Agricultural Policy Monitoring and Evaluation 2021

17. Kazakhstan

Support to agriculture

Support to producers in Kazakhstan was estimated at 4% of gross farm receipts (GFR) on average in 2018-20. The share of potentially most-distorting gross producer transfers (based on output, including market price support and variable input use without input constraint) fell from an average 98% in the early 2000s to 75% in 2018-20. Support to fixed capital formation accounts for the majority of budgetary transfers to producers. Domestic prices were lower than world prices for several crops, generating negative market price support (MPS) worth 4% of GFR, but higher than world prices for livestock commodities, with MPS at just over 1% of GFR. Overall, average prices received by farmers were 2% below world prices. Reflecting individual commodity price gaps, single commodity transfers in 2018-20 were negative for rice, sunflower, maize, barley and cotton, but slightly positive for wheat and livestock products.

Support to general services (GSSE) accounted for 20% of budgetary expenditure for agriculture in 2018-20. Of this, spending on inspection and control made up close to 44% and spending on infrastructure 36%. Total support to agriculture (TSE) declined to 0.9% of GDP, but the corresponding share of the total budgetary support estimate (TBSE) increased to 1%. The share of GSSE in TSE increased slightly, from 19% in 2000-02 to 20% in 2018‑20.

Recent policy changes

Kazakhstan’s main recent policy changes were amendments to agricultural legislation and an update of the 2021 State Programme. The focus now is orienting agriculture towards import substitution, and developing exports of high value-added products, particularly for the beef sector.

The process of rationalising production subsidies continues: farmers’ access to credit is more transparent and their applications for subsidies are made publicly available.

The mandatory crop insurance system was transformed into a voluntary insurance scheme with a view towards expanding crop and livestock insurance markets in the country. The government subsidises half of insurance premiums.

The COVID-19 crisis-response package entailed support of KZT 5.4 trillion (USD 13 billion) or 9% of GDP. Immediate policy actions include trade restrictions and regulated prices for socially-important goods, cash transfers to vulnerable households, and targeted assistance to hard-hit sectors and small and medium-sized enterprises, including a deferral of loan payments.

Assessment and recommendations

• While total support to agriculture is small relative to the overall economy, most producer support is highly distorting, thus likely to influence farm management decisions, increase pressure on natural resources and distort markets.

• Within the framework of import substitution, government support to dairy farmers increased substantially in 2020. The policy focus on import substitution should be assessed carefully as it might lessen producers’ exposure to international competition and divert resources to rent-seeking activities.

• Implementation of the Sustainable Livestock Development Programme is an opportunity to develop a competitive, high-value, export-oriented beef sector. The programme could promote green growth and sustainability policies with climate-smart practices for beef cattle production, reduced greenhouse gas (GHG) emissions and improved agro-environmental outcomes of beef support. The programme is particularly important with the COVID-19 environment affecting employment countrywide.

• The subsidies for inorganic fertilisers and chemical inputs, and for industrial feed should be re-assessed in light of potential negative environmental impact.

• Lifting restrictions on food exports introduced under the state of emergency is welcome. They create an unpredictable trading environment that could disrupt the global food supply, adversely affect international food security and impact Kazakhstan’s trading partners, particularly in Central Asia. Emergency measures related to agriculture and agro-food products in response to the COVID-19 pandemic should be targeted, proportionate, transparent and temporary, and not create unnecessary barriers to trade or disrupt global agro-food supply chains.

• Agriculture is among the most risk-prone sectors in the country. Production shocks from weather, pests and diseases, and adverse movements in agricultural product and input prices impact farmers and agro-business firms, and can strain government finances. Kazakhstan could manage risks better by reducing potential losses and increasing productivity sustainably, thus improving overall resilience in the sector. Kazakhstan should adopt a broader, more integrated approach to risk management than the current system of ex ante public-sector activity associated with crop and livestock disease, and ad hoc, ex post emergency responses to local disasters.

• Reform of the crop insurance system is welcome and should increase the role of private insurers, reduce farmers’ costs and make the system more transparent.

• Efforts to provide more stable policy, streamline support to fewer measures, and create a national digital cadastre database for agriculture increase the transparency and credibility of reform, and should be continued.

• Establishing secure property rights for land, including simplified procedures for land acquisition, are necessary to improve the economic incentives for sustainable resource management. Farm decision-making could be improved by incorporating environmental concerns into agricultural policies.

• Agriculture is the second largest emitter of GHGs after the energy sector, and Kazakhstan should specify how much and how to reduce agricultural emissions to meet the country’s reduction commitments. Moreover, the lack of a co-ordinated and systemic approach hinders the country’s ability to increase its resilience to the effects of climate change, and steps should be taken to enhance agriculture’s adaptation to the impacts of climate change.

