President of National Public Association of Kazakhstan’s Farmers Auezkhan DARINOV:
DIGITIZATION WILL OPEN UP NEW OPPORTUNITIES FOR INVESTMENTS IN AGRICULTURE
This year Kazakhstan’s farmers have gathered a good harvest; in terms of quality crops are also good. President of National Public Association of Kazakhstan’s Farmers (AKF) Auezkhan DARINOV told Interfax-Kazakhstan how the agricultural sector gets along, what changes took place and what is yet to work on.
- Auezkhan Kameshevich, with what indicators will the sector wrap up the year 2017, what do they differ from the year 2016 indicators in? Is there anything to be proud of?
- For Kazakhstan’s farmer, this is already an occasion for pride if he has not yet "bowed down". In principle, the yield this year is not bad; many farmers have crops of excellent quality although the gross cereals harvest is slightly lower compared to last year. In many instances we depend not only on technology and investment but also on weather.
If we talk more specifically, there are official figures. For example, growth in the number of livestock has been recorded - from 2 to 7% - with regard to all basic farm animals such as cattle, sheep, horses, camels and pigs. In general, the meat output in terms of carcass weight has increased by 6% compared to the previous year. The output of cow milk and eggs has been 3% and 5% more than in 2016, respectively. These are all official figures though rounded. Unfortunately, we have no other statistics. In order to maintain our own alternative accounting and statistics, huge financial and human resources are needed. Moreover, what a shame, the state spends huge funds on maintaining all these offices but does not see an objective picture. The Statistics Committee is part of the Ministry of National Economy, therefore the authenticity of any statistical data is in question. And the problem is not even the ministry although it is also part of it. The point is that on the ground local authorities try to embellish reality.
Recently the Majilis [the lower chamber of Kazakh parliament] held a round table on co-operative business where Head of Meat Processors’ Association of Kazakhstan Maksut Baktibayev said that a contest for the procurement of cattle tag-earrings had been held just recently because of red tape what means that there is no accurate cattle count these days, and it is impossible to talk about the livestock growth.
Or another example. According to Head of Milk Union LLP Alexander Kuzlyakin, who stated at a meeting in Petropavlovsk that 5 million tonnes of milk were produced on paper in Kazakhstan in 2016 but processing enterprises got just 1.4 million tonnes. That is, even if we add domestic consumption to here, the question remains about the authenticity of official data.
Draw conclusions yourselves.
But I deviated a little bit. Statistics, indicators of the agricultural sector, this is a separate big topic for discussion.
- What changes have taken place in the sector lately?
- I already said that we try to work constructively with the minister of agriculture and with the ministry of agriculture as a whole. But even with such an approach there is always room for objective criticism.
The most important and fundamental thing is that this ministry, and well, the entire government has no consistency. Each new minister announces that the course of the previous one, to put it mildly, was not quite correct and adopts a new state program for the development of the sector, promotes some new mega-projects under the guise of the most important and necessary ones. In my understanding, this is not right. Yes, you need to make changes, but ‘point wise’ ones.
Secondly, priorities should be sorted out. In the last ten years probably the Association of Kazakhstan’s Farmers has been saying every year that either we should live in the market and state aid should be minimal or should help everyone. We, ordinary farmers, are ready to give up all kinds of state allowances and subsidies but then let the state stop supporting major agrarian businesses and create conditions for all farmers to work. It is not about splitting up subsidies. We are talking about rural infrastructure, tax policies, reduction in unnecessary red tape, reduction in interest on leases and loans for farmers and so on.
Thirdly, all state support programs for agriculture help whoever except for agriculture and an ordinary farmer. For some reason if it is a state program, it must only be carried out through banks and at their interest. If we say that we need to fight middlemen buying and selling at bazaars then why do we keep them in the sphere of state support for agriculture?
Fourthly, farmers throughout the country have long said that our sector needs its own agricultural bank. It does not matter what it will be called. If the state has funds to spend trillions on an assistance program to private banks then why not allocate a small part of this money to create an agricultural bank and why not help the domestic farmers? Although, personally I do not think that the creation of a new, moreover, state-owned bank will solve the problem of access to finances for farmers. Because there are financial institutions in the country through which assistance for farmers could be arranged if desired without setting up a new entity.
An example: every year for five or six years the state has been allocating 60 billion tenge (332.57 tenge/$1) in loans for the sowing campaign. But if we compare prices for fuel and lubricants, spare parts, hardware, seeds, chemicals that were available five years ago and today’s [prices] - it's a far cry from that period. So why not to increase the total amount of lending to at least 100 billion tenge? After all, this money is to be paid back strictly, and in autumn or early winter farmers pay back these funds to the state. That is, lending is not for 15 years, not for 5 years like the state helps our banks - only for 5-7 months. A farmer makes concrete products: bread, meat, milk. And what does the bank produce?
- What projects have been implemented throughout 2017? What projects will be introduced by the end of 2017? What projects are planned for 2018 and onwards?
