New Kazak Reform Could Hit Small-Time Farmers

IWPR Central Asia

Institute for War & Peace Reporting

Sunday, 20 November, 2005

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Kazak smallholders will get a big shock later this year if a new law goes through putting them on the same footing as large-scale industrial farms.

The law has immense implications for the Kazak economy because modest though the typical smallholding might be - a few sheep or cows kept on a village allotment - it is the driver of the country’s livestock production.

The new bill currently being drafted by the agriculture ministry would re-define smallholdings, so that they would have to formally register with the authorities as farms, and then pay taxes and comply with regulations currently applicable to the big agricultural businesses that are the legacy of the Soviet collectives.

“We will have to leave,” said Marzia-apai, a woman who keeps a plot of land in the Akmola region of central Kazakstan. “I have 12 people in my family. Three cows and two horses are all the farm I’ve got. Am I a farmer who receives an income? I scarcely have enough to feed my family, and they want to force me to pay taxes. What for?”

The intention behind the law is clear: ministers feel that small-scale farmers, although responsible for the bulk of production, are inefficient and are not contributing enough in revenue to the government. They consume some of the meat, milk and eggs themselves and turn the rest into hard cash at their local market.

The director of the livestock department at the agricultural ministry, Sovet Satygul, explained that too many farmers are abusing the rules which allow private individuals to keep a limited number of domestic animals.

Ministry regulations say that someone who owns a plot of land of between 0.1 and 0.15 hectares – the national average used as a standard – is allowed to keep two cows, three pigs or up to 15 sheep. Any more, and they are really operating as a farm and should be classed as such, Satygul said.

“Many subsidiary farms have small pieces of land where there should be a garden or one or two animals, but they keep 300 to 600 sheep there or three or four cows. That is, they have already changed from a private subsidiary farm to an agricultural producer,” he went on. “And if there is a surplus [for sale], then they already count as market participants, and should pay [taxes] like everyone else.”

The Kazak people, who were nomads before the Russian Revolution, have specialised in livestock-raising for centuries. The more horses, cows or camels a member of the rural population has, the richer he is considered to be.

The herds were forcibly nationalised in the early years of Soviet rule, and the Kazak republic became an important supplier of animal products for the rest of the USSR.

But tradition remained strong, and people made the most of the small pieces of land they were allowed to keep for personal use, by raising a few animals.

After the collapse of the Soviet Union, independent Kazakstan privatised the state-run giant farms. Some stayed virtually intact and became industrial-scale farms in private hands, while others were broken up into small family-run enterprises. Finally, there are the smallholders operating on a tiny plot of land much as they did in Soviet times.

As of 2002, the big farms owned 60 per cent of the arable land in Kazakstan, according to a World Bank report released last year, while the two million or so smallholders were sitting on less than four per cent of the land.

But looked at in terms of effectiveness, the picture is completely the reverse. The slow recovery of national agricultural production after the post-Soviet slump of the Nineties is entirely the work of the smallholdings and family farms.

The smallholders, while not technically considered farmers in the eyes of the law, contribute over half the agricultural products on the market, with the “family farms” accounting for a quarter and the giants only about a fifth.

The problem is that the marketing and distribution system is set up for the big players, not the small ones, and controlled breeding programmes don’t work well when most owners have only a handful of animals.

“Private farms do not have an established market, and it is unprofitable and inconvenient for the processing firms, who find it difficult to obtain their raw materials from large numbers of private farmers,” said Umerbaev. “The quality of the produce varies, there are veterinary problems, and it is impossible to develop livestock breeding on private farms.”

The planned reform of the smallholding sector is part of a government push to modernise agriculture. Addressing a meeting on the state of agriculture on January 31, President Nursultan Nazarbaev gave orders for the sector to catch up with Europe in seven or eight years.

“Every citizen of Kazakstan must above all think about his future himself and be responsible for his own affairs. Don’t ask for money – no one will give you anything more. There will be no direct state subsidies,” said Nazarbaev.

The authorities want to move towards higher productivity and introduce new farming technologies. Part of the reason is that if Kazakstan joins the World Trade Organisation as its neighbour Kyrgyzstan has already done, domestic producers will have to compete with better-quality and often cheaper imports.

Few doubt the need for the smallholders to be better integrated into the system. But the danger is that the new law with its “one size fits all” approach will simply drive many out of business, with damaging social consequences for an already impoverished population. A farmer with three cows instead of two will suddenly find him or herself facing a mass of red tape and financial rules that will be hard to comply with.

Taxation is not currently too much of a burden for the average farmer. As tax officials at the Kazak finance ministry told IWPR, all registered farmers pay a land duty at a single rate of 0.1 per cent of the estimated value of their property. And those establishing a farm for the first time are exempt from paying business registration duties, and also from other taxes, unless they hire labour in which case they pay social contributions.

But Satygul at the agriculture ministry indicated that changes to farm taxes are in the pipeline, without specifying what they might be.

For Adilkhan Umerbaev, president of the national Farmers’ Union, the social and economic consequences of the reform are the major concern. He warns that smallholders are likely to slaughter their animals rather than register as farms.

“The authorities are creating another social problem,” he told IWPR. “If a villager has a few animals, say ten cows, he keeps some of the produce for himself and sells the rest. This provides some kind of income. And now they want to cut it back.

“What will people do with their livestock? Who will buy it now? The result is that the livestock will be slaughtered. Most villagers will not go for re-registration. It will involve extra outgoings for villagers who have to count every penny, plus lots of bureaucracy such as submitting accounts annually. And what would it achieve anyway? They had 20 cows before and would still have 20.”

Umerbaev believes the government should not be interfering to make the smallholders’ lives more difficult, saying, “The state must understand its place in this system. People should be able to keep as much livestock as they want.”

Ayman Sakenova is a pensioner in Akmola region who supports her household only with the extra income she gets from her animals.

“I’ve got three cows. So I go to town every day to sell milk and sour cream,” she said. “I haven’t any other way of getting by. My husband is sick and needs medicine and I’m not keeping so well myself. We’re bringing up our grandchildren – four of them – so we have to buy clothes for them and send them to school.”

Sakenova is worried that the change could spell the end, “If they bring in a law like that, then I don’t know what I’ll do. Sell the cows? And then what would we live on?”

The agricultural ministry has not yet publicised its farm reform, and the farmers interviewed for this report were unaware of them until IWPR’s contributor told them about it. The law is likely to be unveiled towards the end of 2005, before it goes to parliament.

Alim Bekenov is the pseudonym of an IWPR contributor in Astana.