VZCZCXRO3087
PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDBU RUEHDF RUEHIK RUEHLH RUEHLN
RUEHLZ RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #1128/01 2911413
ZNR UUUUU ZZH
P 181413Z OCT 07
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 9565
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 2891
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0712
RUEHKO/AMEMBASSY TOKYO PRIORITY 0588
RUEHIT/AMCONSUL ISTANBUL PRIORITY 1164
RHMFIUU/CDR USCENTCOM MACDILL AFB FL PRIORITY
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RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
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RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 ASHGABAT 001128 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, DRL, EEB 
 
E.O. 12958: N/A 
TAGS: PGOV PHUM EAGR ECON EIND TX
SUBJECT: TURKMENISTAN: COTTON INDUSTRY STILL TROUBLED 
 
 
 ¶1. (SBU) Sensitive but unclassified.  Not for public 
Internet. 
 
¶2.  (SBU) SUMMARY:  Visits to the regions revealed that 
although President Berdimuhamedov can continue to rely on the 
cotton industry to bring in revenue, the sector needs reform 
and modernization.  One positive change this year is the 
president established higher prices the state would pay for 
cotton.  Overall, however, little in terms of cotton growing, 
manufacturing, and sales process has changed.  END SUMMARY. 
 
HARVEST TARGET UNSTATED, BUT GOALS REMAIN THE SAME 
 
¶3. (SBU) The government allocated 650,000 hectares of land 
this year for cotton.  Information that post gathered in all 
five provinces indicated that farmers were harvesting an 
average yield per hectare of 1.2 tons.  The government 
estimated it would harvest about 780,000 tons of raw cotton 
or 260,000 tons of cotton fiber.  Last year, Turkmenistan 
produced about 200,000 tons of cotton fiber.  According to 
official statistics, as of October 16, farmers had harvested 
763,777 tons of raw cotton.  Unlike previous years, the 
government did not set a harvest target for 2007. 
 
¶4.  (SBU) In an attempt last spring to stimulate production 
this year, Berdimuhamedov established new higher prices that 
the state would pay for cotton. State purchasing prices for 
2007 were set at 5,200,000 manats or US 1,000 (at the 
official rate) for a ton of medium-staple cotton and 
7,500,000 manats or US 1,442 for a ton of fine cotton. 
 
PUBLIC-SECTOR EMPLOYEES STILL BEING PRESSED TO HELP IN COTTON 
PICKING 
 
¶5.  (SBU) The government banned the use of schoolchildren and 
government employees to pick cotton, but this year there were 
reports that city residents in Dashoguz were being forced to 
pick cotton.  In at least one sector near the Iranian border, 
border troops harvested cotton in response to a local mayor's 
request for help.  In Ahal, provincial authorities increased 
the pay for hired labor five times, in order to offset 
apparent labor shortages there.  A resident in Ak Bugday 
region of Ahal said regional authorities were demanding that 
employees in non-agricultural sectors pay a 500,000 manat fee 
to cover the local government's expenses for hired labor if 
they did not help with the harvest.  However, those who 
agreed to help with the harvest discovered that there was 
insufficient cotton remaining in the fields to justify their 
presence.  The contradiction led to rumors that local 
officials were collecting money to buy cotton from 
neighboring regions to cover their own shortfall. 
 
LITTLE CHANGE IN THE REGIONS 
 
¶6. (SBU)  Embassy officers met with cotton officials 
throughout Turkmenistan form September 21 to October 12 
(reftels).  Officials praised new government incentives 
offered to cotton growers, spoke optimistically about their 
harvest estimates and conducted tours of exemplary cotton 
farms. 
 
¶7. (SBU) A first deputy provincial governor in Ahal province 
reported 120,000 hectares sown with cotton.  He claimed that 
the average yield in the province was 3.3 tons/hectare, which 
 would have amounted to 396,000 tons of raw cotton, but 
official statistics on October 16 indicated a harvest of only 
123,021 tons.  the deputy claimed that the number of farmers 
willing to grow cotton had grown from 30,000 to 38,000 since 
last year. 
 
¶8. (SBU) In Dashoguz, the harvest was poor due to low 
precipitation, shortage of irrigation water, and poor 
management during the spring sowing cycle.  Machine 
 
ASHGABAT 00001128  002 OF 003 
 
 
harvesting the cotton had been rendered impossible this year 
because farmers had erroneously sown the plants in furrows 
that were too close together. 
 
¶9. (SBU) The deputy governor of Balkan province said this 
year's crop was substantially better than last year's, 
primarily because the state had provided farmers new seed 
stock and more fertilizer.  He noted almost all the 
province's 5,500 farmers sell their cotton to the State 
Cotton Concern.  Farmers were to receive five million manat 
per ton of cotton (about $1,000 at the official exchange 
rate) form the State Cotton Concern in two payments -- one 
million manat on delivery of the cotton, and the remaining 
four million on completion of the harvest.  He said there 
were no children working in the fields because Balkan simply 
does not produce enough cotton to require additional labor. 
 
