J.11_EAT_AgTCA_Tajikistan_Report.pdf

EAT Enabling Agricultural Trade

JUNE 2014

This publication was produced for the United States Agency for International Development by the USAID Enabling Agricultural Trade (EAT) project, implemented by Fintrac Inc.

AgTCA TAJIKISTAN

AGRICULTURAL TECHNOLOGY

COMMERCIALIZATION ASSESSMENT

AgTCA TAJIKISTAN

AGRICULTURAL TECHNOLOGY

COMMERCIALIZATION ASSESSMENT

JUNE 2014

DISCLAIMER

The views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

ACRONYMS

ADB Asian Development Bank

AgTCA Agricultural Technology Commercialization Assessment

BRAC Bangladesh Rural Advancement Committee

CEDAW Convention on the Elimination of All Forms of Discrimination Against Women

DOCs Day-old chicks

EAT USAID Enabling Agricultural Trade project

EBRD European Bank for Reconstruction and Development

EU European Union

FAO Food and Agriculture Organization of the United Nations

FAST USAID Farmer Advisory Services Tajikistan project

FEZ Free economic zone

GDP Gross Domestic Product

GERES Groupe Energies Renouvelables, Environnement et Solidarités

GoTJ Government of Tajikistan

HA Hectare

ICT Information and communications technology

ILRI International Livestock Research Institute

IPM Integrated Pest Management

IPPC International Plant Protection Convention

IRRI International Rice Research Institute

KG Kilogram

LUC Land use certificate

MoA Ministry of Agriculture

MT Metric ton

NADF National Association of Dekhan Farms

NATC National Agricultural Training Center

NGO Non-governmental organization

ProApt USAID Productive Agriculture in Tajikistan project

SPS Sanitary and phytosanitary

TAFF Tajik Agricultural Finance Framework

TajStat Statistical Agency under the President of the Republic of Tajikistan

TBT Technical barriers to trade

TJS Tajikistani sonomi

UN United Nations

UPOV International Union for the Protection of New Varieties of Plants

USAID United States Agency for International Development

USAID/Tajikistan USAID Mission in Tajikistan

USD United States dollars

VAT Value-added tax

WFP World Food Programme of the United Nations

WTO World Trade Organization

CONTENTS

INTRODUCTION 6

Agriculture in Tajikistan 6 AgTCA: A Tool for Assessing the Scalability of Agricultural Technologies 7 How This Report is Structured 8

THE ENABLING ENVIRONMENT FOR AGRICULTURAL TECHNOLOGY

IN TAJIKISTAN 9

Access to Research 9 Technology Commercialization 10 Farmer Adoption 12

WOMEN AND AGRICULTURAL TECHNOLOGY IN TAJIKISTAN 16

Women’s Participation in the Agricultural Sector 16 Inputs into Decision-making 17 Access to and Control Over Productive Resources 18 Conclusion 20

EARLY ONION 21

Market Opportunity 21 Impact of Proposed Technologies 24 Constraints to Technology Commercialization and Adoption 29 Conclusion and Recommendations 32

ORCHARD PRODUCTION 33

Market Opportunity 33 Impact of Proposed Technology 38 Constraints to Technology Commercialization and Adoption 41 Conclusion and Recommendations 43

BEEF PRODUCTION 44

Market Opportunity 44 Impact of Proposed Technology 47 Constraints to Technology Commercialization and Adoption 49 Conclusion and Recommendations 51

MILK PRODUCTION 52

Market Opportunity 52 Impact of Proposed Technology 55 Constraints to Technology Commercialization and Adoption 57 Conclusion and Recommendations 58

POULTRY: BROILERS AND EGGS 59

Market Opportunity 59 Impact of Proposed Technology 62 Constraints to Technology Commercialization and Adoption 66 Conclusion and Recommendations 69

SUMMARY OF RECOMMENDATIONS 70

Enabling Environment Reforms 72 Gender 73 Early Onion 73 Orchards 74 Beef 74 Milk 75 Poultry 75

6 | AgTCA TAJIKISTAN

INTRODUCTION

The adoption of agricultural technologies at scale is essential to improve agricultural production and marketing, farmer income, and food security. Yet the commercialization of new agricultural technologies often faces substantial challenges. A successful strategy to bring agricultural technology to scale must be based on strong practical and theoretical evidence of the technology’s potential as well as a well-informed action plan to address key challenges within the enabling environment that limit technology distribution and/or adoption at the smallholder level.

This report addresses constraints to and opportunities for the scaling of agricultural technologies for the horticulture and livestock sectors in Khatlon province in Tajikistan. Its findings pertain to a short list of proposed technologies selected by the United States Agency for International Development (USAID) Mission in Tajikistan with potential to improve production in the onion, orchard, beef, dairy, and poultry sectors. Each technology is analyzed for its potential impact on smallholder income, enabling environment obstacles to its commercialization or adoption, and market opportunity for the affected commodity. The report aims to inform the investment strategies of USAID, the Government of Tajikistan (GoTJ), and other donors seeking to increase access to and adoption of these technologies.

