Uzbekistan — Buyuk kelajak bo'lgan Davlat!

This blog is dedicated to providing rigorous analysis of current events in Uzbekistan. Debate and criticism are welcome, please inform me if you would like to offer a correction.

Prices Set for Cotton Procurement

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The government of Uzbekistan officially announced the prices that O’zpaxtasanoat — the government stock company responsible for purchasing and processing the country’s “white gold” — will pay farmers for their crop. Although the company reserves the right to pay farmers more or less depending on the quality of the cotton produced, the price being paid for one kilogram of medium‐quality cotton is set at 285 so’m, an increase of 9% from the price paid last year. This changes in wages are extremely important in Uzbekistan, where approximately 20% of all arable land and slight less than that portion of the population is involved in cotton production, as millions of people are dependent on cotton procurement as their main source of income.

Cotton production in Uzbekistan remains a government monopoly based on the same system of procurement used in the Soviet Union, where all cotton grown in the country is purchased, processed, and sold by a series of government monopolies organized underneath the O’zpaxtasanoateksport Holding Company. In contrast to concerted government efforts to privatize land and most varieties of industry, all aspects of cotton and wheat production in Uzbekistan are intrinsically tied to the state.Whereas government control over wheat cultivation and procurement stems from efforts to ameliorate the skyrocketing food prices following the collapse of the Soviet Union, Uzbekistani policy towards cotton is crucial for the government’s plans for industrialization and development. Although government planning has decreased cotton production substantially from its height during the Soviet Union, when Uzbekistan, Turkmenistan, and Tajikistan essentially produced all cotton for the Soviet Union at great expense to the environment and industrial development, cotton still accounts for around 20% of total exports and makes up 10% of the total annual GDP. To successfully implement its economic policy of import substitution, Uzbekistan requires profitable raw goods to export in return for the machinery to build up its own industrial base. Despite the unpopularity of cotton production and the crop’s association with colonial exploitation, Uzbekistan has not been able to wholly shake its dependence on cotton and the crop continues to be of great importance to national development.

The singular importance of cotton to the national economy and current growth plans has unfortunate side effects for those farmers employed in the production of the crop, as they have been largely denied the benefits of agricultural privatization that have enriched many of their countrymen. The necessity of cotton to maintaining growth outcomes has prompted the government to resort to coercive measures in many cases to keep farmers growing the crop as opposed to more profitable and less labor-intensive alternatives, like fruits, vegetables, or tobacco. While the mobilization and state employees and university students for cotton-picking is most famous in the West — thanks largely to a smear campaign by prominent opposition groups in Turkey — coercion in the cotton industry is mostly based in the system of land rights in Uzbekistan. In designated cotton-growing areas, primary found in Jizzax, Sirdaryo, Xorazm, and parts of Toshkent and the Farg’ona Valley, farmers only received privatized land following the breakup of collectivized farms on the condition that they meet production quotas. Whereas most farmers are given considerably more freedom regarding business practices, cotton and wheat farmers are required to plant certain quantities and varieties of cotton or risk forfeiting their land. Even compared to wheat farmers, cotton farmers have an especially bad deal, partially because cotton production is more intensive, but primarily because cultivation is rarely profitable. Monopolies control all aspects of cotton cultivation, meaning that in addition to being given only one price at which to sell their cotton, farmers are forced to pay uncompetitive prices for agricultural inputs like fertilizer, gas, and seeds. Since the 1990s, the government has made valiant strides towards improving the life quality of farmers, but most subsidies to farmers barely cover the bribes demanded by officials throughout the process, leaving cotton farmers continuously impoverished and indebted. There has been a movement towards agricultural reform since the late 1990s, but increasing benefits for farmers would necessarily requires reducing the profits of O’zpaxtasanoat and thus retarding Uzbekistani industrialization and growth, leading to the current broad consensus among elites and urbanites that the plights of the cotton farmers can be gradually reduced, but remains a necessary evil.

The new cotton procurement prices represent a continuation of the larger trend of gradual increases in compensation and quality of life for farmers. Although the amounts paid will jump in nominal value, almost all of the 9% increase will be eaten away by inflation, leaving a real increase in compensation of only around 1%. The effect of this price change is not, however, uniform across Uzbekistan, as inflation varies substantially throughout the country; from perhaps 12% in Qoraqalpog’iston to maybe 4% or 5% in Toshkent City. Since the regional variation in inflation are largely driven by the presence, or lack, of industrial growth, the poorest regions will be the hardest hit by inflationary growth as they suffer the same price increases, but do not experience the benefits of increased industrial wages. Fortunately for Uzbekistan’s poorest, the impoverished regions of Qoraqalpog’iston, Qashqadaryo, and Surxondaryo have been largely transition to wheat or private fruit and vegetable production, allowing their incomes to increase with demand rather than government fiat. The regions with the highest rates of cotton production — Jizzax, Buxoro, Toshkent, Farg’ona, Sirdaryo, and Xorazm  — are also those experiencing the heaviest industrial development under import-substitution, meaning that this year the 9% increase in compensation for cotton might actually translate into meaningful 2% or 3% income growth for the majority of farmers. Those experiencing zero growth — or even decreases in real wages  — are in the minority now, limited to the small number of poor, benighted, cotton farmers still working in Qoraqalpog’iston or Surxondaryo.

 

Sources:

Shtaltovna, Anastasiya & Anna-Kathrina Hornidge. ‘A Comparative Study on Cotton Production in Kazakhstan and Uzbekistan’. Bonn: Center for Development Research University of Bonn, 2014.

McKinley, Terry. “The Puzzling Success of Uzbekistan’s Heterodox Development”. London: Center for Development Policy and Research, 2010.

McKinley, Terry and John Weeks. “A Proposed Strategy for Growth, Employment, and Poverty Reduction in Uzbekistan”. In Economic Alternatives for Growth, Employment and Poverty Reduction: Progressive Policy Recommendation for Developing Countries, edited by Terry McKinley, 241-271. Palgrave Macmillan, 2009.

UzDaily. “Govn’t sets procurement prices for raw cotton of 2016 crop”. UzDaily.com, 19 Sept. 2016.

Keller, Shoshana. “The puzzle of manual harvest in Uzbekistan: economics, status and labour in the Khrushchev era”. Central Asia Survey, vol.34, no.3 (2015): 296-309.

International Labour Organization. “Third Party Monitoring of the use of child labour and forced labour during the Uzbekistan 2015 Cotton Harvest”. 2015.

Critchlow, James. “Nationalism in Uzbekistan: A Soviet Republic’s Road to Sovereignty”. Boulder, Colorado: Westview Press, 1991.

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Author: Sam

I study international relations and public policy at the University of Edinburgh. My research is focused on political systems and economic development in Post-Soviet states.

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