: / Strategies / National Poverty Reduction Strategy (2003-2005)

Kyrgyzstan Review, 10 years ago

i. Development of agriculture and rural territories

478. Sixty five percent of the total population of the Republic lives in rural areas. Agriculture is a priority sector of economy, providing nearly 40 percent of GDP.
479. In recent years, significant progress has been achieved in agricultural and land reforms and the average annual growth of gross agricultural output has averaged 6 percent. In 2001, more than 90 percent of agricultural products were produced by the private sector, and the share of peasants farms and farming enterprises was more than 44 percent. More than 241,200 farming enterprises and peasants farms, and about 600 various unions and associations, including 462 cooperatives have been established.
Radical changes in production have resulted in the formation of a new economic environment based on market principles. A significant body of rural inhabitants possessing land and other means of production has been formed. Market mechanisms of land use are being developed, private land ownership has been introduced by the Constitution, the Law on Agricultural Land Management has been adopted, providing for land purchase and sale, and work on the development of the land registration system has been started. The agricultural sector is exempt from all types of taxes except for land tax. The agricultural sector is also supported by allocation of seeds and commodity credits. Thanks to the active support of donor organizations, agriculture is successfully financed through the Kyrgyz Agricultural Financial Corporation (KAFC), credit unions and microfinancing institutions. A network of educational, advisory and information services is being developed. The World Bank, Asian Development Bank, European Commission, Swiss Cooperation Office, Government of Japan and other donors, provides significant assistance to the agricultural sector.
480. As a result of agricultural reforms, there is stable growth and the volume of agricultural output now exceeds the level of 1990. During recent years, self-reliance has been attained in certain types of food products that have solved major problems in the countrys food security.
481. Notwithstanding the results achieved, the agricultural sector has not provided a significant increase in the income of the rural population. The poverty level in rural areas is still high, making up 51 percent in 2001. Poverty reduction in rural territories is hindered by serious problems in the sector.
482. The share of financing provided from the national budget to agriculture is decreasing every year. The national system that facilitated the whole agricultural cycle has been significantly degraded, starting with production of agricultural produce and ending with its processing and further sales. The level of support services in the Republic for rural producers is insufficient. In terms of economic performance the agricultural sector and processing industry operate under different conditions. This engenders a lack of cooperation among them and, as a result, instances of overproduction of agricultural produce have become more frequent. Export of agricultural raw materials is impeded by high costs of access to external markets. The level of real income of the population limits growth in the volume of domestic consumption.
483. Institutional reforms in the agricultural sector, together with some positive developments, also have resulted in some negative side effects. Existence of a large number of small farms that produce up to 47 percent of the total agricultural output (on some types of products they retain a dominant position), has in many ways promoted a reduction in the quality of production. Presence of a large number of economic units in agriculture (241,200 in January 1, 2002) has resulted into a significant decrease in the level of management qualifications in rural areas and, as a result, primitive methods of management have become prevalent. It is difficult to introduce new technologies and increase labor productivity on small farms. Modern technologies that enable intensification of rural production are not taken advantage of because of the lack of necessary financial resources and low technical skills of personnel. Modern marketing and management systems are practically absent in agriculture. All these factors have resulted in a decrease in the incomes of rural workers and problems in supplying processing industry with raw materials.
484. One of the major objectives in the development of the agro-industrial complex (AIC) for the current and perspective periods, is revival of industrial agricultural production aimed at providing the population with foodstuffs and the processing sector with raw materials in the volumes necessary for sustainable development of the food market. It is necessary to increase exports of processed agricultural products. For this purpose it is required to solve the priority tasks related to support of domestic industries processing agricultural products, rational import replacement, as well as ensuring competitiveness of the countrys production in the world market.
