Uzbekistan's Troubled Farm Reforms

Farmers say a switch to a new more commercial system leaves them burdened with debt and tied up in Soviet-style regulations.

Uzbekistan's Troubled Farm Reforms

Farmers say a switch to a new more commercial system leaves them burdened with debt and tied up in Soviet-style regulations.

Saturday, 4 February, 2006
Agricultural reforms currently under way in Uzbekistan are supposed to make farmers richer and the land more productive. But agriculture experts and farmers themselves say the changes are unimpressive, because the rural economy is still weighed down by Soviet-style controls and production quotas.

Some analysts believe the basic obstacle is the government’s reluctance to cede its ownership of all land. However much the farms are reorganised, they remain leaseholders beholden to a powerful and intrusive state.

The reforms, which are supposed to be finished next year, involve turning large agricultural enterprises known as shirkat (literally “company”) into private farming units. The shirkats are the successors to the collective and state farms of the Soviet era, and like them have proved inefficient despite the economies of scale.

A third form of business exists on the margins of the bigger farms – the “dehkan” (“peasant”) unit which usually consists of one family working a small plot of land of two hectares or less, but despite their small size they still tend to be much more productive in relative terms than the larger units.

All in all, these different kinds of farm account for half of Uzbekistan’s working population according to official statistics, and it is generally recognised that reform of the sector is crucial to future economic growth.

The shirkat is a cooperative business whose members both work in it and hold shares. But local government at district level in practice continued to direct the shirkats’ activities so as to ensure that the set production quota – which is often unrealistically high - is met. Uzbek-style market economics means that if a shirkat has not fulfilled the “plan”, its members do not get paid – but they are not allowed to opt out of the system and seek their own customers.

Turning shirkats into the new-style private farms – called “ferma” after the English word – is intended to give those who work there greater control over how they are run.

But the persistence of a rigidly top-down bureaucratic system geared to mass production for the state is greatly diluting the effect of any liberalisation, sectoral experts say.

The central obstacle is the continuation of the “state order” – a procurement system under which farmers are required to grow particular crops, generally cotton or wheat, to the exclusion of others, and sell it to monopoly state buyers at prices well below the world market rates for these commodities. The government effectively pockets the difference.

Ranging between 10 and 50 hectares, the private farms are smaller than the shirkats, and since the reform was instituted in 1999 they have grown into an important part of the rural economy. The new farms are said to be a lot more effective than the shirkats, and according to official figures were responsible for 70 per cent of the grain and cotton grown in Uzbekistan last year.

But some of those involved in the farming sector cast doubt on these figures, saying the they are being massaged in order to show the Uzbek leadership how well the transformation is going.

Even thought they are supposed to be independent businesses, the private farms are still subject to government sanctions for poor performance.

“The private farmers are forced to fulfil the state plan, and they are held to account for doing to a much greater extent than the shirkat chairmen,” said a staff member of the regional government in Andijan, in the Fergana valley of eastern Uzbekistan. “At most, a shirkat head who failed to fulfil the plan can be dismissed, but the private farmer can lose his leasehold.”

This sanction can be applied even when a farm underperforms for reasons beyond its control, such as bad weather or the state’s failure to provide it in good time with the seeds, fertiliser and water it needs.

“I don’t feel free,” said one private farmer in Andijan. “I can’t use the land as I wish. Things have got so bad that last year, the district government chief banned people from gathering in the harvest until the cotton had fully ripened. The cotton on my field ripened early and I urgently needed to pick it, but I had to wait for permission to be given. Then it rained, so I had to sell all my cotton to the state at a reduced price as the rain had spoiled it.”

However the land is managed, it remains in the hands of the state, and some local analysts say little will change until farmers have the incentive of actually ownership instead of the leaseholds of 30 to 50 years they have been given.

The private farms are tax-exempt for the first two years. But according to a local agriculture expert, they still face near-impossible conditions as they inherit any debts left by the shirkat whose land they take over.

“In addition, they have to fulfil the same cotton and wheat plan that was set for the [previous] shirkat for a ten-year period. And those quotas were always set too high.”

