Food Security Challenges Facing Central Asia

Alessandra Bravi, Nathan Solbrandt Senior economists office UNDP Regional Bureau for Europe and CIS
Introduction

Food security is of paramount importance to Central Asian countries, whose populations are so severely impacted by fluctuations in food prices. The primary concern surrounding food security in the region is the relatively high level of poverty faced by Tajikistan and Kyrgyzstan, and to a lesser extent Uzbekistan. In general, all five Central Asian countries are vulnerable to earthquakes, floods, land degradation and scarcity of water. In part as a consequence of these hazards, Central Asia suffers from low agricultural productivity. This policy brief aims to provide some relevant information on the status of food security in Central Asia, drawing primarily on data and findings presented in a paper prepared by David Sedik, Guljahan Kurbanova and Gabor Szentpali of the Food and Agriculture Organization (FAO) titled The Status and Challenges of Food Security in Central Asia. This research paper was prepared as part of the background material for the third Central Asia Regional Risk Assessment (CARRA) Meeting held in Almaty, Kazakhstan, 14-15 April 2011.

The Status of Food Security in Central Asia

Food security is achieved when households have year-round access from their own production or purchases - to an adequate amount of safe foods to lead active and healthy lives. When these conditions arent met, food insecurity emerges. FAO defines two types of food insecurity, chronic and transitory, classified according to duration and causes. Both types of food insecurity are measured by dietary energy intake from staple foods.

Transitory Food Security

Transitory food insecurity occurs when there is a sudden drop in the ability to produce or access enough food to maintain adequate nutrition intake. It generally results from short-term shocks and fluctuations in food availability and food access, including year-to-year variations in domestic food production, food prices and household incomes. The duration of transitory food insecurity is short because the shortage of food is only temporary. For example, In January 2010 localized earthquakes and floods in Tajikistan affected remote populations who used up all their seeds as food, leading to food shortages.

Chronic Food Insecurity

Chronic food insecurity occurs when people are unable to meet their minimum food requirements over a sustained period of time and results from extended periods of poverty, lack of 1

assets and inadequate access to production or financial resources. Chronic food insecurity involves consistent, long term and predictable shortages in food, leading to malnourishment and nutrition deficiencies. Several countries in Central Asia face significant levels of chronic food insecurity, particularly Tajikistan, where according to the International Food Policy Research Institute about 26 percent of the population is undernourished1. Food consumption expressed in kilocalories (kcal) per capita per day is a key variable used for measuring and evaluating the evolution of global and regional food situations. Information regarding the nutritional value of a persons diet can be inferred from the composition of their caloric intake. Table 1 shows that the Central Asian populations caloric intake consists mostly of wheat, particularly bread. While more nutritious foods such as meat, vegetables and fruit represent only a small portion of peoples diet.
Table 1: Food Consumption Patterns (percent of total daily dietary caloric intake)
Wheat Kazakhstan Kyrgyzstan Tajikistan Uzbekistan 37.3 40.5 53.9 52.5 Rice 2.6 1.1 2.2 2 Maize 0.2 4.1 3.7 1.3 Pulses 0.1 0.5 0.5 0.8 Sugar 9 8.7 6.9 3.0 Vegetable Oils 8.4 5.4 12.4 11.2 Meat 9.9 7 3.8 6.2 Milk 12.4 8.3 4.8 9.2 Fruits 0.9 2 1.2 3.0 Vegetables 2.7 3.9 2.3 4.3

Sources: FAO Food Balance Sheets 2007. Note: Data in the columns do not all add to 100 percent, because not all food products are included.

Kilocalories (kcal)s intake per capita per day from staple foods is used to measure and monitor food security. In Central Asia, cereals make up about 50 percent of staple foods, although this differs from country to country and among populations. Because of this, food security in Central Asia is largely dependent on cereal production, most notably wheat. However, according to the FAO paper, the main problem is not the quantity of food people have access to (the number of kilocalories intake per day) but the quality of peoples diets (nutritional value), their purchasing power distribution, and access to food for all groups within the populations. Nutrition levels in Central Asian countries were lower in 2007 than the average for other parts of the Eastern and Central Europe Region (ECA). In Tajikistan, nutrition levels are 35 percent lower than the ten year average for transition countries of the Eastern and Central Europe region, 25 percent lower in Kyrgyzstan, and 20 percent lower in Uzbekistan. These data confirm that poverty and vulnerability are the main factors limiting peoples access and consumption of nutritious food in the region.

