Ask any tourist visiting Central Asia what they love about the region and, among other responses, you are likely to hear about their mouth-watering experience eating fresh, tasty fruits and berries. This is not surprising, as the region is home to some 300 wild fruit and nut species.
What is surprising is that the Kyrgyz Republic, Tajikistan, and Uzbekistan currently realize only about one-third of their export potential in cherries, grapes, apricots, and plums—fresh fruits in which they hold a comparative advantage.
There is enormous potential to increase Central Asian fruit exports, thus boosting economic growth, generating employment (horticulture requires at least twice as much labor as cereal crops!), and creating opportunities for income generation in rural areas. All of these would be very welcome developments amidst dwindling GDP growth across the region.
Exporting to China: large market, many hurdles
Chinese markets create a particularly lucrative opportunity for Central Asian fruit suppliers to grow their exports. The country’s increasingly more affluent and educated consumers continue to shift their dietary preferences to include more protein, fruit, and vegetables. This contributes to a rapid growth in fruit import demand, which by 2030 is expected to reach $2.7 billion——a huge opportunity for Central Asian farmers.
Although the Central Asian countries are well placed to be more competitive in satisfying China’s growing demand for fruit imports, entering the formidable Chinese fresh fruit markets is not easy.
China has rather stringent food safety standards. Imported produce must be consistent in both quality and volume, which requires sophisticated quality and logistics systems that the Central Asian countries have yet to develop.
Moreover, Chinese fruit markets are highly fragmented and competitive, so importers need to have a close relationship with a Chinese counterpart on the ground. And Chinese consumers value attractive packaging and products with recognizable brands.
Most Central Asian fruit producers are small farmers with limited access to financial and knowledge resources, which results in constrained production volumes and inconsistent supply quality. Although perfectly adjusted to trading domestically, Central Asia’s small-scale producers lack the capacity necessary to meet the bureaucratic and procedural conformity of international markets.
At the government level, the quality and capacity of the region’s food and safety systems, customs control, and inspection bodies do not meet the requirements of Chinese markets, putting its exporters at a disadvantage vis-à-vis major suppliers to China, such as Chile or the United States. Moreover, Central Asian exporters are often unaware of the available opportunities provided by Chinese markets and of the requirements to enter them.
As a result, China still accounts for only a tiny, albeit growing, share of total Central Asian fruit exports. And those Central Asian exporters that do enter Chinese markets face significantly lower price premiums compared to their competitors.
Similar hurdles are emerging in the traditional markets
Currently, more than 85 percent of Central Asian exports of cherries, grapes, apricots, and plums are shipped to Russia and other countries of the former Soviet Union. However, even in these traditional markets, Central Asian exporters are losing out on existing opportunities, receiving prices 30 percent less than those enjoyed by the competitors.
Why is this happening?
Most Central Asian fruits are largely sold in open-air markets. Yet, sales of fruits through modern grocery store chains in Russia have been growing at an accelerated pace, often at the expense of traditional retail markets. Central Asian fruit suppliers are scarcely present in Russian formal retail stores, as they are often unable to provide produce with the quality, assortment, and packaging that is in accordance with Russian retailer needs and volumes.
Other factors that impede Central Asian farmers from receiving better prices in traditional markets are the high fragmentation of production, the informality and non-transparency of the region’s fruit supply chains, and both producers’ and exporters’ lack of knowledge of, and compliance with, retail requirements.
So what is the way forward?
To be competitive in Chinese and other evolving global fresh fruit markets, in which large modern retail chains play an ever-increasing role, Central Asian exporters need to be able to supply large volumes of fruit of consistently high quality in a timely manner.
National governments have a role to play in creating an enabling environment for the increased production and export capacity of horticulture products by tackling the most binding constraints that exist in the sector.
First, governments can provide a policy environment that facilitates cooperation among Central Asian smallholders. This way, the farmers will be able to consistently supply the large volumes of quality fruit required by importers.
Second, governments need to focus on promoting private investments in cold chain storage and post-harvest processing capacity and on investing in public goods, such as food safety and quality control systems, R&D, and export promotion.
Finally, the rapid growth of e-commerce around the world offers an opportunity for Central Asian exporters to penetrate new and growing markets in their region and beyond. Governments should do more, therefore, to promote the digital development of their respective agriculture sectors.
To learn more, read the World Bank report “Central Asia’s Horticulture Sector: Capitalizing on New Export Opportunities in Chinese and Russian Markets,” which analyzes opportunities for Central Asian fresh fruit exports in Chinese and higher-end Russian markets, and provides policy recommendations on how to take advantage of these opportunities.