As the country’s agriculture industry continues to experience substantial adjustments in the transition to a market-oriented economy, the sector continues to under perform. Many farms and agro processing facilities are not operating efficiently, are not profitable, and in some cases are not financially viable.

In addition, the absence of a viable land market and poor administration of pastures lands are inhibiting productivity. Meanwhile, related activities such as veterinary, machinery, and advisory services are only slowly developing and need to be reoriented to the market system.

"While the issues facing agricultural development are diverse in Kyrgyz Republic, they are interrelated and should be addressed in a holistic and coordinated manner," says John Whittle, an ADB Principal Agricultural Economist. "The project aims to achieve this, resulting in improved agricultural, orchard, and pasture management, higher profits and increased land productivity, benefiting a population of more than 158,000."

The project – ADB’s third to address agriculture and natural resources in the country – adapts the concept and approach of a previous project approved in 1999 in Chui Oblast and expands it to parts of Batken, Jalalbad, and Osh.

Focusing on the lowest level of government – the aiyl okmotu – it will develop agricultural and legal advisory services, boost access to credit for farmers and agribusinesses, improved contractual arrangements between farmers and agribusinesses, and raise the performance of agribusinesses.

To support marketing activities, the project will rehabilitate or build new storage and cooling facilities. The project will also coordinate with the World Bank on rehabilitation of any irrigation and drainage infrastructure in need of repair.

In addition, it will prepare development plans, establishing community organizations, and capacity development to ensure sustainability of pasture lands and orchards.

The total cost of the project is estimated at US$31.23 million, for which ADB is providing a loan of US$15 million and grant of US$5 million, both from its Asian Development Fund. The grant will be used to provide education for farmers on agricultural practices, prepare plans and maps, invest in pastures and orchards, and develop advisory services.

The loan carries a 32-year term, including a grace period of eight years, with annual interest charged at 1% during the grace period and 1.5% afterwards.

The Global Environment Facility will finance about US$2.5 million of the total project cost to provide additional training for farmers, field schools, and meet planning and monitoring needs. The Government will contribute US$6.81 million and the beneficiaries will meet the remaining US$1.92 million.

The Ministry of Agriculture, Water Resources, and Processing Industry is the executing agency for the project, which is due for completion around June 2013. The agreement was signed during a recent ceremony attended by Kyrgyz Minister of Finance Akylbek Japarov and Director of ADB Kyrgyz Resident Mission M. Ashraf Malik.