Overview

The agricultural sector is the largest employer in the Kyrgyz Republic, with about 40 percent of the labor force participating in this sector. And while it accounts for an estimated 14 percent of GDP, the second largest component of GDP, it is disorganized and undercapitalized, and the Kyrgyz food processing industry remains underdeveloped. Most agriculture is family-based on small plots of land. Larger production, particularly in apples, apricots, cherries, sugar beets, beans, cotton, tobacco, and walnuts, is regional and still small-scale compared to Western standards. Most families grow small amounts of fruits and vegetables that are consumed locally, though the Kyrgyz Republic did export more than $155 million of produce in 2020. There are opportunities for small-scale operations in a variety of areas:  orchards, dried fruits, improved seed, fertilizer, small-scale farm equipment, food processing equipment and slaughterhouses, improved storage, and packaging.

Several international donor projects, including through USAID, focus on improving credit to the sector, though the results of such efforts are mixed. Other USAID projects include its economic development initiative “The Enterprise Competitiveness Project,” which aims to create jobs and prevent the outflow of Kyrgyz labor migrants (primarily to Russia). The initiative helps Kyrgyzstani SMEs increase their competitiveness in local and regional markets. The project seeks to increase private-sector-driven development in several sectors, including agriculture. USAID’s cross-border trade and economic integration activity, Agro Trade, aims to increase cross-border trade, particularly between southern Kyrgyzstan and the Ferghana Valley. This activity seeks to create and link value chains and business opportunities in this region to connect enterprises to growing consumer demand and for companies to take advantage of liberalizing markets in Central Asia and the West. In addition to supporting enterprises, the activity may partner with governments to develop policies and regulations that facilitate private sector trade.

Leading Sub-Sectors

Food Processing/Packaging Equipment

Despite its significance to the economy, most vegetable production is seasonal, and export markets are quite limited due to inefficiencies, regional barriers and packaging deficiencies that limit the amount of transport produce can endure. Disorganization and limited capital not only hamper the fruit and vegetable industry, but also constrain cereal, dairy, and meat production. Many international donors assist the agricultural sector, but inefficient and inadequate processing, packaging, certification, and marketing limit the sector’s transition from localized production and consumption to international competition. Furthermore, many Kyrgyzstani dairy, meat, and fruit and vegetable producers still do not meet EAEU sanitary and phytosanitary (SPS) standards necessary to export to target markets within the customs union.

Local companies often lack sophisticated management skills and productive equipment, and many of them operate only at 20-40 percent of capacity. There is a demand for various types of food-processing equipment, including production lines for juice, ketchup, dried vegetables and fruits, potato chips, pasta products, meat products, and packaging. Local firms have limited financial resources and therefore prefer to purchase semi- and non-automated equipment. Refurbished and used equipment is popular for the same reason. Potential clients are food businesses with plans to produce new products or upgrade the packaging or quality of current product lines.

Most small food processing companies source local or Chinese equipment, which is more widely available at a lower price than analogous U.S. or European machines. However, the largest and most successful companies prefer to procure equipment from Italy, Germany, Austria, and other European countries, while medium-size companies tend to rely on Russian or Turkish food processing equipment.

Opportunities

Dairy: The Kyrgyz Republic produces over 1.7 million tons of milk annually, but processes only 2.5 percent of its production.[1]  The cost of raw milk is lower in the Kyrgyz Republic than in neighboring Kazakhstan. While foreign investors cannot own farmland, joint ventures with local partners who own land could further decrease production costs and guarantee a consistent supply of raw milk. Milk yields can also be substantially increased from the current 2-4 liters per day to 15 liters per day. Due to local inefficiencies, milk, butter, yogurt, cheese, and other dairy products sold in the Kyrgyz Republic generally are sourced from more expensive producers in Russia and Kazakhstan, but Kyrgyz producers are catching up. In 2020, dairy product exports nearly doubled compared to 2016 volumes.[2] In previous years dairy shipments were predominantly destined for the EAEU market, primarily to Kazakhstan and Russia. However, 2018 dairy exports to Uzbekistan increased exponentially, reaching 500  tons of products between January and November.[3]  In 2020 the total export of dairy products reached 35 thousand tons for the total amount of 46 million USD, mainly to Kazakhstan followed by Russia, Uzbekistan, and Tajikistan.[4] In 2020, 13 companies received necessary certifications to export their products to China.[5] Investment in the local dairy industry could present an opportunity for Kyrgyz dairy products to reach new export markets.

Meat:  The Kyrgyz Republic has an underdeveloped meat market. Though neighboring Kazakhstan provides a market for Kyrgyz beef and lamb products, the Kyrgyz Republic lacks the processing capability for value-added production. Foreign investment is making improvements in meat processing; USAID helped establish a modern slaughterhouse in the Naryn region, which has the largest number of cattle in the country. Poultry also has considerable unrealized economic potential. Industrial poultry farming in the Kyrgyz Republic has been in decline since the 1990s, partially due to the lack of qualified specialists. USAID provided technical assistance to develop the Kyrgyz Republic’s only industrial-scale poultry farm, providing the full cycle of poultry meat production, from egg incubation to delivery of finished products to consumers. USAID also supported the implementation of international food safety standard ISO 22000.

[6]There is an increasing demand for chicken quarters, which is largely satisfied by EAEU member-countries, predominantly Kazakhstan and Russia.[7] U.S. poultry transiting Russia and Kazakhstan, and destined for the Kyrgyz Republic, faces a number of bureacratic hurdles, but the Kyrgyz Ministry of Agriculture is taking steps to resolve the issue.

Fruit & Vegetable Processing:  Similar to the dairy industry, processed fruits and vegetables amount to slightly more than 2 percent of total production, but the export of dried fruits has steadily increased since 2016.[8]  Potential U.S. investors may be interested in establishing a factory to produce Western-quality processed fruits and vegetables. Possible products include marinated products, canned vegetables, and dried or preserved fruits.