UZBEKISTAN: AMBASSADOR VISITS LAND OF THE "HUNGRY STEPPE"

UNCLAS SECTION 01 OF 03 TASHKENT 001356 SENSITIVE SBU DELIBERATIVE PROCESS SIPDIS DEPARTMENT FOR SCA/CEN AND EB AMEMBASSY ANKARA FOR AG COUNSELOR E.O. 12958: N/A TAGS: ECON SOCI EAGR EAID UZ SUBJECT: UZBEKISTAN: AMBASSADOR VISITS LAND OF THE "HUNGRY STEPPE" ¶1. (SBU) SUMMARY.Ambassador Norlandmade a day trip to the Syrdaryo Region on November 14. The next province west of Tashkent, Syrdaryo is one of Uzbekistan's poorerregions. Known as the "Hungry Steppe" because of the absence of natural watersources, this predominantly agriculturalprovince is struggling todevelop its agricultural base while also attracting foreign investment.In a long conversation Hokim Abdurakhim Jalalov, an unusual regional leader in that he has national-level policy experience and outlook,sharedwith the Ambassadorhis views on land reform, migration and child labor, water, and investment. En route back to Tashkent, the Ambassadorvisited two companies affiliated with the American Chamber of Commerce that have successfully established themselves in Syrdaryo. END SUMMARY ¶2. (SBU) On November 14 Ambassador Norland paid a visit to Guliston, the capital of the Syrdaryo Region. Just an hour and a half's drive from Tashkent, Guliston is usually little more than a name on an exitsign as travelers drivetheTashkent-Samarkand road. Overwhelmingly agricultural, Syrdaryo is considered one of the poorest regions in Uzbekistan in terms of agricultural management. HOKIM OF THE HUNGRY STEPPE ¶3. (SBU) The Ambassador met first with Abdurakhim Jalalov, Hokim of the Syrdaryo Region. Previously First Deputy Minister for Agriculture and Water Management, Jalalov was appointed Hokim in November 2004 to replace Rashan Haydarov. At that time President Karimov cited nepotism, corruption, and failure to meet cotton quotas as reasons for Haydarov's demise. With a long background as an engineer specializing in water management, from the 1970s Jalalov occupied a number of technical positionsbefore being namedDeputy Minister of Land Reclamation and Water Management in 1991. It is Jalalov's expertise in land reclamation and irrigation that appears to have prompted the President to appoint him Hokim of Syrdaryo. ¶4. (SBU) After greeting the Ambassador, Jalalov gave a short history of the Syrdaryo Region. By the beginning of the 20th century most land in Central Asia that could be developedeasily was already under cultivation. Syrdaryo was not one of those. It was known as the "Hungry Steppe" because the land was dry and hungrily soaked up what little water came its way. The first settlers who attempted to make a life here were freed serfs from the Russian north, who made their way to the region in the 1880s. ¶5. (SBU) It was Russian Grand Duke Nicholas who, sensing the region's potential, had the Grand or Romanov Canal built to provide water for irrigation. Opened in 1914, the canal was the catalyst for a new influx of settlers that continued through the 1920s and 1930s. In 1966 the Central Committee of the Communist Party of the USSR issued a decree On Development of the "Hungry Steppe." A program of "complex development" ensued that over the next fifteen years brought an additional 25,000 hectares of land under cultivation. The region's infrastructure including roads, housing, and social services was developed. Syrdaryo City, the old capital, wassubject to flooding and was deemed unfit to be capital of the newly developed region. In its place the new capital of Guliston was built from the ground up. ¶6. (SBU) Todayalmost a million people make their home on the "Hungry Steppe." (NOTE:The steppe also continues across the border into Kazakhstan. End note).The Hokim described the population as a multiethnic"vinaigrette" with almost everyone being new to the region over one generation. 270,000 hectares are now under cultivation. The Hokim's Viewson Land Reform, ¶7. (SBU) The Ambassador asked Jalalov about the recent presidential decrees reducing the acreage devoted to cotton and merging small farms of less than 30 hectares into larger ones (Ref A). Jalalov replied that 2,500,000 hectares were planted with cotton and only 80,000 with grain at the time of Uzbek independence in 1991. President Karimov decreed that Uzbekistan should strive for grain independence, and within five years 1,000,000 hectares were planted with grain. (NOTE: Currently Uzbekistan has 1,300,000 hectares devoted to cotton cultivation.) Although results were at first mixed, with time Uzbekistan developed cadres who know how to produce 6-8 tons of grain from each hectare. "We have learned how to grow grain in our hot and dry climate," Jalalov said, and he added that the October decree increasing the acreage devoted to grain by 48,800 hectares is a continuation of the policy of increasing grain production. ¶8. (SBU) On the reorganization of farms, Jalalov said a mistake had been made in transitioning fromSoviet collective and state farms to cooperatives and then to private farms. In the transition to private TASHKENT 00001356 002 OF 003 farms, no restrictions were imposed on how small a farm could be, and this resulted in many small 15-20 hectare farms. As a result, Jalalov said, in Syrdaryo there are 6200 cotton farms. Jalalov continued that at the time no one understood that such small farms are not viable but that now the GOU understands the need for reform in favor of larger farms. To emphasize this point, he added that in Texas 300-350 hectares of cotton are needed to support a single family. Moreover, he said, cotton requires full