Creating a Marketing Cooperative : Kyrgyz Sheep Breeder's Association, Kyrgyz Republic

1. Creating a Marketing Cooperative: Kyrgyz Sheep Breeder's Association, Kyrgyz Republic

2. The country: • Beautiful scenery • Isolated mountain valleys • Poor communication/roads • Rugged terrain, rugged farmers • Mainly vertical transhumant husbandry • 130 years of Russian and 70 years of Soviet • dominance • Soviet-directed production of wool sheep

3. Background pre-soviet • Livestock herding was the predominant occupation- mainly horses and meat sheep • Landscape and climate/ weather directed the, largely vertical, transhumance • Land-ownership was informal • but use was guided by tribal/clan elders • Social relations dominated rural life • Limited trade • exchange of food products; hide/skins, artisanal wool products

4. Transition Sheep inventory declines: Owner numbers increase: • 1992-96 Lack of liquidity in rural areas • Sheep were used to pay farm debts and temporarily were the “common currency” in rural areas • New owners (without land ) did not have resources to purchase or barter feed for their animals. Few have experience in managing livestock. Reasons include changing terms of trade, cut in feed imports, ill conceived farm privatization, poor urban demand

5. Increase in number of farmers • 1997 • 45.000 house hold farms • 19.000 farming homestead • 25.000 peasant farmers • 345 agricultural coops • 276 agr assoc/56 joint stock ….but few with experience in farming and still dominance of former collective leaders…. ….cooperation was expected to increase power in buying/selling animal products, and increase production efficiency.

6. Field notes from late 1999 Farmer quotes • “…every one is on his own, or has friends and connections…” • “I don’t even trust my brother…” were not promising for a farmer cooperative movement, but this changed after 2000 when farmers “discovered” that they were dependent on each other.

7. Livestock cooperatives in general • Work well, if based on a single commodity or issue • Dairy cooperatives in India (“Operation Flood”), Tunisia etc. were involved in milk trading, quality control and provision of dairy related inputs. • Beekeepers/honey cooperatives in Turkey, Romania • Water user cooperatives etc • Limited experience with wool or meat selling coops or grazier coops. • Originally initiated by farmers themselves (Land’O Lakes, Swiss dairies, Dutch and Balinese water management coops. etc.) • Limited social goals

8. Kyrgyz Sheep Development Project • Objectives • Increase profitability of and efficiency of sheep and wool farming • Privatize provision of several services (animal health, breeding) • Improve management and conservations of natural grazing resources • through • Organizing sheep and wool farmers into farmers’ associations or groups through which essential services can be channeled (largely co-financed by IFAD) • Developing competitive marketing structure • Establishing and training of an advisory service

9. Objective:Organizing sheep and wool farmers into farmers’ associations or groups through which essential services can be channeled • Concept (pyramid) • Village based sheep producer organization • Village based (where needed organized around clan or extended family) • Registered with State as limited liability societies • Open membership and free entry and exit • Also function as grazing associations • Regional organization • National = Kyrgyz Sheep Breeder Association

10. History of cooperatives in KG • Family/clan based cooperation before 1900; limited sales of wool (mainly processed); risk insurance by gifting, joint grazing • Forced collectivization in the late twenties (many herders fled to China) • Even then the sheep kolchoz still employed vertical migration • Brigades and chabans (herders) • Kolchoz organized ( and created dependency) on motorized transport, supplemental feeding, guaranteed off-take and prices.

11. History of cooperatives • EU-TACIS dabbled in organizing farmer cooperatives in 1993-95 based on western “democratic” model >> i.e. general assembly, board of directors, shares, formal voting etc. • …based initially on the “Law on state support and protection of private entrepreneurship “ i.e. there were no laws that supported or regulated cooperatives (apart from another old law on consumer coops). • Government guaranteed “any number of coops” during project preparation. But preparation team did not pay attention to social issues and mode of collaboration under local conditions.

12. History of cooperatives 2 • Project started to identify groups, first with help of a newly created extension effort (ATAS) but without robust selection criteria or explanation. About 375 signed up but nearly all were ex-collective (leaders) • Foreign consultant group started training and weeded out some. Slow process. Finally about 100 coops, and focus was on marketing • Laws changed • First law on consumers cooperative • Then coop law 1 and coop law 2 (all lengthy processes and negotiations) • Final registration in 2001under Cooperative law 2. • New Board elected in 2001 (more independent farmers, old style kolchoz leaders lost control.)

