Economic & social impacts of recent agro-investment in Kazakhstan s grain region

Transcription

1 Economic & social impacts of recent agro-investment in Kazakhstan s grain region Martin Petrick Leibniz Institute of Agricultural Development in Central and Eastern Europe Halle (Saale), Germany

2 Overview of the presentation Introduction Agricultural recovery in the North Kazakh Grain Region Main restructuring outcomes Social impacts Conclusions & recommendations Database: Official statistics, Case studies based on field visit in April/May 2011 Acknowledgements 2

3 Agriculture in the former Soviet Union Untapped land resources for food production Considerable yield gaps to be closed Second-wave farm restructuring in recent years: - largely uncharted effects - high variation in organisational models RUK as future players on global grain markets 3

4 The geographical setting Soil quality Low to medium (Podsol, Gley) Medium to excellent (brown, black soils) Low to medium (salty Solonchak, Solonetz) Very low (sand) Source: Haack Weltatlas Climate Unsuitable for agriculture Too much precipitation Too little precipitation 4

5 Cropland area (million ha) Cropland area expansion in N Kazakhstan North-Kazakh Grain Region Kazakhstan 5

6 Investment in agricultural fixed assets (billion tenge) Rising investment levels North-Kazakh Grain Region Kazakhstan 6

7 2001=100 Grain prices rise, wages rise faster Grain prices Wages in agriculture 7

8 Ag value added (bln 2000 KZT) Real ag value added almost doubled North-Kazakh Grain Region Kazakhstan 8

9 Million tons Kazakh wheat exports / / / / / / / / / / / /2012* Source: USDA. 9

10 A paradigm shift in land policy (early 2000s) From State ownership of land Long-term rentals to rural citizens (share privatisation) Subleasing of land To Private land ownership Limitations on state land rentals Slow evolution of a private land market 10

11 Main steps of farm restructuring : Early reform steps, little profound restructuring : Share privatisation, emergence of limited partnerships & individual ( peasant ) farms : Bankruptcy procedures accelerate restructuring After 2003: Implementation of new land code, recognition of private land ownership, prohibition of subleasing 11

12 Land use (million ha) Expanding land use by ag enterprises Agricultural enterprises Individual farms Household economies 12

13 Gross agricultural output (billion tenge in 2000 prices) Rising output from enterprises (not 2010) Agricultural enterprises Individual farms Household economies 13

14 What distinguishes enterprises from farms? Simpler registration & lower tax burden for farms Political preference in favour of enterprises ( merging small farms campaign after 2003) Capital intensity lower on farms Production portfolios, technologies & management challenges (labour) mostly similar 14

15 Agricultural labour Future access to workers a concern for many managers of all types of farms Substantial wage increases recently Deficient education & training Labour supervision - Persistent challenge on enterprises & farms - Advantages for individ farms due to smaller teams? - Performance pay widely in use - Introduction of satellite imaging technologies 15

16 The role of agroholdings Vertically & horizontally integrated business groups, often with outside capital Some with transnational operations (Russia) Main activity in grain production & trade Control up to 700 thousand ha per holding 15 largest cultivate 35% of cropland in NKGR Internal management structures largely unknown Oshakbaev 2010, Wandel

17 The role of rural households 17

18 Persons employed in agriculture, forestry and fishery (in thousands) Stable employment in agriculture North-Kazakh Grain Region Kazakhstan Workers in ag enterprises 18

19 2003=100 Consumption spending outpaces cost of living Rural consumption spending NKGR Cost of living NKGR 19

20 Share of households below the poverty line (%) Plummeting povety rate North-Kazakh Grain Region 20

21 Income sources of rural households, Akmola 2003 Self-produced food items for own consumption 5% Goods received in kind 7% Other 3% Salaries from agricultural employment 25% Pensions 20% Income from nonfarm businesses 3% Sales of food items 10% Salaries from nonagricultural employment 27% World Bank survey

22 Main findings Cropland expansion, intensification, rising productivity Now three main groups of producers: ag enterprises, individual farms, rural households Productivity figures for enterprises & farms similar Centralised ag policy (production subsidies & finance) on the rise Clear & measurable benefits for rural population 22

