The Cotton Sector of Kazakhstan: a thorny path to market regulation Olga Dosibayeva Presented to the SOAS conference ”Cotton Sector in Central Asia: economic policy and development challenges”, 3-4 November 2005 (English version)

The Cotton Market of Southern Kazakhstan More than 200 thousands ha of the sown area The average harvest – 20.5 c from 1 ha (2004) Now the cotton comprises 37% of the total agricultural production of Southern Kazakhstan The main producers of cotton in Kazakhstan are small farms: In total there are 42,716 farms with an area of less than 5 ha 17/01/2019

Cotton Production Growth 1990: 323.6 thousand tons 2004: 466.1 thousand tons The growth of cotton is due to expansion of the sown area 17/01/2019

Table 1. The sown area, the crop capacity and the crop of cotton in the Southern Kazakhstan region during 1990-2004 The sown area (thous per ha) The crop capacity (c per ha) The crop 1990 119.7 27.0 323.6 1995 109.7 20.3 223.0 2000 153.4 18.7 287.2 2004 211.2 21.5 466.1 17/01/2019

The growth of export There is a significant growth in export of cotton lint. One of the reasons is the profitability of the cotton sector At the same time the specialists explain the situation as a result of the underdeveloped textile industry of Kazakhstan. Only 4% of products are processed in the region 17/01/2019

EXPORT OF COTTON LINT IN THE SOUTHERN KAZAKHSTAN REGION for 1993-2003 Years Quantity (tons) Cost (USD thousands) 1993 8035.0 8540.0 2000 77074.6 71628.9 2003 129606.3 101608.9 TOTAL: 725381.7 738 762.3 17/01/2019

The Supply of Farms The partnership between farmers and cotton gin plants: Farmers receive their main investments from cotton gin plants. The industry increased due to cotton gin plants . 19 cotton gin plants. The major ones: The Jetisay branch of «Nimex Corporation», ОАО «Ak Altin», ОАО «Maktaaral», ОАО «Mirzakent», whose capacities allow the processing of 600 000 tons of cotton per year. 17/01/2019

Pursuing cheap production No less than 250 000 tons out of 70 000 tons of seeds sown in the region’s cotton fields are low quality contraband seeds from Uzbekistan. They are purchased in the market for undercutting the usual price. The cheapness of Uzbek seeds outweighs the disadvantage of low quality cotton and low crop capacity. 17/01/2019

The state policy: to encourage the internal consumption of cotton In 2005 in the Southern Kazakhstan region a cotton cluster has been developed for the first time. The main purpose is to create one body from the chain of “farmer-cotton processor-textile” in order to decrease the number of middle men and to distribute the profit in proportion to the contribution of each member of the cluster. If up to 70% of the cotton lint is processed in the region it will create 18 000 jobs For the most effective, a Special Economic Zone (SEZ) will be created in the Sairam region of Southern Kazakhstan. 17/01/2019

The state policy: strengthening the controlling functions As soon as the industry showed its viability, there appeared new interest from the government structures. The draft of the law “About the Development of the Cotton Sector” was met negatively by cotton planters: 6 out of 9 chapters are devoted on how to license the cotton gin plants and how to withdraw their licenses The cotton gin planters will be prohibited to invest in farms The analysts anticipate that the cotton plants, which recovered the industry from the crisis of the post perestroika period with their own investment, will become bankrupt. The cotton plants created the “Kazakh Cotton Association” (12 cotton gin companies and 1 cotton farm) 17/01/2019

The state policy: stake in consolidation The authorities of the region are insisting on combining the small farms. The reasons: non observance of rotation, impossibility of receiving bank credits for development. Most of the farmers believe that the consolidation will bring them back to the forced collectivization. Nazarbaev: We will not give any privileges or preferences to land owners cultivating 5 hectars. 17/01/2019

The anxiety of farmers “Why should I join someone” says farmer Dosjan Beibitov, “I have five hectares of land that I have been cultivating for five years. We harvest 30 c per ha. I buy good seeds and never had any loss. With my profit I can adopt new techniques. Now I am master of my land but have no confidence that it will continue like this.” 17/01/2019

The anxiety of farmers “I do not want to join anything,” says farmer Kairat, “it is enough for me to go to my investor and he will always help me. The way it worked was that anytime you need money for weddings or funerals, he never refuses. Of course we will pay it off with the crop, but it suits us. Now they say that they will be prohibited to give us money? That is how the state thanks those who raised the industry?” 17/01/2019