Page 10 - Uzbekistan rising bne IntelliNews special report

10 I Special Report: Uzbekistan Rising bne December 2021
the first time – bought the cotton mills and the farmers in their catchment area were forced to sell to the local mill in order to preserve jobs and output levels.
“We were concerned not to disrupt
the cotton production,” said Sukurov. “Cotton remains an important strategic sector and a priority. We don't want
to de-emphasise the sector. But the approach as to how it should be managed has completely changed.
The government doesn't want to be involved in regulation, quotas or setting prices. All of that has been transferred to the private sector.”
The government has been adopting
a suck-it-and-see approach, as Sukurov explained that the first challenge was how to value the assets.
“In the old days everyone in the Ministry would follow the cotton-picking campaign closely. There was
a newsletter that reported exactly how much had been brought in in each region and even the security guards at the front door knew the numbers of each region,” Sukurov said excitedly. “But this year we honestly had very little idea. It just is not relevant any more.
We have other things to do now.”
The second method of privatisation was introduced more recently. Once the groundwork was laid, the government decided to adopt an even more radical method with a new presidential
decree that has put the sector entire
on a market basis: since February this year farmers have been free to sell
to anyone they liked based purely on
and needs sophisticated funding by the largely state-owned banks.
“The government is still providing funding to the clusters at low rates. But next year that will also start to be put on commercial terms,” said Sukurov.
The ministry is now turning to developing the rest of the sector. With the success of the cotton privatisation, next up is wheat production, which will be finished next year and will
use the cotton sector’s privatisation as a template. Here there is also a state holding that owns everything, Uzdonmahsulot, but it should cease to exist sometime next year.
Connected to these reforms are also some restrictions on buying equipment – Uzbekistan is a big producer of tractors, among other things, and farms were forced to buy the made-in- Uzbekistan equipment to support the local industry, but those restrictions are also in the process of being removed.
Sukurov says that the Agriculture Ministry is working hand in glove with the Finance and Economics Ministries to reform the agriculture sector, which remains the backbone of the economy. Sukurov say the Ministry’s focus is shifting to improving nutrition and
it is working closely with the Ministry of Health, with special attention being paid to women’s and youth health issues connected to diet, using the EU’s Agricultural Knowledge and Innovation Systems (AKIS)
as a blueprint.
“For us, what is important is the transparency of the system, to create an enabling environment. Not everything is perfect. There are still
a lot of problems to work out. It’s still a highly subsidised sector. This is a new initiative to respect the value chain,” said Sukurov. “The whole thing will be complete by 2022. The entire Uzbek agro sector will be entirely in private hands. There is no other way.”
“The government is still providing funding to the clusters at low rates. But next year that will also start to be put on commercial terms”
“I would not have bought some of the mills, as the equipment was very old and worn out,” Sukurov said in his characteristically direct way,
but sold they were. “It was done on a “first come, first served” basis.”
The ministry reports there was no lack of investors. The sector was broken up into around 100 clusters, all owned by different companies. Uzbekistan seems to have avoided the trap that Ukraine fell into,
where a few very large agricultural companies snapped up the lion’s share of access to the land leases and built up a few oligarch-controlled agro- industrial concerns that concentrated the business in a few hands.
During the transformation process about 10% of the privatisations have already failed because the inexperienced new owners could make the business work. But the government does not seem unduly concerned, as a bit of “creative destruction” was to be expected.
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price. This has introduced competition between the clusters and created a domestic market price for raw cotton.
“There was some resentment amongst farms who were tied to a certain mill,” said Sukurov. “We didn't want to go down the road where the sector was regulated and prices controlled by the government, or the farmers forced
to work at fixed prices. So they were given the freedom to sell to anyone.”
Land sales eventually
The government has retained the ownership of the land and Sukurov says the discussion of selling the land is “on the agenda to be on the agenda” but not for the foreseeable future, as there are still many other reforms to be done. But farmers have been given long-term leases, and amendments to the law
are in the works to protect their rights better so as to encourage investments.
The government has also helped with the financing of agricultural production, as farming is a seasonal business