VZCZCXRO3919
PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDF RUEHIK RUEHLH RUEHLN RUEHLZ
RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #0930/01 2050715
ZNR UUUUU ZZH
P 230715Z JUL 08
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 1209
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 4060
RHMFIUU/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUEHVEN/USMISSION USOSCE PRIORITY 2717
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 ASHGABAT 000930 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
ANKARA FOR AGRICULTURE COUNSELOR 
 
E.O. 12958: N/A 
TAGS: PGOV EAGR ECON SOCI TX
SUBJECT: TURKMENISTAN:  AGRICULTURAL FIXES FAIL TO RESOLVE 
FUNDAMENTAL PROBLEMS 
 
REF: ASHGABAT 0872 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  As demonstrated by this year's poor wheat 
harvest, Turkmenistan's agricultural sector is facing a growing 
crisis.  At fault is the sector's fundamental resistance to change. 
While the Soviet-era collective farms have been eliminated, most 
other practices remain the same, including implementation of a state 
command agricultural system that was taken to an extreme in former 
President Niyazov's last years.  Most agree that the current system 
is not working, and there are signs that the president is 
considering making at least some changes.  Any overhauls will take 
time, however, given the need to persuade officials under the 
president to change the way they think about agriculture.  END 
SUMMARY. 
 
¶3.  (SBU) Turkmenistan is a desert country which has never been an 
agricultural breadbasket.  While the soil is not bad, the lack of 
water, extreme heat and nomadic lifestyle traditionally have limited 
the scope of agricultural production to narrow swaths in the Amu 
Darya basin in the country's North and East, and along the Karakum 
Canal, which runs much of the length of the southern part of the 
country. 
 
¶4.  (SBU) However, during the Soviet era, the country had a thriving 
agricultural sector.  Although the major cash crop was cotton 
(Turkmenistan is the world's eighth-largest cotton producer), the 
country also produced fodder wheat, vegetables and fruit.  However, 
the country was never self-sufficient in wheat production except for 
a very brief period in the 1990's. 
 
¶5.  (SBU) In former President Niyazov's later years, he introduced a 
series of agricultural "reforms" that gradually led to declining 
production of both cotton and wheat, Turkmenistan's two major crops. 
 These include: 
 
-- The dissolution of Soviet-era collective farms and establishment 
of dayhan birleshiks (farmers' unions) as new economic entities. 
Farmers must rent land (all land is state-owned), and local leaders 
can take the land away from farmers if their production is too low. 
In addition, neither the farmers nor the farmers' unions were given 
freedom to choose their crops or access to free markets.  Instead, 
the government instituted a command system which required farmers to 
grow cotton and wheat if they wanted irrigation water, which they 
then had to sell to government cotton and wheat associations at 
below world-market prices.  This resulted in a drastic decrease in 
agricultural production and in the living standard of the rural 
population, which led to migration to the cities and a general 
shortage of laborers for farming. 
 
-- Poor command management, including mandated deadlines for sowing 
and harvesting (regardless of weather conditions), fixed state 
prices for major crops and a one-year land-leasing practice.  These 
policies discouraged farmers from investing in their land parcels in 
order to improve their yields.  During the last five years of 
Niyazov's rule, these policies were taken to an extreme:  the 
government set unrealistically high targets for wheat, and farmers 
were forced to surrender to the state all their wheat, including any 
surplus grain that they had grown beyond their contract obligations. 
 The result:  farmers refused to sign wheat contracts with the state 
and local governors, desperate to fulfill mandated quotas, 
threatened to deny them access to irrigation water for family 
vegetable plots. 
 
-- Curtailment of state funds for agricultural research and the 
closure of the nation's agricultural research stations in the 
mid-1990's.  This resulted in a major brain drain from 
Turkmenistan's agriculture sector.  For example, the closure of a 
cotton-breeding research station led to an inability to fight crop 
diseases, and poor seed material and low yields. 
 
LOCAL OFFICIALS BENEFIT FROM A ONE-YEAR LEASE CONTRACT. 
 
