Gulbanu ABENOVA

ASTANA, Sept 30

(THE GLOBE)

�Donation of the grain industry is to be one of the main directions of the state policy regarding the agriculture,� the President of the JSC �Prodcorporation� announced and he shared his opinion on this program with THE GLOBE.

In particular, how the state can assist the peasant to survive under the market conditions. Nurlan Smagulov said that the international experience showed that in many countries the main help to peasants was either direct or indirect donation of the grain industry. The leading countries-grain exporters such as Canada, USA, Argentina, Australia and EC countries achieved their aims through donation. According to Mr. Smagulov, this is especially evident in the European Council, where there is the price of interference, the so-called price of support. Hungary and Romania support their producers donating millers for them to be able to buy grain at a high price inside the countries. He stated that donations were divided between the production and the so-called export donations. The donation problem is very significant for Kazakhstan, as our republic is going to joint the World Trade Organisation (WTO), and if our country does not fix donations, after joining WTO it will be difficult to have such official donations approved, Mr. Smagulov believes.

�War of donations� and what farmers are to be supported

According to Mr. Smagulov, at the present time the world is arguing how appropriate is to use donations. There is even a term �war of donations�. It is considered that this war was initiated by European Council. However, examples of usage of donations are striking. For example, before the World War II Europe was the world importer of barley. Of course, there were both pluses and minuses in the policy on support of agricultural producers, the President of Prodcorporation emphasised. But, obviously, donations were being used all over the world, and if Kazakhstan ignored that fact, this would result in the decrease of competitiveness of local farmers in both the external and domestic markets. For example, in other countries donation of the grain production leads to the situation when foodstuffs which are later imported to Kazakhstan are significantly cheaper than products produced of Kazakhstan raw materials.

�In fact Kazakhstan has been trying to support peasants. However, till the recent time the most part of the financing was intended for unreformed sectors of the agriculture, to the so-called depressive regions and to weak farmers, i.e. to those people who cannot repay the money, but use it to maintain the activity somehow,� he affirmed. In the president�s opinion, today it is necessary to change the direction of the donation policy towards the strong farmer. This policy does exist in some western countries. In many countries the price of support is being given to peasants, who manage a definite crop capacity and quality of grain. These criteria allow to determine whether this farmer is strong or weak. If he gets the critical mass of the crop capacity, which is significant for this region, the state will support him more; if the crop capacity is less, the state supports him less. This means a peculiar selection, as all over the world only strong farmers are being encouraged, Mr. Smagulov states.

In his opinion, today it is impossible in Kazakhstan to develop farmers as the main class of producers of the grain industry, as farmers have no sufficient means, modern management. They do not understand the market situation and are not adapted to the current market conditions. The President of Prodcorporation believes that managers from towns and financial-industrial groups, which are called today grain companies, may improve the situation.

These grain companies are a new occurrence under the market conditions of Kazakhstan. But this occurrence is very interesting, Mr. Smagulov thinks. Managers working in these companies, are people who came from other fields of the economy. It had become difficult to work due to the inflow of foreign money with a stronger western management (in particular from the oil and gas sector, metallurgical and mining enterprises, etc., where it is difficult for local businessmen to survive.) But there is a very big sector (the agriculture) in the Kazakhstan market. These managers may use their experience and knowledge, which they gained while struggling in other markets. According to Mr. Smagulov, now these managers are coming to the agriculture and there are a lot of interesting examples, when urban people adapt to the village. Combination of peasants� conservatism and innovation ideas and new approaches of the heads of grain companies and finance directors leads to good results. In particular this is being observed in Kostanai, Akmola and other northern grain regions. Such companies are leading now. They take more than a half of the market on supply of fuel, new equipment, and chemical protection of plants in the agriculture. At the present time these companies are making grain elevators zones of investment, exchange and influence on farmers, Nurlan Smagulov states.

Donation and grain companies

Taking into consideration the experience of Prodcorporation, he says that when money was granted to producers through grain companies, everything was returned, as a rule, grain companies have a good pledged property, and they have banking guarantees. For example, in 1997 since the spring grain companies were invested for the amount of 2 billion tenge through Prodcorporation, and in autumn about 200 thousand tons of grain (100% of the state order) was supplied to the state elevators. Both elevators and quality of grain were best. That time grain companies gained a good investment experience, and the state received grain, while farmers received fuel, pesticides, herbicides and seeds from grain companies.

