AKT - M… · AKT Agro-Food Feasibility Study Main Report (Draft) December 7 2015 ii Contents: Executive Summary

AKT Agro-Food Feasibility Study Main Report (Draft) December 7 2015

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Food Feasibility Study Main Report (Draft)December 7 2015

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AKT Agro-Food Feasibility Study Food Feasibility Study

AKT AGRO-FOOD FEASIBILITY STUDY DRAFT MAIN REPORT

DR. PETER J. MIDDLEBROOK DR. JOHN ASHLEY SWAPNA NAIR ZURA MENDIKULOVA MUKHAMMADJON ESHBADALOV KABIR KHAN ISAKHEL

December 7 2015

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Contents: Executive Summary ............................................................................................................................... vi Section A. Introduction........................................................................................................................ 1 Section B. Study Objectives, Scope and Rationale ............................................................................. 2 Section C. Methodology ...................................................................................................................... 4 Section D. General Product Trading Overview................................................................................. 16 Section E. Revealed Comparative Advantage ................................................................................... 55 Section F. Country Benchmarking .................................................................................................... 59 Section G. Afghanistan Main Findings ............................................................................................. 65 Section H. Kyrgyzstan Main Findings .............................................................................................. 97 Section I. Tajikistan Findings......................................................................................................... 138 Section J. Selected Product Export Potential ................................................................................. 172 Section K. Proposed Bankable Investments .................................................................................... 182 Section L. AKT Public Private Dialogue Options........................................................................... 191 Section M. Recommendations ......................................................................................................... 193 Figures: Figure 1. Geopolicity’s Value Chain Method ..................................................................................... 6 Figure 2. General Considerations in Developing VC Strategies ......................................................... 8 Figure 3. Factors Reviewed For Agro-Food Investment ..................................................................... 9 Figure 4. Illustrative Value Chain for Generic Products ................................................................... 10 Figure 5. Standard (Porter’s) Value Chain Model with Primary and Support Activities.................. 13 Figure 6. Map of Afghanistan Field Visit Areas ............................................................................... 70 Figure 7. Afghanistan Product Feasibility Ranking for Pre-Selected Products (2013)..................... 72 Figure 8. Broad Process for Product Short Listing and VC Investment............................................ 73 Figure 9. Possible Macro, Meso and Micro Intervention Stakeholders ............................................ 76 Figure 10. Promising Agricultural Sub-Sectors in Afghanistan........................................................ 77 Figure 11. Export, Domestic Consumption and Production of Almonds (2001-09) in MT.............. 78 Figure 12. Export (Quality and US$ Value) of Almonds (2001-09)................................................. 78 Figure 13. US Dominates Global Production .................................................................................... 82 Figure 14. Afghanistan Almond Process VCA – Domestic and Export Market Prices ................... 84 Figure 15. Afghanistan’s Major Export Destinations for All Products by Value (US$) in 2013 ..... 87 Figure 16. Composition of Fruit, Vegetable and Nut Exports in 2013 (US$374 million) ................ 88 Figure 17. Almonds Jobs Creation Impact Per USD/Job .................................................................. 95 Figure 18. Projected Net Income by Crop (US$ Per Hectare 2010) ................................................. 96 Figure 19. Map of Kyrgyzstan Field Visit Areas ............................................................................ 101 Figure 20. Kyrgyzstan Product Feasibility Ranking for Pre-Selected Products (2013) .................. 105 Figure 21. Kyrgyzstan Walnut Process VCA – Domestic and Export Market Prices.................... 112 Figure 22. Kyrgyzstan Plums / Prunes Process VCA – Domestic and Export Market Prices........ 117 Figure 23. Map of Tajikistan Field Visit Areas............................................................................... 139 Figure 24. Tajikistan Product Feasibility Ranking for Pre-Selected Products (2013) .................... 144 Figure 25. Tajikistan Grape Process VCA – Domestic and Export Market Prices ......................... 149 Figure 26. Tajikistan Onion Process VCA – Domestic and Export Market Prices......................... 158 Figure 27. Primary Market Connections for Grapes ....................................................................... 170 Figure 28. Primary Market Connections for Onions, Shallots, Garlic and Leeks Etc..................... 171 Figure 29. Afghanistan - Potential Export Markets for Shelled Almonds ...................................... 175 Figure 30. Kyrgyzstan - Potential Export Markets for Shelled and Unshelled Walnuts................. 178 Figure 31. Tajikistan – Potential Export Map for Table Grapes / Raisins ...................................... 181 Figure 32. AKT Anchor, Ancillary, and Spinoff Gains of Integration ........................................... 184 Figure 33. Afghanistan Almonds - Proposed Micro, Meso and Macro VC Development Options 185 Figure 34. Kyrgyzstan Walnuts - Proposed Micro, Meso and Macro VC Development Options.. 186 Figure 35. Tajikistan Grapes - Proposed Micro, Meso and Macro VC Development Options....... 187


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Tables: Table 1. Pre-selected Products FOR VC Validation ........................................................................... 1 Table 2. Product Value Chain Analysis (VCA) Field Questionnaire................................................ 11 Table 3. Pre-Selected Products .......................................................................................................... 16 Table 4. Key Importers of Fresh Grapes (Identifying Markets) - 2014 ............................................ 25 Table 5. Key Global Exporters of Fresh Grapes (Identifying Competitors) - 2014 .......................... 25 Table 6. Key Importers of Raisins (Identifying Markets) - 2014 ...................................................... 25 Table 7. Key global exporters of Raisins (Identifying Competitors) - 2014 ..................................... 26 Table 8. Key Importers of Melons (Identifying Markets) (2014) ..................................................... 28 Table 9. Key global exporters of Melons (Identifying Competitors) (2014) .................................... 29 Table 10. Key Importers (Markets) of Apricots (2014) .................................................................... 32 Table 11. Key global exporters (Competitors) of Apricots (2014) ................................................... 32 Table 12. Key Global Importers (Markets) of Lemons (2014) ......................................................... 35 Table 13. Global Exporters (Competitors) of Lemons (2014) .......................................................... 35 Table 14. Key Importers of Strawberries (Identifying Markets) (2014) ........................................... 37 Table 15. Key global exporters of Strawberries (Identifying Competitors) (2014) .......................... 37 Table 16. Key Importers of Almonds - Unshelled (Identifying Markets) (2014) ............................. 42 Table 17. Key Global Exporters (Competitors) of Unshelled Almonds (2014)................................ 42 Table 18. Key Importers of Almonds-Shelled (Identifying Markets) (2014) ................................... 42 Table 19. Key Global Exporters (Competitors) of Almonds - Shelled (2014).................................. 43 Table 20. Key Importers of Pistachios (Identifying Markets) (2014) ............................................... 46 Table 21. Key global exporters of Pistachios (Identifying Competitors) (2014) .............................. 46 Table 22. Key Importers (Markets)of Walnuts unshelled (2014) ..................................................... 51 Table 23. Key Exporters (Competitors) of Walnuts unshelled (2014) .............................................. 51 Table 24. Key Importers (Markets) of Walnuts Shelled (2014) ........................................................ 51 Table 25. Key Exporters (Competitors) of Walnuts Shelled (2014) ................................................. 51 Table 26. Key Importers (Markets) of Potatoes (2014)..................................................................... 54 Table 27. Key Exporters of Potatoes (Competitors) (2014) .............................................................. 54 Table 28. Table 28. Revealed Comparative Advantages................................................................... 56 Table 29. Revealed Comparative Advantages by Product for AKT Countries ................................. 58 Table 30. Results of AKT Country Benchmarking ........................................................................... 63 Table 31. Major Regional and Global Export Competitors per Product ........................................... 64 Table 32. Afghanistan Technical justification for Selected Products ............................................... 66 Table 33. Comparative Yields for a Sample of Pre-Selected Products ............................................. 75 Table 34. Low Access to Finance as a Major Constraint on Market Expansion............................... 76 Table 35. Afghan Almond Price by Traders and Transport Cost in 2014......................................... 83 Table 36. Almond Product Compliance with AKT Selection Criteria .............................................. 85 Table 37. SWOT Analysis for Almond Marketing and Financial Viability ..................................... 93 Table 38. Estimate of Jobs in Tree Crop Horticulture Sector ........................................................... 95 Table 39. Immediate Physical Integration Partners Include.............................................................. 96 Table 40. Trading Across Borders Indicators.................................................................................... 97 Table 41. Border Export Time and Costs .......................................................................................... 98 Table 42. Walnut Product Compliance with AKT Selection Criteria ............................................. 113 Table 43. Plum/ Prune Product Compliance with AKT Selection Criteria ..................................... 118 Table 44. Onion production in Two Rayons of Osh oblast, Kyrgyzstan......................................... 119 Table 45. Batken Oblast Administration: priority crops ................................................................. 121 Table 46. SWOT Analysis for Walnut Marketing and Financial Viability ..................................... 130 Table 47. Grape Product Compliance with AKT Selection Criteria ............................................... 150 Table 48. Onion Product Compliance with AKT Selection Criteria ............................................... 156 Table 49. SWOT Analysis for Grape Marketing and Financial Viability ....................................... 163 Table 50. Key Export Markets for Afghan (Unshelled) Almonds (2014)....................................... 172 Table 51. Key Export Markets for Afghan (Shelled) Almonds (2014) ........................................... 172 Table 52. Key Global Markets - Shelled Almonds (2014).............................................................. 174 Table 53. Main Kyrgyzstan Export Markets for Walnuts ............................................................... 176


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Table 54. Key Importers-Walnuts In Shell...................................................................................... 177 Table 55. Key Importers-Walnuts Shelled ...................................................................................... 177 Table 56. Export Markets for Fresh Grapes-2014 ........................................................................... 179 Table 57. Export Markets for Raisins - 2014 .................................................................................. 179 Table 58. Key Global Importers-Fresh Grapes-2014 ...................................................................... 180 Table 59. Key Global Importers-Raisins-2014................................................................................ 180 Table 60. Understanding Different Project Impacts ........................................................................ 184 Table 61. Top 20 Sovereign Wealth Fund Ranking by Assets (USS$)........................................... 189 Charts Chart 1. Afghanistan Production Of Pre-Selected Products 2013..................................................... 16 Chart 2. Kyrgyzstan Production Of Pre-Selected Products 2013 ...................................................... 17 Chart 3. Kyrgyzstan Production Of Pre-Selected Products 2013 (Excluding Potatoes) ................... 17 Chart 4. Tajikistan Production Of Pre-Selected Products 2013 ........................................................ 18 Chart 5. Afghanistan Exports Of Pre-Selected Products 2014 .......................................................... 18 Chart 6. Kyrgyzstan Exports Of Pre-Selected Products 2014 ........................................................... 19 Chart 7. Tajikistan Exports Of Pre-Selected Products 2014 ............................................................. 19 Chart 8. Grape Production/Productivity In AKT Countries 1992-2013............................................ 20 Chart 9. Share Of Grape Production In Global Production ............................................................... 20 Chart 10. Share Of AKT Country Exports In Global Exports Of Fresh Grapes ............................... 21 Chart 11. Share Of AKT Country Exports In Global Exports Of Dried Grapes ............................... 21 Chart 12. Afghanistan’s Key Export Markets For Dried Grapes (2014)........................................... 22 Chart 13. Afghanistan’s Key Export Markets For Fresh Grapes (2014) ........................................... 22 Chart 14. Kyrgyzstan’s Key Export Markets For Dried Grapes - 2014 ............................................ 23 Chart 15. Kyrgyzstan’s Key Export Markets For Fresh Grapes (2014) ............................................ 23 Chart 16. Tajikistan’s Main Export Markets For Dried Grapes ........................................................ 24 Chart 17. Tajikistan’s Main Export Markets For Fresh Grapes ........................................................ 24 Chart 18. Production/Productivity-Afghanistan ................................................................................ 26 Chart 19. Afghanistan - Share of Melon Production in Global Production ...................................... 27 Chart 20. Share Of AKT Country Exports In Global Exports Of Melons (2014)............................. 27 Chart 21. Key Export Markets For Afghanistan – Melons (2014) .................................................... 28 Chart 22. Apricot Production/Productivity In AKT Countries 1992-2013 ....................................... 29 Chart 23. Share Of AKT Country Production In Global Production Of Apricots ............................ 30 Chart 24. Share Of AKT Country Exports In Global Exports Of Apricots....................................... 30 Chart 25. Afghanistan’s Key Export Markets For Apricots - 2014................................................... 31 Chart 26. Kyrgyzstan’s Key Export Markets For Apricots - 2014.................................................... 31 Chart 27. Tajikistan’s Key Export Markets For Apricots - 2014 ...................................................... 31 Chart 28. Lemons Production/Productivity In Tajikistan 1992-2013 ............................................... 33 Chart 29. Share Of Tajikistan Lemon Production In Global Production .......................................... 33 Chart 30. Share Of Tajikistan Lemon Exports In Global Exports Of Lemons ................................. 34 Chart 31. Key Export Markets For Tajikistan – Lemons (2014)....................................................... 34 Chart 32. Strawberry Production In Kyrgyzstan 1996-2013 ............................................................. 35 Chart 33. Kyrgyzstan Share Of Strawberry Production In Global Production ................................. 36 Chart 34. Share Of AKT Country Exports In Global Exports Of Fresh Strawberries ...................... 36 Chart 35. Key Export Markets For Kyrgyzstan – Strawberries - 2014 ............................................. 37 Chart 36. Production of Almonds AKT Countries 1992-2013.......................................................... 38 Chart 37. Productivity of Almond production AKT Countries 1992-2013....................................... 38 Chart 38. Share Of AKT Country Exports In Global Exports Of Almonds (Unshelled) .................. 39 Chart 39. Share Of Afghanistan Exports In Global Exports Of Almonds (Shelled) ......................... 39 Chart 40. Key Export Markets For Afghanistan – Almonds (Unshelled) (2014) ............................. 40 Chart 41. Key Export Markets For Afghanistan – Almonds (Shelled) (2014).................................. 40 Chart 42. Key Export Markets For Kyrgyzstan –Almonds (Shelled) (2014).................................... 41 Chart 43. Key Export Markets For Tajikistan –Almonds (Shelled) (2014) ...................................... 41 Chart 44. Production of Pistachios-Afghanistan/Kyrgyzstan 1992-2013 ......................................... 43


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Chart 45. Productivity of Pistachios - Afghanistan/Kyrgyzstan 1992-2013 ..................................... 44 Chart 46. Share Of AKT Country Exports In Global Exports Of Pistachios .................................... 44 Chart 47. Key Export Markets For Afghanistan –Pistachios (2014)................................................. 45 Chart 48. Key Export Markets For Tajikistan – Pistachios (2014) ................................................... 45 Chart 49. Production of Walnuts - AKT countries 1992 (2014) ....................................................... 46 Chart 50. Global Share of Production AKT countries....................................................................... 47 Chart 51. Share Of AKT In Global Exports Of Unshelled Walnuts ................................................. 47 Chart 52. Share Of AKT Country In Global Exports Of Shelled Walnuts ....................................... 48 Chart 53. Export Markets For Afghanistan – Walnuts (Unshelled) (2014) ...................................... 48 Chart 54. Export Markets For Afghanistan – Walnuts (Shelled) (2014)........................................... 49 Chart 55. Key Export Markets For Kyrgyzstan – Walnuts (Unshelled) (2014)................................ 49 Chart 56. Key Export Markets For Kyrgyzstan –Walnuts (Shelled); 2014....................................... 49 Chart 57. Key Export Markets For Tajikistan –Walnuts (Unshelled); 2014..................................... 50 Chart 58. Key Export Markets For Tajikistan –Walnuts (Shelled); 2014 ......................................... 50 Chart 59. Share Of Potato Production In Global Production ............................................................ 52 Chart 60. Share Of AKT Country Exports In Global Exports Of Potatoes ....................................... 52 Chart 61. Key Export Markets For Afghanistan – Potatoes (2014) .................................................. 53 Chart 62. Key Export Markets For Kyrgyzstan – Potatoes (2014) ................................................... 53 Chart 63. Export Values to India/Pakistan – Unshelled Almonds 2005-2014 ................................ 173 Chart 64. Export Values to India/EU – Shelled Almonds 2005-2014............................................. 173 Chart 65. Growth in Market Volumes – (unshelled) Walnuts......................................................... 176 Chart 66. Growth in Market Volumes (Shelled) Walnuts ............................................................... 177 Chart 67. Export Markets for Fresh Grapes - 2005 to 2014 ............................................................ 179 Annexes Annex 1 Almond Exporting Countries and Share of World Market (2013) ................................... 207 Annex 2 Almond Importing Countries (2013) ................................................................................ 208

THS IS A DRAFT REPORT

TYPOGRAPHICAL AND OTHER ERRORS ARE TO BE CORRECTED.

ADDITIONAL FIELD WORK IS BEING UNDERTAKEN IN

TAJIKSTAN TO CONFIRM AND DEEPEN RESULTS.


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EXECUTIVE SUMMARY To be developed in the final report following strengthening feedback and observations. The illustrative figure of product selection below will be illuminated upon.


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Fruits

Vegetables

Nuts

AFG KGZ TJK RCA >1

AKT Pre-Selected Products VC Selected Product Other Products Shortlisted Product


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Section A. INTRODUCTION The Istanbul International Center for Private Sector in Development (IICPSD) was established to support the private sector in accelerating its contribution to inclusive growth and jobs creation. The Afghanistan, Kyrgyzstan and Tajikistan (AKT) Consortium – one of the many initiatives of IICPSD - launched this Feasibility Study for Regional Agro-Food Industry Value Chain Development at a time when growth and productivity outlooks in Central and Southern Asia appeared compromised. The search for higher value therefore demands a greater focus on evidence-based-investment, and this Feasibility Study of the Fruit, Vegetable and Nuts (FVN) sub-sectors is positioned to provide the evidence for more cogent private and public coordination. Work already conducted at the end of 2014 by IICPSD led to the identification of high potential agricultural products, and the January 2014 AKT workshop held in Istanbul further increased this to a list of 12. At the October 15 2015 workshop in Dushanbe attended by Geopolicity consultants, it was agreed that the 12 products chosen would remain indicative, and that final selection of one product per country would be based on determination of the following broad criteria:

! Product export growth potential; ! Product import substitution potential; ! Product volume which could impact trade balance; ! Product potential for cross-border value chains among 3 countries; ! Product employment multiplier potential; and, ! Appetite for public and private investment.

As Value Chains (VC) provide a key framework for understanding how inputs and services are brought together and then used to grow, transform or manufacture a product, this feasibility study adopts an adaptive VC methodology that tracks how products move physically from the producer to the customer, and how value increases along the way. Such a perspective allows for a clearer understanding of how business-to-business relationships connect along the VC across different channels, including mechanisms for increasing efficiency, and ways to enable businesses to increase productivity and value addition. The VC findings provide an important reference point for supporting services and the business environment reforms in relation to agro-food industry and competitiveness.

Table 1. PRE-SELECTED PRODUCTS FOR VC VALIDATION

Pre-Selected Products Potential Other Products Alfalfa Almond Apricot Grapes Lemon Melon Onion Pistachio Pomegranate Potatoes Strawberries Walnut

Apples Saffron Plum/ prunes

Note: Other products were to be explored during the course of the feasibility study

With minimal integrated cold storage and logistical capacities likely to discourage immediate investments in exporting perishable products, this VC study assesses regional and global product benchmarks, as the basis for determining the potential for market expansion going forward. This report presents the results of field- and desk-based analysis in all three AKT countries, conducted from October 15 to November 24th 2015 and covering multiple markets.

This Draft Final Report is the result of significant market and key informant analysis, structured around multiple sections. Section A provide this introduction, Section B provides the study objective, scope and rationale, Section C provides the general product trading overview, Section D presents results of country benchmarking, Section E provides the results of Revealed Comparative Advantage (RCA), Section F provides the study methodology, Section G provides the main findings on Afghanistan, Section H provides the main findings on Kyrgyzstan, Section I provides the main findings on Tajikistan, Section J provides a short discussion on the findings, Section K outlines proposed bankable projects (draft), Section L provides options for improved public-private dialogue, and finally Section M provides the recommendations. This is the draft feasibility study report.


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Section B. STUDY OBJECTIVES, SCOPE AND RATIONALE The development of the AKT Agro-Industry Value Chain work is fully in line with the new Sustainable Development Goals (SDGs), and while selection of high potential VCs must be based on rate-of-return metrics, it has been decided by the AKT consortium that any investment should also: ! Reduce poverty (SDG 1 (No Poverty); ! Ensure food security and good nutrition (SDG 2 -Zero Hunger), SDG 3 Good Health and

Well Being) and SG 10 (Reduced Inequalities); ! Promote labour intensive sectors with potential value chains (SDG 8 - Decent Work and

Economic Growth); ! Lead into greater economic, social and physical integration within Central Asia (SDG 8 -

Decent Work and Economic Growth) and SDG 9 (Industry, Innovation and Infrastructure); ! Support an integrated sustainable model that is replicable and scalable (SDG 17 - Partnerships

for the Goals). As AKT economies do not possess sufficiently broad markets, and are hampered in establishing viable and competitive high value-added agro-food sectors, a regional approach that is inclusive and holistic is required to enhance productivity and competitiveness of the agricultural sector in all three economies. As a result, the aim is to select one product for each country with export potential, ideally also providing synergies between countries to allow lesson learning. Taking the pre-selected products as the starting point, this study has therefore analyzed the competitiveness of these products, selecting three to focus on, identifying their value chains, cost structure and transport routes for cross border trade potential. This draft Feasibility Study therefore has the following four objectives:

! Objective 1: To propose three feasible agro-food industry products among pre-selected

products for inclusive value chain development with justifications, respective action plans and budgets; presenting the features of respective value chains from primary agricultural production to the final consumer and ensuring developing these value chains is feasible in terms of realities, opportunities, and dynamics of each from among AKT markets compared with international markets, especially feasible for potential export markets;

! Objective 2: To propose interventions for increasing the inclusiveness, productivity and connectivity of agro-food industry value chains, which would set the stage for potential future projects and initiatives to be undertaken by different stakeholders (local and international private sector enterprises, AKT governments, civil society, international partners and donors) for development and facilitation of inclusive value chains;

! Objective 3: To adopt a participatory approach in which all stakeholders from AKT countries

and related third parties are involved in the Study, through special workshops and regular communication; and,

! Objective 4: To convert the steps followed throughout the study into a model methodology to

be adapted by future agro-food industry regional inclusive value-chain development projects. Examine key elements and requirements including, but not limited to, legal/procedural aspects, human resource needs and financial requirements for each option.

SCOPE OF WORK In order to meet these objectives, Geopolicity Inc. has undertaken classic VC work to include trade potential analysis and potential export market analysis also, for the pre-selected FVN products. Importantly, given the need to meet certain wider criteria including wealth creation, the consultants have considered additional products in all countries. To meet the above mentioned objectives, the following scope of work has shaped the work of the Geopolicity consultant team, and the results are reflected in this report:


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! To analyze and identify potential export markets for pre-selected FVN products of AKT; ! To map the value chains of the pre-selected products; ! To overview existing aggregators (such as smallholders’ organizations, cooperatives etc)

within the market; ! To overview existing initiatives/projects undertaken by other stakeholders in the field of agro-

food industry value chain development; ! To determine the cost structure of the selected product by specifically detecting the share of

each level of the chain within the market price; to compare the cost structure with international standards in order to identify comparative advantages;

! To determine required investments in order to increase the value chain productivity and

competitiveness; ! To determine potentials and constraints of related sub-industries of agro-food industry in

AKT; ! To analyze and identify existing and potential economic corridors among and around AKT; ! To determine the level of compliance in agro-industry of AKT with international standards

and regulations which affect access to potential markets; ! To determine domestic and international bottlenecks (including customs) with regards to

transportation and logistics of pre-selected products’ agro-food sub-industries; ! To determine the level of smallholders’ access to markets, finance, services and infrastructure

within sub-sectors of pre-selected products; ! To propose interventions in line with the aforementioned Objective 2, especially for

increasing the inclusiveness of and productivity and connectivity within the value chains of the three selected products;

! To propose next steps to be built upon the findings of the Feasibility Study which will shape

the upcoming initiatives to develop agro-food industry value chains of the selected products in particular, and in AKT in general;

! To communicate with all stakeholders including governments, NGOs and private sector and

conduct consultations to bring their inputs to the study; ! To prepare and submit the deliverables of the assignment, including the reports and

workshops listed in the relevant section of this ToR; and, ! To prepare the methodology report in a compatible manner to serve as an input and reference

model for the future inclusive value chain development projects. Geopolicity consultants have considered potential product demand for existing and new products, while also considering world and regional market events that could impact the production and pricing of certain products, including commodity prices and global climatic realities. The approach and method outlined below has been designed to be fully responsive to these requirements, allowing the AKT Consortium to not only identify high rate-of-return investments that meet the overall objectives, but also to develop bankable investment plans. The study presents entry points for national and multinational companies which may have a particular potential to become anchor firms at the implementation stage. Importantly, as it is not possible to conduct detailed value chain studies for 12 products in 3 countries over a 4 week period (this would be 36 value chains), we have adopted a pre-screening approach allowing us to prioritize value chains for more detailed field-based analysis.


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Section C. METHODOLOGY This feasibility study is unusual in a number of regards. Firstly, it seeks to assess the commercial and market expansion viability of 12 pre-selected products across three countries, implying a focus on at least 36 value chains. Secondly, the criteria set by the AKT Consortium go way beyond traditional value chain analysis, as they also include impact on exports, employment and poverty. As a result, an adaptive value chain method was adapted allowing the consultant team to address both normative and idiosyncratic issues. The method therefore presented below builds from standard international best practice, but it also incorporates new elements reflective of the context described above. GENERAL APPROACH TO AKT VALUE CHAIN FEASIBILITY Value chain development covers a number of discrete and yet connected stages, starting with (i) sector and sub-sector selection (ii) competitiveness analysis (iii) an assessment of market opportunities, and (iv) implementation and impact assessment. The AKT Consortium has already selected the sector and sub-sectors, including products, and as a result the consultants will focus on competitiveness analysis, benchmarking, value chain addition and an assessment of market conditions with a particular focus on exports. ! Sample Frame: It is not possible to sample 36 different value chains across national, sub-

national and local markets, and as a result the consultants undertook screening and validation of pre-selected value chains in order to assess viability and compliance with the criteria set. While the sample frame covers the three AKT countries, we sampled 4-6 markets per country, with as many questionnaires as needed to confirm the validity of findings.

! Pre-Screening: We conducted pre-screening on the pre-selected value chain products to see how they conform to the criteria set (i.e. poverty reduction, employment elasticity etc.). Pre-screening results are presented below, though as the aim is to identify products with an export market potential in particular, the latter will lead to a reduction in the number of products to be studied at the value chain level. As outlined below, the final listing falls to 1 or 2 prioritized products per country.

! Country Benchmarking: While there is no budget for sending researchers into regional

countries, we have access to basic secondary data (i.e. FAO FEWS, COMTRADE, WITS, Central Banks etc.) that allow cost differentials (arbitrage) between domestic consumer prices and regional and international benchmark prices to be compiled. Not only does this allow competitiveness to be established, it allowed the consultant team to get a sense of the downstream value chain and potential for market expansion.

! Market Price Volatility: As agricultural product prices change over the year, as a result of

high and low seasonality and supply and demand factors, the high-low pricing charts will provide (where available) for price volatility for products, over time.

! Survey Questionnaires: We have developed (see below) a standard field-based survey

questionnaire that allows us to capture information across the entire product value chain, including pricing, strategy, competitiveness, trade, aggregation and other factors. The survey questionnaire allows for farmer, trader, transporter, wholesaler and retailer interviews to be conducted in a structured way, allowing insights into micro, meso and macro constraints.

! Key Informant Interviews (KII): The Key Informant Interviews (KII) conducted allowed a

focus on the value chains pre-screened and selected for final value chain development. KIIs were conducted in various markets in each country (see results sections below), with the number required for each value chain being determined by resources and confidence levels. For example, if having conducted 4-6 KIIs on one product in one market (i.e. grapes in Herat, Afghanistan) and the results become consistent, the sample size for that product will have


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been determined accordingly. ! Triangulation: Results were triangulated in the field and by using scrutiny of secondary data.

Triangulation facilitates validation of data through cross-verification from more than two sources, and this was used at the KII and final product selection stage. Triangulation tested the consistency of findings obtained through the different VC instruments used and increases the chance to control, or at least assess, some of the threats or multiple causes influencing value chain results obtained. We used both data and methodological triangulation approaches.

! Stakeholders Participation: There are a large number of stakeholders involved in value

chains, including input providers, farmers, processers, transporters, financiers, wholesalers, retailers, government policy makers and regulators and chambers of commerce, for example. The names of all key informants were documented and are annexed in this report. Though farmer and trade-based stakeholders dominated the interviewee base for this study, the main institutional stakeholders were also interviewed.

! Confidence Levels and Finding Validation Process: All evidence, data analysis, findings and

results are presented below, including confidence levels. The final validation process is to be provided through client review of the Draft Report and through the Second Workshop, at which participants can review (and dispute as necessary) the findings.

VALUE CHAIN METHOD Value chains are defined as the full range of activities needed to bring a product from production to the final consumer in a market. From a firm (company) perspective, the primary motivation is profits, though for a product to be profitable in a sustainable manner, firms focus on factors such as price and quality. As such, value chains include all of the vertically-linked interdependent processes that generate value for the consumer, as well as horizontal linkages to other value chains that provide intermediate goods and services. Value chains therefore focus on value creation - typically via innovation in products or processes, as well as marketing - and also on the allocation of incremental value. In the case of regional value chains, activities are spread beyond national borders and not constrained within one country. Conventional development theory would argue for a gradual shift in development emphasis from the agricultural sector to the manufacturing sector, and eventually to the services sector. Yet, recent developments in the global economy have indicated that the traditional stages of growth do not really work well for all economies. Moreover, as outlined below, the heavy dependence of all economies on traditional trading partners – including Pakistan for Afghanistan and Kazakhstan and Russia for Kyrgyzstan – argues for a more selective approach more in line with the real political economy. Furthermore, given the growing trade imbalance between AKT countries and major trading partners, there is a strong argument for import substitution and targeted export-led growth. The method adopted here therefore reflects best international practice, but is adapted to the current context. As a result, we will conduct the method across the following five major stages: ! Sector and Value Chain Assessment and Value Chain Analysis; ! Options to Increase Competitiveness; ! Identifying market based opportunities and replicable business models; ! Identify targeted investments for bankable projects; and, ! Monitoring and impact assessment. The five steps (See Figure 1 below) are not however followed in a stepwise (i.e. Step 1, Step 2, Step 3) linear approach, but rather in a non-linear fashion, with the integrity of all key steps maintained.


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Figure 1. GEOPOLICITY’S VALUE CHAIN METHOD


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The generic Geopolicity VC Analysis Project Cycle outlined above, therefore provides the basis for the proposed AKT VC method. While we have not been contracted to conduct all of these tasks under the Feasibility Study phase, the method below outlines the tasks undertaken, as the basis for full scale implementation of final selected products.

SECTOR AND SUB-SECTOR SELECTION & VALUE CHAIN ANALYSIS Task 1: Identify and Prioritize Value Chains: The AKT Consortium has already selected the VFN sub-sector, and also identified a set of pre-selected products. As a result, Geopolicity conducted Tasks 2 through 5 below, as the basis for selecting a smaller number of value chains for further analysis and potential development. However, we also considered other value chains (i.e. plums/ prunes) that have not been selected by the AKT Consortium, based on evidence, just in case such products may provide a stronger and more compelling business case. Task 4: Assess Revealed Comparative Advantages: Estimating Revealed Comparative Advantages (RCA) helps identify whether the value chains prioritized are those in which AKT countries have a comparative advantage vis a vis other value chains within the country and vis a vis similar value chains in other countries, both globally and in the region. RCAs identify the extent to which an exporting country captures world market share in a particular area relative to the degree at which it captures export market share for all traded goods. Trade data available at the 6-digit level from COMTRADE/WITS has been used for the estimations. An RCA greater than 1 indicates a comparative advantage for that item, while an RCA lower than 1 will indicate a comparative disadvantage. While the RCA analysis has well-documented shortcomings, such as not incorporating transportation costs / transit times and overlooking many domestic factors, this still continues to be a key tool used to assess VC competitiveness. Using the RCA analysis findings in tandem with the other tools outlined, such as country benchmarking, will help provide a broader and more in-depth picture of the VC identified. Task 3: Conduct Country Benchmarking: In-country and cross-country benchmarking of value chains is an important step in assessing the competitiveness of a product in one market compared with another. Benchmarking value chains within the country to other product value chains, and against similar value chains in other countries helps assess relative strengths and weaknesses and also identifies best practices that can be adopted. Once value chains are prioritized, this task would: ! Identify the indicators to benchmark - these could include availability of inputs,

transportation and transit costs, shelf life of intermediate inputs in relation to travel, bottlenecks that could be faced, employment potential and nature of employment generation;

! Assess sources of information and collect the information - a mix of desk-based research

and inputs collected during the field surveys in each of the AKT countries; and, ! Analyze the data and present conclusions - this would help identify the strengths and

weakness of the value chains prioritized and identify points of intervention. Task 4: Assess Value Chain Strategy: For the selected value chains we began the early design of informed strategies using various analytical methods for understanding the value chain, including upstream and downstream value chain integration at various points of the chain. We assessed driving forces (accelerators), strategic actions, operational efficiency and potential building blocks. As outlined below, we have conducted KII interviews with many hundreds of stakeholders across three countries, and many of the issues and constraints outlined in Figure 2 below, were discussed in great detail; in particular: ! Driving force; ! Strategic actions; ! Operational efficiency; and, ! Production building blocks.


8

Figure 2. GENERAL CONSIDERATIONS IN DEVELOPING VC STRATEGIES

OPTIONS TO INCREASE COMPETITIVENESS Task 5: Consider Export Potential / Actions: Country benchmarking and Revealed Comparative Advantage assessments have provided (see below) insight into the export potential of a particular value chain, by assessing production volumes, yields, competitors and markets. We have assessed options for market expansion, aggregation, monopolies of scale and competitiveness, as well as trade and customs policy factors, and factors such as infrastructure availability and certification. Key questions addressed, include, but are not limited to: ! Does market demand exist for a given or improved product in a destination market? ! Is there potential to apply/adopt available/improved knowledge and technology? ! Are sufficient resources, capacities, infrastructure and raw materials available and can they be

used more efficiently? ! Is there a real or potential competitive advantage in the production/processing of a certain

good? Task 6: Conduct Value Chain Assessments: Having reduced the number of value chains to be focused on down from 12 pre-selected to 2-3 products per country for deeper enquiry, we conducted detailed value chain studies of these products in target and representative markets, using the general agro-investment framework outlined in Figure 3 below. The VC assessment also included field and market research, based on the outlines provided in Figure 4.


9

Figure 3. FACTORS REVIEWED FOR AGRO-FOOD INVESTMENT Figure 3 reflects the range of factors reviewed for the selected targeted investments, for each of the final products proposed. While we interviewed a large number of agro-dealers, producers and processors, aggregators, wholesalers and retailers, we also assessed supporting services, critical value chain infrastructure, support industries, market opportunities and regulatory constraints. We also reviewed likely trade barriers. Figure 4 below provides a schematic overview of the major value chain stakeholders and steps, at the micro, meso and macro levels. Input providers and support services are critical to local producers, and with investments such as improved inputs, lower cost credit, improved seeds, basic packaging and producer cooperative structures, considerable greater value can be caught at the local levels. Moreover, as the results of the fieldwork make clear, most of the value chains in the three AKT countries are hugely underdeveloped, implying considerable upside to targeted and costed interventions. A critical factor in identifying entry points for bankable investments is an assessment of profitability and financial viability. Public sector investors must focus on investments with positive net economic rates of return, whereas firms operating in a particular product space look for positive financial rates of return. When combined through public private dialogue, with the public sector drawing down private sector operational risks, market expansion most often occurs. Table 2 below provides our standard value chain field survey form; one form to be filled out for each product based on a specific KII or Focus Group (FG) meeting for different operators in a local market. In a local market anywhere from 5 to 10 of these were completed, until new entries merely matched existing findings. These forms are used to aggregate results, and to identify key interventions to support value addition.


10

Figure 4. ILLUSTRATIVE VALUE CHAIN FOR GENERIC PRODUCTS


11

Table 2. PRODUCT VALUE CHAIN ANALYSIS (VCA) FIELD QUESTIONNAIRE

KYRGYZSTAN KII Date: Location: Land Size: Water? Y / N Credit? Y / N PRODUCT NAME AND DESCRIPTION: WHY GROW THIS CROP?

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Seeds, Fertilizers, Pesticides, non-family labor, Machinery Etc.

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INTERVIEWER NOTES – TO BE WRITTEN AS POTENTIAL CASE STUDY KII Informant Questions (to farmers)1: What is your family size and how many work on production of this commodity? How many paid employees involved? Do you belong to a grower’s/ farmer’s association? Does Government / trader/ other group offer support services? Do you sell all you produce or keep some for home use? Can you always sell all you wish to? If credit – what interest rate? If credit – what payback period? How could you increase yields or profit? Is your product being exported? If not, why not? How volatile are market prices? Do you store any of your product and sell later for a better price? Do you/ would you consider bulking with your neighbour’s production, or with a cooperative, to better attract a hauler/ trader? What would need to happen for you to decide to produce more?

1 Other sets of questions will be needed for hauliers and non-farmer agro-processors


13

Task 7: Consider Replicable Business Models: Replication of business models is critical, if the intervention in a given value chain is to have a wider multiplier impact on the wider economy. For example, in Afghanistan where shelled almonds have been identified as having great export potential, and where a number of processing (de-shelling, heating and packaging) plants have been developed, a key aim was to identify a sustainable model that can be replicated to increase exportable products. We therefore focused on opportunities to implement sound business models repeatedly within a value chain, including demonstration of positive net present values. Each proposed business model was linked to the VC gap analysis. Task 8: Identify Critical VC Gaps: VC analysis and country benchmarking provide considerable data on the potential of a particular product to substitute imports or increase exports. The VC gap analysis presented below, which has emerged from field and desk based work, allows a set of corrective measures to be identified and explored, with a view to maximizing value and efficiency across the product value chain. Each of the three chosen products has a different proposed set of interventions at the micro, meso and macro levels. IDENTIFY MARKET-BASED OPPORTUNITIES Task 9: Assess Support Activities / Services: We have assessed ways to add efficiency, improve product quality and add new operations to increase value added within the value chain, in particular by assessing the quality or shortfall in support services. These include infrastructure, processing capacity, finance, logistics and human resources, all of which impact on primary activities, as outlined in Figure 5 below.

Figure 5. STANDARD (PORTER’S) VALUE CHAIN MODEL WITH PRIMARY AND SUPPORT ACTIVITIES

! Inbound Logistics - involve relationships with suppliers and include all activities required to receive, store and disseminate inputs;

! Operations - are all the activities required to transform inputs into outputs (products and services)’

! Outbound Logistics - include all the activities required to collect, store and distribute the output;

! Marketing and Sales - activities inform buyers about products and services, induce buyers to purchase them and facilitate their purchase; and,


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! Service - includes all activities required to keep the product or service working effectively for the buyer after it is sold and delivered.

Secondary activities are: ! Procurement - the acquisition of inputs, or resources for the firm; ! Human Resource management - all activities involved in recruiting, hiring, training,

developing, compensating and (if necessary) dismissing or laying off personnel; ! Technological Development - pertains to the equipment, hardware, software, procedures and

technical knowledge brought to bear in the firm's transformation of inputs into outputs; and, ! Infrastructure - serves the company's needs, and ties its various parts together (comprising

functions or departments such as accounting, legal, finance, planning, public affairs, government relations, quality assurance and general management).

Task 10: Assess Public – Private Coordination: Searching World Bank ‘Doing Business’ reports, as well as discussion with public and private sector stakeholders in all AKT Governments and the private sector, we assessed the status of policy and investment dialogue, in order to forge a clearer understanding of how public, state-owned enterprises and private sector partners work together, to maximize market coordination and impact. The list of stakeholders interviewed (See Annex 2) is broadly characterized below: ! Farmers, farmers’ organizations and their associations; ! Processors (at different levels) and their associations; ! Traders and exporters and their associations; ! Transporters and middlemen; ! Finance institutions; ! Private advisory, business support and accounting service providers; ! Chambers of Commerce, investment and export promotion agencies and other parastatal

bodies promoting value chain development; ! Regulatory agencies such as Bureau of Standards, food safety agencies and metrology

institutes; ! Private certification and quality control bodies; ! Research institutions and universities; ! Training and education institutions; and, ! Bilateral and multilateral development agencies. We have assessed how to capture value through forward and backward integration, which outlines how vertical integration can help businesses ensure supply or otherwise control inputs and capture more value. In many cases value addition options were obvious, whereas in other cases they were discrete. We also assessed horizontal collaboration, thereby creating and taking advantage of economies of scale, with the aim being to improve the operating environment by promoting Public-Private Dialogue. Task 11: Assess Product Positions / Placement in Market: Positioning products and value chains for greater value and competitiveness is a critical task, and we therefore identified basic competitiveness positioning considerations which would enable businesses to choose improved market value chain business models, and provide strategic direction. Task 12: Assess Standards and Certification: Standards setting, enforcement and certification were key factors undermining value addition and market penetration for all products. Applying standards and certifications to achieve greater quality is therefore important, and though some progress has been made by national authorities to support this, the quality and performance standards of desired export markets were assessed, in order to help achieve entry, market share, and higher unit values for a value chain’s products.


15

IDENTIFY TARGETED INVESTMENTS Task 13: Identify Bankable Investments and Link to National Development Strategies: A project is bankable when it can be financed. If the public sector is financing, it looks for economic and social rates of return. If the private sector is financing, it looks for a positive net present value and cash flows. Once 1-2 value chains have been identified in each AKT country, we developed intervention options at the micro, meso and macro levels based on the following bankable criteria. Any ‘project’ proposed therefore must: ! Have demonstrable impact on growth in trade and transit; ! Have proper Project Management and Governance Arrangements in place; ! Encourage private equity participation / private sector development; ! Have sufficient cash flows and positive NPV and Internal Rate of Return above the

opportunity cost of capital; ! Be politically feasible; ! Contribute significantly to employment and revenue in the AKT country; ! Have a clear risk management and mitigation plan; and ! Should be implementable within 12-36 months. Moreover, in order for bankable investments to the financed, we incorporated the priorities of governments identified in their relevant national strategies, and through discussions with high-ranking public sector officials. Task 14: Strengthen Market Integration / Expansion: Increasing the penetration of products into existing and new markets has been carefully considered, based on the analysis provided below. This includes potential destination markets, trade and transport routes. Our export maps are there to guide investors on the most likely destination markets for a given product, in a given market. Task 15: Target Aggregation: An additional factor to be assessed includes aggregation of production and services, as well as product trade and logistics. In particular, the potential role of producer cooperatives and farmers associations was explored, as well as options for local storage and processing. MONITORING AND IMPACT ASSESSMENT Task 16: Key Performance Indicators (KPIs): While the contractor is not responsible for implementation, we have proposed to select a number of KPIs that can be used to monitor progress and impact during the execution phase.

This VC identification process is therefore the outcome of mixed methods; desk based research and primary research/meetings as well as qualitative and quantitative data collection and analysis. While secondary research initially identified the viability of identified products, primary research involved meeting with government counterparts and other stakeholders, organizations and institutions involved in value chain development in AKT countries in order to identify potential groups for which fruits, nuts and vegetables production and processing can be scaled up/ or supported.


16

Section D. GENERAL PRODUCT TRADING OVERVIEW This section provides a general overview of product trading dynamics by country, as the basis for assessing which of the pre-selected products has greatest export potential; given how important this criterion is for the AKT Consortium. Table 3 below lists the 12 pre-selected products identified by the AKT, alongside the relevant Harmonised System (HS) codes. The objective of this overview is to identify some of the key trends in the production and trade in these products within the AKT countries; and also in relation to external markets. Production data has been collected from FAO Stat, and Trade Data has been taken from WITS/COMTRADE. A few of the pre-selected products are not included in the FAO database and as such, for these products only a trade analysis is carried out (these products are onions, pomegranates and alfalfa). While large informal flows are observed, there is no quantification of these, and thus only formal figures are considered here.

Table 3. PRE-SELECTED PRODUCTS

Fruits HS Code Nuts HS Code Vegetables HS Code Grapes-Raisins 080610

080620 Almond 080211 Alfalfa 121410

Melons 080719 Pistachio 080250 Onion 070310 Apricot 080910 Walnut 080231 Potatoes 070190 Pomegranate 081090 Lemon 080530 Strawberry 081010

AKT COUNTRY PRODUCTION VOLUMES On assessing production volumes of each of the AKT economies we find the following results. For Afghanistan the product that is produced in the highest volume (See Chart 1) is grapes followed by potatoes, melons, apricots and almonds; based on formal (recorded) trade volumes. Almonds are the most voluminous nut produced, with growing export demand.

Chart 1. AFGHANISTAN PRODUCTION OF PRE-SELECTED PRODUCTS 2013

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For Kyrgyzstan the product that is produced in the highest volumes is potatoes (See Chart 2), by a considerable margin. To give a better indication of the production levels of other products, a second chart is plotted after removing potatoes, as indicated below, which identifies apricots, walnuts and grapes as other key products. Chart 3 shows the dominance of both apricots and grapes in production, followed by walnuts as a higher value product.

Chart 2. KYRGYZSTAN PRODUCTION OF PRE-SELECTED PRODUCTS 2013

Chart 3. KYRGYZSTAN PRODUCTION OF PRE-SELECTED PRODUCTS 2013 (EXCLUDING POTATOES)

For Tajikistan (See Chart 4) the product that is produced in the highest volumes is potatoes followed by grapes and apricots, again showing the importance of the potato as a prime national crop. With over a million tonnes of potatoes produced in 2013, national food self-sufficiency is substantially supported by this crop.

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Chart 4. TAJIKISTAN PRODUCTION OF PRE-SELECTED PRODUCTS 2013

The above analysis indicates that based on production volumes, in all the three AKT countries potatoes, grapes and apricots are important commodities, though export potential is observed with lower production volume higher value added crops, particularly nuts. AKT COUNTRY TRADE VALUES Upon analysing export values, for Afghanistan the key export product is grapes - both dried and fresh - while for Kyrgyzstan and Tajikistan the key products are walnuts and onions.

Chart 5. AFGHANISTAN EXPORTS OF PRE-SELECTED PRODUCTS 2014 What makes analysis of Afghanistan exports complex is that Afghanistan exports mostly to Pakistan, from the Pashtun South to the Pashtun north, and though record of products must be considered exports, in reality close historic connectivity means that a great deal of Afghan production is re-exported by Pakistan as a Pakistani product.

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Walnuts are the most significant export among FVN products in Kyrgyzstan, with shelled walnuts totalling more than US$10 million in export value in 2014, followed by onions and shallots, apricots and potatoes. Unshelled walnuts command a far lower share of exports, a key indicator for product competitiveness analysis.

Chart 6. KYRGYZSTAN EXPORTS OF PRE-SELECTED PRODUCTS 2014 In Tajikistan, among pre-selected products, onions and shallots and shelled walnuts dominate 2014 exports followed by apricots and grapes. This analysis is further developed in the Tajikistan section of this report.

Chart 7. TAJIKISTAN EXPORTS OF PRE-SELECTED PRODUCTS 2014

While the production and trade trends by volume and value do initially highlight some commodities with high potential, a more detailed product analysis is needed to fully understand the value chain potential for each product. The following sections therefore provide an item-by-item production and trade analysis.

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DETAILED INDIVIDUAL PRE-SELECTED PRODUCT ANALYSIS GRAPES PRODUCTION TRENDS In 2013 Afghanistan produced 610,570 tons (See Chart 8) of grapes while Kyrgyzstan and Tajikistan produced 8,106 tons and 175,335 tons respectively. Since 2010 there has been an increase in both production levels and productivity (yield per unit area) in grape production in Afghanistan. Regarding the other two AKT economies while in Tajikistan there has been an increase in both production and productivity, in Kyrgyzstan when compared with the 2000 levels, both production and productivity have fallen, although productivity has risen since 2010. When both these economies are compared with fresh grape production in Afghanistan the values trail significantly . Afghanistan clearly is the larger producer among the AKT economies.

Chart 8. GRAPE PRODUCTION/PRODUCTIVITY IN AKT COUNTRIES 1992-2013

Afghanistan has gradually increased its share in global grapes production from 0.55% to 0.79% while Kyrgyzstan’s share has fallen (as expected since total production volumes have decreased as evidenced above). Tajikistan’s share in global production (See Chart 9) has not changed much over the last few decades although absolute production volumes have increased, indicating other producers have also evidenced increasing production volumes. Given that Afghanistan has received considerable international assistance since late 2001, with much of it focused on agriculture and the rural economy, increased production volumes (area and yields) are expected. Annual variations depend on cyclical drought, which affects Afghanistan 1 year in every 4 to 5.

Chart 9. Share Of Grape Production In Global Production

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INTERNATIONAL TRADE ANALYSIS While the AKT economies export both fresh and dried grapes (raisins), the trade in raisins is significantly higher. In the year 2014 Afghanistan exported fresh grapes worth US$ 49 Million and raisins worth US$ 65.8 Million. Afghanistan’s exports of both fresh and dried grapes have significantly increased from the mid 1990’s to 2014. The share of Afghanistan’s fresh grape exports in global trade is still very small at 0.5% while the share of raisin exports in total global exports is much higher at 3.82%. The shares of Kyrgyzstan and Tajikistan are still insignificant in global trade levels. The reported production spike between 2006 and 2011 in Kyrgyzstan we assess to be a statistical anomaly, and as a result production has been straight-lined for the periods 2006 to 2011 until an explanation for the apparent spike anomaly can be found.

Chart 10. SHARE OF AKT COUNTRY EXPORTS IN GLOBAL EXPORTS OF FRESH GRAPES

Chart 11 below provides the export figures for dried grapes – raisins – from 1996 until 2014. Afghanistan clearly remains the major exporter of raisins – largely to India and the Russian Federation. Old market networks and trade relations have been sustained.

Chart 11. SHARE OF AKT COUNTRY EXPORTS IN GLOBAL EXPORTS OF DRIED

GRAPES

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The key markets to which Afghanistan exports grapes and raisins are depicted in Chart 12 below. India and Russia are the largest markets to which Afghanistan exports dried grapes, with India importing almost 60% of those exports. When it comes to fresh grapes, Pakistan is the only significant importer and accounts for almost 99.8% of Afghanistan’s total exports. This reflects close market proximity and connectivity between Afghanistan and Pakistan. It also demonstrates the importance of building processing capacities, allowing non-perishable products to reach often distant markets.

Chart 12. AFGHANISTAN’S KEY EXPORT MARKETS FOR DRIED GRAPES (2014)

By contrast, Afghanistan’s export destination for grapes is the neighbouring market of India, though less than one percent is traded with France and India (see Chart 13 below). Export quantities may be affected following the recent fallout between India and Pakistan in relation to the China Pakistan Economic Corridor (CPEC), after which Indian requested an economic corridor between India and Afghanistan via Pakistan (though turned down by Pakistan).