¶6.  (SBU) While some farmers have long-term contracts, the majority 
lease land on an annual basis.  These one-year land contracts open 
 
ASHGABAT 00000930  002 OF 003 
 
 
the door to official corruption.  After the wheat harvest is 
finished, many provincial governors offer the vacated plots to 
farmers growing rice until the next wheat sowing begins.  Farmers 
from eastern Turkmenistan's Lebap Province reported that, because of 
the shortage of available plots and the increased market price for 
rice, the bribe for such "borrowing" increased from 2,000,000 manat 
($140) per hectare last year to 5 million manat ($250) this year. 
Lebap farmers told Pol/Econ Asst that in order to make even a small 
profit at market, they need to get very high yields. 
 
LACK OF CLEAR POLICY 
 
¶7.  (SBU) Under Berdimuhamedov, the government's agricultural policy 
has become less clear-cut.  Although the government still enforces 
state orders for wheat and cotton, it has discontinued the 
Niyazov-era practice of providing false statistics. 
 
¶8.  (SBU) The government adopted a law in 2007 defining farmers' 
units as independent economic entities.  Nevertheless, there has not 
been any progress in implementing the law.  Reportedly, local 
authorities create bureaucratic obstacles when farmers' units apply 
for registration because they do not want farmers to work 
independently and produce products for the market.  Instead, the 
authorities seek to ensure that farmers continue working for the 
state in order to fulfill provincial quotas for wheat and cotton. 
 
¶9.  (SBU) By all accounts, however, this year's wheat harvest was 
one of the worst in years (reftel), and farmer contacts have been 
reporting that the government may allow state wheat farmers to buy 
flour from the state flour mill at a state-subsidized price of 2,000 
manat ($.11) per kilo.  Reportedly, the amount of flour a farmer is 
allowed to buy will depend on the amount of harvested wheat.  If 
this happens, it will be similar to what the government is doing for 
state cotton growers - allowing them to take cotton seed oil from 
the cotton they have harvested by just paying a fee for processing. 
However, such an "incentive," which would cost the government 
nothing, would be cosmetic only. 
 
NEW LAWS NEEDED TO ENCOURAGE FARMERS 
 
¶10.  (SBU) Local analysts have suggested that it is possible for 
Turkmenistan's agricultural sector to come back from the abyss into 
which it has fallen.  Suggestions include: 
 
-- Provisions for long-term leasing contracts, under which the 
government would just collect fees without interfering in the 
farmers' business. 
 
-- Elimination of the Soviet-style "state-order" system that 
instructs the farmer what to grow and fixes artificially low 
purchase prices. 
 
-- Passage of new laws creating incentives for agricultural growth, 
including increased access to the free market. 
 
-- Better access to loans, preferential tax rates and favorable 
import/export tariffs for farmers and food producers.  The procedure 
for registering new agricultural firms also needs to be simplified. 
 
 
-- More efficient allocation of state funds for agricultural 
development, which should be based on the economic and social needs 
of the provinces and less driven by political concerns.  For 
example, President Berdimuhamedov's commitment to revive "Turkmen 
villages" has resulted in Esenguly Village on the Caspian shore and 
Ruhubelent Village in Dashoguz Province.  Both of these villages 
have received priority funding while other rural communities 
continue to go without. 
 
-- Diversification of agriculture.  Since gas and cotton are major 
revenue earners, the country should be in a position to buy the 
grain it needs rather than placing a huge strain on its limited land 
resources and poor infrastructure by promoting a policy of wheat 
self-sufficiency. 
 
¶11.  (SBU) COMMENT:  There have been some signs that President 
 
ASHGABAT 00000930  003 OF 003 
 
 
Berdimuhamedov may be considering at least some changes.  There are 
plans for the president to visit the provinces -- reportedly on a 
fact-finding visit because of the poor wheat harvest -- in late July 
and early August.  He has suggested that food production should be a 
priority for privatization, and the licensing law has been altered 
to permit this.  Most significantly, however, he raised the 
possibility of permitting private land ownership during a July 21 
Constitutional Commission meeting. 
 
¶12.  (SBU) COMMENT CONTINUED:  Most of these most-needed reforms, 
however, go against Turkmenistan's practices over the last 80 years. 
 Even if the president recognizes the need for change and is willing 
to overhaul the agricultural sector, promoting reforms will take 
determination and time, since this will require persuading many of 
those under him to accept new ways of thinking.  END COMMENT. 
 
CURRAN