Committing to quality in Kyrgyzstan

At a plant in the North-East of Kyrgyzstan’s capital Bishkek, a 20-minute ride from the city centre over potholed roads, 23-year-old Bakhtiyar Kudakeldiev works as a water bottling operator. He does not know it, but he benefits from an ITC programme designed to improve quality management. Kudakeldiev works for Shoro, Kyrgyzstan’s largest beverage company and a beneficiary of a World Bank-funded quality management certification project delivered by an ITC-trained consultant using ITC methodologies.

Kudakeldiev, who has worked at the plant since moving to Bishkek from a small village in central Kyrgyzstan in 2007, has enjoyed a warmer and cleaner workplace, and monthly bonus payments ranging from 5% to a whopping 100% of his salary since the enhanced quality management process was introduced in the summer of 2011. Kudakeldiev has never heard of ITC. This is not surprising because he is an assembly line worker. Until recently, his production director, Nurdin Osmanbaev, who manages most of Shoro’s 300 workers, had never heard of ITC either. For Shoro, and many other companies in Central Asia, quality management is becoming essential to the successful export of products. A lack of quality management and assurance in production processes, a legacy of the region's Soviet past, means products often lack the consistent quality required for export. Conversely, where products are of a consistent quality, it can be difficult for companies to prove the case without quality management and certification processes in place.

Between 2006 and 2008, ITC carried out a US$ 1 million project funded by the Swiss State Secretariat for Economic Affairs (SECO) that was designed to improve the export capacity of small- and medium-sized enterprises in Kyrgyzstan’s fruit and vegetable sector (see below). Shoro, as a water bottling firm, did not qualify to participate, but it has since benefitted indirectly from the project, which trained 25 national consultants, some of whom continue to work on quality management improvement projects and certification preparation. Giulnara Jujsupjanova, one of the consultants trained by ITC, has advised five companies on quality management and productivity improvement since graduating from the course in 2007. Shoro is her largest client.

Jujsupjanova and Shoro’s Quality Director, Gulmira Acanbekovna Ismanova, are responsible for retrofitting Shoro’s entire production system: plugging holes in the wall to keep insects out and heat in, and meeting sanitary and phytosanitary requirements. They have organized the replacement of old corroding doors and windows with new plastic ones, introduced compulsory uniforms and hair coverings for workers, arranged for personal lockers to be built in changing rooms, and achieved a host of other measures as part of the process towards ISO 9001 certification. To earn a bonus, Kudakeldiev and his teammates must perform simple visual quality checks to make sure water bottles are closed properly, contain the right amount of water and have stickers that are glued on well. Pay climbs as the number of defects falls and productivity improves.

The goal of the quality certification project, explains Ismanova, is to improve the company’s image as a producer of high-quality bottled water. The plant upgrade and certification will better position Shoro to take on competition from both local producers and suppliers of imported mineral water. Certification is also a prerequisite to expansion into foreign markets, primarily Kazakhstan and the Russian Federation. Osmanbaev hopes to begin exporting shortly after obtaining ISO 9001 certification towards the end of 2012. To carry out the necessary improvements, Shoro received funding from the World Bank’s Agribusiness and Marketing Project, which has funded quality management improvement projects since 2008.

Could the developments at Shoro have been accomplished without ITC’s involvement? Jujsupjanova, who became Kyrgyzstan’s first certified quality management adviser in 2003, well before ITC’s trade promotion project, says Shoro would not be where it is now without it. She explains, ‘ITC has provided me with a comprehensive understanding of quality management, an understanding that goes beyond individual certifications and has helped Shoro to make both general quality management and food safety improvements.’

According to a report by three external evaluators, the ITC project was ‘very successful’. They concluded that the ‘biggest asset of [the] project’s sustainability is [the] change of mind of various stakeholders.’ Now, three years later, the project is really bearing fruit and its indirect benefits have become evident, says Jujsupjanova.

Since ITC completed its first project in the country, several agencies, including the World Bank, the United States Agency for International Development, the German Agency for International Cooperation and the European Union, have offered assistance to fund quality management projects in the agribusiness sector. ITC, in the meantime, is halfway through the implementation of a similar project targeting Kyrgyzstan’s clothing sector, which has been identified as a key industry for export promotion in the country’s national export strategy. According to Kyrgyz officials, ITC’s involvement contributed to the industry’s 15% growth in the first 11 months of 2011. ‘[The ITC programme] has been practical and successful in sectors with substantial problems. The task of bringing the food processing and clothing sectors [up] to international standards and [making them] an impulse for positive economic development of the Kyrgyz Republic is tremendous,’ says Deputy Economy Minister Oleg Pankratov.

Further funding from donors permitting, ITC plans to move into other sectors and geographic areas of Kyrgyzstan. ‘Our formula has been proved. Sometimes it takes a year after our intervention, sometimes two or three, but sooner or later our approach produces sustainable export growth,’ concludes ITC Project Manager Armen Zargaryan. 

Kyrgyz dried fruit entrepreneur Akhtiyam Koshveev hoped a Moscow trade fair he attended in 2007 would land him a few new clients. It landed much more. Business contacts he made at the Prodexpo fair have enabled him to quadruple his production and double his workforce. ‘We are nowhere near the same business anymore,’ says Koshveev of his company, Osko.

ITC supported six companies to participate in the trade fair as part of a 2006-2008 project to increase the export capacity of fruit and vegetable processing companies in Kyrgyzstan. The US$ 1 million project was financed by the Swiss State Secretariat for Economic Affairs (SECO). Three years after Koshveev received final technical assistance from ITC, Osko employs 80 people directly and has bought farmland where it provides stable employment for another 500 farm workers, many of whom had lived hand to mouth.

The company is now completing its first audit ahead of plans to raise US$ 1 million in foreign investment. These funds are crucial to increasing production capacity and meeting the demands of the company’s distributors in the Russian Federation and Kazakhstan. ‘They are pushing me to produce more and increase the product range,’ says Koshveev. In response, Koshveev and his partners have found a sweet spot in the market by diversifying from dried fruits to produce fruit juices marketed as organic.

Half of the total production of the nascent agriprocessing sector in Kyrgyzstan is now shipped abroad, up from virtually nothing seven years ago, says Dilyara Alimjanova, director of the Association of Fruit and Vegetable Processing Enterprises. Combined employment of 3,500 people is up 20% across the association’s 32 member companies, despite an uncertain business climate over the past few years. She also believes farm employment has grown as a result of ‘The help of ITC was key,’ Alimjanova says, referring to ITC’s first project in the country in 2004 when it assisted the association in kick-starting its export marketing efforts. ‘At that time, nobody offered this kind of assistance,’ she adds.

Besides providing marketing advice and financing participation in trade fairs, ITC helped the companies put quality management practices in place. ITC also trained 25 national consultants, some of whom continue to work on quality management improvement projects and certification preparation at various companies in the agribusiness industry (see main story). Two of the six fruit and vegetable processing companies received ISO quality certification at the end of the ITC project. Aliana, which makes tomato puree and canned vegetables, has hired a quality assurance director to make sure the improvements can be sustained following the end of the project.

Koshveev has decided not to invest in renewing Osko’s ISO certification as there has been no demand to do so from his clients in the Russian Federation and Kazakhstan. In 2009, just after obtaining certification, he found new buyers for his products in Germany, but exchange-rate fluctuations made the venture too risky. The improvements leading up to certification have been useful, however, and Koshveev estimates that two-thirds of the processes introduced are still in place. Looking forward, he says he will renew the ISO certification as markets mature and his buyers become more demanding.