Tajikistan plans reforms of agriculture sector

By bne IntelliNews October 20, 2009

Clare Nuttall in Almaty -

Tajikistan's government will draw up by the end of the year a long-term strategy to develop the agriculture sector, a central part of the country's economy. The plan is intended to tackle the issues of land reform and land registration, as well as the problems besetting the deeply indebted cotton sector.

The government has already stepped in to support cotton farmers, who as of 2008 were struggling under a combined burden of $600m of debt. This figure has ballooned in recent years, tripling from $200m in 2006 as poor harvests make it more difficult for farmers to make repayments.

Part of the problem is the system put in place after the end of Tajikistan's civil war in the early 1990s. A handful of companies control the cotton trade in the country, so farmers have to sell their crop to a single dealer in each region. Their monopoly position enables them to keep prices low.

The quality of cotton produced in Tajikistan also contributes to the low prices it fetches. "Tajikistan has low quality cotton seeds, so productivity is not high. Cotton is also not graded to a competitive standard - high and low quality cottons get mixed up, so the cotton produced is not commercially attractive on foreign markets," says Joji Tokeshi, deputy country director for Tajikistan at the Asian Development Bank, which is working with the government and other international organisations to reform the sector.

To support cotton farmers, the Tajik government adopted a decree May 13 ordering banks to write off all debts run up by the cotton sector before January 1, 2009. Banks were promised money from the public purse to cover their costs, and discussions over how to implement the decree are still in process.

However, the farmer's heavy debt burden threatens to have a knock-on effect on the banking sector. As of April, Tajik banks had managed to repay only 33% of the TJK140m (€21.5m) they had received from the government to provide loans for cotton farmers the previous year. Several banks have recently appealed again for an extension to the November 1, 2009 deadline to repay the latest tranche of government credits. Just 56% of the money lent to cotton farmers via six commercial banks in 2008 had been repaid as of October 12. Tojik Sodirot Bonk and Bonki Rushdi Tojikiston paid their loans back in full by October, and Amonatbonk had almost completed its repayments, having repaid 71%. However, Agroinvestbonk, Orienbonk and Tajprombank had repaid just 45%, 43% and 42% respectively. Agroinvestbonk, which asked in March this year for an extension to an earlier deadline, said it plans to ask the government to postpone its current deadline for repayment until July 1, 2010 and to freeze interest on loans for banks.

Cottoning on

The government is now looking at ways to diversify the economy away from its dependence on cotton and aluminium. But even though Tajikistan has the potential to develop other agricultural businesses, such as fruit and vegetable processing, cotton accounts for 90% of the country's agricultural exports and employs 60% of households in 25 of Tajikistan's 75 districts, making it highly important both economically and socially.

Even with the government support, however, Tajikistan's cotton sector has been hindered by low cotton prices; the price of cotton fibre fell 19% in the first eight months of 2009. Tajikistan is still expected to achieve positive GDP growth this year, but decreased remittances from migrant workers and the drop in the price of cotton and aluminium (down 46% in the first eight months of the year) have slowed growth dramatically. Export revenues were $640m lower in January-August than in the same period of 2008, Economic Development and Trade Minister Ghulomjon Bobozoda told a meeting of government ministers and international donors September 17.

In the agricultural sector, it is due to release its plans for long-term reform by the end of this year. While solving the sector's problems will a long process, this is at least a start. "This is an enormous thing to do and resources are low, so there will have to be priorities," says Tokeshi. "We commend the fact that the government is taking this seriously, and taking a holistic approach."

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