AGRICULTURE IN TAJIKISTAN

Tajikistan is a small, landlocked, low-income country located in Central Asia. Despite having only 7 percent arable land, agriculture is a cornerstone of the economy; the sector employs around 75 percent of the labor force and contributes 20 percent to gross domestic product (GDP). 1 Of approximately 8 million Tajiks, over 70 percent live in rural, agricultural areas. 2 Tajikistan’s major agricultural products include cotton, grain, dried and fresh fruits, vegetables, cattle, sheep, and goats. 3 Livestock production accounts for a significant portion of total agricultural production. Factors limiting land use for agriculture include the country’s mountainous topography, water, electricity, and salinization constraints, and lack of mechanization. These geographical and infrastructural limitations, along with constraints within the enabling environment for agriculture, prevent the sector from reaching its full potential.

Tajikistan’s tumultuous history has adversely affected the current state of the agricultural sector. Its transition from a Soviet Republic to an independent nation was a difficult process, delayed by a five-year civil war that destroyed infrastructure and disrupted market linkages. Since peace was negotiated in 1997, the country has tried to address the destruction of property, displacement of people, and decline of industrial and agricultural production that had taken place. Though agricultural production has increased since 1997, Tajikistan is still considered a food insecure country with 46 percent of Tajiks living below the poverty line. 4

Khatlon province, in southern Tajikistan, is one of two major agricultural zones in Tajikistan. Khatlon is still in transition from a cotton-dominated agricultural system operated by state-owned collective farms during the Soviet era (known as kolkhozes and sovkohzes) to a more market-oriented arrangement with production on recently-privatized farmland. Land reforms have aimed to break up larger plots into smaller plots and make them available to commercially-oriented farmers and households for food production. These reforms and others, such as creating more secure and marketable land use rights, have helped drive productivity gains and welfare gains for farmers. 5

After independence, Tajikistan’s 562 collective farms were divided into tens of thousands of small, independent farms. 6 Many of these newly-minted farmers previously worked as laborers on the collective farms; others were employed in non-agricultural jobs. Almost all lacked the business and marketing skills needed to run a successful small farm. Farmers strongly need access to business training and affordable capital to improve their operations. The inability to access credit to finance investment is keenly

1 Much of the arable land (roughly 80%) is pasture land.

2 Feed the Future, Tajikistan Fact Sheet (Tajikistan Fact Sheet), available at http://www.feedthefuture.gov/sites/default/files/country/strategies/files/ftf_factsheet_tajikistan.pdf.

3 United States Central Intelligence Agency (CIA), The World Factbook: Tajikistan, available at https://www.cia.gov/library/publications/the-world-factbook/geos/ti.html.

4 Tajikistan Fact Sheet.

5 United Nations Food and Agriculture Organization (FAO), Sources of Agricultural Productivity Growth in Central Asia: The Case of Tajikistan and Uzbekistan (2009).

FAO Regional Office for Europe and Central Asia, Policy Studies on Rural Transition No. 2009-5, available at http://www.fao.org/docrep/017/aq337e/aq337e.pdf.

6 USAID, Feed the Future Tajikistan FY 2011-2015 Multi Year Strategy, available at http://www.feedthefuture.gov/sites/default/files/country/strategies/files/ftf_tajikistan_multi-yearstrategy.pdf.

USAID ENABLING AGRICULTURAL TRADE (EAT) PROJECT | 7

felt throughout the rural areas and in particular in Khatlon province. With few options for upgrading, farmers continue to use the worn-out infrastructure and equipment from the Soviet period and employ low levels of improved inputs such as seed, fertilizer, and pesticides. 7 The depleted state of soil fertility further exposes the country’s farmers to crop failures.

Khatlon has the largest population (over 2.5 million), agricultural area (33 percent), and cropped area (49 percent) in Tajikistan, with 60 percent of cotton, 50 percent of cereals, and 40 percent grazing for livestock, making it significant in terms of its contribution to Tajikistan’s agricultural activity. 8 The province’s location in southwestern Tajikistan gives it a favorable climate for the production of high-value horticultural export crops such as onion and stone fruit. Yet Khatlon has the largest number of people living below the poverty line and the highest rates of under-nutrition in the country. 9 USAID, through its Feed the Future Strategy, is working with the GoTJ to improve farmer livelihoods and nutrition throughout Khatlon province.

AgTCA: A TOOL FOR ASSESSING THE SCALABILITY OF AGRICULTURAL TECHNOLOGIES

The Agricultural Technology Commercialization Assessment (AgTCA) assesses the potential for widespread commercialization and adoption of new agricultural technologies. AgTCA evaluates constraints to and opportunities for bringing technologies to scale through an evaluation of the agribusiness enabling environment (i.e., the legal, regulatory, policy, and institutional framework that governs the agricultural sector) as well as a technical assessment of the benefits of the technology itself. The diagnostic results in recommendations for interventions and reforms needed to create the market conditions for private-sector investment in technology. The assessment is conducted on the basis of a preselected list of commodities and technologies and is intended to inform USAID strategies for bringing these technologies to scale.