Chart 13. AFGHANISTAN’S KEY EXPORT MARKETS FOR FRESH GRAPES (2014)

For Kyrgyzstan the chief market for dried grapes is China (See Chart 14 below), which imported 99.63% of the total dried grapes exports. For fresh grapes the single most important market has been

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Kazakhstan. Market proximity – meaning that a country can piggyback on the capacity of a more developed market economy – is an important factor to consider.

Chart 14. KYRGYZSTAN’S KEY EXPORT MARKETS FOR DRIED GRAPES - 2014

Chart 15. KYRGYZSTAN’S KEY EXPORT MARKETS FOR FRESH GRAPES (2014)

Again, as outlined in Chart 15 above, the proximity of Kazakhstan to Kyrgyzstan highlights the benefits of regional neighbours, though it also demonstrates the lack of marketing capacity to reach markets further afield. Clearly, for Kyrgyzstan to benefit from high value-added markets further abroad, a great deal of investment will be required, over a considerable period. For Tajikistan (See Chart 16) the main market for both fresh and dried grapes is Kazakhstan, though 2% of exports found their way to the US, and 5.68% to China. Belarus imported 1.95% of Tajikistan’s dried grape exports.


24

Chart 16. TAJIKISTAN’S MAIN EXPORT MARKETS FOR DRIED GRAPES

In terms of export destinations for Tajikistan’s fresh grapes, again Kazakhstan dominated export destinations (82%) followed by the Russian Federation (18%). The need to specialize and to diversify export markets is clear, given the dependence on proximity. Export market risks given currency fluctuations also should not be underestimated.

Chart 17. TAJIKISTAN’S MAIN EXPORT MARKETS FOR FRESH GRAPES

IDENTIFYING POTENTIAL MARKETS AND COMPETITORS FOR GRAPES Table 4 below shows the key importers and exporters of grapes globally. We see that AKT economies are not exporting to many of the top importers of grapes, thereby indicating that there is a large market of untapped importers that can be prioritized. Assessing potential competitors it can be seen that Afghanistan’s global share in export of fresh grapes is 0.59% while that in raisins is 3.8%, indicating that Afghanistan has a competitive edge when it comes to exporting dried grapes (raisins) in particular. Data indicate that Afghanistan is the sixth largest exporter of raisins although it also has to be noted that Turkey and United States - the top two exporters - dominate the global market (54%). Kyrgyzstan

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and Tajikistan have very low global shares at 0.004% and 0.019% respectively. The United States is one of the largest exporters of grapes – both fresh and dried. Interestingly, the US also imports a large share of fresh grapes. Chile and Peru are two of the large exporters of raisins. For Afghanistan a regional competitor in terms of raisins would be Turkey and Iran, both exporting 30.26% and 7.26% of global exports of raisins respectively. For imports of fresh grapes US, EU and China are the key markets, whereas for raisins it is primarily EU countries, followed by Japan and Canada importing smaller shares.

Table 4. KEY IMPORTERS OF FRESH GRAPES (IDENTIFYING MARKETS) - 2014

Value (Million USD) Global Share (%) United States 946.04 12.27 Germany 737.03 9.56 Netherlands 695.68 9.02 United Kingdom 676.74 8.78 China 594.73 7.71 Russian Federation 336.98 4.37 Hong Kong, China 318.98 4.14 Canada 282.48 3.66 Thailand 276.55 3.59 France 222.42 2.89

Table 4 above ranks the largest exporters of fresh grapes, indicating countries with mature markets, strong private sector operators and public investment very much targeted toward removing binding constraints to growth. Turkey beats Indian fresh grape exports in 2014. Table 5 shows the import domination of European countries (4 out of the top 7), alongside Japan, Canada and Brazil.

Table 5. KEY GLOBAL EXPORTERS OF FRESH GRAPES (IDENTIFYING COMPETITORS) -

2014 Trade Value (Million USD) Global Share Chile 1,991.30 24.06 United States 884.25 10.68 Peru 882.61 10.66 South Africa 806.33 9.74 Italy 789.30 9.54 Mexico 400.74 4.84 Spain 354.78 4.29 Turkey 255.72 3.09 India 243.19 2.94

Table 6. KEY IMPORTERS OF RAISINS (IDENTIFYING MARKETS) - 2014

Value

(Million USD) Global Share (%) United Kingdom 247.68 16.54 Germany 160.65 10.73 Netherlands 108.91 7.27 Japan 82.57 5.51 Canada 68.37 4.57 France 59.77 3.99 Brazil 48.49 3.24 Australia 47.78 3.19 Belgium 44.83 2.99


26

Table 6 above shows the leading global exporters of raisins in 2014, with Turkey and USA dominating. We should note that Turkey, Iran and Afghanistan show strong export .

Table 7. KEY GLOBAL EXPORTERS OF RAISINS (IDENTIFYING COMPETITORS) - 2014 Trade Value (Million USD) Global Share Turkey 519.56 30.26 United States 421.39 24.54 Chile 146.18 8.51 Iran, Islamic Rep. 124.74 7.26 South Africa 84.09 4.90 Afghanistan 65.73 3.83 Greece 61.52 3.58 China 54.05 3.15

MELONS Data on production and productivity for melons (excluding watermelon) are only available for Afghanistan. Data indicate that while production peaked in 2006-2009 it has been falling since then. Productivity has not shown any significant changes over the last few years. For the year 2013, production in Afghanistan of melons was 180,070 tons (see Chart 18 below). While lack of data on Melon production in Kyrgyzstan and Tajikistan does not mean that melons are not grown (they certainly are), but production levels are low with implications for export potential.

Chart 18. PRODUCTION/PRODUCTIVITY-AFGHANISTAN

Afghanistan’s share of melon in global production is currently 0.61% and while this is higher than its share in 2000, it has fallen from the greater than 1% share reached in 2006-2009. Afghanistan is affected by cyclical drought, and in years where snowfall is strong and melting steady, agricultural production can be substantial. Similarly, if snow fall is low, the impact on irrigation and yields massively affects productivity, and GDP, which has swung from 18% to 2 % within a short period. Ongoing conflict and currency depreciation which increases the costs of imported agricultural inputs, will also have a toll on production in the 2015/2016 season. Chart 19 provides Afghanistan’s share in global production for 1992, 2000, 2006 and 2013.

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Chart 19. AFGHANISTAN - SHARE OF MELON PRODUCTION IN GLOBAL PRODUCTION

INTERNATIONAL TRADE ANALYSIS The global share of export of melons in 2014 has been 0.05% for Afghanistan while only 0.002% for both Kyrgyzstan and Tajikistan, indicating that melon production and trade are significant only for Afghanistan among the AKT economies. Chart 20 below provides these figures over time, but exporting melons from landlocked countries surrounded by neighbours with similar production profiles is always going to be uncompetitive.

Chart 20. SHARE OF AKT COUNTRY EXPORTS IN GLOBAL EXPORTS OF MELONS (2014)

Currently Pakistan (see Chart 21 below) dominates as the key market for export of melons from Afghanistan, importing around 91% of Afghan export of melons, for reasons already intimated above. India is the next largest market though still not significant when compared with the share of Pakistan.

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Chart 21. KEY EXPORT MARKETS FOR AFGHANISTAN – MELONS (2014)

IDENTIFYING POTENTIAL MARKETS AND COMPETITORS An analysis of the key global exporters of melons indicates that the AKT economies are highly insignificant in terms of melon exports (See Table 8). Even Afghanistan, the most significant among the AKT economies, has only 0.05% of global exports. Pakistan, the main market to which Afghanistan exports, is not a significant importer and so Afghan supply is not yet reaching major markets in the world (for reasons that are explored in the country field reports). Most of the ,melon trade to Pakistan is cross border and likely occurs only due to the ease of access, indicating a lack of any supply chain structures such as cold storage and transportation over long distances..

Table 8. KEY IMPORTERS OF MELONS (IDENTIFYING MARKETS) (2014)

Import Value (Million USD) Global Share United States 253.36 19.14 Germany 152.30 11.51 France 125.86 9.51 Netherlands 115.31 8.71 United Kingdom 110.47 8.35 Canada 52.74 3.98 Belgium 51.16 3.87 Spain 43.94 3.32 Switzerland 42.92 3.24 Italy 36.32 2.74 Hong Kong, China 33.46 2.53 Sweden 24.58 1.86 Japan 24.30 1.84

Table 9 below shows the main competitors in terms of exports, again showing the domination of highly developed market economies in this export business, implying strong value chain management at the micro, meso and macro levels. Uzbekistan notably had a share of 1.7% of exports in 2014.


29

Table 9. KEY GLOBAL EXPORTERS OF MELONS (IDENTIFYING COMPETITORS) (2014)

Export Value

(Million USD) Global Share Spain 392.96 23.44 Brazil 223.81 13.35 Guatemala 163.36 9.74 Costa Rica 125.95 7.51 Honduras 115.04 6.86 Mexico 109.51 6.53 Morocco 85.16 5.08 Netherlands 82.97 4.95 United States 72.49 4.32 France 64.64 3.86 Germany 33.60 2.00 Italy 31.09 1.85 Uzbekistan 28.49 1.70

APRICOTS Production of apricots in Afghanistan has significantly increased over the last 10 years. In 2013, Afghan production of apricots was 90,000 tons, Kyrgyzstan produced 23,000 and Tajikistan 31,400 tons respectively, as shown in Chart 22 below. Yields have increased per hectare in Afghanistan, but they seem to have declined in Kyrgyzstan and Tajikistan.

Chart 22. APRICOT PRODUCTION/PRODUCTIVITY IN AKT COUNTRIES 1992-2013

As of 2013, Afghanistan’s share in global production was 2.19%, Kyrgyzstan’s was 0.56% and Tajikistan’s was 0.76% (See Chart 23 below). Afghanistan’s share has consistently increased while Kyrgyzstan and Tajikistan production went through a trough during the period 2002-2007, though has increased since then though has only managed to catch up to the early 90’s production levels and shares. Also of note is that while each country’s productivity level in apricot production has not changed significantly, Afghanistan remains a far more efficient producer than either Kyrgyzstan or Tajikistan, with implications for improved rates of return on investment. It will be interesting to see how Afghanistan’s production trend looks in 2014 and 2015, given capital outflow and increased political and security problems. It is for these reasons that the upwards trend must not be taken for granted until proven.


30

Chart 23. SHARE OF AKT COUNTRY PRODUCTION IN GLOBAL PRODUCTION OF APRICOTS

INTERNATIONAL TRADE ANALYSIS While Kyrgyzstan produces fewer apricots when compared with Afghanistan, it has historically exported more as measured by value in US$ Value. Kyrgyzstan’s exports peaked in 2008 and have since declined and fallen below Afghan export levels. For the year 2014 Afghanistan exported apricots worth US$6.4 Million while Kyrgyzstan exported US$5.4 Million.

Chart 24. SHARE OF AKT COUNTRY EXPORTS IN GLOBAL EXPORTS OF APRICOTS

Afghanistan’s key market (See Chart 25 below) for exporting apricots is Pakistan where almost 99% of its total exports go. For both Kyrgyzstan and Tajikistan, Kazakhstan is the single most important importer with the country importing 100% of Kyrgyzstan exports and 99% of Tajikistan exports of Apricots. Kazakhstan and Pakistan therefore remain critical trading partners for the AKT States.

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Chart 25. AFGHANISTAN’S KEY EXPORT MARKETS FOR APRICOTS - 2014

Chart 26. KYRGYZSTAN’S KEY EXPORT MARKETS FOR APRICOTS - 2014

Chart 27. TAJIKISTAN’S KEY EXPORT MARKETS FOR APRICOTS - 2014

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For apricots there is hardly any market diversification for AKT exports, with each country depending on a single market for its export sales. Again, with neighbouring economies being the main exporters, products would rely on limited supply chain infrastructure and logistic support, and of course a great deal of such produce could be processed and re-exported by these countries. IDENTIFYING POTENTIAL MARKETS AND COMPETITORS Afghanistan and Kyrgyzstan - with global export shares slightly higher than 1% - fall within the top 15 exporters, though towards the bottom of the list (see Table 10 below). There is high potential for increasing the export of apricots from the AKT economies particularly looking at the case of Kyrgyzstan where even during years of lower production, it was able to export more than Afghanistan. The reasons for decline in Kyrgyzstan exports has to be analysed more deeply to understand the country’s true potential. Afghanistan given its much higher production than Kyrgyzstan would have potential to increase its exports, including dried apricots where are less perishable and fetch higher prices in the Gulf States, for example. Most of the key global importers are European countries, so if they would be the target market it would be essential to have an understanding of the export requirements into these markets, particularly the certification and SPS standards.

Table 10. KEY IMPORTERS (MARKETS) OF APRICOTS (2014)

Trade Value (Million USD) Global Share Germany 121.346 28.234 Russian Federation 38.236 8.897 Italy 35.565 8.275 France 30.383 7.069 United Kingdom 21.312 4.959 Switzerland 20.232 4.707 Belgium 17.523 4.077 Austria 16.007 3.725 Netherlands 15.306 3.561 Canada 10.611 2.469 Poland 10.462 2.434 Czech Republic 9.552 2.223 Spain 7.682 1.787

Table 11. KEY GLOBAL EXPORTERS (COMPETITORS) OF APRICOTS (2014)

Trade Value (Million USD) Global Share Spain 145.46 29.36 France 119.29 24.07 Italy 42.80 8.64 Turkey 27.63 5.58 Uzbekistan 27.24 5.50 Greece 19.27 3.89 United States 15.70 3.17 South Africa 14.75 2.98 Germany 10.47 2.11 Netherlands 9.59 1.94 Serbia, FR(Serbia/Montenegro) 6.66 1.34 Afghanistan 6.45 1.30 New Zealand 6.01 1.21 Kyrgyz Republic 5.44 1.10 Tajikistan 0.87 0.18


33

LEMONS For lemons, production values are only available for Tajikistan (Sse Chart 28 below). Data indicate that lemon production by Tajikistan had peaked in 2003-2004 but has fallen since then. Currently,while production is higher than the pre-2004 peak it still is not near peak values. As of 2013, Tajikistan produced 1,900 tons of lemons.

Chart 28. LEMONS PRODUCTION/PRODUCTIVITY IN TAJIKISTAN 1992-2013

Tajikistan had a higher share of global production in 1992 than in 2013, indicating that despite increased production volumes in 2013, other producers have significantly increased production. Since 2000, the global share has only marginally changed. Either way, production totals and export values are low.

Chart 29. SHARE OF TAJIKISTAN LEMON PRODUCTION IN GLOBAL PRODUCTION

INTERNATIONAL TRADE ANALYSIS Trade data on lemons for Afghanistan and Kyrgyzstan are very limited, though Afghanistan is known to have invested in production in recent years through projects supported by USAID and the EU among others. There is however strong domestic demand also, which would offset export potential.

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Data on Tajikistan are available though, with analysis indicating that the global share of Tajikistan’s lemon exports has significantly and steeply fallen since the late 1990’s. Absolute values and global share of lemon exports from Tajikistan has fallen and as evidenced above, production volumes have also not significantly increased (see Chart 30) indicating that this is a product the commercial significance of which has fallen considerably over the last decade. Chart 30. SHARE OF TAJIKISTAN LEMON EXPORTS IN GLOBAL EXPORTS OF LEMONS

For Tajikistan, the key export market (see Chart 31 below) is Kazakhstan with the Russian Federation importing only 0.39%. Similar to Afghan exports to Pakistan, Tajikistan exports to Kazakhstan are largely determined by market proximity as the key competitive advantage.

Chart 31. KEY EXPORT MARKETS FOR TAJIKISTAN – LEMONS (2014)

IDENTIFYING POTENTIAL MARKETS AND COMPETITORS Though the key importers and exporters are identified below (see Tables 11 and 12), currently the AKT economies produce and trade too low a level of lemons to be considered a serious contender for lemon value chain production.

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Table 12. KEY GLOBAL IMPORTERS (MARKETS) OF LEMONS (2014)

Trade Value (Million USD) Global Share United States 363.58 12.99 Germany 305.49 10.92 France 198.93 7.11 Netherlands 176.42 6.30 Russian Federation 167.54 5.99 United Kingdom 145.32 5.19 Italy 123.23 4.40 Poland 96.40 3.45 Hong Kong, China 95.27 3.40 Canada 90.38 3.23 Japan 89.81 3.21

Again is should be noted that the main exporters exhibit mature market economies with considerable infrastructure and a high Doing Business ranking. Even if agro-ecological conditions were favourable, considerable investment would be needed to contribute to global export demand, though import substitution might be affected.

Table 13. GLOBAL EXPORTERS (COMPETITORS) OF LEMONS (2014) Trade Value (Million USD) Global Share Spain 746.90 25.34 Mexico 447.57 15.18 Turkey 275.26 9.34 Argentina 274.78 9.32 South Africa 259.20 8.79 United States 253.22 8.59 Brazil 161.09 5.47 Netherlands 114.76 3.89 Germany 70.74 2.40

STRAWBERRY Production data are available only for Kyrgyzstan (see Chart 32 below) among the AKT countries, though they are grown in Afghanistan and Tajikistan, and sold in local markets as a niche product. As of 2013, Kyrgyzstan produced 2,200 tons of strawberries. While strawberry production volumes in Kyrgyzstan have been increasing consistently since 2002, the years 2011 and 2012 saw a brief fall in production volumes. Since 2013 production has once again picked up.

Chart 32. STRAWBERRY PRODUCTION IN KYRGYZSTAN 1996-2013

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Kyrgyzstan production constitutes a very low share of global production (see Chart 33) at around 0.028%, and despite increasing total volume of production there has seen a decline in the global share, indicating that other countries have similarly ramped up their production over the last decade.

Chart 33. KYRGYZSTAN SHARE OF STRAWBERRY PRODUCTION IN GLOBAL PRODUCTION

INTERNATIONAL TRADE ANALYSIS Trade Values are available only for Kyrgyzstan indicating the lack of importance of strawberries as a commercial crop in the other two AKT countries, with virtually no immediate export impact and limited impact on employment either. Chart 34 below indicates that the global share of strawberry exports has fallen since 2011, highlighting the falling significance of the crop in the country.

Chart 34. SHARE OF AKT COUNTRY EXPORTS IN GLOBAL EXPORTS OF FRESH STRAWBERRIES

Kazakhstan is the only market for export of strawberries from Kyrgyzstan as indicated in Chart 35, again demonstrating the trend of trading with proximate markets with sufficient purchasing power.

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Chart 35. KEY EXPORT MARKETS FOR KYRGYZSTAN – STRAWBERRIES - 2014

IDENTIFYING POTENTIAL MARKETS AND COMPETITORS Production and trade data (see Tables 13 and 14 below) indicate that strawberries might not be a commercially viable product for value chain development in the AKT economies. Nevertheless we do provide a snapshot of the key markets and competitors of strawberry trade globally.

Table 14. KEY IMPORTERS OF STRAWBERRIES (IDENTIFYING MARKETS) (2014) Trade Value (Million USD) Global Share Germany 320.232 13.775 Canada 319.432 13.741 United States 233.665 10.051 France 229.508 9.873 United Kingdom 219.918 9.460 Belgium 106.041 4.562 Russian Federation 104.891 4.512 Italy 74.675 3.212 Netherlands 72.048 3.099 Norway 60.532 2.604 Switzerland 46.281 1.991

Table 15. KEY GLOBAL EXPORTERS OF STRAWBERRIES (IDENTIFYING COMPETITORS)

(2014) Trade Value (Million USD) Global Share

Spain 655.99 26.44 United States 435.22 17.54 Mexico 415.64 16.75 Netherlands 250.07 10.08 Belgium 163.93 6.61 Egypt, Arab Rep. 65.44 2.64 Germany 60.24 2.43 Morocco 57.17 2.30 Portugal 57.07 2.30 Italy 40.12 1.62 Greece 34.05 1.37 United Kingdom 31.00 1.25


38

ALMONDS Afghanistan has been the largest producer of almonds among the AKT economies (see Chart 36 below) though production appeared to have fallen in 2012 and 2013. There have been no significant changes in production volumes of almonds in Kyrgyzstan and Tajikistan over the last two decades. Interestingly when productivity is analyzed it can be seen that the productivity of almond production in Kyrgyzstan has been significantly increasing over the last few years and as of last year is the same as that of Afghanistan (see Chart 37 below). This indicates that though production volumes of almond in Kyrgyzstan is currently much lower compared with Afghanistan there is potential for augmenting production levels upwards, to meet growing global demand.

Chart 36. PRODUCTION OF ALMONDS AKT COUNTRIES 1992-2013

Chart 37. PRODUCTIVITY OF ALMOND PRODUCTION AKT COUNTRIES 1992-2013

The global share of Afghanistan’s almond production has been declining, this being intuitive given that production volumes have also been decreasing. Moreover, as highlighted in the value chain analysis on Afghanistan, global production has been increasing considerably in response to growing global demand. For the other two economies there have not been any significant changes, again intuitive given that production volumes have not increased.

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INTERNATIONAL TRADE ANALYSIS The global share of trade in almonds (see Chart 38 below) for both shelled and unshelled almonds is highest among the AKT countries for Afghanistan. Kyrgyzstan and Tajikistan appear to only export shelled almonds, and have captured only a very small proportion of global market share. While the share of unshelled almonds has been falling for Afghanistan, shelled almond exports as a share of global exports have historically fluctuated, though the current trend is upward (See Chart 39).

Chart 38. SHARE OF AKT COUNTRY EXPORTS IN GLOBAL EXPORTS OF ALMONDS (UNSHELLED)

Chart 39. SHARE OF AFGHANISTAN EXPORTS IN GLOBAL EXPORTS OF ALMONDS (SHELLED)

Analysis of the key export markets for each of the AKT economies reveal that Afghanistan’s main market for almonds unshelled is India (see Chart 40 below) with a smaller percentage being imported by Pakistan. For both Kyrgyzstan and Tajikistan, export values are reported only for shelled almonds, with Kyrgyzstan exporting mainly to Germany and Tajikistan exporting equally to Italy and Kazakhstan.

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Chart 40. KEY EXPORT MARKETS FOR AFGHANISTAN – ALMONDS (UNSHELLED) (2014)

Chart 41. KEY EXPORT MARKETS FOR AFGHANISTAN – ALMONDS (SHELLED) (2014)

Chart 41 above highlights that shelled (processed) almonds are beginning to reach global markets in Europe, not just regional or neighbouring markets. Export markets include India, Germany, Italy and Turkey, and there are few reasons why other export destinations could not be considered, given that the product is already meeting EU standards, for example. Chart 42 below shows that the key export market for Kyrgyzstan products is exclusively Germany, with Tajikistan exports for shelled almonds destined for Kazakhstan (55%) and Italy (45%).

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Chart 42. KEY EXPORT MARKETS FOR KYRGYZSTAN –ALMONDS (SHELLED) (2014)

Chart 43. KEY EXPORT MARKETS FOR TAJIKISTAN –ALMONDS (SHELLED) (2014)

IDENTIFYING POTENTIAL MARKETS AND COMPETITORS Unlike most other products analysed above, the AKT economies are exporting almonds to key importers such as India, Germany and Italy (see Table 16 below). While Afghanistan is the only AKT country which has a significant share, this may be a product that could be developed into a value chain given that links are already developed with established import markets. Moreover, as outlined in the main Afghanistan value chain report, options for processing and marketing appear to be considerable, and new markets such as the Gulf States would appear to be within reach.


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Table 16. KEY IMPORTERS (MARKETS) OF ALMONDS - UNSHELLED (2014)

Trade Value (Million USD) Global Share India 499.016 45.091 Hong Kong, China 159.490 14.412 Vietnam 119.193 10.770 United Arab Emirates 57.094 5.159 Turkey 43.899 3.967 Japan 37.001 3.343 Spain 27.268 2.464 Italy 19.473 1.760 China 18.852 1.704 Germany 16.191 1.463 United Kingdom 15.388 1.390

Table 17 above provides the main competitors markets for the AKT countries, showing the absolute domination of the US and Australia (some 95%) in exports. Given that both countries are highly technically proficient, a focus should be on markets where price advantages and low transaction costs can lead to entry points, particularly in South Asia, Europe and the Gulf States.

Table 17. KEY GLOBAL EXPORTERS (COMPETITORS) OF UNSHELLED ALMONDS (2014) Trade Value (Million USD) Global Share United States 746.31 80.45 Australia 127.17 13.71 Spain 11.64 1.25 Italy 7.43 0.80 Germany 5.03 0.54 Iran, Islamic Rep. 4.87 0.52 Afghanistan 4.19 0.45 Netherlands 2.49 0.27 France 2.18 0.23 Canada 1.74 0.19 Portugal 1.73 0.19

Table 18 shows the dominant import demand of Germany and Spain, but we note that the UAE has also emerged a strong regional importer, and it would appear therefore to be a logical export destination for Afghanistan in particular.

Table 18. KEY IMPORTERS OF ALMONDS-SHELLED (IDENTIFYING MARKETS) (2014) Trade Value (Million USD) Global Share

Germany 699.46 13.50 Spain 597.99 11.54 United Arab Emirates 340.52 6.57 France 304.73 5.88 Italy 290.61 5.60 Japan 226.69 4.37 Netherlands 221.69 4.27 Canada 212.93 4.10 Korea, Rep. 205.60 3.96 Hong Kong, China 180.54 3.48 United Kingdom 175.47 3.38

Table 19 below looks at the main competitors for shelled almond, showing the potential for Afghanistan to increase its share of the market, with micro, meso and macro value investments targeted to add greater value to existing production, processing, packing, distribution and marketing processes.


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Table 19. KEY GLOBAL EXPORTERS (COMPETITORS) OF ALMONDS - SHELLED (2014)

Trade Value (Million USD) Global Share United States 3,314.88 72.09745 Spain 533.87 11.61143 Australia 239.80 5.215552 Italy 92.93 2.021303 Germany 83.61 1.818408 Netherlands 61.92 1.346768 United Kingdom 42.71 0.928893 Chile 33.61 0.731042 France 22.69 0.493394 Iran, Islamic Rep. 22.12 0.481152 Afghanistan 18.22 0.396343

PISTACHIOS In 2013, Afghanistan and Kyrgyzstan produced 2,100 tons and 9,48 tons of Pistachios respectively (see Chart 44 below). While the volumes of pistachio production in Afghanistan is higher, the Chart indicates that Afghan volumes have fallen since a peak in 2008/9. In contrast the volume of production in Kyrgyzstan has been increasing since 2004. Productivity in Pistachio production is higher in Kyrgyzstan than in Afghanistan (see Chart 45 below).

Chart 44. PRODUCTION OF PISTACHIOS-AFGHANISTAN/KYRGYZSTAN 1992-2013

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Chart 45. PRODUCTIVITY OF PISTACHIOS - AFGHANISTAN/KYRGYZSTAN 1992-2013

INTERNATIONAL TRADE ANALYSIS Assessment of global shares of pistachio exports (see Chart 46 below) reveals that while Afghanistan historically has had a relatively high share, there was a significant fall in 2010 and 2011, linked to drought and political instability. While there has been an increase from 2012 onwards, global share still has to reach the 2008/09 peak levels of above 1% of global trade. Chart 46. SHARE OF AKT COUNTRY EXPORTS IN GLOBAL EXPORTS OF PISTACHIOS

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An assessment of export markets (see Chart 47 below) reveal that the markets are more diversified than most other products. Afghanistan’s main market for exporting pistachios is India with a few other markets (such as Italy and Lebanon) also importing large volumes, with Canada and Germany reporting much smaller shares. For Tajikistan the main market is Kazakhstan.

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Chart 47. KEY EXPORT MARKETS FOR AFGHANISTAN –PISTACHIOS (2014)

Chart 48 below shows the main pistachio export market for Tajikistan, as being Kazakhstan (89%) and the EU (11%). The EU is likely to be an important forward market, though China must also be courted for this product.

Chart 48. KEY EXPORT MARKETS FOR TAJIKISTAN – PISTACHIOS (2014)

IDENTIFYING POTENTIAL MARKETS AND COMPETITORS An analysis of key importers (see Table 19 below) and exporters (see Table 20 below) reveal two things. Firstly Afghanistan and Tajikistan while primarily exporting to their neighbouring countries such as India and Kazakhstan, also export a small share to the EU which is a key importer. Given an already established relationship with key importing markets, there is a potential for further value chain development without significant obstacles. Secondly, it can also be seen that Afghanistan, while falling to the lower end of the list, does stand with the key exporters globally, again demonstrating its reputation as a considerable fruit and nut exporter.

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Table 20. KEY IMPORTERS OF PISTACHIOS (IDENTIFYING MARKETS) (2014)

Trade Value (Million USD) Global Share Hong Kong, China 321.789 18.142 Vietnam 270.050 15.225 Germany 186.098 10.492 Belgium 154.165 8.692 Netherlands 119.814 6.755 Italy 93.453 5.269 France 90.032 5.076 China 77.827 4.388 Spain 55.319 3.119 United Kingdom 43.363 2.445

Table 21. KEY GLOBAL EXPORTERS OF PISTACHIOS (IDENTIFYING COMPETITORS) (2014)

Trade Value (Million USD) Global Share United States 1130.64 45.98 Iran, Islamic Rep. 913.74 37.16 Germany 124.87 5.08 Turkey 32.97 1.34 United Arab Emirates 32.32 1.31 Unspecified 25.28 1.03 Italy 19.34 0.79 Netherlands 17.37 0.71 Afghanistan 17.06 0.69 Luxembourg 16.41 0.67

WALNUTS In 2013, Afghanistan and Kyrgyzstan produced 11,122 tons and 5,859 tons of walnuts respectively (see Chart 49 below). Production in both Afghanistan and Kyrgyzstan has been on a general increase, although in 2012/13 it fell in Afghanistan. Walnut is a product in significant and growing global demand, providing the potential for increasing exports whilst also conserving important forest ecosystems.

Chart 49. PRODUCTION OF WALNUTS - AKT COUNTRIES 1992 (2014)

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The global shares of both Afghanistan and Kyrgyzstan (see Chart 50 below) have been falling though indicating that other producers have been increasing their production values at a faster pace thereby gaining greater shares in global trade. Given the continued trend of growing population, and trend towards free market capitalism, the importance of removing the binding constraints to market expansion remains considerable.

Chart 50. GLOBAL SHARE OF PRODUCTION AKT COUNTRIES

INTERNATIONAL TRADE ANALYSIS Analysis of AKT country exports for walnuts (see Chart 51 and Chart 52 below for shelled and unshelled respectively) indicates that all three ATK countries had a peak and drop, evidencing the vulnerability of production to pests leading to extreme defoliation. Only Afghanistan’s share of trade is now on a rise again though how long this trend will continue is unknown. In the case of unshelled walnuts, while Afghanistan trade value has fallen, both Kyrgyzstan and Tajikistan have been volatile. By analyzing global shares we see a great deal of volatility, affecting all stakeholders along the value chain.

Chart 51. SHARE OF AKT IN GLOBAL EXPORTS OF UNSHELLED WALNUTS

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Chart 52. SHARE OF AKT COUNTRY IN GLOBAL EXPORTS OF SHELLED WALNUTS

Looking at the key export markets for Afghanistan we see that unshelled walnuts are mainly exported to India (see Chart 53 below) and Pakistan.

Chart 53. EXPORT MARKETS FOR AFGHANISTAN – WALNUTS (UNSHELLED) (2014)

Chart 54 below shows the main export markets for Afghanistan, for unshelled walnuts in 2014. Again, India remains a dominant market player though again so does Turkey, with the EU and Jordan taking 6% of the market collectively.

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Chart 54. EXPORT MARKETS FOR AFGHANISTAN – WALNUTS (SHELLED) (2014)

Chart 55 below provides the key export markets for Kyrgyzstan for unshelled walnuts in 2014, indicating considerable exports to Turkey and China, with 10% going to Georgia and Kazakhstan. As a result, Turkish and Chinese investors are already open to this market, providing leverage for value chain interventions.

Chart 55. KEY EXPORT MARKETS FOR KYRGYZSTAN – WALNUTS (UNSHELLED) (2014)

Chart 56 below shows that China and Turkey remain critical export markets for unshelled walnuts from Kyrgyzstan, with three quarters of the export market.

Chart 56. KEY EXPORT MARKETS FOR KYRGYZSTAN –WALNUTS (SHELLED); 2014


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Chart 57 below shows the two key export markets for unshelled walnuts from Tajikistan, as being Kazakhstan and China. China dominates, and given membership of the SCO, mapping Chinese demand for Tajikistan nuts would provide a useful pull factor for producers and exporters.

Chart 57. KEY EXPORT MARKETS FOR TAJIKISTAN –WALNUTS (UNSHELLED); 2014

Chart 58 shows the export markets for unshelled walnuts, showing far lower imports by China. We can deduce therefore, that Chinese demand for shelled walnuts appears to be lower than its demand for unshelled walnuts, though this issue is discussed in detail in the Tajikistan country study section of the report.

Chart 58. KEY EXPORT MARKETS FOR TAJIKISTAN –WALNUTS (SHELLED); 2014

IDENTIFYING POTENTIAL MARKETS AND COMPETITORS Table 22 below shows that Turkey, Italy, Vietnam, China and Hong Kong represent over 50% of the potential export market. The AKT countries are also currently exporting to a number of EU countries, which are also key importers. Prior knowledge and experience of exporting into established key importers of walnuts would help in any attempts to build value chains.


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Table 22. KEY IMPORTERS (MARKETS)OF WALNUTS UNSHELLED (2014)

Trade Value (Million USD) Global Share Turkey 172.9 15.7 Italy 161.9 14.7 Vietnam 129.9 11.8 Hong Kong, China 127.7 11.6 United States 109.3 9.9 Spain 88.9 8.1 Germany 60.6 5.5 China 50.0 4.5

Table 23 shows the main market competitors for the AKT countries, again for unshelled walnuts, highlighting the powerful dominance of the USA and France, covering some 80% of the export market alone.

Table 23. KEY EXPORTERS (COMPETITORS) OF WALNUTS UNSHELLED (2014) Trade Value (Million USD) Global Share United States 501.507 65.44 France 109.8636 14.34 Chile 60.30264 7.87 Australia 18.17841 2.37 Argentina 14.22876 1.86 Germany 6.831575 0.89 Spain 6.720362 0.88 Ukraine 6.622636 0.86

Table 24 shows the major potential export markets for AKT shelled walnuts, all of which are a considerable distance away from AKT. As a result, exports should target regional markets such as the Gulf States, but also focusing on linking up with wholesale and retail companies operating in these countries.

Table 24. KEY IMPORTERS (MARKETS) OF WALNUTS SHELLED (2014) Trade Value (Million USD) Global Share Germany 229.7314 11.81 United States 212.6999 10.94 Korea, Rep. 146.7994 7.55 Japan 142.4412 7.32 Spain 114.4075 5.88 Netherlands ! 100.9801 ! 5.19 Canada 92.29007 4.74 United Kingdom 87.64934 4.50

Table 25 shows the same results for key exporters for unshelled walnuts in 2014.

Table 25. KEY EXPORTERS (COMPETITORS) OF WALNUTS SHELLED (2014)

Trade Value(Million USD) Global Share United States 796.3238 49.17789 Chile 200.2739 12.36814 Moldova 111.269 6.871548 Ukraine 76.0467 4.696352 Romania 68.5865 4.235638 Germany 60.89719 3.760776 Unspecified 52.31525 3.230788 France 36.28338 2.240722 China 33.61786 2.07611


52

POTATOES Kyrgyzstan (see Chart 59 below) is the largest producer of potatoes among the AKT countries with production volume in 2014 being 1.3 Million tons. Tajikistan trails with 1.1 Million tons (still considerable) followed by Afghanistan with a low base of some 302,980 tons.

Chart 59. SHARE OF POTATO PRODUCTION IN GLOBAL PRODUCTION

Despite increasing production, global shares of potato production are very low indicating that the AKT economies lag behind most producers in terms of volumes produced, area and yield. INTERNATIONAL TRADE ANALYSIS Though Kyrgyzstan is the larger producer, Afghanistan is the larger exporter of potatoes globally according to official trade data (see Chart 60 below). Afghanistan exported US$11.9 Million worth of potatoes in 2014, while Kyrgyzstan exported potatoes worth US$4.4 Million globally. During the last two years, shares of both Afghanistan and Kyrgyzstan have been falling.

Chart 60. SHARE OF AKT COUNTRY EXPORTS IN GLOBAL EXPORTS OF POTATOES

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Identifying the key current export markets for Afghanistan and Kyrgyzstan potatoes (see Chart 61 below), it can be seen that Kazakhstan is the single most important market currently with just short of 90% of production. Export markets are not at all diversified and there is limited focus on EU markets , which are huge consumers of the product.

Chart 61. KEY EXPORT MARKETS FOR AFGHANISTAN – POTATOES (2014)

Chart 62 shows the key export markets for potatoes from Kyrgyzstan, indicating again that Kazakhstan remains the most important trading partner for most products. Export diversification, based on comparative and cost advantages, must be an important future consideration.

Chart 62. KEY EXPORT MARKETS FOR KYRGYZSTAN – POTATOES (2014)

IDENTIFYING POTENTIAL MARKETS AND COMPETITORS The key importers and exporters of potatoes are mostly European economies (see Tables 26 and 27 below). It would be difficult for the AKT economies to enter European markets given that producers from the region would provide strong competition. Russia is one of the largest importers of potatoes and there might be an opportunity to divert exports into Russia given regional proximity.


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Table 26. KEY IMPORTERS (MARKETS) OF POTATOES (2014)

Trade Value (Million USD) Global Share Russian Federation 321.8098 7.85 Netherlands 292.0129 7.13 Germany 253.5566 6.19 Belgium 235.8700 5.76 Spain 206.8382 5.05 Italy 205.4657 5.01 United States 176.9924 4.32 France 118.0093 2.8

Table 27 shows the key potato competitors for the AKT countries, again highlighting that competing against this group of countries will be very difficult, given the advanced nature of markets there, including strong quality controls and competitive pricing (in part as a result of lower transaction costs, efficiencies and monopolies of scale).

Table 27. KEY EXPORTERS OF POTATOES (COMPETITORS) (2014) Trade Value (Million USD) Global Share Netherlands 730.7433 18.4 France 639.2394 16.1 Germany 375.5668 9.4 Egypt, Arab Rep. 340.1457 8.6 United States 208.4579 5.2 Canada 188.7962 4.7 China 166.8016 4.2 Belgium 166.7933 4.2

CONCLUSION This section has not attempted to remove products from the pre-selected list. However, it has provided an opportunity to look at: ! Production volumes; ! Production yields; ! Exporters (competitors); and, ! Importers (potential markets). The result of this analysis was prioritized up front, and was made available to the field study teams, to assist in justifying the final selection of products that best meet the criteria set by the AKT Consortium. When combined with the results of the Revealed Comparative Advantage (see Section E), Country Benchmarking (see Section F) and Country Value Chain Analysis (see Section G, H and I), informed decisions can be made in relation to product selection and intervention focus at the micro, meso and macro levels of the value chain.


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Section E. REVEALED COMPARATIVE ADVANTAGE The Revealed Comparative Advantage (RCA) index is a measure of a country’s relative advantage or disadvantage in a specific industry/commodity as evidenced by trade flows. The traditional RCA estimate as constructed by Balassa (1965) is a ratio of product k’s share in country i ’s exports to its share in world trade. Formally, RCAi

k=(Xik/Xi )/ (Xk/X) where Xi

k is country i ’s exports of good k, Xi = !k Xi

k its total exports, Xk =!i Xik world exports of good and X = !i!k Xi

k total world exports. A value of the RCA above one in good (or sector) k for country i means that i has a revealed comparative advantage in that sector. A disadvantage of the traditional RCA index is that it is asymmetric, i.e. unbounded for those sectors with a revealed comparative advantage, but it has a zero lower bound for those sectors with a comparative disadvantage. There are two ways in which to address this. The first is to use mirror data ie to use imports rather than exports applying the same formula as above, but where X is replaced by M. The second solution is to rely on a simple normalization proposed by Laursen (2000). The normalized RCA index, NRCA, becomes: NRCAi

k=( RCAi

k-1)/ ( RCAik+1). This is the measure of RCA estimation that we have used. The interpretation of

the NRCA index is similar to the standard RCA measure except that the critical value is 0 instead of 1 and the lower (–1) and upper (+1) bounds are now symmetric. Therefore, any product that has an RCA greater than zero has a relative revealed comparative advantage, with larger values having larger RCAs and any product that has negative values does not reveal any comparative advantage globally. Estimating Revealed Comparative Advantages (RCAs) for the pre-selected products, show that Afghanistan has the highest number of products having RCAs greater than zero. Below we indicate the products in each of the AKT economies which have RCAs greater than one, indicating that these are the products in which each of the three economies has a clear comparative advantage globally. While this does not mean that a product with the highest RCA is automatically selected, or that negative RCA products might not emerge as an export product, it does provide us with a useful assessment that can be integrated with other findings, particularly at the field and markets levels. From the RCAs estimated, and the trade volumes compared, it seems that there are four potential FVN products which are important to all three economies - walnuts, onions, apricots and grapes. While walnuts(shelled) and onions have RCAs greater than 0 in all three AKT economies onions have much higher trade volumes and shares among all three economies compared with walnuts, whilst grapes are significant to the Afghanistan and Tajikistan economies, but less so to the Kyrgyzstan economy. Similarly, apricots have significance to the Tajik and Kyrgyzstan economies but less so to the Afghan economy. Despite this analysis, the consultants will remain aware if there might be a particular product which is not currently significant for AKT countries, but would appear to have significant production or export market potential. Crucial to our assessment is an understanding of the emerging trade and transit arrangements in Central Asia, given the impact that new resource corridors, trade routes (including CAREC and TRACECA) and the emergence of Iran as a trading community may have on comparative advantages. NEW AKT REGIONAL CONNECTIVITY INITIATIVES COULD CHANGE PRODUCT RCAS Any regional export-driven value chain approach must look at the emerging strategic trade opportunities that would improve physical and trade connectivity between the AKT countries. At the RECCA VI Conference held in Afghanistan in September 2015, the following major regional economic cooperation initiatives were formally approved by the representatives of all AKT countries, and these must therefore be taken into consideration in the Value Chain work.

! Kyrgyzstan Republic – Tajikistan – Afghanistan - Iran (KTAI) Project: Iranian, Afghan and Tajik Presidents signed an agreement to develop the Kyrgyzstan Republic – Tajikistan - Afghanistan-Iran (KTAI) railway project during the fifth trilateral summit in Dushanbe on March 25, 2012. A working group has been established to undertake the necessary preparation. Iran’s Economic Cooperation Organization (ECO) will co-ordinate the plans


56

being developed by various railway agencies in Central Asia around the KTAI Rail Route, which passes through Afghanistan and connects the Kyrgyzstan Republic to Iran via Tajikistan and Afghanistan. The 3rd Meeting of the KTAI High level Working Group (HLWG) of the Road Transport Corridor was held on 27th October, 2014 in the ECO Secretariat in Tehran. All member states participated, as well as delegations of the ECO Secretariat and IRU. The Meeting agreed that the TIR system would be used as the transit system for the corridor, and recommended that the free transit system should be implemented along this corridor to enable efficient governance. The HLWG approved the Terms of Reference (TOR), prepared by the ECO Secretariat, for a field study along this Corridor. The next HLWG was to be held in the Republic of Tajikistan in October/November 2015.

! The Lapis Lazuli Route: The recent commitments towards this multimodal trade and transport route are promising. The Lapis Lazuli Route encompasses part of the Central Asia Regional Economic Cooperation (CAREC) Program Transport Corridor #2, stretching from China in the East – through the Kyrgyzstan Republic, Uzbekistan and Turkmenistan – to Azerbaijan in the West. However, instead of continuing on to Uzbekistan from Turkmenistan, the Lapis Lazuli Route turns south toward Afghanistan from Turkmenistan at the border town crossing of Anthony, Afghanistan. Beyond CAREC Transport Corridor #2 in the West, the Lapis Lazuli Route stretches through Georgia and connects with both Turkey by land and several European nations, including Bulgaria, Romania and the Ukraine, via the Black Sea and to Kars and the Bosporus via Istanbul;

! The Five Nations Railway Corridor: This transport project will connect East Asia to Central

and South Asia and expand inter-regional trade and development, while also enhancing increased social and political integration, by constructing a railroad linking China to Iran via Afghanistan, Tajikistan and the Kyrgyz Republic; and,

! Multi-Modal Inland Port (MMIP) Development: Afghanistan, supported by the Gulf States,

is committed to constructing a number of MMIPs, which would provide a considerable contribution to regional trade connectively. As dry ports, a Multi-Modal Inland Port comprises an inland cargo terminal from which railway and truck operators can accomplish their transport needs just like a traditional waterway port. MMIPs are proposed because high market delivery costs caused by fragmentation of supply chains, poor logistic service levels, and low levels of connectivity within the wider region prohibit Afghanistan from emerging as a trade and transit hub. MMIP’s would provide a range of services, including (i) cargo consolidation and distribution (ii) temporary storage of containers (iii) customs clearance (iv) connectivity between formal transportation nodes (v) the agglomeration of institutions (vi) issuance of bills of lading in advance of clearance (vii) inventory management and potential pre-customs clearance also. Moreover, they could provide a stronger enabling environment for business, and perhaps be strategically linked to Special Economic Free Zones, as proposed.

Though this analysis remains insufficient to determine which product shows the highest export potential, it does allow a top-down trade-based assessment around which other results can be triangulated. Key product (top 5) findings for the AKT countries based on RCA analysis are provided in Table 28 below:

Table 28. TABLE 28. REVEALED COMPARATIVE ADVANTAGES Afghanistan Tajikistan Kyrgyzstan Republic Raisins (0.997) Onions and Shallots (0.982) Apricots (0.987) Apricots (0.992) Apricots (0.954) Walnuts (Shelled) (0.979) Pistachios (0.985) Walnuts (Shelled) (0.940) Plums (0.946) Grapes (0.983) Walnuts (Unshelled) (0.913) Onions /Shallots (0.937) Almonds (0.978) Raisins (0.641) Potatoes (0.920)


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Revealed Comparative Advantages will shift over time, perhaps as a result of targeted value chain intervention. Table 29 provides the RCA ranking for each pre-selected product by AKT country, while also showing the following variables: ! Share of AKT product exports in Country's Total Exports; ! The share of AKT exports in total exports; and, ! Total Export Volumes based on formal flows. Eventually, the analysis provided below for selected products in each country reflects on a number of different factors, including trade volumes, competitiveness, production complexity and other factors, including risks minimization and ability to attract private investment. Moreover, what we have been able to do is to assess which are the most binding constraints to market expansion (upstream and downstream), and to target areas of comparative advantages.