485. In order to stabilize the situation in the agricultural sector, it is first of all necessary to solve completely the problem of self-reliance of the population in relation to basic products, strengthening of all positive tendencies that developed as a result of reforms in agriculture through: 
organization of a complete technological cycle of production of export-oriented agricultural produce;
active development of the processing industry;
establishment of an effective system of marketing for agricultural products;
stimulation of domestic and external investments;
ensuring adequate legislation;
intensification of production;
establishment of commodity cooperatives and associations;
development of the education system and advisory services on modern methods of agri-business management; and
ensure access to information on domestic and international commodity markets.
486. The goal of official policy on food security is to ensure stable access for all citizens of the Kyrgyz Republic to a sufficient quantity of food products in all regions of the country. This policy is based on four major principles: availability, stability, effective use and accessibility. They imply that, first of all, local producers should ensure production of foodstuffs, while the demand for foodstuffs should be satisfied by the Republics own production and rational imports. Secondly, availability of food products should be stable. People need food on a daily basis, and they should not suffer due to unexpected failures in food production. Thirdly, food products shall be processed, preserved and stored adequately, and consumers should be assured that products for consumption are of an acceptable quality and are safe for health; nutrition shall be balanced. Fourthly, food should be available both in terms of its physical availability and the paying capacity of the population.
487. On the whole, development of the food market is based on the principles of the market economy, and tackles the problem of ensuring employment for rural population and attaining of food security on the basis of domestic production. This will be promoted by the following political measures:
ensuring of stable production growth, establishment of the market system of providing rural commodity producers with machinery, fuel and lubricants, fertilizers, protection devices, bio-preparations, etc. on a tender basis;
development of a science-based agricultural policy;
improvement of a legal framework regulating activities of AIC enterprises of all property forms;
formation and strengthening of market infrastructure of the agricultural sector;
improvement of interaction of the AIC with other sectors of the economy;
creation of economic conditions for social development of rural territories; and
expansion of agricultural production capacities based on application of technological achievements.
To achieve food security at all levels (national, regional and the level of households), it is necessary to focus on qualitative development of the agricultural potential. Increasing prices for foodstuffs and growth of imported foods, hamper the process of ensuring food security. In order to solve this task successfully, it is necessary to conduct a purposeful policy, given the political, economic and environmental specifics of the development of the Republic. To attain food security, self-reliance on food produced locally should be not less than 85 percent of total demand, while the volume of production at the level of 60 percent is critical. At the present stage, it is necessary to envisage mechanisms of flexible stimulation of production of raw materials and production resources, consolidated measures of state support for agricultural production, in order to achieve production volumes that are not lower than the critical level.
488. Effort is being directed, with donors support, to ensure food security. Thus, an agreement has been signed, according to which in 2002 the Republic will be allocated a grant of EURO 9.5 million by the European Community Commission aimed at establishment of a sufficient government grain reserve, and effective implementation of social and agricultural policies. The Program, Food Security-2000, assumes further reforming of the agricultural sector and is a continuation of previous similar programs of international organizations.
489. Official policy on establishing a food reserve will be aimed at further strengthening of market relations in agricultural production, agro-processing and the in the area of agricultural services, supplemented by measures on social protection of vulnerable layers of the population.
490. Food security objectively requires the development of the most important sectors of the AIC. Thus, it is planned to attach a priority to production of hard and durable types of wheat, that is the basis for all agricultural production and a precondition for food security. An increase in the grain crops and productivity of other agricultural crops will be achieved, first of all, through the rehabilitation of the seed-breeding system, growing the best seeds of sugar beet, cotton, potato and other crops in farming enterprises of the Republic, and their further sale to CIS and non-CIS countries. The strategy for the formation of the food reserve will be based on the principle of the Republics self-reliance on food production. Orientation on own agricultural production presupposes a continuous increase in export volumes and improvement in the structure of imports. At the same time, it is necessary to use the WTO membership of the Republic, advantages of international specialization of labor as ell as favorable food market conditions, for overall strengthening of food independence of the Republic.