- I am not going to speak for the whole industry. It is better to address this issue to the Minister of Agriculture, probably. We have implemented several important projects within the Association of Farmers. Most importantly, we have established dialogue with the ministry. Quarterly representatives of the Ministry of Agriculture and a number of other departments take part in the meeting of the AKF Central Council. That is, the exchange of information is set up so that people know on the ground that they can have their say, raise problems, and officials at the top will listen to them.
In addition, with the direct participation and support from the Farmers' Association, the Electronic Grain Receipts Institute and the ratings of grain elevators have been introduced. It is about digitization of the agri-industrial sector. The electronic grain receipts and grain elevators ratings will make the grain market in the country as transparent and attractive for investment as possible. We all remember that because of a fraud with paper grain receipts, almost 7 million tonnes of bread were ‘stored’ in the country only on paper and not in storage facilities. With electronic grain receipts, such risks are minimized. I hope that the scale and possibilities for using electronic grain receipts will only grow. For example, as collateral for lending and leasing. In addition to electronic grain receipts there are other interesting projects specifically in the field of digitization in our sector. Moreover, everything is available for electronic grain receipts to be transformed into agrarian receipts. That is, not only grain but also other agricultural products would act as e-securities.
- Is any price for grain available, what is the current demand?
- For the time being there is no price. In any case, there is no price that would be beneficial for producers. And there is no demand as such. Here, apart from external reasons, stagnation in the market is caused by the shortage of grain wagons. In private conversations, many traders raise this problem, so-and-so, even grain of the Food Corporation is not loaded because of the absence of freight cars, but in public nobody wants to talk about the problem to the media in order not to spoil relations. Currently the shortage of wagons is the main problem. Although, as far as I can recall, not recently at a meeting in Kazakhstan Temir Zholy [national railway operator] producers and grain-receiving enterprises were accused of causing shortages of grain wagons who load up wagons with poor-quality wheat that is lower than prescribed in contracts. Allegedly because of this, most of rolling stock was simply standing idle. In addition, carriers claim that practically everyone places orders for freight cars using the ‘here and now’ principle but not in good time. Therefore, it is difficult to plan volumes given infrastructure. Such things may be well happening. It is necessary to be objective and sort out each separate case.
Last week I raised the issue of the price for this year’s crops in a conversation with Deputy Prime Minister and Minister of Agriculture Askar Myrzakhmetov. It's a very painful question and its solution must not be dragged out. Without normal prices farmers will not be able to fulfill their obligations to [other] workers, that is to say, to rural residents. And those have loans, have to pay for children’s education and so on. For its part, the Association of Farmers suggested ways to address the solution to this issue. I cannot know if the relevant ministry will listen to our opinion.
- You said that annually 60 billion tenge is allocated for the spring field work, that is, the money has not decreased? Why do you say that many farmers are left without funding?
- Yes. You know, it is possible to provide the 60 billion to 10 large companies and report that the program has been 100% fulfilled. Isn’t it? That is, the total amount is one bit the make-up of the recipients is something different.
- What is the current situation with the sale of products in the agricultural sector?
- You know, each of your questions could take hours to answer. For example, the sale of products is also the export of products, [including] the sale of a bucket of tomatoes by a pensioner from a summer cottage kitchen garden. By the way, the other day I literally read that on October 31 new sanitary rules came into force and under them it is forbidden to sell butter or cottage cheese from private farmsteads. I do not know who needs this ?! Only in early 2017 the prosecutors' offices reported that 11,000 requirements for businesses were scrapped in the country, and this is concerning the public health protection and emergency situations areas only. It turns out that the same sanitary service again expands its powers, doesn’t it? We all understand that where there are many demands, there are many possibilities for corruption. This is normality. And in general, in whose way did the pensioners selling salt pickles stand? These people stand in the cold selling home grown ducks because they do not enjoy good life. People are trying to earn some money. These people need to be supported on the contrary, but not kicked out. You know, this is just a step to the next rules for someone in Astana, but a meal on the table for a rural resident, or medicine or notebooks for a child, it's money to pay for electricity.
- Do you see Russia as a competitor?
- Of course. And with regard to many types of agricultural products in terms of cost and quality, unfortunately, the balance is not in our favor.
- What are the current priority areas in your work?
- Digitization of the agri-industrial sector. That is, all processes in the sector must be automated using modern technologies. First, it will release the huge number of officials who are just busy with putting papers over from place to place - they will be able to direct their energy to really important work. Secondly, it will make the sector as transparent as possible. Finally, digitization will open up new opportunities for attracting private capital, that is, investments into our sector. The same agrarian receipts I mentioned - this is very promising for Kazakhstan, and without any budgetary expenditure based on public-private partnership.
In addition, among the priorities I would mention work on providing access to finances for farmers, work to bring together farmers into a single force, to resolve common problems.
- Thank you for the interview!
November, 2017
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