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Anti-smuggling Enforcement Imperils Uzbekistan's Cotton Farmers

31 October 2003 Editor's note: EurasiaNet provides information and analysis about political, economic, environmental, and social developments in the countries of Central Asia and the Caucasus, as well as in Russia, the Middle East, and Southwest Asia.

Uzbekistan has tightened enforcement against cotton smuggling, dispatching as many as 18,000 police to border areas. Agriculture remains economically crucial in Central Asia’s largest country. But even though the country ranks second only to the United States in cotton-export volume, the business cannot sustain a large farming class. If the government cracks down on smuggling, it will need to develop other means to allow farmers to survive.

These might be boom times for Uzbekistani harvesters, if they worked in a better-developed sector. According to experts at the International Cotton Advisory Council, cotton prices will reach a six-year peak in the 2003-2004 harvest, following a weak crop in China. Experts say China’s domestic cotton production will probably not be enough to cover increasing demand from its textile industry, and worldwide stocks have already fallen to ten-year lows. Projections show demand increasing, despite a price increase of more than 12 percent, from $0.58 to $0.64 per pound. Some analysts expect prices to peak at $0.70 per pound.

According to Interfax, 1.393 million hectares of Uzbek cropland were allocated to cotton in 2003. Forecasts call for a harvest of 3.6 million tons this year, compared to 3.2 million tons in 2002. More than two thirds will be exported, because the republic’s textile industry is still surprisingly underdeveloped.

While Uzbekistan’s cotton cannot match other countries’ quality, and sells at a discount--analysts do not expect it to fetch more than $0.65 per pound at the most--it comprises roughly 27 percent of Uzbekistan’s exports and up to half its budget revenues. Since Uzbekistan was due to make its currency convertible on October 15, strong cotton sales could conceivably boost its economic prospects.

However, old Soviet-style methods are likely to thwart currency reform and leave farmers with only a small portion of Uzbekistan’s cotton revenues. Farmers still have to sell their cotton to the government at fixed prices, several times lower than international cotton prices or even prices offered to cotton farmers in Kazakhstan or Kyrgyzstan. Last season, farmers sold their crop for less than five cents per pound--and payments usually come erratically. This year, premium cotton picked before the rainy season sells for around $0.083 cents per pound. No other buyers are available.

A EurasiaNet correspondent recently visited the village of Sayhunabad in Syr Darya province. The visit made clear why some farmers choose to smuggle their cotton on the black market.

As with many cotton-centered villages, life virtually halts in Sayhunabad at harvest time: schools close, government organizations slow to a crawl, and old people and schoolchildren ride trucks into cotton fields for the day. Cotton pickers receive 30 soms per kilogram of picked cotton (approximately $0.014 per pound). The government obliges private farmers to pay their workers every day or at least every-other day. (Collective farms issue payment every five days.) But private farmers cannot get loans from government banks for the cotton they sell to government organizations.

"The system works as follows," says Zukhra, an accountant of one of the collective farms who refused to give her last name. "The farmers sell their cotton to the only government organization working in the area. But they do not receive their money at once. When they come to the bank to take their money to pay it to their workers--who they are obliged to pay every day--the bank says it has no cash, or asks the farmers to fill out lots of forms, including how many workers they have, the names of workers, their signatures, etc. Even if the farmers fill out those ridiculous forms, they will not receive their money at once." Many farmers corroborated this story.

Farmers, says Zukhra, often feel trapped and see smuggling as a means of survival. If they do not pay, “the Hokimiyat [regional administration] will not give them equipment, or fertilizers, or will just revoke the rights for the land the farmers lease. The farmers have to sell their cattle and other private property to pay their workers. Those who do not have enough property to sell, have to cut corners."

In Sayhunabad, EurasiaNet witnessed one corner-cutting technique. The district’s fields border on Kazakhstan, and in one area the border is just a tiny ditch. EurasiaNet saw Uzbek farmers penetrate several hundred meters inside Kazakhstan, where Kazakh farmers were waiting for them. Cotton in Kazakhstan can reportedly sell at around $0.22 per pound, nearly three times the maximum price in Uzbekistan. At least one smuggler was a private farmer.

Cases of smuggling are growing at a massive rate. The government has increased patrols of border areas and invoked rhetoric about national sabotage to fight smuggling. State television shows report about additional flying squads deployed to border areas and local community volunteers hunting smugglers. In a resolution broadcast on October 13, the Cabinet of Ministers blamed regional chiefs for not keeping tighter control over farm storage.

But villagers say the authorities hold unreasonable control. "The police and border guards overstep all marks and limits," says Takhir, another resident of Sayhunabad who used only his first name when criticizing the government. "My relative married her daughter to a man in Kazakhstan. The police convoyed the wedding to the border and then from the border back home fearing that they might smuggle anything. They searched the guests. It was such a shame!"

Alternatives may be taking shape. The government, facing pressure from the same international lenders that demanded currency convertibility, issued an agricultural-reform plan in March. Under the plan, surviving Soviet-style cooperatives will have to lease cropland, and will make independent business decisions addressing both governmental and private customers. The government claims it has already "introduced new measures, including modern contractual agreements between all parties, including producers, sellers and exporters."

But in Sayhunabad, farmers doubt the decree will weaken Soviet-style controls or reduce inefficiencies. Local government, they say, has not gone beyond inviting those who want to lease land to submit their applications. Farmers are generally not holding their breath.

"Giving freedom to us farmers is against the interests of local bureaucrats," says a farmer in Sayhunabad. "The Hokimiyat will find a way to oppress us."

Esmer Islamov is a journalist in Uzbekistan.
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