The AgTCA methodology examines the environment for technology commercialization and adoption through three lenses:

» Market Opportunity. A market analysis is conducted to assess the extent and nature of output market opportunity for the target commodities to ensure that a market exists for the improved quality or quantity of production the proposed technology is intended to create.

» Technology Impact. Each technology is analyzed to determine the effect of the technology on the production system and its potential impact on smallholder income. This analysis compares the farmers’ current economic situation with pilot data from scaling activities in the host country or similar contexts.

» Enabling Environment. An enabling environment assessment is conducted to determine whether—under existing conditions—technology suppliers face disincentives to production, importation, and distribution of agricultural technology attributable to the legal, regulatory, and institutional environment in which these companies operate. The feasibility of adoption of the proposed technology at the farm-level, due to various factors of production, gender considerations, or technical and cultural concerns, is also assessed.

The resulting report synthesizes these findings to determine which technologies have the greatest potential for scale and impact on smallholder income.

An AgTCA diagnostic was conducted in Tajikistan from January 13-31, 2014 to assess opportunities for scaling agricultural technologies for the horticulture and livestock sectors in Khatlon province. The findings from this assessment are based on substantial research and over 150 in-country interviews with smallholder producers, input providers, processors, traders, industry associations, consumer organizations, donors, academics, and government staff in Dushanbe and Khatlon province.

7 Many agro-processors are operating very old (on average 19-year-old) equipment, drastically reducing their productivity. For example, a recent World Bank survey indi-cated that Khatlon agro-processors operate at about 66% capacity about 50% of the time. Lack of electricity, water, and sufficient supplies of suitable commodities were cited as reasons for underutilization of their plants and machinery. World Bank Agriculture and Rural Development Sector Unit, Europe and Central Asia Region, Republic of Tajikistan Rural Investment Climate Assessment (2013) (World Bank Rural Investment Climate Assessment).

8 Ministry of Agriculture of the Republic of Tajikistan, UN FAO and UN World Food Programme (WFP), Crop and Food Security Assessment Mission Report: Tajikistan (Dushanbe: September 2011), available at http://www.fao.org/docrep/015/an110e/an110e00.pdf.

9 Tajikistan Fact Sheet.

8 | AgTCA TAJIKISTAN

HOW THIS REPORT IS STRUCTURED

The Enabling Environment for Agricultural Technology in Tajikistan The report begins with an overview of key aspects of the enabling environment that inform the technology-specific findings explored throughout the report. The section examines technology suppliers’ access to new research, constraints to business entry and operation, and transaction costs that discourage investment in Khatlon province. In addition, the section examines farm-level constraints to technology adoption, including access to critical inputs such as land and water, the availability of finance, and access to agricultural advisory services.

Women and Agricultural Technology in Tajikistan This section provides an overview of women’s role in agriculture as it pertains to their access to and incentives to invest in new technologies. It examines both the enabling environment issues that affect men’s and women’s access to productive resources and the household dynamics that facilitate or limit the capacity of women farmers to adopt new technologies. Gender analysis is further integrated throughout the report through an evaluation of the relevance of the proposed technologies to men’s and women’s current economic activities and the extent to which women would benefit from increased income as a result of the new technology. Gender analysis of each technology incorporates three key elements: (1) the potential impact on women’s time and labor, (2) the extent to which women provide input into the productive decisions associated with the targeted commodity, and (3) the extent to which women have access to income derived from increased sales of the targeted crop or livestock by-product, or other income-related implications (e.g., wage labor).

Commodity-Specific Findings The chapters on onions, orchard production, beef, milk, and poultry contain in-depth analysis of each commodity and the agricultural technologies proposed to increase production and income for smallholder farmers in Khatlon. Each chapter examines in turn

(1) market opportunity for the subject commodity, (2) the potential impact of the proposed technology or technologies on smallholder income and women, and (3) constraints at the farm-level or technology supplier level that would limit the potential to bring these technologies to scale.

The AgTCA Tajikistan Team

» Amy D’Angelo, Team Lead, Enabling Agricultural Trade (EAT)/Fintrac Inc.

» Ydun Donahoe, Project Coordinator, EAT/Fintrac

» John Culley, Consultant, EAT/Fintrac

» Charity Hanif, Consultant, EAT/Fintrac

» Cristina Manfre, Consultant, EAT/Fintrac

» Rusudan Mdivani, Consultant, EAT/Fintrac

» Loren Puette, Consultant, EAT/Fintrac

Conclusions are drawn regarding the overall utility and scalability of the proposed technology(ies). With an eye toward encouraging technology distribution and adoption, each chapter concludes with recommendations for reforms to the enabling environment or support to farmers and agribusinesses to overcome these barriers. In addition, recommendations are made regarding how the incentives to adopt the technology might be augmented to attract women farmers, to increase women’s access to the benefits derived from the technology, or to design a distribution model that would respond to the needs of women farmers.

Summary of Recommendations The final chapter of the report summarizes the findings across all chapters and proposes priorities for USAID investment in light of overall market opportunity, potential impact of the technology, and the availability of viable commercial pathways to technology commercialization and adoption.

