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EMMA report on the Cement Market System, Kyrgyzstan

Osh and Jalal-Abad oblasts
July, 2010

The ethnic conflicts in Kyrgyzstan in June 2010 resulted in large impacts on the regional economy. Nearly 3,000 homes and businesses were damaged or destroyed in a 3-day period. Furthermore, fear of reprisals has immobilized most sectors in and outside of the metropolitan areas. Transport of goods to and from the southern regions of Kyrgyzstan and other regions of the country and neighboring countries like China, Russia and Uzbekistan, has largely stopped.

The EMMA assessment in Kyrgyzstan focused on early recovery needs for four selected critical markets: wheat flour, early potatoes, corrugated galvanized iron (CGI) and cement. This report provides the findings and recommendations on cement, which was selected because it is a key building material necessary for reconstruction of homes and businesses. The team’s interest with regard to the cement market was to understand the ability of the market to respond to the needs created by the crisis as well as how appropriate humanitarian procurement mechanisms can stimulate or support economic recovery in the area.

Kyrgyzstan has three main functioning cement factories. Raw materials for producing cement are extracted from the ground in the areas around the factories. Sulfate-resistant cement is also imported from Uzbekistan. Bags of cement are delivered to construction retail markets by transport hired by the cement factories. Most consumers of cement are individuals and small construction companies which are hired to build houses or to lay foundations.

Since the onset of the crisis, the factories in southern Kyrgyzstan have been operating below capacity. The large, newly constructed factory at Kyzyl-kiya stopped production in April; though it has since resumed production, it is operating at less than 10% of its capacity. Most of the cement available on the market is lower-quality product from the Aravan factory. Prices have risen, and demand has fallen sharply in the wake of the June events. Because vulnerable consumers face higher prices and often limited access to construction materials markets, cement is not readily available to the most affected populations. Retail sales are down about 50% across the region, meaning retailers are vulnerable because they depend on product turnover for income to continue the operation of their businesses and to support their families. Some factory employed middlemen continue to be paid despite not working, while others are forced to find alternative sources of income.

If political stability is maintained, the cement market is fully capable of responding quickly to a rise in demand. The internationally-managed construction of 2,000 transitional shelters will require up to 15,000 tons of cement, which can easily be provided by the local market system. Additional demand for reconstruction by individual households and businesses can also be met without exceeding existing market capacity for production and transportation. The local procurement of the thousands of tons of cement necessary for reconstruction will not just benefit those for whom houses are being built, but also retailers, transporters and factories who depend on the cement market system for their livelihoods. It is therefore recommended that cement used in reconstruction be of domestic origin and purchased in the Kyrgyz market. The shelter cluster and other coordinating bodies are encouraged to provide strategic oversight and policy parameters for the purchasing of cement for reconstruction anticipated in the coming months. Further, agencies should make sure that aid distributed to the affected populations is accessible to all affected parties regardless of their ethnicities, since the perception of bias in the response can further exacerbate communal tensions.

Report authors: 
Benjamin Barrows, Eugenia Gusev
Download Report (652.32 KB pdf)