Figure 17.1. Kazakhstan: Development of support to agriculture

Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Figure 17.2. Kazakhstan: Drivers of the change in PSE, 2019 to 2020

Note: The producer price change and the border price change are not calculated when the negative price gap occurs at the commodity level for the current or previous year.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Figure 17.3. Kazakhstan: Transfer to specific commodities (SCT), 2018-20

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

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Table 17.1. Kazakhstan: Estimates of support to agriculture

Million USD

	2000-02	2018-20	2018	2019	2020p
Total value of production (at farm gate)	3 367	13 809	12 937	13 418	15 072
of which: share of MPS commodities (%)	76.6	60.1	61.0	62.4	56.9
Total value of consumption (at farm gate)	2 933	9 760	11 779	11 545	5 957
Producer Support Estimate (PSE)	286	653	434	1 017	509
Support based on commodity output	268	-345	-377	-74	-583
Market Price Support1	268	-426	-460	-179	-640
Positive Market Price Support	369	197	164	285	142
Negative Market Price Support	-101	-623	-623	-464	-781
Payments based on output	0	82	83	105	57
Payments based on input use	18	953	746	1 036	1 078
Based on variable input use	8	509	206	632	690
with input constraints	0	0	0	0	0
Based on fixed capital formation	10	439	534	400	384
with input constraints	0	0	0	0	0
Based on on-farm services	0	5	6	4	5
with input constraints	0	0	0	0	0
Payments based on current A/An/R/I, production required	0	42	57	55	14
Based on Receipts / Income	0	0	0	0	0
Based on Area planted / Animal numbers	0	42	57	55	14
with input constraints	0	0	0	0	0
Payments based on non-current A/An/R/I, production required	0	0	0	0	0
Payments based on non-current A/An/R/I, production not required	0	0	0	0	0
With variable payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
With fixed payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
Payments based on non-commodity criteria	0	0	0	0	0
Based on long-term resource retirement	0	0	0	0	0
Based on a specific non-commodity output	0	0	0	0	0
Based on other non-commodity criteria	0	0	0	0	0
Miscellaneous payments	0	2	7	0	0
Percentage PSE (%)	8.5	4.4	3.1	7.0	3.1
Producer NPC (coeff.)	1.09	0.98	0.97	0.99	0.96
Producer NAC (coeff.)	1.09	1.05	1.03	1.07	1.03
General Services Support Estimate (GSSE)	67	312	313	286	335
Agricultural knowledge and innovation system	3	50	39	57	53
Inspection and control	29	138	155	106	154
Development and maintenance of infrastructure	28	112	108	110	116
Marketing and promotion	0	5	4	6	5
Cost of public stockholding	5	0	0	0	0
Miscellaneous	1	8	7	7	8
Percentage GSSE (% of TSE)	19.0	20.5	24.6	15.5	23.4
Consumer Support Estimate (CSE)	-313	833	818	596	1 084
Transfers to producers from consumers	-288	282	313	61	474
Other transfers from consumers	-21	-5	-4	-10	0
Transfers to consumers from taxpayers	0	555	524	549	590
Excess feed cost	-4	0	-15	-4	20
Percentage CSE (%)	-10.7	9.3	7.3	5.4	20.2
Consumer NPC (coeff.)	1.12	0.97	0.97	1.00	0.93
Consumer NAC (coeff.)	1.12	0.91	0.93	0.95	0.83
Total Support Estimate (TSE)	353	1 520	1 271	1 853	1 435
Transfers from consumers	309	-278	-309	-51	-474
Transfers from taxpayers	65	1 802	1 584	1 914	1 908
Budget revenues	-21	-5	-4	-10	0
Percentage TSE (% of GDP)	1.6	0.9	0.7	1.0	0.8
Total Budgetary Support Estimate (TBSE)	85	1 946	1 731	2 032	2 074
Percentage TBSE (% of GDP)	0.4	1.1	1.0	1.1	1.2
GDP deflator (2000-02=100)	100	743	715	770	..
Exchange rate (national currency per USD)	147.38	380.38	344.90	382.87	413.36

.. Not available

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. 1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for Kazakhstan are: wheat, rice, maize, barley, sunflower, potatoes, cotton, milk, beef and veal, pig meat, sheep meat, poultry and eggs.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Description of policy developments

Overview of policy trends

In the late Soviet era, all sectors of Kazakhstan’s economy, including agriculture, were regulated by central planning. Production, the marketing of agricultural inputs and outputs, and processing and distribution of food were controlled by state enterprises. Agriculture was supported by high, administered prices and considerable input and output price subsidies, in addition to policies such as cheap energy and transport, which were not agriculture-specific. After the mid-1990s price liberalisation removed the benefit of output prices above world levels and key input prices below them. From the early 2000s, Kazakhstan vacillated in trade liberalisation. It was not until its accession to the WTO in 2015 that the country implemented more liberal measures.