One such farmer affected by inherited debts and obligations of the shirkat says, “We acquired the land of a loss-making shirkat which had debts. After its assets were sold off, the rest of the debt was transferred to those who got the land…. I have three years to pay it off."

The farmer added, "This year I’ll have to fulfil the wheat delivery plan as my contract states that the terms of the shirkat contract extend to my farm."

Contradictory legislation means that even though the law on private farms says they are free to choose which crops to grown, this right is nullified by a government decree according to which the farmer’s lease contract stipulates the crops grown and the size of the harvest. Failure to deliver on these requirements, says the agriculture expert, constitutes breach of contract which can result in loss of leasehold.

Because the farmers remain trapped in a web of controls, they adopt they same defence mechanisms as their Soviet forebears – massaging production figures upwards. “The private farmers are obliged to use every kind of truth and untruth to fulfil the plan and show high rates for property,” said the Andijan official.

The agriculture expert explained that “the government needs to show the private farms are highly profitable in order to demonstrate that agricultural reforms are taking place.”

But are things actually getting better? Not really, says this expert. “Every year the official statistics say the private farms are a great deal more profitable than other kinds of rural business.

“However, just look at the facts: the 130,000 private farms across the republic now account for 3.65 million hectares, in other words 80 per cent of all irrigated land. Yet the position of rural peasants is not improving. An army of unemployed people, many thousands strong, are leaving their home villages in search of work. You can see it at any of the mardikar [hired day-labour] markets that have sprouted like mushrooms in recent times.”

The bulk of the new rural unemployed are people left out in the cold after the shirkats are broken up.

The Andijan official said there should have been a plan to place these people in work to ease the transition. He says the one measure that was introduced – requiring new private farmers to take on some of the spare manual labourers – has been a failure, “It hasn’t solve the problem. Everyone agrees to these [contractual] terms in order to acquire land, but once they get it they immediately begin sacking them [workers] so as not to assume the burden of wages and social security payments – a young private farm just cannot afford those costs. At best they keep the jobs open but pay only minimal wages.”

His conclusion is that “the creation of private farms does not solve the social problems of the countryside; instead, it lays them bare”.

Some farmers complain that the procedure for acquiring a landholding is itself unfair. The shirkat is divided up into parcels of land by local “liquidation commissions”, and then holds a tender in which anyone can take part. Applicants have to supply documents including a business plan and letters of recommendation. As a member of one such commission [yes?] explained. “We then award points out of ten to each applicant. The highest scorer gets the land. If there’s a tie, preference goes to the one who’s a member of the shirkat that is being restructured.”

One man who lost out in the process says he was treated unfairly. After 14 years in the local shirkat, and five years in a Soviet state farm before that, he thought he must be in with a good chance, arguing, “Who knows how to work this piece of land better than me?” In the event the land was awarded to a younger man from outside the village. The farmer complained but was told everything was above board.

The commission member insists the procedures are fair, “The tendering system is perfect. It’s practically impossible to exert external influence on it…. There are people who have doubts about the transparency of tenders, but that’s understandable as losing bidders will always think it isn’t fair.

But the Andijan local government staffer disagrees, saying some of the criteria used in the tender are necessarily subjective and are thus open to manipulation.

“It’s mostly rich people who have acquired land,” he said. “In some places they kept the local peasants from complaining by the cunning ploy of promising them verbally to give them a sub-lease on half the land they [wealthy bidders] acquired. That’s impossible as subletting land is illegal.”

Many rural people have been left disillusioned by the process. “I didn’t even take part in the tender,” said a young man from Pakhtaabad in Andijan. “I worked for three years on a shirkat and I didn’t even get a new [traditional, and inexpensive] skullcap in that time,” he said.

“Rather than bribe someone to get the right to work on my own land, and still end up with the same rights as a shirkat employee, I’m going off to work in Kazakstan. No matter what – as a porter or manual labourer – I’ll be able earn a living, however hard it is.”

(Names of interviewees in this article have been withheld out of concern for their safety.)
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