Kazakhstan to have another growth of oilseeds and by-products production — Fat-and-Oil Union of Kazakhstan

For several recent years, Kazakhstan actively develops the fat-and-oil sector. In particular, the country increased the production of oilseeds. According to APK-Inform figures, in 2017/18 MY the production of oilseeds increased by 24% year-on-year. Also, the production of vegetable oils is rising. This season oil-extracting enterprises can produce oils by 23.4% more y-o-y. What help the industry to develop, and what barriers are there, and what is needed to do further were the main matters of our interview with the President at the association Fat-and-Oil Union of Kazakhstan, Konstantin Nevsorov.

- Konstantin, when was the association founded, and what did it succeeded?

The association Fat-and-Oil Union of Kazakhstan was founded in 2015. As for today, 11 companies are members of the association. Among them are large – the champions of the Kazakh’ and Middle Asia industry, producing more than 200 items, and the small ones – that produce specialized functional organic oils. The union of such enterprises together with foreign experience gives the opportunity to take correct and coordinated decisions aimed at industry development.

- For several recent years, the dynamics of the oilseeds production in Kazakhstan significantly increased, which in turn stimulated the exports and processing of oilseeds. How would You estimate the tendencies of the oilseeds market development, and what are the prospects?

For 10 recent years, the production of oilseeds increased in more than 3.5 times. The production of veg oils increased 6 times since 2000. And, they will continue to grow for two reasons. First, it is the workload of processing enterprises, which amounts to 40%. The ministry of Agriculture of Kazakhstan expects that by 2021 the workload will increase together with the number of processing companies. Second factor, which make this industry very attractive, is the growth of demand for oilseeds from China.

The Ministry of Agriculture notes that the oilseeds production growth is connected with the widening of vegetable oils use and their high profitability. The government started to stimulate the production of oilseeds in 2008 by means of production costs refund.

- Taking into account the strong development of the fat-and-oil industry in Kazakhstan, do You plan to increase the processing capacities? What is the obstacle to significant enlarging of the production of veg oils?

The Ministry of Agriculture plans to increase the processing capacities if oilseeds from existent 1.4 to 2 mln tonnes by 2021. By this time, it is offered to put into service six new enterprises and seven of the existing companies will be modernized. Thus, the number of fat-and-oil plants should increase from 49 to 62. Moreover, the workload of the enterprises should reach 70% (2 mln tonnes). The main problems of the industry in my opinion are the necessity to develop the export potential of Kazakh producers, lack of sufficient raw-materials base, high costs of the working capital, large amount of false products, the inadequate training of workers, and the uncontrolled operations of retailers.

It would not be an exaggeration to say that more than 30% of the finished products are false items. It is not a secret that they are mostly imported and distributed through the diversified brokerage network. The unfair competition is thriving in Kazakhstan. The fair producers who cannot allow large-scale consumers fraud face significant losses. The false products displaces from the market the fair producers. The Kazakhstan monitoring and controlling bodies must become uncompromising in quality control of the imported products as the Russian Federation does. In order to curb the false products it is necessary to make regular thematic audits of the different outlets to detect the fake items imported from the near and far abroad. It should be provided without any false modesty or shame that we can abuse the allies from the Eurasian Economic Union or small and medium-sized business. Otherwise, the domestic market will never be cleared off the false products.

Despite the domestic fat-and-oil industry seem to be strong, it is in fact absolutely uncompetitive. There are three main reasons: the small scale, low technical level, absence of large companies with high added value. Due to the absence of the guaranteed products distribution channels the long planning of the farming work is not possible. The choice of the crop to grow is made by means of the short-term demand on the market. The crops are sold to the random traders.

- Does the Government take any steps to support domestic oilseeds processing companies?

For the moment, the work team of the Ministry of Agriculture including the Association elaborates the development program of the oilseeds industry of Kazakhstan. There is also a great prospect for work and collaboration with the new department of exports developments of Ministry of Investment and Development of Kazakhstan. The fat-and-oil industry is the priority issue for the economic development of the country.

- What steps in Your opinion should be taken, in order to stimulate the further development of the oilseeds industry in Kazakhstan?

