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ANALYSIS AND NEWS - ANALYSIS


CAPITALISING ON CENTRAL ASIA: AGRICULTURAL ASSETS IN KAZAKHSTAN

14 Aug 2024
 * 
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 * 
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 * Simeon Woo

Agriculture plays an essential role in Kazakhstan’s economic, social and
environmental development. According to Qazstat, 11.1% of Kazakhstan workers,
equivalent to 1 million people, worked in the agricultural sector in the first
quarter of 2024. Kazakhstan is the largest grain producer in the Central Asia
region by volume. In terms of exports, products of animal and vegetable origin
and prepared foodstuffs[1] accounted for 6.8% of the country's exports in 2023,
a significant increase from 3.3% in 2014, reflecting the growing importance of
the sector. Major agricultural products exported from Kazakhstan in the last
year included wheat, barley, linseeds, and sunflower seeds[2].

In President Tokayev’s state of the nation address ‘Economic course of a just
Kazakhstan’, the President recognised the enormous potential of the country’s
agricultural sector, yet acknowledged that this potential has not been fully
exploited. The strategic goal is to transform Kazakhstan into one of the leading
agricultural centres on the Eurasian continent. To achieve this, a gradual
transition from primary production to high valued‑added agriculture products is
required.


Sunflower field in Kazakhstan.

The president outlined a number of key directions to transform the country’s
agricultural sector, including the development of the agro‑industrial complex,
enhancing production capacity to achieve economy of scale, support for small
farms, upgrade and renewal of agricultural machinery, and the application of
innovative solutions and modern agricultural technologies.


National Agro-industrial Project

The Kazakhstan government aims to boost agricultural output by establishing more
agro‑industrial complexes, in other words, integrated clusters or facilities
that combine agricultural production, processing, storage and distribution. In
line with the national address by President Tokayev, the Kazakhstan government
published a draft government resolution on 23 April 2024 to reform the country’s
agricultural industry so as to attract investment and increase both quality and
quantity of agricultural output[3]. The estimated cost of the national project
is about KZT15.7 trillion (US$33 billion), and it has several targets to meet by
2028: increasing the volume of gross agricultural output by 2 times of the 2023
level to KZT17 trillion (US$ 38.3 billion); increasing agricultural exports by 2
times to KZT4,438 billion (US$10 billion); attracting investment in the
agricultural sector; upgrading agricultural equipment to enhance labour
productivity; and raising the share of processed and high valued‑added
agricultural products (such as milk, meat, oilseeds, and rice) to 70%.

To achieve these goals and targets, Kazakhstan will accelerate the
diversification of its crop production, reducing the share of water‑intensive
crops and transitioning to highly profitable crops, such as oilseeds, corn and
forage. The government wants to introduce new farming technologies, particularly
water‑saving and irrigation technologies. Additionally, the Kazakhstan
government is prioritising investment projects in the agro‑industrial complex
for specific products, including poultry meat, fish and dairy products. Through
these initiatives, the government aims to achieve self‑sufficiency in some of
the import‑dependent food products, such as dairy products and sugar, and expand
export capacity through domestic production.

Kazakhstan is actively developing greenhouse complexes to boost production.

Challenges Faced by the Sector

Extreme weather can be one of the key challenges to Kazakhstan's agricultural
sector, and the country has experienced droughts and flooding in recent years.
To date, these the climate changes have had limited impact on the country's
agricultural yields, but their impact on crop yields in the future is
unpredictable. There is a need to upgrade and modernise the agricultural
industry in Kazakhstan via infrastructure investment and technological
innovation. Currently, there are not sufficient climate‑proof agricultural
facilities such as greenhouses, and the implementation of technologies such as
weather monitoring, analytics, and precision farming is limited.