¶10. (SBU) Mary province's first deputy governor reported 
180,000 hectares of cotton had been sown this year, with an 
average yield of 1.3 tons per hectare.  He claimed that there 
was more interest in farming because of the government's 
efforts to raise purchase prices.  He noted the process of 
selling cotton directly to the State Cotton Concern was 
easier to manage than dealing with private purchasers, 
suggesting that farmers preferred to sell to the state rather 
than the open market.  He said private cotton growers can 
sell their harvest on the stock market, but taxation reduced 
the profitability of this option.  He argued that farmers are 
paid more quickly by the state and that it is difficult to 
find a buyer for the small harvests of most private farmers. 
He claimed he did not have accurate information regarding how 
many farmers contracted with the state and how many engaged 
in private agriculture, because the number of private farmers 
was constantly increasing.  He was aware of no difference 
between the average yields of private and state farmers. 
 
¶11.  (SBU)  The Lebap province deputy governor responsible 
for the cotton harvest reported that 145,000 hectares had 
been sown.  They had harvested 220,000 tons so far, averaging 
about 3,000 tons daily.  Lebap's cotton was coming in a 
little late, because they had planted late.  They expected to 
finish the harvest by November 20, a month after the harvest 
normally ends.  He said 10 percent of the province's cotton, 
or about 17,000 tons, was harvested by machine, and about 90 
percent by hand.  The average yield was about two tons per 
hectare, although some farmers were harvesting up to five 
tons per hectare.  He estimated the province would harvest a 
total of 280,000 tons.  The sate was paying farmers 5,200 
manats per kilo of cotton and was making payments every 5-10 
days.  One cotton farmer said the cost of a ton of 
machine-picked cotton is 670,000 manats and 1 million manats 
for hand-picked cotton.  (NOTE: Hand-picked cotton is higher 
quality and, therefore, more valuable.  END NOTE.) 
 
TURKMEN STATE COTTON CONCERN 
 
¶12. (SBU) The State Cotton Concern is tasked with purchasing 
the vast majority of cotton harvested in Turkmenistan at a 
state-established price.  The Cotton Concern also determines 
the quality of the cotton and issues conformity certificates. 
 This process invites corruption because the Cotton Concern 
can declare a farmer's cotton to be low quality to pay him at 
a lower price.  then the Cotton concern could potentially 
sell the cotton at a higher price, benefiting form the wider 
profit margin. 
 
DOMESTIC TEXTILE INDUSTRY NEEDS MODERNIZATION 
 
¶13.  (SBU)  Turkmenistan has 34 antiquated ginning plants.  A 
new ginning plant will be commissioned on October 22 in 
Ruhabat district near the late President Niyazov's hometown. 
The factory will have U.S.-made continental ginning 
equipment.  One other ginning plant in Turkmengalla district 
 
ASHGABAT 00001128  003 OF 003 
 
 
has been using equipment from the American company Lummus 
since 1996.  The government subsidizes 50 percent of the cost 
of cotton for local textile manufacturing.  The Ministry of 
Textiles buys cotton from the Cotton concern at the price of 
2 million manats per ton, about $400 at the official exchange 
rate.  According to several sources, Turkmenistan now uses 
100,000-110,000 tons of cotton per year in domestic textile 
manufacturing. 
 
FOREIGN COMMERCIAL COTTON SALES STILL LIMITED 
 
¶14.  (SBU) According to a foreign company cotton buyer with 
offices here, Turkmenistan is expected to auction off 140,000 
tons of raw cotton to foreign dealers.  He noted the bidding 
process has become a bit more transparent.  When the 
responsibility for commercial cotton sales moved form the 
Agricultural Joint Stock Company, the stockholders of which 
were state agencies, to the State Cotton Concern, bidding and 
contracting processes became a bit more streamlined, due to 
expertise of managers at the Cotton Concern.  The 
government's current stated priority is to increase textile 
exports to include yarn, thread, and cloth, instead of 
less-profitable cotton fiber. 
 
¶15.  (SBU) COMMENT:  Cotton farming and manufacturing is a 
strategic national priority here, because of the hard 
currency revenues it brings in, but it is not a consistently 
reliable source of revenue, and the sector is fraught with a 
variety of problems.  Initiating privatization of farms and 
factories would gradually make the sector more productive and 
profitable.  However, given the current state of the cotton 
industry here, there are few signs that President 
Berdimuhamedov's pre-election promises to radically reform 
the sector are, to date, not much more than cosmetic.  END 
COMMENT. 
HOAGLAND