The first Kazakh-Chinese grain forum AGRICOM 2024 was held in early June in the Chinese city of Bole in the Xinjiang Uyghur Autonomous Region. Here, in the region bordering Kazakhstan, near the Alashankou station, there is a bonded zone with a grain terminal through which Kazakh grain cargo passes. The results of the forum in a conversation with ElDala.kz were summed up by Nurlan Ospanov, Chairman of the Grain Union of Kazakhstan.
The main result of AGRICOM was the agreement to create a working group to quickly resolve problematic issues that arise during the transportation of goods.
- The XUAR administration supported the need for this group to work on an ongoing basis, and not from conference to conference. Thanks to the working group, we will constantly know each other’s needs, and responsible coordinators will be appointed from each side. By preliminary agreement, the working group will include representatives of government agencies, possibly the Grain Union.
It is very important that the forum brought together real exporters, processors and grain producers. For the first time, we managed to gather 80 representatives from 67 Chinese companies, and among them there was not a single intermediary, namely those who buy grain from us. A very large number of new companies have been added to the portfolios of potential customers of Kazakhstani products. For example, the Famsun company (manufacturer of agricultural equipment) invited all real Chinese clients to whom they supplied plants.
What have we heard from the Chinese side? China is ready to accept large volumes of grain from Kazakhstan and is ready to buy the entire line of products that we produce. Chinese services have accredited our elevators so that we can load lentils, peas and rapeseed. During Kassym-Jomart Tokayev's visit to China last year, an agreement was signed between the Ministry of Agriculture of the Republic of Kazakhstan and the General Administration of Customs of the PRC on inspection and quarantine requirements for peas and edible lentils for export to the PRC. In particular, Chinese grain farmers want Kazakh soybeans and corn. We saw with our own eyes the bonded zone and their storage capacity: they can accept up to 4 million tons of grain per year. In previous years, we supplied less than 1 million tons of grain; last year’s record was 2.2 million tons.
- Does China have a limit on grain exports?
- The needs of the Chinese market are huge, and we can increase volumes in Kazakhstan, the main thing is not to interfere with us. And our government agencies often interfere by creating new duties. But the main thing we heard is that the Chinese are ready to buy everything we can offer, and in the volumes in which we can provide. They have virtually no purchasing limit. The only thing is that there is a protective policy - tariff regulation measures so that their grain producers do not go bankrupt due to huge imports. In particular, today duties on wheat supplied to China reach 67% of the customs value. Because China itself is the largest producer of wheat: more than 130 million tons.
- How are import duties formed in China, and what are grain prices there today?
- The state constantly purchases grain from its producers. And so that the flow of cheap imports from all over the world does not reduce prices, today the Chinese state buys wheat from local producers at $300 per ton. At the same time, for all types of agricultural raw materials in the world, prices have returned to the levels they were before the pandemic, and such prices can suppress domestic production. That is why the Chinese government determines the level of volume of duty-free imports or imports into a bonded zone where processing takes place. Next, they calculate how much additional wheat they need, give the state company COFCO the right to duty-free import, and accept the rest of the volume only after paying a duty. China purchases approximately 10 million tons of wheat from all over the world, including from Kazakhstan.
- One of the problematic issues affecting the speed of cargo deliveries remains the coordination of permitting documents. What decision did you come to during the forum?
- We proposed to the Chinese side to reduce the time required for processing documents permitting imports. We also asked to be given the opportunity to have a surveyor on our side in China in the event of complaints arising during the supply of our products. So that both inspectors - Kazakh and Chinese - jointly draw up a commercial act on issues of shortages and so on. It is also a common problem when the Chinese side issues complaints 6-9 months after delivery, deducting a percentage for the claim. As a result, our suppliers lose their income, and only find out about it nine months later. We want all issues related to complaints to comply with the requirements of international agreements, including the requirements of GAFTA (International Grain and Feed Trade Association). Both China and Kazakhstan are members of this international association, so we proposed to adhere to the prescribed GAFTA deadlines - 10 days, and not 6-9 months. The Boro-Tala administration has promised to forward the proposal to the central authorities.
- What other significant agreements were reached during the international forum?
- The first and most important question is that we found out the capabilities of China in receiving trains. Now there is congestion at the border, plans have not been fully agreed upon, and this has been going on for several months. We did not know why we did not coordinate transportation for our exporters. Having arrived here, we figured out this issue. When interacting between Kazakh and Chinese government agencies, within each of the parties there is also internal interaction between the bodies - the customs department, railway committees. As it turned out, communications between these departments were not worked out here, and as soon as we increased the volume of supplies, the regulations adopted here stopped working. Now these regulations will be revised. And if we establish interaction between all parties (Kazakh and Chinese), then they will be ready to accept from us at least two trains of grain wagons per day.
- Will this solve the problem of congestion at the border?
- We stood there for several months, and now they promised to give us the opportunity to go as soon as possible. We expect the Ministry of Transport to announce this and also determine the quantity of deliveries that will be allowed. I think we will go in July.
The Ministry of Transport of Kazakhstan has agreed on pilot solutions with the PRC in order to understand where our weak points are in logistics. And after negotiations in Alashankou, we managed to obtain the consent of the Chinese side to work together on the entire path of Kazakh grain - from the elevator to the bonded zone - in the form of timing. This will help to understand at what stage regulatory deadlines are met or not met and for what reasons, as well as find a solution to this issue.
I would like to personally thank the representatives of the Ministry of Transport and Communications of the Republic of Kazakhstan, the Railway Transport Committee and the KTZ company, who together with us have done a lot of work here in China. We managed to draw attention to many points that the Chinese representatives did not notice.
- During the forum, the Grain Union entered into an agreement with the Chinese company Famsun. Tell us in more detail, what did you agree on?
- Famsun is ready to deliver turnkey projects for Kazakh participants who want to go into grain processing, feed production, or use sprinkler equipment. They are interested in offering our participants equipment on preferential terms, with a deferred return on investment of up to two years. We were the first to agree to cooperate with the Altyn Astyk Group, and if the project works successfully, then we want to offer such conditions to all participants in the grain market. But for this it will be necessary to first work out the possibility of guaranteeing these projects with the Baiterek NMH and the Damu Fund. The decision to issue guarantees to the applicant will be made by these financial institutions, and if everything works out, this will be a very good help for the Kazakh project initiators - two years of complete deferment. But in order to go to government agencies and ask for such a guarantee product, we need to show that one real project has been successfully implemented.