USAID ENABLING AGRICULTURAL TRADE (EAT) PROJECT | 9

THE ENABLING ENVIRONMENT FOR AGRICULTURAL TECHNOLOGY

IN TAJIKISTAN

Tajikistan ranked 143rd out of 189 economies in the World Bank’s Doing Business report for 2014. 10 Burdensome taxes, complex permitting and transport and trading issues together with only intermittent access to electricity, and exorbitant credit rates add up to a crushing environment for small business, particularly in Khatlon province.

A general lack of clarity within the legal and regulatory framework gives government officials, and the private sector, wide latitude to negotiate extra-legal arrangements in lieu of effective regulation, and corruption is rampant. As discussed below, this situation has its pluses—most of the corruption involves low value payments for speedy processing. As a result, agribusinesses reported that it is quite easy to manage the licensing and permitting processes. On the other hand, true regulatory enforcement is virtually nonexistent, allowing counterfeit and low-quality products to flood the market.

Value-added industry (such as for cotton and cement) is dominated by a few large, politically connected families. By contrast, small businesses such as input suppliers or traders are plentiful but lack incentives to invest and grow. Multiple sources suggested that staying small is a mode of survival—those that grow too large face harassment and the risk of being usurped by powerful interests.

At the farm level, despite years of donor assistance in legal and market reforms, the legacy of the Soviet period continues to permeate farming practices. Preferential water pricing structures, facilitated market linkages, and strong encouragement from GoTJ extension agents ensures that farmers continue to plant a high percentage of cotton, despite the 2007 “Freedom to Farm” bill that formally removed quotas for cotton production and other production controls. 11 Faced with numerous financial and marketing challenges, many farmers retain a romantic notion of the Soviet era of collective agriculture and look to the government (or donors) to provide for them.

For its part, the GoTJ faces a severe lack of funding and is greatly reliant on donors to support the implementation of government policies or provide services that it lacks the capacity to undertake. Donors and non-governmental organizations (NGOs), prevalent throughout the country since the civil war, have become a quasi-government and heavy drivers of the economy in many agricultural regions, providing services, finance, and employment to rural populations.

Tajikistan acceded to the World Trade Organization (WTO) in March 2013. The Tajikistan Ministry of Economic Development and Trade has developed a WTO implementation plan which, if implemented, would materially improve Tajikistan’s economic position by opening export markets. However, the GoTJ has a long road ahead to achieve these milestones. In the interim, increased access to agricultural technologies that decrease the cost of production and increase farmers’ profit margins are essential to kickstarting economic growth and reducing poverty in Khatlon province.

ACCESS TO RESEARCH

Access to research is critical to the commercialization of new agricultural technologies. Research often produces the new technologies or forms the basic building blocks for technology companies to use in developing innovative tools and products.

Agricultural research is conducted by an array of actors, including international or government research institutes, universities, and private companies domestically or abroad.

In Tajikistan, the national system of agricultural research is housed within the Ministry of Agriculture (MoA). The horticulture and livestock institutes, amongst others, are very poorly supported and unable to deliver field-ready agricultural technologies, particularly new varieties of crops. The government has established procedures to monitor seed quality, but it is far from certain that sufficient budgetary resources exist to fulfill this mandate. There does not appear to be capacity for testing new varieties of crops for their adaptation to Tajik soils and climate. Systematic testing of new varieties, whether domestically created or imported, is not undertaken. Further, respondents noted a lack of effective linkages between the research institutes and the Agrarian University, 10 World Bank, Doing Business Report 2014, available at http://www.doingbusiness.org/data/exploreeconomies/tajikistan/.

11 GoTJ, Resolution No. 111 (March 5, 2007). Various national and local level government officials defended the focus on cotton as the key to jobs, industry, taxation (i.e., through value-added industry), and even to provide fuel for rural households (who typically use the cotton stalks for winter firewood).

10 | AgTCA TAJIKISTAN which itself lacks sufficient students. Few young people in Tajikistan choose to pursue agricultural science and economics, preferring to seek work in the cities and abroad. Accordingly, new agricultural research and technology is largely imported. Most of the technologies researched for purposes of this assessment are fairly basic production practices rather than complex scientific innovations. However, the lack of an effective public mechanism for testing new or even imported technologies creates substantial commercial risks both for suppliers and farmers.

TECHNOLOGY COMMERCIALIZATION

For the most part, suppliers of agricultural technology in Tajikistan, such as input suppliers and animal feed manufacturers, operate in a laissez faire regulatory environment in which the bureaucratic burden of formal registration and licensing is fairly low, but there is very limited formal enforcement of the regulatory regime. In this environment, it is relatively easy for an entrepreneur to do as he or she pleases—for a fee—but nearly impossible to protect one’s rights. Thus while it is not difficult to import new technologies, the government provides little to no protection for intellectual property rights or against competition from illegal imports.