Food Accessibility and Poverty

Since independence, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan have undertaken a significant economic transition away from planned economies towards more market oriented systems. However, despite these efforts policy reform has been frustratingly slow and as a result agricultural productivity and performance has been declining, and food insecurity and malnutrition remain high.
1

A Regional View of Wheat Markets and Food Security in Central Asia July 2011

Income levels vary considerably across Central Asian countries. Kazakhstan with 10,694 USD GDP per capita in 2011 remains the country with the highest income per capita in the region followed by Turkmenistan (4,658 USD), Uzbekistan (1,753 USD), Kyrgyzstan (1070 USD) and Tajikistan (831 USD). Since 2000, there has been a tremendous increase in income per capita in Kazakhstan; significant improvements were recorded also in the other Central Asia countries, but still income per capita remains quite low particularly in Tajikistan and Kyrgyzstan. The share of household expenditure allocated to food is an important measure of food security. When a high share of household budgets is spent on food, households become highly vulnerable to changes in prices. In this case even small fluctuations in prices may lead to a situation of food insecurity. According to World Bank information, in Uzbekistan and Tajikistan almost 80 percent of household income is devoted to food, in Kyrgyzstan the figure is 58 percent, and in Kazakhstan it is 42 percent. Developed countries report between 15 and 30 percent expenditure of household income on food. Approximately 60 percent of the total population of Central Asia lives in rural areas and poverty remains a largely rural phenomenon, mostly due to slow growth in the agricultural and non-farming rural sectors. Therefore, in Central Asian countries, where agriculture employs around 30 percent of the total population, improvements in agricultural productivity will firstly benefit the rural poor. So far the economic growth that has been observed since 2000 has not translated into higher agricultural yields or improved productivity.

Food Price Volatility

Under-investment in agriculture in Central Asia has led to a decrease in productivity over the past twenty years. The agriculture sector was never completely reformed and liberalized. The value chain in agricultural production seems not to be properly functioning and price transmission from producers to consumers and vice-versa is not working properly. Land tenure doesnt allow private ownership for agricultural land in most Central Asian countries except for Kazakhstan and Kyrgyzstan2 (see Annex 1). In the majority of the cases, land tenure is still marked by mainly state ownership, centralized land administration and management, including centrally established production quotas3 . Additionally, the entire sector is vulnerable to abrupt government interventions in export markets. The risk of sudden variations in weather conditions and climate change, including the risk of devastating floods or draughts, combined with a lack of adequate crisis management increases the vulnerability of the agricultural sector. In 2010, food prices in Central Asian economies have been impacted by higher fuel prices and lower domestic wheat production. This was in part mitigated by the record high wheat production in Kazakhstan in 2011, which contributed to lower prices of wheat for Central Asian importing countries. Still, an underdeveloped agricultural sector in energy importing countries leads to significant problems. When fuel prices increase, local production is strongly affected

2 3

Land Tenure and Property rights regional report volume 28 Central Asia, USAID July 2007. Governance of land tenure in Eastern Europe and Commonwealth of Independent States (CIS ), FAO and GTZ, July 2010.

and restricted: rather than being able to ramp up production to take advantage of the higher food prices, they are forced to lower production due to higher input costs. In the current debate about rise in food prices, the diversion of food crops to biofuel refineries has been also seen as a cause of increasing global food prices. According to the Carnegie Endowment, biofuel crop demand has only had a modest impact on food prices to date, however in the long-term, the effects are likely to rise4. In CIS countries the biofuels industry is only in its infancy so at the moment prices are mostly influenced by a raise in production costs. Still grain producing countries like Kazakhstan, Russia and Ukraine have great biofuels potential. In 2006, Kazakhstan launched the first bioethanol plant in the Community of Independent States (CIS) called Biohim Co. The plant has a current bioethanol producing capacity of 57,000 tonnes a year. If not properly regulated, the expansion of the biofuel industry might become in the future a reason of concern for food security. Increases in international food prices have made the low income food deficit countries (LIFDCs) import bills more expensive and made their populations more vulnerable (particularly poor households). At the same time, farmers and local agriculture production apparently did not benefit from higher food prices. A malfunctioning value chain and a lack of investments in local food supplies have made countries even more dependent on food imports. In cereal importing countries, like Tajikistan and Kyrgyzstan, the increase in food prices is related to the rising costs of agriculture inputs from Russia. Fertilizers, agro-chemicals, machinery and fuel are mostly imported and when their prices increase food prices in Central Asia naturally rise. The use of agricultural inputs has continuously declined since independence. International food prices have increased due to factors outside the control of Central Asian countries. However, Central Asian countries are still not able to adjust towards localised production. Most farm machinery and irrigation equipment, such as pumps and pipes, are in a dilapidated condition and there is a high dependency on fuel and fertilizer imports, leaving input factors susceptible to external forces.