The main task set by the President of Kazakhstan Nursultan Nazarbayev is the increase of the agricultural products exports in 2.5 times. It should be noted, that the riffle approach is needed to succeed the tasks, and the new department of the Ministry of Investment and Development carries it out. It is also necessary to consider, protect and take a stand of domestic producers when there are any changes made in documents of technical regulations by the country-member of the Eurasian Economic Union that sometimes contradict the rules of the fair competition. This is our responsibility as the single accredited industry association and the responsibility of the National Chamber of Entrepreneurs “Atameken”.

- If we look at the foreign trade of oilseeds, how would You estimate its dynamics for several recent years both on the raw materials market and by-products market (oil and meal)?

The dynamic is positive. According to the Ministry of Agriculture, in 2018 there is an increase of the agro-industry by 47.5% (from $538.9 mln to $794.7 mln) including the processed agriproducts by 26% (from $243.9 mln to $307.3 mln). The main volume of the exports can be attributed to wheat (31.6%) and flour (15%).

Main products of the agricultural industry

Exports of the main products of the agricultural industry

However, some obstacles hamper the development of the Kazakhstan exports. Among them are: the insufficient level of the processing capacities; significant wastage and obsolescence of the authorized funds and consequently the low inner competitiveness of our producers; the insufficient financial support of the exporters and the high cost of the credit resources; the absence of the mechanisms granting the governmental support and services for the exporters based on the “one window” principle; the insufficient transparency and clearness of the export procedures; and also the questions connected with the issue of the Kazakh products quality – the certification and standardization.

On the other hand, the high level of the resource endowments and the existence of the relatively cheap skilled workforce, our geographical location, the participation in the regional integration processes give us the considerable competitive advantages.

- What prospects on the export market do the Kazakh producers of sunflower and flaxseed oils have?

The global market of the oilseeds processing industry according to the report “Global Oilseed Processing Market Analysis & Trends – Industry Forecast to 2025” will be increasing by 6.3% annually and by 2025 will reach approximately $82.51 billion. For now, the share of the Eurasian Economic Union countries is 10% of the total global volume of the oilseeds processing, and this share for Kazakhstan amounts to only 1%. Thus, the prospects are huge.

- What countries are the main buyers of Kazakh oilseeds and by-products?

Kazakh producers of fat-and-oil products and importers are the main consumers of oilseeds. It is expected, that the consumption rate will be growing on behalf of both the local processors and the county-importers (generally China).

- On June 26-28 of the delegation of the Kazakhstan fat-and-oil sector members led by LLP “The Competence Center” will visit China and take part in the second international conference Sunflower Oil & Meal Trade Conference in Shanghai. What are the prospects of Kazakhstan and China agriproducts trade in Your opinion?

Despite the vast difference of the economies, China is the center of attraction for the Kazakhstan exports. At the year-end of 2016 the volume of the VAT of China amounted to $11.2 tln with the population at 1.4 bln. And, even if it is not comparable with the level of our economy still the China market capacity, its growing domestic needs in goods and food are the main factors of the export activity of the Kazakh business and the growth of our economy. As for today, China is focused on the exports of the food industry finished products, in particular, fat-and-oil and meat products, bottled water, honey and others. As you know, China together with India and Turkey is the one of the TOP-3 of the main consumers of the sunflower oil in the world, buying approximately 1mln tonnes annually. With this, for the last years Kazakhstan has being increasing the export of sunflower oil and successfully surpassing permissible trade barriers.

Herewith, the Kazakh companies must avoid thinking that 1.5 bln of the Chinese consumers are waiting for their products. Like everywhere else, it is necessary to introduce the products to the buyers and to form the product ideology. That is why we are making determined efforts to make the positive associations of the Kazakh products for the Chinese consumers – they being eco-friendly and of high quality.

- Konstantin, the Kazakh delegation will introduce the large exposition of the sunflower oil brand QazMai at the conference in Shanghai. Tell us please more about its creation and development.

The the association Fat-and-Oil Union of Kazakhstan was one of the first to introduce the concept and to develop an umbrella brand QazMai. Despite the fact that the work is still going on this project, I can state with confidence that the plants producing the oil under this brand are concentrated on making the high quality, eco-friendly and competitive product on both the domestic and foreign markets. We are encouraged that the creation of the umbrella brand involves export support. Also, with QazMai we plan to enter the closed chains of the Russian markets for the Kazakh producers.

Interviewed by Anna Skotar, APK-Inform Agency