In addition, agribusinesses above the farm level face high taxes, difficulties accessing credit, electricity shortages, trade barriers, and high transport costs, all of which make it difficult to turn a profit. High-quality inputs and other technologies that enter the country through formal channels are thus dependent on an educated consumer base willing to pay higher prices over those offered for similar (but lower quality) goods in the local markets—a challenge in an environment where farmers’ access to credit and qualified advisory services are limited. The following subsections explore some of the more challenging constraints faced by technology suppliers in Tajikistan.

Finance Bank credit for both farmers and agribusinesses is expensive. While inflation is less than 10%, loan rates are quoted at 24-26% per annum. 12 Repayment periods are also very short, often no more than 90 days. Bank savings rates are roughly 18% per annum. Such terms are prohibitive for both capital investment and operating loans. A new credit bureau has been established in Tajikistan, but its effect on lending practices is not yet apparent. Accordingly, most agribusinesses and farmers do not generally access commercial credit. As will be discussed in below in Farmer Adoption, the most significant source of funding for agriculture is through donors—either through grants, voucher programs, or credit guarantees. Some of these programs link farmers and agribusinesses to banks and MFIs. However, long-term relationships between banks and agribusinesses are unlikely to emerge until the base cost of commercial credit declines.

Taxation Businesses in Tajikistan consider taxation to be a considerable burden. Recent reform of the tax code simplified the system, but high VAT taxes and customs duties continue to pose obstacles to the importation of agricultural technologies. The import of seed and fertilizers, for example, is subject to an 18% VAT tax and 5% duty. By contrast, inputs in the Krygyz Republic are subject to only 0.15% tax, which contributes to the high rate of illegal smuggling of these goods into Tajikistan. The GoTJ has instituted a VAT exemption for certain types of agricultural equipment, including tractors and chemical sprayers, but tax authorities expressed no intention to extend the exemption to other agricultural inputs, animal health products, or spare parts. Further, leasing arrangements and service contracts are also subject to a value-added tax (VAT), thus driving up the cost and reducing the commercial viability of lease-to-buy equipment agreements or services such as tillage. These taxes discourage the development of innovative business models for input supply at prices farmers can afford to pay.

Under the new tax code, small businesses (i.e., those with an annual turnover of less than 500,000 Tajikistani somoni (TJS), or 100,000 United States dollars (USD)) are exempt from VAT and subject to an income tax based on gross revenues at a rate of 5% on goods and 6% on services. While this approach should be simpler for the tax authorities and businesses from an administrative perspective, it does not allow for the deduction of expenses and encourages underreporting of income. For example, there are reports of importers bribing customs officials to reduce the official documented shipment value so as to avoid the VAT threshold.

12 Inflation and interest rates quoted as of January 2014.

USAID ENABLING AGRICULTURAL TRADE (EAT) PROJECT | 11

Larger businesses pay a graduated tax on net income, 18% VAT, and transportation and road taxes and are subject to significantly greater reporting requirements. Overall, the tax regime limits farmers’ access to quality inputs and equipment by encouraging smuggling and disincentivizing the provision of spare parts, equipment leasing, and related services. 13

In an attempt to spur investment and industry, the GoTJ has created 4 free economic zones (FEZs), two of which are located in Khatlon province (Dangara and Panj). FEZs offer trade, tax, and customs benefits to their members, and are open to all types of businesses regardless of industry. The FEZs in Khatlon are in the early stages of development. It remains to be seen what, if any, agro-processing will develop in these zones.

Intellectual Property Rights Effective border controls are essential if innovative technologies and products are to flow into the country. For example, as there is minimal commercial plant breeding in the country, Tajikistan should be a major importer of plant varieties. It is essential that international seed companies, as well as suppliers of chemicals and their agents, have confidence that the country’s customs system is enforcing efficiently and effectively applicable laws and regulations to minimize the movement of counterfeit and black-market goods, and assure that contracts are effectively enforceable.

Tajikistan is a signatory of the Patent Cooperation Treaty and a member of the World Intellectual Property Organization and the International Union for the Protection of New Varieties of Plants (UPOV). While these legislative frameworks are in place, the underlying capacity to manage the resulting obligations and provide for effective enforcement, particularly at the borders, remains a work in progress.

Electricity Khatlon province faces power outages during much of the winter. Most businesses are afforded only 8 hours of electricity per day. Without reliable access to electricity, some agro-industries (such as poultry and milk processing, or storage facilities for perishable horticultural and livestock products) cannot viably operate year-round in Khatlon. Access to electricity is more reliable in the capital district, Dushanbe, and currently larger wholesale fresh fruit, dairy and meat producers are mostly located there.

Larger businesses with political connections or sufficient capital and an advantageous geographic location can buy access to the “red line”—a dedicated power line directly to their business that affords them 24-hour access. However, such access is very expensive (business must pay all costs for the physical hardware and labor to connect the line) and is beyond the reach of small agribusinesses that must aggressively compete to survive.