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Table 29. REVEALED COMPARATIVE ADVANTAGES BY PRODUCT FOR AKT COUNTRIES

Revealed Comparative Advantage Share of AKT product exports in Country's Total Exports

Share of AKT exports in Total exports

Total Export Volumes

AFG KGZ TJK AFG KGZ TJK AFG KGZ TJK AFG KGZ TJK Onions and shallots 0.978 0.937 0.982 1.364 0.463 1.621 0.451 0.215 0.443 11.963 5.701 11.766 Almonds (Unshelled) 0.978 -1.000 -0.284 0.478 0.000 0.003 0.451 0.000 0.002 4.189 0.000 0.021 Almonds (Shelled) 0.975 -0.518 -0.784 2.077 0.008 0.003 0.397 0.002 0.000 18.223 0.102 0.023 Walnuts (Unshelled) -0.610 0.761 0.913 0.001 0.031 0.094 0.001 0.051 0.090 0.009 0.387 0.682 Walnuts (Shelled) 0.819 0.979 0.940 0.090 0.851 0.291 0.050 0.662 0.133 0.789 10.476 2.109 Pistachios 0.985 0.079 0.210 1.812 0.016 0.021 0.660 0.008 0.006 15.893 0.196 0.151 Lemons -0.351 -1.000 -0.320 0.008 0.000 0.009 0.002 0.000 0.002 0.070 0.000 0.062 Grapes-Fresh 0.983 -0.094 0.422 5.587 0.039 0.115 0.590 0.006 0.010 49.017 0.478 0.837 Grapes-Dried 0.997 -0.242 0.641 7.503 0.006 0.045 3.817 0.004 0.019 65.818 0.073 0.323 Melons 0.829 -0.510 -0.444 0.101 0.003 0.004 0.053 0.002 0.002 0.887 0.038 0.026 Apricots 0.992 0.987 0.954 0.735 0.442 0.120 1.296 1.094 0.175 6.448 5.441 0.869 Strawberries NA NA NA NA NA NA NA NA NA NA NA NA Pomegranates NA NA NA NA NA NA NA NA NA NA NA NA Alfalfa NA NA NA NA NA NA NA NA NA NA NA NA Potatoes 0.725 0.920 NA 0.094 0.358 NA 0.031 0.166 NA 0.824 4.409 NA Plums 0.946 0.158 0.249 1.948 Prunes -0.375 0.001 0.003 0.018


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Section F. COUNTRY BENCHMARKING AFGHANISTAN Afghanistan is the more significant producer and exporter among the AKT countries for most of the pre-selected products. In terms of production, the products that Afghanistan generates the most in terms of volumes are grapes, potatoes and melons. Among the AKT countries, Afghanistan is also the largest producer of apricots, almonds, walnuts and pistachios, though overall production volumes are lower than the previously identified products. Grape is the product in which Afghanistan seems to be the most competitive among all the pre-selected products, with the country exporting fresh grapes worth US$49.02 Million and dried grapes worth US$65.82 Million. Dried grapes (raisins) in fact is the product in which Afghanistan has the largest global export share, of 3.8%. The share of Afghan exports in global share of fresh grapes is 0.59%. The other products in which Afghanistan has significant value in terms of exports are Shelled Almonds (Export Value- US$18.2 Million; Global Export Share-0.40%), Pistachios (US$15 Million; 0.6 %), Onions (US$11.96 Million; 0.45%) and Apricots (US$6.45 Million; 1.3%). India (Raisins, Almonds, Walnuts, Pistachios) and Pakistan (Onions, Apricots, Melons) are two of the key markets for many products for Afghanistan. Kazakhstan (Potatoes) and some EU countries (Raisins, Shelled Almonds, Walnuts unshelled) are also markets for Afghanistan for some products to a lesser extent. This indicates a familiarity that Afghanistan exporters, in at least some products, might have towards the EU market which is one of the largest markets for many products. KYRGYZSTAN For Kyrgyzstan, the key products in terms of production volumes are Potatoes, Apricots, Grapes and Walnuts. In terms of export values and global shares the two key products are shelled walnuts (Export Value- US$10.48 Million; Global Share 0.66%), Apricots (US$5.44 Million; 1.09%) and Potatoes (US$4.41 Million; 0.16%). For most other products, export volume global shares are very small. Kazakhstan is the single most important market for Kyrgyzstan exports. There is very limited export market diversification for Kyrgyzstan. Though interestingly, China is the main market for raisin and walnut exports from Kyrgyzstan, and Germany is a market for almonds and walnuts (the export values and global shares in these products are low though). TAJIKISTAN In terms of production volumes, the key products are potatoes, grapes and Apricots, though when looking at exports the most significant products are different. For Tajikistan the only products in which export values are significant are Onions (US$11.77 Million; 0.44%), Shelled Walnuts (US$2.11, 0.13%), and to a much lower extent Apricots (US$0.87, 0.17%). Kazakhstan is the single most important market for exports from Tajikistan. PRODUCT SPECIFIC ANALYSIS GRAPES - FRESH AND DRIED Afghanistan’s global share in export of fresh grapes is 0.59% while that for raisins is 3.8%, indicating that Afghanistan has a competitive edge when it comes to exporting dried grapes (raisins). Data indicate that Afghanistan is the sixth largest exporter of raisins, although it also has to be noted that the top two exporters Turkey and United States do take up a major chunk of the global market (54%). For raisins, while the US is the largest global exporter, for Afghanistan a strong regional competitor is Turkey which exports 30.26% of global exports of raisins and 3% of fresh grapes. Iran is also a lesser but still strong regional competitor in terms of raisins. For imports of fresh grapes, US, EU and China are the key markets, whilst for raisins it is primarily EU countries, followed by Japan and Canada importing smaller shares. MELONS Data are available only for Afghanistan in terms of production. While trade data are available for all three AKT countries, global shares of Kyrgyzstan and Tajikistan are extremely low, almost


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insignificant. Afghanistan has 0.05% of the global share of melon exports and this is also extremely low when compared with the key global exporters. Pakistan is the key market for Afghan export of melons. Most of the melon trade to Pakistan is cross-border and likely occurs only due to the ease of access, indicating a lack of any supply chain structures such as cold storage and transportation for long distances. The key importers of Melons are the United States and EU countries. Afghanistan does have an entry point already into the UK which is the 5th largest importer of melons in the world. Afghanistan, currently out of its total exports, exports an extremely small share of 0.23% into UK. While this is almost insignificant, it is important because there might be existing channels of trade that could be taken advantage of. It would be useful for Afghanistan to diversify its export markets and increase its share of exports to UK. More information needs to be collected from exporters of melons in Afghanistan on why the share of exports to the UK is so minimal. Is it because of entry barriers in the UK such as standards or other requirements? Most significant global exporters of melons are from the Latin American and EU region, with no significant exporter in the Central Asian or MENA region. APRICOTS Among the AKT countries, Afghanistan and Kyrgyzstan are the more significant exporters of fresh apricots. Interestingly, Afghanistan is the largest producer of apricots but exports almost on par with Kyrgyzstan. Tajikistan also seems to be producing more apricots in terms of volume, though exports are much lower. Kyrgyzstan seems to have a competitive advantage when it comes to exports. The global share of both Afghan and Kyrgyzstan exports are 1.3% and 1.09% respectively. Afghanistan’s key export market is Pakistan while that for Kyrgyzstan is Kazakhstan. There is clearly no export diversification in terms of markets. The key global markets for apricots are EU countries (Germany, Italy and France) and Russia. The key exporters are Spain, France and Italy while the key regional exporters are Uzbekistan and Turkey. LEMONS Tajikistan is the only country for which lemon production and trade data are available indicating that among the AKT countries this is the only significant producer and exporter. But even for Tajikistan, lemon production and exports have fallen, with current export shares constituting only 0.002% of global trade. Further, there is very limited export diversification, with almost all exports from Tajikistan going to Kazakhstan. None of the AKT countries has a positive RCA in lemons, indicating there might not be much potential in developing value chains in this product in future. Turkey is the only regional country that is a strong exporter of lemons. STRAWBERRY Production volumes and trade values are only available for Kyrgyzstan, indicating that among the AKT countries only Kyrgyzstan has any significant production and trade in strawberries. In terms of production, Kyrgyzstan volumes are increasing in absolute numbers though the share in global production has fallen indicating that other countries have overtaken the country. Currently share of Kyrgyzstan production in total global production is only 0.028% (2,200 tonnes). Share in global exports is also very limited at 0.012% in 2014. The only market for Kyrgyzstan strawberry exports is Kazakhstan. EU and US are the key markets for importing strawberries worldwide. The main global exporters of strawberries are Spain, Mexico and US, while significant exporters in the MENA region are Egypt and Morocco. None of the AKT countries has a competitive advantage globally in strawberry production, as indicated by the RCA analysis. ALMONDS Afghanistan’s almond production for 2013 has been 42,215 tonnes. Production has been increasing since 2006, but from 2012 has been a decline. Kyrgyzstan and Tajikistan have seen very low levels of production compared with Afghanistan. When it comes to exports of almonds (both shelled and unshelled) it can be seen that Afghanistan is the only significant exporter among the AKT. Afghanistan’s global export share of almonds unshelled is 0.45%, and that of shelled almonds is 0.40%. The main market to which Afghanistan has been exporting shelled almonds is India, which imports almost all unshelled almonds (except for an insignificant export value to Pakistan). The


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markets to which Afghanistan exports shelled almonds are more diverse. While India still is the largest market to which shelled almonds are exported (61%), a fair share of exports goes to EU countries as well (particularly Germany). Interestingly though, Tajikistan and Kyrgyzstan shares in exports are very low, though they do export shelled almonds to EU countries. Globally, India is the largest importer for unshelled almonds and Germany for shelled almonds. As AKT countries are already familiar with these markets, there might be ease in developing value chains (currently Afghanistan has an RCA greater than 0 for almonds, indicating a comparative advantage) PISTACHIOS Pistachio production in Afghanistan for the year 2013 was 2,100 tonnes, and for Kyrgyzstan 948 tonnes. Compared with Afghan value of exports, that of Kyrgyzstan and Tajikistan are much smaller. While the key export market for Afghanistan is India, smaller share of exports also go to a few European countries, and in the region towards Lebanon and Turkey. For Tajikistan and Kyrgyzstan, the key market is Kazakhstan. An analysis of key importers and exporters reveals two things. Firstly Afghanistan and Tajikistan, while primarily exporting to neighbouring countries such as India and Kazakhstan, also export a small share to the European Union which is a key importer. Given an already established relationship with key importing markets, there is potential for further value chain development without significant obstacles. Secondly, it can also be seen that Afghanistan, while falling to the lower end of the list, does stand with the key exporters globally. Regionally though, the AKT countries would face strong competition from Iran which is the second largest exporter globally, and from Turkey which is also a strong exporter of pistachios. The key import markets are Hong Kong, Vietnam and the EU. WALNUTS In 2013, Afghanistan and Kyrgyzstan produced 11,122 tons and 5,859 tons of walnuts respectively. Production in both Afghanistan and Kyrgyzstan has been on a general increase, although in 2012/13 it fell in Afghanistan. Kyrgyzstan and Tajikistan though having lower production volumes than that of Afghanistan, seem to have higher shares in global exports than Afghanistan. Kyrgyzstan’s share of global exports of unshelled walnuts was 0.05%, and for shelled walnuts was 0.6%, in 2013. Looking at key export markets for Afghanistan it can be seen that walnuts (both shelled and unshelled) are mainly exported to India. For walnuts unshelled, Pakistan is also a significant importer of Afghan exports. Interestingly, for Kyrgyzstan and Tajikistan, China is a major importer of unshelled walnuts. For shelled walnuts, China is the major importer from Kyrgyzstan, and Kazakhstan is the major importer for Tajikistan. Turkey is a significant regional importer of walnuts, while there are no other significant exporters regionally. POTATOES Kyrgyzstan and Tajikistan are significantly larger producers of potatoes in terms of volume than is Afghanistan. Potato is the product that is being produced in largest volumes among the pre-selected products, by both Kyrgyzstan and Tajikistan. But in spite of being the lowest producer among the AKT countries, Afghanistan exports almost twice as much as Kyrgyzstan in terms of values. Tajikistan has extremely low values of exports globally. Afghanistan and Kyrgyzstan exports constitute 0.4% and 0.1% of global exports respectively. Identifying the key current markets for Afghan and Kyrgyz potatoes, it can be seen that Kazakhstan is the single most important market currently. There is very limited diversification in export markets for potatoes, and less focus on the EU markets which are huge consumers of the product. The key exporters and importers of potatoes are mostly European economies. It might be difficult for AKT economies to enter the European markets given that producers from the region would give strong competition. Russia is one of the largest importers of potatoes, and there might be an opportunity to divert exports into Russia given regional proximity. ONIONS For onions, the limitation in availability of production data focuses the analysis only on trade. Analysing export values of onions, it can be seen that Tajikistan is the largest exporter, though values have been volatile in terms of exports. Afghanistan exports have increased over the last few years, and


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in 2013 and 2014 export values from Tajikistan and Afghanistan have been similar. In terms of global shares, Tajikistan’s share in global exports has fallen from the peak in 2010, while the overall trend has been upward for Kyrgyzstan and Afghanistan in terms of global share. The shares of all three countries though are less than 1%. For Afghanistan, the most important export market is Pakistan with 99% of the exports from the country going to Pakistan. For Kyrgyzstan and Tajikistan –Kazakhstan and Russia are the largest markets. The key importers of onions globally are Netherlands, Mexico, China and India, while the key global exporters are United States, United Kingdom and Germany. ALFALFA No trade and production data are available for AKT countries POMEGRANATES No trade and production data are available for AKT countries, though there is known to be a considerable and high quality product in Afghanistan, in Kandahar in particular. COUNTRY BENCHMARKING RESULTS Table 30 below provides the results of country benchmarking data, taken from numerous sources. While data on informal trade flows and exports are not available, it is believed to be considerable, and more work should be done to improve quantification. 2

2 Data Limitations: Some of the key limitations of the data are (i) Data on production has been obtained from the FAOstat database. The latest data available on production is 2013. In spite of it’s limitations we have used data on production volumes rather than production values since the data on latter is extremely sparse and the few data points available would not add value in terms of obtaining a picture on the AKT competitive analysis in the pre-selected products (ii) Data on trade has been sourced from the COMTRADE/WITS database. Data for Kyrgyzstan across identified products indicates a peaking of exports in 2008 and then a dip in 2009 across most products. This seems to be a data reporting issue than a trade trend in the country. Further clarity needs to be obtained on this when doing the regional surveys (iii) Production data for the AKT countries is not available for Onions and hence the analysis restricts itself to trade patterns and competitive. It should be noted that both production and trade data is not available for the AKT countries for pomegranates, hence the analysis has not incorporated this product into the analysis. In order to obtain export data of the AKT countries mirror data has been used ie import data as reported by the world and other trading partners has been used. This adoption has been to address reporting gaps and data unavailability issues. While for almonds and walnuts, both unshelled and shelled products have been covered in the analysis separately, for pistachios this has not been possible given that the COMTRADE data does not separately report shelled and unshelled pistachios. For RCA analysis the initial estimation was carried out using the classic RCA estimation-Balassa's RCA the limitation was evidenced that the analysis was asymmetric i.e. the upper bound is infinity while the lower is 0 leading to RCA's as high as 300 and 400 being estimated. After reviewing further refinement of the analysis adopted normalised RCAs proposed by Laursen. The findings in terms of key products do not change (The order of revealed advantage remains the same)


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Table 30. RESULTS OF AKT COUNTRY BENCHMARKING

Afghanistan Tajikistan Kyrgyzstan

Product Product Volume (Tons)

Exports (US$

Million)

(Ton / Ha)

Global Share in exp (%)

Main Export Market

Product Volumes (Tons)

Exports (US$

Million)

(Tons / Ha)

Global Share in Exports

(%)

Main Export Market

Product Volume (Tons)

Exports (US$

Million)

(Tons / Ha)

Global Share in Exports

(%)

Main Export Market

Raisins - 65.82

- 3.817

India Russia EU - 0.32

- 0.02

Kazakh - 0.07

- 0.004 China

Fresh Grapes 610,570 49.02 9.83 0.590 Pakistan 175,335 0.84 4.38 0.02 Kazakh 8106 0.48 1.39 0.00575 Kazakh

Pistachio 2,100 15.89

1.10 0.660

India, Italy, Lebanon

NA 0.15

NA 0.00628

Kazakh EU 948

0.20 1.47 0.01

Kazakh

Onions NA 11.96 NA 0.45 Pakistan NA 11.77 NA 0.44 Kazakh Russia NA 5.70 NA 0.21

Kazakh Russia

Apricot 90,000 6.45 9.99 1.30 Pakistan 31,400 0.87 2.24 0.17 Kazakh 23000 5.44 2.77 1.09 Kazakh Almond (Unshelled) 42,215 4.19 2.99 0.45 India 3,421 0.02 0.75 0.002 Kazakh 1720

0.001 3.02 0.0001

Kazakh

Almond (Shelled) - -

- 0.40 India, German - -

- 0.0005 Kazakh Italy - 0.101

- 0.002 German

Melons 180,070 0.89 11.00 0.052 Pakistan NA 0.03 NA 0.0016 - NA 0.04 NA 0.0023 -

Potatoes 302,980 0.82 13.20 0.45 Kazak, Russia 1,115,700 - 25.13 - - 1332020 4.41 16.55 0.16

Kazakh

Walnuts (Shelled) - 0.79

0.05 0.05 India, Turkey -

2.11 - 0.13 Kazakh

China - 10.48

- 0.66 China, Turkey EU

Lemons NA 0.07 NA 0.002 - 2,500 0.06 3.17 0.012 Kazakh NA NA NA - -

Walnut (Unshelled) 11,122 0.009

4.80 0.001 India, Pakistan EU

NA 0.68

NA 0.09 China, Kazakh 5859 0.39

4.80 0.05 Turkey Kazakh

Strawberry NA NA NA - - NA NA NA - 2200 0.295 5.50 0.012 Kazakh Plums 380,00 0.033 9.87 0.004 10,000 0.141 3.03 0.01 13500 1.9 6.75 0.25 Prunes - 0.125 - 0.02 - 1.9 0.34 0.018 0.003 Pomegranate - - - - - - - - - - - - - - - Alfalfa - - - - - - - - - - - - - - -


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Table 31 below provides an overview of the major regional and global competitors for each pre-selected product, giving an indication of how tough the competition is. One option therefore would be to strengthen trading relations with a major competitor, to build core capacities, including sharing industry experiences.

Table 31. MAJOR REGIONAL AND GLOBAL EXPORT COMPETITORS PER PRODUCT

Product Major Regional competition for

each product

Major Global competition for

each product

Major Global Markets for each product

Raisins Turkey Iran

Turkey US

Chile

UK Germany

Fresh Grapes Turkey

Chile USA Peru

USA Germany

Netherlands Pistachio

Iran Turkey

USA Iran

Germany Turkey

Hong Kong, Vietnam Germany

Onions

-

US UK

Germany

Netherlands Mexico China

Apricot Turkey, Uzbekistan

Spain France Italy

Germany Russia Italy

Almond (Unshelled) Iran

USA Australia

Spain

India Hong Kong

Vietnam Almond (Shelled)

Iran USA Spain

Australia

Germany Spain UAE

Melons

Uzbekistan

Spain Brazil

Guatemala

USA Germany

France Potatoes Egypt EU

Egypt Russia

EU Walnuts (Shelled)

- US

Chile Moldova

US Germany

Korea Japan

Lemons Egypt, Morocco Spain, Mexico, US

US Germany

France Walnut (Unshelled)

- US

France Chile

Turkey Italy

Vietnam Strawberry Egypt

Morocco

Spain Mexico

US

Germany Canada

US Plums Prunes Pomegranate - - - Alfalfa - - -


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Section G. AFGHANISTAN MAIN FINDINGS INTRODUCTION This section reports the most significant findings in relation to the AKT feasibility study on value chains in Afghanistan. The Government of the Islamic Republic of Afghanistan has outlined the particular potential of Almonds (good upside and non-perishable) and Apricots (higher value crop that can also be dried) in particular, though it also outlined the potential of already-established crops such as Grapes, Potatoes and Pomegranates. Though grapes have a cold storage problem, potatoes are easily traded with Pakistan and pomegranates from the south are some of the very best the world has to offer. In addition to the other products pre-selected, this report provides the results of field work and justification for product selection. Afghanistan is the most significant producer and exporter among the AKT countries for most of the pre-selected products. In terms of production, Afghanistan produces the most in terms of volumes in Grapes, Potatoes and Melons. Among the AKT countries, Afghanistan is also the largest producer of Apricots, Almonds, Walnuts and Pistachios, though overall production volumes are lower than the previously identified products. Grapes are the product in which Afghanistan seems to be the most competitive among all the pre-selected products with the country, with exports of fresh grapes worth US$49.02 million and dried grapes worth US$65.82 million in 2014. Dried grape (raisin) in fact is the product in which Afghanistan has the largest global export share, of 3.8%. The share of Afghan exports in global share of fresh grapes is 0.59%. Shelled Almonds (export value of US$ 18.2 million and a global export share of 0.40%), Pistachios (US$15 million – global share of 0.6% share), Onions (US$11.96 million - global share of 0.45% share) and Apricots (US$6.45 million - global share of 1.3%). India (Raisins, Almonds, Walnuts, Pistachios) and Pakistan (Onions, Apricots, Melons) are two of the key markets for many products from Afghanistan. Kazakhstan (Potatoes) and some EU countries (Raisins, shelled and unshelled Almonds) are also markets for Afghanistan for some products to a lesser extent. This indicates a familiarity that Afghanistan exporters, in at least some products, might have towards the EU market, which is one of the largest markets for many products. Afghanistan’s agricultural productivity however remains some 50% below its pre-war level, and crop yields are only half those of its regional neighbours such as Pakistan and India. This section identifies the most feasible product of those pre-selected by the AKT Consortium, with the greatest potential in terms of meeting the investment criteria set for Afghanistan. The final product identified here, based on empirical findings, includes detailed value chain analysis and value chain entry points, to maximize upside value for that product and producers. Of the 12 + value chains pre-selected, Almonds were selected for deeper analysis. It should be noted however that given the high seasonality in production and prices and widespread political, economic and security uncertainty, the results provided here reflect evidence collected and consensus reached so far. Before the analysis is provided, Table 32 provides the technical justification for the selected product (Almonds), and the reasons that other pre-selected products were not finally selected as being the products with the greatest potential, and complying with criteria set.


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Table 32. AFGHANISTAN TECHNICAL JUSTIFICATION FOR SELECTED PRODUCTS

Exports # Product Justification RCA US$ Million

Share in GDP

Share in Global

SELECTED 1 Almonds Afghanistan RCA for almonds (both unshelled and shelled) is one of the highest across all products studied.

Shelled almonds are the product with the highest share (2%) in Afghan total exports when compared with all other identified products. Afghanistan’s global export share of almonds unshelled is 0.45% and that of shelled almonds is 0.40%, which is also among the highest in preselected products. While India is still the largest market to which shelled almonds are exported (61%), a fair share of exports go to EU countries as well (particularly Germany) indicating diversification of exports and familiarity with the large markets, thereby underlining a potential for future increase in market shares. There was US$1 8.2 million in export of shelled Almonds in 2014, and though there has been volatility in volume, the last few years have clearly been showing an increase in exports. World Almond production/exports continue to track growing demand from established and developing markets. ! Leading RCA ! Quadrupled production since 2003 ! Global demand to double ! Non-perishable ! Strong forward & backward linkages ! Value added through processing ! Value added through marketing ! Strong employment multipliers

0.98 (Unshelled) 0.98 (Shelled)




NOT SELECTED 2 Apricots While Apricot production volumes are lower than a few of the other pre-selected products there is a clear upward

trend. In fact, from 2003 to 2013, volumes have increased by 115%. Exports have also significantly increased during this period by more than 800% having increased from US$ 0.6 Million to US$ 6.4 Million, and RCA values are the highest. The share in Afghan total exports across all commodities and share in world exports of apricots is high, being lower only than almonds and grapes.

0.99 6.44 0.73 1.29

3 Melon Melon production in Afghanistan has fallen by 51% from 2009 to 2013, and the overall trend since then has been downwards. Exports of melons have also been falling during this period. Competitiveness is this product is fast being eroded as indicated by very low global share of Afghan exports.

0.83 0.88 0.10 0.05

4 Grapes Grapes are a well-doing product given high RCAs, high trade values and global shares, but is a mature product and hence not selected.

0.98 (Fresh) 1 (Dried)

49(Fresh) 65(Dried)

7.5 3.8

5 Pomegranate Not enough information was available to do an in-depth analysis. It is assumed that lack of information on FAO/WTO data portals could be an indication of lack of significant trade/production

NA NA NA NA

6 Lemon Production/Trade data not available for Afghanistan indicating lack of significance of the crop to the country NA NA NA NA 7 Strawberry Not enough information was available to do an in-depth analysis. It is assumed that lack of information on NA NA NA NA


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Table 32. AFGHANISTAN TECHNICAL JUSTIFICATION FOR SELECTED PRODUCTS

Exports FAO/WTO data portals could be an indication of lack of significant trade/production

8 Onions and Shallots

Onions have high potential. Onion is a mature product in terms of investment already gone into product development, hence has not been chosen.

0.98 11.96 1.36 0.45

9 Pistachio Pistachio production in the country has fallen since the peak it reached in 2007. Productivity has also reach a plateau over the last few years. Exports have also fallen in this period by 36%, indicating a reducing competitiveness among the selected products

0.99 15.89 1.8 0.66

10 Walnut While walnut production has shown an increase in the last few years, the volume of trade and production is extremely low to be considered a significant product.

-0.61(Unshelled) 0.82(Shelled)

0.009 0.001 0.001

11 Alfalfa Not enough information was available to do an in-depth analysis. It is assumed that lack of information on FAO/WTO data portals could be an indication of lack of significant trade/production

NA NA NA NA

12 Potato Potato production volume and export values have shown a dip over the last few years. RCA ,export values and global/regional shares are also very low compared with the selected product

0.72 0.82 0.09 0.031


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VALUE CHAIN & MARKET CHARACTERISTICS Currently, around 12 % of Afghanistan’s agricultural area is utilized, compared with 87 percent for India and 78 % for Pakistan. As of 2012, only 20 % of agricultural land is equipped for irrigation compared with 37 % and 76 % in India and Pakistan respectively. Moreover, irrigation systems operate at very low efficiency rates of about 25 %. In recent years, yields in Afghanistan have reached an average of 2.1 tons of cereal per hectare, versus 3.8 for the rest of the world, 2.7 for Pakistan, and 4.4 for Uzbekistan. 3 Value chains are an integral part of strategic planning for many businesses today, though in most countries smaller businesses do not have the resources to conduct such studies themselves. The public sector and aid community can assist in sharing that burden, making the results available to the private sector. As the agricultural economy generates the majority employment (around 60% nationally) and the majority of exports (about 55% of exports) with an import substitution potential over 20 %, options for investment appear considerable. Agricultural labour is also dominated by women, and as the production process is so labour-intensive, options for increasing labour efficiency through technological transfers and know-how are attractive. A value chain refers to the full lifecycle of a product or process (e.g. walnuts), including material sourcing, production, consumption and disposal/recycling processes. Value chain and market characteristics therefore generally focus on: ! Inbound logistics; ! Operations; ! Outbound logistics; ! Marketing and sales; ! Services; and, ! Secondary activities such as procurement, infrastructure, finance, human resources etc. A value chain approach therefore describes the full range of activities that firms and workers contribute to bring a product from its conception to its end use and beyond. This includes activities such as design, production, marketing, distribution and support to the final consumer, though many of these activities within the Afghanistan agricultural economy are poorly conducted or absent. The activities that comprise a value chain can be contained within a single firm or divided among different firms, or smallholders. Value chain activities produce agricultural goods, and can either be contained within a single geographical location or spread over wider areas. Afghanistan currently lacks information systems for apprising value chain entities about market conditions, input supply costs, new technology, access to business services and improved farming practices. Moreover, at the micro to meso level, agribusiness lack the relative sophistication of larger operators, and there is very little export promotion support. Moreover, poor understanding of customs procedures and access to agricultural credit undermine both production volumes and export potential. Certification in general is unavailable.

3 Includes wheat, rice, maize and barley. Afghanistan Economic Update, World Bank, April 2013; FAOSTAT; Afghanistan: Priorities for Agriculture and Rural Development, World Bank; “Food for Thought: Analysis of Agriculture Financing in Afghanistan”, Economic Literacy and Budget Analysis Group; United States Department of Agriculture (USDA) reports; MOCI internal data; Dalberg analysis.


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In general, for agricultural products, the value chain comprises thousands of smallholder farmers who sell most of their crops to traders at farm gate prices. While a few larger farmers also trade, the reality is that there are few market aggregators. Markets too remain incredibly fragmented, and much of the value or production marketed to Pakistan is merely reflective of the porous borders. As a result, still emerging from a low base, there is considerable upside potential if a set of basic value chain constraints can be overcome. The results of discussion with nearly 100 farmers, traders, wholesalers and retailers led to the following set of constraints being identified, though there are others: ! Input suppliers: Lack of investment capital, adulterated products and lack of producer

cooperative structures leads to complex and costly supply lines;

! Producers: Lack of knowledge of improved cultivation techniques and improved seeds to increase yields;

! Traders: Traders lack cold chain storage systems, and as a result perishable produce can simply not find export markets despite competitive prices and often superior quality;

! Processors: Lack of appropriate technology and knowledge to process products for domestic and export consumption; and,

! Exporters: Lack of trade credit, lack of market information, prohibitive transaction costs and lack of value chain and transport infrastructure to ship to export destination markets in bulk.

So how does this translate at the farming level? The majority of participants along the VC have incentives to upgrade to meet the demands of foreign and local markets. However, current constraints force farmers and traders to be risk-averse; particularly given the small size of landholding for most producers, political and security challenges and the ongoing devaluation of the Afghani, which while good for exports increases the cost of inputs. As a result, the analysis in this report focuses on identifying the value chains with the highest rates of return to investment as well as “entry points” for value chain investment. The ‘entry points’ imply investments at the value chain structure, relationships, market linkages, on strategic or operational levels. They provide effective leverage points for working with or influencing the value chain actors and increasing impact on the AKT criteria set. One of the many factors critical to vertical integration is market connectivity. Sadly, Afghanistan remains a highly (though improving) unconnected place, though traders do a remarkable job in gaining income from trading in often very difficult market environments. As Figure 6 below outlines, if Afghan products are to reach export markets further afield, access, mobility, availability and utility must be improved. The results of the recent RECCA VI discussion highlight the potential for improved regional integration and economic cooperation, which will lower transactions costs and expand market access.

Figure 6. MARKET CONNECTIVITY IS KEY TO VALUE CHAIN DEVELOPMENT


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Figure 7. MAP OF AFGHANISTAN FIELD VISIT AREAS


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PRODUCT SELECTION AND JUSTIFICATION The AKT Consortium established the following broad criteria for final selection of products. In fact, the application of these criteria excludes a number of products without further analysis, as this country section makes clear. The broad product final selection criteria are outlined below: ! Product export growth potential; ! Product import substitution potential; ! Product volume which could impact trade balance; ! Product potential for cross-border value chains among 3 countries; ! Product employment multiplier potential; and, ! Appetite for public and private investment. The current negative political, security and economic climate, including reductions in external assistance, have led to broad scale economic contraction over the past 24 months. The Chief Economic Advisor to the Government of the Islamic Republic of Afghanistan (GoIRA) estimates that anywhere between US$10 – 12 billion has left the country to the Gulf States and Turkey, as a result of the economic downturn. However, Afghan agricultural markets have proven fairly resilient and production is more affected by cyclical drought, though loss of national purchasing power has led to a downward pressure on product prices. Traditional trading partners in Pakistan and India are the main export routes, though the consultant team observed Afghan traders operating deep into Tajikistan also. Figure 8 below provides an overview of official exports (USD) for many of the pre-selected products. They are ranked according to complexity and distance (see definitions inserted). While the value of imports in recent years has led to a considerable trade imbalance, the reduction in external flows has improved the trade balance at the expense of growth. Exports in 2013 were US$722 million. While the team is aware that there are considerable informal flows, they are difficult to value and assess. Flows of potatoes and onions into Tajikistan, Pakistan and Iran for example, are probably undervalued by many times. Given that the aim is to enhance official product exports, Figure 8 gives us a general understanding of the ranking of products by value, with implications for trade balance and foreign currency reserves. STUDY FINDINGS (SUMMARY) FIELD VISITS Two Geopolicity staff (Dr. Peter J. Middlebrook and Kabir Khan Isakhel) were deployed to Afghanistan, supported by a number of national enumerators who collected prices from multiple markets. The main markets assessed were in Kabul, Herat, Mazar, Jalalabad and Kandahar, as well as local villages in Parwan province. The security situation constrained survey work, though key informant analyses extended to more than 70 farmers, traders, wholesalers, retailers and exporters. The list of the key informants with whom the team held discussions is presented in Annex 1. SELECTION OF COMMODITIES Afghanistan exported some US$722 million in exports in 2013, with official agricultural (vegetable and nut) exports reported at around US$374 million, or 52% of total exports. Within this context, and the revealed comparative advantage of products for export, we have been able to justify excluding certain products from the reduced list.


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Figure 8. AFGHANISTAN PRODUCT FEASIBILITY RANKING FOR PRE-SELECTED PRODUCTS (2013)


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FIELD BASED PRODUCT SELECTION Given that every product has growth potential under the right circumstances, it is critical to assess the major agro-ecological, investment climate and doing-business environment constraints impeding increased productivity and market penetration. Our product selection is therefore based on a number of basic generic steps that combine field-based analysis with analysis of trade and other factors. ! Choosing priority sectors for value chain interventions; ! Designing informed strategies across the value chain; ! Conducting benchmarking and gap assessments of value chains; ! Upgrading and deepening the value chain; ! Identifying Business Models for Replication; ! Capturing value through forward and backward integration; and, ! Horizontal collaboration - creating and taking advantage of economies of scale. This analytical process, in line with the value chain methodology outlined in the inception report, allows us to justify which product meets the criteria set. Our discussions in various provincial centres and surrounding villages provide invaluable information for us to assess the likelihood of a targeted investment leading to a replicable model, beyond the life of any AKT support. For that to happen, while complying with set criteria, investments must focus on: ! Products with high, sustained and inclusive growth; ! Increasing agricultural productivity, including irrigation, access to credit and finance and

output markets, energy, and extension and regulatory services; and, ! Expanding employment opportunities for the majority of people trapped in low-skills labour

markets. The Afghan agricultural sector is expected to absorb a large proportion of an estimated 400,000 – 500,000 young people entering the labour market annually, and so field based analysis will need to be supported by analysis of employment multipliers also.

Figure 9. BROAD PROCESS FOR PRODUCT SHORT LISTING AND VC INVESTMENT The World Bank reports that over 800,000 Afghan households are cultivating horticultural crops, and farmers reported that high value crops give a far higher rate of return to farmers than staple crops such as wheat/rice. Afghanistan’s climate is highly suited to high quality fruit and vegetable production, and the country is the centre of origin of various horticulture species, such as pistachio, walnut and pomegranate, many of which have international interest for their quality - pomegranates, apricots, almonds and raisins.


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Analysis shows that high value crops have constituted over 64% of all agricultural exports since 2002. Of high value crops, dried nuts are consistently the largest contributor to exports, followed by fresh fruits. Out of dried fruits and nuts, raisins and almonds are the largest contributors to export value, followed by pistachios. Out of fresh fruits, grape, melon and pomegranate represent the largest exports, though exports of medicinal plants is led by liquorice root and Asafoetida (Hing). Traders and interviews with MRRD and MAIL staff also indicated that sesame seed is beginning to emerge following years of decline, and saffron is a new entrant to the market, which is a promising high value crop. LEVEL OF TECHNOLOGY EMPLOYED BY FOOD CROP FARMERS Production and marketing techniques have not changed for a number decades, presenting options for value addition. Most farmers interviewed – particularly for perishable products – complained at the absence of producer and marketing cooperatives and the weaknesses of the extension system. It is therefore clear, based on field observations, that: ! Traditional and Outmoded Technology: Most technology is traditional, and there are very

few intensive commercial orchards, which would appear to indicate considerable gains for high input agriculture in commercial sectors;

! Lack of Product Uniformity: There is apparently virtually no uniformity because of the range of varieties used, and many species are propagated without grafting, including walnuts, some almonds and other stone fruits; and,

! Poor farming practices: Farming practices are also traditional and generally very poor, using outmoded technology. Examples include, but are not at all limited to: o Poor pruning for pomegranates; o Over-irrigation (every 7-15 days) leading to leaching of critical minerals; o Over-deep planting leading to delayed bearing, which given short growing seasons

impacts yields; o Weak orchard floor management practices; o Almost complete absence of product cleaning and packaging; o High incidence of disease not combated due to lack of inputs and weak purchasing

power; o Labour-intensive methods (little mechanisation); and, o No integrated pest management systems in place.

There are very few intensive commercial orchards, which indicates considerable gains for higher input agriculture in the commercial sector When lack of appropriate technology is combined with the

Summary of Afghanistan’s Land Resources ! Total area : 652 000 square km - 12% is arable; ! 3% forest cover; ! 46% permanent pasture; ! 39% is mountainous, unusable for agriculture; ! About 70% of rural households have access to land (through ownership, lease,

sharecropping); ! Government claims ownership over more than 80% of Afghanistan’s land resources; ! Around 44% of HH have access to irrigated land (aver. 1.2 ha); ! About 26% of households have access to rain-fed land (aver. 3.2 ha); and, ! The percentage of households with access to land has increased over the period between

2005 and 2008 and slightly more between 2011 and 12, but average access to irrigated land holdings is decreasing.

Source: World Bank Land Policy Note, 2014


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current land situation (see Box), productivity (yields, area under production and volume) are negatively impacted. As a result, yields for major products remain low (Table 33), significantly impacting profitability, which again undermines re-investment back into product development.

Table 33. COMPARATIVE YIELDS FOR A SAMPLE OF PRE-SELECTED PRODUCTS

Grapes Yield (Mt/Ha) Watermelon Yield (Mt/Ha) India 24.49 China 32.90 United States of America 16.65 Turkey 30.36 China 11.19 United States of America 28.76 Turkey 9 to 11 Pakistan 21.00 Iran 9.51 Iran 20.90 Afghanistan 8.50 Turk-Uzb-Taj 13.14 Turk-Uzb-Taj 5.30 India 12.75 Pakistan 4.14

Afghanistan 12.30

Almonds Yield (Mt/Ha) Potatoes Yield (Mt/Ha) United States of America 3.46 United States of America 41.15 Pakistan 2.47 Turkey 25.99 China 2.20 Iran 21.00 Turkey 2.11 India 18.49 Afghanistan 1.40 Pakistan 16.52 Iran 0.91 Turk-Uzb-Taj 14.79 Turk-Uzb-Taj 0.67 China 14.67

CONSTRAINTS EXPERIENCED BY THE FARMING COMMUNITY Field results with farmers, traders, processors, wholesalers, retailers and exporters highlight the following major constraints impacting product expansion:

! Political and security problems; ! Extension system not working and under-resourced; ! Shortage and high cost of finance; ! Shortfall of electricity; ! High tax rates; ! Farmers and traders reported high logistical costs, often equalling 100 per cent or more of

farm gate prices; ! No recognition of collective rights (e.g. grazing lands); ! Afghanistan is not part of a major trading block; ! No counter-season opportunities with major trading partners; and, ! Lack of product certification considerably undermines expansion of export markets.

Land Tenure System Constraints

The existing land tenure system (the legal and customary system which defines how land (property) is held and managed has a significant influence on the agricultural sector, which is the cornerstone of rural development, (agricultural) growth, agribusiness development and employment generation for the foreseeable future. The current institutional framework for land management and administration is not conducive to economic development:

! Out-dated systems, overlapping responsibilities, lack of capacity at local levels, conflicting systems of land ownership, and uncertain or incomplete legal frameworks, compounded by decades of conflict and widespread displacement, result in competing claims to land and conflicts between individuals, among communities, and between citizens and the State.

! Land disputes constitute the majority of legal disputes; and , ! Lack of land tenure security – tenure security defined as landholders’ confidence that neither the

State nor other people will interfere with the landholder’s possession or use of the land for an extended period of time.


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Limited access to finance was mentioned by all major players in the value chains as a major constraint, and the crisis in the banking and finance sector is not going to be resolved anytime soon. As a result, VC development will need to recognize this, and either work around or with this constraint. The microfinance sector in Afghanistan grew steadily until 2007 and has faced a major consolidation since then. The number of borrowers has been decreasing (with a slight increase in 2013) and the speed of loan growth has slowed (See Table 34). The sector still faces financial sustainability challenges. MISFA, the apex institution, had a peak portfolio of $127m for all 16 MFPs in 2009. As of November 2013, MISFA has a gross portfolio of $91m for 4 microfinance partners, with 157,000 active clients and 86,700 active borrowers. There are two main institutions outside MISFA: FINCA and IIFC. The current portfolio is concentrated in FMFB (130,700 clients and 62,800 borrowers). Two microfinance institutions exited the sector (BRAC and ASA) in 2013 (World Bank, 2014).

Table 34. LOW ACCESS TO FINANCE AS A MAJOR CONSTRAINT ON MARKET EXPANSION

Afghanistan Nepal Pakistan South Asia

Yemen MENA

% of firms with a bank loan/line of credit 5.7 (2014) 39.1 8.6 30.0 8.1 6.0 % of firms using bank investment finance 2.2 (2014) 17.5 9.7 29.7 4.2 5.6 Credit to Private Sector as a % of GDP 4.1 (2012) 55.8 16.9 47.0 4.6 34.3

Source: World Bank Enterprise Surveys and World Development Indicators

POTENTIAL INTERVENTION AREAS UNDER UNDP’S IICPSD Section J below provides details of proposed macro, meso and micro areas of intervention for the two initially selected products. These two products will subsequently be pared down to one product as the one representing the key bankable investment under the AKT (Section K below). What is clear is that a project such as the AKT can do nothing to directly impact constraints such as finance, land policy, political instability, insecurity and corruption in the trading system. As a result, the final proposed intervention areas will be very much focused on specific geographical areas and on a number of core actions, which would add considerable value to existing systems, with a focus on expanding export market potential. Critical here is understanding that US$ billions have already been committed to agricultural and product development, and as a result, any action should have its own comparative advantage in relation to other ongoing investments. Figure 10 provides a summary of potential value chain actors to receive targeted support.

Figure 10. POSSIBLE MACRO, MESO AND MICRO INTERVENTION STAKEHOLDERS


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THE TWO SHORTLISTED CROPS ALMONDS Almonds have been mentioned as a key export product not just because Afghanistan has a comparative advantage for this nut, but also because it is a non-perishable item that can be readily stored and exported. Out of all dried fruits and nuts in Afghanistan, raisins and almonds are the largest contributors to export value, followed by pistachios. Demand is seasonal for almonds, with market entry dates of September to January reported by traders and exporters, and product quality must be assured. As a result, it is important to maintain consistent supply and quality throughout this normal marketing season which would affect quantities and price. If higher export values are to be achieved, both supply and demand sides of the market need to be carefully considered, with the aim of better delivering common genetic materials and consistent grades and standards. 4 Afghanistan is the only significant exporter of almonds among the AKT countries with a global export share of unshelled almonds being 0.45% and that of shelled almonds being 0.40%. Afghanistan ranks as one of the top producing almond counties in the world, though its global market share is small. The main export market is India which imports almost all as shelled almonds, except for a small but reportedly insignificant export value to Pakistan. The markets to which Afghanistan exports shelled almonds are more diverse. While India still is the largest market to which shelled almonds are exported (61%), a fair share of exports goes to EU countries as well – particularly Germany. What is clear is that Afghanistan has considerable potential for expanding exports to export destinations such as India, but also increasing exports to the Gulf States and the EU also.

Figure 11. PROMISING AGRICULTURAL SUB-SECTORS IN AFGHANISTAN

4 Afghan almonds belong to one of two fundamental classes: soft-shell almonds and hard/medium-shell Almonds. Both hard- and soft- shell classes are composed of several types, and each type often has multiple varieties. As a result, there are many different export options, with more than 10 types of national and international commercial interest. The Perennial Horticulture Development Program (PDHP) has categorized around 90 native varieties of almonds.


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Production figures and exports show an interesting trend. Production increased remarkably from 2001 to 2009 (See Figure 12 below) as did global per capita consumption. While almonds are consumed domestically, exports to Pakistan (then to Gulf States), India and Germany show great potential demand. China must now be considered an important future market, as must Turkey and the Gulf States.

Figure 12. EXPORT, DOMESTIC CONSUMPTION AND PRODUCTION OF ALMONDS (2001-09) IN MT

Source: UNSTAT Database, FAO Database What is surprising however is that export levels have been highly volatile (See Figure 13 below), (though figures for 2010 to 2015 appear to be unavailable), and while export values have increased, differences between domestic, regional and global market destination are huge, showing comparative advantage from a price competitive point of view.

Figure 13. EXPORT (QUALITY AND US$ VALUE) OF ALMONDS (2001-09) THE ALMOND VALUE CHAIN The field work covered a large array of producers, traders, transporters and exporters in the main urban and peri-urban markets. While Afghanistan itself remains a significant market for domestic consumption, there is a risk that with declining purchasing power prices will begin to fall. As a result,


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and with the Afghani having already depreciated from Afs 50 to Afs 70 to the US$ over the past 3 years, export markets become far more competitive. With only 3 to 4 % of product currently exported, there is considerable potential for increase. Within Afghanistan, the South Western and Northern provinces dominate production areas, with Kandahar and Samangan dominating production, followed by Uruzgan, Kunduz, Balkh, Saripul, Tahar, Zabul and Parwan. As of 2012, according to FAO, there were approximately 13,490 hectares with a yield of 4.5 tonnes per hectare, meaning a total production of approximately 62,000 tonnes. The Afghan Almond Industry Development Organization (AAIDO) has produced a national directory of 9,737 almond growers, 182 nursery operators, and 253 almond merchants.5 AAIDO, as a membership based organization, focuses on marketing, research, legal aspects and administration.

The Afghan domestic market remains a traditional market. Evidence suggests that it continues to be more driven by price than demand. Such a reality means that it is difficult to stimulate domestic demand other than by lowering price, and with most consumers buying from local markets, affecting this end of the value chain would need to be market-wide. In observing the value chain for almonds, it is crucial to assess options for expanding production, reaching new markets, increasing consistency in product supply and quality, and guaranteeing competitiveness against other major producing countries such as the USA. WHO ARE THE MARKET PLAYERS ? We observed that Afghan Almonds (including sweet almond (Amygdalus communis) and bitter almond (Amygdalus amara) flow through markets across multiple production and distribution channels. Moreover, as is the case with Pakistan, imported nuts are sorted and packaged and re-exported to India and the Gulf States. At the starting point however, all almonds are grown by farmers, who sell to merchants who in turn sell to exporters. Packaging is not done at the farmer end, but more generally downstream in the value chain, at the export and marketing end of the business. ! Growers / Farmers: Almonds are produced by farmers in 11 of the provinces of Afghanistan.

The farmer harvests the product, removes the hull and then either bags them or sells them in bulk to local merchants. If the farmer is skilled, he/she may separate almonds into the various component varieties, otherwise lack of product consistency undermines price advantage. Farmers face high working capital needs because almond trees require five years to mature and a further two years to bear fruit, meaning that only farmers with existing trees or large

5 Almond Industry Development Project Six Month Report, EC Perennial Horticultural Development Project (PHDP), European Union and Roots of Peace, plus personal communication-Zach Lea.


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land size can afford to make such investments. Financing, improving quality of existing variable tree stock and standardizing genetic stock would increase product quality and improve market position.

! Provincial and District Merchants: Merchants, many of whom were met in the field, purchase almonds in shell from the farmers. The merchants reportedly then sort the almonds into consistent quality and varieties, before bagging them, and in most cases they have already identified buyers up the value chain in place, depending on demand and quality. Smaller merchants may sell to the main urban centres (Mazar, Kandahar, Kabul etc.) but many of the larger traders export. Those growers and traders closer to the Pakistan border obviously export to Pakistan and India. Lack of product regulations (varieties and nomenclature) and lack of packing undermine export potential.

! Almond Exporters: Almond exporters such as Morvarid, who our consultants met in Herat,

have established a considerable processing and export base, to include packaging, certification and a strong international marketing footprint. Exporters consolidate almond lots from growers and merchants - increasingly cutting out merchants – and have a clear export market in mind. As a result, they are aware of export quality needs, and value is added by shelling, sorting and packaging. The biggest problems expressed by exporters were lack of consistent supply, variable quality, variable grades and variable size. As a result, exports are not consistent but rather opportunistic.

! Foreign Importers: Once exported, the foreign entity importer (e.g. in Pakistan) determines

volumes to go to wholesalers or retailers, manufacturing or processing. Given that common genetic materials, nomenclature, grades and standards are the basis for delivering better products to meet market demand, importers have to undertake their own further checks, meaning that they again take increased value from the farmer, who could have conducted those checks. Most importers have access to world market and major producers, and as a result, the best price incentive for Afghanistan so far is price, not necessarily quality or branding (which does not exist).

! Distributors and wholesalers: A distributor moves the product throughout the marketing

chain, matching supply with demand. They need to match a product with a particular market demand, which includes packaging and quality considerations, among other factors.

! Manufacturing/Processing: Manufacturing and processing capacities in Afghanistan are

slowly beginning to improve, with Morvarid and other investors slowly increasing national value added. While high-end factories such as Morvarid are changing the market, most processing in Afghanistan is still through use of manual labour, and processors typically have limited understanding of quality standards. Adding flavours, roasting, slicing, flour, paste or oil capacities all add considerable value to

the primary product. Lack of information on market demand affects marketing strategy and export penetration.

Photo 1 Peter J. Middlebrook meets Baryalay Artifi, the owner of Morvarid Fruit and Nut Processing Plant in Herat


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! Retailers and retailing activities: Retailers present the almond or its by-products to the consumer, either domestically or internationally. The retailer’s position in the market determines where and how the nuts are sold. Retailers in Afghanistan include the local and larger markets, small community shops and larger shops in the major cities. They also include market stalls, small retail outlets, restaurants and bakeries. In future, products could target high end markets and even airlines and cinemas, for example. In a competitive global market, market information is critical to positioning exports with retailers, and that is lacking currently.

! End Consumers: Consumers are domestic and foreign. However, outside of Afghanistan,

most almonds are not branded as Afghan Almonds, with Pakistan (for example) re-exporting products to third country destinations. Consumers are the final participant in the marketing chain and the single most important one when it comes to choice and satisfaction. Consumers care about quality and price.

MARKET POTENTIAL The principal market for Afghan Almonds remains domestic, though that is changing, and targeted investment can support a far stronger export orientation. Almonds are purchased from merchants in local and main city bazaars from the growers directly. The almonds are sold in both the in-shell and shelled form. Additionally, value added almond products are utilized in a variety of bakery and culinary ways though there are no figures on such volumes. We found it difficult to determine market prices and distribution of sales because prices are not set in stone, but are bartered. According to the Dalberg analysis, developed for the German Government: ! An historical growth in production of 14% a year (MAIL statistics 2009-2012), as a result of

expanded area under production and improved yield, both of which may vary widely by geography;

! Current processing capacity equals around 1,200 tonnes per year, which is only a very small percentage of current production (less than 5%) (Nut feasibility study, USAID);

! Current export share of production: 30% (96% to regional markets);

! Cost per processing plant is around USD 1.3 million for a capacity of 2,000 tons/year (Nuts feasibility study, USAID); and,

! Total investment required for 6 new plants (donor + private): USD 8 million. The total capacity of 13,200 tons/year in the target state would represent 11 times the current processing capacity, which would transform export potential.

MAIN REPORTED CONSTRAINTS Field assessment across the value chain highlights considerable market development constraints, many of which can be resolved with the right balance of public and private investment. Considerable money has already been spent by Government (MAIL, MRRD, AAIDO etc.) and the international community, and there is ongoing investment from BMZ and USAAD, among other actors. These constraints therefore need to be pared down into actions that the AKT can support. However, main, micro, meso and macro constraints reported through the field survey are as follows. Main Structural Constraints:

Major Local Varieties There are an estimated 68 to 99 Almond genotypes found in Afghanistan, and some of the major varieties are listed below: ! Satar Bayee (Satar Bayi) ! Khairuddini (Khairuldini) ! Qahar Bayee (Gharhar Bayi) ! Qambari (Ghambari) ! Nakhshi (Sise) (Saizi?) ! Shokar Bayee (Shukar Bayi) ! Zareeri ! Abdul Wahedi ! Kap Mal ! Khaghazi ! Moravaja ! Sanghak ! Shakh Bozak ! Dasi The value of exports for a specific variety is unknown.


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! Lack of product consistency; ! Variable product quality; ! Lack of trade finance export expansion; ! Lack of domestic processing capacity; ! Land-locked nature of the market implying - ! Lack of wider international market knowledge including on pricing; and, ! Lack of country branding capacity. Micro Level Constraints ! Lack of product standardisation; ! Lack of processing capacities; and, ! Lack of packaging and quality control. Meso Level Constraints ! Low networking/ marketing capacity of key trade associations (ADFEDA, AAIDO); ! Non-existent product branding; ! Lack of coordination among farmer groups at district and provincial levels; ! There are no local farmer almond associations, undermining aggregation, extension and

knowledge and inputs sharing; and, ! Few fora for producers to coordinate water sharing Macro Level Constraints ! Lack of long-term financing products (both for tree crop production and packaging/processing

equipment); ! Water and land constraints, in particular lack of irrigation systems; ! Absence of system for quality standards/certification; ! Difficulty navigating export/investment licensing processes; and, ! High cost of air freight to export almonds (e.g., to Gulf States or India) Leading world almond production markets from which lessons can be gained include: ! USA (California alone has 83% of the world production); ! Spain; ! Tunisia; ! Morocco; ! Portugal; ! Turkey; ! Greece; ! Italy; and, ! Iran (particularly North-West of Iran, in the Azerbaijan (Tabriz) region).

Figure 14. US DOMINATES GLOBAL PRODUCTION


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As a result, given the market development capacity of these leading producers, it is critical to take a longer term investment view, focusing on lowering the costs of production, standardizing product quality and conformity, establishing market networks - on product diversification in particular. PRICING Getting market prices for almonds is difficult due to bartered prices, different qualities and multiple varieties, different supply and demand conditions and high seasonality. Moreover, medium-quality almond varieties include Qahar Bai, Khairodini and Abdul Wahidi, with high-quality almond varieties including Satar Bai, Bela Bai and Qambari, and all differ in price markedly. Furthermore, depreciation of the Afghani undermines comparative export prices. Domestic retail prices in Kabul, depending on quality, range from Afs 600 to Afs 700 per Kilo for unshelled, whilst shelled almonds fetch prices from Afs 700 to 1,200 per kilo, again quality and demand dependent. Prices on the market in Kandahar show a considerable difference from wholesale markets in India and the Gulf States, with a wholesale price being 150% to 350% higher than wholesale prices in Kandahar. Examples of 2014 export prices and transport costs are provided in Table 35 below, for different traders by destination. The exorbitant costs of reaching Central Asia should be noted.