Food Availability Based on Cereal Production

Cereal Production in the Central Asian Importing Countries
Out of the five countries in Central Asia only Kazakhstan is able to meet its own cereal needs (mainly wheat). The other four countries depend heavily on imported cereals, for example the proportion of imported cereals made up of wheat is 97 and 95 percent in Tajikistan and Turkmenistan respectively. Total annual production of cereals in Central Asia fluctuated between 23.3 million and 33.9 million tonnes during the period 2001-2009 (a 45 percent fluctuation) due to weather conditions and economic and political stability in the region. Kazakhstan is the main exporter and supplier of wheat and
4

Polaski, Sandra, Carnegie Endowment for International Peace, Rising Food Prices, Poverty, and the Doha Round, May 2008 at 3-4. Whats Behind the Global Food Crisis? Food and Water Watch.

has increased its total planted area by almost 42 percent since 2001. However, the wheat yield has declined by 30 percent over the last ten years; this seems to suggest that productivity has also declined in Kazakhstan. Kazakhstans share of the total cereal production of Central Asia averages 60 percent, although it accounts for only 15 percent of the total population of the region. This allows Kazakhstan to act as a wheat basket for neighbouring countries and export part of its production. Kyrgyzstan and Tajikistan are the countries which are the cause for the most concern, importing 43 percent and 69 percent of the wheat required to meet domestic food needs. They are the poorest countries of the former Soviet Union republics and have relatively high levels of poverty compared to other countries in the region.

Food Consumption
Production trends cannot provide the whole picture, and should be complemented with data on how much countries need for food consumption and other domestic needs. For example, in the case of cereals production not all wheat (or any other grain) produced can be used for food, only high quality wheat will suffice. Excluding Kazakhstan, the quality of wheat cultivated in Central Asia is low, due primarily to poor agricultural conditions. Therefore, even countries that are producing grains may still need to import higher quality wheat for food consumption. Nonetheless, producing lower quality wheat is also valuable as it has other domestic uses. Livestock production depends on the availability of livestock feed which is primarily derived from wheat. For example, in Kyrgyzstan about 50 percent of the wheat crop is used as feed for livestock. Since most of Central Asian countries produce low quality wheat (82-83 percent of all wheat production is considered to be low quality) the majority of it is used as feed. The figure below shows how much the local production in Central Asia satisfies domestic needs (Chart 1). Chart 1: Central Asia: A comparison of food production, consumption and domestic needs in cereals
12,000 10,000 8,000 6,000 4,000 2,000 0 Food consumption (FC) thousand tonnes Domestic utilization (DU) including FC thousand tonnes Production (PR) thousands tonnes

Source: FAO paper The Status and Challenges of Food Security in Central Asia2011.

In four out of the five countries the overall cereal production doesnt meet domestic needs. In particular, the production of quality wheat for consumption is much lower than what is needed. Insufficient domestic quality and volume of wheat production leads to a strong dependence on wheat imports, especially for food needs. Import dependence varies from country to country. The largest portion (about 60 percent) of imported wheat goes to Uzbekistan, the second largest importer is Tajikistan with 29 percent and the third is Kyrgyzstan with almost 12 percent. In 2009/10 imported wheat came from Kazakhstan (96.5 percent), Russia (3 percent) and other countries (0.82 percent). The Central Asian wheat market is not diversified in terms of exporting countries Kyrgyzstan, Tajikistan and Uzbekistan import more than 90percent of their wheat from Kazakhstan - which puts import opportunities at risk. At a regional level the overall production of wheat is sufficient to cover domestic needs for food consumption. However, at the national level, none of the countries except Kazakhstan can cover their food consumption needs: Tajikistan is able to cover only 31 percent, while the other three countries cover around 50 percent (Kyrgyzstan 57 percent, Turkmenistan 50 percent and Uzbekistan 55 percent).

Wheat production and export opportunities in Kazakhstan, Russia and Ukraine

Over the last ten years wheat production has increased in the main exporting countries in the region; namely, Kazakhstan, Russia and Ukraine. However, extreme weather conditions in 2010 have significantly affected crop production in all these countries. In grain producing countries (Russia, Ukraine and Kazakhstan) agricultural production is still highly dependent on weather conditions and natural resources. Additionally, agro-technologies are not sufficiently developed to cope with the effect of natural factors. CIS countries capacity to produce different cereals including wheat which is the main export product is still limited and based mainly on the expansion of the planted area and low yields. Thus Kazakhstan, Russia and Ukraine remain the main suppliers of cereals for neighbouring importing countries. Due to vast arable areas they have the capacity to cultivate the volume of cereals needed, while transportation and other related costs are much lower when compared to imports from the EU or any other region. Energy prices remain a key variable in determining food prices as they contribute significantly to production costs. This also represents a comparative advantage for energy exporting countries, like Russia.