Transportation and Cross-Border Trade Uzbekistan, which borders Tajikistan to the North and West, provides both road and rail routes to important agricultural markets in Kazakhstan and Russia. Due to a dispute over Tajikistan’s plans to build a dam (the Rogun Dam) over the Vakhsh River, Uzbekistan has actively impeded the flow of goods into and out of Tajikistan since the GoTJ expressed its renewed intent to pursue construction of the dam in 2008. Agricultural shipments, particularly those containing perishable goods, are frequently subject to undue delays and excess customs charges. 14

A railroad line tying Khatlon (via Qurghonteppa) to Dushanbe has fallen into disrepair. Thus all agricultural goods are transported via trucks before being loaded in railway containers to travel to Sughd and beyond. Farmers can also access markets in China via the Pamir, although the mountainous terrain and poor road conditions, impassable in winter, make this route costly. The US funded construction of a bridge across the Panj River south of Dusti that facilitates the flow of goods south into Afghanistan and from there south to Pakistan and east into China. The Khatlon provincial government expects that much of future Khatlon vegetable production will be transported via this route to markets in Afghanistan and possibly on to China. The Asian Development Bank is also actively supporting improved links and border processes between China, Tajikistan, Kyrgyzstan, and Afghanistan.

13 The Consultative Council on Improvement of Investment Climate, an advisory group established in 2007 under the office of the President, has a working group dedi-cated to taxation issues that continues to evaluate and make recommendations for future reforms of the tax system in Tajikistan. Its members come from the public and private sectors as well as international organizations. For additional information on the work of the Council, see http://investmentcouncil.tj/en/.

14 One stakeholder claimed that railway fees have jumped 40 percent in the past three years due to the dispute with Uzbekistan.

12 | AgTCA TAJIKISTAN

WTO Accession Issues Sanitary and phytosanitary (SPS) protocols are crucially important to agricultural trade. Both China and Russia, important export markets for Tajik agricultural products, are signatories of the WTO. Tajikistan has commenced implementation of the required framework, for example by signing onto the International Plant Protection Convention (IPPC). Much remains to be done in regard to food safety and to assure that established technical standards are enforced on both agricultural imports and exports.

Stakeholders expressed particular concern about an increase in the import and use of black and gray market agro-chemicals from China in recent years. The standards agency Tajikstandart is currently in charge of all technical barriers to trade (TBT) related activities—drafting and adoption of standards and technical regulations, conformity assessment, accreditation and metrology—as well as market inspection. This arrangement creates a conflict-of-interest that serves to impede effective monitoring of the quality and safety of goods. The agency also lacks the financial resources and equipment required for effective testing of goods, although it employs sufficient inspectors. Technical trade issues are sure to surface as Tajikistan implements WTO processes and seeks access to foreign markets for its agricultural goods.

Workforce Education and Business Skills Tajikistan’s need for more skilled workers transcends all economic sectors. Many of the agricultural advisors employed by donors and the Ministry of Agriculture are nearing retirement. Yet few new graduates enter the agricultural sector workforce. Approximately 125 students are accepted annually into the Horticulture and Agricultural Biotechnology Faculty at Tajik Agrarian University. Of these students, only 20% return to rural areas to work as farmers. New graduates of the agricultural universities face low salaries and often seek employment abroad, even in fields such as construction that are completely unrelated to the students’ degrees.

Salaries in Tajikistan, even for professional agronomists, cannot compete with income from employment in Russia.

Farmers uniformly stated that there is sufficient unskilled labor available, either through unpaid family labor or hired workers.

Tajikistan has a very young population, including a large number of teenagers who are capable of farm work but not yet old enough to migrate to Russia. In addition, women play a significant role as hired laborers in many aspects of agricultural production.

All of these workers by and large lack an understanding of agriculture as a business—not all farmers in Tajikistan have learned how to make decisions independently, how to be profitable, and how to manage their own expenses.

FARMER ADOPTION

The transition from large-scale collective farms to small private dekhan (or “peasant”) farms has created numerous challenges for farmers in Tajikistan. The prevalence of small farms has repercussions for effective irrigation management, access to equipment, and the development of strong marketing channels. Government policies and messaging to farmers continue to favor cotton production over the more lucrative fruit and vegetable sectors. Long-term development of agriculture in Khatlon province will require overcoming these organizational barriers to improve farmer access to markets, technology, and high-quality advisory services.

Land After independence, the large state-owned collective farms of the Soviet period were divided into shares and given to individual, families, or other collective groups. These dekhan farms range in size from less than one hectare to greater than 40 hectares with an average size of 10. 15 Families also retained control of their household gardens, small plots of land near the home that are typically used for household consumption rather than commercial agricultural production. Land reform began in 1992 and have taken place gradually. Most recently, reforms were enacted to enable the establishment of a market for land use rights and the use of land certificates as collateral. 16 Although some farmers have received formal land use certificates, all land remains the property of the state and can be confiscated for a broad range of reasons. Some of the more pernicious rationales, such as the “non-rational use” exception, were addressed in recent land reforms. Yet farmers remain uncertain of their long-term rights over their land. These concerns are reportedly stronger in Sughd province, where the population is denser and the land less plentiful, but some farmers in Khatlon voiced these fears as well.

