Identifier
Created
Classification
Origin
07ASHGABAT1128
2007-10-18 14:13:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ashgabat
Cable title:  

TURKMENISTAN: COTTON INDUSTRY STILL TROUBLED

Tags:  PGOV PHUM EAGR ECON EIND TX 
pdf how-to read a cable
VZCZCXRO3087
PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDBU RUEHDF RUEHIK RUEHLH RUEHLN
RUEHLZ RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #1128/01 2911413
ZNR UUUUU ZZH
P 181413Z OCT 07
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 9565
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 2891
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0712
RUEHKO/AMEMBASSY TOKYO PRIORITY 0588
RUEHIT/AMCONSUL ISTANBUL PRIORITY 1164
RHMFIUU/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
UNCLAS SECTION 01 OF 03 ASHGABAT 001128 

SIPDIS

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, DRL, EEB

E.O. 12958: N/A
TAGS: PGOV PHUM EAGR ECON EIND TX
SUBJECT: TURKMENISTAN: COTTON INDUSTRY STILL TROUBLED


UNCLAS SECTION 01 OF 03 ASHGABAT 001128

SIPDIS

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, DRL, EEB

E.O. 12958: N/A
TAGS: PGOV PHUM EAGR ECON EIND TX
SUBJECT: TURKMENISTAN: COTTON INDUSTRY STILL TROUBLED



1. (SBU) Sensitive but unclassified. Not for public
Internet.


2. (SBU) SUMMARY: Visits to the regions revealed that
although President Berdimuhamedov can continue to rely on the
cotton industry to bring in revenue, the sector needs reform
and modernization. One positive change this year is the
president established higher prices the state would pay for
cotton. Overall, however, little in terms of cotton growing,
manufacturing, and sales process has changed. END SUMMARY.

HARVEST TARGET UNSTATED, BUT GOALS REMAIN THE SAME


3. (SBU) The government allocated 650,000 hectares of land
this year for cotton. Information that post gathered in all
five provinces indicated that farmers were harvesting an
average yield per hectare of 1.2 tons. The government
estimated it would harvest about 780,000 tons of raw cotton
or 260,000 tons of cotton fiber. Last year, Turkmenistan
produced about 200,000 tons of cotton fiber. According to
official statistics, as of October 16, farmers had harvested
763,777 tons of raw cotton. Unlike previous years, the
government did not set a harvest target for 2007.


4. (SBU) In an attempt last spring to stimulate production
this year, Berdimuhamedov established new higher prices that
the state would pay for cotton. State purchasing prices for
2007 were set at 5,200,000 manats or US 1,000 (at the
official rate) for a ton of medium-staple cotton and
7,500,000 manats or US 1,442 for a ton of fine cotton.

PUBLIC-SECTOR EMPLOYEES STILL BEING PRESSED TO HELP IN COTTON
PICKING


5. (SBU) The government banned the use of schoolchildren and
government employees to pick cotton, but this year there were
reports that city residents in Dashoguz were being forced to
pick cotton. In at least one sector near the Iranian border,
border troops harvested cotton in response to a local mayor's
request for help. In Ahal, provincial authorities increased
the pay for hired labor five times, in order to offset
apparent labor shortages there. A resident in Ak Bugday

region of Ahal said regional authorities were demanding that
employees in non-agricultural sectors pay a 500,000 manat fee
to cover the local government's expenses for hired labor if
they did not help with the harvest. However, those who
agreed to help with the harvest discovered that there was
insufficient cotton remaining in the fields to justify their
presence. The contradiction led to rumors that local
officials were collecting money to buy cotton from
neighboring regions to cover their own shortfall.

LITTLE CHANGE IN THE REGIONS


6. (SBU) Embassy officers met with cotton officials
throughout Turkmenistan form September 21 to October 12
(reftels). Officials praised new government incentives
offered to cotton growers, spoke optimistically about their
harvest estimates and conducted tours of exemplary cotton
farms.


7. (SBU) A first deputy provincial governor in Ahal province
reported 120,000 hectares sown with cotton. He claimed that
the average yield in the province was 3.3 tons/hectare, which
would have amounted to 396,000 tons of raw cotton, but
official statistics on October 16 indicated a harvest of only
123,021 tons. the deputy claimed that the number of farmers
willing to grow cotton had grown from 30,000 to 38,000 since
last year.


8. (SBU) In Dashoguz, the harvest was poor due to low
precipitation, shortage of irrigation water, and poor
management during the spring sowing cycle. Machine

ASHGABAT 00001128 002 OF 003


harvesting the cotton had been rendered impossible this year
because farmers had erroneously sown the plants in furrows
that were too close together.


