Investment subsidies and other barriers in providing farmers with agricultural machinery

1.

Investment subsidies
and other barriers in
providing farmers with
agricultural machinery
2023
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2.

.
President Tokayev stated that 80% of
machinery is outdated and set two
goals:
• Increase agricultural productivity by
two times within five years.
• Annually update 8-10% of
agricultural machinery
(tractors and harvest combines)
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3.

According to the Ministry of Agriculture, in 2022, Kazakhstan farmers purchased 17.3
thousand units of agricultural machinery totaling 330 billion tenge. Investment
subsidies amounted to 115 billion tenge.
If the Government of Kazakhstan changed its policy, approximately
4 350 farmers could also upgrade tractors and combines with government support.
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4.

Current problems of Farmers
Expensive machinery (both local and imported).
Lack of finances.
Lack of competition between machinery distributors.
↓
↓
Utilization fee: 5-10%
VAT: 12%
↘
↓
↓
Import duties: 5%
↙
Combined artificial increase of cost of machinery by 20-30%.
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5.

GOVERNMENT SUPPORT for
AGRICULTURAL MACHINERY
for Domestic
for Foreign
SERVICES
Proposed measures
for Foreign
VAT = 0%
VAT ≈12%
VAT ≈12%
CIT = 0%
custom duties ≈ 5%
custom duties ≈ 5%
custom duties = 0%
recycling fee ≈ 5-7%
recycling fee ≈ 5-7%
recycling fee = 0%
30%
subsidy
Declared │ Actual
25%
subsidy
10-12%
subsidy
Declared │ Actual
15%
subsidy
5-6%
subsidy
Further reduction to 15% will lead to even lower subsidy rates, estimated at around 5-6% for foreign
machinery
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6.

Government support for local assembly production
Tax exemption (2018 - 2022)
123 billion tenge*
Building and infrastructure:
by North Kazakhstan and Kostanay 19,5 billion tenge**
regions
Subsidizing rate of leasing/loans 81,3 billion tenge***
* - information according to Ministry of Finance
** - information provided by akimats of Kostanay and North Kazakhstan region
*** - information according Ministry of Agriculture
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7.

Price increase of local machinery from 2019-2022
Brand and Model
2019
2020
Combines
2021
2022
VECTOR 410KZ
with a 7-meter header
43 466 000 tenge
45 809 289 tenge
47 300 000 tenge
93 450 000 tenge
45 000 000 tenge
50 858 676 tenge
53 314 286 tenge
95 857 500 tenge
55 000 000 tenge
66 869 431 tenge
68 335 714 tenge
136 612 500 tenge
6 767 060 р.р
53 588 122 tenge
54 800 000 tenge
112 050 000 tenge
Kirovets K-742
7 560 600 RUB
Tractors
50 261 400 tenge
58 050 000 tenge
89 150 000 tenge
RSM-2375/Buhler2375
64 500 000 tenge
65 200 000 tenge
75 200 000 tenge
133 000 000 tenge
ESSIL KZS-740
with a Don Mar 9meter header
ESSIL KZS-760
with a Don Mar 9meter header
ACROS 550KZ
with a 7-meter header
Prices are provided by KazAgroFinance, JSC
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8.

Similar situation
EU vs Turkey
Actions by the Government of Turkey:
• Introduction of a program to exclude imported medicines from the list of
reimbursed goods by Government funds if they are not localized and produced
within the country.
• Providing incentives for medicines manufactured in Turkey.
• “Prioritization measure” whereby Turkey gives priority for domestic
pharmaceutical products as discrimination against imported medicine.
EU arbitration case against Turkey:
• EU filed a case to the WTO in 2019 against Turkey's compulsory measures
regarding pharmaceutical manufacturing localization.
• WTO arbitration ruled that the Turkey’s localization measure discriminates
against foreign pharmaceutical products.
Currently, Kazakhstan is facing a similar issue in the agricultural machinery sector
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9.

Lack of competition between local and imported machinery creates an opportunity for market monopoly and increases the
cost of tractors and combines for farmers.
This policy discriminates highly productive imported agricultural machinery.
Our Proposal
Local Agricultural
Machinery
Government
Preferences
Imported Machinery
0
Import Duties
0
0
VAT
0
0
Utilization Fee
1 – 2%
30 % state budget
5 % local budget
Subsidy Rate
20 – 25 % from
actual price
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10.

If the Government implements our proposal:
1.
Price for agricultural machinery shall decrease by 20 – 25% (local and imported).
2.
Update of agricultural machinery will increase at least 20%.
3.
Productivity of Agricultural sector will increase annually 10-15%.
4.
Effectiveness of state budget increases (less money but more tractors and combines).
5.
Increase of jobs in agriculture.
• In 2022, the total amount is calculated as follows:
17300 machinery worth 330 billion – 25% = 82.5 billion
82.5 billion / 19 million = 4350 machinery,
17300 machinery + 4350 machinery = 21650 – updated machines.
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11.

Adherence to International
Standards in Agricultural
Machinery: Our Path to
Development. Fair rules in
the market will lead to
President Tokayev’s goal to
increase Agricultural
productivity and updating
machinery.
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