15 World Bank Rural Investment Climate Assessment (2013).

16 USAID, Property Rights and Resource Governance Profile: Tajikistan (2010).

USAID ENABLING AGRICULTURAL TRADE (EAT) PROJECT | 13

On collective dekhan farms, it is not uncommon for the elected head of the collective to have retained the formal land use certificate for all of the land, reducing individual members to paid laborers, similar to the structure under the large state-run farms of the Soviet era. New land allocations can be requested in some areas, and land can also be rented. In some cases, rental is preferred to allow for temporary expansion of farm land for annual crops such as onions without the hassle of land taxes, use requirements, and the threat of confiscation. According to farmers, rented land costs approximately $1,400/ha per year.

Farmers are nominally free to plant whatever crops they wish on their land, but in practice the MoA still exerts a large degree of influence, as evidenced by the fact that 100% of non-orchard farmers interviewed by the assessment team continue to grow exactly 70% cotton in accordance with the former national production plan. Freedom to farm does not extend to the establishment of orchards—for this, farmers must apply to and receive consent from the local government. In practice, however, all such applications have reportedly been accepted.

Water While about 85 percent of Tajikistan’s 830,000 hectares of arable land is irrigable, only about 515,000 ha are currently estimated to be irrigated. 17 The irrigation systems were established under the Soviet collective farm system that strove for large scale and highly mechanized cotton production. When land reform divided those farms into thousands of dekhan farms, management of the collective irrigation system was neglected.

Years of poor management have led to degradation of irrigation infrastructure, a rising water table, and widespread soil salinization.

Salt build-up is visible on the surface of fields throughout much of Khatlon, threatening crops and rendering thousands of hectares of land unusable for agricultural production. For example, one farmer stated that of his seven hectares, only two were currently arable due to the high water table and salinization in the soil. This problem is especially detrimental to orchards, whose tree roots extend further into the soil.

The Ministry of Water Resources and Land Reclamation is nominally tasked with the development and maintenance of the country’s irrigation infrastructure, including both supply and drainage channels. However, low institutional capacity and poor management led to its bankruptcy and restructuring in 2013 as part of the Ministry of Energy and Water Resources. 18 In the past 10-15 years, private water user associations, with funding from USAID, the World Bank, and other donors, have been established to remediate and manage the upkeep for irrigation supply canals. Yet little to no efforts have been addressed at improving the drainage channels, which remain the primary responsibility of the farmer.

Farmers are required to pay fees to both the national water agency and the local water user association, but many complained that they experience little benefit in return. The inability and/or unwillingness of farmers to pay water fees leads to the chronic underfunding of the system as a whole, limiting capital investment in long-term infrastructure maintenance and upgrades. The resulting soil salinization poses a serious risk to the long-term development and competitiveness of agriculture in Khatlon province.

Tax Farmers are subject to comparatively favorable tax treatment. Under the new tax code, there is no income tax on farmers.

Instead they are taxed based on the land area under production. Rates on land differ, in part based on whether or not the land has access to irrigation. This tax must be paid regardless of the farmer’s yield and income, although in practice farmers stated that they could receive a reprieve in the event of drought or extreme cold through petitioning the local government.

Farmers also pay monthly a social protection tax equal to 10 TJS for each shareholder in the dekhan farm. Although no farmers discussed this issue directly, the tax seems to have the potential to encourage the consolidation of dekhan farm ownership in a single individual. This dynamic has particular implications for women, who are much less likely to be heads of households or the leaders of collective dekhan farms. 19

17 World Bank, Project Appraisal Document Report No. 72293-TJ (October 25, 2012), available at: http://www-wds.worldbank.org/external/default/WDSContentServer/ WDSP/IB/2012/11/08/000356161_20121108233950/Rendered/PDF/722930PAD0P1330Official0Use0Only090.pdf.

18 See Asia Plus, “Deputy Ministers of Energy and Water Resources Appointed” (Nov. 23, 2013), available at http://news.tj/en/news/ deputy-ministers-energy-and-water-resources-appointed.

19 This issue is discussed in more detail in the next section, Women and Agricultural Technology in Tajikistan.

14 | AgTCA TAJIKISTAN

The preferential treatment for producers only extends to sales at farm gate or into the market. Sales to processing facilities, such as the sale of stone fruit to a jam producer, would be subject to the 6% tax on gross income for small businesses. This approach reflects the government view that processing is business and that only primary production should receive favorable treatment.

However, it incentivizes the sale and export of raw goods and discourages the development of value-added processing.

Finance Under the Soviet system, all support for agriculture derived from the government, and many farmers raised during this period continue to look to outside assistance for funding their activities. Given the limited resources of the Tajik government, most of the financial support to the sector today derives from or is subsidized by donors and NGOs, including both large-scale investments in infrastructure and small-scale support to farmers in the purchase of equipment and inputs. Accordingly, farmers have little incentive to seek out formal credit. As discussed above, banks and microfinance institutions offer loans to the agricultural sector, but the terms of these products put them out of the reach of most farmers. Farmers also lack the business skills necessary to put together a successful loan application.