Before 1997 farmers were directly financed, as it had been in 1995 to 1996, when Prodcorporation had bought 1 million ton of grain according to voucher program at a price of about US$ 130. The volume of received grain was 55 to 60%, i.e. about 40% was �lost�. At the present time it is required to introduce the crediting of farmers through grain companies. In this case the state will receive 100% of the ordered grain, as this will be secured by bank guarantees.

At the present time grain companies are the bridge from the state, banks and investors to peasants and farmers. This bridge is to be used to finance the agriculture, Mr. Smagulov believes. According to the President of Prodcorporation, his company was the first which introduced the financing practice through grain companies in 1997. This was the only year when supplies of grain to the state resources were completely fulfilled.

When in the last year Mr. Karibzhanov, who was the Minister of Agriculture offered to attract grain companies to purchase directly the gathered harvest, but not to invest the agriculture, Prodcorporation was against of his proposal. �If the state purchases directly, when in autumn grain kept at elevators is bought for �live� money, no grain companies are required, but this is management which is necessary,� Mr. Smagulov believes.

Two directions of donations and export of grain

According to Mr. Smagulov, donations are to be used in two directions: for export and for the production. In its own turn, donations to the production are to be divided among several directions (to make grain cheaper, the state should buy qualitative grain from seed-growing farms and to make agricultural technique cheaper by means of banking guarantees and grain companies). If fertilisers are cheaper, this will result in a proper operation of chemical plants. These plants will supply the cheaper fertilisers to peasants, and, hence, peasants used them will have higher crop capacity and their grain will be cheaper as well.

It is more effectively to donate not the purchase of grain, but product-tangible resources which are necessary for the production and export. Thus, this will lead to the restoration of quality of the Kazakhstan grain and widening penetration of our grain producers into the export markets. �The export markets around Kazakhstan are big and the potential has not been exhausted, but we are restrained by internal contradictions,� he believes. In his opinion, state donations to the production and export will create the necessary motivation to attract investments to the agriculture. Having heard that Kazakhstan donates the grain production, any investor from Australia, New Zealand or Canada will prefer to invest himself to Kazakhstan. He will be sure that here he will be able to get agricultural technique, fertilisers, good land and to produce competitive grain and to sell it near Kazakhstan, e.g. in Iran or Russia, or in neighbouring Uzbekistan and Turkmenistan.

�The Kazakhstan agriculture is promising,� the President of Prodcorporation affirms. Taking into consideration the international donation experience, potential of our agriculture is doubled. �We should create these interests in the market, we should create irritants to make investors to come to this market,� he emphasised.

As far as donations to the export are concerned, according to Mr. Smagulov, there are strategic market near Kazakhstan, e.g. Iran, which is the biggest grain importer in the world. in his opinion, if Iran received donations to its market, this country will be eager to work with Kazakhstan and will invest to our grain production. This is called the point export donation, i.e. some countries are interesting as potential sale markets. �Iran is a monogamous country, where one company buys 6 million tons, and the same managers settle all issues regarding the grain market. Naturally, there market is of a great interest for us,� the President of the JSC said.

Speaking of the grain export, he touched the construction of the grain terminal in Aktau. The Iranian party has notified us that once the first brick is laid at this terminal, they will start to set up their own terminal in one of their northern ports to accept our grain.

It is planned to build the terminal in Aktau within 2 years. The capacity of the terminal will be 1 million tons of grain per annum. For the time being the technical-economic feasibility is being prepared, but the Japan Institute of Development and a number of big Japanese companies are going to allot a soft credit for 40 years to Kazakhstan to construct the terminal. The value of the construction is US$ 4 million to US$ 6 million.

Besides, �Japanese people are solid people� and they are planning to invest money to the purification equipment for the export elevators, to make grain competitive, and to invest money to modern laboratories, agricultural technique. They also plan to invest their money to the entire Kazakhstan agricultural production.