Domestic manufacturers of pesticides, with appropriate state support are ready not only to ensure import substitution, but also to go for export

The introduction in 2017 of the principle of equal subsidizing for mineral fertilizers of Kazakhstani and foreign production threatens the development of the agro-chemical industry of the republic. This was stated by participants of the meeting of the Committee on agrarian issues of Mazhilis.

The meeting of representatives agrochemical  industry with deputies was planned for January 2017, but given the severity of problematic issues was moved to December, which became possible thanks to the initiative of the President of the Committee of the manufacturing industry of the National Chamber of Entrepreneurs "Atameken" Duman Kydyrbaev, who took part in the meeting.

As it was reported by the executive director of the Association of Legal Entities "Association of Kazakhstani producers of plant protection products" Boris Tsoktoev, until 2012 priority to subsidizing domestic pesticides has been provided by the law of RK dated by 8th of July 2005 "On state regulation of development of agriculture and rural areas".

In May 2012, the Ministry of Agriculture by initiating changes in the law, at a meeting of the Committee on Agrarian Issues of the Mazhilis has promised to preserve the priority of subsidizing domestic producers of pesticides in rules on provision of subsidies.

However, the project of the state program of development of agriculture of the Republic of Kazakhstan for 2017-2021 years, provides for the introduction of a new principle of subsidizing fertilizers - regardless of country of origin - on the basis of 50 to 50.

Meanwhile, according to Tsoktoev, domestic production of pesticides increased 9.5 times from 0.9 tons in 2010 to 8.6 million tons in 2016, accounting for 55% of the current needs of the Republic of Kazakhstan in pesticides. The nomenclature of manufactured products increased 14.5 times from 4 to 58 names.

Kazakhstani content in the average has risen from 6% to 53%, while the cost of domestic products compared with imports decreased by 48%. The number of jobs increased by 6.3 times from 63 to 394 jobs. Total tax payments increased by 15.5 times from 181 million to 2.8 billion tenge.

"The positive dynamics of domestic enterprises has been achieved, primarily due to state support in the form of priority subsidies for Kazakhstan's production of pesticides in the period from 2010 to 2015. Since 2016, the Ministry of Agriculture canceled subsidies for domestic producers of chemical plant protection products with reference to the WTO rules. Despite this, due to the registration of new own products, modernization and expansion of production capacities, transition to own recipe of production and synthesis of the final stages, high economic efficiency, the domestic producers have kept positive dynamics of development in 2016 ", - emphasized Mazhilismen Boris Tsoktoev.

In the coming years, domestic pesticide manufacturers are planning to increase the local content to 75%, followed by the full import substitution, as well as to enter the export markets of Russia and Ukraine.

However, the solution to these problems is impossible without state support.

"So we ask to amend the text of the state program of development of agribusiness for the years 2017-2021 (Section 5.4.1" Subsidies in the field of crop production and processing of crop production".) on the establishment of rules of subsidy for fertilizers and pesticides - with the change of the phrase " regardless of country of origin" to the phrase "domestic production in a priority order", as mentioned in other sections, such as agricultural production", - addressed to the deputies the executive director of the Association of Kazakhstani producers of plant protection products.

Boris Tsoktoev also raised the question of the need to permit the production of pesticides that are not registered in the Republic of Kazakhstan, for further exports, by making changes to the current version of the law of RK "On Plant Protection".

"Achievement of the goals will increase the production capacity of Kazakhstani pesticides from 8.6 tons to 18 tons, it will fully cover the needs of the country's agro-industrial complex; increase the volume of pesticides for exports from 0.3 million tons to 25 million tons worth up to 250 million USD, covering the need of EAEU and Ukraine to 9%. The local content will also increase from 50% to 75% and production capacity from the current 48 to 57 million tons, expanding the range of products from 58 to 120 items and will increase annual tax revenues from the current 2.8 billion tenge to 10 billion tenge", - said Boris Tsoktoev.

In addition, state support will increase employment from the current 400 to 1,100, including training of 200 employees of high engineering, chemical and technological qualifications.

Other producers of mineral fertilizers addressed to the members of the Committee on Agrarian Issues of the lower house of parliament with the request to preserve the principle of priority subsidies for domestic producers of fertilizers.

Deputy General Director for Corporate Development of LLP "KazAzot" - the only plant in Kazakhstan for production of nitrogen fertilizer - Takhmina Nagumanova noted the extremely negative impact of new subsidy principle.

"Subsidies will actually support the foreign production of fertilizers, especially of Uzbek producers. The new rules, in fact, mean the loss of the market for domestic producers, the lack of incentive to increase and diversify production.

The holt of production and the loss of manufacturing jobs are not excluded, as well as the loss of tax revenue. Meanwhile, the total forecasted amount of taxes from LLP "KazAzot" and LLP "Kazphosphate" in 2016 is more than 13 billion tenge, it is almost 40% of tax revenues in all agro-industrial complex of the republic", - informed Takhmina Nagumanova.

At the same time representative of the "KazAzot" stressed that the current program of subsidizing the acquisition of mineral fertilizers positively affected not only the performance of the agricultural sector, but also ensured a cumulative effect in the agrochemical sector, which is recognized as the priority sector of development in Kazakhstan.

"Kazakhstan has a huge potential in domestic consumption of fertilizers, estimated need - one million tons. We now provide only 10% - a little more than 100 thousand tons of active ingredients. This situation provides the potential for our joint growth", - said Nagumanova.

In turn, a member of the Committee on Agrarian Issues of the Mazhilis Roman Kim expressed his gratitude to the National Chamber of Entrepreneurs "Atameken" for organizing a meeting on topical issues of development of the agrochemical industry.

"Without the support of domestic producers, including pesticides and fertilizers, we can’t speak about the increase of productivity and gross output. We need to make agrochemical direction a priority. Domestic manufacturers of pesticides need support ", - said Roman Kim.

Nazgul Abzhekenova