Policy Responses in Central Asia and Neighbouring Countries

As a result of extreme weather conditions in 2010, which lead to a decline in crop production, especially cereals, Russia, Kazakhstan and Ukraine have started to introduce some measures to protect their populations; including export bans and state subsidies. These measures have potentially damaging consequences on the food security of their trading partners. While these policy instruments can be effective in controlling domestic food prices in the short run, they are expensive in terms of budgetary 6

resources and can distort food markets. In the international market these measures resulted in an increase in the price of food imports. In response to increasing prices, importing countries have taken some policy measures, such as eliminating import duties (Kyrgyzstan), using food stocks (Tajikistan) or controlling prices using administrative measures (Turkmenistan and Uzbekistan). The policy responses made can be grouped into four broad categories: export restrictions, taxation, State subsidies, and price regulation (Table 2). These measures have so far had no long term positive effect and served only to increase budgetary spending. A long term solution would require policy measures aimed at developing and improving domestic production, making countries less dependent on imports. Table 2: Policy measures in cereal importing Central Asian countries. Countries Kyrgyzstan Export restrictions n/a Taxation n/a State Support (subsidies) Subsidies on soft loans to farmers but very limited Subsidies to regions faced by floods Subsidies on agricultural inputs Price regulation n/a

Tajikistan

Export quotas

n/a

through interventions on staple food

Turkmenistan

Export quotas, licensing and state orders Export quotas

soft taxation to small farmers n/a

Uzbekistan

Subsidies on agricultural inputs

on selected staple food

Source: FAO paper The Status and Challenges of Food Security in Central Asia2011.

Unfortunately, in Central Asian importing countries trade measures and subsidies are not complemented by measures aimed at expanding investments and creating enabling business environments to increase domestic food supply. Moreover, subsidies and food price controls do not always help the most vulnerable or poor populations, because they are not targeted at those who most need help.

Main Food Security Risks in Central Asia

According to the FAO paper, food security in Central Asian countries is improving. However, there are still threats related to the fragility of national economies and other internal and external factors such as price volatility and natural disasters. Kyrgyzstan, Tajikistan and Uzbekistan remain the poorest countries in the region with the most fragile economies; in particular Kyrgyzstan and Tajikistan who rely so heavily on the gold and aluminium industries are very vulnerable. Although the agricultural 7

sector has been characterized by stable upward trends over the last ten years, it is still underdeveloped, lacks adequate mechanization and remains vulnerable to different natural and economic hazards (changes in prices of fuels, fertilizers, etc.). Productivity of crop cultivation is still low and highly dependent on scarce resources such as water and fertilizers. Table 3: Matrix on Food Security Potential Risks in CA Countries Turkmenistan

Kazakhstan

Type of Risk

Factor

Food access Food prices volatility Malnourishment Import Dependency Climate Change & Weather Conditions & natural resources Weak social food safety net Financial constrains & macroeconomic conditions

Poverty Market volatility and fluctuation PPP/ Income Limited local production Frequent weather fluctuation, water scarcity Fiscal situation and shortage of emergency reserves High interest rate, limited access to financial resources

X X

X X X X X

X X X X X

X X X X X

Source: FAO paper The Status and Challenges of Food Security in Central Asia2011.

Central Asian countries face seven main risks: food access, food price volatility, malnourishment, food import dependency, a weak social safety net, weather conditions and financial constraints (Table 3). Among them three main risks can be identified: market volatility, climate and natural conditions, and food import dependency. Based on this, the FAO paper suggests that it would be advantageous for countries in the region to cooperate on trade arrangements in order to enhance the free flow of food and agricultural commodities. Cooperating on building joint monitoring systems on weather and climate change that will predict any sharp declines in crop production may also contribute to improving preparedness for climate disasters. However, many of the restrictive trade and price controls that governments in the region adopted in response to the food price increases in 2007 have not yet been reversed, and together with lower food prices, these policies could further increase the poverty gap between urban and rural areas. 8

Uzbekistan X X X X -

Kyrgyzstan

Tajikistan

Recommendations and Follow up Actions

The best strategy for improving food security is to reduce poverty through economic growth, in particular by sustainably increasing agricultural productivity. Growth in agricultural food production and the subsequent increase in employment can have a positive effect on household incomes and can contribute to the government budget. Increases in household incomes have a direct effect on poverty and the increase in government budgets can be used to enhance the social protection systems including food safety nets and helping to bring the poor above the poverty line. In Central Asian countries, where the rural population represents around 50 percent of the entire population, improving labour productivity requires adopting advanced technologies for agricultural processes (investment in capital). This needs to be combined with growth in the nonagricultural economy, a necessity to absorb the surplus labour as well as direct employment away from the agricultural sector. Currently there is over-employment in the agricultural sector due to a lack of technical capacity as well as a lack of alternative employers for the majority of the population.

