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Association of fruit and vegetable enterprises
 
 

Overview of the situation in the industry

In the mid eighties, enterprises of fruit and vegetable industry played an important role in the economy of Kyrgyzstan. After the collapse of the Soviet Union, volumes of production in this industry significantly decreased. Main reasons for sudden decrease of production were lost of business connections with suppliers of raw fruit and vegetables and buyers of end product which existed in the Soviet Union, and also difficulties with crossing borders. Substantial and negative influence on the development of enterprises were inner problems within those enterprises, that is lack of an effective owner and of qualified administrative personnel ready to work in conditions of transitional economy.    

First signs of improvement of the industry appeared in 2001. Since then, production in the industry increased approximately by 20 percent. However, such rates of growth do not satisfy the needs and capabilities of Kyrgyzstan. Geographical and climate conditions along with economy structure, where 30 percent belongs to agriculture, dictate the need of boosting the development of the industry to provide employment, improve welfare of the nation and reduce poverty.

At this time the industry counts about 30 enterprises of different capacity. In 2003 production in the industry rose by 49% in relation to the previous year making up 3,6 thousand tons of finished product.

Domestic market

According to results of the marketing research conducted in February of 2004, domestic market of processed fruit and vegetable product (juices, salads, jams, tomato ketchup and sauce, etc.) in Kyrgyzstan is estimated at 1 billion soms a year (more than 20 million US dollars). Also with this, in the last years demand is persistently rising, and future forecasts are quite bright. Not so considerable scale of the domestic market at present time is explained by following reasons.

In the domestic market from the available range of products having most demand are tomato paste, natural juices and preserved cucumber. Less popular are other salted preserves, jams, marinades and dried fruits. Local consumers value Kyrgyz products for their relatively low price, taste qualities, content of large number of vitamins, small amount of preservatives added. Most import ratio for products of fruit and vegetable industry in 2002 belonged to goods from Russia, Kazakhstan, Moldova and Hungary. In 1997-2001 biggest share of import belonged to mixtures of juice (28%), citrus juices (24%), and preserved tomatoes (9%). Remaining groups of products are delivered into Kyrgyzstan irregularly, in small amounts.  

From the point of view of barriers of entry/exit to a market, the domestic market is considered as very open. Size of startup capital needed to reach effective scales of production is not high. Enterprises of the industry are not aggressive to newcomers and don’t coordinate their operations to reflect possible expansion. However there are barriers of exit connected to underdevelopment of the capital market, which decrease ability to return main funds.

Foreign markets

In 2002, 43% of enterprises of the industry exported their products, total volume of export amount to approximately 0.5 million US dollars. Foreign demand is mostly composed by Russian, Kazakh and Uzbek markets. Main regions of sale in Russia are western and eastern Siberia, specifically, cities of Novosibirsk and Omsk, also Yekaterinburg and Central Russia. However Kyrgyz products form only a small portion (one tenth of a percent) from the total volume of these markets [2]. Share of other markets – Turkey, Belorussia, Tajikistan and others – does not exceed even a few percent in the overall volume of export.

In the industry’s range of exported products half-finished products dominate – juices, jams, tomato and fruit pastes, dried vegetables, fruits (apricot) and spices. Distinctive characteristics of Kyrgyz export products in the foreign markets are good taste qualities and lack of preservatives, these are associated by consumers as of natural product.

Until recently a serious barrier for export of Kyrgyz products to the Russian market was customs barriers, transit dues and exactions on the product on its way through Kazakhstan; however lately the situation improved.

Data of National Statistics Committee of Kyrgyz Republic.
 
Productions diagram, number of enterprises
 
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According to this diagram, it is possible to mark out a number of regions in the republic with distinctive product orientation. In example, three quarters of polled enterprises in Issyk-Kul region produce fruit juices; in Osh region 100% polled produce canned vegetables; 4 out 6 enterprises in Batken region are involved in wine-making; main facilities involved in producing dried fruits are located in Chui region (including production facilities of Bishkek enterprises). Production is mostly diversified in Osh, Chui regions and in Bishkek, enterprises polled there produce 7 out of 8 groups of products. Chui region and Bishkek have a more full range of products.





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Association of fruit and vegetable enterprises
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    42a Ahunbaeva str., 720010
+996 (312) 51-08-71
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