PRIVATIZATION OF MALI'S STATE-OWNED COTTON COMPANY

UNCLAS BAMAKO 000589

SIPDIS

E.O. 12958: N/A
TAGS: EAGR EAID ECON ETRD ML
SUBJECT: PRIVATIZATION OF MALI'S STATE-OWNED COTTON COMPANY
MOVES AHEAD


1. Summary: On May 28 Mali's Council of Ministers' passed a
draft law authorizing the sale of government stock in the
cotton parastatal, Malian Textile Development Company (CMDT),
marking a major step in the World Bank-sponsored
reconstruction of the Malian cotton sector. The text now
goes to the National Assembly for ratification. CMDT workers
and farmers' unions, however, still pose a significant
obstacle to privatization efforts and are likely to place
increased pressure on National Assembly Deputies when the law
authorizing the sale of CMDT reaches the Assembly floor. End
Summary.


2. On May 28 the Council of Ministers approved a draft law
authorizing the sale of the government of Mali's shares in
CMDT. The government currently owns 92.38 percent of CMDT's
shares. The remaining shares have been bought by French
Geocoton, formerly Dagris. This draft law marks a major step
in the World Bank-sponsored privatization process of Mali's
cotton parastatal. The National Assembly is slated to vote
on the draft law on July 5 although there are already
indications that some Deputies will vote against passage.


3. Provided the law passes, the Malian government then will
create four independent subsidiaries of CMDT divided by
geographical region -- Southern Sikasso, Eastern Koutiala,
Central Fana, and Western Kita. All relevant assets and
liabilities currently under assessment will then be allocated
to the four subsidiaries. When the sale of government shares
is complete (the call for bids is currently scheduled for
November 2008),the CMDT will have been transformed into four
privately owned companies each with the autonomy to gin and
sell cotton in their respective regions.


4. Although the Council of Ministers' decision has been
expected for months, it triggered negative reactions from
cotton farmer and CMDT worker's unions. Cotton farmers and
CMDT unions were regularly consulted during restructuring
discussions. Their participation, however, has not reduced
criticism of Mali's privatization efforts as the unions
continue to argue that CMDT privatization will plunge Mali's
cotton sector into turmoil similar to that experienced by
Burkina Faso, Benin and Cote d'Ivoire. A high-ranking member
of Mali's Cotton Restructuring Commission told the Embassy he
believed the CMDT workers' union was positioning itself to
bargain for better severance payments in advance of
"inevitable hundreds of lay-offs to come in the future."
Farmers' unions are also warning of layoffs, disincentives to
cotton cultivation, and an end to seed and fertilizer
subsidies.


5. COMMENT: Many Malians believe the CMDT's main problem is
not its parastatal status but decades of rampant
mismanagement. Declines in the world price of cotton have
aggravated the situation. Although the privatization of the
CMDT has been underway for years, cotton farmers and CMDT
workers remain unconvinced of the need to privatize and wary
of negative impacts that may harm cotton growers and reduce
the power of CMDT labor unions. More serious concerns focus
on the viability of four private cotton companies and their
understandable need to reduce costs, cut corruption, and
increase operational efficiency while maintaining a work
force and supply network that has never had to focus on
turning a profit.
MCCULLEY