The World Bank Agriculture Modernization Project (P158372)
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remain to be severely underfinanced.
10. Uzbekistan can materialize its potential to increase its agricultural, and specifically horticultural, production by addressing constraints related to: (i) availability and quality of agricultural services for raising on-farm productivity,
resilience to climate change, and output quality; (ii) better value chain organization and access to suitable financial
products; and (iii) facilitation of trade through better agri-logistics, enhanced plant protection and phytosanitary capacity,
and access to market information. The current state of these constraints is as follows:
a. Services for increasing on-farm productivity, climate resilience, and output quality: Most horticulture
producers do not have access to a variety of agricultural services including: seeds/seedlings that are tailored
to specific agroecological zones (most of the seeds are imported) and are resilient to climate change; support
services on water saving, soil fertility management, IPM, organic farming, and other GAP; and on intensive
orchards’ management, harvest and post-harvest handling practices, and others. Agricultural extension and
advisory services do not exist
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, and digital-based farm services are lagging. This keeps agricultural
productivity low. The private sector has not stepped in to cover this gap. Agribusinesses do not have direct
contractual relations with farms, but work mainly through aggregators, who in turn have no commercial
interest to invest in provision of technical services to farmers. This creates market failures of low productivity
and quality, and inconsistency of production. Furthermore, most land areas that are currently being
converted from cotton to horticulture production are of poor soil quality, requiring significant investments
to restore fertility; financial resources and technical assistance are largely missing also for this purpose.
b. Value chain organization: Weak cooperation among farmers and lack of value-chain linkages between farms
(and farm cooperatives) and exporters undermine export potential to new markets. Export-oriented firms
seek to vertically integrate to mitigate risks of low quality, fragmented production, and unreliable supply.
But even they mostly source horticulture products from aggregators, who buy from small farms and firms,
and in most cases not on the basis of written contracts but only on the basis of verbal agreements resting
on trust due to repeated business. Cooperation and productive partnerships are not yet in place, although
the GoU has initiated pilots on horticulture farm cooperatives in several regions
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. Business associations that
serve an essential function in exporting countries creating economies of scale through information sharing
and cooperation, are absent in Uzbekistan.
c. Tailored/suitable agricultural finance: The required long-term financing for horticulture investments, for
example, for cold storage and greenhouses up to 7 years and for orchards up to 10 years, exists only within
the credit lines provided by IFIs. Despite the provision of IFI credit, the demand for these lending products
continues to outstrip supply, and financial sector bottlenecks prevent the market from addressing these
gaps
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.
Collateral requirements are not suited for farmers’ capacity. The longest-term lending product
available to most farmers and agribusinesses from local banks is a 1-2 years loan to finance working capital.
Long-term products in the banking system are still very limited relative to the investment needs in the
agriculture sector (that requires products with a 5 to 10-year term). Intermediation is further compounded
by low deposit rates and low, mostly very short-term (up to 2 years) uptake from the public in using the
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Some extension services are being provided by the GoU, focusing on directing production of cotton and wheat. The Council of Farmers, Dehkans
and Household Plots has recently started providing extension services linked to the delivery of equipment and greenhouses. In parallel, many
several development partners in their projects arrange training for farmers and public agencies. Despite the range of services and training courses,
farmers’ needs are still unmet, and there is particularly high demand for extension services among farmers who produce fruits and vegetables.
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Resolution of the President of Uzbekistan No. PP-4239 “About Measures for Development of Farm Cooperation in Horticulture Sector” dated
March 14, 2019 created a legal environment for piloting farm cooperatives in Jizzakh, Fergana, Samarkand, and Tashkent regions.
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The WB-financed HDP project along with its Additional Financing made available US$650 million of credit for horticulture investments. Yet, the
unmet demand underpinned for ready-to-go business plans is estimated by MOA at more than US$1.5 billion.