13. Registration • All SGPs were registered as a cooperative • All had legal stamp allowing them to do business • Registration costs varied; about 1500 som • Project helped by paying about 50% of costs (500 som*) • Some had to pay bribes “chapka” for registration to administration – if not, they needed more frequent visits (but…..the chapka costs were more or less equal to the additional travel costs if chapka was not paid – about 100 – 300 som) * Then about 20 som/US$

14. Registration process

15. Comment on registration process • Expectation was inflated, in part unwarranted but in part by exaggerated promises by (foreign) consultants. • Registration process led to rent seeking • Understanding of registration is poor • lack of understanding of democratic process • lack of understanding of independent association • registered cooperatives are more commonly exposed to rent seekers such as tax police, tax inspection etc. • Poor financial management • Cooperative fee poorly understood (“…we paid, but did not get anything back”)

16. Foreign consultant team Focus on formalities/legal Limited understanding of development issues Limited recognition of transition issues Kyrgyz management (since 2000) Stuck on lack of working capital Entrepreneurial/ less focus on formal and legal Greater local involvement and focus Greater focus on farmer needs and poverty issues Better public relations New concepts (in wool payment, shows, prices etc.)

17. Major activities in cooperative development Group development Marketing development Local producer groups Local producer groups mainly seen as collection points National Coop (KSBA) as major (centralized) marketing organization National Cooperative Regional groups not established Limited coordination

18. Issues 2/2000 • Realistic membership? • Most members either “followed” the leader or expected goods and services, and were disappointed that they did not materialize • New membership • Not clear how new member could sign up or what the entry and exit criteria were. • Range of SGP activities • Initially limited to wool trading and training • Relation KSBA and SGPs • Cloudy- most members had not paid dues • Promote linkage to other project activities • Grazing and pasture management • Animal health

19. Type of Activity Osh Batken Chu Issyk-kul Talas Naryn Jalalabad Meetings 14 2 13 21 12 12 11 Joint shearing 12 2 8 14 23 6 7 Joint use of pasture land 18 2 13 21 25 12 11 Facilitate for loans from KFAC 6 1 5 5 5 2 4 Request for Vet. drugs 2 1 2 2 2 2 2 Training courses for farmers and women 1 - 2 1 1 1 1 Requests to solve problems 4 2 1 1 2 2 2 Activities Undertaken by KSBA/SGPs in various oblasts (during year 2000)

20. Major activities in cooperative development National Sheep Producer Association Local producer groups • Purchase of wool from members • Training members in wool quality, artisanal wool processing • (mainly women) • Organizing national farm shows • Input supply (veterinary products) • Providing a political voice for (small) farmers • Collection and sorting of wool from members • Joint grazing • Organization of rangeland water supply Cooperating with other project components • All components • Animal Health component • Pasture component • Rangeland component

21. Major other issues • - of concept, of independence, of role in rural development • often seen as possible source of legal or illegal revenue • fighting loss of central planning role • Lack of understanding • Government • MoF • MAWR • Others • Livestock institute • Lack of working capital • Farmers start to understand • concept that KAFC would provide finance failed KAFC = Kyrgyz Agricultural Finance Company (Bank supported agricultural credti provider

22. Progress 2001 The KSBA has made considerable progress, and has among others ·       obtained further confidence of farmers by continuing the system of part payment upon delivery, and a second payment after it has sold the sorted product (mainly wool) some live animals and meat; ·       introduced a system of a quality based payment for wool, with considerably higher prices for quality wool which will provide an important incentive for producers to pursue quality production, consequently farm gate prices improved; ·       explored other marketing opportunities for wool, felt, cashmere, meat etc.; ·       started a pilot in the provision of inputs such as animal health products, shearing equipment etc.; ·       organized or participated in farm shows and animals auctions; ·       improved the link with wool/garment industry and as well as development organizations; ·       trying to strengthen its 115 subsidiary local sheep producers cooperatives (currently representing 1250 members with approximately 125,000 sheep) through training and services. The latter is not yet satisfactory, and needs further plans, including an efficient use of KSBA limited staff and financial resources.

23. Current activities • KSBA • Collection and selling of wool • Training and extension • Input provision • New product development • Organizing shows • Pilot water rehabilitation • Training • SPGs • Collection and selling of wool • Joint shearing • Joint dipping (animal health activity) • Joint grazing

24. Achievements • Introduced the idea that working together on a common goal may benefit group and group members • National meetings provided forum for a discussion of issues among farmers from different regions (which is deemed to have helped in the transition) • National forum that could have dialogue with Government (and request them to focus on farmer issues) • Trained over 500 herders in group formation and management • Trained sheep producers (and women) in technical skills (shearing, felt making, wool sorting etc.) • Trained limited number of local producers in marketing • Created a tax paying wool trader and generated some competition with private traders • Focus on representation of smaller farmers

25. Future • KSBA not yet fully self sufficient (another 2 years) • Further building on the organization (some donors are interested) and scaling up • Rangeland water supply • More pasture work and group lease • Group pasture lease • More marketing • New initiatives • But there are risks • MoF wants to see money • MAWR reluctant to give up power

26. Lessons • You can create any organization with promises and free goodies. However they are short lived • Creation of real cooperative is a lengthy process. • Extensive piloting is needed before main streaming. • Formal organization of cooperative in an imperfect world may be detrimental to its members • One good charismatic and knowledgeable leader can in the second phase of the project make greater impact than expatriate experts • Lengthy process of explaining concept to MoF and other Government officials is needed.