Table 35. AFGHAN ALMOND PRICE BY TRADERS AND TRANSPORT COST IN 2014

Company Name Variety Export Price US$/Kg

Transport Cost New Delhi Per Kg

Transport Cost to Pakistan Per Kg

Transport Cost to Central Asia Per Kg

1 Angaza Ltd Processed

Processed Gourbandi Almond

7.6

2 Zmaray Rasoli Ltd Processed


8.0

3 Mujtaba Sajad Refa Processed Gourbandi Almond

8.5

4 Rahmat Kamal Ltd Processed


8.0

5 Aziz Basit Ramaky Ltd


7.6

6 Haji Sayeed Karim & brothers


8.0

7 Painda M. & Brothers


7.6

8 Aziz Hedayat Ltd Processed Gourbandi Almond

8.0

9 Khalid Shoaib Ltd Processed Gourbandi Almond

8.2

20-30.5 Cent

10.5-20.5 Cent

40.5-45 Cent

In the UAE, for example, loose shelled almonds (unprocessed) fetch prices from Afs 1,300 to Afs 1,500 and processed, flavoured and roasted almonds fetch prices of Afs 1,800 to Afs 2,000 per Kilo. Prices increase in winter.


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Figure 15. AFGHANISTAN ALMOND PROCESS VALUE CHAIN ANALYSIS – DOMESTIC AND EXPORT MARKET PRICES


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Table 36. ALMOND PRODUCT COMPLIANCE WITH AKT SELECTION CRITERIA

Product Justification # Compliance with Criteria Field Based Observations Trade and Economic Observations

1 Product export growth potential

! Very significant indeed, with shelled almonds receiving a high RCA.

! Increasing domestic processing capacity and production internally.

! Options to promote increased exports and value addition through internal processing and marketing are relatively strong.

! Even including import tariffs, CIF prices still show competitiveness.

! Afghanistan RCA for almonds (both unshelled and shelled) is the highest across all products studied. Shelled almond is the product with the highest share (2%) in Afghan total exports when compared with all other identified products.

! Afghanistan’s global export share of almonds unshelled is 0.45% and that of shelled almonds is 0.40% which is also among the highest amongst preselected products.

! While India is still the largest market to which shelled almonds are exported (61%), a fair share of exports go to EU countries as well (particularly Germany), indicating diversification of exports and familiarity with the large markets thereby underlining a potential for future increase in market shares

! US$18.2 million in export of shelled almonds in 2014, and though there has been volatility in volume, the last few years have clearly been showing an increase in exports.

! World almond production/exports continue to track growing demand from established and developing markets.

2 Product import substitution potential

! There is no important substitution for this product as a net exporter, though with world population set to double, domestic demand is expected to double.

! While Afghanistan’s exports in almonds both unshelled and shelled have been 4Million USD and 18 Million USD respectively, imports are negligible being just a few thousand dollars; thereby import substitution is not an issue for this product.

3 Product volume which could impact trade balance

! Almond production is increasing considerably, and with land under Government ownership slowly being redistributed, potential production volume increases are considerable.

! Product quality is also slowly improving, and increasing domestic processing (shelling, roasting)

! 62,000 tonnes in 2102, though lower in 2014 (42,000) ! Until 2012 there has been a clear upward movement in terms of

production volumes. The last two years show a decline but if sufficient levels of investment go into the product, and value chains promoting exports are developed, there would a further impetus to produce more, reversing the decline

! Yields per hectare are less than half that of the US, 60 per cent that of Pakistan, though they are higher than Iran indicating regional competitiveness

4 Product potential for

cross border value ! While there is limited potential for exporting to Tajikistan and

Kyrgyzstan, Afghan almonds do reach both markets, though ! Limited, but sharing experience can be useful if almonds are to

be chosen as the primary target product for AKT in Afghanistan


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Table 36. ALMOND PRODUCT COMPLIANCE WITH AKT SELECTION CRITERIA

Product Justification chains among 3 countries

often as informal flows. ! These markets may benefit indirectly from exports, though

they would not be primary markets.

for example.

5 Product employment multiplier potential

! There are 220-240 days of employment added per year per hectare under production, and this excludes backwards and forward linkages, particularly in relation to processes.

! Not inconsiderable, and given other linkages with industrial processing capacity, employment elasticity seems strong. Almond production employs mostly widows in processing, adding a potentially strong social benefit.

6 Appetite for public and private investment

! Considerable interest in this product, in Government, the international aid community and with the private sector. The potential for linkages, networks and sharing experience and information is considerable, and given high rates of return on investment, this is a great road show product with considerable potential.

! Global almond production increased by 69% from 2003 to 2013 and exports increased by more than 400% during this period, indicating an ever growing global market demand. With global market demand set to double in the next decade or so, there is considerable product and market experience that can support further expansion.


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Figure 16. AFGHANISTAN’S MAJOR EXPORT DESTINATIONS FOR ALL PRODUCTS BY VALUE (US$) IN 2013

AKT Agro-Food Feasibility Study Main Report (DRAFT) December 7 2015

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PRODUCTS EXCLUDED AND JUSTIFICATION While we propose to focus on almonds as a significant export product, we have considered all other major pre-selected products based on feasibility. The worsening macro-economic outlook, currency devaluation, declining aid flows but new economic corridors planned (the China Pakistan Economic Corridor (CPEC) and Chabahar Garland Highway bridging through Zerang and Herat), mean that only non-perishable products have the potential to reach international markets beyond India and Pakistan. This is a national economic development objective, as we discussed with the Economic Advisor to the President, Omar Zakhilway and the Director General for Economic Cooperation in the Ministry of Foreign Affairs, Wahid Waissi. Quantifying trade flows to Pakistan is made complex as a result of the open and porous borders across the Pashtun south, and in many ways such flows are not considered formal exports at all, given the contested issues around the Durand Line. As a result, a great deal of produce moves between Kandahar, Helmand, Paktika and Khost for example, informally. Moreover, with Pakistan, Afghanistan, Iran, Turkey and even Egypt applying for membership of the Shanghai Cooperation Organization (SCO), the reality is that increased levels of production at competitive prices make almonds a product of choice, with considerable options for forward and backwards linkages into these markets.

Figure 17. COMPOSITION OF FRUIT, VEGETABLE AND NUT EXPORTS IN 2013 (US$374 MILLION)

This short section, supported by the summary table at the front of the report, provides justification for not selecting the products cited below. There are a number of products that already have substantial penetration into foreign markets, buoyed by the massive inflows of aid in recent years which has increased national purchasing power considerably. Moreover, while products such as pomegranates and apricots show great potential, there are strong forward and backward linkages for almonds – as a non-perishable product – with considerable potential for small scale industrial processing and packaging in-country, adding considerable value to GDP.


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FRUITS Afghanistan produces some of the best fruit in the world, and with Pakistan and India as export markets, it continues to show great potential. However, lack of value chain infrastructure, lack of cold storage systems and lack of product standardization and certification make expansion into new markets challenging. A number of key informants note that the reason trade is strong with these countries is also because of the capacity of these countries to purchase, transport, process and export products to third markets. It is this external capacity that must be leveraged where possible until such processing capacities are installed in Afghanistan. New export markets must be a priority. GRAPES (RAISINS) Afghanistan exported some US$65.3 million of grapes in 2013, being 9% of total exports, and 17% of total fruit, nuts and vegetables exported. As a result, grapes already have an established market, particularly for raisins. Given that cold storage systems make the grape stems turn off colour, processing grapes as a dried and non-perishable product is a considerable business. As of November, based on market prices collected from Herat, Jalalabad, Kabul and Mazar, prices for different varieties of red and green table grapes ranged from Afs 60 to Afs 90 per kilogram. Afghanistan’s global share in export of fresh grapes is 0.59% while that of raisins is 3.8%, indicating that Afghanistan has a competitive edge when it comes to exporting dried grapes (raisins). Data indicate that Afghanistan is the sixth largest exporter of raisins, although it also has to be noted that the top two exporters Turkey and United States do take up a major chunk of the global market (54%). For raisins, while the US is the largest global exporter, for Afghanistan a strong regional competitor is Turkey which exports 30.26% of global exports of raisins and 3% of fresh grapes. Iran is also a lesser but still strong regional competitor in terms of raisins. For imports of fresh grapes, the US, EU and China are the key markets; for raisins it is primarily EU countries followed by Japan and Canada importing smaller shares. As an established industry, and given the need to diversify export markets to non-traditional trading partners, we determine that there is less upside from focusing on this crop, which has already benefitted from hundreds of millions of dollars in external support. APRICOTS Afghanistan exported some US$12.4 million in dried apricots in 2013, and US$3 million in fresh apricots, highlighting the limitations of cold storage systems and the importance of focusing on non-perishable products until such infrastructure is in place. While fixed capital formation of private sector assets is increasing, with a reported US$10 to 12 billion in capital leaving Afghanistan since early 2014, domestic liquidity for investment remains at an all-time low. There were no fresh apricots available on the market during the survey period, through dried apricots fetched prices from Afs 200 to Afs 300 per kilo, in wholesale and retail markets respectively. Among the AKT countries, Afghanistan and Kyrgyzstan are the more significant exporters of fresh apricots. Interestingly, Afghanistan is the larger producer of apricots but exports are almost on a par with Kyrgyzstan. Tajikistan also seems to be producing more apricots in terms of volume, though exports are much lower. Kyrgyzstan seems to have a competitive advantage when it comes to exports. The global share of both Afghan and Kyrgyzstan exports are 1.3% and 1.09% respectively. Afghanistan’s key export market is Pakistan while that for Kyrgyzstan is Kazakhstan. There is clearly no export diversification in terms of markets. The key global markets for apricots are EU countries (Germany, Italy and France) and Russia. The key global exporters are Spain, France and Italy, while the key regional exporters are Uzbekistan and Turkey, making it difficult for Afghanistan to diversify into new markets without considerable investment and support. MELON Total official melon exports in 2013 totalled around US$873,000, though informal export flows are likely to be higher still.


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Data are available only for Afghanistan in terms of production. While trade data are available for all three AKT countries, global share of Kyrgyzstan and Tajikistan is extremely low and almost insignificant. Afghanistan has 0.05% of the global share of melon exports and this is also extremely low when compared with the key global exporters. Pakistan is the key market for Afghan export of melons. Melons traded to Pakistan across the border likely only occurs as a result of ease of access, indicating a lack of any supply chain structures such as cold storage and transportation over long distances. The key importers of melons are the United States and EU countries. Afghanistan does have an entry point already into the UK which is the 5th largest importer of melons in the world. Afghanistan currently (out of its total exports) exports an extremely small share, of 0.23% into UK. While this is almost insignificant, it is important because there might be existing channels of trade that could be taken advantage of. It would be useful for Afghanistan to diversify its export markets and increase its share of exports to UK. However, more information needs to be collected from exporters of melons in Afghanistan as to why the share of exports to the UK is minimal, and why the UK, given its distance from Afghanistan. Is it because of few entry barriers in the UK, such as standards or other requirements? Most significant global exporters of melons are from the Latin American and the EU region, with no significant exporter in the Central Asian or MENA region and it will be difficult for Afghanistan to scale exports considerably under current conditions. LEMON/ CITRUS Lemon is an important but rarely cultivated crop in Afghanistan, and currently there are no reported exports. It takes three years for a seedling to produce its first fruit. Tajikistan is the only country for which lemon production and trade data are available, indicating that among the AKT countries this is the only significant producer and exporter. But even for Tajikistan, lemon production and exports have fallen with current export shares constituting only 0.002% of global trade. Further there is very limited export diversification, with almost all exports from Tajikistan going to Kazakhstan. None of the AKT countries has a positive RCA in lemons indicating there might not be much potential in developing value chains in this product. Turkey is the only regional country that is a strong exporter of lemons. Afghanistan officially exported only some US$390,000 in citrus fruits in 2013, though informal border flows are impossible to value. Lemons, which key informants reported as being very important during Ramadan when people are fasting, was available on most markets surveys, priced between Afs 55 to Afs 75/kg, for local and major urban centres respectively. The National Horticulture and Livestock Project (NHLP), a Ministry of Agriculture, Irrigation and Livestock (MAIL) initiative supported by the Afghanistan Reconstruction Trust Fund (ARTF) has assisted many farmers in establishing lemon plantations, albeit with subsidized inputs. Farmers were paying some 20% to 30% of the actual sapling cost, and were given free fertilizer, micronutrients, pesticides and ‘intercrops’ like peas and zucchini, to grow between the trees while they mature. A new certified South African root stock which is hardy and highly adapted to Afghan growing conditions was introduced. Currently, however, new production supports local demand, but the potential upside for exports remains limited. STRAWBERRY There is a very small, only a niche market in Afghanistan, for strawberries, though they were available in Kabul and Herat markets, at prices ranging from Afs 100 to Afs 200 per punnet. Quality was not good and they were already perishing in many cases.


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Production volumes and trade values are available only for Kyrgyzstan, indicating that among the AKT countries only Kyrgyzstan has any significant production and trade in strawberries. In terms of production, Kyrgyzstan volumes are increasing in absolute numbers though the share in global production has fallen indicating that other countries have overtaken the country. Current share of Kyrgyzstan production in total global production is only 0.028% (2,200 tonnes). Share in global exports is also very limited at 0.012% in 2014. The only market for Kyrgyzstan strawberry exports is Kazakhstan. EU and US are the key markets for importing strawberries worldwide. The main global exporters of strawberries are Spain, Mexico and US while significant exporters in the MENA region are Egypt and Morocco. None of the AKT countries has a competitive advantage globally in strawberry production as indicated by the RCA analysis. NUTS WALNUT In 2013, Afghanistan and Kyrgyzstan produced 11,122 tons and 5,859 tons of walnuts respectively. Production in both Afghanistan and Kyrgyzstan has been on a general increase, although in 2012/13 it fell in Afghanistan. Kyrgyzstan and Tajikistan, though having lower production volumes than that of Afghanistan, seem to be having higher shares in global exports than Afghanistan. Kyrgyzstan’s share of global exports of unshelled walnuts was 0.05%, and for shelled walnuts was 0.6% in 2013. Looking at the key export markets for Afghanistan it can be seen that walnuts (both shelled and unshelled) are mainly exported to India. For unshelled walnuts, Pakistan is also a significant importer of Afghan exports. Interestingly for Kyrgyzstan and Tajikistan, China is a major importer of unshelled walnuts. For shelled walnuts, China is the major importer from Kyrgyzstan, and Kazakhstan is the major importer for Tajikistan. Turkey is a significant regional importer of walnuts while there are no other significant exporters regionally. PISTACHIO Pistachio production in Afghanistan for the year 2013 was 2,100 tonnes, and for Kyrgyzstan 9.48 tonnes. Market prices ranged from Afs 700 to Afs 1,400 per kilo depending on nut size and quality, and there is considerable domestic consumption as a table nut across the country. Compared with Afghan value of exports, those for Kyrgyzstan and Tajikistan are much smaller. While the key export market for Afghanistan is India, a smaller share of exports also goes to a few European countries, and in the region towards Lebanon and Turkey. An analysis of key importers and exporters reveals two things. Firstly, Afghanistan and Tajikistan, while primarily exporting to their neighbouring countries such as India and Kazakhstan, also export a small share to the European Union which is a key importer. Given an already established relationship with key importing markets, there is a potential for further value chain development without significant obstacles. Secondly, it can also be seen that Afghanistan, while falling to the lower end of the list, does stand with key exporters globally. Regionally though, AKT countries would face strong competition from Iran which is the second largest exporter globally, and from Turkey which is also a strong exporter of pistachios. The key import markets are Hong Kong, Vietnam and the EU. As a result, and with other donors such as USAID focused on this sector, it could be that synergies between almond and pistachio exports can lead to other multipliers. VEGETABLES / OTHERS ONION Afghanistan exported some US$17.8 million in onions and shallots in 2013, which is a considerable export for such an unsophisticated market. Onion prices in Mazar and Kandahar were similar, at Afs 20 to Afs 30 per kilo.


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For onions, the limitation in availability of production data focuses the analysis on trade. Analysing export values of onions it can be seen that Tajikistan is the larger exporter though values have been volatile in terms of exports. Afghanistan exports have increased over the last few years, and in 2013 and 2014 export values from Tajikistan and Afghanistan have been similar. In terms of global shares, Tajikistan’s share in global exports has fallen from the peak in 2010, while the overall trend has been upward for Kyrgyzstan and Afghanistan in terms of global share. The shares of all three countries though are less than 1%. For Afghanistan, the most important export market is Pakistan with 99% of the exports from the country going to Pakistan, because of proximity and traders based on both sides of the border. For Kyrgyzstan and Tajikistan – Kazakhstan and Russia are the largest markets. The key importers of onions globally are Netherlands, Mexico, China and India, while the key global exporters are United States, United Kingdom and Germany. Exporting to EU markets is unlikely over the near term. ALFALFA There are no trade and production data available for AKT countries, and it is unlikely that alfalfa seed can find an export market, though it is used for livestock fodder locally. POTATOES Afghanistan officially exported only some US$3.8 million of potatoes in 2013, and in November 2015 local wholesale prices ranged between Afs 20 to Afs 30 per kilogram, for varying varieties and qualities. During fieldwork in Tajikistan, traders stated that they imported potatoes from Afghanistan and Pakistan during winter time. Kyrgyzstan and Tajikistan are significantly larger producers of potatoes in terms of volume than Afghanistan. Potato is being produced in the largest volumes among the pre-selected products by both Kyrgyzstan and Tajikistan. However, in spite of being the lower producer among the AKT countries, Afghanistan exports almost twice as much as Kyrgyzstan in terms of value. Tajikistan has extremely low values of exports globally. Afghanistan and Kyrgyzstan exports constitute 0.4% and 0.1% of global exports respectively. Identifying the key current markets for Afghan and Kyrgyzstan potatoes, it can be seen that Kazakhstan is the single most important market currently. There is limited diversification in export markets for potatoes and there is less focus on the EU markets which are huge consumers of the product. The key exporters and importers of potatoes are mostly European economies. It might be difficult for AKT economies to enter European markets given that producers from the region would give strong competition. Russia is one of the largest importers of potatoes, and there might be an opportunity to divert exports into Russia given regional proximity. OTHER COMMODITIES CONSIDERED NOT ON THE PRE-SELECTED LIST SAFFRON Saffron is an emerging market (new entrant) with lots of interest, particularly around Herat, and was reportedly introduced by DACAAR in 1998. Saffron is dried stigmas of Crocus sativus and it does not compete for irrigation though it is a labour-intensive crop. The entire crop is normally harvested over 3-4 weeks a year in October, Saffron is well suited to the semi-desert and rugged ecology of Afghanistan, particularly in the western provinces, the northeast (Badakhshan), Central (Laghman, Panjshir, and Wardak), and some Southern (Hellmand, Kandahar, Uruzgan, and Zabul) provinces. The success of Herat province has much to offer as far as learning for other ecologically-comparable Provinces, though in particular in securing the incomes of farmers in


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the first three years or so, while the plants are maturing. The consultant team met saffron farmers and traders in Herat, including input suppliers, processors, financiers and traders and wholesalers. It is exported to India, Iran, Pakistan and the UAE. While there are considerable options for improving micro, meso and macro linkages across the value chain, lack of commercial credit and consumption smoothing impedes many new market entrants. Producing a kilogram of dried saffron requires 150,000 to 170,000 flowers and around 400 hours of labour. According to the farmers in Herat, a Jerib of land under saffron yields greater profit than opium, though of course it can never compete on such a scale. On a Jerib of land, 2-3 kilograms of Saffron can be produced, sold locally for US$2,500 to US$3,500 per kilo, and fetching more than US$10,000 per kilo with the final consumer. While saffron is a key spice traded across the Silk Road, for medicinal and spice purposes, and though it has considerable potential, it remains a highly specialized niche export crop, and expansion is thankfully happening based on growing internal competencies, though financing remains a major constraint. Domestic demand also remains strong, for saffron tea. MARKETING AND FINANCIAL FEASIBILITY Marketing constraints, alongside lack of access and the high costs of finance affects all products, particularly those with long gestation periods and demanding export finance to be put in place. The AISA-funded Feasibility Study of the Almond Industry, based on the Mazar processing plant, provides many insights for this important crop. With production levels having increased fourfold since 2003, it is clear that targeting interventions at the micro, meso or macro level can have significant rates of returns on exports, employment and foreign currency, with backwards and forward linkages and spill over effects into other nut and dried fruit production sectors. 6

Table 37. SWOT ANALYSIS FOR ALMOND MARKETING AND FINANCIAL VIABILITY

Strengths Opportunities ! Competitive prices on world markets ! Strong export potential ! Production increasing exponentially ! Strong immediate markets in India and

Pakistan, as well as the Gulf States ! Suitable climate ! Increasing annual yields ! Considerable potential for backwards and

forwards employment linkages ! Processing and value added small scale industry

options including packaging and certification ! Non-perishable, does not require cold storage ! Strong private sector interest ! Strong government support

! Structured private sector financing support ! Grading and packaging ! Certification and quality control ! Labelling ! Gender focus on high-end work force ! Low/high value processing into diversified

sub-products ! Considerable new end markets ! Training ! Producer cooperatives and associations ! Many varieties ! Immediate Gulf State markets as well as Hong

Kong, Turkey and China ! Almond milk and other products ! WTO Accession

Weaknesses Threats ! Fragmented value chain ! Inconsistent quality and supply ! Relatively high input costs ! Lack of sorting, grading and packaging ! Lack of value added processes such as roasting

and flavouring ! No labelling ! Lack of direct linkages with export markets ! Low level technical marketing skills ! Lack of export market information and maps

! Absence of low cost financing ! Product must be price- and quality-

competitive, for example with Tajikistan and Iran

! High import standards into EU and US ! Disease and lack of herbicide, pesticide and

fungicide inputs ! Emerging markets in this space

6 See http://www.aisa.org.af/Content/Media/Documents/Almonds-Feasibilitystudyforprocessingplan7112014142331812553325325.pdf


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The economic rates of return for a given project must be worked out, but with a standard discount rate of 12% and below applied, NPV likely to be positive. There are also options to link this to the RECCA VI Investment Roadshows, and to consider public private partnerships and international link ups. TECHNICAL FEASIBILITY OF AN INTERVENTION There is already considerable support for almonds beginning to emerge, which reflects its potential and spill over contribution to other nut and dried fruit sub-sectors. Given the trade imbalance, and the need to close the trade gap, the export potential is strong. Despite growing producers such as the USA, drought in California may eventually reduce production there, and global demand for almond has never been greater. With a further 3 billion people to be born over the next 20 years, existing and new markets can be penetrated. Existing investments in this product, include, but are not limited to, those from: ! MAIL, MRRD, AISA, AAIDO etc.; ! The Export Promotion Agency for Afghanistan; ! Champ/USAID, Kabul Afghanistan; ! Root of Peace, Afghanistan; ! Afghanistan Almond Association; ! Ministry of Agriculture and Irrigation; and, ! Afghanistan Almond Industry Development Organization. There are a number of intervention options, and these are listed below, based on the field findings. It is critical to assess whether interventions should focus at the micro, meso or macro level, and this will also depend on the levels of financial and institutional support that AKT is able to mobilize. A final project design will assess options in this regard, however the following entry points make most sense, based on the fieldwork alone. ! Support the establishment of processing and packaging facilities to add immediate value to

upstream producers, while also agreeing on the most logical geographical locations (linked to expansion on national irrigation) for such facilities;

! Improve farmer, merchant and exporters access to market information; ! Create and support exporter associations to develop networks and marketing capabilities; ! Foster export and investment promotion; ! Assess options for reducing freight costs; ! Establish national Almond Certification (MAIL, MOCI and ANSA); ! Work with Ministry of Foreign Affairs economic attaches to target primary export

destinations; ! Consider innovative long-term financing models given start-up time needed; ! Customs and transit support, local financial services, dialogue and decision-making; and, ! Strengthen coordination linkages with BMZ (RIDF, RCDF and SLS), USAID, EU and other

programs. RESOURCE & ENVIRONMENTAL FEASIBILITY Almond production is water-intensive, and unless managed well, it can have a negative impact on water tables, affecting the local ecology and even drinking water supply. Given the links with honey bees to pollinate, the fact is that building-in strong environmental conservation into large areas under the crop is critical to long term sustainability. A focus on water use efficiency, improved crop and land management techniques and farmers know-how will go a long way to addressing these concerns. SOCIAL AND INSTITUTIONAL FEASIBILITY


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Strong employment multipliers and impact on gender equity in the work place are noteworthy, as are the benefits of elevated farmer incomes to poverty reduction. Farmers and traders interviewed clearly see almond both as a product and an important livelihood, in a country with growing joblessness. There are also good gender linkages, in particular, and as highlighted in the excellent analysis undertaken by Dalberg, almonds are second only to dairy for the cost of creating a single job. With more Government land being leased to the private sector, options for job creation, addressing poverty directly, are considerable.

Figure 18. ALMONDS JOBS CREATION IMPACT PER USD/JOB

Analysis by the World Bank estimates jobs created in tree crop horticulture, including forward and backward linkages. As can be seen from Table 38 below, if area under production is to continue to expand, then the total full time employment could close the unemployment gap using fruit trees and vegetables in a decade or so. If processing capacities were to be significantly expanded, the direct, indirect, induced and spill over impact on jobs would support both national and local economies.

Table 38. ESTIMATE OF JOBS IN TREE CROP HORTICULTURE SECTOR

Crop Area (Ha.)

man days/Ha

FTE jobs On-farm

Fwd Lnkge

Bkwd Lnkge

Total Employment Linkage Effects

Total FTE Estimate

Nuts 15,796 220-240 17,376- 18,955

0.2 0.1 6,358 23,733- 25,313

Fruit Trees 53,871 260-280 70,032- 75,419

0.3 0.1 32,727 102,759- 108,146

Grapes 61,558 240-260 73,870- 80, 025

0.3 0.15 34,626 108,496- 114,652

Melons 24,717 100-120 12,359- 14,830

0.15 0.05 2,719 15,077- 17,549

Watermelon 22,592 100-120 11,296- 13,555

0.15 0.05 2,485 13,781- 16,040

Vegetables 53,718 240-260 64,462- 69,833

0.1 0.1 13,430 77,891- 83,263


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VALUE CHAIN GAPS & BANKABLE ENTRY POINTS The major gaps have been identified at micro, meso and macro levels, though it is important to identify a sub-market of potential, and perhaps to establish a very different kind of investment framework leveraging both public and private sectors, including trade financing and technological transfers at the micro and meso levels (see Sections J and K below). POTENTIAL IMPACT Almonds have emerged as a crop of considerable potential, and as show in Figure 19 below, the annual income from harvesting shell almonds and soft shell almonds is better than pomegranates, and only beaten by grapes. The impact of course depends on the scale of project proposed, and that will be detailed in due course. 7

Figure 19. PROJECTED NET INCOME BY CROP (US$ PER HECTARE 2010) The investment would also have a potential positive impact on Afghanistan’s immediate physical integration partners, as outlined below, given upstream and downstream linkages.

Table 39. IMMEDIATE PHYSICAL INTEGRATION PARTNERS INCLUDE

Immediate Trade Potential Countries Afghanistan Tajikistan Iran Turkmenistan Kazakhstan Uzbekistan Kyrgyzstan India Pakistan China

7 Note: (1) Projected income for ‘Tarash Mazari’ variety of almonds (shelled); (2) Projected income ‘Satarbai’ variety of almonds (shelled) (2) Projected income for grapes harvested in trellised vineyards. Source: Crop Income Projection Afghanistan, Roots of Peace, 2010; “Can Afghan Farmers Move Beyond Opium?”, Time Magazine, 2010


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Section H. KYRGYZSTAN FINDINGS INTRODUCTION This Section provides the field notes of field visits conducted in Kyrgyzstan, in relation to the AKT project. VALUE CHAIN & MARKET CHARACTERISTICS Value chains are an integral part of strategic planning for many businesses today, though in most countries smaller businesses do not have the resources to conduct such studies themselves. The public sector and aid community can assist in sharing that burden, and making the results available to the private sector. A value chain refers to the full lifecycle of a product or process (e.g. walnuts), including material sourcing, production, consumption and disposal/recycling processes. Value chain and market characteristics therefore generally focus on: ! Inbound logistics; ! Operations; ! Outbound logistics; ! Marketing and sales; ! Services; and, ! Secondary activities such as procurement,

infrastructure, finance, human resources etc. A value chain approach therefore describes the full range of activities that firms and workers undertake to bring a product from its conception to its end use and beyond. This includes activities such as design, production, marketing, distribution and support to the final consumer, though many of these activities within the Kyrgyzstan agricultural economy are poorly conducted or absent. The activities that comprise a value chain can be contained within a single firm or divided among different firms, or smallholders. Value chain activities produce agricultural goods, and can either be contained within a single geographical location or spread over wider areas. Input Suppliers: With many adulterated and inferior products on the market (including fertilizer, seeds, pesticides etc.) as a result of poorly regulated borders and markets, considerable gains can be made – as the USAID Kyrgyz Agro-Input Enterprise Development (KAED) project is attempting to do – to improve the quality, responsiveness, costs and appropriateness of input supplies at the primary and processing stages of development. Physical input supplies are encumbered in terms of cost and quality. Economies of scale not currently being common through bulk buying by cooperatives, means that prices from retailers can be high. World Bank indicators for ‘Trading across Borders’ show that, compared with the average for Europe and Central Asian countries, Kyrgyzstan fared badly in several ways: 8

Table 40. TRADING ACROSS BORDERS INDICATORS

indicator Kyrgyzstan Average for Europe and Central Asia

Time to import: border 37 23

8 http://www.doingbusiness.org/data/exploreeconomies/kyrgyz-republic/#trading-across-borders (accessed November 24, 2015)

Financing The costs of financing alone – with Central Bank interests rates at 8% and commercial banks at 20% and over, means the hurdle rate of any investment is considerable, undermining profits and market appropriability. Heavily dependent on gold, cotton, wool, garments, meat, tobacco, mercury, uranium, electricity; machinery and shoes for exports, falling international commodity prices are always going to be a problem; as also the declining value in remittances. Economic diversification and specialization is therefore essential to long term growth prospects, as is economic efficiency. Lowering the costs of borrowing is achievable, if creative solutions are found.


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compliance (hours) Cost to import: border compliance (US$)

512 202

Time to import: documentary compliance (hours)

36 27

Cost to import: documentary compliance (US$)

200 108

Source: World Bank There are many agro-chemicals on the market in Kyrgyzstan which are known to be adulterated, even harmful, with only Chinese script on the container which cannot be understood. This knowledge, together with the price, deters farmers from buying them, the lack of purchasers discouraging retailers from stocking agro-chemicals. In EU countries there are 30% fake agro-chemicals, so a much greater percentage will likely apply to Kyrgyzstan. Producers: Specifically for the crops of the pre-selected twelve which the consultants have prioritised (as explained below), walnuts are largely harvested from the natural forest by collectors, who rent the trees from the government. To a lesser extent, in terms of area and production, the crop has been planted – in homestead gardens, in municipality spaces such as along roadsides, or in plantations. Apricots and plums are planted in land which the Ministry of Agriculture has authorised to be used for tree crops. In the south in particular, land is too dry to enable ‘field crops’, such as potatoes or legumes, to be grown, so tree crops are the rational land use alternative. Processors, their Associations and Traders: For walnuts, processors range from well-equipped factory premises such as that of Vega-Plus, to processing at home. In the latter, individuals can buy a sack of whole walnuts in the market place, then take them home to crack, clean and grade by hand, a more laborious procedure one walnut at a time, before selling the kernels and shells back to the market again, having added value. The intermediate level processors, in terms of sophistication, are represented by the shed on a railway siding in Kant, which has been leased and fitted with simple equipment. For apricots, the cooperative processing factory in Batken is well-equipped and -run, with good quality outputs. In Kerben, the consultants witnessed a home-made drying shed, powered by both electricity and coal, which was turning plums into prunes; there are 185 of such sheds operating at homestead level in the Kerben area. The Association of Fruit and Vegetable Processors in Bishkek is a major umbrella group for the processors. Of the twenty members, a couple make jam from apricots and one makes walnut butter; walnut, apricot and plum processors largely operate without recourse to trade associations it seems, having the market linkages themselves and traders actively coming to markets, farm and factory gates to purchase the produce. The Organic movement is growing in strength, and there are groups such as Falcon and Agroproduct, which are actively encouraging producers of organic products, like juices and dried fruit. The inadequacy of quality certification in-country is of concern, this being a constraint on reaching many agricultural export markets. Certification is not covered holistically and coherently by any one body; a roadmap is required on what needs to be done to resolve the issue, with the ECTAP project set to do this. It would include having a comprehensive coverage of practical parameters of the subject in the teaching curriculum at one of the country’s universities, including ‘Organic’ and ‘Fairtrade’ stipulations. Table 41 shows, using World Bank Doing Business in Kyrgyzstan data, shows how border compliance cost is disadvantageous.

Table 41. BORDER EXPORT TIME AND COSTS

Indicator Kyrgyzstan Average for Europe and Central Asia Time to export: border compliance (hours) 27 28


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Cost to export: border compliance (US$) 485 219 Time to export: documentary compliance (hours)

24 31

Cost to export: documentary compliance (US$)

190 144

Source: World Bank, Doing Business For walnuts, as detailed by Bourne (2012), the majority of kernels from Kyrgyzstan are purchased by exporters for further processing, grading and export, mainly to Turkey, Iran, Iraq and Syria. Kurgan bazaar, in the valley below Arslanbob walnut forest, is the major walnut market in the country. There are twenty medium to large kernel exporters, four of which are based in Bishkek. These companies purchase high volumes at Kurgan and Jalal-Abad wholesale markets, grade and pack them for export in 22-tonne containers sent to Turkey and Iran via Uzbekistan, Tajikistan and Turkmenistan. In terms of governance, the competitiveness of the kernel export industry is undermined by corruption. The result is that transaction costs of exporters are forced higher, which reduces profits and the competitiveness of Kyrgyz walnut products on the global market. For dried apricots, traders come to Batken, the main centre for collection of dried fruit from farmsteads in the oblast, and where the two processing cooperatives are located. The traders are largely from north Tajikistan, and they take their purchased sun-dried produce from farms back to Sughd region where the crudely dried produce is subjected to more sophisticated procedures in the 15 processing factories there, from where they are exported. Credit: For Kyrgyzstan interest rates for bank credit to the private sector, the World Bank provides data for Kyrgyzstan from 1996 to 2014. The average value for Kyrgyzstan during that period was 33.97 percent with a minimum of 12.75 percent in 2012 and a maximum of 73.44 percent in 1998. Current Central Bank Interest Rates are around 8% and market lending rates are 18% and higher, undermining competitiveness. According to the IMF, credit grew by 44 percent in 2014, reflecting a low base effect, the devaluation of the Som and IMF efforts to improve access to credit, particularly for agriculture. A substantial proportion of credit growth, about 36 percent, is linked to trade, with the NBKR agricultural sector credit auction of 2.6 billion Som, accounting for 17 percent of the growth. At 20 percent of GDP, credit to the private sector remains far below the CIS average of about 31 percent. Financing: Financing of the producers of the crops prioritised in this country report, and indeed other crops, is both insufficient and expensive. Farmers tend to sell their primary produce as soon as they can, both to raise cash and because there is a great shortage of storage capacity. In the homestead, both the unshelled walnut and cleaned kernels, and dried apricots and plums need to be stored well to avoid their becoming wet or damaged by pests. Absence of sufficient storage favours early entry into the market, without the value added by selling in a low season period when the value is higher. Access to financing by processors is similarly difficult and expensive, and often not available as the processor likely does not own the premises, only the equipment and this is considered insufficient collateral for loan approval. Therefore, processors do not have the cash to buy the local primary produce as it becomes available. The result is that buyers from outside of the country, be they walnut buyers from Turkey or Russia, or apricot buyers from Tajikistan, purchase the products with the cash that they have brought with them. There is a downward pressure on the buying price, as the grower cannot play the market. Financial products are expensive (the Central Bank Interest Rate alone is 8%), and also not appropriate to the farming community, for monthly repayment premiums on pre-season financing are required long before the harvest is due and can be sold. Farmers also experience challenges in getting loan approval, for they have only leasehold tenure of the land, owning only the crop on it, regarded as insufficient collateral. Being an agrarian country, improving the balance of payments deficit and removing poverty in Kyrgyzstan means that agriculture must be made more competitive and profitable, and this is a strong


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raison d’être for IICPSD and commercial private sector involvement in agriculture. Even more than is the case in Tajikistan, expatriate remittances are vital to maintain standards of living in the country. This means that agricultural activity is effectively subsidised, and unsustainable as those remittances reduce, because of the economic pressures currently being experienced in the Russian economy. To worsen this situation, the crash of the Russian ruble reduces Russia’s purchasing power for imports from its neighbours. The threat of increasing food insecurity in Kyrgyzstan is real and pressing, especially amongst marginalised families and individuals in rural areas. As a result, as evidenced by the field work, there is an urgent need for: ! Developing cost-efficient agro-input distribution systems; ! Transferring targeted agricultural technology to farmers; ! Supporting seed/ seedling development of high potential varieties; ! Promoting improved agricultural practices; ! Identifying the major binding constraints at the value chain level for producers. Kyrgyzstan ranks 67th out of 183 in the World Bank’s Doing Business index. The Investment Policy Review of UNCTAD also provides many insights on binding constraints to growth. This AKT consortium country study report indicates some key entry points in key products, involving two crops selected from over 12 as outlined in the Terms of Reference (ToR).

General Economic Snapshot in 2015

As an open and export-oriented economy, Kyrgyzstan is affected by downturn in major trading partners, changes in remittances which hurt purchasing power, and foreign currency receipts. In recent years the Kyrgyz Republic’s economy has been resilient, but its growth momentum has waned due to a difficult international economic environment and spillovers from regional conflicts. Non-gold GDP growth is expected to slow down this year to about 3 percent, as a result of the slowdown in major trading partners, turbulence in regional currency markets, and uncertainty surrounding the economic impact of the recent accession to the Eurasian Economic Union (EEU). Inflation dropped to 5.8 percent in August, but is expected to increase in the coming months driven by the som depreciation and the impact of higher EEU import tariffs. The overall fiscal deficit would rise to 2.6 percent of GDP by the end of the year, reflecting lower-than-projected revenue and higher-than-budgeted spending. With declining exports as well as falling remittance inflows, the external current account deficit would rise to 18.4 percent of GDP in 2015.

The economy is expected to improve going forward, but there are critical downside risks. Economic growth is expected to average about 4 percent over the medium term. However, several risks prevail: dependence on gold, remittances, and foreign aid leaves the economy exposed to external shocks and unable to generate broad-based prosperity; further regional economic slowdown could hurt economic activity; a loose fiscal policy combined with additional investment projects could undermine debt sustainability; and high credit growth, coupled with high dollarization and som deprecation, could create risks for financial sector stability.

The structural reform agenda is progressing, but further efforts are needed to promote rapid and inclusive growth. In particular, diversifying the economy and maximizing benefits from EEU accession require improving the business climate and combating corruption through removing bureaucratic obstacles and streamlining the process for establishing, running, and closing businesses. (Source, IMF ECF Mission Statement, September 30 2015)


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Figure 20. MAP OF KYRGYZSTAN FIELD VISIT AREAS


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PRODUCT SELECTION AND JUSTIFICATION The criteria set by the AKT Consortium go a long way to excluding many of the pre-selected products, and for this reason we repeat the broad criteria below: ! Product export growth potential; ! Product import substitution potential; ! Product volume which could impact trade balance; ! Product potential for cross border value chains among 3 countries; ! Product employment multiplier potential; and, ! Appetite for public and private investment. What makes selection challenging in Kyrgyzstan at the moment is the high levels of macro-economic uncertainty, costs of finance and lack of even basic value chain infrastructure, which continue to make many products uncompetitive in international markets. Moreover, given the porous nature of many of the borders, high value products are smuggled out and value added externally. Figure 21 below provides an overview of official exports (USD) for many of the pre-selected products. They are ranked according to complexity and distance (see definitions inserted). While the Geopolicity team is aware that there are considerable informal flows, they are difficult to value and assess. Given that the aim is to enhance official product exports, these results give us a general understanding of the ranking of products by value, with implications for trade balance and foreign currency reserves. STUDY FINDINGS (SUMMARY) The restricted time available for field visits inevitably meant that many areas of the country were not visited. For instance, the consultants were unable to assess the potential for increasing bean exports from Talas (where a laser-operated cleaning system is in place, with direct sales to Turkey) and adding value to the beans before export (a concern expressed by the Minister of Agriculture to the consultants); looking at the apple and apricot orchards in Issyk-Kul oblast or the livestock communities of Naryn oblast, to investigate the potential for fresh meat export to Russia and Pakistan (though currently Kyrgyzstan is importing fresh meat from China, and refrigerated storage capacity is so low), or to visit the dry meat project funded by the Swiss at Naryn. Nor were they able to see the rice grown at Kara-Kuldzha, south-east of Jalal-Abad or in the south-west at Isfana. The restriction imposed by this shortage of time is mirrored in one of the studies cited in this report, concerning the walnut value chain by Willie Bourne, May 2012. Despite having ten consultants each working for 5 days on a Kyrgyz field study in a concentrated geographical area, plus an unstated number of days ‘writing up’, the output of the work recorded a number of aspects which needed deeper study to unravel the complex situation. So, the consultants offer this AKT study report as what was possible on the basis of two consultants each working for ten days, covering a large range of crops with a country-wide brief. Inevitably, the outputs represent a ‘shoot-from-the-hip’ assessment. Though the October timing of the country visit was not expected to reveal a great deal of farming activity in the field, there was clearly much potential for crop agriculture, with large expanses of level fields from the Soviet era. The irrigation canals were largely clogged with reeds though, and most of the fields seemed designated for rough browsing and grazing for livestock, rather than being farmed intensively. This represents a wasted resource from the citizen’s perspective, and a loss of revenue to

Kyrgyzstan Quick Agro Facts Total cultivation area, occupied with agricultural crops is 1,2 million hectares Contribution to the economy – 17,5 % of GDP (2014) 33 % of the country’s workforce is employed in the agricultural sector More than 357 thousand agricultural business are registered (2012) All agricultural products are exempted from 12 % VAT (Value Added Tax) Internal Rates of Return for different products from 15 to 30 + percent.


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government through revenue from the lease and on harvested produce. The government is anxious to lease land on a 49-year basis. The highlands are badly over-grazed and riven with gulley erosion, clearly seen from the plane whilst approaching Bishkek and Osh airports, and looking from the valleys up to the low hills. Mechanisation is not economically viable on the smallholdings, so production is labour-intensive. Again, because the plots are small, standardisation of a commodity across farms is also impossible, each farm following its own practices. In his meeting with the consultants on October 22nd, the Acting Minister of Agriculture lamented the small size of the 350,000 farms in the country, now that the large collective farms had been disbanded. The Minister stressed the need for ‘trade logistics centres’ and better functioning cooperatives in the country, at least one in every village, to provide for storage and serve as marketing foci for the farmers’ produce. Batken oblast was particularly vulnerable said the Minister, as there were no companies operating there. Poor farm management and input quality was another constraint; also insufficient experience, for many farmers are recycled teachers and doctors who have left their professions as the remuneration is so poor. Technical capacity of the Ministry of Agriculture is low – it needs help for digging wells, and improving field water management, with the Ministry starting only 5 years ago to express interest in drip irrigation (one political party having this as its emblem). The Minister named drip irrigation as one of his priorities. Farming, processing and marketing components of the agricultural value chain do not work together well, with weak linkages, the Minister said (this later confirmed by Himiay Suyerkulova, Coordinator for Osh and Batken oblasts for the Community Development Alliance). Kyrgyz people are not traditional farmers but livestock keepers, so do not have the institutional memory of arable farming as a livelihood, or even a great interest in it. School children do not aspire to be mechanics or technical specialists in the agricultural field, but rather to become lawyers or diplomats – a vocation in agriculture is regarded as a failure, a career dead-end which will not lead to a good standard of living. This perception needs to change, and it can do so if agricultural profitability is enhanced. Any intervention proposed under IICPSD needs to work with these current national inclinations, rather than against them, whilst endeavouring to raise agriculture’s game, so that agriculture becomes, and is perceived as, an attractive profession - because farming becomes regarded as a successful business opportunity. Geopolicity also believes that if UNDP is to attract donor support for an AKT intervention, that intervention needs to be ‘unique’ rather than comprising something that other donor agencies are already addressing, and also scalable to cover all three countries of the consortium. Though the Kyrgyz government is looking for import substitution and food self-sufficiency rather than export, exporting brings in foreign exchange which helps the balance of payments. The strategy would be to capitalise on any comparative advantage, concentrating on crops in which Russia and Kazakhstan (say) are deficient, whilst stimulating employment and increasing income for poor farmers so they can afford to buy food to be food- and nutrition- secure. FIELD VISITS The two Geopolicity staff who undertook this country visit study in Kyrgyzstan were John Ashley and Zura Mendikulova (hereafter ‘the consultants’). Over the period October 19th – 31st, the two consultants worked in tandem in-country, with Ms Mendikulova remaining in-country for further research, recently concluded just prior to this write-up. The first week of the study was spent in Bishkek, whilst the second week was spent covering three oblasts Jalal-Abad, Batken and Osh. These were selected on the basis that southern oblasts contained a high proportion of the country’s poor population, yet the land having high agricultural potential. Batken has plenty of land though is relatively ‘dry’. Its orchards may be the most rewarding to target for drip irrigation. The list of the 93 key stakeholders with whom they held discussions is presented in Annex 1. The Report presented here


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is based on a synthesis of information gleaned through these discussions, together with documents perused. SELECTION OF COMMODITIES Kyrgyzstan exported US$13.2 billion in 2013, with official agricultural (vegetable and nut) exports reported at around US$ 176 million, or 9% of total exports. Within this context, and the revealed comparative advantage of products for export, we have been able to justify excluding certain products from the reduced list. Kyrgyzstan Country Benchmarking

For Kyrgyzstan, the key products in terms of production volumes are Potatoes, Apricots, Grapes and Walnuts. In terms of export values and global shares the key products are shelled walnuts (Export Value- US$ 10.48 Million, Global Share- 0.66%), Apricots (US$ 5.44 Million, 1.09%) and Potatoes (US$ 4.41 Million or 0.16%). For most other products export volumes and global shares are very small. Kazakhstan is the single most important market for Kyrgyzstan exports. There is very limited export market diversification for Kyrgyzstan. Interestingly, China is the main market for raisin and walnut exports from Kyrgyzstan, and Germany is a market for almonds and walnuts (the export values and global shares in these products are low though).


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Figure 21. KYRGYZSTAN PRODUCT FEASIBILITY RANKING FOR PRE-SELECTED PRODUCTS (2013)


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FIELD BASED PRODUCT SELECTION The aim of the initial fieldwork was not to complete and report value chain analysis, but rather to exclude pre-selected products based on their non-compliance with criteria set by the AKT. The consultants set about identifying commodities which have comparative advantages, are excellent potential business propositions, relatively non-perishable, high value-low volume and correspond with the imperatives of targeting poor farmers, and promoting their income stream and full- rather than under-employment, sucking paid labour onto their farming enterprises; and that there is scope for agro-processing of primary produce. Commodities other than the 12 fruits, vegetables and nuts listed in the Terms of Reference were also considered, as also livestock commodities. The latter option was an endeavour to provide benefits to poor pastoralists too, in recognition that they are often left out of development efforts whilst pasture land is 6x more abundant in Kyrgyzstan than is arable land. Initial reading of the ToRs indicated that economies of scale were sought from selecting commodities which were common to all three countries under survey, with a view to pooling these, thereby increasing bulk for marketing. Two aspects soon became clear however: ! First, that logistics were not in favour of that thesis - not for all three countries, though the

case for two countries collaborating cross-border in this way were more favourable; and,

! Secondly, that it may be difficult to find commodities to prioritise that could be common to all three countries. Even within Kyrgyzstan, there were comparative advantages for one commodity in one location, and another commodity in another location. Sometimes, the comparative advantage of a commodity was very specific, in terms of current spread of the commodity – for instance, 80% of apricots are grown in Batken oblast, whilst walnut production is centred in Jalal-Abad oblast, and plum cultivation in just two rayons of that oblast.

The consultants’ experience, as well as that of seasoned agricultural value chain development workers in the country (such as Eugene Ryazanov, Director of AgroAsia), is that recommendations of ‘priority export crops’ vary, depending on whether the view is expressed by a UN agency, public sector, private sector or the farming community. The four-crop selection favoured by the consultants based on their field visits is the result of our enquiry with many stakeholders, and our synthesis of these opinions, together with hard data. Walnut and plum/ prune are the crops selected in the first division of choice, with apricots and onions in the second division. The choice has been based on a private sector perspective, what is profitable whilst being relatively risk-free, rather than on considerations like promoting food security and employment generation. Wheat for instance is excellent for household food security, but it has low profitability, due to its production being non-mechanised (threshing is done by cows walking in circles on the cut straw). LEVEL OF TECHNOLOGY EMPLOYED BY FOOD CROP FARMERS GDP dropped by 50 per cent after support from the Soviet Union ceased. The Kyrgyz Republic was quick to implement land reform, and by 1995 about 75 per cent of all agricultural land had been distributed to individuals in rural areas. Between 1996 and 1999, agricultural GDP rose by 60 per cent and land devoted to high value crops, such as cotton, more than doubled. The country's food security requirements also led to the considerable expansion of wheat, largely at the expense of fodder crops. Yet, after 2002 agricultural growth slowed considerably. Poor access to credit, legal barriers to land consolidation, and a lack of producer organisations and cooperatives have been blamed. In the three oblasts visited, the technologies used are ‘mixed’ in terms of modernity. No drip irrigation was seen (for vegetables or fruit trees), only furrow irrigation, terrace-flooding for rice through river training, or none at all. Mechanisation services were not apparent, with individual vegetable farmers sometimes having tractors, and arranging sharing amongst themselves. The level of mechanisation for


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planting or harvesting that occurs in developed agricultural economies was absent. Greenhouses for early spring vegetable production are employed to a limited extent. There were some areas where the techniques employed are more intensive, such as at Shamaldysai village, Nooken rayon, Jalal-Abad oblast. In Kyrgyzstan, agricultural output comes from private household plots (55 percent of the total), private farms (40 percent), and state farms (5 percent), and therefore reflects many other economies in the world harbouring both subsistence and commercial operators. At the lower level of production, where farmers are poorly capitalised and lack access to cheap inputs, the means of production and access to high value export markets, the need to lower the costs of doing business and transaction costs to markets has never been more important. CONSTRAINTS EXPERIENCED BY THE FARMING COMMUNITY Field research provides considerable insight into the generic challenges faced by different players in the value chain for different products. Certain (horizontal) constraints such as the costs of finance or lack of infrastructure were commonly stated whereas other (idiosyncratic) constraints provide insight for more targeted interventions. Support for producers is not provided through any government research/ extension service, and the capacity within the Ministry of Agriculture is low. Extension advice which is available is linked to donor-funded projects, implemented for example through the agency of agricultural consulting groups – such as Agrolead, based in Bishkek or the Training and Extension System (TES) Centre, based in Osh. Farmers are operating with rudimentary practices, and restricted access to improved technologies (inorganic fertilisers, improved varieties, drip irrigation for fruit trees and vegetables etc). The Soviet State Farm irrigation system is in disrepair. Ever since the State Farm system was de-commissioned following the 1991 collapse of the empire, farms of 1ha on average are not sufficiently large to be commercial. Cooperatives are in their infancy, which could provide economies of scale for producers, advice on production technology upgrades, microfinance in order to invest in their (newly-privatised) farms, and ideas on value-addition and marketing. Especially in the south of the country, like Batken and Osh oblasts, cooperatives are rare. Pastoralism is associated with insufficient veterinary, A.I and disease surveillance services. Pastures belong to the State, and overgrazing is rife, with gully erosion common (both of which seen over huge areas of mountainsides from a plane). No pasture improvement is under way on a significant scale or re-sculpting of hillsides to protect against erosion, and retain water on the land rather than running into the valleys, as in Ethiopia under the Productive Safety Net Programme (World Bank Trust Fund), for instance. Key constraints raised, during the course of key informant interviews, are summarised below: Significant upstream producer constraints including (i) high costs of finance (ii) weak integrated market chain development (iii) many buyers and sellers operating within small margins (iv) lack of specialization (v) fragmentation (vi) uncompetitive costs despite high quality products (vii) weak market regulation and certification (viii) lack of packaging and processing and (ix) contraband exports; ! Other issues raised include but are not limited to (i) too little produce storage capacity (ii)

shortage of producer cooperatives and farmer associations (ii) high price volatility due to year-on-year production yield changes (iii) general lack of infrastructure and (iv) ineffective extension system.

