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Opportunities in the Kazakh Greenhouse Industry

28 Июн 2022
Actual, Kazakhstan
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The Dutch greenhouse industry sets the example for many regions around the world. With the leading position in the agricultural sector, Dutch expertise can be used to enhance greenhouse practices in the agricultural areas in Kazakhstan. In the regions of Nur Sultan and Almaty, hyper-modern greenhouses have been realised with sustainable growing methods and sustainability as a key aspect. However, the construction of Kazakh greenhouses surges and diffuses to less-developed parts of the country. Do you know how to use your expertise and management skills to capitalize on these new opportunities?

 

Introduction

The 1970s mark the era of the first development of greenhouses in the Republic of Kazakhstan. With (winter) greenhouses realised in the 1970s and 1980, the collapse of the soviet union halted these developments. The economic crisis decreased local and foreign investment, and by 1994 the production of greenhouse vegetables declined by more than 200%. The surge in greenhouse development in the 1970s covers the unique selling point of low energy prices. While the company had profitability of +70%-200%, the 1990’s increase in energy prices, abolishing subsidies, and the development of high-yielding crops led to a decrease in the initial 560 hectares of protected ground.

Since 2003, Kazakhstan sees a positive trend in the development, construction, and reconstruction of greenhouses. However, only in the last ten years has the greenhouse industry fully developed. From only 108 greenhouses with a total area of 59 hectares in 2008 to a total greenhouse area of almost 1.200 hectares in 2018. In 2018, the largest areas of greenhouses are concentrated on family farms (618 hectares — 53%). Agricultural enterprises have 180 hectares of area, whereas private farms are in the middle with 366 hectares.

 

Structure of production and yield

According to the market research by Ministerie van Landbouw, Natuur en Voedselkwaliteit, the structure of production can be categorised in three categories. Greenhouses mainly produce cucumbers (49%) and tomatoes (47%). Other vegetables (4%) include aubergine and types of salad. While there is no official data on the yield of vegetables, the calculated data for agricultural enterprises is 26kg/m2 for tomatoes and 23kg/m2 for cucumbers. For greenhouses owned by family farms, the yield is 50% of the agricultural enterprises.

Since Kazakhstan mainly produces tomatoes and cucumbers, other vegetables need to be imported from the bordering countries (e.g. China, Uzbekistan). Sweet pepper and tomatoes are the highest-demand vegetables (12.8 and 38.3 million euro), but also cucumbers (5.9mln. euro) and aubergine (3.5mln euro) are noteworthy import vegetables.

Government support

The Association of Greenhouses of Kazakhstan and the Ministry of Agriculture of the Republic of Kazakhstan developed rules for subsidizing greenhouse construction. Whereas funds initially were allocated per 1 hectare (3.500 euro) to compensate for the costs of greenhouses, nowadays this hectare subsidy is abolished. The producers of greenhouse vegetables have equal rights to government support with producers of other crops. These benefits include loans, subsidies for mineral fertilizer and herbicides, subsidizing the water cost for irrigation, reimbursement of (a part of) the cost for the expansion of greenhouse complexes and implementation of projects, and participating in leasing programs. In practice, only industrial greenhouses can apply for these subsidies. This entails that additional lighting systems and heating systems should be present and that the yield is comparably high.

 

Opportunities

State support including a preferential tax regime in the agricultural business is the main incentive for investment in the Kazakh greenhouse industry. Further, the export channel to Russia can be realised and is sustainable. The development of import substitutes (mainly bell peppers; aubergines; tomatoes) can be an opportunity to enter the local market. The export goods of tomatoes and cucumbers are also gaining foot in other markets such as the Middle East. Moreover, the rapid growth of the greenhouse sector in Kazakhstan (mostly in the south and the northwest of the country) includes the need for experts to lead the project. The Dutch knowledge is therefore required to share knowledge and supervise projects. Besides new greenhouses, reconstructing (older) models can be done to increase yield and apply sustainability principles. Moreover, with 14% of the Kazakh inhabitants working in the agricultural business, potential employees are abundant.