Wear and tear in machinery and the lack of sufficient equipment to support
agricultural production is another key challenge. It is reported that the
country lacks 65,000 tractors and 43,000 combines, resulting in inefficiency in
production. Meanwhile, the renewal rate of machinery is only 4.5% annually,
while the optimal technological upgrade level is 6‑8%. Due to lack of funds,
limited availability of new machinery, and high recycling fees, farmers are
relatively reluctant to renew or upgrade their machines, resulting in widespread
use of worn‑out or obsolete equipment[4]. To encourage the renewal of machinery
and equipment, the Kazakh government plans to introduce up to KZT450 billion
(US$1 billion) annually in preferential loan to finance their purchase. As part
of the national project, the initiative aims to boost the renewal rate of
machinery to 8‑10% per year.

In short, productivity has been low due to insufficient investment and limited
application of agricultural technologies, which hinder the country’s
competitiveness despite the vast amount of land and natural resources available.
The National Agro‑industrial Project is specifically designed to address these
challenges and to improve efficiency and value‑added throughout the entire
agricultural value chain.

Potentials for Hong Kong

The agricultural sector has suffered from underinvestment and significant
challenges have been placed on producers. However, the agricultural businesses
are increasingly seeking out modern technologies. As more equipment reaches the
end of its lifecycle, the national project to modernise the industry can offer
significant opportunities in the sector.

Kazakhstan is promoting modernisation and industrialisation in the
agro‑industrial sector, and plenty of proposed investment projects can be found
on Kazakh Invest. Foreign investment in food manufacturing facilities, storage
facilities and agricultural technology are highly sought‑after to build
resilience in the sector.

In addition to enhancing agricultural production and investment, Kazakhstan also
plans to increase its exports, particularly exports to members of the Shanghai
Cooperation Organisation (SCO), like mainland China[5]. In fact, there has been
a substantial increase in agricultural products trade between the two countries.
In 2023, exports of Kazakh products of animal and vegetable origin and prepared
foodstuffs (HS code 1‑24) to mainland China surged 76% over the year, with the
value around US$961 million, according to the ITC Trade Map database. Kazkahstan
imports of animal and vegetable origin and prepared foodstuffs from mainland
China also grew by 62% in the same year to US$382 million. Mainland China is an
attractive market with enormous potential for Kazakhstan’s producers, and both
countries are dedicated to deepening collaborations and trade in the
agricultural sector.

As Kazakh agricultural industry players are seeking market outlets for their
products, Hong Kong has the potential to serve as a platform showcasing
Kazakhstan food products via its exhibitions and international network. As the
world’s tenth largest merchandise trading economy in 2023, Hong Kong has
developed into a premier exhibition and sourcing hub in the region. Kazakhstan,
building on its status as a major grain producer and exporter among SCO members,
seeks to establish strong trading relationships with Southeast Asian countries.
This presents an opportunity for Hong Kong stakeholders to leverage the city’s
networks and trade fairs to introduce Kazakh food products into different
markets.

Nevertheless, transitioning Kazakhstan’s agricultural exports beyond its
traditional markets into southern China and Southeast Asia will involve
overcoming various challenges. Hong Kong stakeholders will need to deepen their
understanding of Kazakhstan’s agricultural sector and forge stronger commercial
ties between the two markets. With the right strategies and collaborative
efforts, Hong Kong may be able to position itself as a strategic gateway and
distributor for Kazakh agricultural goods in the wider Asia‑Pacific region.

--------------------------------------------------------------------------------

[1] HS Code 1‑24

[2] Source: ITC Trade Map

[3] https://legalacts.egov.kz/npa/view?id=15027204

[4] www.agroberichtenbuitenland.nl/actueel/nieuws/2024/05/24/kazakhstan-mulls-cancelling-recycling-fees-for-farmers-to-stimulate-upgrade-of-agricultural-machinery

[5]
https://daryo.uz/en/2024/05/30/kazakhstan-china-agricultural-trade-nearly-doubles-to-13bn-in-2023



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Food & BeveragesKazakhstanEastern EuropeAGRITECHAGRICULTURAL
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