POTENTIAL INTERVENTION AREAS UNDER UNDP’S IICPSD


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Economies of scale can only be achieved at the upstream end of the value chain, through pooling extension efforts. That said, if the overall business climate is restrictive, in addition to value chain work we need to assess which is the most significant binding constraint on a chosen product. UNDP Bishkek itself strongly urges that value-addition with any crop-based commodity starts with the on-farm primary production phase, and that this be prioritised over value-addition at the downstream agro-processing stage. That said, given the many binding constraints at the level of the market (i.e. costs of finance, lack of insurance, monetary issues, lack of market regulation and certification etc.) our analysis will need to justify how best to intervene for a given product. Though different stakeholders insisted on the need for ‘export’ initiatives to focus on internal opportunities within the AKT and immediate neighbours, rather than marketing in Europe or USA, it will be critical to assess which entry points would best lead to increased rates of return. Interventions of the type suggested below should not be donor-driven, so that post-project they fade into nothing. The indicative interventions suggested are demand-led, by the farmers, and their implementation must seek to establish implementation coordination into government institutions at national, oblast and rayon level, in the interest of sustainability in perpetuity. THE SHORTLISTED PRODUCTS WALNUTS Quality of the Kyrgyz walnut was ranked the best in the world for taste, at the 2007 walnut conference in Chicago. There is no worry with pesticides as none is used, so the product is ‘organic’ in essence, and certainly not GMO. However, the walnut and kernel value chain is both large and complex, engaging multiple actors, including collectors, traders, crackers, processors, exporters, retailers and other manufacturing users. The two defined seasons for walnuts are high season (between September and February) and low season (March to May). The high season is characterized by high volumes of mainly wet walnuts, heavier in weight in September and October, and increasingly dry in later months. Walnut and kernel prices are lower in the high season. The low season has significantly lower volumes entering the market with less weight, but higher prices for walnuts and kernels prevail. Most of the fruit from the south comes from the State-owned natural forest reserve abutting Arslanbob village, north of Jalal-Abad. The forest comes under the auspice of the State Agency on Environmental Protection and Forestry, which has responsibility for walnuts in the mountains, rather than the Ministry of Agriculture and Irrigation, which has responsibility for walnuts grown in the valleys9. The Arslanbob forest is the largest natural walnut forest in the world, at 41,000 ha (according to the forest promotion NGO Lesic-South - 35,500 ha in Jalal-Abad oblast and 5,500 ha in Osh oblast). The trees are not farmed as such, yet collectors live in or around the periphery of the forest. In the spring, buyers book produce from individual trees which a given collector has leased from government, at 1,000 Som/ha per year, which can be paid in cash or kind. Walnuts comprise the main source of income for these collectors.

9 Legislation in force discriminates between land assigned to arable agricultural use, and land for trees (including fruit trees), and does not allow transfer of land use from one category to another, this restricting expansion of plum orchards too, as discussed below. Penalties are imposed when this law is disregarded.


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In the north of the country, most trees are in individual gardens, in rural and urban environments. There are some small private plantations, such as those around Jalal-Abad. These total about 5,000 ha, together with another 5,000 ha at municipality level. More plantations are being encouraged by government, Walnut/ Tree Associations and groups allied to the Organic movement, such as LLC Falcon Group and the Wealth of Kyrgyz Forest Commodity Service Cooperative, Jalal-Abad. There is ‘spare’ land on which new plantations could be established, land which belongs to the State Agency on Environmental Protection and Forestry.10 The crop and related value chain has the support of the Investment Promotion Unit of the Ministry of Economy (MoE) and its Deputy Minister, both present at the workshop in Dushanbe on October 15th. The Minister of Agriculture and the Ministry of Health also support initiatives which promote this crop. A government notice has been produced by the Ministry of Economy which officially states this support, the mover behind this initiative being the Kyrgyzstan Association of Forest and Land Users, which directs its activities towards policy goals. MoE has a ten-year support programme in place for walnuts. The Ministry of Health is able to certify the walnut as organic produce of the Kyrgyz people. Technical advice and free seedlings are availed by the Walnut and Forest Planters Association, and the State Agency on Environmental Protection and Forestry has a walnut nursery in Salamglik municipality, to supply the private plantations there. The consultancy group Agrolead, based in Bishkek and well-thought of by UNDP Bishkek, offers training to farmers and processors under a GIZ-funded project. Turkish businesses are bringing in seed of white kernelled varieties for planting. The main risk at the primary production end of the value chain is represented by what happened in early 2015, a late winter frost in April which damaged the young reproductive shoots of the trees, nullifying the subsequent yield in much of the forest and free-standing trees. By contrast, long-term risk is the ongoing global warming, leading to a drying environment and melting of the snow and glaciers, which will upset the hitherto slow release of melt water during summer months, and a likely lowering of the summer water table. Water availability is already constraining forest yield. Walnut farmers provide the following reasons for investing in the Walnut business: ! Diversification of business activity by the community; ! Potential for export opportunities and increased profitability; ! Conservation and improvements in woodlands; and, ! Income enhancement. 10 http://nature.gov.kg/index.php/en/

AKT Walnuts In 2013 Afghanistan and Kyrgyzstan produced 11,122 tons and 5,859 tons of walnuts respectively. Production in both Afghanistan and Kyrgyzstan has been on a general increase, although in 2012/13 it fell in Afghanistan. Kyrgyzstan and Tajikistan, though having lower production volumes than that of Afghanistan, seem to be having higher shares in global exports than Afghanistan. Kyrgyz share of global exports of in-shell walnuts was 0.05% and for shelled walnuts was 0.6% in 2013. Looking at the key export markets for Afghanistan it can be seen that walnuts (both shelled and in shell) are mainly exported to India. For walnuts in shell, Pakistan is also a significant importer of Afghan exports. Interestingly, for Kyrgyzstan and Tajikistan, China is a major importer of in-shell walnuts. For shelled walnuts, China is the major importer from Kyrgyzstan and Kazakhstan is the major importer for Tajikistan. Turkey is a significant regional importer of walnuts, while there are no other significant exporters regionally.


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Marketing of the primary or shelled walnut is not a constraint, in terms of ready uptake of all walnuts grown, whole or unshelled, graded or ungraded. The consultants visited many bazaars, such as Bazar-Kurgan between Jalal-Abad and Arslanbob forest, where the whole or processed nut is traded. There is no shortage of small-time players, intermediaries from the forest to the seller of final product, most of these traders being women. Men are involved only for driving vehicles from mountain forest source to valley bazaar markets, and negotiating sales of processed products from the factories. Processing (shelling, grading and bagging/ packaging) is often undertaken in-country, a lot of it in individual households. Commercial processing, as seen by the consultants at the leased Vega Plus factory in Jalal-Abad, works effectively, with marketing to order. The Vega Plus factory still has to obtain the HACCP certificate, and when that happens it can apply for ISO certification, and even

State support for Development of Nut Crops in the Kyrgyz Republic until 2025 According to the State Customs Service of the Kyrgyz Republic, export of walnut kernels in 2007 amounted to 3,169 tonnes (worth 950 million Som), and in 2008 rose to 4,575 tonnes (worth 1.370 billion Som). According to Article 12 of the Constitution, forests, flora and fauna are the exclusive property of the Kyrgyz Republic, and need to maintain a ‘unified ecological system as the basis of life and activity of the people’. Hence they are accorded special State protection. A Programme of State support for the development of nut crops in the Kyrgyz Republic until 2025 was approved by Resolution ! 293 of the Government on June 2, 2014. This Programme was developed within the framework of, and in order to facilitate implementation of, the National Strategy of Sustainable Development for 2013-2017. The Programme was developed in accordance with: ! Concept of Forestry Development of the Kyrgyz Republic, approved by the Government "On approval

of the Concept of the forestry sector of the Kyrgyz Republic" dated April 14, 2004, ! 256; ! National Forest Programme for 2005-2015, approved by the Government "On approval of the National

Forest Programme for 2005-2015" dated November 25, 2004, ! 858; ! Action Plan for the implementation of the priorities of biodiversity conservation of the Kyrgyz

Republic for 2014-2020, approved by the Government "On the priorities of biodiversity conservation of the Kyrgyz Republic for the period till 2024”; and,

! Action Plan for the implementation of the priorities of biodiversity conservation of the Kyrgyz Republic for 2014-2020" dated March 17, 2014, ! 131.

The purpose of the Programme of State Support is “to improve the existing plantations of nut crops: the creation of nut plantations aimed at obtaining higher yields; to meet the needs of the local market; the processing and export of nuts at competitive prices; the encouragement of environmentally friendly products; promoting the strengthening of food security; and, improving the living standards of the population”. The Programme contributes to the forest land of the Republic in accordance with the priorities of the State policy on development of the forestry sector, mitigation and adaptation to climate change, the production of environmentally friendly products, and the implementation of the priorities of the "green economy". The Programme includes a series of measures to improve the status of existing plantations with a view to their reorientation to increase productivity, while maintaining their protective functions, and the creation of new plantations to enable nut production goals to be achieved. The area under walnut plantations in the forests is 41.0 thousand hectares. Until 2025, it is planned, that eight thousand hectares of plantations be upgraded on land belonging to the State forest. These activities will provide a significant increase in production of walnut in the country, which by 2025 is expected to reach more than an incremental 2,500t, which will significantly increase the export of fruit and walnut kernel. The implementation activities of the Programme will promote: ! Reduction in the level of poverty of the population living in the vicinity of the forests; ! Conditions for attracting foreign investments and grants, as well as domestic investment ; ! Enhancing the capacity of forest and land users, representatives of local government bodies and

others stakeholders implementation of public-private partnerships to address infrastructure problems of forestry.


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organic certification. The primary constraint is shortage of operating capital, to enable the factory operator to buy whole walnuts from the gardens of individual homes. Such cash shortfalls are the more pronounced with small processors, such as that visited in Kant, just to the east of Bishkek. In that case, the Manager, Aibek Mambetakynov, explained that no lender is willing to advance the US$120,000 funds to enable the season’s local harvest (which begins in September) to be purchased, in the absence of sufficient collateral (factory premises are used on a lease-hold basis, even though the processing equipment is owned by the operator). Owing to general shortage of liquidity in the community, sellers of whole walnuts are not prepared to accept deferred payment, and they do not have to, as traders from Turkey and Russia in particular come to their door with ready cash. The nuts are then taken to Turkey or Russia, further processed, branded and marketed from there. 11 The consultants were shown one instance of this by the Chairman of the Walnut and Forest Planters Association - a sophisticated tin of high quality walnut kernels, with a label ‘manufactured in Russia’, though the product was acknowledged on the tin, in small print, to be from Kyrgyzstan. Hence, lack of capital to purchase the local crop impacts negatively on the value chain advantage to the Kyrgyz players in it. One outcome of this is foregone employment opportunities for Kyrgyz nationals, especially women who are the preferred gender for light tasks such as sorting and grading (because of their legendary greater patience, and ability to multi-task – to talk and work simultaneously, unlike their male counterparts). So, employment and income generation possibilities are lost to Kyrgyzstan, as well as promotion of the product as having a Kyrgyz origin, all because of shortage of lenders or investors willing to provide the necessary working capital. Walnuts is a highly favoured commodity by the Minister of Agriculture (as expressed in a meeting with the consultants on October 22nd), and meetings with the Deputy Minister of Economy and his Investment Promotion Agency, October 21st – 23rd, and by the Jalal-Abad oblast Administrator in a meeting on Oct 27th. Walnut has a measurable effect on GDP, and is a recognised export through official channels. The classic walnut value chain analysis of May 2012 by Willie Bourne and others gave a number of conclusions and recommendations for Kyrgyzstan, together with a number of key points for further study: ! There is need to reduce input supply costs through bulk buying; ! There is need for farmers to sell collectively in bulk; ! Farmers/ collectors lack drying and storing facilities; ! Hand-held tools to crack the nuts are needed to save the laborious cracking procedures

conducted during home shelling/ processing; ! The value of exports officially recorded is probably 5x that recorded on export forms, due to

under-estimates of volume and for reasons of export tax avoidance; ! Government support for product promotion is lacking; ! Decree #331 of 2006 prohibits cutting of trees and limbs, may good undermine management; ! A detailed survey is needed of market volumes and conditions in wholesale markets; and, ! A review of microfinance institutions, with a view to reaching out to marginalised groups. The value chain prices provided in Figure 22 below are aggregated for different qualities, and these are disaggregated later in this final report. In bad production years – such as 2015 – walnuts in Kyrgyzstan itself fetch prices similar to the Gulf States and Europe. High costs of financing, high transaction costs and monetary constraints make exports expensive, unless products are illegally taken out the country as contraband. As a result, it is expected that export figures are in fact much higher than official statistics. 11 Yields per tree can be under 10 kilograms, and in good years up to 20 kilograms. Some exceptional trees may yield 40–45 kilograms in a good year. Walnuts kernels are graded A and E in quality, with considerable difference in final market prices. Turkish Airlines had been offering subsidized rates of US$1 per kilo of freight, allowing profitable exports to Turkey and beyond. While subsidized transport is often rejected by neo-liberal economic models, if higher profits can be made at the export market end, then lowering costs here is just a market hedge.


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Figure 22. KYRGYZSTAN WALNUT PROCESS VALUE CHAIN ANALYSIS – DOMESTIC AND EXPORT MARKET PRICES


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Table 42. WALNUT PRODUCT COMPLIANCE WITH AKT SELECTION CRITERIA



! Huge potential as the kernel is rated world-class quality; demand for the product is more than supply; GoK promoting new plantations and has placed a conservation order on the 41,000 ha indigenous walnut forest. One of the barriers preventing exports is the inability to meet international food standards, such as ISO and HACCP. Virtually none of the companies that were interviewed had certificates for international standards.

! Walnuts are a product with significant export potential, particularly shelled walnuts. The value of shelled walnut exports has been consistently increasing over the last decade. Even in terms of global share of exports while it did fall from the peak of 2007 indicating other countries performing better (since absolute values didn’t fall of exports), over the last three years the share has been increasing. Currently Kyrgyzstan exports of shelled walnuts constitute 0.6% of global exports. This is the highest share that Kyrgyzstan exports enjoy in the global market after apricots.


! As a net exporter of walnuts there will be no substitution impact for this product.

! There is almost nil import of walnuts into Kyrgyzstan, hence this is not really relevant for this product


! A good year crop of 6,000t/ yr official export is perhaps only 20% of that which is actually exported, though even that 6,000t has an impact on trade balance.

! Production volumes in walnuts have also been consistently increasing.

4 Product potential for cross border value chains among 3 countries

! Kyrgyzstan has a greater product volume than the other two countries, and there is potential for bulking in Bishkek for onward marketing, using the advantage of Eurasian Economic Union membership

! Kyrgyzstan and Afghanistan have significant amounts of product potential and could develop synergies to develop value chains across the two countries


! Collectors of nuts from the forest and from private or municipal gardens increase linearly with increased hectarage; many players are involved in the in-country marketing, hauling, buying, processing, grading and selling, with the potential for more processers working from home; women comprise the majority of those involved in processing and marketing in this sub-sector

! Studies indicate that there is significant employment dependent on walnut production and export, particularly poor households and women. A recent PROFOR study (2012) indicates that more than 6000 people are employed directly and 8000-10,000 indirectly in the walnut processing industry in Kyrygzstan. As exports grow, these numbers would only increase.


! Turkish investors already involved, supplying white seed suited to Turkish preferences; fulsome interest from public and private investors, attracted by the international quality of the product. GoK fully behind expansion of this comparative advantage crop. If interventions that are public in nature, such as providing low cost finance to boost profits or developing trade corridors and value chain infrastructure are outlined, some considerable

! Same findings as in the field study


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Table 42. WALNUT PRODUCT COMPLIANCE WITH AKT SELECTION CRITERIA

Product Justification progress can be made.


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PRODUCTS EXCLUDED AND JUSTIFICATION PLUMS (PRUNES) Plum has only one major centre of cultivation in the country (in two rayons of Jalal-Abad oblast - Aksy and Alabuka), and rootstocks from there do not establish in other parts of the country (from the experience of Himiay Suyerkulova, of the Community Development Alliance). Plum cultivation in Aksy rayon was started by a group of Ukrainians at the end of World War II. This group has now left the area, but cultivation continues by the indigenous population. The very specific growing conditions in these rayons, between the high mountains and the warmer valleys below, well suit the plum crop, which produces its first harvest after 3-4 years. Production is 30,000t from 3,000 ha. On average, 50% are sold fresh directly to Russia, Tajikistan and Turkey (through local buyers who truck the produce), whilst 30% are dried locally into prunes. The remaining 20% are not ready for harvest in time and lost to the winter. Prunes and plums are regarded as a family business in the Kerben town area, not a short-term enterprise. As for marketing, middlemen from Batken come to Aksy and buy the prunes to export to Tajikistan, where they are processed further, stones being removed. Up to 100t were exported to Russia alone, which has a requirement for 1,000t. There is some export also to Uzbekistan, despite the border being closed, and (according to the Deputy Director of the Investment Promotion Agency of MoE), these are then processed and sold to Russia. The Deputy Director is confident that were enough plums produced, there would be a ready market in Japan. Of the 30,000 households across these two rayons, 17,000 households (85,000 people) grow plums as their main income-earning occupation. Each family has 0.15 ha orchard currently, split into various tree crops – plum, apricot and apple. Constraints on prune production are: ! The insufficiency of commercial drying equipment, with only local technologies used for

drying. Mainly this is sun-drying, with the fruit cut open and the stone removed from the fruit. The one processing plant the consultants saw in Kerben town is very impressive, with electric and coal fire sources combining to generate 100 degree Celsius in the drying room. This does not provide an even heat throughout the drying shed though, so the drying process is rather uneven. There are 184 other processing units like this in Kerben says the Aksy rayon administrator;

! There is no fruit quality laboratory of international standard in the country. The Head of the Aksy rayon administration went to a trade fair in Istanbul recently, and explained about the plum in his rayon. Yet with the absence of a quality laboratory and associated certificate, export was deemed impossible (it is possible to get a certificate of origin through the Chamber of Commerce in Bishkek, but not a quality certificate). This is a general malaise in the agricultural sector, and it can take up to 5 years to obtain a quality certificate (according to the Agribusiness Competitiveness Centre (ABCC). ABCC is able to provide support on certification for processing companies. It has set up a training centre in the Technological University in Bishkek, which opened in April 2014. This University has chemical and microbiology laboratories, newly equipped with good equipment;

! The current 3,000 ha of plum orchard can be increased to 4,000 ha, by planting fallow land

within land designated for orchard by the Ministry of Agriculture (MoA). Yet, if MoA were to reclassify land allocated for arable production to land for orchard, then the area of plum trees could increase 15-fold with the planting of new orchards. Currently, the arable land supports water melon, melon, onion, pepper and tomato for home consumption and the local market.

A prune processing business plan has been drawn up by the Rayon Administration, of which Geopolicity has a copy. The whole equipment package cited is US$200,000. This would cater for 6t/per 24-hour period, of the 9,000t fresh fruit currently allocated for drying in a season (at


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186t/month this would clearly not suffice to professionally dry all 9,000 tonnes which would be harvested September-October, let alone be able to cater for an increased proportion of fruit dedicated to drying) (10,000t fresh plums are required to make 3,000t prunes). At the time of the consultant’s visit, prunes are selling at 120som/kg. The Aksy rayon administration believes that only 100 families of the 30,000 growing plums could raise US$15,000 each, to raise US$1.5 million, sufficient for 7 more similar drying plants, yet he would appreciate funding from IICPSD to enable more of these, or larger units, to be set up. UNDP Bishkek selected plum/ prune as worthy of UNDP IICPSD support in the AKT consortium, and it was at its prompting that the consultants visited Kerben. The Aksy Rayon Head has also secured the support of the Minister of Agriculture, Mr Chagotay (the Turkish Trade Ambassador to Kyrgyzstan), and the Iranian and Indian ambassadors, who have visited Kerben. The rayon chief met with businesses in Russia, and is in correspondence with Dubai, Qatar and China, which he visited accompanied by the Minister of Agriculture. The Prime Minister has also expressed an interest in prune production in the Kerben area. 12

12 On November 13th, in a meeting with the consultants, the Executive Director of the Agribusiness Association of Tajikistan opted for plum/ prunes as the second highest priority crop (after grapes), so there is a scope for AKT synergy on this crop, with Kyrgyzstan taking the lead due to its larger current production


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Figure 23. KYRGYZSTAN PLUMS / PRUNES PROCESS VALUE CHAIN ANALYSIS – DOMESTIC AND EXPORT MARKET PRICES

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Figure 23.


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Table 43. PLUM/ PRUNE PRODUCT COMPLIANCE WITH AKT SELECTION CRITERIA



! Direct sales of both plum and prune to Russia at the moment; Turkey, Iran and Korea have expressed interest in buying prune; Minister of Agriculture fully supportive, as is Aksy Rayon administrator; there is a 20% increase potential for plum trees on existing orchards, and the potential of 15x more plum orchards being planted if MoA agreed to re-classify arable land as land suitable for trees (in the 2 rayon of Jalal-Abad oblast having suitable growing conditions)

! Export growth of plums and prunes had been consistently growing until 2012, with some variation from year to year. But over the last two years it has been falling. But given that the overall trend for export values has been upward except for the last two years there is evidence of potential. Once the fluctuations in terms of value/volume from year to year can be addressed with clear export support mechanisms and guidance and training for market diversification, there would be significant increase in exports.


! As a net exporter of plums/prunes there will be no substitution impact for this product.

! There is almost nil import of plums/prunes into Kyrgyzstan, hence there is no substitution impact


! While current production is small, given its similarities to Apricot production, and interested export markets that includes Turkey, there would appear to be considerable upside for formal exports impacting trade balance and foreign currency reserves – once a certain scale has be met.

! Export values of plums are higher than prunes for Kyrgyzstan. While the export values are lower than that of potatoes, walnuts, apricots and onions, it is higher than all the other pre-selected products. Further, after potatoes and apricots it is the product with highest production volumes (13,500 tonnes per year), and volumes have been consistently increasing. Exports have not kept pace with the increasing production so there is definitely potential to increase exports


! Tajikistan plum production could be pooled with that of Kyrgyzstan produce

! Kyrgyzstan is the larger exporter in terms of value of plums, while Tajikistan significantly exports are much higher in terms of prunes. This indicates a possibility of value chain development. Both the countries could build on their comparative advantage and jointly target larger export markets.


! There is a linear relationship between area of plums grown and paid employment opportunities on-farm, in powered driers, haulage and marketing of prunes. Increased income would largely be ploughed back into local development, creating employment for artisans.

! As evidenced from other country case studies, plums are a labour- intensive crop. Increased production and export opportunities would definitely lead to further employment generation and impact.


! Excellent, with local investors in the two Rayons ready with money to purchase driers (to the tune of $US1.5 million), looking for matching funds from international investors or donors

! Findings from the field study hold here


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ONION Visits to Osh wholesale market on the morning of Sunday October 25th showed a very active trading scene for onions, of very good quality. Indeed, the quality was better than any other fresh locally-produced commodity (apples, pears, carrots etc), and adjudged to be of ‘international standard’ by inspection. Two types of onion were present, the ‘normal’ brown scaled (large and small-bulbed), and far less of a white scaled onion, sold for salads and medicinal purposes. One advantage of selecting onion as a commodity is that it can be grown commercially in most places in the country below say 1,100m, not just in its northern heartland of Chui, and from Karakul. Figures on the increasing scale of onion production in two rayons of Osh was provided by the Oblast Administrator (Table 44):

Table 44. ONION PRODUCTION IN TWO RAYONS OF OSH OBLAST, KYRGYZSTAN

Hectare (ha) Average yield, t/ha Price (Ksom/ kg) Years Aravan

rayon

Kara-Suu

rayon

Aravan rayon

Kara-Suu

rayon

Aravan rayon Kara-Suu rayon

2013 315 437 20.0 20.0 7 13 2014 385 474 20.2 20.0 8-9 15 2015 339 660 21.5 21.0 10-12 7-12

During the subsequent site visit to Tajikistan, it was clear to the consultants that Kyrgyz onions are of far higher quality than those grown in Tajikistan, despite the good Dutch varieties apparently used in the latter. The reason for Kyrgyz produce being of such high quality is likely explained by the erstwhile presence of a hard-working Russian-Korean ethnic input, over the course of more than a generation. This group facilitated variety improvement over that period, as well as inculcating other techniques of production to the Kyrgyz labour force and lower level managers who worked with them. Quite recently the Russian-Koreans departed the agricultural scene in Kyrgyzstan, as a result of production costs rising, especially related to the decline in value of the KGS and rising price of fuel and other imported agro-inputs. Yet the technology for production remained intact, together with the external market linkages for produce, and Kyrgyz farmers were/are prepared to run onion-growing enterprises at lower profit margins (the margin equates to the production costs, according to one farmer interviewed in Jalal-Abad oblast, namely 100% profit). Onion involves mainly women doing the field work, with production following ploughing being exclusively labour-intensive. Pulling and grading at field level is deadly back-breaking work, with women shuffling forward on their haunches. Yet they can make good money, and there is bonhomie amongst the group of women working in line abreast as a team. The crop is highly favoured by the Minister of Agriculture (as expressed in a meeting with the consultants on October 22nd), and in meetings with the Deputy Minister of Economy and his Investment Promotion Agency, October 21st – 23rd, and by the Jalal-Abad oblast HQ in a meeting on Oct 27th, and Osh oblast HQ on October 30th13). Though there is huge competition regionally for increasing export penetration, this is a crop in which Kyrgyzstan has a competitive edge. Onion is much favoured as a commodity too by the Seed Association of Kyrgyzstan – there are 10,000 ha of onion in the country, with varieties grown here being good (Dutch) varieties, which have excellent storage qualities, able to stay in good condition for 8 months if kept cool. They can even withstand frost in the field, and yield 30-40t/ha. The main growing area on the Kazak border makes access to the Siberian market easy, so long as sorting into grades is with exceptional rigour. Kazakhstan is Kyrgyzstan’s main competitor for onion export. Some Kyrgyz farmers used to go to Kazakhstan to

13 Owing to its position, no crop is currently being exported from Osh, said the Osh Administration. Onion could be, if more of it were produced. This would need drip irrigation probably – there is less water in Osh than in Chuy, and also a farmer in Osh was allocated only 6 socka after the Soviet era, whereas in Chuy, each farmer was allocated 1ha.


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grow onions and return after the season had finished; now the border is open for business, thanks to the Eurasia Economic Union, Kyrgyz farmers grow onions at home and then export. FRUITS APRICOTS Apricots are grown particularly in the south-west of the country, especially Batken region and around Jalal-Abad. Issyk-Kul oblast is another centre of production, 10% of the country’s apricots being grown around Karakol, sold fresh to the local market or trucked to Russia and Kazakhstan, cash on delivery. Small farms are the main source, these processing the fruit in situ. The quality of both fresh and processed fruit is said to be superior to those grown in neighbouring Tajikistan, where fresh apricot production is around twice as much as in Kyrgyzstan, with production costs being higher in the latter14. When there is a shortfall of dried apricots in Tajikistan to fulfil order books, Tajik traders visit the apricot farmers in south Kyrgyzstan and buy directly from them, transporting these to Tajikistan, secondarily processing them and then selling on to Russia (according to the Deputy Director of the Investment Promotion Agency of MoE, and confirmed in the field). UNDP Aid for Trade has invested in Batken, having installed processing machinery there with the Moltushum Cooperative, including some at a village site using solar power. Though power is sustainable, farmers reported that the fruit takes a very long time to cure using this technique. UNDP Bishkek explained the background for the investment, and that farmers had outlined that improved processing was the key to their being able to sell on international markets. However, this goal appeared to have proved elusive, reportedly as a result of traders who had outsmarted their counterparts in Kyrgyzstan. Farmers were subsequently forced to sell to visiting traders, having found that external markets were dominated by vested interests, including tactics of undercutting the market. This led to UNDP withdrawing from the apricot value chain in Batken, and moving to other areas in the country, and exploring alternative value chains. As with all investments, there are multiple sides to any story. Geopolicity consultants were given the farming community perspective during their site visit to Batken, and told that the washing/ processing/ sorting/ grading/ packaging/ marketing of the Moltushum Cooperative factory was working well, with more than 50 women hard at work during our visit. The Cooperative and community are grateful to UNDP for their contribution. The over-riding constraint on factory output was not (reportedly) onward marketing however, but the amount of working capital that it had, so that factory managers were unable to purchase all the local primary-processed produce that was available, and the equipment was therefore under-utilised. Obviously, profitability is key to business sustainability, and such issues would affect any cooperative type arrangement, in its attempt to aggregate up the value chain. Most dried apricots go to Tajikistan, to Tajik traders who have ready cash, though Russia is interested to import directly, as is Mongolia and Korea, the Head of Moltushum advised. The other constraint voiced by the farmers is that the cooperative in which UNDP installed processing equipment is physically out of reach for most apricot farmers at village level in this remote oblast, and 14 In a subsequent visit to Tajikistan, the consultants were told that the Tajikistan dried apricot had a superior taste to the Kyrgyz apricot

AKT Apricots Among the AKT countries, Afghanistan and Kyrgyzstan are the more significant exporters of fresh apricots. Interestingly, Afghanistan is the larger producer of apricots but exports almost on a par with Kyrgyzstan. Tajikistan also seems to be producing more apricots in terms of volume though exports are much lower. Kyrgyzstan seems to have a competitive advantage when it comes to exports. The global share of both Afghan and Kyrgyz exports are 1.3% and 1.09% respectively. Afghanistan’s key export market is Pakistan while that for Kyrgyzstan is Kazakhstan. There is clearly no export diversification in terms of markets. The key global markets for apricots are EU countries (Germany, Italy and France) and Russia. The key exporters are Spain, France and Italy while the key regional exporters are Uzbekistan and Turkey.


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they cannot deliver their heavy fresh produce there without damaging it. So, they continue to process in the traditional sun-drying way on the farm. Dried apricots originating in Kyrgyzstan are sold at a much higher price in Turkey, say, compared with selling locally. This is so because they are sold as organic products, this competitive advantage being one that the government is keen on exploiting. It is therefore in the country’s interest to promote direct marketing of the dried apricots from Batken as external trade to northern countries rather than in cross-border trade with Tajikistan or Uzbekistan. The importance of apricot to the economy and community well-being in Batken oblast cannot be over-estimated. Figures obtained from the Batken oblast Head of Administration on October 28th, reveal the following (Table 45 below), these being comparative figures for the three crops which the Administration has prioritized. 50,000 families (a quarter of a million people) rely on apricot for their main livelihood. The total cultivated area for fresh apricots in Kyrgyzstan was 8 thousand hectares in 2012. Over 80 percent of these apricots are cultivated in Batken oblast. Around 15 percent of the harvest is processed to produce fruit juice, preservatives, jam and jelly, with the remainder being processed (dried) on-farm, and sold as dried fruit (80 percent)(largely to Tajikistan) or fresh fruit (5 percent).

Table 45. BATKEN OBLAST ADMINISTRATION: PRIORITY CROPS

Apricots Rice Onion Area 8,000 ha already productive (>7 years

old, the age of full productivity) 7,000 ha are 2 years old 150 trees/ha the most profitable of the 3 crops mentioned here, with lowest production costs (50som/tree/yr)

3,000 ha (one crop per year

700 ha

Yield 15t/ha, vis a vis 120,000t/yr fresh fruit, of which 60,000t designated for drying, of which one third for export

10,000t before milling; 7,000t after processing

55t/ha, though can rise to 80-90t/ha

Main or secondary income source for

50,000 families (250,000 people) – primary income source

5,000 households (25,000 people). For 2,000 households, rice is the main crop; for 3,000 it is an additional crop

9,000 households (45,000 people) plus a further 47,000 people growing onion as a subsidiary occupation

These figures were given to the consultants in the presence of nine other burgers of Batken town, as recorded in the list of people met by the consultants on October 28th (Annex 1) (two senior UNDP staff were present at that meeting). Apricot is the most profitable of the three crops prioritised. As for risks to the crop, it suffers from any late (spring) frost) or early frost in the autumn, just as experienced by walnuts, and the long-term threat of global warming. The crop is also highly favoured by the Minister of Agriculture (as expressed in a meeting with the consultants on October 22nd), and meetings with the Deputy Minister of Economy and his Investment Promotion Agency, October 21st – 23rd. Better cooperation between producers would make for larger bulk quantities for export, making exporting more profitable. As well as UNDP Agricultural Development Programmes, both GIZ and USAID have projects working with this crop. GRAPES Grape production is not well-developed in the country, the climate being unsuitable for the long season needed for the crop to ripen properly. All the grapes seen in bazaars were from Tajikistan.


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MELON Never was this crop mentioned as a priority crop by government, nor cited as a key export commodity. Its relative low value/ high volume nature is not in its favour, with the associated high haulage cost. POMEGRANATE Pomegranate is not a significant crop in Kyrgyz agriculture, unlike Afghanistan. LEMON Lemon is not a significant crop in Kyrgyz agriculture (though it is grown in Tajikistan). STRAWBERRY On temperate climate land next to the borders of neighbouring countries, especially Kazakhstan, strawberry could be a serious player in the export market. The crop can be very profitable, yet is also highly perishable. Strawberries in Osh bazaar (at 40s/kg), sourced in Nokat, were ungraded, small and unappealing, unsuitable for export as they are. If strawberries from Kyrgyzstan were large and suitable as table fruit, there would be a large market for them in Russia – currently, they are used mainly for jams. For investment in this commodity to pay, it is best left to a private entrepreneur to set up the structure and marketing necessary, and to train a dedicated cadre of workers. Strawberry is not seen as a commodity that need attract donor support, nor one needing promotion. It is not a suitable instrument for relieving poverty across the country on a widespread basis, that can also be up-scaled (as is the case for walnut and dried apricot, each of which having the additional advantage of being relatively non-perishable). NUTS ALMOND An estimated 5,439 ha of almonds are grown in Kyrgyzstan, in open rather than close stands. There are large potential markets in the EU, Turkey, Russia, China, Japan and Korea. The means of quality control certification is not in place in the country at present, and until it is it may prove difficult to break into, and keep, a new market. The crop has not therefore been prioritised in the top four. PISTACHIO This could be twinned with walnut, though it is not ideal as a choice. Its range of preferred climate in Kyrgyzstan, at 500-1,200m, is lower than the preferred range for walnut (1,200 – 2,300m, the best grade coming from 1,400 – 1,700m). Pistachio trees established on the low mountain slopes in Soviet times when livestock were not permitted to graze there; some 36,000ha pistachio is supported as open mountain forest, and 20,000 ha under municipality control (according to Lesic-South). Nowadays, livestock browse the lower branches in the low hills, and also eat the young seedlings which are trying to establish. Moreover, as these trees are ‘public property’ on State land, there is intense competition to harvest the fruit, which leads to premature picking, resulting in a sub-standard fruit availed on the market. The early picking has a damaging effect on the physiology of the tree too, with a negative impact on the following year’s yield. The tree takes 20 years to attain maturity. Another problem with the crop in Kyrgyzstan is that male trees outnumber female trees (60%:40%), though only 15% need to be male to ensure full pollination, so a lot of grafting is needed to correct that situation, to improve the yield potential of the population, especially using elite Iranian varieties. The best yield per tree under Kyrgyzstan conditions is 20kg nuts/ha/year (compared with up to 70kg/ha in some competitor countries). 11,000ha of pistachio is gown in orchards, and FAO has a project trying to develop the pistachio industry. The crop has not been selected as a priority crop for Kyrgyzstan to develop under this AKT initiative.


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VEGETABLES / OTHERS ALFALFA This commodity from the pre-selected list, was given an initial reasonable chance of ascending to the top three of the selection list. The Director of Agro Asia in Bishkek gives the crop a high priority, as does the President of the Seed Association of Kyrgyzstan. It is currently grown in the country, both for its fodder value and its seed. There are suitable local markets for the fresh produce, as it is a valuable nitrogen-rich fodder input into the livestock value chain, in situations where livestock are within easy reach of the growing area (for the delicate foliage quickly deteriorates, and it is too bulky for long-distance transport). Another outlet for the commodity is in the processed form, dried pellets which may be bagged and delivered in a stable condition to pastoral communities in the mountains. The crop requires a great deal of careful attention, the main reasons being its very high water requirement, with the associated cost, and need for sophisticated delivery of same to the growing plants, and the need for mechanisation. The irrigation system left from the Soviet era is not in good condition, nor of the type needed to irrigate this crop. The crop is also very attractive to insect pests too, none more important than forager ants which collect the seed and take it into their burrows, requiring careful pest management at sowing time and where seed is the main item of commercial yield. It is deemed too specialised a crop to be grown commercially by small farmers, being more suited to large scale production and harvesting mechanisation. Kyrgyz farmers do not manage the crop well, preferring to work with ‘easy’ crops ! Alfalfa is too challenging an enterprise for the small farmer target group highlighted above. The crop is already being grown in the country, in Chuy, funded by a Chinese company, which has invested $5m (as advised the consultants by MoE). This company is both growing it and processing it into pellets, which are then sold to China. Over 5 years, it will invest a total of US$260 million. Just as for strawberries above, this activity is deemed by the consultants best left to the private investor already involved. China itself has 200,000 ha under alfalfa production for hay and seed, says the President of the Seed Association of Kyrgyzstan. POTATOES In Kyrgyzstan, potatoes are highly varied in quality, with mixed varieties being grown as a heterogeneous plant population. This is good as security at subsistence level, providing a buffer against a disease or pest preferentially attacking one variety. Farmers try to separate produce from each of the four varieties, but the marketable product is still uneven. A research programme would probably be able to purify the landraces to render the commodity more uniform, and even through a breeding and selection programme identify elite lines for testing, selection and subsequent commercialization. The nation’s 80,000 ha yield only around 16.6t/ha on average, compared with 41t/ha in USA. 1.4 million tonnes/yr are produced, though the national need is only 800-900,000t (for eating and for seed potatoes). So, the balance does need to be exported, Kazakhstan and Russia taking 90% of the surplus, with Uzbekistan and Tajikistan taking the other 10%. 40% of potatoes in Kyrgyzstan are grown in an area west of Issyk-Kul, from where they are trucked to Almaty. Because of the high production costs due to lack of mechanisation on the small plots, and uneven quality, the crop is hardly profitable (except for early potatoes, grown in Aravan, South Kyrgyzstan, which has almost sub-tropical conditions). The crop is not grown in a professional way, though with good training and an extension system, yields could double. Farmers need education on very basic parameters, such as the need to sort and grade potatoes before marketing. One of the constraints on this crop is that since the Soviet era the arable soils in Kyrgyzstan have become largely exhausted, owing to insufficient replenishment of minerals which are removed by crops year after year. This is a major reason why potato yields are so low, compared with other


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countries (it has been noted too, that year on year, carrots are becoming smaller). Farmers currently are too resource-poor to be able to purchase the inorganic fertilizer needed, or even to find credible sources of this in the market place. Even if composting on-farm is done, it is insufficient to replace the minerals removed from the soil by a crop. Tree crops, with their deep roots are better placed to extract minerals from the soil with the greater volume of soil which can be explored – compared with the superficial fibrous root system of potatoes, which extract minerals from only the superficial layer. The tuber is also relatively low value-high volume, most of the weight being water. Transport costs are difficult to recover for such a crop. Potatoes were not, therefore, prioritized as a secondary selection crop. Compared with onion, the consultants regard the latter as a higher priority – it stores and travels better, is more homogeneous and of international quality standard, and more profitable per unit area and investment. OTHER COMMODITIES CONSIDERED NOT ON THE PRE-SELECTED LIST APPLES Apples do not travel well, and though tasty are not of good uniform quality, certainly in the three southern oblasts visited in the time the consultants had available. In Osh bazaar, the price varied from 10-25 som/kg, depending on size, regularity of shape, and general appeal. Apples in Issyk-Kul oblast are of better quality, being seemingly less prone to pest and disease attack than they are in the south. Apple export to Kazakhstan used to be profitable, but since the collapse of the Soviet era, this is no longer the case. It is understood that Kyrgyzstan exports 100t apples per day to Russia in-season, where they are turned into juice. There is ample scope for crop improvement, especially using the modern dwarf and semi-dwarf types, yet that is a long-term enterprise, not considered suitable for the IICPSD programme. FRUIT JUICE The promise of selecting fruit juice extraction as a priority held early promise during the consultant’s research, the industry being sufficiently flexible to switch from one fruit to another depending on seasonality, and the commodity having the support of the Minister of Agriculture. Ten companies currently market fruit and vegetable juices. The office of one of these, Ecoproduct, was visited, which uses the trademark ‘Organic’ for the 350t/year it produces, with a target of 800t/yr. The production line is sited some 20km west of Bishkek. Though the fruit used are grown under chemical-free conditions, the company has yet to obtain internationally-recognised ‘organic’ standard certification, this programmed to be achieved by 2019. The range of juices produced includes apple, apricot, carrot, plum and beetroot, with the company dealing directly with the farmers. Half of these live in the south of the country, with an August harvest date, with the other half in Issyk-Kul, where the harvest starts in September. The Netherlands has helped fund a 3,000t storage facility, so that the juice production period can be extended. Farmers need first to be trained in organic farming techniques – in mid-October Finland sponsored an organic festival in Osh. Locally-made packaging for fruit juice is inferior to that imported from France or (an Italian company working in) Russia, it not being robust and is sealed with inferior glue, the need for importing packaging adding to juice production costs and reducing profitability. China is currently an importer of Kyrgyzstan fruit juice (and bottled water, with up to 12 companies in Kyrgyzstan currently doing this), on the basis of its high quality. Fruit juice does not therefore need promoting, though MoE happily supports it. Examination of the value chain, however, determined that the benefit brought by this value addition was not significantly going to the poor producers, but rather to the processors and those involved in marketing the commodity. The imperative of maximising benefit to the farmers of Kyrgyzstan, who are usually poor and marginalised, is not thereby achieved. As a consequence, fruit juices were not prioritized by the consultants, as deserving of especial attention, further to that being accorded currently by UNDP and other donors; this is also the view of UNDP Bishkek.


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TOMATOES There is potential for exporting table tomatoes to Tajikistan, Kyrgyzstan having a comparative advantage because of its temperate summer. Yet the crop was not deemed more deserving of attention than the two crops selected, as above. HONEY In world rankings of acceptability, honey from Kyrgyzstan used be ranked top. Yet only limited supply of this is produced in the country at the moment, according to MoE, and the honey farmers are scattered. To satisfactorily compete on the world market, there need to be many beekeepers in one place, so that there is a standard product, and a greater volume of it. So, this is deemed by the consultants a long-term project for future private sector/ donor involvement. LIVESTOCK PRODUCTS Livestock commodities were considered as export commodities deserving of attention, from the perspective of offering opportunities to livestock keepers. However, the Minister of Agriculture himself pointed out that the epizootic disease legislation was still pending, and this would discriminate against export. Also, Russia is protecting its own livestock industry and will not let in livestock products from Kyrgyzstan. Nor does MoE’s Investment Promotion Agency have a place for livestock products on its portfolio. Moreover, the standard of sanitation and hygiene amongst the uneducated population leaves a lot to be desired, so attention to such aspects for dairy products is not going to be high. Cheese was perhaps the most favoured item from a theoretical perspective, yet Kyrgyz farmers make very little cheese. The Minister of Agriculture explained that Kyrgyzstan, as part of the Eurasian Economic Union since 2007, was working on 44 enterprises involving milk, seven of which have full rights to export. The country still requires a good phytosanitary and veterinary laboratory, meeting international standards, so that the certification can be secured to enable such export. The Minister was confident that by November 2015, only the veterinary part of the laboratory would need to be completed. The laboratory will still take time to become fully operational. Yet there is a cheese industry in the country, with many companies exporting cheese says ABCC, and the Chamber of Commerce has a list of these factories. The ‘tilzit’ type cheese, mid-may between hard and soft is factory-produced under a US$ 1 million Swiss-funded project in east Kyrgyzstan, is having some success exporting to Almaty. Dried meat, tinned yak meat and fermented mare’s milk were deemed as having a lower chance of success than cheese. In the future perhaps these products would warrant attention, but not now, with the volume of cross-border trade in any of these commodities currently being low, much through informal barter. MARKETING AND FINANCIAL FEASIBILITY A sound analysis of markets needs undertaking, the preferences of potential importers and to ascertain exactly what quality/ certification the market demands, and where (much of this will be reported later in this main report). The prospect of the financial crisis across the AKT countries and the region increasing, and local currency(ies) continuing to fall in value, even falling more steeply, must pose the question ‘who will then buy Kyrgyzstan produce?’. Key aspects to be addressed by those who write the AKT consortium programme document is how best to make the best possible use of membership of the Eurasian Economic Union with regard to these two crops, and to reap the benefit of the closer political ties being established between Kyrgyzstan and Turkey.


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TECHNICAL FEASIBILITY OF AN INTERVENTION There is a huge need for a good research-extension service to support the primary production phase of the two crops selected (walnut and plum) and the two which are considered as second choices (apricot and onion), this not being available currently. In the case of walnuts and onions the research component is not as necessary, as it is for plums and apricots. Availability of agricultural finance is a related generic issue to be addressed, to remove a major constraint in the agricultural sector. Investment level in Kyrgyz agriculture is low, allied with the shortage of working capital. At the moment loan interest rates from private financing institutions are prohibitively high for farmers, reflecting the latter’s lack of collateral and lack of experience. Perhaps the best option is through the Agrobusiness Competitiveness Centre (ABCC), which is a legal government entity, established in 2004 especially to work with World Bank projects in agriculture, agro-processing and marketing. A credit line is available through the Ministry of Finance. There is now a Russian-Kyrgyz fund of US$0.5 billion, which can provide credit for ‘good’ projects, able to sponsor them for a minimum of US$ 3 million per project. Its provisions are becoming more flexible. An example of sponsorship is of potato processing in Talas, into 15 products, including starch (Korean help is also being directed towards starch production, in an initiative just starting). There is, in addition, a Russian project with a budget of US$ 4 million which can fund equipment, but not operating expenses. The energy of the commercial private sector needs to be harnessed to resolve the agricultural finance issue, and must be a focus of AKT consortium programme designers. Finance cannot be left in its current ad-hoc modality, and dependent on temporary project largesse, in a localised way. The over-riding need for the country’s agricultural sector is an intervention at the primary production level, as explained above. This is the independent opinion of the two consultants, matched also by the opinions expressed by all key stakeholders. It reflects the current shortage of support to farmers. The intervention proposed under the AKT Consortium initiative is at a conceptual and feasibility level, the detail of which needs formulating during the project design phase. The intervention proposed will be targeted at the selected crops – walnuts and plums - , yet lends itself to support other crops also, especially apricots. It also lends itself to being up-scaled across the two other AKT countries, taking into account existing structures there. Walnuts Current walnut production is largely from the natural forest reserve, road access to which is through Arslanbob, Jalal-Abad oblast. Some trees in that forest are considered to be more than 800 years’ old. There are some young plantations too, started by farmers in the area of the forest, and in other places in the country. There are many trees in household gardens too, such as in Kant near Bishkek, and on roadsides, planted by the Forest Union sometimes, owned by the municipality and individually rented to collectors for harvesting. The Arslanbob forest is under threat by encroachment of the population settled at its fringes. Their livestock forage in the forest, one casualty of this being the young walnut seedlings, which are browsed and trampled, with the result that walnuts at the forest fringes cannot regenerate. This bodes ill for the sustainability of the forest. Arslanbob is a tourist attraction too, attracting thousands in the summer season to explore its snow-capped scenic vistas, and waterfalls. It has a community forestry guesthouse, and bazaars specifically selling goods for tourists, in addition to its weekly produce bazaar on Wednesdays. The authors envisage one of a set of interventions to be at the level of ecotourism, creating local employment with the trade-off of improved community forestry, keeping livestock (cows and horses)


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from entering the forest, and clearing the discarded litter, to maintain forest integrity. Government has already issued a restriction notice to render illegal the cutting of trees in the forest, thereby stopping a private logging enterprise which was marketing the valuable timber for furniture making. The State Agency of Environmental Protection and Forestry is seen as the major partner here, its office in Arslanbob visited by the consultants on October 27th. To encourage further establishment of walnut plantations, and taking better care of existing trees, the main intervention envisaged is enhanced provision of extension advice, and provision of seedlings and other accredited physical inputs. A walnut seedling will take 3 years for its first fruit to form. Walnut plantations are profitable, and represent a pension fund for older farmers, and a livelihood in-waiting for their children. Self-employment through establishing and managing fruit orchards is deemed by the consultants to be a cornerstone for enhanced employment in Kyrgyzstan. The Ministry of Economy and the Ministry of Agriculture are actively promoting this crop. MoE’s Investment Promotion Agency chairs the Walnut Focus Group, one meeting of which was attended by the consultants. The State Agency on Environmental Protection and Forestry has a vital role to play in not just the ecotourism component of the proposed intervention, but also to foster improved care for the forest trees. Non-government partners, the support of which could be sought in implementing this proposed intervention, include those listed below, all of which were visited during the study visit in October: ! Kyrgyz Association of Forest and Land Users (KAFLU). There are 8,000 members in the

Association, including forest renters/collectors and farmers. The Association lobbies for the rights and interests of their members, at the policy level, through linkages with public sector bodies. The Association has MoUs with the Ministries of Agriculture and Irrigation and State Agency on Environmental Protection and Forestry. It works closely with the Norwegian Forest Group, UNDP, GIZ, the World Bank and FAO. It is anxious to increase the amount of walnuts produced, as private sector buyers come to Kyrgyzstan looking to buy 1,000t. The country exports only 100 Mt in a bad year, but 5,000 Mt in a good year; these figures are under-estimates says the Chairman of KAFLU, as much of the export is informal. Produce imported by Turkey for further processing, is sold as produce of Turkey. There is a need for improved local marketing, under a ‘Silk Road’ or similar brand, to raise income to farmers and to promote Kyrgyzstan as the producer; this brand name will be used for the first time in 2016. KAFLU is preparing the way for organic certification for Kyrgyzstan walnuts.