A limited amount of value chain finance has emerged to cover short-term operating costs. Many of the input suppliers interviewed sell seeds, fertilizer, and pesticides to their clients on credit and are repaid when the crop is harvested and sold. It is important to note that these arrangements were most common with small-scale local input dealers who have developed trust through a long-term relationship with their farmer clients. Larger companies and equipment suppliers often insisted on cash at the time of sale, or accepted a more limited credit or lease-to-own arrangement if it was supported and guaranteed by donors.

By contrast, interviewees were unable to point to any examples of farmers receiving credit from the buyers of their agricultural products (i.e., the traders and exporters who come to the farms to purchase onions or stone fruits at harvest time). The use of formal contract farming arrangements would allow farmers to receive inputs and/or agricultural advisory services on the basis of advance purchase agreements for their production. The lack of this relationship is telling for the broader goals of technology distribution as it cuts off an important potential commercial pathway for farmers to access new technologies. This dynamic is particularly surprising for the onion and orchard sectors, which have the type of strong, high-price export market opportunity that should incentivize the development of long-term supply relationships with farmers. More research is needed to better understand these dynamics and what is needed to facilitate these market linkages.

Agricultural Advisory Services Agricultural advisory services are critical to the successful dissemination and adoption of new agricultural technologies.

“Technology” implies not only physical products but also new agronomic practices and techniques. For both products and processes, the proper use of these technologies must be taught to ensure farmers experience the type of return on investment that will encourage long-term adoption. Advisory services can be provided by both public and private sectors. The relative merits of each approach have been considered extensively by researchers and policymakers and will not be discussed here.

However, both types of service have a role to play.

In Tajikistan, extension services were originally provided through agronomists employed by the state-owned collective farms. In the wake of independence, many of these agronomists have become government extension advisors employed at the district level or private agronomists employed by large dekhan farms or donor projects. The district-level government advisors are few in number and have little access to training. Accordingly, their reach is limited and the advice provided may not be up-to-date with the most modern production methods. The advice may also be skewed in support of government policy—without fail, the farmers interviewed whose chief advice came from government agents grow 70 percent cotton, in line with the government’s agricultural production plan but not necessarily with the farmers’ best interests.

NGOs and donor projects provide substantial assistance to farmers through agronomists employed directly as project staff.

These advisors are highly qualified, but their tenures (tied to the project lifecycle) are necessarily short-term, creating gaps in service over time. Moreover, the duplication and contradiction between the advice provided by the government and donors can confuse farmers.

USAID ENABLING AGRICULTURAL TRADE (EAT) PROJECT | 15

A small number of previously project-based extension providers have attempted to transition to a sustainable fee-for-service business model. As seen elsewhere in the developing world, this business model is difficult because farmers have a long tradition of getting these services for free or very low cost. Donor and NGO specialists often provide free or very low-cost services, and government advisors (if paid) are typically paid in kind or offered tea for their efforts. The most successful of these consultancy businesses have bundled their advisory services with other business branches, such as input shops, financial services, and exporting of agricultural goods. Yet all of these businesses readily admitted that their consultancy services are not yet financially sustainable, and they remain reliant on donor funding. These businesses also face competition for long-term staff from donors themselves, whose projects often hire agronomists directly as project staff rather than working by contract through existing consultancy groups. Donor projects can offer much higher salaries, and many of these businesses have struggled with losing staff, and the investment into the training of that staff, to donor projects. This cycle must be broken if a long-term sustainable extension system is to develop in Tajikistan.

Extension services can also be integrated into the purchase price of agricultural inputs and equipment. Many input suppliers in Tajikistan offer advice to farmers through demonstration plots and in-house lectures or simple assistance in selecting from among the products on sale. Larger, more established businesses with ties to international seed companies arguably provide the highest quality advice. However, farmers reportedly prefer and trust the advice of their local input dealers. These dealers have little formal training but do test their products in their own household plots. Larger input companies have responded to this market dynamic by licensing the local dealers to sell their products. By contrast, as discussed above, there is little to no provision of inputs or advisory services by the buyers of agricultural products. Long-term relationships between farmers and traders or exporters have not yet developed in Khatlon to allow for this type of knowledge transfer.

16 | AgTCA TAJIKISTAN

WOMEN AND AGRICULTURAL TECHNOLOGY IN TAJIKISTAN

The status of women and girls in Tajikistan has undergone significant changes over the last twenty years, and continues to change.

Under Soviet rule, human development indicators on education, literacy, and life expectancy were high. Post-independence economic and social transitions have left women and girls more vulnerable. 20 Civil war, the rollback of social services (e.g., child care and medical coverage), and migration have increased the burden of care and household responsibilities onto women and girls. Significant gender inequalities persist, despite a legal framework that largely provides for equality between men and women.

The Constitution of Tajikistan, adopted in 1994, and later amended in 1999 and 2003, guarantees equal rights for women and men.

It upholds international conventions on the advancement of women including the Convention on Elimination of All Forms of Discrimination Against Women (CEDAW, ratified in 1993), and the Platform for Action adopted at the Fourth World Conference on Women (1995). In 1991, the Government created the Committee on Women and the Family, which aims to promote the advancement of women and continues to operate today.