Kazakhstan became an independent country in 1991 following the collapse of the Soviet Union. Stabilisation and transition to a market economy were its main economic challenges. During the transition, the agricultural sector was affected by economic shocks, land reform and reduced government support. The main agricultural policies were geared towards decreasing food import-dependency and increasing domestic food production (Baubekova, Tikhonova and Kvasha, 2021[1]).

Table 17.2. Kazakhstan: Agricultural policy trends

Period	Broader framework	Changes in agricultural policies
Prior to 1992	Soviet era Closed economy	Government control of the agricultural economy through regional trade controls, input supply controls, and the continuation of soft budget constraints Taxation of the agricultural sector to support the industrial sector Tariffs Low administrated prices on energy and transport
1992-1997	Initial structural reforms towards an open economy	Price liberalisation of agricultural products and inputs Emergence of new policy institutions
1998-2002	Economic crisis Stabilisation measures	Debt rescheduling Limited support to the sector Agrarian Credit Corporation created as main agricultural lender (credit at preferential rates) Restructuring agricultural enterprises
2003-2015	Agriculture as part of economic diversification	Price support Support for import-competing products Tariff protection for meat Taxation of agricultural exports
2015-present	Reforms to trade liberalisation	WTO accession 2015 EAEU membership in 2015 Elimination of payments per hectare for priority crops Promotion of producer co-operatives Increase in land tax rates Debt restructuring programme Introduction of investment subsidies Introduction of interest concessions Agricultural insurance reform

Source: (OECD, 2013[2]; Baubekova, Tikhonova and Kvasha, 2021[1]).

Producer support in Kazakhstan reveals no distinct long-term trend. The %PSE fluctuated considerably between 1995 and 2020. In some years, negative support provided through depressed market prices for some products offset budgetary allocations and positive support provided through higher domestic prices for others. However, overall policies are supportive of domestic producers (Figure 17.4). Net producer support was positive in most years, due also to increasing support related to the use of production inputs, in particular credit, over the past ten years. Overall, total budgetary support to agriculture increased relative to the size of the economy, now representing about 1% of GDP. As market price support was estimated as strongly negative in 2016, net TSE shows a substantial drop in that year. However, in addition to budgetary support to producers, support to consumers was also significant in recent years.

Figure 17.4. Kazakhstan: Level and PSE composition by support categories, 1995 to 2020

As a percentage of gross farm receipts

Note: A/An/R/I:Area planted/Animal numbers/Receipts/Income.

Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Main policy instruments

The State Programme of Agro Industrial Complex Development for 2017-2021 (hereafter, the 2021 State Programme) provides the agricultural policy framework in Kazakhstan. While maintaining the principles of the previous framework (Agribusiness-2020 Programme), the 2021 State Programme puts stronger emphasis on the development of, and support to, individual household plots and small farms, agricultural producer co-operatives and agriculture supporting services and infrastructure. In addition, some input subsidies including on seed, fertiliser and pesticides will be increased.

Kazakhstan applies a range of border and domestic price intervention measures. Border measures are implemented within the Customs Union of the Eurasian Economic Union (EAEU) and include tariff rate quotas (TRQ) and non-tariff measures. TRQs apply to imports of lower-grade beef and of poultry products.

Intervention in domestic markets is twofold. The State Commission for the Modernisation of the Economy undertakes intervention purchases of grains to support domestic producer prices. At the same time, consumption price stabilisation is in place for 29 commodities. Purchase occurs after harvest at market prices and commodities are stored and released at below-market prices later in the year.

For crops, per tonne payments go to oilseeds, rice, sugar beet and cotton to be used for processing. Headage and output payments support the livestock sector. Large commercial livestock producers receive most of these. Other forms of support to livestock are silage and fodder subsidies, support to artificial insemination and to the purchase of young cattle for feedlots.

Purchases of mineral fertiliser and high-quality seeds receive subsidies. Administered prices below market prices apply to diesel fuel sold to agricultural producers; total volumes supplied at these prices during sowing and harvesting periods are pre-determined as well.

Investment subsidies, together with concessional credit, represent the principal forms of support to agriculture. Concessional credit comes through numerous channels. Several credit agencies provide loans at reduced interest rates under the umbrella of the state company KazAgro Holding. Along with agricultural producers, food processors benefit from concessional credit and leasing of machinery and equipment from credit agencies of KazAgro Holding.

A complex approval system provides investment support. It applies to 39 priority groups, conditioned on compliance with a number of technical specifications and regulations, and has to be approved by regional authorities and in some circumstances by the Ministry of Agriculture.

Agricultural enterprises and individual farms benefit from special tax regimes with substantial concessions. For example, corporate and family farms enjoy a 70% discount on all business taxes applied in the country (property tax, social tax, VAT, profit tax and tax on vehicles). Since January 2016, primary processors and procurement organisations receive 100% subsidy of VAT on agricultural products from individual farms.