Dalsem argues that these hyper-modern greenhouses have risen in a relatively short period. In the case study of vegetable greenhouse BRBAPK LLP (2022) in Almaty (Kazakhstan) it is noticeable that Dutch knowledge and level of expertise are required. In this new greenhouse, the development of Dutch horticulture showcases a process in the form of “a step of 30 years”. On par, the openness for knowledge and the drive to learn are what make Kazakhs unique and “enables them to take fast steps”. With mutual respect, the Kazakhs learn from the Dutch and cooperate into making this a successful business.

The developments the Dutch can implement and bring to Kazakhstan are aspects such as optimizing production and quality, implementing process computers, and realizing the optimal greenhouse climate. This process computer is the competitive advantage in the Kazakh market. Utilizing the iSii computer, parameters such as the heating, humidification, screens, irrigation and lighting can be controlled and adjusted. With the competitive advantage, the Dutch knowledge goes hand in hand with the Kazakh mentality.

 

Conclusion

As this case study shows, the opportunities in Kazakhstan are evident in the constantly developing greenhouse sector and the aim to maintain expanding the agricultural business. Building these greenhouses is now only done in a couple of main areas (Almaty; Nur Sultan), but can be expanded to other locations. With the production of vegetables such as aubergine and bell peppers, you can enter the local market and fill the current import gap of these vegetables. that Dutch expertise and management can create a top competitor in the Kazakh market, this opportunity is one to keep in mind.

 

Sources

https://www.freshplaza.com/article/9437889/when-investing-in-a-kazakhstan-greenhouse-also-consider-the-most-advantageous-exchange-rate/

https://www.dalsem.com/en/Largest-Kazakh-glass-greenhouse-works-with-Dutch-knowledge-and-technology

https://www.agroberichtenbuitenland.nl/actueel/nieuws/2020/06/19/market-study-on-greenhouse-industry-in-kazakhstan

Market research on RF & KZ Greenhouse Growing

The Conundrum of the Two-Pillar Solution

21 Июн 2022
Actual, Current news, Europe, Netherlands, Tax Planning

The Organization for Economic Co-operation and Development (OECD) Pillar 2 Rules reached a ground-breaking international accord, with over 130 countries that agreed to impose a minimum 15% corporate tax on multinational enterprises (MNEs) with a global turnover of €750 million or more.


The proposed global minimum tax will be implemented as a “top-up” tax to increase the tax burden of MNEs to at least 15% in countries where the MNEs’ tax burden, on a country-by-country basis, is lower than 15%.


Questions have been raised whether the accounting rules in the consolidated financial statements used in Pillar 2 can be reconciled with local generally accepted accounting principles without incurring considerable extra cost and risk. A particular focus is the risk of double taxation when applying the Pillar 2 rules alongside existing regulations.


The OECD’s model rules on Pillar 2 bring together two interlocking measures:
Firstly, the income inclusion rule (IIR): A top-up tax on the ultimate parent entity of a low-taxed foreign subsidiary; and secondly the undertaxed payment rule (UTPR): The UTPR requires a UTPR taxpayer that is a member of an MNE Group to make an adjustment in respect of any top-up tax that is allocated to that taxpayer from a low-tax Constituent Entity of the same group.


The OECD Model Rules suggest the following for the geographical attribution of additional tax revenue.
Firstly, a Qualified Domestic Minimum Top-up Tax (QDMTT) can be levied in an under -taxed country where a subsidiary of MNE is located. Secondly, the domicilium country where ultimate parent company is located, can apply a global minimum tax of 15% through the IIR, and lastly in exceptional circumstances where the global minimum tax is not charged under the IIR, other high-tax countries where the members of MNEs are located, can apply the UTPR.