9. (SBU) The deputy governor of Balkan province said this
year's crop was substantially better than last year's,
primarily because the state had provided farmers new seed
stock and more fertilizer. He noted almost all the
province's 5,500 farmers sell their cotton to the State
Cotton Concern. Farmers were to receive five million manat
per ton of cotton (about $1,000 at the official exchange
rate) form the State Cotton Concern in two payments -- one
million manat on delivery of the cotton, and the remaining
four million on completion of the harvest. He said there
were no children working in the fields because Balkan simply
does not produce enough cotton to require additional labor.


10. (SBU) Mary province's first deputy governor reported
180,000 hectares of cotton had been sown this year, with an
average yield of 1.3 tons per hectare. He claimed that there
was more interest in farming because of the government's
efforts to raise purchase prices. He noted the process of
selling cotton directly to the State Cotton Concern was
easier to manage than dealing with private purchasers,
suggesting that farmers preferred to sell to the state rather
than the open market. He said private cotton growers can
sell their harvest on the stock market, but taxation reduced
the profitability of this option. He argued that farmers are
paid more quickly by the state and that it is difficult to
find a buyer for the small harvests of most private farmers.
He claimed he did not have accurate information regarding how
many farmers contracted with the state and how many engaged
in private agriculture, because the number of private farmers
was constantly increasing. He was aware of no difference
between the average yields of private and state farmers.


11. (SBU) The Lebap province deputy governor responsible
for the cotton harvest reported that 145,000 hectares had
been sown. They had harvested 220,000 tons so far, averaging
about 3,000 tons daily. Lebap's cotton was coming in a
little late, because they had planted late. They expected to
finish the harvest by November 20, a month after the harvest
normally ends. He said 10 percent of the province's cotton,
or about 17,000 tons, was harvested by machine, and about 90
percent by hand. The average yield was about two tons per
hectare, although some farmers were harvesting up to five
tons per hectare. He estimated the province would harvest a
total of 280,000 tons. The sate was paying farmers 5,200
manats per kilo of cotton and was making payments every 5-10
days. One cotton farmer said the cost of a ton of
machine-picked cotton is 670,000 manats and 1 million manats
for hand-picked cotton. (NOTE: Hand-picked cotton is higher
quality and, therefore, more valuable. END NOTE.)

TURKMEN STATE COTTON CONCERN


12. (SBU) The State Cotton Concern is tasked with purchasing
the vast majority of cotton harvested in Turkmenistan at a
state-established price. The Cotton Concern also determines
the quality of the cotton and issues conformity certificates.
This process invites corruption because the Cotton Concern
can declare a farmer's cotton to be low quality to pay him at
a lower price. then the Cotton concern could potentially
sell the cotton at a higher price, benefiting form the wider
profit margin.

DOMESTIC TEXTILE INDUSTRY NEEDS MODERNIZATION


13. (SBU) Turkmenistan has 34 antiquated ginning plants. A
new ginning plant will be commissioned on October 22 in
Ruhabat district near the late President Niyazov's hometown.
The factory will have U.S.-made continental ginning
equipment. One other ginning plant in Turkmengalla district

ASHGABAT 00001128 003 OF 003


has been using equipment from the American company Lummus
since 1996. The government subsidizes 50 percent of the cost
of cotton for local textile manufacturing. The Ministry of
Textiles buys cotton from the Cotton concern at the price of
2 million manats per ton, about $400 at the official exchange
rate. According to several sources, Turkmenistan now uses
100,000-110,000 tons of cotton per year in domestic textile
manufacturing.

FOREIGN COMMERCIAL COTTON SALES STILL LIMITED


14. (SBU) According to a foreign company cotton buyer with
offices here, Turkmenistan is expected to auction off 140,000
tons of raw cotton to foreign dealers. He noted the bidding
process has become a bit more transparent. When the
responsibility for commercial cotton sales moved form the
Agricultural Joint Stock Company, the stockholders of which
were state agencies, to the State Cotton Concern, bidding and
contracting processes became a bit more streamlined, due to
expertise of managers at the Cotton Concern. The
government's current stated priority is to increase textile
exports to include yarn, thread, and cloth, instead of
less-profitable cotton fiber.


15. (SBU) COMMENT: Cotton farming and manufacturing is a
strategic national priority here, because of the hard
currency revenues it brings in, but it is not a consistently
reliable source of revenue, and the sector is fraught with a
variety of problems. Initiating privatization of farms and
factories would gradually make the sector more productive and
profitable. However, given the current state of the cotton
industry here, there are few signs that President
Berdimuhamedov's pre-election promises to radically reform
the sector are, to date, not much more than cosmetic. END
COMMENT.
HOAGLAND