The land tax applies since 2015. Individual farms of less than 3 500 hectares are eligible for a Single Land Tax set as a percentage of the cadastre value of land owned or used, which replaces the land tax and the five business taxes mentioned above. Since 2015, individual farms pay a 10% income tax for physical persons on income above KZT 150 million (USD 0.4 million).

Harnessing information technologies is part of Kazakhstan’s long-term strategy to simplify, facilitate control, and improve the transparency and effectiveness of government support to agriculture. An electronic system of subsidy payments applies to most subsidy programmes. Applicants to KazAgro credit and leasing can apply electronically.

Work continues by the Ministry of Agriculture, the Ministry of Digital Development, and the Defence and Aerospace Industries on the creation of the National Spatial Data Infrastructure project, which includes a section on agricultural land.

The Law on the Regulation of the Agro-Industrial Complex, signed by the President in October 2019, allows using the results of space monitoring to identify unused lands and return them to state property. A new digital cadastre for agricultural land stores 6.5 million data inputs on land plots, including soil, geobotanical and agricultural lands.

The President’s Edict dated 6 May 2016 imposes a moratorium until 31 December 2021 on the introduction of private ownership of agricultural land and on the extension from 10 to 25 years of the maximum period of agricultural land rent to foreign entities.

Kazakhstan is a party to the Paris Agreement on Climate Change. Through its Intended Nationally Determined Contribution, Kazakhstan set an economy-wide target to reduce its total GHG emissions by 15% in 2030 compared to 1990, over a period starting in 2021. This target covers all emissions, including from agriculture. Specific targets or reduction plans for the agricultural sector were not defined.

Kazakhstan, together with Armenia, Belarus, Kyrgyzstan and the Russian Federation, is a member of the Treaty on the Eurasian Economic Union (EAEU) established in 2015. Kazakhstan’s border measures are implemented within the Customs Union of the EAEU and a number of national responsibilities in the area of custom regulations are transferred to the EAEU, including SPS and technical regulations.

Domestic policy developments in 2020-21

The main changes were amendments to agricultural legislation and an update of the 2021 State Programme. The principal priorities of the updated 2021 State Programme include: explicit focus on import substitution and export development; sustainable land use conditions in provision of concessional credit; shift the focus of investment support to priority areas; continued organisational reform of KazAgroHolding; focus on bringing land into productive use; establishment of land cadastre, land evaluation, preparations for considerable changes to the land taxation, including increased taxes for unused land.

The changes in the 2021 State Programme primarily affected the programme indicators, as well as some institutional changes following the creation of the new Ministry of Ecology, Geology and natural Resources. In this regard, several responsibilities and functions of the Ministry of Agriculture of the Republic of Kazakhstan were transferred to the new ministry, including sustainable management of water resources.

Furthermore, the updated State Programme aims to strengthen the agro-industrial complex towards import substitution and the development of exports of high value-added products. To achieve this the capacity utilisation rate of processing enterprises is to be increased through:

• subsidising farmers for products delivered for processing

• subsidising the costs of processing enterprises for the purchase of agricultural products

• providing investment support for the creation and expansion of processing enterprises

• subsidising the interest rate on loans issued to replenish fixed and circulating assets

• subsidising value-added tax to procurement organisations

In 2020, the government launched the preparation of a new State Programme for the period 2022-26. Key objectives of the planned State Programme include self-sufficiency of socially important food products, stable income for rural populations, a 2.5‑fold increase of farm labour efficiency, and a doubling of agricultural exports. A ministerial commission has been formed to start working on the plan.

In 2020, the World Bank approved a USD 500 million loan for the Sustainable Livestock Development Programme to support the development of environmentally sustainable, inclusive and competitive beef production in Kazakhstan. The borrowed funds will support the implementation of the State Programme in improving veterinary services and animal recording systems, scaling-up a farmer-centric service delivery model and improving agro-environmental policies for the sector. Over a period of five years (2021‑25), the programme aims to achieve a 10% increase in the share of public expenditure for sustainable beef production and processing, and a three-fold increase in the value of beef exports. In addition, around 20 000 small and medium-scale farmers are to be connected to export value chains. The funds will be disbursed on the basis of Programme-for-Results (PforR) – a financing instrument that links the disbursement of funds directly to the achievement of specific programme results.

In 2020, the Food Contract Corporation JSC (a subsidiary of KazAgro) carried out a forward purchase of 350 000 tonnes of grains. The purchase prices for wheat were set in the range of KZT 83 000-KZT 87 000 (USD 201-USD 210), depending on the quality. The price for barley of the second class was KZT 50 000 (USD 121).