! Kyrgyzstan Walnut & Forest Planters Association (KWFPA). There are 160 members,

involved in growing (not processing) the crop. The General Director Mr Karaev is anxious that the knowledge of growing is better institutionalised within the country, as projects ‘come and go’. Now that Kyrgyzstan is in the Eurasia Economic Union, it is expected that Russia will provide an ever-increasing market. As a small country, Kyrgyzstan’s low export volumes often mean that earnings for farmers are hardly above their production costs. Increasing volume is an antidote to this. In Mr Karaev’s view, there is ample scope for bringing in walnuts from Afghanistan and Tajikistan to bulk with that from Kyrgyzstan, under the auspices of the UNDP AKT consortium initiative. This would need assessment of compatibility of the produce with that in Kyrgyzstan, and ways in which economies of scale may be harnessed. According to Lesic-South, there are 5,000 ha of low density walnut forest in Tajikistan, less than 1,200 ha in Afghanistan and 1,200 ha in Uzbekistan.

! Wealth of Kyrgyz Forest Commodity Service Cooperative, Jalal-Abad. There are 200

members of this Cooperative. This group, funded by GIZ and started in 2013, helps to bulk its members produce, so they sell at higher prices (walnuts, fruits and berries, honey).

! Training and Extension System (TES) Centre, Osh. This NGO was started in 1999, and

works with farmers and processors. It engages with agricultural research, with government


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and under contract. It independently supports the choice of crops the consultants have made – walnuts, apricots and onions, as expressed during the consultant’s visit to its office in Osh on October 30th.

! Agrolead, Jalal-Abad: This consulting company was established in 2009, and trains farmers

in both quantity and quality aspects of primary production and processing, and total value-chain linkages. There is need to build trust of all actors in the supply chain, to get it working smoothly and in an integrated way, in a country in which socio-political events since 1991 have undermined trust. The company links producers, processors, buyers and exporters. In 2013 it started its involvement with walnut. Agrolead works in association with GIZ, USAID and other donors, with 20% of its funding coming directly from business.

! Lesic-South, Jalal-Abad, an NGO which specialises in forest products, walnuts in particular,

and has several walnut specialists on its staff. This group works with Imams and mosque-goers to educate the population in how to take care of the trees and forests.

! Biofarmer Cooperative, Jalalabad. This provides advice, training on standards and pest

management, and provides some credit (using a Fairtrade fund) ! LLC Falcon Group ! Organic Cotton Production and Trade Promotion Project, Helvetas, Jalal-Abad ! Agribusiness Competitiveness Centre (ABCC), Bishkek ! NAIMA Plus LLC walnut processing company, Kant town ! Vega Plus LLC, Jalal-Abad (walnut processor) All of these entities are currently engaged in supporting the walnut industry. Some are especially involved in primary production, others in processing and marketing. A thoroughly joined-up approach is needed along the whole value chain, with government and non-government actors involved, and the proposed AKT intervention can encourage and facilitate this, especially harnessing the energy of the commercial private sector. Currently, the groups involved are acting individually and in relative isolation, thereby not enabling the full potential of the crop to be reached, as an export earner. The primary focus should remain at the primary production level, to safeguard the production base and increase its output. Such is already under way, as exemplified by a Kyrgyz press item on 22nd October 2014, which reads:

Commercial Cultivation of Walnuts

Due to the annual increase in demand and export of walnuts from Kyrgyzstan, the Kyrgyz Association of Foresters and Walnut Growers intends to establish commercial cultivation of this crop. Thus, over the next five years it is planned to cultivate 1,500 hectares of land for planting 500,000 walnut trees. “This year, we have already cropped 100 hectares of land with walnut varieties brought from Turkey and the United States; in 2015 we plan to crop another 200 hectares” said the executive director of the Association Maadanbek Karaev. “We have no problem with demand for our walnuts. Annually Kyrgyzstan exports about 50,000 Mt of walnuts to Iran, Turkey, China, South Korea, France and the Netherlands” he notes. According to Maadanbek Karaev, the demand from China has recently increased. Besides “Russia has become more interested in our nuts. A few days ago, we signed a contract for the supply of 500 Mt of nuts to Penza” he concluded.


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Currently there are two main types of walnut produced, the smaller type from the south, and the larger type in the north. The quality of both is extremely high, in terms general market acceptability, and this is well-attested amongst countries which import from Kyrgyzstan. New plantations should be encouraged and existing cooperatives strengthened, and a revolving fund facility introduced which would enable local processors to be able to buy local produce rather than having the produce bought by buyers from outside of the country, who have cash-in-hand to secure deals.

Kyrgyzstan produce should be packaged, labelled and marketed as such, to promote the profile of the country on the world stage, as a producer of excellence. Better prices would accrue to the producer and collector in this way, the resulting increased profitability of the enterprise encouraging better husbandry and care of existing trees, and increased planting. Kyrgyzstan, whilst not in the top ten production league in terms of traded volume, has a world comparative advantage in quality with this crop, and deserves recognition under the IICPSD initiative, through attracting further investment.

Costs for the proposed intervention (for all crop foci) would need to be assessed, filling gaps which currently exist, and enhancing those efforts which are currently under way. This, and details of the intervention will be formulated during the AKT consortium project design/ formulation phase. Provision of technical inputs and advice, where they are needed and in a timely way, would be one pillar of the proposed intervention. Availing financial products appropriate for farmers/ collectors/ processors, through their cooperatives, would be another.

A niche market is for ‘organic’ walnuts, which attracts premium prices. Though almost all walnuts grown in Kyrgyzstan would qualify for European and American ‘organic’ certification, the procedures have not yet been put in place. To arrange this is something which the proposed IICPSD programme could facilitate. Similarly for Fair Trade produce; in October 2015 there was a regional Fairtrade conference in Dubai, attended by the Executive Director of the Wealth of Kyrgyz Forest Commodity Service Cooperative, Jalal-Abad. The deliberations of that conference form the basis of a stronger presence of Kyrgyz walnuts in Fairtrade market. Agrolead is involved with Fairtrade export, more than ‘organic’. Of the 40 Mt of walnut kernels which have been exported to the Netherlands recently, half were under the Fairtrade label. In Jalal-Abad, no company has the HACCP food safety standard certification, and Agrolead is assisting in working towards achieving this, introducing HASP and Fairtrade standards to farmers and cooperatives, through training. One aspect of the technical input envisaged under IICPSD would be enhanced regulated storage capacity. This would enable the produce to be kept under dry conditions, to prevent aflotoxin development. It takes just one incidence of this to destroy export markets. Allied with this is the necessary laboratory availability and food safety certification, still rudimentary/ lacking in Kyrgyzstan. Suitable storage also, of course, acts to the advantage of producers, as produce can be released to the market after peak season gluts, when prices are higher. Lesic-South identifies several needs for advancing walnut production in Kyrgyzstan. These include: lack of a revolving fund to enable Kyrgyz buyers to purchase all produce from collectors, farmers and home gardens; need for a comprehensive database on growers and marketers (in Bazar-Kurgan, Susak, Aksy and elsewhere) - so that advisers can meet them and explain legal issues (rent of land procedures, renting forest, training and marketing); help to establish plantations as the natural forest is not very productive per unit area (150-200kg/ha/yr whole walnuts on 30,000 mature trees in the forest, and 25kg/ha/yr on the 10,000 ha of trees which are young or too old. The highest yield recorded for Kyrgyzstan over the last 30 years was in 1969, 20,000t whole nuts (10,000t kernels), this information from the Forest Union. Table 46 below provides a SWOT analysis for the Walnut Marketing and feasibility, drawn up based on key informant analysis, data analysis and review of key documents.


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Table 46. SWOT ANALYSIS FOR WALNUT MARKETING AND FINANCIAL VIABILITY

Strengths Opportunities ! Competitive prices on world markets ! Strong export potential and actual exports

increasing ! Comparative advantage due to a 42,000ha

natural walnut forest ! Relatively low input costs ! Production increasing ! Strong immediate markets in Turkey and

Russia ! Suitable climate ! Thousands of families rely on this crop for their

only or main income ! Considerable potential for backwards and

forwards employment linkages ! Women preferred for processing tasks ! Value added small scale industry expansion

options including cracking, processing, packaging and certification

! Non-perishable, does not require cold storage ! Strong private sector interest ! Strong government support, through

Presidential decree and government expansion plan for plantations

! EurAsia Economic Union since Aug 2015, and WTO accession since 1998

! Structured private and banking sector

financing support, to enable local purchasing by processor and export marketing as Kyrgyz produce

! Improved storage, grading and packaging ! Improved certification, quality control and

labelling ! Improved value processing into diversified

sub-products, such as walnut oil ! Potential new end markets, especially for

Organic and Fair Trade ! Coherent training and other extension services ! Enhanced producer cooperatives/ associations

to enable economies of scale ! Better capture of tax by government on the

huge informal export of walnuts

Weaknesses Threats ! Fragmented value chain and lack of joined-up

coherence in industry services ! Variable quality and supply of raw produce ! Poor market infrastructure and access at main

walnut trading bazaar at Kurgan, Jalal-Abad oblast

! Shortage of working capital amongst processors to fund purchase of crop from farmers and collectors, and low cost finance to rectify this

! Difficulty of the processor raising collateral for borrowing to buy the raw crop as he does not own the factory premises

! Low level technical marketing skills ! Sub-optimal export market information and

maps ! Common export of raw produce for value

addition in other countries, thus wasted potential

! Aflotoxin development if product gets wet in storage

! Insufficient safe storage so that product can be marketed when market demand is high

! Weak producer skills as most orchard farmers do not have long experience or organised access to extension services

! Late winter cold snap in April damages young

fruits, even destroying whole crop in the affected parts of the forest

! Financing for orchard expansion is often not forthcoming as the government owns the land, the farmer therefore unable to offer collateral

! High import standards into EU and US


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Plums and Apricots Plums and apricots may be considered together, as allied tree crops. The linkages for apricots are well-developed, and most of the text below refers to them. The potential for plums and prunes is enormous, despite having a modest volume of trade currently. Linkages concerning the extension system are considered to be highly similar to those for apricots, yet will need to be clarified during project formulation. Concerning apricots, key extension inputs are needed particularly to introduce late-flowering varieties of apricot, to avoid damage from late winter frosts, and advice on pruning and drip irrigation. Pre-season partial financing, as currently availed to its members by the Moltushum Cooperative, needs to be up-scaled in an extension drive. The apricot sub-sector includes a number of processing factories, to supplement the sun-drying of fruit which is practiced on the farm – most farmers dry in their backyard or on their roofs, without recourse to cooperatives/ processing plants. Dried apricots have a ready market, whatever the standard of processing. The price obtained, naturally, is correlated with the quality of post-harvest attention which is given to the fresh fruit. The assured market is the constant to create a positive enabling environment for the primary production phase. The same is true of fresh plum and the processed prune. On-farm trials are needed to determine the apricot varieties which are suitable, and even perhaps to improve the rootstocks, with imports from Serbia, Germany or elsewhere. Pest and disease control, using agrochemicals or organic methods, are needed, as also advice on supplementary irrigation and maintaining soil fertility. Most importantly, current pruning regimes lead a lot to be desired, and hands-on training is required for most farmers in the subsector. The research and extension system should be based in Batken oblast for the apricot, and in Aksy rayon (Jalal-Abad oblast) an extension service for plum growers. A one-stop-shop logistics centre was the most pressing need expressed to the consultants by members of the Batken oblast administration during the meeting of October 28th. Supplementary irrigation by drip was another expressed need. Cooperatives suggest themselves as the most appropriate modality through which this service should be availed, with the same logic as advanced for walnuts and onions above. The Moltushum Cooperative in Batken is doing a good job, set up in 2004 with help from GIZ, it becoming very active since 2010, with a revolving fund in place. It delivers fertiliser to the farm gate of its 2,000 members, with 50% payment on delivery, and the other 50% deducted from the value of the processed harvest. The proposed strengthening of the extension service, with far wider coverage to the more remote regions of the oblast, should be closely associated with the oblast administration, which provides access to the excellent network of farmers which it has, and which can serve as an intervener with central government – for instance on policy issues, especially regarding arable and orchard land classification issues, to which reference was made above. 40% of the Batken oblast population are working in Russia now; if profitability of the apricot industry could be raised, they would return and relieve the shortage of labour. At the present time, there is little point in adding to the processing capability of Batken oblast, when across the border in Sughd region of Tajikistan there are already 15 processing facilities. It makes synergistic sense for the investment in Batken to be on the primary production side, to increase the volume of good quality fresh fruit, to be primarily processed on-farm and in the two processing plants there, and for this to be exported to Sughd, Tajikistan for value addition there. This makes good economic sense for both countries.


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However, this does not mean that Batken and other districts cannot also promote direct export to Russia – Kyrgyzstan has a strong advantage over Tajikistan in that it now belongs to the Eurasia Economic Union, which Tajikistan doesn’t, therefore being subject to a significant trade barrier. Kyrgyzstan also has access to a massive US$1billion grant facility from Russia, of which it has already drawn US$200,000 to facilitate agricultural product certification. Once the latter is fully functional, there would be more of a case for improving the processing capacity of Batken oblast.

‘Organic’ Apricot – A Case Study There is a special case for promoting the organic market. Kyrgyzstan is a small land-locked agrarian country, surrounded by large countries which can easily harness economies of scale. On ordinary agricultural produce, it is difficult to compete in volume terms with giants like China in the export market. Kyrgyzstan needs to produce high value items in which it already has a comparative advantage. Walnuts, apricots and onions fall into this category, especially the former two, being high value-low volume, even without the organic component. Getting proper quality accreditation is urgent. Turkey is the natural export target for this, as it seems to have a lower point of entry, compared with more distant markets in Europe and the Americas. TIKA and the Turkish embassy commercial counsellor will help expedite the marketing component, further to the ongoing trade with Turkey, with its businessmen visiting Kyrgyzstan already. There is a town called Malatya in Turkey, the centre of a region where 60% of the country’s apricots are produced, and the mayor of that city and the mayor of Batken have twinned their cities. Helvetas has already obtained the Turkish Organic certificate for cotton. There are organisations in Bishkek which will facilitate this trade too, through developing an understanding of organic standards – such as Bio Farmer, Bio Service and the Federation of Organic Development. A key trading group is LLC Falcon (www.falcon.kg). The consultants held discussions with its commercial director, Sanzhar Sultankulov, on October 23rd. Mr Sultankulov is the founder of the Organic Farmers’ Union in Kyrgyzstan, and already has the network of organic traders at his fingertips. These include the Rapunzel Naturkost company that started the organic trade in Izmir, and he intends to ask this company to do the same in Kyrgyzstan. He plays a major role in the ‘Bio Kyrgyzstan’ movement. The country’s IMO organic certification to enter the Turkish market has already been facilitated by USAID and GIZ. The country’s main regional competitor for organic produce would likely be Bhutan. Like the Minister of Agriculture, Mr Sultankulov is most concerned with Batken oblast, which exhibits the highest poverty profile in the country, the economic survival of which depends on apricot and is indeed at the centre of ‘organic’ apricot production. He is of the opinion that dried apricots from there are superior in taste to those produced in Tajikistan, though the latter has the advantage in terms of volume. There is one apricot tree in remote Batken which is 600 years old, showing the length of time over which experience in the crop has been gained. More and more farmers in Batken are going ‘organic’, both in the growing and processing, to benefit from the higher price that produce attracts. Mr Sultankulov is keen on developing marketing links with the Koreans too, who have already expressed interest in organics from Kyrgyzstan, especially walnuts, apricot fruit and kernels, and honey. Koreans whom he knows say that Kyrgyzstan honey has the ‘scent of their ancestors’, so have an emotional attachment to it. In addition to training needed, an aftercare service is also required, to track trainees on the job, to mentor and support them is applying what they have been taught in their daily work, viz. the need to institutionalise the organic standards and techniques.

Non-government partners, the support of which could be sought in implementing this proposed intervention for apricots, include those listed below, all of which were visited during the site visit in October 2015:


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! Training and Extension System (TES) Centre, Osh (as per walnuts above) ! Agrolead/ GIZ, Jalal-Abad (as per walnuts above) ! Biofarmer Cooperative, Jalalabad (as per walnuts above) ! LLC Falcon Group (as per walnuts above) ! Kyrgyz Association of Forest and Land Users (KAFLU) (as per walnuts above) ! Community Development Alliance, Osh ! Moltushum Cooperative, Batken ! Batken Jemishi Agriculture Co-Operative All of these organisations are currently engaged in supporting the apricot industry, some more specialised in that task than others. Onions As for walnuts, the quality of onion production is excellent, yet growers do not have access to a significant extension service. Nor is there a raft of organisations which provide support, as is the case with walnuts. An agricultural extension service is needed which targets onion growers, one which brings economy of scale gains to the sub-sector. A gender analysis shows that women are preferentially employed in this sub-sector, just as for walnuts and apricots (but not potato), this seen as a ‘plus’ for the selection of these crops. From the short visit which the consultants made to the field, good quality fertilisers are perhaps the most important physical input required to secure good yields when intensive growing practices are employed. Much of the fertiliser on the market is suspected of being bogus, with worthless or even harmful ingredients. Farmers need protection from this. Fertiliser is an expensive input, and often farmers have been unable to secure supplies of these owing to their cost and high interest rates from microfinance institutions (this being 24-30%, according to Himiay Suyerkulova, of the Community Development Alliance in Osh, who has extensive experience of working with women farmers). Though government grants have a low interest, very few of the 300,000 farmers in the country can obtain them. Also, as collateral is needed for any loan, very few women can raise that. In the absence of cooperatives in the south of the country, Ms Suyerkulova has concentrated on facilitating Community-based Organisations in the first instance, with cooperatives hopefully following later. In the view of the consultants, one of the possible ways that good quality fertilisers can be availed is through a cooperative system, which is run by officers elected by their members, which one way or another is adequately funded so that it can procure large quantities of the specific fertilisers needed, from credible sources in a timely way. These would be availed to farmers at the beginning of the season in a contract farming modality, payment for which made at harvest time. This would overcome the constraint of shortage of funds at the start of the growing season, and bring economies of scale. This service provision does not have to be restricted to onion growers. Other physical inputs could be availed similarly, such as herbicide to kill sedge and other weeds, or pesticides to control insects. Another benefit of setting up a cooperative, or facilitating the operation of an existing one, is the provision of training in business skills, including book keeping and the need to make savings from the money achieved when the harvest is sold. The cooperative could enhance benefits from the value chain by providing safe storage for produce, such that the harvest can be kept for a while rather than being sold for low prices at peak harvest season. Again, economies of scale can be achieved when large quantities of good quality onions can be offloaded onto the market to buyers who demand large


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quantities. Such would transform the profitability of a small scale onion enterprise. Export of onions from Tajikistan has significantly reduced over recent years, and this could reflect that importers are rejecting produce on the basis of quality, the market preferring the better quality onions from Kyrgyzstan. Non-government partners, the support of which could be sought in implementing this proposed venture, include those listed below, all of which were visited during the site visit in October 2015: ! Training and Extension System (TES) Centre, Osh (as per walnuts above)

! Agrolead/ GIZ, Jalal-Abad (as per walnuts above) ! Biofarmer Cooperative, Jalalabad (as per walnuts above) ! LLC Falcon Group (as per walnuts above) ! Community Development Alliance, Osh ! Seed Association of Kyrgyzstan All of these organisations are currently engaged in supporting the onion industry, some more specialised in that task than others. RESOURCE & ENVIRONMENTAL FEASIBILITY There are key resource personnel (institutions) already in-country, not all of whom has it been possible to link with during this feasibility study (Annex 1). There is in-country knowledge of where the best germplasm can be obtained for the crops selected, for example. There are also crop specialists. A full stakeholder analysis needs to be done at the start of the project design phase, with gaps filled by consultants and specialists from outside of the country. The amount of financial resources to be allocated, including that for any revolving fund, will be known only when the proposed intervention takes on more shape during the project design phase. There is a huge need to support the country’s economy, in the interests in securing peace and stability in Central Asia, in testing times. The outline proposals for walnuts, plums/ apricots above are all environmentally-friendly and sustainable. In particular, this is the case with walnuts, for not only is tree planting being encouraged but an ecotourism venture is recommended which will reduce browsing pressure on the walnut forest and encourage its regeneration and protection, in a community-led forestry effort. The latter will be funded by tourism revenues, the employment generated providing the rationale behind the conservation effort. In addition to being good agribusiness sense, planting new orchards is good news for protecting the land from wind and water erosion through the perennial ground cover afforded, providing centres of biodiversity and more biomass to soak up carbon dioxide. Better husbandry of existing orchards increases profitability, and helps to maintain the orchard in good condition. Minimal pesticide and disease control application is needed for orchards, and no herbicides; in the case of organic production, only natural remedies are used, having no environmental repercussions. SOCIAL AND INSTITUTIONAL FEASIBILITY There is need to strengthen the public sector institutional set-up, its powers and coordination, through capacity building and improved organisational management, so it is better fit for purpose and results-oriented. The Ministry of Agriculture in particular deserves an organisational development makeover,


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so that it plays its rightful pivotal role in this agricultural intervention. The consultants believe that the Honourable Minister would relish the prospect of both. Social institutions will be supported through the proposed extension system being based in the farming community itself, with a fully participative involvement not just in its implementation, but its formulation. Cooperatives will be strengthened and new ones created as required, in the interests of economy of scale savings and sharing knowledge, skills, access to physical and financial inputs. Storage facilities, so much needed, are an example of benefits which can accrue from a stronger engagement with commercial private sector investors. For this engagement to work properly, there needs to be a suitable enabling environment, and this role of government needs to be determined and negotiated during project design and costing. VALUE CHAIN GAPS & BANKABLE ENTRY POINTS As explained above, the key value chain gap foreseen for the AKT consortium is the primary production section, from choice of land and crop to harvest and post-harvest care. A revolving fund or low-interest loan is a key potential provision under the proposed AKT consortium programme, and a strong case can be made for it, as farmers’ intent to invest in their infrastructure or fertilisers, say, is usually disabled due to inability to secure funding at an interest rate and repayment terms that still enable the venture to be profitable. A revolving fund, operated under rigorous conditions, can break the log-jam. There are also possibilities for synergies with other programmes, levering their loans. As indicated above, the private sector, which provides a better basis for long-term engagement than through a project, should find the prospect of returns on establishing and then leasing a bank of storage warehouses, an attractive proposition. As both the farmer and warehouse owner would be inter-dependent partners, the basis of trust is there from the outset, and would get stronger season by season. POTENTIAL IMPACT An impact on agricultural productivity, production, efficiency and profitability is envisaged, with all four crops, those in the first division of choice and those in the second. The ‘missing link’ at the moment in the value chains of all, is the huge insufficiency of attention to primary production, and there must be renewed emphasis on removing all of the constraints which currently pertain therein. Not removing them in a joined-up cohesive way would not achieve a strong impact; all must be removed simultaneously. By doing so, income streams are generated and the food access component of food security is improved through poorer farming households being able to afford the food in the market place – its mere availability does not guarantee food security for marginalised people. One aspect of the improved income streams is that the more wealthy farmers are able to hire more paid labour.


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Figure 24. PRIMARY MARKET CONNECTIONS FOR VARIOUS VEGETABLES Source: Atlas for Economic Complexity (2013) Source: Atlas for Economic Complexity (2013)


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Figure 25. PRIMARY MARKET CONNECTIONS FOR APRICOTS AND PLUMS Source: Atlas for Economic Complexity (2013)


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Section I. TAJIKISTAN FINDINGS INTRODUCTION This section provides the results from field visits conducted in Tajikistan. Additional analysis is provided in Sections J and K. It is important to note that agricultural product prices change season-to-season and year-to-year, and they also depend heavily on input prices. Tajikistan’s economy also has a reduced rate of growth down to 4.2% in 2015 (itself down from 6.7% in 2014), as a result of lower remittances (which represent the second largest sources of household income) from Russia. Weak exchange resources and a poor banking sector mean that this survey was conducted within the context of relative volatility. The recent Ruble devaluation and slowing Russian economy, along with new restrictions placed on migrant employment in Russia, is likely to decrease Tajikistan’s 2015 remittance inflow by 35 percent, according to the International Monetary Fund’s (IMF). Tajikistan became the 159th member of the World Trade Organization (WTO) on March 2, 2013. 15 VALUE CHAIN & MARKET CHARACTERISTICS It is the intention of this study to identify common value chain investment projects within the AKT consortium, or at least projects in which two of the three countries could benefit, by various pairing or tripling arrangements. That said, the focus remains on meeting the criteria set, which includes growth and export potential. After the Soviet era, the 698 State Farms were re-allocated to 165,000 smaller farms. According to the National Association of Dehkan Farms (NADF), farmland in Tajikistan includes 15% very large farms (more than 100 ha). Of the remainder, 60% are small farmers (up to 15 ha) with 40% being large farmers, with 50-100 ha. A drying environment (as a result of Global Warming) is expected in the immediate future for the approximately 4 million ha of land in the country, 3 million of which being pasture and 1.2 million ha being arable; of the latter, 870,000 hectare are irrigated and 250,000 ha non-irrigated. The Government of Tajikistan (GoT) is anxious to create employment, incremental income generation, increased equity within the population of the country and generation of skills relevant to national development. GoT is fully behind integrated efforts to achieve economies of scale and greater efficiencies amongst the AKT consortium countries. GoT also wishes to focus on crops currently grown, rather than entertaining new untried crops. In terms of foreign exchange earnings, agricultural exports could in theory compensate for falling earnings from gold export, due to the latter’s falling price. Because of the high VAT (20 per cent), customs charges and other taxes in Tajikistan, farmers experience difficulty in being competitive and profitable, owing to associated high production and marketing costs. In 2013, Tajikistan adopted a new national Tax Code; however the tax system remains complex and tax rates act as a disincentive for exports. Combined with weak value chain infrastructure the transaction costs of exporting products makes Tajikistan uncompetitive, despite the need to improve the trade balance and improve foreign currency receipts.

15 Tajikistan is ranked 152 out of 176 on corruption in 2014, 138 out of 189 in the World Bank Doing Business rankings, 137 out of 143 in the Global Innovation Index and has a GNI Per Capita of US$1,060. Coming from a low base there is great potential for expansion and innovation. It is therefore within a context of economic downturn and relative volatility that the field results need to be understood.

Figure 1 Grapes being Dried for Winter Livestock Feed Outside of Gisar


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Figure 26. MAP OF TAJIKISTAN FIELD VISIT AREAS


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The field team observed that crop production costs are often higher than the export market pays. Tajikistan would benefit enormously if VAT on trade amongst the AKT countries were further assessed by Government, for special preferences to apply regarding the agricultural sector. For the moment, Tajikistan farmers derive a benefit by exporting primary produce, rather than processing it, which would thereby attract another layer of taxes. One big advantage in favour of Tajik farmers is the cheap hired labour available to them (though labour is even cheaper in China), despite this low pay being a driver of poverty. The Programme for Reforming the Agriculture Sector (2012-20) was published in September 2012, yet it has still not been implemented. GoT does not have the funds to do so, and donors will not fund it as the Ministry of Agriculture (MoA) insists on direct execution. A Sector Wide Approach based on Standard Service Delivery Models and Standard Operating Procedures would also be required. Furthermore, the structure of Government coordination arrangements would also need to be clarified.

In general, trading conditions for Tajikistan are currently bad, this being stressed by the Deputy Minister of Economic Development and Trade, Umed Davlatzod, at an UNCTAD investment presentation in his Ministry on November 3rd, 2015, to which the consultants were invited by UNDP Dushanbe. The Deputy Minister, in pointing out that the country’s 15-year development goals were largely connected with the agro-economy, called for strong linkages between private and public sector partners. He urged the country to become more competitive, at national and local levels, and specifically mentioned the AKT consortium as an instrument to achieve his country’s development goals. In support of this statement, Chantal Dupasquier (Chief, Investment Policy Reviews, Division on Investment and Enterprise, UNCTAD Geneva), pointed to the need to diversify out of the two commodities currently driving the economy - cotton and aluminium – as these were highly prone to external shocks. Echoing the Deputy Minister’s comment, she called for an enhanced Public-Private Sector dialogue. The government and its partners need to be applauded in recognition of Tajikistan improving its rank on the World Bank’s Doing Business list, from 164 to 138 – yet there is still some way to go in making Tajikistan an attractive place for external investors to do business. It is reported that 30% of Tajikistan’s GDP until recently used to come from Russia. In 2014, seasonal migration to Russia and other countries for work from spring until autumn accounted for a $US 4.2 billion inflow as expatriate remittances from the one million or so economic migrants from the country, representing 60% of GDP. The outflow of labour has led to a labour shortage for Tajikistan farming. Owing to the downturn of economies in neighbouring countries, during 2015 only $US 2.1

General Economic Snapshot in 2015 GDP growth eased to 6.7 percent in 2014 from 7.4 percent in 2013. Growth in 2014 was supported primarily by a rapid expansion in construction, while services (driven by remittances) and agriculture slowed markedly. In 2015, growth is projected to fall to 3 percent on the back of an expected sharp decline in the U.S. dollar value of remittances inflows. Annual headline inflation has been moderate—in the range of 3.5–7.5 percent—over the past two years, reflecting favourable food and fuel import prices and the relatively stable exchange rate through 2014. The external environment has worsened. Falling remittances and exports—combined with flat imports due to the relatively strong Somoni - are estimated to have driven the 2014 current account deficit to around 9 percent of GDP, from an average of 3.3 percent during 2011–13. The exchange rate to the US dollar has been depreciating, notwithstanding efforts to slow that depreciation, and inflation is projected to reach double digits in 2015 due to exchange rate pass through. The Gross Domestic Product (GDP) in Tajikistan was worth 9.24 billion US dollars in 2014. The GDP value of Tajikistan represents 0.01 percent of the world economy. GDP in Tajikistan averaged 3.16 USD Billion from 1990 until 2014, reaching an all time high of 9.24 USD Billion in 2014 and a record low of 0.86 USD Billion in 2000. World Bank (2014).


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billion has been remitted until the end of October; affecting purchasing power. Increased labour availability in Tajikistan is likely to follow downstream of this, as expatriate Tajiks return, unable to earn as they used to in neighbouring countries. In parallel with these events, poverty levels will likely increase, this underlining the need to create ever more local employment. Being a predominantly agrarian country (though agriculture has been declining as a function of growth), this entails making agriculture more profitable, this being a strong raison d’etre for IICPSD involvement in agriculture. It is possible that the apparent average income of a farmer in Tajikistan, of $US1,000-2,000 a year off 1.2ha, comes not just from farming, but from remittances from a relative abroad, and maybe other income streams. Agricultural activity is therefore subsidised and not sustainable. The threat of increasing food insecurity in the country is real and pressing. To worsen this situation, the crash of the Russian Ruble, reduces Russia’s purchasing power for imports, though a rebound is forecast for 2016. PRODUCT SELECTION AND JUSTIFICATION The criteria set by the AKT Consortium go a long way to discounting many of the pre-selected products, and for this reason we repeat the broad criteria below: ! Product export growth potential; ! Product import substitution potential; ! Product volume which could impact trade balance; ! Product potential for cross border value chains among 3 countries; ! Product employment multiplier potential; and, ! Appetite for public and private investment. STUDY FINDINGS (SUMMARY) FIELD VISITS Field visits were conducted to numerous market and agro-economic destinations between October 15th and November 6th, 2015, as outlined in Figure 26 above. Dr. Middlebrook visited Sughd Region around Ayni district and the Zeravshan River, the Gisar Valley in Khatlon Region which runs east-west along the southern slopes of Gisar Range and on the northern border of Khatlon Province, around Qurghonteppa, a city in south western Tajikistan and capital of the region, to the road to Kulob and along the road to Chindara. A further week’s field visits were made by John Ashley, accompanied by national agricultural expert Mukhammadjon Eshbadalov. The week was largely spent interviewing stakeholders in Dushanbe, together with a day’s visit to Shahrinav District, west of Dushanbe towards the Uzbekistan border including to Ittifoq, Tursunzoda and Vangebag. Following Dr. Ashley’s departure on November 7th, Mr Eshbadalov continued with more visits on the list of key stakeholder contacts which time had not allowed to be completed during the earlier weeks of the mission and again visited the field on November 13th, and from November 23rd to 27th 2015. Field visits were supplemented with collecting spot price market data from various sources. GENERAL OVERVIEW The study has taken the form of a project identification exercise for Tajikistan, which (when combined with other sections of the Final Report) is hereby offered to UNDP IICPSD, the project design being the follow-up phase. In addition to top-down analytical and diagnostic trade and export base analysis, these field notes are based on discussion with farmers, financiers, traders and transporters, wholesale and retail markets. As a result, the long-list of pre-selected crops has been reduced to two, with the rationale for this provided. In addition to key informant analysis, we have used models for variables such as product feasibility analysis (See Figure 27 below) and country product space. Furthermore, the consultants


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have selected where intervention is most needed in the value chain, and some of the parameters which need to be taken forward. It should be noted that the consultants have obtained a majority consensus view on the crop selection proposals, and a unanimous consensus view on the intervention strike point, from across the stakeholder groups. Travelling in the Tajikistan countryside is a different experience from travelling in Kyrgyzstan, the intensity of land use for crop agriculture being generally far higher in the former. Significant money has already been spent by ADB and others in improving roads along major trade corridors, and the benefits from these roads need to be optimised through improved export activity. That said, the gains from improved road infrastructure are rapidly offset by the rather fragmented and poorly aggregated value chains serving local, national and export markets. As in Kyrgyzstan, there is a lack of trust amongst the people. For example, as farmers don’t appear to trust banks, they keep their money in cattle. Nor do they appear to trust Public-Private Partnership (PPP) dialogue or ‘intermediaries’. There is general lack of trust of government (because of what are considered to be punitive taxes), though Government has made progress in Doing Business indicators. This results in farmers ordering agrochemicals direct from across the land borders, and smuggling it in through their couriers, thereby avoiding import duties. Also, again as for Kyrgyzstan, the young are not attracted into agriculture, preferring to aspire to ‘white-collar’ jobs at home, or travel to Russia to seek work at a higher salary level. The challenge for those in agricultural development is how to make agribusiness profitable, and keep youth on the land. Mechanization would be one option, but without cooperative systems in place, such an approach would have limited impact and high cost on the small holder system. Project-related free handouts must be avoided, as these are not sustainable, and there have been instances of project leaders requisitioning these items at the end of the project. There is a lot of wastage of primary produce – 35% tomatoes are lost in the field (as processors can’t buy the crop), 30% of apples rot - on the orchard floor or through lack of storage -, and there is loss of apricots because of late or early winter frosts. There is need to diversify agriculture, to spread the risk of failure in any one commodity. The Ministry of Economic Development and Trade and the Ministry of Agriculture are the key public sector partners identified for the AKT consortium programme. The Ministry of Employment has strategies and schemes in place to help rural dwellers improve their agriculture and thereby generate employment, and is a worthy partner too in order to help that Ministry better implement its training and loans provisions. SELECTION OF COMMODITIES Initial reading of the ToR indicated that economies of scale were sought from selecting commodities which were common to all three countries under survey, with a view to pooling these, thereby increasing bulk for marketing. Two aspects soon became clear however. ! First, that it may be difficult to find commodities that could be common to all three countries,

and be of similar quality and certificate-worthiness, to enable export out of the AKT area; and,

! Secondly, that logistic considerations for pooling were not favourable - not for all three countries, though the case for two countries collaborating cross-border in this way were more favourable.

As a result, and confirmed by UNDP, the focus is on products with the greatest direct export potential, implying impact on other variables such as employment and returns to GDP and foreign currency. On


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the basis of the country visit, Table Grapes and Onions are the two crop commodity selections made from the pre-selected list.

Figure 2 Traditional Local Market Offering Fresh Production. Quality Varies Considerably. Fruit, Vegetable and

Nut Markets are Separate.

Figure 3 Lemons Arrive in the Back of Local Trader Vehicles Using Plastic Bags


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Figure 27. TAJIKISTAN PRODUCT FEASIBILITY RANKING FOR PRE-SELECTED PRODUCTS (2013)


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FIELD BASED PRODUCT SELECTION As outlined below, and based on field results and the application of the above mentioned criteria, the main crop selected by the consultants and corroborated by Government officials and the private sector is Table Grapes. No donor-funded project is currently specifically addressing this product, which has great potential both fresh and dried. We present the rationale for selecting the chosen crop below, on the basis of field visits, discussions with stakeholders and perusal of available documentation. Following that, other crops on the pre-selected list cited in the Terms of Reference are considered, and reasons given for their non-selection. LEVEL OF TECHNOLOGY EMPLOYED BY FOOD CROP FARMERS Intermediate technology levels are often used for crops. Clearly some farmers, those who are better financially-resourced, are able to command better use of modern technologies, whilst the poorer ones cannot and do not. The transition from centrally-controlled State Farm agriculture to private enterprise, albeit on government-owned leasehold land, has not been easy. Most farmers today only became farmers following the re-distribution of land following the Soviet era dissolution in 1991. Before that, today’s farmers were either employed labourers, or in professions such as teaching or medicine. Owing to the absence of a functional national extension system in the country, together with a shortage of professional input suppliers and marketers in the private sector, it has been difficult for farmers to access the knowledge and skills which farmers in developed countries in Europe, for instance, have fine-tuned over generations within a given family. In Soviet times, mechanisation was centralised as was irrigation, but not now. Agricultural infrastructure has fallen into disrepair, as no-one is responsible for its maintenance any more. CONSTRAINTS EXPERIENCED BY THE FARMING COMMUNITY Based on Key Informant Interviews with more than 80 farmers, 18 trader, 7 financiers and multiple Government and international community experts, the constraints cited by producers are considerable. Moreover, given the generally poor Doing Business environment, lack of storage and aggregation and packaging facilities, entry points for value addition appear clear in most cases. Key issues raised by farmers are outlined below: ! Poor access to information - advice on Integrated Pest Management (IPM) and access to safe

physical inputs (Chinese agrochemicals, with only Chinese script on the label, possibly contraband and worthless, flood the market; shortage of genuine inputs from Europe). Even a trained agronomist in rural areas does not have access to updated information. Market information (i.e. spot prices across domestic and export markets) are unavailable. As a result, the market regulatory environment remains weak, undermining compliance and potential profits;

! Shortage of farming and business skills – such as formulation of business plans, how to farm and how to market. This is because many farmers were once doctors, teachers and other professionals. They have the intelligence, but lack knowledge and skills appropriate to their new livelihood. They need to learn the technologies (choosing the right variety from those on the market; ability to discriminate between cheap seeds which traders procure, and seeds of those which have been proven in-country to do well; ignorance about hybrid seeds, trying to multiply their own rather than buying anew each season etc). Home-sufficiency ‘garden technology’ of production currently used must be transformed into market place ‘plantation technology’.

! No research-extension system tailored to the needs and means of poorly-resourced farmers

- as an example, no soils testing to underpin good soils management. A better link is needed between production activities and input supply. Its absence results in poor crop management.


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Market-led contract farming and leasing of equipment, with an assured market and inputs up-front would be a step towards more efficient farming. This is only possible when small farms belong to a cooperative/ farmers association, and private sector buy-in when the enabling environment becomes attractive;

! No cooperatives or farmers associations to assist in aggregation and monopoly of scale –

there are very limited community level support networks in place to assist producers in being price makers, combining input purchases, bulking and transporting production;

! Insufficient agricultural produce storage, packaging and haulage capacity – there is

extremely limited access to storage facilities, cold chain storage, packaging and haulage, through some traders do provide an integrated service, though service is fragmented;

! Punitive interest rates on loans and financial products which are unsuitable for farmers.

Up to 30% of farmers are progressive, and would be prepared to borrow money, but around 70% are short of knowledge to support such a risk-prone decision;

! High taxes increasing production costs (a third as much again customs tax alone – 18%

compared with 12% - as in Kyrgyzstan); ! Sharecropping has positive and negative impacts – many of the farmers interviewed are

sharecroppers, with land owners taking 30-50 % of the profit and renters taking 50 – 60 % of the profit. If the land owner has financial problems, it affects the supply of critical inputs;

! Limited National Seed Production Capacity – the methods employed in producing seeds for

onions for example, plays a significant role in yield and seed production efficiency. As a result, yield rates per hectare are often far lower than they could be, and locally produced seeds could increase yields considerably;

! Problems of marketing and selling surplus production – with the majority of product

reaching domestic markets, in good production seasons significant production simply fails to find a market; and,

! Produce quality certification poor, undermining export marketability. The Technological

University of Tajikistan does not run a course in agricultural product certification (HACCP, ISO, Global Gap, organic etc). On November 13th, the Executive Director of the Agribusiness Association of Tajikistan stressed to the consultants the extreme weakness of this part of export crop value chains, and how much it hindered the range and volume of crops exported.

POTENTIAL INTERVENTION AREAS UNDER UNDP’S IICPSD As the study progressed in Tajikistan, it became increasingly clear that economies of scale may more easily be achieved at the primary production end of the value chain, through targeted value chain and pooling interventions across the AKT consortium. This thesis has been developed through first examining what is needed in the country concerned, and then how these improvements may lead to synergy across the consortium. In particular, pooling lessons learned is of great importance, as also sharing information on product strategy development, export maps and market prices.


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SELECTED PRODUCT TABLE GRAPES Official export figures for grapes in 2013 was US$ 1,300,000 only. There are many varieties of grapes (see below) covering the three main colours; Red, Black and Green. Red Grapes were reported by farmers to produce higher yields, and therefore fetch a lower price. Grapes currently have a low share in terms of export values and global share but production volumes are significant, in fact increasing. Key Informant Interviews also show that Tajikistan grapes are being exported to both Kyrgyzstan and Kazakhstan, though much of the exports appear to be informal and not reported in national trade statistics. Tajikistan has about 120 varieties of grapes, 80% is for the fresh market and 20% for wine processing. Based on statistical data provided by Government, total area under grapes equals 37,800 ha (31,900 ha fruit-bearing). Average yields is 6 ton per hectare, and reported potential yield for non-irrigated land is 6 ton/ha and for irrigated land is 40 ton/ha.

With table grapes, there are ‘champions’, those who show the way for others to follow, and facilitate their doing so. One such is Usmanov Nematjon who has demonstrated the reality of consistently growing high quality grapes in Shahrinav district of the country, having soils and spring/ summer weather which suit the crop’s requirements. Furthermore, he has demonstrated that post-harvest handling can also be done in a highly-professional manner, such that export markets are assured for all the table grapes he grows. There are many other growers in the region who are less well-endowed than Mr Nematjon, who grow grapes for the export market, yet who are short of finance to expand or be able to access good quality physical inputs and advice. More farmers would grow grapes if cheaper finance were available, so that they establish plantations, which cost $US20,000 per hectare to set up, before an income atarts 5 years after establishment. Just outside of Gisar, about 10 kilometres into the hills, a sharecropping farmer works on 25 hectares of land, growing grapes and apples of different varieties, including producing raisins and low quality grapes for cattle feed. Local wholesalers arrive in small trucks and cars to negotiate prices, and pick the grapes, before placing them into bags of carton boxes. The land owner works for Government and they are able to borrow from the bank at an interest rate of just 3%, far lower than other farmers. This is a 60% (renter) 40% (owner) share cropping arrangement. Table grapes was the number one crop priority voiced by senior staff of the Department of Agrarian Policy and Private Sector Support in the Ministry of Agriculture, during the consultants’ visit to the

Grapes - Farm Gate, Wholesale and Retail Market Prices Somani – October/November 2015

Farm Gate prices (based on aggregated results from multiple markets) go from Somain 1 to 5 Per Kilo, depending on grape variety and quality, with wholesale prices sampled across more than 10 markets attracting prices of Somani 1.5 to 8. Retail prices in larger urban centres range from Somani 3 to 12, depending on many factors such as variety, quality, packaging and market location.

Tajikistan Grape Varieties Varieties for fresh market: ! Toyfi roziviy ! Husaini beliy ! Husaini chyorniy ! Husaini krasniy ! Shohona krasniy ! Pobeda chyorniy ! Rizamat krasniy ! Javs ! Kishmish cherniy

Early variety: ! Zarif cherniy ! Gissarskiy ! Chilagi hujandi ! Chilagi safed ! Bobotog

Wine variety: ! Izabella cherniy ! Recastelli ! Resling ! Kojenka ! Kaberni ! Savingion


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Ministry on November 3rd 2015. The same top priority selection of table grapes was made by the Head of the National Association of Dehkan Farms (NADF), during a visit by the consultants on November 5th. The Executive Director of the Agribusiness Association of Tajikistan (AAT) also opted for this crop as his priority, in a meeting with the consultants on November 13th. There is a good market for Tajikistan grapes in Kyrgyzstan, and from there the grapes can pass easily to Russia and Kazakhstan. The country only officially exported around US$1,300,000 of fresh grapes in 2013, yet this is insignificant compared with the potential. The export potential to Uzbekistan is undermined by the serendipitous closure of the common border. Russia has been known to turn back grapes from Tajikistan if the certification is unsatisfactory, so attention to this is paramount. Major Challenges outlined as a result of field work include, but are not limited to: ! Seed and seedling quality is poor, with most farmers producing seedlings by themselves; ! Mechanization; shortage of small tractors for land management between the trees; ! Absence of processing capacity; for dry fruits, wine making, juice and jams; ! Low level farmer and worker pruning skills; ! Limited pesticide management capacity and knowledge; ! Intensive orchards which are not progressive; ! Lack of knowledge and practical experience of agro-technology; ! Severe absence of product marketing skills; ! Mainly rain fed production systems dependent on climatic conditions; ! Low quality of final product but huge potential; ! Absence of coordination among scientists and farmers; ! Lack of research and development; ! Weak access to extension service in rural area; ! Regional capacities differ widely; Soghud region is progressive and yet Khatlon and RRP

regions are still lagging behind; ! There are no processing, packaging, certification of export centres; ! Levels of primary production need boosting; ! Lack of coordination between farmers, traders and exporters; ! Limited involvement of Government in quality agricultural extension work; ! Lack of international certification and laboratories (HACCP, GAP ); ! Exorbitant VAT rates; and, ! No export guidelines developed. The following summary of major recommendations reflect the views of Government officials, farmers, traders, wholesalers and retailers and exporters: ! Important to establish demonstration plots; ! Extend and expand extension service in chosen locations; ! Involve agrarian university students to support the extension service; ! Improve quality of planting material at all levels, linked to export needs; ! Massively upscale farmer training in key aspects of crop development and processing; ! Improve pesticide quality and transfer arrangements; ! Develop farmer and producer associations; ! Target organic product markets abroad; ! Focus on minimizing post-harvest losses as well as increasing yields; ! Develop targeted financial products with low cost loans; ! Establish national and local grape farmers associations; and, ! Strong focus on product certification. Figure 28 below provides an overview of the basic value chain for Table Grapes, based on prices reported in the field, markets and based on country benchmarking.


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Figure 28. TAJIKISTAN GRAPE PROCESS VALUE CHAIN ANALYSIS – DOMESTIC AND EXPORT MARKET PRICES


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Table 47. GRAPE PRODUCT COMPLIANCE WITH AKT SELECTION CRITERIA



! Plenty of excellent quality produce, far more of which can be brought up to standard with a good extension system and more cold storage; ongoing export to Kazakhstan and Kyrgyzstan. Production already far exceeds Tajikistan’s domestic needs

! While the export value of both fresh and dried grapes has fallen from the peak it had reached during the 2008-09, they still are products with high export trade value compared with many of the pre-selected products. (The only other products which have higher export values among the pre-selected products are Onions, Apricots and Walnuts)


! There are no grape imports so this would not apply, unless grapes were also to be pulped for juice.

! There is very limited imports of grapes into Tajikistan, both fresh and dried hence this is not really relevant for this product


! There is a significant potential for thousands of tonnes to be exported, and considerable upside potential for value addition and foreign currency earnings. Exports maps would need to be developed.

! Production volumes of grapes have been consistently increasing in Tajikistan. From 2003 to 2013 there has been more than 30% increase in production volumes. Export growth has not been matching production increase, indicating there is a potential for increasing exports


! Particularly export to Kyrgyzstan, evidenced by Tajik product preference in Kyrgyz bazaars and K-registered trucks waiting to load with produce in grape production areas of Tajikistan

! Currently the extent of cross border trade in grapes –both fresh and dried-is very limited among the AKT countries. Fresh grapes and raisins are significant products in terms of production and exports for Afghanistan but not so much for Kyrgyzstan. Afghanistan and Tajikistan could develop synergies depending on their infrastructure comparative advantages to build added value to the value chain.


! Very high. This is a labour-intensive crop, grown intensively, needing excellent care and attention throughout the year. Crop coverage and product quality can expand vertically and horizontally, with more farming families drawn in on a tenant or out-grower basis. The more grapes grown, the more physical inputs are required from the market, more cold stores need to be built and managed, more haulier hours needed to truck the produce to the border

! Considered to be significant.


! KfW Development Bank is confident more DFI will be forthcoming once volume of key comparative advantage crops are grown (the head of the KfW office also being Chair of the Economy & Trade Development Cluster of the Tajikistan Development Cooperation Council); The EU-funded ECTAP project will support this crop, and broadcast

! There would appear to be considerable appetite for both public private dialogue and public private partnerships, in particular linking up potential foreign direct investors with local companies.


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Table 47. GRAPE PRODUCT COMPLIANCE WITH AKT SELECTION CRITERIA

Product Justification its worth to European investors; UNDP Aid for Trade supports grapes; the State Committee on Investments and State Property Management would likely support cold storage facilities for grape.


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PRODUCTS EXCLUDED AND JUSTIFICATION FRUITS MELON According to official trade statistics, total exports of melons only reached USD 88,000 in 2013. While this figure is most certainly wrong – with products traded across porous borders and therefore not being reported – the reality is that such a bulky product demands considerable economies of scale to reach international markets on a competitive basis. In Tajikistan, melons are sold by the piece, not by the kilo. The price changes considerably throughout the year, from a low of Somani 5 at the farm gate price, to between 30-35 Somani a piece during winter for yellow melons, and from 5-10 in the winter for Green Melons. If farmers have their own transport, they often bring melons to the

local market. It would be possible to produce more melons for export – small and early ones from the south, for Kyrgyzstan and Afghanistan - yet there is a huge shortage of cold storage space for agricultural produce in the country. This would mean that the melons would need to be sold off at peak season, for the depressed prices applicable then. Being a relatively high volume-low value product, haulage charges undermine profitability of the crop. Moreover, melon was never mentioned as a priority by any government agency, farmer’s association, GIZ or other donor agency. APRICOT UNDP Dushanbe is not keen to pursue this crop, as it is already working with it under an existing project. The NGO SAROB is providing advisory services for apricot farmers in the north of the country. There are also several projects and other donors working on processing this crop, for instance the Enhanced Competitiveness of Tajik Agribusiness Programme (ECTAP). According to the UNDP-funded Export Promotion and Import Substitution (EPIS) project documentation, there are no comparative advantages for this crop in Tajikistan (the EPIS Final Report will be published in late 2015). The crop is sold cheaply to Russia, and is not very profitable. Tajik communities in Russia may be strongly involved in this trade. Tajikistan Apricots come in different colours and different sizes, and their high sugar and high acidity gives them an incredible flavour that far surpasses North American apricots In 2013 some US$2.2 million in dried apricots were officially exported, with 73% going to Kazakhstan and the balance being exported to Russia. There are 23 varieties of apricot in Tajikistan, though only a few of these are suitable for drying. There are 15 processing plants already in the north-west Sughd region of the

Melon Prices Farm gate prices for onions – of different quality – are relatively low. In the winter, when supplies are short, onions are even imported from Afghanistan. Farm gate prices are from Somani 0.5 to Somani 1.0 per Kilo, though wholesale prices cross multiple markets surveyed range from Somani 1.20 to 1.50. Retail prices are obviously higher at Somani 1.50, up to Somani 3.0 during winter time.

