07 September 2019

Flour mills of Kazakhstan transfer business to Uzbekistan

Forbes.kz. posted a material in which it says that Kazakhstan flour mills are transferring business to Uzbekistan.

Dos-Mukasan Taukebaev, director of the Mutlu, a large Karaganda mill complex, told the publication that if two weeks ago wheat in the region was worth 60 thousand tenge per ton, today it is already 70.

There are several reasons for the rise in price. The main thing is the expectation of a low crop. If last year Kazakhstan collected 14 million tons of wheat, then in current preliminary estimates it is 10-12 million tons. More precisely, it will become clear by the end of September, when the harvest is completed by 80%. So far, Kazakhstani flour mills are not working for export and can only watch from the side how their Uzbek colleagues quietly push them to the market. Kazakhstan was the world leader in the export of flour in 2007-2010, after which, for various reasons, lost the palm to Turkey.

Now everything goes to the fact that Uzbekistan will withdraw Kazakhstan from the second position. It could happen this season. The fact that Pakistan traditionally competing with Kazakhstan for a meal on the Afghan market, this year banned the export of grain and its products: the harvest here was 33% lower than last year, which caused a risk of a food crisis.

According to Taukebaev (director of the large Mutlu mill complex in Karaganda), there are 6 reasons for the higher competitiveness of Uzbek flour mills:

– grain can be imported into the country without VAT, and imported flour is taxed at a rate of 20%;

– transit of tons of flour through Uzbekistan to Afghanistan for Kazakhstanis costs $ 47, and transportation costs of Uzbek producers in the same direction – only $ 22;

-Uzbek flour mills for 5 years are exempted from many types of taxes;

– if in Kazakhstan the average loan rate is 14% and it is issued for seven years, then in Uzbekistan – at 4% to 15 years. That is, in Kazakhstan there is not enough cheap long money, and this is the “blood” of any business;

– the cost of electricity in Kazakhstan is 20 tenge (approximately 0,50 dollars) per kilowatt, in Uzbekistan – no more than 10 tenge;

-working force in Uzbekistan is also two times cheaper: in Kazakhstan, the average salary in an enterprise is 140 thousand tenge (approximately 364 dollars) per month, in Uzbekistan – 80 thousand

According to him, several large flour milling companies from the Turkestan region, as well as two from Karaganda, have already built mills on the territory of Uzbekistan and transferred their production there.