In July 2020, a number of changes were introduced to the rules for the development of livestock breeding, including:

• increased subsidies rates for the purchase of domestic breeds (from KZT 8 000 to KZT 15 000) (USD 19 to USD 36) and imported sheep (up to KZT 150 000 per head) (USD 363 per head)

• changed collateral policy for lending for the purchase of livestock

• reduced cost of diagnostic tests during quarantine from KZT 23 500 to KZT 4 271 per cow (USD 57 to USD 10 per head), and from KZT 28 500 to KZT 8 741 (USD 69 to USD 21 per head) for a bull imported from the countries of the European Union

• increased support on dairy cattle breeding – the subsidy rates for the purchase of imported breeding stock were increased from KZT 225 000 to KZT 400 000 per head (USD 544 to USD 968 per head) and for domestic from KZT 150 000 to KZT 200 000 per head (USD 363 to USD 484 per head) – as well as the subsidy rate per kilogramme for reducing the cost of milk trial.

Regional governments are expected to increase subsidies for pesticides to KZT 30.8 billion (USD 68 million). Under this subsidy, farmers can receive funds covering up to 40% of the cost of eligible pesticides. Previously only herbicides were approved, but in October 2019 the Ministry of Agriculture changed its regulation to allow farmers to purchase insecticides and fungicides under the programme as well.

In 2020, the single land tax was amended and all income received by the farmer from the sale of agricultural products will be subject to a single land tax at a rate of 0.5% of the sales revenue per calendar year. Previously, the single land tax was calculated on the assessed value of land plots rented or owned and was not tied to the turnover from the sale of agricultural products. Small business farmers are exempted from the single land tax from this year until 2023.

In 2020, in the context of the government’s efforts to shift away from subsidising credit to a credit guarantee system, a mechanism for guaranteeing loans from second-tier banks through the Fund for Financial Support of Agriculture JSC (FFCA) was created. The new form of support for farmers is aimed at reducing the credit risks of commercial banks and increasing the attractiveness of financing the agricultural sector. The guarantee will be used for the implementation of investment projects in all types of activities in agriculture, as well as in the field of food production. Priority investment areas within the framework of the guarantee include: dairy farms; meat poultry farming; intensive gardening; greenhouses; cultivation of sugar beet and production of beet sugar; production of cereals; processing of vegetables and fruits; production of vegetable oil and fat and oil products. The fund provides guarantees up to 50% on loans up to KZT 3 billion (USD 7 265) at a rate of no more than 17% per annum, for a period of up to ten years. The commission for guaranteeing is 30% of the amount of the guarantee, of which 29.9% is paid by the local executive body and 0.1% is paid by the agricultural producer himself.

In April 2020, a special programme of concessional financing for agricultural producers leasing equipment of Kazakh production “Made in Kazakhstan” was launched. Eligible producers can obtain loans with a 6% per annum interest rate for up to ten years with a grace period of lease payments up to one year.

Kazakhstan is also making progress on its plan to design “BidayCoin”, a new crypto currency to help traders and producers make payments directly. This is to avoid costly and delayed banking services. This system will be connected with electronic warehouse receipts and other payments; for instance, for subsidised fuel, fertilisers, insurance and other services.

In 2020, the method of calculating the regional allocation of payments for subsidising agriculture was changed. Now the regional allocation of payments is calculated based on the region’s share in gross agricultural output instead of its share in population. Moreover, in order to avoid diverting funds for other purposes of the region's development, minimum expenditures will be set for supporting agriculture. In addition, in order to avoid frequent changes to policy settings, the Ministry of Agriculture considers introducing a law to retain the rules of the support measures included in the WTO classification in the Green Box unchanged for five years.

Starting from June 2020, Kazakhstan reformed its crop insurance system from obligatory to voluntary with a view to expand crop insurance markets in the country. The obligatory crop insurance, introduced in 2004 to provide producers of grain, oilseeds and other field crops with a minimum level of protection against catastrophic climatic events, had not performed well and farmers complained that insurance payments did not cover even minimal production costs (Broka et al., 2016[3]). The new voluntary insurance system is established for both crops and livestock production and 50% of the insurance premium are subsidised by the government. Moreover, the insurance policy will be accepted as additional collateral for loans. The insurance contract, payment and other details will be administered electronically.

Until 2020, insurance in animal husbandry was practically absent in Kazakhstan and livestock was insured as property. Taking into account the current epizootic situation, so-called multi-risk insurance products have been developed together with foreign reinsurers. Farmers can insure livestock against diseases and other risks on the territory of their farm, as well as on the territory of neighbouring farms within a 5 km radius. The risks include infectious and especially dangerous diseases, fire, malicious acts of third parties, dangerous natural phenomena, as well as accidents – explosion, lightning strike, strangulation, animal attack, snake or insect bite, traumatic injuries. In 2020, KZT 2.5 billion (USD 6 million) was allocated from the state budget for livestock insurance support.