Figure 4 Melons for Sale in a Wholesale Market in Dushanbe


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country alone, giving it a competitive processing advantage over neighbouring Batgen oblast in southern Kyrgyzstan. The apricot sub-sector in Sughd also benefits from the lack of a well-connected rail network in its ‘competitor’ Batgen; the line from Batgen to Kazakhstan goes through Uzbekistan, and that border can be closed without notice on the Uzbek side, making this trade corridor highly unreliable. Were it not so, Batgen could export its crudely dried apricots directly by rail to Almaty and beyond. It is understood that Russia is pressing for the official crossings between Tajikistan and Kyrgyzstan to be permanently closed. The consultants therefore believe that the Sughd/ Tajikistan apricot sub-sector is sufficiently distinct and advanced not to need yet more assistance under the AKT consortium. POMEGRANATE Few pomegranates are grown in Tajikistan (unlike Afghanistan) and there is therefore no need to provide further insight in this product’s export potential. LEMON Lemons grow well in the country, but the volume of exports is deemed too low for this to warrant more attention than grapes and onions. STRAWBERRY This crop is highly perishable and a poor traveller by road. Furthermore, the shortage of refrigerated storage areas means that the crop could not be kept to market off-season, to attract premium prices. This is a niche market product, differing widely in quality, and has little hope of achieving early export volume. Integrated cold storage systems would be required and these do not exist. Evidence also suggests that production is still way below domestic demand. NUTS ALMOND There is a huge amount of dryland in Tajikistan, and almond is an ideal fruit tree suited to survive under these conditions. There are some trees in the north of the country, but not many, and on this basis a visiting Turkish entrepreneur who visited Tajikistan (through the Commercial Office of the Turkish Embassy, Dushanbe), decided not to proceed with a business proposition, despite the quality of almonds being excellent. The local almond industry potential is being undercut by illegal imports from USA, these being used to fill delicatessen apricots for a niche market. The crop is also high-risk, if rain falls at flowering, this resulting in low yield. SAROB is supporting this crop, however, together with the GIZ/ BMZ/ DFID ’Framework and Finance for Private Sector

Figure 5 Almonds for Sale in Marktes Just Outside Dushanbe

Apricot Prices Farm gate prices for fresh apricots were difficult to assess, given the short production season, however a kilo of dried apricots fetches anywhere from 50-70 Somani. The quality varies greatly, as does the packaging, from open presentation to more traditional cellophane package Kilos.

Pomegranate, Lemon and Strawberry Prices

Pomegranate prices (farm gate) are around Somani 3 to 12, depending on quality. Wholesale prices are from Somani 4.5 to 15, and retail prices from 10 to 15 depending of colour and juiciness. Wholesale prices for lemons runs from Somani 5.50 to 9.00 and retail from 12.0 to 20.0, again depending on quality. Prices for strawberries (we only found retail) were Somani 10.0 to 18.0 by the punnet.


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Development Project’, bringing in almond crop expertise, and improved seedlings from Iran. Kyrgyzstan and Tajikistan have seen very low levels of production compared with Afghanistan PISTACHIO There used to be wild pistachio in the low mountains, though these populations have deteriorated now. There are some plantations, but of low quality nuts compared with imports from Iran. The crop needs 20 years before coming into production, too long a lead-in time for the purpose of the AKT consortium. WALNUT Very few walnuts are produced in Tajikistan. Currently, these are exported to Russia direct. There is a case for pooling this amount with those from Kyrgyzstan to achieve potentially better prices resulting from larger quantities. VEGETABLES / OTHERS ONIONS The second priority crop the consultants have selected is onions. Official exports of Onions and Shallots in 2013 was US$17.8 million only. This is a well-established crop, especially in the south, grown in a labour-intensive manner without the benefit of mechanisation, or adequate recourse to the benefits of research and extension advice. The result is onion production of good yield yet inferior quality, compared with that of Kyrgyzstan. In 2013, Onions and Shallots represented 2% of Tajikistan’s formal exports. There are a number of basic varieties being produced in Tajikistan: ! Onion Radar (An ultra-hardy autumn planting variety) ! Onion Sedona (A high yielding, single centred onion that stores well, is shiny, medium dark

skin and globe shaped); ! Spanish Onion (A large-sized, mild, succulent onion, often

eaten raw; and, ! Peshpasak (An important onion for winter production and

early season bulbs). Onions is the number two priority of the Department of Agrarian Policy and Private Support, MoA, whilst ‘early onions’ was selected as the second priority by the Head of NADF. The Head of the Industrial Sector Development of the Ministry of Trade gives his support for onions, with ongoing exports to Russia and Kazakhstan, early spring onions having a particular comparative advantage. The Executive Director of the Agribusiness Association of Tajikistan (AAT), Mirahmad Rahmatov, nominated onions as a priority crop for export. 70% of production costs for onions is for hired labour, and increased employment is one of the government’s mantras, voiced to the consultants on November 5th by Miralizoda Abdusalom, the Deputy Minister of Employment. Within the crop, the priority is not to produce MORE onions at the moment, but to produce better quality more competitive onions, by addressing weak links in the value chain, starting with better crop variety/ies, and better crop management practices to increase bulb size. Even with the relatively

Almond, Pistachio and Walnut Prices

Almonds fetch from Somani 45 to 55 and from 80 to 95 per kilo depending on quality, and whether or not they have been de-shelled. Tajikistan imports Pistachio’s from Turkey and Iran, and imported varieties are larger in size. Some are salted and others not. Prices per kilo range from Somani 45 to 65 and from 65 to 100 for nuts from Turkey. The quality of walnuts ranges widely and production quantity is low, and mostly comes from local farms. In local markets along the road to Chidara, Kulob and Qisar, prices at the farm level were around Somani 12 to 15. The same price seemed to hold in more urban locations. Shelled walnuts fetched from Somani 50 to 75.

Onion Prices Farm gate prices for onions – of different quality – are relatively low. In the winter, when supplies are short, onions are even imported from Afghanistan. Farm gate prices are from Somani 0.5 to Somani 1.0 per Kilo, though wholesale prices cross multiple markets surveyed range from Somani 1.20 to 1.50. Retail prices are obviously higher at Somani 1.50, up to Somani 3.0 during winter time.


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inferior product, the onion farmers which the consultants spoke with on November 6th indicated that onions were the second-most profitable crop this year (after persimmon). Financial products to enable farmers to undertake onion production are expensive, if the farmer can secure finance at all without collateral in the land (which he only leases, so needs to offer his home as collateral). An under-resourced farmer needs money up-front to pay the labour for land cultivation, planting and weeding, harvesting, grading, bagging etc. Yet financial products available can have annual interest rates of up to 40% (24% being the best rate mentioned by farmers), whilst the harvest would not bring income for 3 months or so; in the meantime, farmers have to pay interest monthly. In the south of the country there is potential for spring onion production, whereas in the north the potential is for autumn onion production. Far more storage facilities are needed to improve profitability, as market price has a 3x range from a low at peak harvest to an off-season price, on the local market. The storage structure required is very simple for onion, compared with grapes, say, it needing to protect the bulbs from sun, though allowing wind to dry the crop. Yet even with storage at hand, farmers may still tend to sell at harvest time, as their liquidity is low.


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Table 48. ONION PRODUCT COMPLIANCE WITH AKT SELECTION CRITERIA

Product Justification # Compliance with Criteria Field Based Justification Trade and Economic Justification


! Export potential would be enhanced if a good extension system were instigated which would improve variety use and field crop management; exports are ongoing despite average quality, probably on the basis of price; travels well, less prone to damage than grapes in-transit

! While Onion exports from Tajikistan have fallen from the 2010 peak of exports, the export value of onions is the highest among all the pre-selected products by a significant margin. For instance for the year 2013, export values for Tajik onions to the world was US$ 11 Million. By contrast most other pre-selected products export values for the same year were less than US$ 1 Million except for shelled walnuts which was US$ 2 Million. This indicates the significance onions already have as an export product. Further, while post-2010 peak export values have fallen, current export values are still much higher than the pre 2007 values indicating growth (The peak and fall seems to be more to do with global commodity cycles or overall economy performance as this trend seems to be there across many Tajik products)


! There is very limited import of Onions into Tajikistan, both fresh and dried hence this is not really relevant for this product.

! Again, as noted in the field report, there is not likely to be a significant import substitution effect, as domestic production already meets domestic demand.


! Without doubt this product has the potential to positively impact the balance of trade, both on traded volumes and in terms of foreign currency returns.

! Export volumes are significant for all three AKT countries when compared with the rest of the pre-selected products. Having a stake in the development of export potential of the same product does not necessarily mean competition, but it could lead to a development of taking advantage of comparative advantages and help to build value chains which could develop the region as a hub for onion production


! High multiplier effect as it is a labour-intensive crop, so plenty of field labour needed throughout the season; bulky produce, stored in net sacks; does not need post-harvest cold storage, but needs drying on open racks away from direct sunlight; ample requirement for haulage

! Hard to measure though as informal traded volume is considered to be fairly good, the potential for exports within the region could be boosted by increased volume, better packaging, and potentially processing also.

5 Product employment ! To be calculated based on available cross- ! Multipliers have not been calculated, but it can be


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Table 48. ONION PRODUCT COMPLIANCE WITH AKT SELECTION CRITERIA

Product Justification multiplier potential national comparators. assumed that the direct, indirect, induced and spill over

effects on employment are not inconsiderable. 6 Appetite for public and

private investment ! Considerable public and private interest in this

crop, and all that is required is to identify a preferred model for interaction, based on burden sharing, comparative advantage and risk reduction for market expansion.

! Assumed to be considerable.


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Figure 29. TAJIKISTAN ONION PROCESS VALUE CHAIN ANALYSIS – DOMESTIC AND EXPORT MARKET PRICES


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ALFALFA This is an even less suitable crop for Tajikistan than for Kyrgyzstan. It is far more profitable for livestock keepers in Tajikistan to use natural pasture and hay to feed or fatten their animals, which are relatively few in number, and 90% of which are kept in the household. POTATOES There is a history of potatoes produced in China and Russia being dumped in Tajikistan, at prices which are lower than Tajik production costs (in part due to lack of mechanisation). Potatoes are also being imported from Afghanistan and Pakistan. Though there is good local production, at 1.2 million t/yr, these are only for local consumption. There are technical barriers in primary production and insufficient storage. There is considered to be little export potential. However, there is a certain import substitution potential, by processing chips for fast food outlets and supermarket freezers, rather than importing ready-made chips as at present. OTHER COMMODITIES CONSIDERED WHICH ARE NOT ON THE PRE-SELECTED LIST CHERRY China is keen to buy the cherry which is currently grown in Tajikistan. There is potential for this to be pooled with the cherries grown in even greater amounts in large plantations in South Kyrgyzstan. Cherry for export has the support of the Executive Director of the Agribusiness Association of Tajikistan, as his fourth highest priority crop. However, the consultants considered cherry to be not as high a priority as either table grapes or onions, owing to the low current volumes grown. APPLES Apples are grown in Tajikistan, yet there is insufficient storage capacity, and the electricity supply is insufficiently reliable to power what there is. Most of the apple trees in the country are old, from the Soviet era and unproductive. Experience from the Tajikistan Agricultural Financing Framework (TAFF) project, which finished in 2012, was that the price of apples plummeted owing to insufficient storage capacity to enable more timely marketing. Moreover, the apple harvest in 2015 was almost wiped out by late winter frost. The crop is clearly one of high risk. Apples are imported from Afghanistan and Iran, though the observable quality in the field was wide. Where apples are grown locally farm gate prices were stated at between Somani 2.0 and 3.0 per kilo, and wholesale and indeed retail prices seemed similar, at between Somani 5.0 and 6.0. Apples were therefore not selected as a priority crop during this study. FRUIT JUICE There is potential for making more concentrated forms (purée) of fruit juice, even powdered forms of juice. This was suggested by one of the juice manufacturers to whom the consultants spoke, though only for import substitution, as China and Uzbekistan have huge economies of scale for exporting purée to Russia and the region. In Tajikistan, larger quantities of fruit such as grape, of better quality, would enable fruit juice companies to expand as profitability would increase through cheaper grapes and greater throughput in the factory. TOMATOES In the Soviet era, tomatoes were produced in large quantity in Tajikistan, being used for juice or paste. The climate is unsuitable for producing good quality table tomatoes, it often being too hot, as in 2015,

Potato Prices Based on many farm level visits, farm gate prices for Potatoes are around Somani 0.90 to 1.20. Wholesale prices increase from Somani 1.60 to 2.00 and retail prices go as high as Somani 4.0 in winter, when they are imported from Pakistan and Afghanistan.


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causing the plants to grow fast but yield little. Out of season tomatoes were grown during the winter in greenhouses, again in the Soviet era, yet owing to the high cost of fuel and unreliability of electrical power, this is now high-risk and of low profitability. Such a crop is difficult to export too, owing to insufficient storage facilities, the cost of haulage and its high perishability. Though the tomato paste factory in Dushanbe has the capacity for 1,000t/day, it is under-utilised as the price the factory can afford to pay for tomatoes does not encourage farmers to produce, leading to an estimated 30% loss in the field. HONEY ECTAP is targeting this, as one of 5 priority products (plus dried apricot, milk, vegetables and medicinal/ aromatic plants). It is noted that honey expert Peter Moody will be in Tajikistan from 10th – 20th November, and his report on its export potential has been requested from the FAO Representative. MARKETING AND FINANCIAL FEASIBILITY In addition to technical constraints in the two selected crops, there is the pervasive corruption of a ‘baksheesh’ nature, which is considered to add 30% to production and marketing costs. A sound economic feasibility study needs to be undertaken to get a proper handle of this aspect of trading in the agricultural sector. This would focus on financial rates of return to investment, including NPV, IRR and discount rate considerations. A sound analysis of markets also needs undertaking, the preferences of potential importers, and to ascertain exactly what quality/ certification the market demands, and where. The increasing financial crisis across AKT countries and the region, and local currency(ies) continuing to fall, even falling more steeply, must pose the question ‘who will then buy Tajikistan produce?’. A key aspect to be addressed by those who write the AKT consortium programme document is how to reap the benefit of the closer political/ military ties being established between Tajikistan and Russia, China and Turkey. “Large investors will come, but first we must produce more”, says Kristine Laabs, the Chair of Economy & Trade Development Cluster of the Tajikistan Development Cooperation Council, when she met the consultants on November 3rd. The marketing and feasibility studies developed in Section J and K below for the product chosen will assess, among other issues, key questions such as: ! Is there a demand for the produce – where we find out the characteristics required of the

product and the size and value of the market;

! Who else is producing similar products –to determine the number and type of competitors; ! What is needed to make the product – to find the availability and cost of staff, equipment,

services, raw materials, ingredients and packaging; ! What is the cost of producing a product – where we calculate the capital costs of getting

started and the operating costs of production); and, ! What is the likely profit – where we calculate NPV, IFF – i.e. the difference between the

expected income from sales to an estimated share of the market and the costs of production) TECHNICAL FEASIBILITY OF AN INTERVENTION Strengthening/ creating a unified research and extension service is proposed as the prime AKT consortium intervention, addressing the two selected crops individually (yet which can readily be up-scaled to include other crops in future), and which can synergise with a similar proposal being made for Kyrgyzstan. The Ministry of Agriculture, Ministry of Economic Development and Trade, Ministry


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of Industry, FAO, UNDP Aid for Trade, KfW, IFC and the ECTAP team leader are just some of those in Tajikistan who agree with this pressing generic need. CROP COMPONENTS GRAPES The Government of Tajikistan does not operate a credible extension service. The Ministry of Agriculture has never sent a representative to look at Mr Nematjon’s progressive vineyard, though the latter is often in the national news, as the President has visited the site. Small-scale grape growers do not receive any help from the Ministry in practical and business matters. An NGO, supported by GIZ, called SAROB is currently operating a non-profit fee-based extension service, cove ring all field and orchard crops (but not livestock), in all parts of the country except Badakhshan. Cotton, corn (maize) and sunflower are the 3 main crops targeted, the latter two being ‘new’ (for which imported hybrid seed is being used) and gradually replacing cotton on the former Soviet State farm land. SAROB evolved out of the EU-funded TAFF project, mentioned above. SAROB is a cooperative of individual agricultural advisers, currently numbering 160 members, with 40 associate members. SAROB core staff train the advisers’ extension agents rather than farmers themselves, yet also are involved in facilitating improved seed and mechanisation services to farmers (SAROB/GIZ have 64 functional mechanisation service groups in the country). SAROB targets those farmers who have the ability to pay, which excludes most farmers in the country (and certainly those subsistence farmers in more elevated parts of the country, even though these do not grow grapes). The first steps in developing the agency needed a 50% subsidy, to bump-start the process, and this came from TAFF and GIZ. The idea was that after 3 years from the programme start in November 2011, the farmers would be able to pay all 100% of the fees needed; from January 2014, all subsidies for services were stopped, and a market economy situation started, with all services paid for. SAROB provides subsidies now only to help farmers buy equipment. GIZ commissioned a study to investigate if such a fee-based service could target the poorer farmers, the study reporting that it could be possible, without specifying how (Engel et al, 2015). It is believed that SAROB currently works with only 3% of the country’s farmers. 33x SAROBs would therefore be needed to cover all of the county’s farmers. If farmers of medium means, who feel that they cannot afford an extension service, were to club together in associations16, a fee-based service could function, and moreover on monies contributed to a pool by its members rather than provided by a benefactor like GIZ. This would be the basis of sustainability. However, there is an alternative to the SAROB extension scenario described above. The precedent already in place can be seen at Mr Nematjon’s vineyard. Of his 150 hectares of mature vineyard, he crops only a certain proportion himself; the rest of the land he leases to 500 farming families in the 16 Cooperatives apparently attract a tax, so it may be better to conceptualise a ‘group of individuals’. This is compatible with NADF’s view that farmers need to belong to a support group, yet retain their independence, lack of mutual trust being a key issue

Figure 6 Table Grapes Growing Some 20 Kms from Gisar


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neighbourhood. The techniques he uses can be observed by these leaseholders, so that for the price of Somani 285/ 100m2, they have land, the physical infrastructure of vine supports (trellises) and a pumped surface water irrigation system in place, together with an advisory service set by precedent and demonstration on-site. Thus, for example, the means of reducing damage from early or late winter frost can be countered by the use of rice straw spread over the raised horizontal platform bearing the flowers or fruit bunches (rice being grown in the area and available for purchase/ barter from rice farmers in the valley nearby). This practice is demonstrated on the landlord’s own vineyard, and copied as it is seen to substantially reduce the incidence of frost damage to the vine and its crop. Mr Nematjon’s vineyard also has a 600 Mt cold storage facility with 12 discrete units, 8 of which he leases out to his tenant farmers, in which the fresh packed grapes can be stored for up to 5 months at +2oC, without deterioration. Traders come to his warehouse from Russia, Afghanistan and Kyrgyzstan, with cash to buy. The economics of this are remarkable. Storage for just one month following peak harvest time can more than double the market price achieved (this fact was triangulated with several farmers). Storage for longer increases the market price further. This vineyard is thus a model of a grape production service centre, called ‘logistics centre’ in Tajikistan. To it may be added one or more extension workers, with logistics support to comprise an outreach facility, beyond the boundary of Mr Nematjon’s own vineyard. A revolving fund is necessary also, to enable purchase of good quality agro-chemicals in bulk, and in a timely way, from a reliable source (many agrochemicals on the local market are of doubtful pedigree). Trucks to convey the produce are already attracted to the main vineyard, which is readily accessible on good roads, one of these vehicles (with Kyrgyz number plates) already waiting to collect the next consignment during our visit. A proposal for scaling up this extension model for Tajikistan is proposed below. Non-government partners, the support of which could be sought in implementing the proposed venture, include those listed below, all of which were visited during November: ! Usmanov Nematjon, Commercial grape farmer/ trader, Vangebag village, Tursunzoda town.

Mr Nematjon provides both a model for success, and an extension outreach service for under-resourced grape farmers in Shahrinav district and beyond (which has 5,000 ha of grapes, 4,000 ha of which under irrigation). From this district alone, grape production is 3x more than that needed for national consumption, so the venture is export-oriented; 17

! ECTAP Project; an EC-funded programme without a budget for providing extension advice, yet the mandate of which requires that function. ECTAP also has technical specialists, for instance a Food Testing chemist, and the project will address international-level certification in the agricultural sector including making a roadmap for this (involving MoA, MoH etc, and a credit facility with EBRD). Symbiosis and synergy between ECTAP and the AKT consortium intervention is foreseen, by both the consultants and ECTAP team leader;

! SAROB/ GIZ. An extension service provider for well-resourced farmers. Possible synergy foreseen with regard to extension provision, supply of physical and credit inputs, and mechanisation, for under-resourced farmers;

! GIZ/ BMZ/ DFID ‘Framework and Finance for Private Sector Development project’, to facilitate credit lines for poor farmers, in a more inclusive way than under SAROB;

17 Visiting bazaar markets in three southern oblasts in Kyrgyzstan during October, all the grapes seen by the consultants there were from Tajikistan


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! National Association of Dehkan Farms (NADF), Dushanbe. This will provide a network of small farmers, many of whom would grow grapes, and having the need for improved on-farm efficiency, productivity, competitiveness and profitability;

! Agribusiness Association of Tajikistan (AAT), Dushanbe. Just as for NADF, AAT can provide a network of contacts, not only of farmers but agrochemical suppliers/ importers;

! Aquajuice Corporation, Dushanbe; a packaged drinks provider, with synergy foreseen regarding providing a market for grapes;

! Tajikistan Academy of Agricultural Sciences, Dushanbe, and the Technological University of Tajikistan;

! UNFAO, Dushanbe;

! National Association of Small and Medium Businesses of Tajikistan (NASMBT), Dushanbe. Membership of this organisation comprises 100 or so business associations/ processors rather than farmers, the annual membership fee of $US2,500 being too high for the latter group. For the potential of turning fresh grapes into raisins or juice, NASMBT has already developed AKT links in agro-processing, and can assist with networking in AKT and potential importing countries, NASMBT having offices in Russia and Siberia, for instance. NASMBT also has knowledge on product certification and branding in the AKT countries, and access to processing contacts within the group ‘British Expertise’. NASMBT can play an important role in facilitating exchange of information and skills within the AKT consortium.

! Turkish Cooperation & Coordination Agency (TIKA), Dushanbe. On November 13th, the Programme Coordinator welcomed the opportunity to integrate with the AKT consortium programme, to enhance the capacity of Tajik farmers, especially regarding training and study tours. The offer of arranging study tours was also made by the Commercial Counsellor to the Turkish embassy in Dushanbe, who attended the AKT launch workshop in Dushanbe on October 15th.

Table 49 presents the results of SWOT analysis draw up on the basis of field interviews, data analysis and secondary documentation including technical reports.

Table 49. SWOT ANALYSIS FOR GRAPE MARKETING AND FINANCIAL VIABILITY

Strengths Opportunities ! Competitive prices on regional markets ! Strong export potential, and actual exports

increasing, with buyers and trucks coming to farm gate

! Production increasing ! Strong immediate markets in Kazakhstan and

Tajikistan ! Suitable climate ! Considerable potential for backwards and

forwards employment linkages ! Value added options present to some extent ! Strong private sector interest ! Strong government support ! WTO membership since 2013

! Structured private and banking sector

financing support ! Need for one or more ‘logistics centres’ in

areas of high production, acting as a one-stop-shop across the grape value chain

! Potential new end markets, especially in Organic and Fair Trade

! Training and other extension services across the value chain

! Producer cooperatives and associations to access economies of scale, and ensure only genuine agrochemicals purchased

! Potential Eurasia Economic Union accession

Weaknesses Threats ! Fragmented value chain ! High production cost due to government taxes

on physical inputs ! Inconsistent quality and supply of inputs

! Absence of low cost financing in the face of

expensive physical inputs ! Financing for orchard expansion is often not

forthcoming, as the vineyard farmer does not


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! Variable quality of primary produce ! Shortage of cold storage with reliable power

supply ! Shortage of professional grading, packaging

and labelling ! Low level technical marketing skills for most

traders ! Ad-hoc export market information and maps ! Weak producer skills as many farmers do not

have long experience or tradition of farming livelihoods, and absence of extension service

own the land, thus cannot offer collateral other than his house

! Product must be price- and quality- competitive

! Emerging markets in this space

ONIONS The key constraint on improved onion productivity, production, competitiveness and quality, is lack of a good research and extension service catering for smallholder crop agriculture, in particular in this case for onions. Rich farmers can afford the advisory services of SAROB, and may not need to seek credit facilities to purchase the physical inputs required, or additional storage. Many farmers the consultants visited on November 6th grew both of these crops. Non-government partners, the support of which could be sought in implementing this proposed intervention, include those listed below, all of which were visited during November

! ECTAP Project (as for grapes above);

! SAROB/ GIZ (as for grapes above), which is currently helping farmers only with the initial

production phase of the value chain;

! GIZ/ BMZ/ DFID ‘Framework and Finance for Private Sector Development project’, to facilitate credit lines for poor farmers, in a more inclusive way than under SAROB. This project is working in the mountains of the Gorno-Badakhshan Autonomous Region (GBAO), where 280,000 people live (3% of the national population, who are famed in the country for their resilience, vibrancy and optimism). The area is adjacent to the Afghan and Kyrgyz borders, offering opportunities for AKT synergy. This is the only agency group working there, other than the Aga Khan Foundation. The Mountain Societies Development Support Programme (MSDSP) could be another partner, it having been created to improve community infrastructure (roads, electricity transformers, drinking water supply);

! National Association of Dehkan Farms (NADF), Dushanbe. This will provide a network of small farmers, many of whom would grow onions, with a need for improved productivity, competitiveness and profitability;

! Agribusiness Association of Tajikistan, Dushanbe (as for grapes above);

! Tajikistan Academy of Agricultural Sciences, Dushanbe, and the Technological University of Tajikistan; and,

! UNFAO, Dushanbe B. Modality of Technical intervention


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In order to improve crop management and post-harvest care, improved technical services for primary producers are a must. There is a huge need for small farmers to be associated in a group or number of groups, thereby comprising a critical mass, with all the economies of scale which can thereby be harnessed – in purchasing inputs, marketing outputs, training, securing finance, providing storage facilities etc. In this case, the farmers will be focus groups for grapes and/or onions; it may be possible to have a unified dual focus facility, on the basis that farmers often seem to grow both of these crops. Farmers need to be better linked with input supplies and processing/ marketing (akin to the milk collection service in Switzerland, or out-grower rubber latex buying in Liberia). The IICPSD project should target primary production, quantity and quality, as the processing sector is already established, though not brilliantly so (EU and other donor partners are focusing on improving the latter). There is currently no significant player holistically addressing agricultural primary production. Support is needed at village and community level, as well as at central level, with the Law of Subsidiarity applying. In keeping with the wishes of the Ministry of Agriculture expressed to the consultants on November 3rd, the AKT programme can help farmers understand the requirements of the market, through developing farming associations. One-stop-shop logistics centres are needed, to cater for the primary production part of the value chain for the two selected crops, from land selection to storing and grading/ packaging. As these logistics centres must be market-led, there also has to be provision in these logistics centres for the downstream activities of processing, marketing and haulage. A model system has been described above for grapes, already functioning, based on one far-sighted entrepreneur who also runs an outreach service. This can be up-scaled and copied, in places as will be determined when the Project document is written. This, and mechanisms for farmer associations will be determined by project designers, in consultation with farmers. SAROB has been mentioned above, and its limitations and dependence on GIZ support. Any support to extension services needs to be sustainable. A former extension support service (EU-funded “Support to the Establishment of a National Agricultural Advisory Service” - SENAS) from 2007-10 made some headway at setting up a national extension service based in the Ministry of Agriculture, yet it has not lasted following the end of the project in 2010, and lessons must be learned from that. SENAS’ strength was that it formulated a system of information sharing, similar to that of FAO Farmer Field Schools. SENAS developed six ‘advisory packages’, and rightly promoted co-financing of agricultural ventures by farmers and the commercial private sector jointly, so each has a stake in success (or failure). Lessons may also be learned from USAID’s Family Farming Programme, and examining research-extension systems in China and Kazakhstan. What is being proposed for the AKT intervention is not a complex national system, based within government. Rather, a commodity-focused research-extension support intervention, based in the commercial private sector and farming community, targeting the primary production part of the value chain. It will be based in the field, and be market-oriented in the same way that the farmers are. The starting point will be what is going on now, in the absence of donors (who are hardly involved currently at the primary production end of the value chain). The multiple constraints for both grapes and onion growers are clear. Now is the time to do something about it. It is not for academics or UN bodies to devise a system for farmers, but for farmers to devise a system for farmers. 18 A champion for grapes has been identified in this report, Mr Nematjon. The IICPSD outreach intervention for grapes, should be drafted in discussion with him. Project designers can fill in the detail, and work on the financing arrangements, leading to cost-recovery. Locations for additional storage are best identified by Mr Nematjon; these locations can then be ground-truthed in discussion with other grape farmers in the district. Arrangements for sourcing fertilisers and other agro-chemicals are also best suggested by Mr Nematjon. He will be a key consultant for programme formulation, and should be paid for it in recognition of his opportunity cost. He can also arrange that 18 The lead author of this country report is a farmer, in Uganda


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the concept of the programme receives the blessing and support of the President, with whom he has good relations. Other champion farmers like Mr Nematjon are being sought, in other areas of the country in which grapes grow well. NADF is one possible national coordinator for the research-extension system, though it has only limited presence in the field and lacks the staff with practical hands-on management skills for the task. Management is best allocated to the Private Sector, with technical working groups involved, together with farmers who have been selected by their associations to represent them. The details of this, and the national coordinating body, will be formulated during project design, following deeper investigations and soundings of opinion. The notional system that the consultants have in mind, would be similar in both Tajikistan and Kyrgyzstan19, and some of the major components are as follows: ! Agricultural scientists must link with commercial private sector, to use its energy and

business sense, its finance and commitment;

! Research must be properly resourced, with international research institutions playing their part. Variety improvement is a key area of research, it being more needed for onion than grape, this being market-led so that market demand leads the initiative. As much as possible, research needs to be on-farm with the farmers deeply involved, as researchers not merely observers; their opinions must be heeded, otherwise they will have no ownership of the results20. Different brands of fungicide, for example, can be tested on farm, and the most cost-effective one will be selected by farmers, not scientists; 21

! Professional sourcing of genuine physical inputs must be secured, in a timely way; 22

! Agricultural finance must be secured at viable interest rates, and/or through a revolving fund. EBRD/ ECTAP and other players in Tajikistan need to be consulted in designing and costing this;

! Though marketing and export haulage are not the prime emphases of the proposed intervention, it is essential that these are accorded attention, so that all parts of the table grape and onion value chain links are consolidated and function seamlessly as a whole;

! An especially important part of the export value chain is quality certification. Being a small agrarian country, there is a strong logic for there to be an emphasis on producing for both the Organic and Fairtrade niche markets, to obtain the highest prices available. A particular focus for the AKT intervention should be quality, as guaranteed by accredited certification. A study tour for key stakeholders to Uganda may be useful, it being the country having the second-highest number of certified organic farmers in the world; and,

! ECTAP is seen as a prime partner in the AKT intervention, and does not need to be persuaded to be such. It has offered its full support, the AKT consortium, ECTAP and the people of Tajikistan being equal beneficiaries.

19 Synergies across AKT countries resulting from the proposed interventions at national level are dealt with below 20 Researchers often recommend the variety that yields most, yet farmers may have criteria that will not be given importance by scientists; moreover, women may have different views than do men, on key criteria. Attention to gender-specific opinions is necessary to accurately determine both farmer and market preferences. 21 Researchers can err in recommending the product that brings about the greatest yield increment, which may not be the product that is most cost-effective 22 There has been no registration of agrochemical imports into Tajikistan for the last 12 years. In EU countries, there are 30% fake agrochemicals, so a much greater percentage will likely apply to Tajikistan.


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RESOURCE & ENVIRONMENTAL FEASIBILITY Key resource personnel (institutions) are already stationed in-country, not all of whom has it been possible to link with during this feasibility study (Annex 1). There is in-country knowledge of where the best germplasm can be obtained for the two crops selected, for example. There are also crop specialists, such as agronomist Mukhammadjon Eshbadalov, now working with the International Finance Corporation, Dushanbe, and an agronomist and agribusiness specialists with the Agribusiness Association of Tajikistan (AAT); also, those involved in produce certification, such as Ted Langridge of ECTAP, which project also has agronomists on its staff. Were these and other senior experts to be mobilised, some in an intermittent way, for the AKT intervention in Tajikistan, only specialist staff inputs would be needed from outside of the country. A full stakeholder analysis needs to be done at the start of the project design phase. The amount of financial resources to be allocated, including that for any revolving fund, will be known only when the proposed intervention takes on more shape during the project design phase. There is a huge need to support the country’s economy, in the interests in securing peace and stability in Central Asia, in testing times. Neither crop is a challenge to environmental sustainability. The grape vineyard provides a full canopy cover for the land during the growing season. Herbicides are not required as little light penetrates to the soil. Pest and disease problems are not a serious constraint in Tajikistan, so no aerial sprays are required, this being compatible with organic accreditation. SOCIAL AND INSTITUTIONAL FEASIBILITY There is need to strengthen the public sector institutional set-up, its powers and coordination, through capacity building and improved organisational management, so it is better fit for purpose and is results-oriented. The Ministry of Agriculture in particular deserves an organisational development makeover, so that it plays its rightful pivotal role in this agricultural intervention. We believe that the Honourable Minister would relish the prospect of both. Social institutions will be supported through the proposed extension system being based in the farming community itself, with a fully participative involvement not just in its implementation, but its formulation. Cooperatives will be strengthened and new ones created as required, in the interests of economy of scale savings and sharing knowledge, skills, access to physical and financial inputs. Storage facilities, so much needed, are an example of benefits which can accrue from a stronger engagement with commercial private sector investors. For this engagement to work properly, there needs to be a suitable enabling environment, and this role of government needs to be determined and negotiated during project design and costing. Gender equity issues need to be addressed, and have been referred to above. Presently, women are disadvantaged in many ways in the agricultural community. Land ownership is normally in men’s names, and it is men who traditionally take the important decisions on land use. It is women who form the majority of the agricultural labour force however, and when paid (rather than being unpaid family labour) derive the only money for which they have a major say in disbursing in the family. Provisions for women in project design need to encompass those noted in Annex 9 of the agricultural commercialisation project appraisal document of World Bank (2014), listed in Annex 2 below. There is also need to enhance the resources and capacity of the Investment and Promotion Agency, so it can make the prospect of investing more attractive (both Foreign Direct Investment and internal investment). It is important to both attract more investment AND derive more benefit from it, towards the twin goals of more economic development and better social outcomes. The State Commission on Investments is also an important partner for infrastructure investments, as related to the primary production component of agricultural value chains, which it normally does not deal with.


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Reducing the tax burden on the agricultural sector is an issue raised at the UNCTAD presentation held in the Ministry of Trade on November 3rd, and the consultants believe that progress could be made on this with a suitable intervention by IICPSD at a high level in Dushanbe. The punitive taxes for the sector are a hindrance not a help in promoting the country’s economic performance and competitiveness (the agricultural renaissance in China since 2006 is in part due to the low tax regime for the agricultural sector). VALUE CHAIN GAPS & BANKABLE ENTRY POINTS As explained above, the key value chain gap foreseen for the AKT consortium (in both Tajikistan and Kyrgyzstan) is the primary production section, from choice of land and crop to harvest and post-harvest care. In Sections below, we will also assess other investment climate constraints, including value chain infrastructure, lowering transaction costs and maximizing vertical integration where possible. In a meeting with the consultants on November 13th, Mrs Gulru Jabborzoda, Deputy Minister, Ministry of Economic Development and Trade, suggested that investment programmes could be developed along the following scheme of financial contributions: 85% Foreign investor + 10% Tajikistan entrepreneurs + 5% government. A revolving fund or low-interest loan is a key potential provision under the proposed AKT consortium programme, and a strong case can be made for it, as farmers’ intent to invest in their infrastructure or fertilisers, say, is usually disabled due to inability to secure funding at an interest rate and repayment terms that enable the venture to be profitable. A revolving fund, operated under rigorous conditions, can break the log-jam. As pointed out above, there are also possibilities for synergies with other programmes, levering their loans, such as the EBRD loan facility for ECTAP. In addition, the Climate Resilience Finance Facility (a 3-year programme which will be launched at the end of November 2015, also under EBRD) has a Euro 10 million fund to promote various technologies to facilitate resilience. This will be done through providing credit funds through national small finance institutions. Two of the benchmarks for this are agricultural: ! Reducing water use; for example through fitting orchards with drip irrigation; and, 23 ! Energy saving through greenhouse technology, and minimum/ zero tillage Both the EU and ADB also intend to support climate change, with the involvement of the private sector. Once people see that profits increase if they engage with this theme, it should catch on. Heavy duty investors attracted into Tajikistan through KfW may also be interested in the AKT programme, if they can see the volume of high quality production increasing. Indeed, the private sector, which provides a better basis for long-term engagement than through a project, should find the prospect of returns on establishing and then leasing a bank of storage warehouses, an attractive proposition. As both the farmer and warehouse owner would be inter-dependent partners, the basis of trust is there from the outset, and would get stronger season by season. POTENTIAL IMPACT An impact on agricultural productivity, production, efficiency and profitability is envisaged, with each of the two crops. The ‘missing link’ at the moment in the value chains of each crop, is the insufficiency of attention to primary production, and there must be renewed emphasis on removing all of the constraints which currently pertain therein. Not removing them in a joined-up cohesive way would not achieve a strong impact; all must be removed simultaneously. By doing so, income streams

23 Drip irrigation is not considered suitable for grapes, as the vines have a laterally-spreading rooting pattern


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are generated and the food access component of food security is improved through poorer farming households being able to afford the food in the market place – its mere availability does not guarantee food security for marginalised people. One aspect of the improved income streams is that the more wealthy farmers are able to hire more paid labour. The government is a beneficiary also through incremental taxes on the increased production, and inflow of foreign exchange from the incremental exports.


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Figure 30. PRIMARY MARKET CONNECTIONS FOR GRAPES Source: Atlas for Economic Complexity (2013)

Figure 30.


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Figure 31. PRIMARY MARKET CONNECTIONS FOR ONIONS, SHALLOTS, GARLIC AND LEEKS ETC. Source: Atlas for Economic Complexity (2013)


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Section J. SELECTED PRODUCT EXPORT POTENTIAL This feasibility study has sifted through a substantial volume of (i) primary and secondary data that is both (ii) quantitative and qualitative. The timing of the study comes at a period where many of the products studied were at the end of their production season, and were actively being marketed. The study was also conducted in a period of great monetary instability, affecting import and export volumes and remittances. That said, of all the criteria applied to the AKT VC feasibility study, the need to select the most viable product for export has been a driving factor in decision making, and this short section provides an overview of the major export markets to be prioritized for the selected products; listed below: ! Afghanistan – Almonds (shelled); ! Kyrgyzstan – Walnuts (shelled) (Plums can be a point of discussion); and, ! Tajikistan (grapes). AFGHANISTAN ALMONDS Currently Afghanistan’s main markets for almonds, both unshelled and shelled is India. For shelled almonds, after India EU countries are significant importers. Export markets for shelled almonds are far more diversified than unshelled almonds, not least because the lower weight makes an otherwise uncompetitive price more competitive. Table 50 below provides the export markets for unshelled Almonds, and Table 51 provides the export markets for shelled Almonds, showing already substantial penetration into high value added markets.

Table 50. KEY EXPORT MARKETS FOR AFGHAN (UNSHELLED) ALMONDS (2014)

Market US$ 1000 Export Share India 4,054.74 96.79 Pakistan 134.61 3.21

Table 51. KEY EXPORT MARKETS FOR AFGHAN (SHELLED) ALMONDS (2014)

US$ 1000 Export Share India 11097.98 60.90 Germany 4563.41 25.04 Italy 2311.59 12.69 Turkey 150.12 0.82 Kazakhstan 79.83 0.44 Australia 7.50 0.04 Pakistan 5.31 0.03 Qatar 3.51 0.02 Netherlands 1.12 0.01 New Zealand 0.93 0.01 Canada 0.87 0.00 Bahrain 0.60 0.00

Chart 63 below show that while India is the main market there has been volatility in terms of export volumes. For unshelled almonds the EU has gained significance over the last year, though there were negligible reported exports to the EU for years 2009 to 2012. Interventions that remove the volatility in export volumes will be critical if the private sector is to be able to forecast cash flows and rates of return.


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Chart 63. EXPORT VALUES TO INDIA/PAKISTAN – UNSHELLED ALMONDS 2005-2014

Chart 64 highlights the massive variation, even in exports of shelled Almonds. Exports to India were around 4,000 Metric tons in 2007, rising to almost 16,000 Metric tons the following year. Similarly, exports to the EU were virtually zero in 2012, and yet they increased to over 6,000 Metric tons just two years later.

Chart 64. EXPORT VALUES TO INDIA/EU – SHELLED ALMONDS 2005-2014

POTENTIAL MARKETS Table 52 below indicates the main global importers of shelled almonds, as export destinations for Afghan production. India is the largest importer indicating that if Afghanistan increases its almond production is has a well established market to which it can further increase exports. Turkey, Italy, Canada are other coutnries which feature in the top global markets to which Afghanistan is already exporting, though exports are of relataively low value. As a result, these could be potential markets for high quality processed Afghan Almonds.

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Table 52. KEY GLOBAL MARKETS - SHELLED ALMONDS (2014)

Trade Value (1000 USD) Global Share India 499,016.37 45.09 Hong Kong, China 159,490.11 14.41 Vietnam 119,193.32 10.77 United Arab Emirates 57,094.19 5.16 Turkey 43,899.03 3.97 Japan 37,000.60 3.34 Spain 27,268.01 2.46 Italy 19,473.18 1.76 China 18,852.44 1.70 Germany 16,191.07 1.46 United Kingdom 15,388.40 1.39

Figure 32 below provides the export map for Afghan shelled Almonds, showing existing and potential markets. Many new markets are probably within easy reach.


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Figure 32. AFGHANISTAN - POTENTIAL EXPORT MARKETS FOR SHELLED ALMONDS


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KYRGYZSTAN WALNUTS The main markets to which Kyrgyzstan exports walnuts (unshelled and shelled) are indicated in Table 53 below. Currently for shelled walnuts Turkey and China are the primary markets. China and Turkey are also the two key markets for unshelled walnuts. Charts 65 and 66 below also indicate that for unshelled walnuts, Turkey is the larger market and has grown faster than China while for shelled walnuts the growth of China as an export market has been significant. Given that the total volume of shelled walnuts is higher in exports from Kyrgyzstan, China is the most significant market on which to focus.

Table 53. MAIN KYRGYZSTAN EXPORT MARKETS FOR WALNUTS

Unshelled Shelled Key Markets

Trade Value in US$ 1000

Global Share

Key Markets

Trade Value in US$ 1000

Global Share

Turkey 224.665 58.02 China 5,585.31 53.32 China 122.85 31.72 Turkey 2,478.87 23.66 Georgia 23.57 6.09 Georgia 486.53 4.64 Kazakhstan 15.84 4.09 Russia 443.85 4.24 Austria 0.33 0.08 Italy 326.38 3.12 Korea, Rep. 285.60 2.73

Chart 65 shows the growth in market volumes of unshelled walnuts over a seven year period, from 2007 to 2014. Exports have more than doubled to Turkey during this period though China has also increased demand. Though the Chinese and Turkish economies are suffering as a result of weakened macro-economic fundamentals, demand for walnuts remains strong and these markets will continue to increase. The Gulf States too, through principally the UAE, would also appear to be an export destination worth considering.

Chart 65. GROWTH IN MARKET VOLUMES – (UNSHELLED) WALNUTS

Chart 66 shows the considerable potential for export of shelled walnuts to China in particular, and as a proximate market with considerable purchasing power, robust growth is expected to continue. With the medium to longer term growth outlook for China – which is already a US$ 9 trillion GDP economy – makes China an export market of choice in particular. Turkey too, which continues to have huge potential, will remain a considerable market for this product. Strengthening institutional ties, establishing platforms for national private sector dialogue, among other factors, will be key.

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Chart 66. GROWTH IN MARKET VOLUMES (SHELLED) WALNUTS

OTHER POTENTIAL EXPORT MARKETS Table 54 and 55 below indicate some of the key global importers as potential export destinations for Kyrgyzstan. Other than Turkey and China, Italy is a market to which Kyrgyzstan exports and it is one of the main global markets as well so this could be a potential market since it imports large volumes. Trade shows for products could be established there. In terms of shelled walnuts, Germany (since there is existing familarity with the EU) and Rep of Korea (since it is a key global market and a market to which Kyrgyzstan already exports) can be considered as potential markets for this product. Figure 33 provides the export map for Kyrgyzstan walnuts, highlighting existing and potential markets.

Table 54. KEY IMPORTERS-WALNUTS IN SHELL

Importer Country Value in 1000 US$ Global Share Turkey 172,991.38 15.76 Italy 161,995.37 14.76 Vietnam 129,949.34 11.84 Hong Kong, China 127,703.62 11.64 United States 109,344.02 9.96 Spain 88,969.01 8.11 Germany 60,601.38 5.52 China 50,058.76 4.56 United Arab Emirates 28,194.71 2.57 Mexico 23,443.66 2.14

Table 55. KEY IMPORTERS-WALNUTS SHELLED

Importer Country Value in 1000 US$ Global Share Germany 229,731.43 11.82 United States 212,699.93 10.94 Korea, Rep. 146,799.43 7.55 Japan 142,441.18 7.33 Spain 114,407.50 5.89 Netherlands 100,980.08 5.19 Canada 92,290.07 4.75 United Kingdom 87,649.34 4.51

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Figure 33. KYRGYZSTAN - POTENTIAL EXPORT MARKETS FOR SHELLED AND UNSHELLED WALNUTS


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TAJIKISTAN TABLE GRAPES Currently the main market to which Tajikistan exports grapes is Kazakhstan; both for fresh grapes and raisins. The only other market to which Tajikistan has been exporting fresh grapes, though to a much lower extent, is Russia (18%) in 2014. Table 56 provides details for export volumes, again showing a vast gap between production and exportable produce. Chart 67 below indicates that Kazakhstan is increasing its share of imports, though overall trade volumes have significantly fallen.

Table 56. EXPORT MARKETS FOR FRESH GRAPES-2014

Trade Value in US$1,000 Share in Exports Kazakhstan 685.61 81.94 Russian Federation 151.16 18.06

Chart 67 also shows that significant export figures in 2006 from Russia have subsequently dropped hugely, though demand in Russia remains strong. Clearly, a number of structural constraints have been hit, though many other export markets could be positioned to fill this gap.

Chart 67. EXPORT MARKETS FOR FRESH GRAPES - 2005 TO 2014

Processing, as Afghanistan does, adds considerable value and makes it easier to move the product to distant markets. Table 57 show the main current market for raisins as Kazakshtan, with China, US and Belarus importing very low volumes/shares. Looking over trade volumes over the last ten eyars it can be seen that Kazakstan has been slowly replacing most other markets as the main importer of raisins. China though has only recently emerged as a market, even though volumes are very low.

Table 57. EXPORT MARKETS FOR RAISINS - 2014

TradeValue in 1000 USD Share in Exports Kazakhstan 279.987 89.66 China 18.352 5.88 United States 7.65 2.45 Belarus 6.3 2.02

POTENTIAL MARKETS Tables 58 and 59 below indicate the key global markets for grapes/raisin and their share in global imports. The markets to which there is exposure in terms of already exporting grapes or raisins are the United States and China. Therefore these are potential markets that can be developed in the future.

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Table 58. KEY GLOBAL IMPORTERS-FRESH GRAPES-2014

Value(1000 USD) Share United States 946,044 12.27 Germany 737,025 9.56 Netherlands 695,675 9.02 United Kingdom 676,745 8.78 China 594,732 7.71 Russian Federation 336,981 4.37 Hong Kong, China 318,975 4.14 Canada 282,483 3.66 Thailand 276,548 3.59 France 222,418 2.89

Table 59. KEY GLOBAL IMPORTERS-RAISINS-2014

Trade Value in 1000 USD Global Share United Kingdom 247,681.96 16.54 Germany 160,652.20 10.73 Netherlands 108,907.71 7.27 Japan 82,571.64 5.51 Canada 68,370.70 4.57 France 59,765.63 3.99 Brazil 48,490.65 3.24 Australia 47,782.81 3.19 Belgium 44,831.89 2.994319

Figure 34 provides the export map for Tajikistan Table Grape and Raisin exports, highlighting existing and potential markets.


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Figure 34. TAJIKISTAN – POTENTIAL EXPORT MAP FOR TABLE GRAPES / RAISINS


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Section K. PROPOSED BANKABLE INVESTMENTS Bankable investments are projects that can attract financing. Financing can be through grants, loans or private equity and financing models can be public, private or public private partnerships. As a result, there are numerous funding modalities that can be considered for the development of the three priority selected products; it is hoped that the majority of investments will be private. We have proposed (see below) a set of interventions targeting micro, meso and macro parts of Almond, Walnut and Grape value chains. We outline an initial summary of these proposed interventions, which target gaps while also exploiting the potential for greater commercial viability in export markets, including strengthening forward and backwards linkages. The fundamental comparative advantage of the AKT Consortium is that it is in essence a partnership between public and private interest, and as a result options to explore Public Private Partnership (PPP) models for the development of these value chains appears compelling. Moreover, as grant-based aid systems are being revamped to allow greater clarity on engagement with the private sector, and with UNDP leading the way in establishing public private dialogue platforms, we believe that PPP financing arrangements should be prioritized over standard grant based flows. BANKABLE PROJECTS Figures 36 to 38 below outline the proposed micro, meso and macro value chain development options to strengthen production and supply chain management. They outline the proposed investments at the following four stages of the value chain: ! Production; ! Aggregation; ! Processing; and, ! Distribution and marketing. These are indicative investment models that require further development, and costing. It has been assumed that the second AKT workshop will deliberate on these findings, and to agree the preferred constellation of investment partners for a specific product. This will also mean choosing geographical locations, funding modalities, project management structures and key performance indicators. The project financing arrangements would be developed for future road shows, to include private and public participation. EXPLOITING VALUE CHAIN GAPS We have identified the major value chain gaps for investment for each product, based on a review of market requirements, and these have led to the identification of a preferred set of entry points for investment. Agreeing on which gaps should be prioritized will depend on the results of public private dialogue; and options for this are presented in Section L below. We will propose options during the Second Workshop, as we are unsighted with regards to the financial resources that might be made available for the implementation phase.

