy Case 2 – Export Duty on Fertilizers

Kyrgyz Government in February 2012 introduced seasonal export duty (0.3 USD/kg) for mineral fertilizers from mid-Feb till mid-Aug period to protect domestic market.

Introduction of the export duty doesn’t support to decrease ‘official’ re-export of fertilizers – export of fertilizers increased in 2012. Main country of re-export is Uzbekistan – 89% in 2011 and 99% in 2012.

Conclusion: Government cannot affect on the market directly. Strategy to protect domestic market need to be re-analyzed

Source: COMTRADE database (http:// http://comtrade.un.org/db/) (date accessed: Jul. 2013).

Empirical Analysis of Fertilizers Use – Regional Case

Researchers often faced with the absence of the data for empirical analysis to assess importance of the input factors and policy changes. Evidence from the regional case study – Talas Oblast (Tilekeyev, 2011)

Target Area -Talas Oblast•Located in north-west of Kyrgyzstan

•92% residents are Kyrgyz

•220 thousand inhabitants

•85% rural residents

•Rural sector dominating - 64% of regional GDP

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Empirical Analysis of Fertilizers Use (continued)

Main cultures:

Haricot beans (56%), hay(24%), wheat (9%), potatoes (7%)

Main livestock;

cattle (59% of HH), sheep (48%), horses (17%)

Sample:

297 households

Representative on regional and district levels

Geographical randomization

Households Parameters:Average size of HH – 5.4 pers.Residents in working age – 55.4%,Nationality -92% KyrgyzAverage age -27.3 years,88% of HH has a land plot,Average land plot - 2 ha per HHCrop production – 56%, Livestock production 43%, renting land – 0.4%Agricultural income – 71%Non-agricultural income- 29%

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Evidence from Talas farmers experience (Agricultural Production Relationship

with Land – Labor – Fertilizers )

2,13210 iii FertilizerLaborLandY Yi is the aggregated crop output in monetary terms of the i-th householdLandi is the total land used for crop production, hectares of the i-th householdLabori is number of working people in working age of the i-th household, personsFertilizeri 1 is the categorical dummy variable, which shows value of 1 if i-th household use fertilizers or 0 if not, or Fertilizeri 2 is the variable, which shows amount of use of fertilizers by i-th household, in kilogram per ha.

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Empirical Analysis of Fertilizers Use (continued)

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Empirical Analysis of Fertilizers Use (continued)

1. Agricultural policy decisions often failed due to absence of the necessary empirical evidence.

2. Analysis of the effectiveness of state programs on seed and fertilizers markets requires deep information (often unavailable) about impact of improved seeds on productivity of small – scale farmers, impact of fertilizers and other technological inputs.

3. Researchers may overpass the policy gap through experimental and survey activity on the farmers and market stakeholders level.

4. Joint work of researchers and Government may improve policy decision quality and results.

Main Conclusions

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Thanks for the attention!