Within the framework of updating the 2021 State Programme, changes in the organisation and structure of the government-owned financial institution KazAgro have been implemented in 2020 to address its poor performance and duplicative functions between its subsidiaries. KazAgro has reduced the number of its subsidiaries from seven to three: i) the Agrarian Credit Corporation (ACC) is in charge of loan programmes, lending to commercial banks, credit and microcredit unions, and leasing companies; ii) the Fund for Financial Support in Agriculture (FFSA) serves small and medium agribusiness and agricultural co-operation; and iii) KazAgroFinance focuses on the leasing of machinery and equipment and no longer provides credits. Within the framework of the Address of the President to the people of Kazakhstan on 1 September 2020, the two state financial development institutions “Baiterek” and “Kazagro” will be merged in March 2021.

Kazakhstan continues to reform land use legislation towards providing more transparency to agricultural land use and several amendments were made to the land regulations and laws in 2020. Some procedures for the provision of land plots were simplified and new amendments would provide monthly public updates of available land plots, which will be “sold” (i.e. the lease rights will be granted) at auctions or through electronic bidding.

Also the regulation on unused land was updated. The updated law provides for: an accelerated process for returning unused agricultural land into production; a 20-fold increase of base tax rates on unused agricultural land; and the introduction of preventive monitoring of land use based on satellite data and remote sensing. So far, unused land can be seized only through the courts and the procedure takes between two and three years.

In 2020, the Ministry of Agriculture completed the creation of soil maps for 26 million hectares, geobotanical maps for 25 million hectares and agricultural maps for 6.5 million hectares (or 3% of agricultural land). In 2021-22, coverage will be increased to 40 million hectares for soil and geobotanical maps and to 33.2 million hectares for agricultural maps. As part of the 2022-26 State Programme for the development of the agro-industrial complex of the Republic of Kazakhstan it is planned to convert all the prepared maps to digital form.

In 2021, Kazakhstan launched a large-scale programme to modernise the irrigation system, KZT 274 billion (USD 663 million) were allocated for this purpose. Over the next two years, the reconstruction of 6 785 kilometres of canals, 4 reservoirs, 4 hydroelectric complexes, 239 vertical drainage wells and 23 000 other water facilities is foreseen. The implementation of the project will increase the irrigated area by a total of 500 000 hectares (about 24% of land equipped for irrigation) in Almaty, Zhambyl, Turkestan, Kyzylorda and Aktobe regions.

On the agricultural innovation system, the structure of subsidiaries of the National Agrarian Research and Education Center NJSC was transformed in 2020 to make it more responsive to business needs. Twenty-two centres for the dissemination of knowledge have been created and permanent consulting centres have also been organised. Also, work is underway to ensure sufficient funding for agricultural science. Funding of KZT 50.4 billion (USD 122 million) was approved to develop 36 scientific and technical programmes in 10 priority areas of research (crop production, animal husbandry, veterinary medicine, processing of agricultural raw materials, etc.) over the next three years.

Starting from January 2020, the Ministry of Agriculture established a new type of subsidy to compensate 80% of the farmer’s expenses for purchasing services from Kazakhstani scientific and research organisations. This subsidy is expected to facilitate the implementation of new and innovative technologies in agriculture.

To modernise and increase productivity in agriculture, new technologies are introduced into the work of agricultural facilities. For example, 49 “smart” farms have been created and projects are being implemented to label agricultural products and create an electronic trading platform for selling agricultural products.

In 2020, the Ministry of Agriculture carried out a large-scale work on digitalisation of public services and industry-specific business processes. By the end of 2020, 94% of the public services and industry-specific business processes are automated, and 34% of the Ministry’s services are provided in electronic format. All application and distribution procedures of subsidies are 100% automated, as well as the processes of registration of agricultural machinery, accreditation of procurement organisations and the work of the commission to guarantee microcredits. Also, the Ministry of Agriculture has digitised the registration of animals and farmers who participate in the breed transformation, carry out the selection and pedigree work.

An Import Substitution Council was set up in 2020 by the National Chamber of Entrepreneurs (Atameken). Its main goal is to analyse the best practices used by the successful enterprises in the manufacturing and agricultural sectors and to develop and submit to the government proposals for import substitution. The Council will also focus on local content development, regulated procurement practices, customs and tariff policies, technical regulations, mineral resources base expansion, infrastructure development, government support mechanisms, industrial co-operation, sub-contractor development, and other issues relating to development of the manufacturing sector. The Import Substitution Council consists of representatives of the Kazakhstani business community and government agencies and organisations.

On food safety, due to the outbreak of bird flu, temporary restrictions on the import and transit of live poultry and poultry products from the Russian Federation were introduced in early August and September 2020. Also an amount of KZT 295.3 million (USD 0.7 million) was paid to compensate poultry farmers for the cost of seized and destroyed sick birds.