Mahagrapes Grape in India

A success story in horticultural exports from India is that of a marketing partner named Mahagrapes (http://www.mahagrapes.com) for a collection of cooperatives that started exporting grapes to Europe in the early 1990s. As reported by Roy and Thorat (2006), in the first five years of exports, the cooperatives faced extremely high rates of rejection (at times greater than 80 percent). With the aid of the public sector, the cooperatives were able to install cold chains and pre-cooling facilities, and facilitate high rates of information dissemination related to IFSS. Consequently, the rejection rates came down substantially to less than 10 percent in late 90s and to less than 1 percent after 2001. Mahagrapes, the marketing partner of cooperatives, built upon an existing network of producer organizations and now provides product certification to farmers to meet Food Safety Standards.


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BUSINESS INVESTMENT PLANS Before the implementation phase, business plans (setting goals, objectives, rationale, business case, stakeholders, rates of return, key performance indicators and financials etc.) will need to be developed. These would need to be short 10 page plans, similar to corporate ‘pitch books’ that can be taken on investment road shows, to entice the private sector. The investment plans must clearly present how to best position public support in value chain development, to improve the business and enabling environment for a specific product, based on the comparative advantages of the parties (not- for-profit and for-profit). In particular, creating financial products for a specific crop and value chain stage will be key, as also will be strengthening B2B and B2G dialogue INDICATIVE RATES OF RETURN The investment suggestions presented below are proposed precisely because they conform to the feasibility criteria established by the AKT, and because they are considered vital in the current context. Of critical importance, economic analysis indicates that the total return on investment of the individual projects is greater than the sum of their collective development, once certain investments are grouped, prioritized, and sequenced to achieve maximal impact. It is therefore assumed that the principal goal of value chain development is to facilitate the spatial organization of economic activity as a catalyst for faster growth across the supply and demand chain. The evidence for activity and project integration is compelling. ! Regional Integration Impact: The Asian Development Bank estimates that regional trade

benefits in South Asia increase the Economic Rate of Return for related regional investments by 3.5% and further that the impact of infrastructure investment on productivity depends more on the size of a country’s infrastructure network than on its level of development (see ADB Institute, 2009);

! Trade Cost Reduction Impacts: A similar study estimates that the accumulated reduction in trade costs resulting from “infrastructure” and “communications” investment between 2010 - 2020 are 11.5 per cent and 12.1 per cent respectively, for Central Asia (see ADB, “Infrastructures for a Seamless Asia,” p. 118);

! Road Corridor Impacts: A road network project in Kazakhstan aims to create a corridor

throughout Kazakhstan, helping to link Uzbekistan and the Kyrgyz Republic with the Peoples Republic of China (PRC). The ADB calculates a GDP growth premium of 3.19 per cent of baseline GDP by 2015, with significant GDP gains to countries as far as EU25 (0.27 per cent) and the US (0.15 per cent) (see ADB, “Infrastructures for a Seamless Asia,” p. 97);

! Trade Related Income Impacts: Regressing countries’ income per person on their trade share

(trade between countries) as well as their size (within-country trade) shows that the trade elasticity of income is about 1.4, that is, a 1% increase in the trade share on average raises a country’s income per person by 1.4%. (ADB, Economics Working Paper No. 234). In Thailand, around 40% of survey respondents associated electricity with increases in income (Chatterjee et al. 2004). In India, poverty rates were lowest for households near good roads and with electricity, and highest for households with neither (ADB, 2004);

! Trade Creation and Network Externalities: Integration increases access to a wider selection

of goods and services at a lower cost due to decreasing transaction costs. The main economic benefit of regional value chain infrastructure therefore derives from the development of network externalities (ADB, 2010).

Project level analysis alone does not explicitly analyze an investment’s distributional impact although grouping investments within an “anchor, ancillary and spinoff” framework provides for a clearer understanding of upstream and downstream benefits of any AKT investment The proposed investments outlined below have been selected because they conform to the criteria established and


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because they are projected to have a significant impact given existing production profiles, gap and competiveness analysis. They also leverage private capital and have one or more of the following types of impact (Table 60):

Table 60. UNDERSTANDING DIFFERENT PROJECT IMPACTS

# Impact Characteristic 1 Indirect impacts Anchor (i.e a nut processing plant) and ancillary projects spend money

on upstream and downstream goods and services. 2 Spillover Impacts Anchor projects provide demand for the infrastructure services needed to

operate and maintain the ancillary projects. 3 Catalytic Impacts Anchor and ancillary projects improve the productivity of local Micro to

Small Medium Enterprises (MSMEs) and producers, allowing them to increase value addition.

4 Imputed Impacts Anchor projects yield net government revenues, allowing continued investment in infrastructure and processing and export services.

Source: Geopolicity Inc. US Government, New Silk Road Economic Impact Assessment (EIA) 2011 These findings suggest that the most impactful investments leverage cross-border advantages (exports) and markets and are integrated around anchor, ancillary and spinoff projects, as outlined in Figure 35 below.

Figure 35. AKT ANCHOR, ANCILLARY, AND SPINOFF GAINS OF INTEGRATION THE IMPORTANCE OF ECONOMIC VIABILITY Connective value chain infrastructure and support systems reduce the economic distance between locations - the time and cost of trading between them - and thereby links and expands markets. AKT’s future growth prospects are therefore heavily dependent upon physical integration within the wider region and global trading communities and we expect higher rates of return (i.e. 18 to 24 percent) for the chosen activities, based on cross national comparative investments. While the discount rate (cost of finance) is not yet known, it is critical to utilize a PPP oriented model to lower total investment costs. A standard discount rate of 12% for infrastructure related components could be applied, though other elements will likely have lower costs and can be substantially grant driven; where justified. A major public good can be the AKT governments working with export market Governments to bring businesses together, for example. The proposed investments for the three products are presented below.


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Figure 36. AFGHANISTAN ALMONDS - PROPOSED MICRO, MESO AND MACRO VALUE CHAIN DEVELOPMENT OPTIONS


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Figure 37. KYRGYZSTAN WALNUTS - PROPOSED MICRO, MESO AND MACRO VALUE CHAIN DEVELOPMENT OPTIONS


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Figure 38. TAJIKISTAN TABLE GRAPES - PROPOSED MICRO, MESO AND MACRO VALUE CHAIN DEVELOPMENT OPTIONS


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NEW INSTITUTIONAL LINKAGES FOR AKT It will be vital for the AKT governments to avail themselves of the opportunity to establish new institutional linkages with a number of international initiatives that have been established globally to assist in getting model and adaptive PPPs off the ground. The World Bank, IFC, ADB and other bodies have developed highly specialized units dealing with such support, and as a result, AKT Governments and IICPSD would do well to seek institutional linkages with the following initiatives: ! United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) - PPP

Activities: ESCAP assists governments in building their capacity to engage the private sector, both as infrastructure providers and as private sector funders, in the development of transport infrastructure and services including through public-private partnerships. ESCAP is supporting governments to implement measures to promote public-private partnerships, including through the development of training materials on assessing PPP readiness. ESCAP also maintains contact with a network of PPP Units across the region. 24

! United Nations Economic Commission for Europe (UNECE) - PPP Activities: The main

objective of CECI in this area is to increase the expertise of governments to identify, negotiate, manage and implement successful PPPs. This will be done through exchange of knowledge and experiences of PPPs by member States, including experts from public and private sectors, particularly in the identification and testing of best practice. The activities will result in guides on best practice, studies and innovative tools that can be used in capacity-building programs and training. To achieve its objectives, CECI organizes meetings and conferences, drawing on the expertise of an international network of experts in the area of Public-Private Partnerships. It incorporates the work of the former PPP Alliance. 25

! Kazakhstan PPP Centre: Joint-stock company Kazakhstani Centre of Public-Private

Partnership was created in accordance with the resolution of the Government of the Republic of Kazakhstan No. 693 to provide the creation of specialized organization on the issues of concession. The Government is the sole shareholder and is represented by the Ministry of Economic Development and Trade. The vision is by 2020 to have successfully implemented PPP projects accounting for 20% of total investment with state participation in the country. 26

! International Project Finance Association (IPFA): The International Project Finance

Association (IPFA) is an independent, not-for-profit, professional members association dedicated to promoting and representing the interests of both public and private sector organisations involved in project finance and Public Private Partnerships (PPPs) worldwide. It has, as its members, the key players within the infrastructure and energy industry including, financial institutions, project sponsors, law firms, construction companies and operators active in PPP and project finance markets globally. The principal objectives of the IPFA are to: (i) encourage networking and dialogue between the public and private sector and (ii) provide up-to-date information on best practice, industry trends and new developments that can be immediately applied to projects. 27

! European PPP Expertise Centre (EPEC): EIPA is an independent institute, with a Board of

Governors comprising representatives of EU Member States and the Institute's associated members. These representatives form a permanent link between EIPA and national public administrations, and also guarantee a strong institutional network at the highest level of public administration throughout Europe. While this is an EU focused body, given the potential

24 http://www.unescap.org/themes/transport/finance-and-private-sector-participation 25 See http://www.unece.org/ceci/ppp.html 26 http://kzppp.kz/en/index/ 27 http://www.ipfa.org/about-ipfa/


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future involvement of the EIB, there may be latitude for gaining support through expert networking 28

! European Institute of Public Administration (EIPA): EIPA undertakes seminars and training

courses, e-learning, study visits, consultancy and research. 29 ! European Investment Bank (EIB) - Projects Pipeline: The EIB is the European Union's

bank. It is the only bank owned by and representing the interests of the EU Member States; working closely with other EU institutions to implement EU policy. EIB is the largest multilateral borrower and lender by volume, providing finance and expertise for sound and sustainable investment projects which contribute to furthering EU policy objectives. More than 90% of its activity is focused on Europe but it also supports the EU's external and development policies; which makes the EIB a potential partner in project financing. 30

! The Private Infrastructure Development Group (PIDG) mobilizes private sector investment

to assist developing countries in providing infrastructure vital to boosting their economic growth, and combating poverty. 31

! The Public-Private Infrastructure Advisory Facility (PPIAF), is a multi-donor trust fund

providing technical assistance to governments in developing countries in support of the enabling environment conducive to private investment. This includes the necessary policies, laws, regulations, institutions and government capacity. PPIAF also supports governments to develop specific infrastructure projects with private sector participation;32

! World Bank Global Infrastructure Facility (GIF): The newly established GIF is focused on

expanding the universe of infrastructure projects that have the potential to mobilize private investment, through support across the project preparation and transaction process, to include infrastructure investments in power, transport, water and sanitation. 33

We also believe there is a possibility of attracting Sovereign Wealth Funds – particularly from China and the Gulf States – to provide considerable investment in upgrading value chains, and in linking products to international markets. The analysis provided in the previous section demonstrates the increased commercial interest of certain countries, though China, Turkey and the UAE are notable. Table 61 below provides a list of the top 20 Sovereign Wealth Funds by assets under management, demonstrating the importance of AKT Governments opening communications with these funds, to create investments of mutual interest.

Table 61. TOP 20 SOVEREIGN WEALTH FUND RANKING BY ASSETS (USS$)

# Country Funds Assets (US$ Billion)

Origin

1 China CIC / SAFE / NCSSF / CADF 1,534.7 Non-commodity 2 UAE ADIA / ADIC / EIA / ICD /

IPIC / MDC / RIA 1,214.8 Oil

3 Norway GPF 882 Oil 4 Saudi Arabia PIF / SAMA 677.1 Oil 5 Kuwait KIA 592 Oil 6 Singapore GIC / TH 537.6 Non-commodity 7 Hong Kong HKMA 400.2 Non-commodity 8 Qatar QIA 256 Oil

28 http://www.eipa.eu/en/topic/show/&tid=149 29 http://www.eipa.eu/en/topic/show/&tid=149 30 See http://www.eib.org/about/index.htm 31 See http://www.pidg.org/ 32 www.ppiaf.org 33 http://www.worldbank.org/en/programs/global-Infrastructure-facility


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9 Russia RNWF / RRF / RDIF 181.8 Oil 10 Kazakhstan SKJSC / KNF / NIC 156.5 Oil 11 United States APF / NMSIC / PWMTF /

PSF Etc. 142.4 Oil & Gas / Non-

commodity 12 Australia AFF / WAFF 95.3 Non-commodity 13 South Korea KIC 84.7 Non-commodity 14 Libya LIA 66 Oil 15 Iran NDFI 62 Oil 16 Algeria RRF 50 Oil 17 Malaysia KN 41.6 Non-commodity 18 Brunei BIA 40 Oil 19 Azerbaijan SOFAZ 37.3 Oil 20 Ireland NPRF 27.4 Non-commodity


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Section L. AKT PUBLIC PRIVATE DIALOGUE OPTIONS Of the many issues that the AKT Consortium will need to focus on, further developing public-private dialogue around the chosen products will be critical to long term success. To develop these value chains effectively, governments, businesses, Chambers of Commerce, civil society, research institutes, financiers and donors must come together to promote the chosen sub-sectors, while also strengthening evidence and promoting access to information. Through the AKT Consortium, the number and range of stakeholders will need to increase, to include large national and international firms operating in these sectors. The AKT Consortium could establish Product Working Groups, bring public and private sector operators together, including farmers associations, traders and exporters. Critical to long term success will be building self-reliant market structures that can add considerable value, operating within the market place. For that to happen, the next phase of development of these value chains must become a bottom up and top down process. Analysis presented above shows the importance of lowering the costs of financing, developing targeted financial products, and in linking up national and international firms through investment road shows. It also shows the need to target technological transfers at the primary production, processing, aggregation and marketing phases of product development. PRODUCT PLATFORMS & B2B & B2G NETWORKS The best way to develop value chains is to establish product platforms and networks to assist in design, facilitation and implementation of commercially viable value chains supplemented with rural infrastructure projects to link products to markets. Left to its own resources, the private sector will likely remain fragmented and poorly invested, unless dynamic networks are developed that bring all key actors together. Critical here will be a focus on knowledge acquisition and management, information and market analysis, identification and development of replicable and up scalable business models, sharing experiences on binding constraints to firm development, and enhancing competitiveness. PRODUCT BRANDING The process of branding national products is not just a naming process. It is essential for focusing investors and consumers on a given product, on enhancing its quality and consistency, and on shelf appeal and marketability in a given product space. Once export maps have been agreed, and development pathways discussed, how a processed product appeals to a given market is as important as pricing. Branding is also one of the most important aspects of any business, be it large or small, retail or B2B. An effective brand strategy (for example for Afghanistan Almonds, Kyrgyzstan Walnuts from Arslanbob or Tajikistan Table Grapes) provides a major edge in increasing access to competitive markets. The power of a good name, a good logo or powerful visual image should not be underestimated to communicate the potential benefits of PPD aimed at improving conditions for private sector development. The AKT Consortium could support product branding and certification. If a brand is a promise of quality to a consumer, it allows a country or company to differentiate its product from a competitor. Governments should also support this brand, including international marketing, by representing: ! Product attributes; ! Product benefits; ! Brand Values; and, ! Brand personality. FINANCIAL FACILITATION The costs of financing – particularly in Kyrgyzstan – are prohibitive, and major reasons why many


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products are uncompetitive abroad. There needs to be a huge push within the AKT Consortium to work with International Finance Institutions, commercial banks and donors to develop financial products for farmers, traders, processors and exporters. Currently, the discount rate (cost of finance) is too high, undermining profits, and in the case of walnuts in Kyrgyzstan such a situation not only affects poverty rates it also impacts the sustainability of the forests themselves. Governments and donors should draw down the risk of investment.

INVESTMENT ROAD SHOWS LINKED TO RECCA The Regional Economic Cooperation Conference on Afghanistan (RECCA), which recently met in Kabul in September 2015, and at which Kyrgyzstan and Tajikistan were represented, selected the AKT project as a primary project to support in 2016 and 2017. The recent New Delhi and Washington DC Friends of RECCA meetings endorsed the regional economic cooperation strategy, and they have agreed to support investment Road Shows in the Gulf States, potentially Iran, India and Turkey. Bankable investment projects can be developed and national, regional and international private sectors can be brought together through this forum.

NATIONAL PRODUCT PORTALS While there are a number of national associations established for the selected products in the AKT countries, they need considerable support to increase their effectiveness. AKT could assist in establishing national product portals, perhaps sponsored by a leading international brand, to provide considerable information on product development, standards, processing equipment and market information. There is a large body of analytical work, and product pricing information, which could quickly be aggregated to serve as a considerable resource for agro-industry. Examples of successful investors and model farmers could be showcased. The portals could also: ! Pilot the establishment of new sub-national, national and regional private sector networks; ! Support existing national, regional, thematic and industry private sector networks; and, ! Create product portals to connect new and existing firms national, regional, thematic and

industry private sector networks and platforms, Support will need to be provided by the AKT Consortium to existing private sector networks to strengthen their activities and showcase leading practice, including by providing networks with training tools and guidelines. Support will also be provided to launch new private sector networks.

SOCIAL MARKETING Given that every farmer, trader, wholesaler, retailer and exporter and importer has access to social media, many countries have develops Apps for Android phones that provide up-to-date information to producers and consumers alike. In this regard, social marketing is the name given to attempts to bring about social change around a product and consumers by using commercial marketing techniques to target audiences. This approach can be linked to farmer extension systems, farmer associations and cooperatives, and can be critical to technological know-how and know-who transfers also. Social marketing can be used for a specific issue - for example that a new financial product has been developed and is available to walnut processors – available to those who might wish to use that product or service. Based on the standard model: ! Pre-contemplation: Farmers or traders often start from not knowing that an issue (i.e.

certification) at stake is a problem; ! Contemplation: Once they are presented with the facts and an option to certify a product at

marginal cost, they move to the contemplation stage; ! Implementation: The farmer gains access to the new certification process and requirements,

for example, and is guided to link that product to an exporter; and,

Sustainability: Once the solution has been adopted, the outcome of the process is monitored carefully, and checks made to promote market self-reliance.


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Section M. RECOMMENDATIONS This report has justified the final selection of high potential products from a list of pre-selected products proposed by the AKT Consortium. While many of the products have existing and future potential, it has been agreed to select one product per country for support, to meet the investment criteria established under the support. This means products with considerable export potential, products that can generate employment, products that be developed as an entry put for building strong supply and demand chain investments. The three products chosen through this analysis have been justified based on the results of primary and secondary data analysis, also combining field and desk based studies. While it would be possible to substitute Walnuts with Plums in Kyrgyzstan for example, such a decision eventually rest with the members of the AKT Consortium. What we have done, given the over-dependence on traditional trading partners (Kazakhstan, Russia, Pakistan and India for example) and lack of value chain processing and aggregation infrastructure as well as certification and packaging that discriminate against perishable products, is to balance two non-perishable products (Walnuts and Almonds) of considerable advantage with Table Grapes, given the potential for export market development of that product. There is also the capacity for Tajikistan – like Afghanistan – to become a major exporter of raisins which are easy to produce, store, brand and market. MARKET AND FINANCIAL FEASIBILITY We have established the market potential for each product assessed, and to the extent provided for under the Terms of Reference, been able to assess the market and financial feasibility of each product, against different export destinations. We have also assessed the Revealed Comparative Advantage of each product, conducted Country Benchmarking, assessed value chain strategy, considered export potential and export market maps, identified critical value chain gaps and considered the case for sustainable business models. We therefore recommend the following actions to be taken by the AKT Consortium: ! To review the draft Feasibility Study report, assessing the merits and demerits of evidence

and arguments presented in favour of a given product, market and value chain investment strategy;

! Provide feedback to the consultants on likely funding allocations and sources for the AKT implementation phase, after which economic and financial rates of return can be assessed;

! Assess options for sharing the burden of delivery across public and private actors; and, ! Maximize efforts to lower the hurdle rate for investors, as outlined above. RESOURCES AND ENVIRONMENTAL FEASIBILITY We believe that all three interventions will have a positive impact on both product potential and on resourcing and environmental context within which production is being transacted. Successful execution would increase production efficiency, maximize vertical integration for producers and national traders and exporters, and also increase the utilization of appropriate technology and know-how necessary to secure sustainable expansion. We have assessed (i) processing, storage and transportation requirements (ii) identified value chain as including infrastructure and human resources (iii) identified current practices of production, processing and marketing; and (iv) studied export markets including pricing, competitiveness and regulatory and quality compliance requirements. We therefore recommend the following actions for the AKT Consortium: ! Be clear about project fiscal space and resourcing parameters going forward; ! Balance between public and private capabilities through PPD; ! Assess linkages with the SDGs/GEF to mobilize additional support and advice – in particular

for the Walnut forests of Kyrgyzstan; and, ! Establish environmental safeguards.


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TECHNICAL FEASIBILITY The technical feasibility study involved an assessment of physical, technical and technological aspects of product development, whilst facilitating an assessment of the broad resources necessary for the proposed investment. The sources of financing for this investment can be envisaged, but are not clear. However, all of the products selected show high degrees of technical feasibility, though exporting Table Grapes will require a different investment approach and mix than Almonds and Walnuts. The biggest risks to technical feasibility relates to competent project management and coordination, and targeting of support to high potential producers and traders. Furthermore, given the implicit export orientation, and our preference for PPP-related funding modalities combined with grants and private equity, we recommend that the AKT Consortium focus on the following actions: ! Ensure that investments are carefully coordinated with similar ongoing actions and/or actions

where synergies can piggyback on existing capacities; ! Carefully consider the most appropriate funding modalities for each intervention, given the

risk that an overly grant-based approach frequently creates perverse incentives and is likely unsustainable. The exact PPP model (albeit heavily adapted, with or without a Special Purpose Vehicle) for a given investment shapes the enabling environment to address value chain gaps;

! Promote and support ‘pitch book’ development at the investment road shows; ! Develop a strong institutional partnership with public and private actors in export destination

markets; and, ! Support the development of production baselines and key performance indicators, carefully

tracking progress and building these into M&E systems. SOCIAL AND INSTITUTIONAL FEASIBILITY There is huge potential to augment (upwards) the incomes of producers and to generate considerable employment in processing, aggregation and marketing, through all the recommended interventions. Moreover, we propose a strong gender-based component for all interventions, to minimize social and gender exclusion. The Afghanistan Almond Value Chain – as demonstrated – has one of the highest employment potentials, as does Walnuts in Kyrgyzstan. We propose to make interventions labour -intensive where possible, and to focus on increasing profits gained by producers in particular, though technological transfers, improved post-harvest storage and packaging. As the value chain pricing work has shown, in most cases, producers gain less than 10-20 per cent of captured value, which is highly exploitative and leads to rural poverty. We recommend that the AKT Consortium adopts the following considerations: ! A focus on addressing gender and social exclusion through targeted investment; ! A focus on facilitating the establishment of self-reliant farmer, producer and exporter

associations; ! A focus on financing product development to meet the specific needs of value chain actors; ! Support for either Government or private sector certification and quality control programs; ! A focus on up scalable and replicable business models only, including pilots; and, ! A focus on promoting B2B and B2G relations within, between and beyond AKT states. OVERALL FEASIBILITY While further work may be required, we believe that the products selected are highly feasible, though no individual product meets all criteria set. As a result, we have chosen products the export of which can be scaled from existing production, processing, aggregation and marketing and distribution systems, allowing quick wins, win-wins and deeper reforms to emerge.


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Annex 1: Key Informants

Afghanistan Key Informants

Date Name Position Tajikistan workshop

October 15 Ahmad Shareer Shahriar

Deputy Minister of Programmes, MRRD, Kabul, Afghanistan

“ Haroon Rasheed Adviser to Deputy Shahriar, Afghanistan “ Imanaliev Daniyar

Sharshenbekovich Deputy Minister of Economy, Kyrgyzstan

“ Matluba Uljabaeva Chairperson, National Association of Small and Medium Businesses of Tajikistan (NASMBT)

“ Jocelyn Mason Senior Deputy Country Director, Programmes, Afghanistan

“ Erkina Urazbaeva Programme Associate, UNDP Kyrgyzstan “ Mrs Gulcin Salingan Deputy Director, UNDP IICPSD, Istanbul “ Joern Riekin Team Leader, Aid for Trade, Istanbul Regional Hub,

Regional Bureau for Europe and CIS, Istanbul

Afghanistan Field Visit November 10 Ahmad Shareer

Shahriar Deputy Minister of Programmes, MRRD, Kabul, Afghanistan

Haroon Rasheed Adviser to Deputy Shahriar, Afghanistan Hekmat Karzai Deputy Minister for Foreign Affairs November 16 Assadullah Zameer H.E. Minister of Agriculture Zia Massood Special Advisor to the President on Good Governance Erhsad Ahmadi Previous Lead Istanbul Heart of Asia Process Saad Mohseni Entrepreneur Omar Kahilwal Chief Economic Advisor to the President Baryaly Artifi Marvarind Fruit and Nuts Wahid Waissi DG for Economic Affairs, MoFA Massoud Amer UNDP Barekzai Dealawr Office of the President Hamid Karzai Former President of Afghanistan Obaid Ibrahim Business Owner and Trader November 18 Habib Wayand Former MRRD Adviser Suleman Kakar Village Elder and Former Deputy Minister Nadeem Ul Haq Former Minister of Planning in Pakistan Albana Vuji Trade Competitiveness Export Solomon Moore Governance and Exports Vegetable Traders and Transports – Pakistan and Iran Haji Gallbadin Nut Trader Mohib Allah Nut Trader Haji Dawod Nut Trader M. Naima Nut Trader Hisker Khan Farmer / Producer Haji Hamed Farmer / Producer Nower Sayed Nut Trader Sayed Mohammed Farmer / Producer Howja Dawod Farmer / Producer Haji Gallah Vegetable grower Kabul


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Ahmed Shah Vegetable grower Kabul Haji Mher Allah Vegetable grower Kabul Joma Khna Mazar Traders Ajmal Agh Herat Saffron Mostafa Vegetable grower Kabul Barkzi Fruit and Nut Trader Haji Hosahalla Herat Industrial Processing Ismail Khan Kandahar Pomegranate Farmer Merwis Trader Abdulla Wahid Nut Trader Gallam Mohammed Industrial Processing Ismari Kandahar Exporter / Trader Mafois. Fruit and Nut Trader Fresh Fruit Merchants Haji Sher Agh Kabul Exporter Shahai Fruit and Nut Trader Haji Hamyoown Parwan Trader Haji Marza Farmer / Producer Gullah Agh Kandahar Exporter / Trader Haji Fraid Parwan Farmer

Kyrgyzstan Key Informants

Date Name Position Tajikistan workshop

October 15 Ahmad Shareer Shahriar Deputy Minister of Programmes, MRRD, Kabul, Afghanistan





“ Erkina Urazbaeva Programme Associate, UNDP Kyrgyzstan “ Mrs Gulcin Salingan Deputy Director, UNDP IICPSD, Istanbul “ Joern Riekin Team Leader, Aid for Trade, Istanbul Regional Hub,

Regional Bureau for Europe and CIS, Istanbul

Kyrgyzstan field visit October 19 Diliara Alimzhanova Director, Association of Fruit and Vegetable Enterprises

(AFVE), Bishkek (and chair of coalition of Business Associations of Food Industries)

“ Eugene Ryazanov Director, Agro Asia, Bishkek “ Markus Ischer Country Director, Helvetas Kyrgyzstan, Bishkek “ Kanat Abdrahmanov Head of Investment Policy and PPP Division, Ministry

of Economy, Bishkek October 20 Alexander Avanessov UNDP Resident Representative/ UN Resident

Coordinator, Kyrgyzstan, Bishkek “ Erkinbek Kazybekov Assistant Resident Representative, UNDP, Bishkek “ Kubanychbek Ormushev Programme Associate, Programme Oversight & Support

Unit, UNDP, Bishkek


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“ Almaz Doronbaev Head, Agribusiness Competitiveness Centre (ABCC), Bishkek

October 21 Uran Chekirov Dep Director of Investment Promotion Agency (IPA), MoE

“ Mirlan Kubanychbekov Expert, Information & Analysis Division, IPA, MoE “ Asel Abanova GIZ, Bishkek “ Karaev Maadanbek

Adilbekovich Chairman, Kyrgyzstan Walnut & Forest Planters Association

“ Aibek Patiev PR & Networking Expert, Bishkek Business Club “ Burul Faridinova Bishkek Business Club “ Ormokeev J. Kyrgyzstan Walnut & Forest Planters Association “ Aitkul Burhanov Kyrgyz Association of Forest and Land Users (KAFLU) “ Elnura Joldosheva Kyrgyz Association of Forest and Land Users (KAFLU) “ Mambetakulov Z.T. State Tax Service under the Government of the Kyrgyz

Republic “ Aibek Mambetakunov A. Manager, NAIMA Plus LLC walnut processing

company, Kant town “ Mukaev A.A. Naima Plus LLC “ Kubanychbekov Specialist of Investment Promotion Agency (IPA), MoE “ Ibraimov N.N. State Customs Service under the Government of the

Kyrgyz Republic “ Daniyar Janybekov Specialist of Minister of Agriculture and Irrigation and

Acting Minister, Ministry of of Agriculture and Irrigation

“ Kim Eduark Nikolaivich Specialist of Minister of Agriculture and Irrigation and Acting Minister, Ministry of of Agriculture and Irrigation

“ Kangeldivea A. Ministry of Economy of Kyrgyz Republic “ Baijumanova E. GIZ, Bishkek “ Sharipa K Aimanbaeva Director, Chamber of Commerce & Industry (CCIK),

Kyrgyzstan “ Amangeldy Davletaliev Senior Vice-President, CCIK October 22 Abdulhakim Islamov President, Seed Association of Kyrgyzstan “ Nazgul Mambetalieva Marketing Manager, EcOproduct Asia Ltd “ Arstanbek Ishenbayev CEO, Agroproduct “ Ghoduev Erkinbek

Uraiymovich Deputy Minister of Irrigation and Acting Minister, Ministry of Agriculture and Irrigation

October 23 Sanzhar Sultankulov Commercial Director LLC Falcon Group (and founder of Organic Farmers’ Union, Kyrgyzstan)

“ Julia Ssergeevna Journalist, LLC Falcon Group “ Gulnaz Kaseeva Chairperson, Agrolead, Bishkek “ Aitkul Burhanov General Director, Kyrgyz Association of Forest and

Land Users (KAFLU) “ Elnura Zholdosheva Manager, KAFLU “ Askat Kysanov North Kyrgyzstan Coordinator, KAFLU “ Maadanbek Karaev General Director of the Walnut and Forest Planters

Association (WFPA), and Gold Walnut Ltd “ Urmat Takirov UNDP Coordinator of Aid for Trade, Kyrgyzstan October 25 Umut Egemberdieva Gender mainstreaming adviser, Agro Horizon Project,

Osh “ Himiay Suyerkulova Coordinator for Osh and Batken oblasts, Community

Development Alliance, Osh Oct 26 Ismail Arapov Project Manager, Organic Cotton Production and Trade


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Promotion Project, Helvetas, Jalal-Abad “ Nurbek Kainazarov Chair of Biofarmer Cooperative, Jalalabad “ Zakirhodja Sarymsakov Biodiversity specialist, PEU Lesic-South, Jalal-Abad “ Davlet Mamadzhanov Walnut specialist, PEU Lesic-South, Jalal-Abad “ Mizamidin Satygulov Association of Forest and Land Users, Jalal-Abad “ Tobias Gerhard International Adviser, Agrolead/ GIZ “ Kanybek Aitakalov Director, Vega Plus LLC (walnut processor), Jalal-Abad “ Bakut Zakirov Manager, Vega Plus LLC, Jalal-Abad “ Sovetbek Kenzjebaev Pistaccio expert, FAO/ Institute of Forest Products,

Jalalabad “ Prof Kamil Ashimov Pistaccio expert Oct 27 Abdulrakim Sarymsakov Biodiversity specialist, PEU Lesic-South, Jalal-Abad “ Usaev Ashumanat Head of Department of Agriculture and Natural

Resources, Jalal-Abad oblast administration “ Isaev A.J. Head of Regional Development Region Office of the

Plenipotentiary Representative of the President of Kyrgyzstan in Jalal-Abad

“ Baimyrzaeva A. Leading specialist of the Department of Regional Development Region, Office of the Plenipotentiary Representative of the President of Kyrgyzstan in Jalal-Abad

“ Djenaliev Nurbeck E. Head of the sector of the economy, investment and foreign economic relations of the Office of the Plenipotentiary Representative of the President of Kyrgyzstan in Jalal-Abad

“ Bagyshev S.M. Acting head of the Jalal-Abad regional branch of the Southern inter-regional department of the Ministry of Economy

“ Tashpolotov R. Head of the Department of Agriculture Statistics, Jalalabad Regional Department of the National Statistical Committee

“ Kochorov A.B. Chief specialist of the Jalal-Abad regional administration of the State Agency of Environment and Forestry

“ Rahat A Borbieva Coordinator of the NGO "AgroLead", Jalal-Abad “ Jusupova Ch. Local expert, Center for promotion of civil society, city

of Jalalabad (NGO) “ Kadyraly Uuly M. Section Head Office of the Plenipotentiary

Representative of the President of Kyrgyzstan in Jalal-Abad

“ Ten Lubov Ivanovna Team leader of expert group, Adviser to Minister, Ministry of Economy

“ Toktogulova N. Expert on economic components of sustainable development (budgeting)

“ Aleksander Temirov Expert on the social components of sustainable development

“ Anna Kirilenko Expert on environmental pillar of sustainable development

“ Vladimir Korotenko Strategic planner for sustainable development, environment and social affairs

“ Zul’fiay Kochorbaeva Expert on gender and conflict reduction “ Chinara Kynatova Chief specialist of the regional development policy,

Ministry of Economy


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“ Begaliev A. Expert, Information and Analysis Department of Investment Promotion Agency, Ministry of Economy

“ Temirbaev Expert “ Junusov O.E. Head of Production and Technical Department of

Capital Construction Administration (housing and civil construction)

“ Mamatalieva G.A. Deputy director of the regional center of family medicine

“ Toktosunov A. Director of the Regional Methodological Center, Ministry of Education and Science

“ Chinara Babanova Executive Director, Wealth of Kyrgyz Forest Commodity Service Cooperative, Jalal-Abad

Oct 28 Abdelrashit Halmurzaev Head, Moltushum Cooperative (processor of dried apricots), Batken

“ Taalaibek Azimov UNDP Area Manager, Batken Area-Based Development Programme, Batken, UNDP

“ Talaibek Isaev Component Coordinator, Aid for Trade Project, Naryn Area-Based Development Programme, Naryn, UNDP

“ Musurrmankulova. J Chief of Staff, Batken Oblast State Administration “ Sattarov A.J. Leading Specialist, Batken Oblast State Administration “ Mataev A.K. Chairperson, Batken Jemishi Agriculture Co-Operative “ Abdyldaev B. Manager, Centre for Processing Dried Fruit, Batken “ Pinazarov Manager, Centre for Processing Dried Fruit, Batken Oct 29

Medetbek Aidaraliev Head of Administration, Aksy Rayon, Kerben town, Jalal-Abad oblast

“ Uluk Atamyrza Yyly Assistant Head of Administration, Aksy Rayon, Kerben town, Jalal-Abad oblast

“ Algyl Kochorbaeva Market lady, Kerben bazaar “ Mavluyda Kozhbekova Market lady, Kerben bazaar “ Kula Sadlon Onion farmer, Shamaldysai village, Nooken rayon, Jalal-

Abad oblast Oct 30 Baktygul Satykulova Programme Manager, Training & Extension System

Centre (TES), Osh “ Mairambek Imetov Manager of Operations Department, TES, Osh “ Joldoshev Bolot

Sooaonbaevich Head of Regional Local Development, Osh Oblast Administration

Nov 30 Sanjar Altymyshev Assistant, Turkish Cooperation and Coordination Agency (TIKA), Bishkek

“ Seit Ali Avju Coordinator, TIKA, Bishkek (pending) TBD Trade Department Officer, Turkish Embassy, Bishkek


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Tajikistan Key Informants

Date Name Position

Tajikistan workshop

October 15

Ahmad Shareer Shahriar Deputy Minister of Programmes, MRRD, Kabul, Afghanistan





“ Alexander Zuev UNDP Country Director, Tajikistan “ Gulcin Salingan Deputy Director, UNDP IICPSD, Istanbul “ Joern Riekin Team Leader, Aid for Trade, Istanbul Regional Hub,

Regional Bureau for Europe and CIS, Istanbul “ Erkina Urazbaeva Programme Associate, UNDP Kyrgyzstan October 16

Field Visits Farmers, trader, wholesalers from Gisar / Tursunzade and around the Zeravshan River

October 17

Field Visits Farmers, trader, wholesalers from Gisar / Tursunzade

October 18

Field Visits Farmers, trader, wholesalers from Sughd Region around Ayni district

October 19

Field Visits Farmers, trader, wholesalers from around Qurghonteppa on the road to Kulob

October 20

Alexander Zuev UNDP Country Director, Tajikistan

October 21

Field Visits Farmers, trader, wholesalers along the road to Chindara.

Tajikistan field visit Nov 2 Mukhammadjon

Eshbadalov Agriculture Expert, Central Asia Agrifinance Project, IFC, Central Asia, Dushanbe

“ Manuchehr Rahmonov Senior Economic Development Officer, UNDP Communities Programme, Dushanbe (focal point for study in Tajikistan)

“ Parviz Akramov National Coordinator, Aid for Trade Project, Dushanbe “ Parviz Rashidov Trade Policy Specialist, AfT project, Dushanbe “ Laurent Kaelin Team Leader, ECTAP (EU project), Dushanbe “ Usmonkul Boturov Agronomist, ECTAP (EU project), Dushanbe “ Jamshed Boboaliev Junior Local Agro Finance Expert, ECTAP (EU project),

Dushanbe “ William Kruse Deputy TL and Economist, ECTAP (EU project),

Dushanbe “ Ted Langridge Senior International Food Testing Laboratory Expert,

ECTAP (EU project), Dushanbe “ Farukh Kasimov Deputy Team Leader, Tajikistan Climate Resilience

Finance Facility (EBRD) Nov 3 Chantal Dupasquier Chief, Investment Policy Reviews, Division on

Investment and Enterprise, UNCTAD, Geneva “ Ariel Ivanier Investment Policy Reviews, Division on Investment and


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Enterprise, UNCTAD, Geneva “ Zabirzoda Nekruy Head of Tajik Invest, Dushanbe “ Kristine Laabs Director of KfW Development Bank Office, Dushanbe;

Chair of Economy & Trade Development Cluster of the Tajikistan Development Cooperation Council

“ Marifat Shokirova Ministry of Employment “ Daniel Zaretsky Member, American Chamber of Commerce in Tajikistan “ Mullokhol Ismoilov Head of Department of Industrial Sectors Development

& Infrastructure, Ministry of Industry “ Nazarov Bahodur Head of Dept of Agrarian Policy and Private Sector

Support, MoA “ Zamonov Salohiddin Dept of Agrarian Policy and Private Sector Support,

MoA “ Lola Umarova Hydrologist, MoA “ Nigina Anvari Deputy Chairman, State Committee on Investments and

State Property Management of the Republic of Tajikistan

“ Abdujaborov Numon Head of Investment Section, SCISPM, Dushanbe Nov 4 Muminov Muhamadi Chairman, SAROB “ Sanginov Jamshed Sales Manager, SAROB “ Juraev Shavkat Agriculture Development Specialist, SAROB “ Bozoriev Yormuhammad Training Coordinator, SAROB “ Ziyodulloev Qutfullo Agriculture Development Specialist, SAROB “ Zara Mahmudova Head of Office, GIZ, Dushanbe, Tajikistan “ Boyakov Davlatali Chairman, Aquajuice Corporation, Dushanbe Nov 5 Viorel Gutu FAO Representative in Dushambe “ Azizbek Sharipov Chief, National Association of Dehkan Farms (NADF),

Dushambe “ Miralizoda Abdusalom Deputy Minister, Ministry of Employment “ Farrukh Tyuryaev General Director, ASTI, Dushambe Nov 6 Nazarali Yorov Ittifoq, Shahrinav District, Jamoat Ittifoq, village Selbur-

2 “ Islom Masodikov Trader, Sogd region, Khujand city “ Usmanov Nematjon Commercial grape farmer/ trader, Vangebag village,

Tursunzoda town Nov 13 Mustafo Butun Program Coordinator, TIKA (Turkish Cooperation &

Coordination Agency), Dushanbe “ Mirahmad Rahmatov Executive Director, AAT – Agribusiness Association of

Tajikistan “ Hakki Barutcu Commercial Counsellor, Embassy of the Republic of

Turkey “ Gulru Jabborzoda Deputy Minister, Ministry of Economic Development

and Trade, Republic of Tajikistan “ Manizha Mamahabieva International Finance Corporation, Dushanbe

Qalandarov Rustam Head of Grapes Dept., National Horticultural Research Institute, Dushanbe

Firuz Abdunazarov Head of Food Industry Dept of Ministry of Industry and New Technologies

Ibrohim Ahmedov National consultant, FAO, Dushanbe

Nov 23 – Nov 25

Sulangov Mahmadzamon Onion scientist, Tajikistan Agricultural Academy, Dushanbe

Nov 26 Muslimov Atokhuja Commercial onion grower, Qumsanjir district, Khatlon region


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“ Gadoi Naimov Commercial onion grower, Qumsanjir district, Khatlon region

“ Usmanov Nematjon Commercial grape farmer/ trader, Vangebag village, Tursunzoda town, Shahrinav district

Nov 27 Makhuash Qalandaroua Programme Manager, DFID, Dushanbe “ Laura Cizmo Economic Growth TL, USAID, Dushanbe


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Annex 2. List of Documents Consulted Ackerman, J. M. (2005). ‘Social Accountability in the Public Sector: A Conceptual Discussion’. Social Development Papers 82. Washington, DC: World Bank. Afghan Export Promotion Agency (2014) Afghan Almond Cost Competitive Analysis 2014 AISA (2007) Feasibility Study for Almond Subsector Plan: Operationalising processing plant in Mazar ARTF (2010) Draft ARTF Incentive Program Sy1390 (2011/12), Administrator’s Technical Review: Structural Benchmarks Bates, R. (1999). ‘Ethnicity, Capital Formation and Conflict’. Working Paper 12. Washington, DC: World Bank. Beath, A. B., Christia, F. C. And Enikolopov, R. E. (2013) Randomized Impact Evaluation Of Afghanistan’s National Solidarity Program. Independent Evaluation. MIT. Bishkek Business Club (2015). Walnut business in Kyrgyzstan: state and prospects of development. Presented at the round table meeting at MoE, October 21st, 2015. 7pps. Bliss Frank (2010). Social and Economic Change in the Pamirs (Gorno-Badakshan, Tajikistan). Routledge. Engel. E. et al (2015). How much would you pay ? Adapting fee-based agricultural advisory services to mountainous regions in Tajikistan. SLE publication series – S262. Humboldt University Berlin/ GIZ. 107 pps. Boots of Peace (2006) GMP and HACCP for Tree Nuts and Dried Fruit Processing Plants in Afghanistan Bourne Willie (2012). Analysis of the Walnut value chain in the Kyrgyz Republic. Final Draft working paper. 95pp. May 2012. PROFOR Program on Forests. Washington, USA Business and Finance Consulting (2014). Agriculture Finance Bulletin. Edition #2, April 2014 Concept Master (2014). Analysis of external markets for dried fruits. 48pp (Russian) Davon, E.D. Et Al (2013) NSP Subproject Sustainability: Altai Consulting. De Wulf L. and J. B. Sokol (eds) (2004). Customs Modernization Initiatives: Case Studies. Washington, DC: World Bank. DEG, Presentation on DEG-Experience of SME Credit Guarantee Facility (CGF) in Afghanistan (June 2013); EcOproduct Asia (2015). Fruit juice availability sheet. 1pp. FAO (2012) http://faostat.fao.org/site/339/default.aspx FAO (2015). Pastachio value chain. Slide presentation. 21pp (Russian)


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Geopolciity Inc. (2012) Iraq Value Chain Analysis and Method, FAO Geopolicity Inc. (2014) Options for Transition and Sustainability of the National Solidarity Program, for the World Bank Geopolicity Inc. (2014) Trade and Product Competitiveness Analysis (Guideline) Geraedts. P. (2010a). Challenges for the future. Final workshop. EU SENAS project. “Support to the Establishment of a National Agricultural Advisory Service”. 24 sides. Powerpoint. October 13, 2010. Geraedts. P. (2010b). Short-term mission: extension services consultancy to the USAID family farming programme. December 8 – 30, 2010. 24pp. GIZ (2015a). Framework and Finance for Private Sector Development in Tajikistan: developing capacities for production, trade and financial systems. 2-page information sheet on programme funded by GIZ and UK Aid. GIZ Dushanbe. GIZ (2015b). Sustainable Economic Development in Tajikistan. 4-page information sheet on programme funded by GIZ and UK Aid. GIZ Dushanbe. GoIRA (2013) Central statistics organization year book, Kabul Afghanistan GoIRA/Geopolicity (2010) Afghanistan – Regional Resource Corridor Initiative (AR-RCI) Helvetas & ICCO Cooperation (2014). Analysis of value chains in Kyrgyzstan: apples, apricot, walnuts, kidney beans, raspberry and strawberry. 155pp. M Vector consulting, Bishkek. Fair and Sustainable Advisory Services HMG (2009) Scenario Planning, Guidance Note, Foresight Horizon Scanning Centre, Government Office for Science IFOAM (2012). Organic without boundaries. Celebrating 40 years (1972-2012). International Federation of Organic Agriculture Movements. 43pp. KAFLU (2015) Kyrgyzstan Walnut and Forest Planters Association. promotional brochure. 2pp. KAFLU (2015). Activities, development prospects and challenges. Kyrgyz Association of Forest and Land Users. 4pp. KAFLU (2015). October 2015. Opportunities and prospects for the development of nut crops in the Kyrgyz Republic. Presented at the round table meeting at MoE, October 21st, 2015. 25pps. Kruse. W. (2015). Enhanced competitiveness in agricultural value chains – gross margin calculations. ECTAP. 7pp. M-Vector (2013). Basic research for forming a programme in export of agricultural products from Kyrgyzstan. July 2013. 113pp. (Russian) Madybaev. M. (undated). Report on organic sector developed in Kyrgyzstan and analysis of organic markets in CIS and Europe. M Vector, Bishkek. 33pp MAIL (2104) Statistical Department, Ministry of Agriculture and Irrigation. Malakooti, A. M. Et Al (2012) The Sustainability Of CDCs: Altai Consulting.


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Marenin, O. (2005). ‘Policing Nigeria: Control and Autonomy in the Exercise of Coercion’. African Studies Review, 28 (1): 73–93 Microfinance Centre and ICCO (2011). Research on agricultural value chains in Tajikistan. December 2011. 124pp. Ministry of Agriculture (2010). System of agricultural extension. 13 slides, Powerpoint. June 16, 2010. Ministry of Agriculture (2012). Programme for reforming the agriculture sector of the Republic of Tajikistan for 2012-2020. pps 88-117 (English translation). Dushanbe, September 2012. MoFA, RECCA VI Conference Main Report Mumidjanov Hafis (undated). The project on the development of production pistachios and walnuts. 42pps. NaWi, Gender Survey (2012); Okenov Askar and Okenov Azamat (2014). Research on raw apricot kernels in the area of Batken region of Kyrgyzstan. 20pp. Bishkek (Russian) Ryazanov .E. (2011). Supply Chain Analysis: potato. Agro Asia. Bishkek. 22pp SENAS (2010). Presentation: SENAS Final Workshop. 13th October 2010. 6pp. State Agency on Environmental Protection and Forestry and KAFLU (2014). Programme for the development of nut crops in the Kyrgyz Republic until 2025. June 2, 2014. 11pps. (Russian) Swiss Cooperation Office in the Kyrgyz Republic et al. (2009). 1: 1,500,000 map showing natural vegetation zones (including walnut). Bishkek (Russian). Taste of Hatlon (2015). Try Real Taste. Brochure associated with the EYU-funded project “Development of Fruit and Vegetable Sector in Kyrgyzstan and Tajikistan”, in the framework of the EU-financed Programme Central Asia Invest, by British Expertise. TES Centre (2015). Promotional brochure. Training and Extension System Centre. Osh UNDP (2009) Police Perception Survey 2009 - The Afghan Perspective, UNDP Afghanistan Country Office UNDP (2015) AKT Project Document UNDP and Ministry of Foreign Affirs Finland (2015). Brochure “Wider Europe: Aid for Trade for Central Asia (Phase III), Tajikistan” USAID (2008) Case Study of the Poultry and Grape/Raisin Subsectors In Afghanistan USAID (2012) Market Assessment of Almonds, Raisins and Figs, Champ/USAID, Kabul Afghanistan USAID (2012). Tajikistan. FY 2011 -2015 multi-year strategy. 53pp. USDA (2012), National Agricultural Statistics Service, California Almond Price Report USDA (2013) Almonds, Tree Nuts: World Markets & Trade, Foreign Ag Service (FAS), USDA


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USDA (2013) Tree Nuts: World Market and Trade Vega Plus (2015). Promotional brochure for walnuts, dried fruits, pistachios. Jalal-Abad. Venglovsky.B.I. (2006). Bioecological peculiarities of renewal and development of walnut forests in Kyrgyzstan. National Academy of Sciences of the Kyrgyz Republic: Institute for Forest and Walnut Research. Kyrgyz-Swiss Forestry Support Programme (Inter-Cooperation). Bishkek. 170pp. World Bank (2005). ‘Building Effective States. Forging Engaged Societies’. Report of the World Bank Task Force on Capacity Building in Africa. Washington, DC: World Bank. World Bank (2007) The Challenge of Combating Corruption in Customs Administrations in The Many Faces of Corruption - Tracking Vulnerabilities at the Sector Level, Carlos Ferreira, Michael Engelschalk and William Mayville World Bank (2009) Fighting Corruption in Afghanistan – Summaries of Vulnerabilities to Corruption Assessment, July 2009 World Bank (2009) Interim Strategy Note for Islamic Republic of Afghanistan, Report No: 47939-AF World Bank (2009) Rapid Logistics Review: Transit of Afghan Good through Pakistan-Afghanistan Border Crossing and the Implication of Transit Trade on the Economies World Bank (2010) Afghanistan Economic Update, October 2010 World Bank (2012) “Afghanistan in Transition: Looking beyond 2014”, World Bank World Bank (2014) Agricultural Policy Note World Bank (2014). Project appraisal on a proposed grant to the Republic of Tajikistan, for an agricultural commercialisation project. 123pp. World Bank gender mainstreaming reports (2011-2013);


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ANNEX 1 ALMOND EXPORTING COUNTRIES AND SHARE OF WORLD MARKET (2013) Source: Atlas for Economic Complexity (2013)


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ANNEX 2 ALMOND IMPORTING COUNTRIES (2013) Source: Atlas for Economic Complexity (2013)


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AKT Agro-Food Feasibility Study Food Feasibility Study Main Report (DRAFT)December 7 2015

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