Very few countries are on track to legislate or implement Pillar 2— similarly with Pillar 1, which aims at reallocating taxing rights to reflect an increasingly digitized global economy. There is a serious risk of tax disputes and double-taxation due to the differences in interpretation, application, and legislative enactments which raises the question if it is feasible to set the date for implementation for 2023. While there may be a temptation to leave preparations until everything is set in stone, this would leave your business with dangerously little time to get ready for what is a major overhaul ahead.


Sources:


https://www.grantthornton.global/en/insights/articles/global-developments-in-international-tax—pillar-2-model-rules/

https://www.tkfd.or.jp/en/research/detail.php?id=884

 

2022 Intellectual Property (CNIPA) regulations: What is New in Regards to the 2019 “New Trademark Act”?

14 Июн 2022
Actual, China, IP
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The China National Intellectual Property Administration (CNIPA) has taken further regulations on trademark usage in China. From 2022 onwards, new rules have been into place that emphasise the detection of fraud and the infringement of laws related to illegal trademark acts in China. This is done to improve the security of private trademarks. The requirements and supervision of using trademarks have become increasingly strict. What do foreign manufacturers need to take into account?

 

The publication of the regulations at the end of December 2021 by the CNIPA aims to strengthen the protection of intellectual property (IP). This publication builds on the trademark laws which are in effect from December 1, 2019. The amendments of the latter relate to the usage of a trademark, claims for damage and opposition to illegal trademark applications. This “new trademark act” focuses on the following three aspects mainly anchored in the Chinese trademark law articles 4, 19 ,33, 63 and 68:

  • Trademarks must be registered and must be proven to not be used previously before registering.
  • Three months after registering the trademark, opposition to this application can be filed at the Chinese Trademark Office.
  • In serious infringements, the statutory damages are RMB 5 million (€711 thousand) and can equal up to five times the actual damage suffered. The counterfeit goods produced under this trademark can get destroyed by the People’s Courts without compensating the counterfeiter. This can only happen at the request of the original trademark.

Whereas these regulations already try to defend the IP of an original trademark or brand, the newly introduced rules improve the security and strictness of intellectual property (IP) in China. The brands themselves need to adhere to around ten new enforcement criteria to further diminish the stealing of IP in China. These regulations are all established according to the Chinese Trademark Law and can be found under the articles 6,10, 43, 49, and 52:

  1. Infringement by (not) using a registered trademark. Chinese Trademark Law acknowledges registered brands in European Trademark Law.
  2. Infringement by signs which may not be used as a trademark.
  3. The term “well-known mark” may not be used in commercial activities
  4. The trademark licensee is not allowed to fail to indicate its name and the origin of the goods
  5. Infringement is where the trademark applicant, in the course of using the registered trademark, changes the registered trademark, name, address or other registered particulars of the applicant on its own initiative.
  6. Infringement by using unregistered trademarks as registered trademarks
  7. Violation of provisions on the registration and administration of collective marks and certification marks, and failure to comply with obligations to administer collective marks and certification marks.
  8. Violation of the provisions for the administration of trademark printing and failure to fulfil the duties of trademark printing administration.
  9. Infringement through malicious application for trade mark registration.
  10. Other infringements of the trade mark administration order

 

Especially interesting for foreign manufacturers are articles 14 and 23 of the new regulation.

  • According to rule 23, using a trademark which is not registered in China but instead is registered somewhere else in the world (e.g. Europe), the owner gets seen as a trademark infringer in China.
  • If an unregistered trademark with multiple meanings is used, this may be considered a breach of the rules (Rule 14). This is the case whenever the Chinese public gets the impression that this particular sign cannot be used as a trademark according to Article 10 (6-8).
    • Signs referring to ethnically discriminatory persons.
    • Signs that can make the public misunderstand the product (e.g. quality, place of origin).
    • Signs that go against socialist morals and norms.

 

To conclude, the rules in China are becoming stricter in order to tackle the theft of intellectual property. However, while these rules are good for foreign investors, they still need to be careful to not use a European-registered trademark without registering it in China. Further, the signs and articles can be interpreted differently in a cultural context. We recommend interpreting these in the broadest sense and trying to avoid risk at all costs. Infringement in China can be expensive and troublesome.