Domestic policy responses to the COVID-19 pandemic

The anti-crisis package entailed support of KZT 5.4 trillion (USD 13 billion) or 9% of GDP. Immediate policy actions have included trade restrictions and regulated prices for socially-important goods, cash transfers to vulnerable households, and targeted assistance to hard-hit sectors and small and medium-sized enterprises, including a deferral of loan payments. Near- to medium-term plans include improving public administration through civil service reform, enhancing competitiveness in priority sectors such as agriculture, manufacturing and pharmaceutical, and adopting social policies to support the welfare of the population.

In order to help carry out spring sowing in a timely manner, KZT 170 billion (more than USD 411 million) worth of loans was allocated for farmers. Credit will be repayable at rates of 5-6% per annum, as opposed to the 13-15% rates usually available on the open market. Furthermore, the government has pledged to buy the output of agricultural producers six months in advance.

Agricultural producers were also eligible for new tax concessions, including 15% discounts on diesel fuel and exemption from the land tax for agricultural land.

As part of its COVID-19 response, the value added tax (VAT) rate for food products was reduced (from 12% to 8%) and certain customs duties were eliminated through October 2020. Also payment of VAT tax on imported cattle and breeding chicken was deferred.

The government created a panel to set ceiling prices for socially important food products, such as flour, bread, pasta, buckwheat, rice, beef, eggs and sunflower oil. Prices were set separately for each region and a fine of up to KZT 530 200 (USD 1 283) was imposed if the maximum permissible level of retail prices was exceeded.

Trade policy developments in 2020-21

In 2020, a draft law on the ratification of the Agreement on measures aimed at unifying the selection and breeding work with agricultural animals within the EAEU was presented to the Parliament. For the development and implementation of innovative technologies in the field of livestock breeding and genomic selection in the EAEU states, the Agreement provides for the establishment of a unified procedure for co-ordination and analytical support of selection and breeding work in the field of livestock breeding.

In 2020, an agreement on a veterinary certificate for the export of meat, raw meat and offal of horses from the Republic of Kazakhstan to Japan was reached.

As a member of the EAEU, efforts are on-going to harmonise veterinary and phytosanitary standards with several export destinations, including the People’s Republic of China (hereafter “China”), Iran and Saudi Arabia. Veterinary requirements are being harmonised for beef, sheep and camels, various varieties of honey, and fish. In turn, work on phytosanitary requirements concerns flax, beans, peas, safflower, melon seeds, alfalfa and oil cake. To date, protocols have been signed for the export to China of 19 types of crop and livestock products, including wheat, flax seeds, barley, alfalfa, corn, wheat bran and feed, rapeseed meal, wheat flour, honey, wool, dairy products, beef, lamb and pork.

Trade policy responses to the COVID-19 pandemic

In late March 2020 Kazakhstan implemented a number of temporary export restrictions and bans for a range of food commodities. In particular, wheat and wheat flour were subject to export quotas, while buckwheat and many vegetable and oilseed products were prohibited for export while Kazakhstan remained under an emergency situation related to COVID-19. The country’s state of emergency ended on 11 May and the restrictions were lifted on 1 June 2020. Also, there was a ban on exports of live cattle from January 2020 until November 2020.

Contextual information

Kazakhstan has the ninth largest land area in the world and is one of the least densely populated countries. It has the second-highest per-capita availability of arable land in the world. Kazakhstan is also an important exporter of mineral fuels. The country is an upper middle-income economy and the richest country in Central Asia, but its economy remains highly dependent on fluctuations in the oil and commodity markets. An important bottleneck to Kazakhstan’s economic development is the state of infrastructure systems, particularly in transport. The share of trade in GDP (26%) is substantially higher than the corresponding value for all countries analysed in the report.

Although the contribution of agriculture to the economy has declined sharply over time, agriculture remains an important pillar of economic development, contributing to about 4% of GDP and to 15% of total employment. Approximately 75% of the country’s territory is suitable for agricultural production, but only about 30% of the land is currently under agricultural production. Kazakhstan is one of the top ten grain exporters in the world, exporting to over 70 countries. The country’s major crops are wheat, barley, cotton and rice, with wheat exports a major source of foreign currency. Farmers raise sheep and cattle, and livestock products include dairy goods, leather, meat and wool.

The farm structure is dualistic: large-scale and often highly integrated operations dominate the grain sector, while rural households produce the majority of beef and milk. Kazakhstan’s agriculture and mining sectors are particularly vulnerable to the effects of climate change, as increasingly frequent hot weather and severe droughts threaten the availability of water.

Table 17.3. Kazakhstan: Contextual indicators

	Kazakhstan		International comparison
	2000*	2019*	2000*	2019*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	115	508	0.3%	0.4%
Population (million)	15	19	0.3%	0.4%
Land area (thousand km2)	2 700	2 700	3.2%	3.2%
Agricultural area (AA) (thousand ha)	215 393	216 037	7.0%	7.1%
			All countries1
Population density (inhabitants/km2)	6	7	53	63
GDP per capita (USD in PPPs)	7 734	27 444	9 265	21 975
Trade as % of GDP	37	26	12.3	14.6
Agriculture in the economy			All countries1
Agriculture in GDP (%)	8.1	4.5	2.9	3.5
Agriculture share in employment (%)	36.6	15.8	-	-
Agro-food exports (% of total exports)	2.0	5.8	6.2	7.3
Agro-food imports (% of total imports)	0.7	9.9	5.5	6.7
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	56	55	-	-
Livestock in total agricultural production (%)	44	44	-	-
Share of arable land in AA (%)	14	14	32	34

Notes: *or closest available year.

