Kazakhstan looks to neighbours to realise agribusiness ambitions

Once considered the breadbasket of the Soviet Union, Kazakhstan remains one of the world’s largest producers and exporters of grains. Yet some believe the potential of its agriculture has still to be fully explored. 

“Kazakhstan has been a well-kept secret over the years,” says Joshua Dixon, vice-president and general manager for international irrigation at US-based Valmont Industries. “For those who haven’t heard much of Kazakhstan in the past, they will hear more about the country because of its proximity to so many large markets in the world. It’s next to China, Russia and north of India. Many millions of people in close proximity will be eating products grown and shipped from Kazakhstan in the future.”

Kazakh authorities are now preparing for an overhaul of the national agriculture sector by directly engaging with private domestic and foreign agribusiness companies. New opportunities are emerging along the agribusiness value chain, and a first wave of food producers is already setting up local operations to meet the needs of major markets across the whole Eurasia region. 

Quantity or quality?

Kazakhstan’s vast landmass, the world’s ninth largest, together with its low population density, provides the agriculture sector with a wide stock of land to put to work. The country currently has about 20 million hectares of arable land, about the same size as the whole of UK, and another 180 million hectares of meadows and pastures, according to figures from Kazakh Invest. It features among the top 10 grain exporters in the world, shipping about 9.8 million tonnes of produce in the 2017/18 season, figures from the International Grains Council show, and is one of the largest exporters of wheat flour. 

Yet quantity does not necessarily mean quality and Kazakhstan has a long way to go to upgrade its crops. In this regard, the adoption of better irrigation practices and technologies is already a government priority. 

“The opportunity is tremendous here. The agriculture department issued very strong goals to irrigate an incremental 1 million of hectares in the next 10 years. They have plenty of land, good access to fresh water, but they need the know-how and expertise,” Valmont’s Mr Dixon told fDi a few weeks before signing a co-operation agreement with the government of Kazakhstan for the development of a $50m facility alongside another two partners, Global Beef (of the US) and Kusto Group (of Kazakhstan), to produce modern irrigation systems locally.  

Nearly 90% of machinery currently in use in the Kazakh agriculture sector is at the end of its life cycle and needs to be replaced, according to estimates by the US Department of Commerce, with the rate of machinery renewal expected to grow to between 6% to 8% a year (up from 3% to 4.9% over the past five years) through imports, but also new projects to assemble machines locally. 

Fertile ground for FDI 

Improved irrigation and machinery can help unlock the potential of the country’s crops, as well as improve its pastures. The country produces about 5 million head of cattle per year but with better pastures and genetics, Kazakh authorities estimate that could reach as high as 15 million head of cattle per year. This potential has not gone unnoticed to a first wave of foreign investors. 

“It is believed that with the export of beef and mutton to the Chinese market, Kazakhstan’s agriculture and animal husbandry will be developed rapidly, and Kazakhstan will soon become an international agricultural and animal husbandry country,” says a spokesperson for Longyuan Jetysu, a Chinese company setting up a slaughterhouse and meat processing facility in Almaty. 

Chinese investors have been active in growing crops, as well as producing meat and other food products, for several years in Kazakhstan, as the Belt and Road Initiative opened up new co-operation opportunities at a national and local level while upgrading export routes able to cater to western China. But the sector is increasingly on the radars of investors from other parts of the world. 

Western interest

The US’s largest meat processor, Tyson Foods, is reported to have been in talks with the Kazakh government since early 2019 to set up a $200m meat-processing facility that would give the company backdoor access into China and potentially allow it to avoid tariffs on US agriculture goods. Inalca, a subsidiary of Italian meat giant Cremonini, is carrying out a Tg15bn ($39m) investment in Almaty for a facility that can produce 180,000 tonnes of meat a year at full capacity and employ 280 people. Also in Almaty, Dutch food powerhouse Farm Frites is investing Tg43bn in a processing facility expected to produce 140,000 tonnes of potato chips a year at full capacity and employ 150 people. In the Turkistan region, Nepalese tycoon Binod Chaudhary is investing more than Tg5bn to upgrade an instant noodle facility to serve the domestic markets, as well as neighbouring Uzbekistan and Kyrgyzstan, and even India. 

“We are very excited to be in Kazakhstan, there is so much happening here,” Mr Chaudhary told fDi Magazine on the fringes of the Kazakhstan Global Investment Roundtable, held in May in Nur-Sultan. 

Husbandry and agriculture have marked the pace of life on the Kazakh steppes for centuries. The knowledge that comes from that tradition, combined with the capital, technology and management skills of foreign investors, is now expected to take the country’s agribusiness sector to the next level. Millions of consumers in neighbouring markets, from China and Russia all the way down to India, could soon be the final judges of Kazakhstan’s sweeping agribusiness ambitions.