Follow Up Actions
According the FAO paper several follow up actions are indentified that will help to address the issues facing the food security of Central Asian Countries. A. Improve market functions and avoid market distortions by facilitating regional trade and better integration with global commodity markets. Farmers and national economies alike would gain from improvements in market efficiency, which can include improved transport infrastructure, improved market information systems, increased competition in the marketing chain, and increased efficiency and transparency in regulatory systems. B. Develop Risk management tools for farmers Yield insurance, revenue insurance, contracting and improved access to futures market tools can all assist in managing risk. Governments can assist the private sector in developing and offering such tools and could even use prudent incentive measures to encourage the adoption of such risk management tools. These all require a proper information systems and monitoring capacity. C. Enhance rural development and rural infrastructure investments A rural development support system provides rural residents and local governments with information, coordination and technical assistance. Social infrastructure needs will vary but will include such things as roads and highways, schools and child care facilities, hospitals and clinics, community centres with libraries, internet connections and adult learning facilities. D. Invest in social protection or safety net measures to protect vulnerable populations Safety net measures cover various programmes aimed at assisting vulnerable population groups. They include targeted food distribution programmes, targeted cash transfer schemes, feeding programmes 9

and employment schemes. Safety net measures are temporary and targeted at mitigating the worst consequences of a financial or food crisis. E. Create an enabling business environment and promote investments The task of the government is to provide a favourable institutional and policy environment for stimulating more foreign direct investment (FDI). They can do this by providing a favourable institutional and regulatory climate for foreign investors. The inflow of FDI in the food industry and the associated pressure on domestic firms to restructure will lead to important changes in the agricultural supply chain. F. Integrate nutrition and food security considerations into policies, programmes and cross-sectoral partnerships Nutrition should be integrated into development strategies, sectoral policies, programmes and cross sectoral partnerships with an emphasis on food-based approaches to reduce malnutrition. This should be promoted through inter-sectoral collaboration between agriculture, research, food technology, health and education.

10

Annex 1: Land Tenure and Property Rights in Central Asia Tenure Types Kazakhstan
Land can be privately owned in Kazakhstan. The process for privatizing former collective farms has been slow, and those holding land share rights in these farms will have a hard time transforming these share rights into land ownership rights. Agricultural land is held through "conditional land shares," which do not correspond to a particular parcel of land. (Rolfes) The Constitution was amended to allow for private ownership of agricultural land in 1998, and land can be purchased and sold. (Giovarelli) The Constitution does not permit the private ownership of land, though long term heritable land rights are provided for in law. (PA at 58-60 and Giovarelli)

Land Tenure and Property Rights Constraints

In 2003, Kazakhstan's President adopted a new land code that requires these share holders to either start their own farms or invest their rights in large agricultural production companies. Therefore, millions of poor Kazakhs will lose their rights to land, and the land will be transferred to massive agricultural enterprises controlled by government officials and their associates. (Rolfes)

Kyrgyzstan

Tajikistan

Turkmenistan

Uzbekistan

The 1992 Constitution of Turkmenistan formally recognizes private ownership of land. However, the Land Code and subsequent legislation made it clear that "ownership" of land does not include the right to transfer land and such land may not be sold, gifted, or exchanged. Private land ownership is forbidden by the Constitution and land is held in long term leases from the state.

More than a decade of reforms privatized most of the countrys arable land, which is held by 2.7 million peasant farmers and households. Land disputes with the State are a source of some tenure insecurity. (Giovarelli) All land management is dictated from the center and is still a throwback to the command economy, including quotas for production, broad requirements for "rational use" and improved soil quality, and the threat of confiscation for not meeting these goals. (Giovarelli and PA at 63) Although land has been widely distributed, the Government of Turkmenistan sets quotas and specifies required crop production. Land use rights can be revoked for not following the state orders on cropping and production (ALBFR at vi and 15).

Although the government has pushed forward with land reform, even private farmers are subject to many of the same mandates, orders, and constraints as the collective farms, with the possibility of their land rights being taken for noncompliance.

Source: Land Tenure and Property rights regional report volume 28 Central Asia, USAID July 2007.

11