1. Average of all countries covered in this report.

Sources: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.

The COVID-19 pandemic has hit the economy more than the crises in 2008 and 2015. In 2020, the economy contracted by 3% and domestic demand fell sharply because of job losses and lower disposable income (Azamat, 2020[4]). But unlike past recessions, the pandemic has hit severely retail, hospitality, wholesale and transport sectors, which account for about 30% of total employment. Inflation has increased during the coronavirus lockdown, primarily driven by a rise in food prices. Hoarding, driven by a fear of supply disruptions associated with restrictions on movement, likely caused higher demand and boosted food prices. Kazakhstan’s poverty rate are estimated to have increased up to 4% in 2020 from, equivalent to 1.5 million additional poor people, with the most significant increase in the number of the poor expected to be in rural areas (Azamat, 2020[4]).

Kazakhstan has been a net agro-food importer since the mid-2000s, yet is one of the world’s largest wheat exporters. More than 60% of agro-food exports are in primary commodities, most of which go to processing. More than 60% of agro-food imports are in processed commodities, the bulk of which are for final consumption.

Figure 17.5. Kazakhstan: Main economic indicators, 2000 to 2020

Sources: OECD statistical databases; World Bank, WDI and “Kazakhstan Economic Update”; and ILO estimates and projections.

Figure 17.6. Kazakhstan: Agro-food trade

Note: Numbers may not add up to 100 due to rounding.

Source: UN Comtrade Database.

The average annual TFP growth rate (the difference between the growth rate of total output and the growth rate of total inputs) of 0.9% between 2007 and 2016 underscores the remaining gap to achieve productivity growth rates similar to the world average. Output grew by 2.5% per year. Although the use of intermediate input such as fertilisers and machinery increased faster than the output, the reduction of primary factors, particularly the amount of labour employed in agriculture led to a small positive TFP growth.

Moreover, the negative average nutrient balances suggests that in the long term such trend could lead to a decline in both soil fertility and productivity growth. Agriculture’s share of energy use declined considerably between 1991-2000 and 2007-16. Agriculture’s share of GHG emissions remained unchanged during the period and above the OECD average, a comparison that should be qualified by the higher contribution of agriculture to the country’s GDP than the OECD average. The share of irrigated land remains low at 0.9%. The share of agriculture in abstracted water has declined, but still remains much higher than the OECD average.

Figure 17.7. Kazakhstan: Composition of agricultural output growth, 2007-16

Note: Primary factors comprise labour, land, livestock and machinery.

Source: USDA Economic Research Service Agricultural Productivity database.

Table 17.4. Kazakhstan: Productivity and environmental indicators

	Kazakhstan		International comparison
	1991-2000	2007-2016	1991-2000	2007-2016
			World
TFP annual growth rate (%)	6.1%	0.9%	1.6%	1.6%
			OECD average
Environmental indicators	2000*	2019*	2000*	2019*
Nitrogen balance, kg/ha	-14.4	-13.4	33.2	28.9
Phosphorus balance, kg/ha	-2.7	-2.4	3.4	2.6
Agriculture share of total energy use (%)	4.0	3.9	1.7	2.0
Agriculture share of GHG emissions (%)	12.4	9.1	8.4	9.5
Share of irrigated land in AA (%)	0.5	..	-	-
Share of agriculture in water abstractions (%)	68.1	61.8	46.0	43.4
Water stress indicator	..	..	9.3	8.5

Notes: * or closest available year.

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

References

[4] Azamat, R. (2020), A Slow Recovery Through the COVID-19 Crisis in 2020: Kazakhstan-Economic-Update, Washington, D.C.: World Bank Group, http://documents.worldbank.org/curated/en/792601609750238730/Kazakhstan-Economic-Update-A-Slow-Recovery-Through-the-COVID-19-Crisis.

[1] Baubekova, A., A. Tikhonova and A. Kvasha (2021), “Evolution of Agricultural Policy in Kazakhstan”, in Kazakhstan’s Developmental Journey, Springer Singapore, http://dx.doi.org/10.1007/978-981-15-6899-2_3.

[3] Broka, S. et al. (2016), Kazakhstan Agricultural Sector Risk Assessment, http://www.worldbank.org.

[2] OECD (2013), OECD Review of Agricultural Policies: Kazakhstan 2013, OECD Review of Agricultural Policies, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264191761-en.