 

Sources:

https://www.cnipa.gov.cn/art/2021/12/16/art_75_172237.html

http://www.gov.cn/zhengce/2019-10/22/content_5443183.htm

Einführung in Global Connect Admin BV & Global Connect Consultancy BV Ein kurzer Überblick über Amelkis XBRL.

05 Июн 2022
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Presidents Summit 2022, Northern Europe’s leading Business conference, Copenhagen Denmark. Rethinking Business

05 Июн 2022
Actual, Aktuelles, Current news, Europe, GCA on Tour, IFRS

Through adversity we grow and this year’s summit taught to inspire just that; the tools needed to adapt in this vast — changing world and in every step of the way, to grow and draw strength and purpose from what has happened in the past. 

The PS provided a platform for actionable insights, inspiration and networking with over 2000 meet-ups held per day at the 2021 Summit. Global Connect Consultancy B.V., together with Global Connect Admin B.V.  again this year enriched their professional know-how and built on its vast & steadfast network!

It is the ability to find harmony in the noise and to know there is a safety net when we err. According to Itay Talgam this can be achieved by our ability to recognize and explore gaps, our decision to interpret the plans we create. This speaker is an orchestral conductor who teaches leadership by looking at examples of world leading maestros. In his book The ignorant Maestro Talgam explains that sometimes the best way to stimulate and let people develop their full potential under your direction is to be ignorant. Leaders do not have to be the one who knows everything, but the one who helps his leaders to develop their full potential and to coordinate the team so that those energies flow in a common sense, as happens in a well-assembled orchestra. He teaches his audience not to mind the gaps but to use them.

Other experts on the stage included Daniel Pink, expert on human behavior who aims to teach businesses that regret is both healthy and universal and an integral part of human life. Regret is not abnormal or dangerous, it clarifies what we value and teaches us to be better if we can learn from it.

Dr. Frederik Pferdt, CIE of Google teaches around the central idea that “it’s important to create an environment where everyone is allowed to bring in opinions”. His teachings focus on human mindset and how it channels our inner attitude towards every external event and how to reprogram our negativity bias and start inventing a better future, today.

Noteworthy insights from Linda Hill included inter alia that “most innovations arise from the collision of different ideas, perspectives, and ways of processing emotions”. Organizations are increasingly faced with pressure to innovate, but lack the tools to fuel, inspire and sustain that innovation. In summary the professor teaches her audience to reduce their should’ve and could’ve; be collaborative-ready; develop your successors and paying attention to both scale and speed.

We would like to thank our hosts at this years’ President’s Summit for the outstanding event that was had! Your hospitality is remarkable and the teachings are what we will draw from in the coming year. Thank you!

Join the leaders of future, the investors of tomorrow, and the founders of TODAY! Join Global Connect Consultancy B.V., your trusted partner in financial reporting — today, tomorrow and into the future. Our professional global team will ensure that you regain control of your financial data, allowing you to focus on your core business.

 

EFRAG launches draft Sustainability Report Standards

22 Май 2022
Actual, EFRAG, ESEF, IFRS, Sustainability
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The European Financial Reporting Advisory Group (EFRAG) has released exposure drafts (ED) of the European Sustainability Reporting Standards (ESRSs). With this proposal, requirements are set out for European companies to report on various environmental, social and governance (ESG) topics including societal impacts, risks and opportunities.

The European Commission’s proposal for a Corporate Sustainability Reporting Directive (CSRD) envisages the adoption of the EU Sustainability Reporting Standards (ESRS). Regarding the latter, EFRAG was requested to assist the European Commission in establishing Sustainability Reporting Standards.

EFRAG, as a technical advisor, aims at providing relevant stakeholder information and analyses on sustainability and ESG subjects to the European Commission. This is done to inform the manner of ESRS adoption by the EU. EFRAG decided to launch the public consultation based on the exposure drafts created under the responsibility of the Project Task Force (PTF-ESRS).

