TURKMENISTAN: GOVERNMENT SILENT ON OUTCOME OF COTTON

UNCLAS SECTION 01 OF 02 ASHGABAT 001491

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EUR/RUS, EUR/CARC, EEB
ANKARA FOR REGIONAL AGRICULTURAL COUNSELOR

E.O. 12958: N/A
TAGS: EAGR EIND ECON TX
SUBJECT: TURKMENISTAN: GOVERNMENT SILENT ON OUTCOME OF COTTON
HARVEST


1. (SBU) SUMMARY: For the second year in a row, the Turkmen
government has not released cotton production figures. Numerous
challenges result in a harvest that falls short of the record
harvests of the Soviet era. The impact of last year's increase in
the price paid to cotton farmers, intended to boost production, was
mitigated by inflation. Despite plans to attack corruption in
cotton marketing activities, a new marketing organization announced
by the government last year showed no sign of life. Some regions
not naturally suited for cotton cultivation experienced water
shortages, reducing the crop yield. In response, the government is
looking at diversifying its agricultural planning, which could
result in increased efficiency. Meanwhile, cotton remains king and
its importance will likely require significant investments in water
and other technologies in order to maintain adequate production.
END SUMMARY.

GOVERNMENT DOES NOT RELEASE COTTON PRODUCTION FIGURES


2. (SBU) At the November 3 Cabinet of Ministers meeting, President
Berdimuhamedov announced that ninety percent of the cotton harvest
had been gathered. He did not, however, mention any cotton
production figures, nor are such figures expected to be released.
While the official date for the end of the cotton harvest is
November 30, as a practical matter the first rain, which occurred
several weeks ago, marks the end of the harvest. Unlike former
President Niyazov's practice of announcing inflated cotton and wheat
harvest goals, which then led to falsified harvest reports, the
current Turkmen government remains silent on production targets and
harvest results.

COTTON PRICES INCREASED, BUT INFLATION ERODED THE GAIN


3. (SBU) On April 10, 2007, Berdimuhamedov signed the decree "On
increasing the production of cotton in Turkmenistan and improving
the procedure of carrying out payments to cotton producers," which,
at that time, substantially raised cotton farmers' income.
According to the decree, the state purchasing price for the 2007
cotton harvest was quintupled to 5,200,000 manats (USD 366) per ton
of medium-staple cotton, and 7,500,000 manats (USD 528) per ton of
fine cotton. Despite the increase, however, some farmers reportedly
feel nostalgic about the Niyazov-era method of payment, which was
done partially in currency and partially in-kind (cotton seed oil
and cotton seed cake),which farmers found profitable to sell at the
market due to price inflation.

NEW COTTON MARKETING BODY EXISTS ON PAPER ONLY


4. (SBU) Prior to 2007, Turkmenpagta (Turkmen State Cotton Concern)
was the exclusive buyer and seller of Turkmen cotton. In order to
eliminate corruption at Turkmenpagta, last year the president
established the self-financed "Ak Altyn" ("White Gold") marketing
organization. Officially, Turkmenpagta was left with responsibility
only for cotton ginning. Ak Altyn was reportedly capitalized
through a bank loan and was supposed to both pay back the loan and
pay for farmers' input costs through the proceeds of cotton sales.
It appears, however, that Ak Altyn exists only on paper. A cotton
grower from Mary Province told Embassy staff that Turkmenpagta is
still concluding purchase contracts with farmers, despite the
president's decree, while Ak Altyn is nowhere to be seen.

WORKING AGAINST NATURE RESULTS IN GREAT INEFFICIENCIES


5. (SBU) Embassy contacts in Dashoguz and Balkan Provinces have
reported poor harvests, which they attribute to a shortage of
irrigation water. Agricultural officials in these provinces
struggle every year to distribute their scarce water resources
equally between wheat and cotton growing needs. Insufficient
irrigation water results in stunted cotton plants and immature
cotton bolls. This, in turn, makes mechanized harvest impossible
and requires a huge manual labor force, often drafted from other
provinces. Hired labor costs 1,000 manat (seven U.S. cents) per
kilo. A contact from Balkan Province said that local officials
doubled this payment to hired labor in order to attract skilled
cotton pickers from Mary Province, since Balkan is not a
cotton-growing area and natives of the region are not experienced in

ASHGABAT 00001491 002 OF 002


cotton-picking.

PRESIDENT SUGGESTS DIVERSIFICATION OF STATE AGRICULTURE


6. (SBU) During the November 3 Cabinet meeting, President
Berdimuhamedov reportedly ordered his Cabinet to review the policy
of growing predominantly cotton in Turkmenistan and to consider
diversifying state agriculture. (NOTE: This would be a radical
turn away from the Soviet practice of monoculture, or exclusively
focusing on one individual crop. END NOTE.) He ordered Deputy
Chairman for Agriculture Myratgeldi Akmammedov to develop a state
agriculture diversification program, taking into account each
province's weather, land and water resources for growing certain
crops. If implemented, such a program could release Dashoguz and
Balkan Provinces from the burden of cotton growing, and bring them
back to their traditional occupations: rice and wheat cultivation
in Dashoguz, and cattle and sheep breeding in Balkan.


7. (SBU) COMMENT: The fact that the government failed to release
harvest figures signals that this year's cotton harvest probably did
not meet expectations. Current production will always be measured
against Turkmenistan's record cotton harvest, last achieved in the
1980s, which was 1,000,000 tons. Some Turkmen farmers are
disappointed in Berdimuhamedov because he has not reformed the
agriculture sector as he promised during his election campaign in
early 2007. In addition, corruption continues in spite of the
cotton marketing decree announced in 2007, indicating bureaucratic
resistance to reform.


8. (SBU) COMMENT CONTINUED: The fact remains that cotton is a
strategic crop for Turkmenistan. It yields hard currency revenues
as well as provides raw materials for the domestic textile industry.
In order to maintain cotton production at an adequate level, the
government will have to invest more in the agriculture sector and
improve cotton growing technology. In addition, returning to
traditional farming activities better suited to naturally occurring
soil and climate conditions could result in greater efficiencies, if
properly implemented. END COMMENT.

CURRAN