491. Ensuring food security will create the basis for development of the agricultural sector by more intense methods, providing for:
attraction of new technologies and equipment;
stimulation of production of ecologically pure products;
introduction of effective management; and
aggressive promotion of exports.
492. A continuously growing demand for agricultural products both in the domestic and external markets, the need to increase income of agricultural commodity producers and to reduce the poverty level of the rural population, require stable and significant growth of agricultural production, ensuring sales and export of agricultural products. Short-term crop rotation would further improve productive capacity of cultivated crops under the condition of the limited land resources of peasants farms and farming enterprises. Such a crop rotation will be developed for small-scale peasants farms by relevant institutions and introduced in practice. These measures should ensure a high level of employment and production profitability, a significant gross output per unit of land area.
493. Further development of agricultural production in the Republic is closely related to the level of irrigated farming, irrigation network development and improvement of irrigation methods. Sufficient budget subsidies and credit resources necessary for maintaining irrigation infrastructure at a proper level will be allocated each year. These funds will be used to conduct rehabilitation works of the most important irrigation facilities of the country, and establishment of new institutional forms of water resources management.
494. Development of livestock breeding will be focused on meat and milk production to attain production volumes satisfying not only the local market, but sufficient for partial selling of these products on external market. For this purpose, it is necessary to restore breeding farms, because it is impossible to ensure high productivity in the livestock sector without highly productive cattle. The Republic also has all the conditions for development of yak breeding and production of wool. The revival of profitable sectors such as poultry breeding and fish farming have also significant potential.
495. To ensure growth of agricultural production, it is necessary to improve the activities of agricultural support services. For this purpose measures will be taken to establish agro-chemical and agro-technical services in each aiyl okmotu. Arrangements will be made to provide for unlimited sales of mineral fertilizers, agricultural chemicals and pesticides, agricultural tools and spare parts for agricultural machinery through specialized centers and shops. Projects implemented with the help of international donors will play a great role in the development of agricultural support services.
496. Further sustainable growth of the agricultural sector in general depends on technical re-equipment of processing enterprises, their re-orientation to production of products competitive in local and foreign markets. This will ensure the quality of agricultural products at the level of international standards. New technologies will be introduced to accelerate development of the agricultural sector.
497. These problems will be addressed during the forthcoming stage of agricultural and land reforms. It is necessary to continue working on improvement of the existing legal framework, as well as on land relations promoting an improved use of land and other natural resources. Leasing arrangements for land should be developed further. For the purpose of obtaining of adequate information, the prospective introduction of primary record keeping and analysis of conducted land and agricultural reforms, will be streamlined at the level of economic agents and aiyl okmotu. Free access to necessary information will be provided to farmers and peasants through organization of advisory and informational services and establishment of centers of agricultural development throughout the country. A uniform state system of rural land registration will be introduced and closely linked to the real estate; improvement of the land cadastre will be continued.
498. Establishment of a stable agricultural market based on short-term or long-term contracts between agricultural producers and consumers will have a major impact on growth of agricultural production. At the same time, an important role will be attached to an effective system of procurement of agricultural products, as well as establishment of a marketing system. In future, wholesale food markets will be organized in the large cities of the Republic for the purpose of maximum involvement of peasants and farmers in the process of selling of agricultural products and creation of certain facilities.
499. It is planned to pay special attention to the formation of economic and social infrastructure in rural areas rehabilitation of roads and communications, ensuring of access to healthcare and educational services, safe potable water for rural inhabitants. For these purposes it is intended to attract investments from interested donor countries and international organizations. A key factor for the revival of the agricultural sector and development of rural areas, is restoration of integration between cities and rural settlements under new mutually profitable conditions.
500. The issues of future development of the agricultural sector will be addressed by strengthening the structures engaged in agricultural production, reforming and retraining existing personnel in order to orient them to a market economy, as well as the development and introduction in practice of science-based recommendations and progressive technologies for profitable management of agriculture.