23 Some conclusions No tradition of individual land use & ownership, smallholder farming not the default situation at the outset of investment boom Recent labour scarcity shifted balance of power towards workers, who value secure wage income Policy makers, investors & managers continue to embrace ideal of the industrialised farm Little involvement of foreign stakeholders / investors Competition among farm types (individual vs agroholdings) has not yet produced a clear winner 23

24 Lessons to be learned 1. Large-scale farming based on hired labour will likely form the backbone of future land cultivation in N Kazakhstan, entailing a mix of corporate & family businesses 2. Beneficial effects of agricultural investment materialise even in the absence of an ideal protection of property rights or fully transparent forms of citizens representation 24

25 Lessons to be learned 1. Large-scale farming based on hired labour will likely form the backbone of future land cultivation in N Kazakhstan, entailing a mix of corporate & family businesses 2. Beneficial effects of agricultural investment materialise even in the absence of an ideal protection of property rights or fully transparent forms of citizens representation Thank you! petrick@iamo.de 25

26 Min of Agriculture budget structure 2008 Credit support 27% Cross functional expenditures 4% Administration 7%Infrastructure 5% Crop & livestock services 17% Research & extension 3% Subsidies 24% Market intervention 13% World Bank PEIR

27 KazAgro sub-holdings 27

28 Policy recommendations Government control of land & capital access should be further relaxed Public investment in human capital much more warranted Centralised administration structures likely inefficient in targeting economically most promising activities Wide array of ag policy measures lack consistent strategy, hard to evaluate, not WTO conform More focused & less distortionary policy approach recommended 28

29 Future research needs Labour supervision: contracts, technologies, impacts Strategic policy implications of increasing labour scarcity Collect micro data to better compare outcomes of different farm types, scale economies Further commercialisation of rural households: pathways, policy implications Interdependencies among farm types: complementarity vs. specialisation Agricultural entrepreneurs, their origin & abilities 29

30 Area on which mineral fertiliser is applied (percent of total cropland) Expanding fertiliser use North-Kazakh Grain Region Kazakhstan 30

31 An evaluation of land reform so far Gradual evolution of land policy Paradigm change from share distribution to private land market (around 2001) Most land still in government ownership today (low state rental rate) Prohibition of secondary land transactions limits shortterm adjustments & discriminates against individ farms Rising global interest keeps land on the political agenda (Chinese investors) 31

32 Average farm size (ha) Recent farm consolidation Agricultural enterprises Individual farms 32

33 Annual change of total land use (%) Ag enterprises grow more persistently Agricultural enterprises Individual farms 33

34 USD/ha Rising profitability of ag enterprises Production cost of grain in ag enterprises Grain revenue 34

35 Share of economically active population employed in agriculture, forestry and fishery (%) but falling employment share North-Kazakh Grain Region Kazakhstan 35

36 Share of agriculture in regional GDP (%) Ag share in GDP lower than employment share North-Kazakh Grain Region Kazakhstan 36

37 Real monthly consumption expenditures by rural households (2003 USD) Real consumption spending doubled in 5 years North-Kazakh Grain Region Kazakhstan 37

38 Financial flows in the rural economy of NKGR 38

39 Source: Deininger et al. 2011, Rising Global Interest in Farmland, Washington DC. 39

40 Wheat yields (dt/ha) Three-year moving average Rising (but still volatile) yield levels Kostanay North-Kazakhstan Akmola Kazakhstan 40

41 Disposition of formerly subleased land % 80% Conditional land shares (ths ha) Land plots (ths ha) % % % 0% NKGR Kaz NKGR Kaz turned into individual farms contributed to ag enterprise stock returned to government not decided yet / other Data by Land Resources Management Agency of Kazakhstan. 41

42 Land Code 2003 Private land ownership acknowledged Prohibition of secondary lease transactions Three options for subleased state land: - Continue lease for own cultivation as an individual farmer - Purchase from government, lease to 3rd parties possible - Contribution to capital stock of an ag enterprise However, ongoing primary lease of state land possible at low normative rate 42

43 Number of farms Farm numbers peak after new land code Agricultural enterprises active Individual farms active

44 GAO per ha (thousand tenge) GAO per ha is practically equal Agricultural enterprises Individual farms 44

45 Wheat yields (dt/ha) Three-year moving average but wheat yields in farms are higher Agricultural enterprises Individual farms 45

46 Population living in rural areas (million persons) Stable rural population numbers North-Kazakh Grain Region Kazakhstan 46