"GREEN MARKET"

The reforms in the agro-industrial sector that began 15 years ago have helped to shape market mechanisms and a modern infrastructure in the countryside and, as a consequence, to increase substantially the volumes of import-substituting production. But now, the agricultural logistics system needs to be streamlined and access of producers to the sales markets simplified. In order to carry out this task, Azerbaijani President Ilham Aliyev has signed an instruction on additional measures to improve the performance of the country's agricultural and food markets.

Task No 1

Agriculture and the processing of agricultural products are recognized as being among the developed branches of the Azerbaijani economy, and in terms of quantity of integrated labour resources they rank a confident first in the country's non-oil sector. By developing intensively over the past decade, our agro-industrial sector [AIS] is now in second place after the energy sector in export volumes.

But one could argue that reaching an over-80 per cent level of self-sufficiency in food was the main outcome of the agrarian reforms. This is extremely important, particularly against the background of the many local crises on the world's food market in recent years, which sparked a global price increase for foodstuffs. The high risks entailed in preserving the country's dependence on external food markets forced the Azerbaijani government to take effective measures to prevent the import of produce inflation and other "globalization" drawbacks into the country.

The state programme for the steady provision of food for 2008-2015 has been consistently implemented for five years now. The radical reforms of the AIS stipulated in the state programme were aimed at ensuring the country's food security through the intensification of domestic agricultural production. The stimulative mechanisms introduced in recent years have included providing subsidies for private farmers and preferential credits for processors to install state-of-the-art technology; hundreds of millions of manats are allocated every year for keeping irrigation systems in working order, building elevators, cold-storage plants and greenhouses and developing a new agricultural infrastructure.  

In the context of direct state support, over 587m manats have been allocated to agricultural producers in the form of subsidies over the past 10 years. The Aqrolizinq joint-stock company has been given over 430m manats to purchase agricultural machinery and special equipment and to import pedigree cattle, as well as develop a modern material-technical base for the industry.

One of the main reasons for the heightened tempo of development in the agricultural sector has been the activity of the National Fund for Entrepreneurship Support (NFES), which in 10 years has provided about 1.2bn manats in preferential credit. Experience has shown that 80 per cent of all allocated funds go to the rural regions, and three quarters of preferential loans are offered to private farms and agricultural processors. Long-term tax breaks and other types of state support have helped to lift the profit margin of private farms to 54.8 per cent.

The aforementioned measures of support for agriculture are reflected in the annually increasing production volumes. For example, last year a 5-per cent growth in agricultural production was achieved, and in certain areas of vegetable growing and stockbreeding the figures were even higher. As a result, today the ratio of food to the country's overall volume of imports is a little over 10 per cent (by way of comparison, five years ago food products accounted for almost a quarter of our country's total imports). This is a very good figure, because in a number of the developing countries the ratio of food in the import structure is still within the 40-50 per cent mark. It is not difficult to calculate to what extent the achievements in our agriculture industry protected Azerbaijan from the global increase in food prices.

Additional measures

However, global external factors are by no means the only threat standing in the way of the effective provision of our country's food security. The increase in prices for food products often provokes shortcomings in the mechanisms of transport and warehouse logistics, an insufficient rate of development of consumer cooperation and the forms of mass distribution inherent in it, and also artificial obstacles that prevent small private farms reaching out to sales markets in the big towns and cities. 

In order to overcome these issues, as well as develop a state-of-the-art and transparent food and agricultural sales market, the head of state has instructed the Agricultural Ministry to draw up within three months a strategy for the development of the agro-industrial sector. This document should embrace the basic principles of agricultural policy and stipulate the strategic aims and priority areas of development of the agricultural sector. The Agricultural Ministry has also been instructed to provide President Ilham Aliyev as soon as possible with recommendations for the improvement of the structure of the ministry and also its local departments.

A separate section of the head of state's instruction concerns preparing recommendations for the development of cooperation in agriculture. Providing state support for the cooperative movement in Azerbaijan has long been a requirement. As world experience has shown, a system of agricultural production and consumer cooperatives, various credit unions, associations of water consumers and other commercial private farmers' associations helps to make more effective use of the land and water resources in agriculture and eases access to privileged funding or to sales markets. 

Unfortunately, collective forms of economic management in the countryside have not been popular in Azerbaijan and the activities of a few associations and cooperatives have, as a rule, been carried out as part of pilot projects of international financial organizations. Undoubtedly, Aliyev's attention to this problem should help towards the speedy adoption of the law "On agricultural cooperation", the draft of which has been debated by the Milli Maclis [parliament] since 2011.

Meanwhile, the main emphasis in the president's instruction was laid on improving the performance of the foodstuffs market and providing transport logistics. Specifically, the Ministry of Agriculture has been instructed to take urgent measures towards a more effective organization of agricultural markets in Baku and to encourage small and medium-size producers to move into the wholesale and retail sales markets. Normal conditions must be created for such forms of mass trade to work, bearing in mind the convenience for both the population and the private farmers, and the reasons for abusive practices in this sphere must be eradicated. There are proposals to organize similar fairs in other towns and district centres in the country.

"We are planning to adopt a raft of measures to improve agricultural markets which we have been organizing for seven years now. Worldwide, agricultural markets are organized in the form of logistics bases, and we, too, intend to apply this mechanism by creating a new scheme. Thus, the logistic bases that are being created in the large towns will be equipped with public catering facilities, warehouses, transportation services, and so on," Azerbaijan's Agricultural Minister Heydar Asadov believes.

The Azerbaijani president's instruction also indicates other measures, the implementation of which should improve the access of private farmers to sales markets and eradicate bureaucratic obstacles. For example, specialized centres for the distribution and sale of meat products are due to be created, and their activities must comply fully with veterinary and sanitary-epidemiological standards. The ministries of agriculture, economy and industry are to prepare recommendations to create private bases for the storage and sale of agricultural produce, trader companies, logistics centres, container and packaging companies and a pool for cold-storage vehicles and other transport for the delivery of agricultural produce, as well as permanent "farm shops" and "green markets".

The head of state's instruction defines quite clearly the need to eradicate any kind of negative occurrence in the sphere of agricultural transport logistics. Thus, the Ministry of Transport and the Interior Ministry have been instructed to create conditions for private farms for the uninterrupted transportation of agricultural produce throughout the republic. Effective mechanisms are also to be set up for anti-monopoly supervision and to prevent unscrupulous competition in agricultural and food markets, and to provide quarterly accounts on the transportation of agricultural and food products. New requirements have also been imposed in the sphere of agricultural production accounting and more comprehensive reports on the statistics of food safety and consumer price monitoring will be drawn up. Finally, the Ministry of Economy and Industry and the State Customs Committee have been instructed to draw up recommendations to increase the export of agricultural and food products and to simplify procedures in this sphere.

One hopes that the implementation of the measures planned in the new strategy will enable local farmers and the producers of processed and packaged food products not only to maintain high volumes of production and modernize production capacities, but also to impose order on sales markets, thereby providing our citizens with high-quality and inexpensive food products.