mechanization to a degree not available to small farmers and rational water management that is better accomplished by having a smaller number of larger farms. Once land reform is complete, Jalalov said the number of cotton farms in Syrdaryo would be only 3000. On Migration and Child Labor, ¶9. (SBU) The Ambassador asked the Hokim to comment on any changes in migration patterns due to the world financial crisis and, particularly, the economic downturn in Russia and Kazakhstan. Jalalov replied thatrelativelyfew peoplefrom Syrdaryo had gone to Russia and Kazakhstan as migrants. Rather, he claimed that the situation with pay for agricultural workers in Syrdaryo is so good that ethnic Uzbeks from Kazakhstan come there to work. He added that there is so much land in Syrdaryo that each worker is able to have his own private plot to use as he wishes and that there is an abundance of private poultry and livestock. He concluded, moreover, that people in Syrdaryo are more modest, less pompous than elsewhere in Uzbekistan. ¶10. (SBU) Jalalov continued that criticism of Uzbekistan for using child labor in the cotton harvest is unfounded. "Like the Jews, Uzbeks love their children and would not allow them to be exploited." He added that at no time had children younger than 14 ever work in the harvest, although he allowed that at times children did help their parents. Jalalov saidenvy of Uzbek success was the reason for the world's criticism, but he added that "As you know, we have adopted appropriate legislation." On Water, ¶11. (SBU) Citing the Hokim's long background in water management, the Ambassador asked him for his views ontheongoing watercrisis in Central Asia. Jalalov responded that if there is more snow this winter than last, the level of the Amu Darya River will be higher next year. The situation with the Syr Darya is more complex, however, because the Kyrgyz use the water of the Toktogul Reservoir for energy generation (Ref B). He said as of October 1 there is 4 billion cubic meters less water in Toktogul than at the same time last year and 6 billion cubic meters less than in an average year. He saidthat at present inflow and use rates, the reservoir could not support Kyrgyz electricity generation at the same level as last winter. Jalalovconcluded that an intergovernmental water agreement is needed to provide a long-term solution to the crisis. He added that Uzbekistan must search for other water sources and practice better conservation. And on Investment ¶12. (SBU) "Bring us your investors!"Jalalov said when asked about the climate for business and industry in Syrdaryo. He cited the region's central location, nearness to Tashkent, and goodwater,electricity, and gas suppliesas attractive features. He added that the main road and rail line "from London to Shanghai" passes through Syrdaryo, thereby providing easy access to other markets. He continued that Syrdaryo can offer better tax breaks for businesses thanother regions of Uzbekistan. He boasted that all transactions are open and transparent and thatland grant documents are routinely processed and registered within three days. THE ROAD BACK TO TASHKENT ¶13. (SBU) After meeting with the Hokim, the Ambassador paid a visit to the Syrdaryo Regional Boarding School of Foreign Languages, where he had an informal chat with English language students. En route back to Tashkent, he stopped first at the Central Asian Seed Company (CASC) and then at JMP International. Both are members of the American Chamber of Commerce of Uzbekistan. CASC operates the only American owned cotton gin in Uzbekistan, and it was operating at full volume on the day of the Ambassador's visit. CASC officials told us they are having a good year because they had managed to conclude their sales contracts in August, before the world financial crisis with the resulting drop in cotton prices hit. They added that the GOU had not been as lucky and that Uzbekistan is losing its competitive position in the world cotton market. (NOTE: We have heard rumors that Uzbek cotton sales this year have not been nearly as good as loudly trumpeted at the Tashkent International Cotton Fair in October [Ref C]. The reason is reported to be that the GOU TASHKENT 00001356 003 OF 003 is holding out for a return to the higher prices of pre-August.) ¶14. (SBU) With both local investment and investment from Russia and Canada, JMP markets the "Fruktovy sad" brand of juice products in Uzbekistan. The Ambassador visited JMP'snew processing plant under construction in Syrdaryo City. Scheduled to open in January 2009, the plant will be the largest juice facility in Central Asia. Its products will likely be of suitable quality for U.S. forces in Afghanistan if the U.S. decides to increase local purchases of such supplies. COMMENT ¶15. (SBU) Only an hour and a half from Tashkent, the Syrdaryo Region is visibly poorer than the capital. Abandoned factories greet travelers entering Guliston, and thecity's exhibition hall lacks both heat and water. The main marketplace appeared less than crowded. Hokim Jalalov clearlyis proud of his region, but many of his claims conflict with reality. In particular, his claims for the region's agriculture are reminiscent of thosemade by Soviet officials extollingthe productivity and quality oflife on collective and state farms. Nevertheless, the Hokim's boasts and claims of transparency aside,both CASC and JMP have demonstrated that the region has potential for foreign investors. Given time, this potential could evolve into tangible success. 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