A consultation period of 100 days has been launched with the deadline of 8 August 2022 wherein companies can comment on the draft and share relevant information. Incorporating the input and result from the public consultation together with the feedback on the exposure drafts, EFRAG will agree on the final set of draft ESRS to be submitted to the European Commission.

After further evaluations, the finalised version of the ESRS applies the new sustainability standards according to the disclosures made under the EU’s Corporate Sustainability Reporting Directive (CSRD). Bridging finance and sustainability, the ESRS promise to expand mandatory sustainability reporting to European companies as the ongoing drafts are a “journey towards a faithful representation of sustainability performance”.

EFRAG invites comments on all aspects of the draft ESRS and expects feedback no later than 8 August 2022.

LUNA Cryptocurrency Collapse: Is The End Near?

14 Май 2022
Actual, Cryptocurrency, Investment
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The downfall of LUNA shook the crypto world. With most cryptocurrencies plunging more than 50%, billions of dollars have gone into thin air. Fear and uncertainty have taken the place of confidence as noticeable in the investment behaviour in the cryptocurrency market. How could this meltdown happen and what are the consequences?

 

LUNA

The cryptocurrency LUNA is associated with TerraUSD (UST). UST is a stablecoin which entails that there is an algorithmic $1 peg governed by underlying code. UST is inherently different from the other stablecoins like Tether and USD which are both backed by real-world assets such as bonds. UST has no real-world assets are merely relies on the algorithm. To maintain the $1 peg, the UST algorithm stabilises to create and burn tokens of both UST and the linked crypto LUNA. However, due to the extreme market volatility, UST has been unable to maintain the peg and dropped to 12 cents according to data from CoinGecko. Further, the Terra blockchain, which is the operating chain for UST and LUNA, had problems processing transactions twice in less than 24 hours.

Due to the inability to maintain the peg, LUNA plunged to $0 from more than $100 in the last months. This decline in price in UST – and therefore LUNA- has resulted in a meltdown in the crypto market. Even while the collapse of UST only lasted for several hours to regain the $1 peg, billions of dollars in value have been erased and the largest cryptocurrency bitcoin dropped 15% for the week, a level not seen since late 2020.

LUNA price (USD) in the last 7 days. Derived from https://coinmarketcap.com/currencies/terra-luna/

 

Compensation                                      

Bitvavo, a big trading platform, compensates investors after this disaster. The prices are equal to the prices of the pause on 13-05-2022 at 8:20. This pause was needed to create a plan to further stop the devaluation of the stable coin. Binance, the world’s largest crypto exchange temporarily delisted UST and LUNA but reversed this decision after Terra announced resuming new verifications on the blockchain and halting direct transfers.

Fear

The LUNA / UST situation resulted in panic and insecurity in the crypto market. In combination with the higher inflation and interest rates that have caused a sell-off in the global stock market, the cryptocurrency market seems to be related to the stock markets and manifests in a loss of more than 50% value in most cryptocurrencies. The growing fear and growing levels of inflation decrease the trust and investment in the crypto market. According to Vijiay Ayyar, the vice president of corporate development and international at crypto exchange Luno, in the crypto market «it’s normal to see bounces amounting to 10-30%».» While «these are normally bear market bounces, testing previous support levels as resistance», even the largest of cryptocurrencies such as bitcoin may not be sustainable or be able to bounce back. As  To long-term feasibility of cryptocurrency needs to be further explored — focussing on the environmental impact of the mining of these coins.

 

Conclusion

Cryptocurrencies as investments bring the known risks of (heavy) value fluctuation. However, as seen in the LUNA case study, the value of your assets can rapidly drop to a point of no return. KSI, a well-known Youtube, lost $2.8 million in his LUNA investment making his coins virtually worthless.

For more information about personal advice regarding international business advice, tax situations or consolidation, Global Connect Admin B.V. can assist you with these challenges due to the rich experience and framework of connections.

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