SOUTHERN TAJIKISTAN'S RUSTED BELT: INDUSTRY IN

UNCLAS SECTION 01 OF 02 DUSHANBE 001846

SIPDIS

SIPDIS

STATE FOR SCA/CEN

E.O. 12958: N/A
TAGS: EAGR ECON EFIN EINV EIND ELAB EAID ETRD PGOV TI
SUBJECT: SOUTHERN TAJIKISTAN'S RUSTED BELT: INDUSTRY IN
QURGHON-TEPPA

REF: DUSHANBE 1625

DUSHANBE 00001846 001.2 OF 002



1. (U) INTRODUCTION: Called Kurgan-Tube by the Soviets,
Qurghon-Teppa is a depressed city of 80,000 people, sixty
minutes south of Dushanbe in the Khatlon region. Remains of the
city's crumbling industrial infrastructure line city streets.
The mayor threatened to re-nationalize failing industries if
they fail to increase production. Meanwhile, major factories
eagerly await completion of the U.S.-funded Nizhny Pyanj bridge
so they can increase exports to Afghanistan. The few hotels in
the city do not even meet Dushanbe's post-Soviet standards, let
alone international norms. Oblivious to these problems, a
private entrepreneur is pouring millions of dollars into
renovation of an airport that hardly anyone uses. END
INTRODUCTION.


2. (U) The largest factory located near Qurghon-Teppa is
called VATZ, a nitrogen fertilizer plant. In an astonishing
chemical process, "carbomid" nitrogen fertilizer is produced by
combining the two ingredients air and natural gas. VATZ
receives natural gas from Uzbekistan, and is the single largest
user of natural gas in Tajikistan. VATZ receives air inputs for
free. The company exports 20% of its product to Iran,
Afghanistan, and previously to China. The company plans to
greatly increase its sales to Afghanistan with completion of the
U.S.-funded Nizhny Pyanj bridge. A businessman from Cyprus
invested $17 million to renovate the plant, and now owns 80% of
VATZ shares. The company employs 1,200 workers, who enjoy
decent medical and social benefits. Problematically, days after
the visit by EmbOffs, VATZ directors decided to close the plant
temporarily due to a lack of natural gas from Uzbekistan.
(Note: According to some press reports, VATZ's disputed bills
for natural gas are a major pretext for Uzbekistan's periodic
shut-down of gas supplies to Tajikistan.) Tajik farmers can
still import fertilizer from Russia. In addition, Turkmenistan
is currently building a carbomid plant which will produce double
the capacity of the Tajik plant - 350,000 tons. Presumably,
they will receive a steady supply of natural gas internally.


3. (U) The second largest factory in Qurghon-Teppa is 70 years
old and produces electrical transformers for Tajikistan and
Afghanistan. Since its renovation in 1960, the factory has not
installed new equipment, but manages to produce 400 working
transformers each year. The government-owned Kurgan Tube
Transformer Company imports parts from Russia and Ukraine, with
aluminum inputs from Tajikistan. The company sells 60% of its
products through Barki Tojik, the state-owned power company.


4. (U) The director of the company, Zikirullo Muroduloevich
Begmatov, is the son-in-law of the acting chairman of Khatlon
Oblast. Barki Tojik owes the company $1 million for delivered
goods. Begmatov told EmbOffs September 22 that the U.S.-funded
Nizhniy Pyanj bridge will allow the company to greatly expand
its deliveries to Afghanistan. The 200 factory workers earn on
average $70 per month. The company currently brings in $3
million in annual income, with $250,000 profit. According to
Muroduloevich, Chinese investors have expressed interest in the
plant, but made no commitments.


5. (U) In the farming sector, the relative success of a small
farm and a large farm demonstrate that sometimes, size does
matter. Abdurazok Abdullaev farms 25 hectares of cotton, and is
deeply in debt to a commodities "futures" holding company
"TAMER." TAMER financed his land but did not show Abdullaev the
contract. TAMER does not disclose the prices of farming inputs
it supplies, or how much it will pay for the cotton Abdullaev
will supply at season's end. Abdullaev is highly unlikely to
pay off his $1,300 per hectare debt anytime soon.


6. (U) A 408-hectare cotton farm owned by Raidin Sulaimonov
employs 600 people. Raidin managed to switch away from TAMER to
another futures company that provides better prices for fuel and
fertilizer supplies. Each year, Raidin has paid off 25% of its
$450 debt per hectare, and hopes to be debt-free by 2008.
Unfortunately, many farmers lack the ability to get out from
under rapacious futures companies.


7. (U) The privately-owned NUR Company plans to invest up to
$15 million in revitalizing the sparingly-used Qurghon-Teppa
airport (reftel). NUR's main engineer for the project
Mirhodjaev Umarhodja showed EmbOffs design plans for the site
September 22, which include 6,000 square meters of terminal

DUSHANBE 00001846 002.2 OF 002


space, able to accommodate 600 passengers per hour. NUR plans
to complete construction by summer 2007. NUR's plans to lease
four Yak-42's for flights between Qurghon-Teppa and Saratov,
Russia, (reftel) failed financially, and are not operating.


8. (U) COMMENT: Although a large population of migrant workers
flies in and out of Qurghon-Teppa each year, this does not seem
sufficient to pay off a major airport infrastructure investment.
The region's economy lacks the dynamism to support major
domestic or international travel. Without significant land
reform and debt restructuring for the cotton farmers, the
region's prospects will remain bleak. END COMMENT.
HUSHEK