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'Swamp Of Poverty': Uzbek Cotton Farmers Refusing To Work With 'Cluster' Monopoly

Clusters control access to almost everything needed for independent private cotton farming -- from agricultural loans, seeds (above), fertilizers, and fuel to cotton gins and export licenses.
Clusters control access to almost everything needed for independent private cotton farming -- from agricultural loans, seeds (above), fertilizers, and fuel to cotton gins and export licenses.

Uzbek farmers say they are fed up with the private monopolies they’ve been “forced” to work through in recent years to grow and sell crops under Uzbekistan’s agriculture reform strategy -- the so-called “cluster” system.

Now, in the Shovot district of the northwestern region of Khorezm, scores of cotton farmers are refusing to sign contracts for 2021 with the private textile “cluster” firms that dominate the area.

Instead, they’ve set up a kind of do-it-yourself “cooperative” in an attempt to sidestep the private cluster monopolies of the Uztex Group and a powerful local oligarch, Farhod Mamajonov.

But the clusters control access to almost everything needed for independent private cotton farming -- from agricultural loans, seeds, fertilizers, and fuel to cotton gins and export licenses.

Combined with pressure from local authorities who support the cluster monopolies in Uzbekistan, those who’ve set up the Shovot Cotton Cooperative as a “free association of farmers” admit they have a daunting task ahead.

Corruption Scheme

Uzbekistan’s cluster reforms have proven to be a new form of “hidden” or “secret privatization” -- a scheme used during the 1990s by corrupt officials and their private-sector cronies in the former communist countries of Eastern Europe to plunder the assets of state firms.

In Uzbekistan’s case, the new “cluster” firms have taken over the state’s longtime monopoly on the most profitable aspects of agriculture.

Uzbek state banks have disbursed hundreds of millions of dollars to the private firms from loans received through the World Bank’s Horticulture Development Project since January 2018, when Tashkent launched its cluster reforms.

Uzbek authorities also marked out exclusive territorial control for each of the new private agribusinesses without any public bidding process.

The World Bank says the funds it has provided were meant to help create “better paid jobs in rural areas” where about half of Uzbekistan’s 32 million people live.

But since 2018, an increasing number of Uzbek farmers say they’re not being adequately compensated under contracts they’ve been forced to sign with the cluster firms that monopolize their region.

In cases of the more shadowy clusters documented by RFE/RL, some Uzbek farmers say they’ve never been paid for their harvests.

There is no competition between clusters within their marked-out territory. That means farmers don’t have an option to get loans or supplies elsewhere, or sell their harvests, if their cluster contracts are unfavorable.

Western agriculture experts conclude that if farmers don't have the incentive of higher prices for their harvests, it is only a matter of time before agricultural production collapses.

De Facto Quotas

In Uzbekistan, all agricultural land is owned by the state.

That allowed the government for decades to set annual harvest quotas and tell farmers what crops they should plant on the farmland they leased from the state.

Even though Uzbekistan’s official regulation of cotton prices and state harvest quotas was officially abolished in March, farmers say they are pressured or forced into signing contracts with a private cluster monopoly in their district to receive the loans and supplies they need.

Those contracts specify which crops each farmer must grow and the price that the cluster firms will pay them for their harvest.

Meanwhile, local officials are in charge of ensuring each farmer fulfills the harvest obligations specified in their private cluster contracts.

The Uzbek Forum for Human Rights concludes that local authorities are, in essence, continuing to enforce “de facto cotton quotas” of the private cluster contracts.

Uzbek Forum says the responsibility of local officials to fulfill planned cotton yields “raises concerns that they could resort to coercion, given their past role in mobilizing forced labor, to fulfill state quotas.”

The rights group also found that during Uzbekistan’s September cotton harvest, thousands of state employees were forced to pick cotton despite the threat of the COVID-19 pandemic.

It also reported cases where children of families that receive state aid were being forced to work in the cotton fields.

On October 12, Uzbekistan reported through a summary of information from regional officials that just 72 percent of the planned 3.1 million-ton cotton harvest had actually been harvested.

Treated 'Like Slaves'

Altogether, the heads of 78 farms in the Shovot district of the Khorezm region have joined together to set up the new Shovot Cotton Cooperative.

The group says it plans to use “family contracting methods” in order “to get rid of the clusters” that dominate the district: Shovot Texile and Textile Finance Khorezm. Both are subsidiaries of the Uztex Group, which is controlled by Mamajonov.

One of the disgruntled farmers, Ruslan Bekchonov, told RFE/RL that the group was set up because they were being treated “like slaves” by the Uztex Group.

Shovot district of Khorezm region
Shovot district of Khorezm region

The Uztex Group says on its official website that it is “the largest exporter of textile products” in the Commonwealth of Independent States. It owns five large cluster monopolies in Uzbekistan’s Khorezm and Namangan regions.

Uztex representatives would not comment to RFE/RL about the situation that led Khorezm’s farmers to create their own independent cooperative.

Officials in the Khorezm region also refused to discuss the relationship between local cotton farmers and Uztex’s cluster firms, saying it is a “trade secret.”

Someone is stealing the money from the farmers’ pockets. Why can’t I set my own price for my harvest according to a market economy?”
-- Uzbek farmer Ruslan Bekchonov

Bekchonov told RFE/RL that he and other Shovot farmers informed Mamajonov in December that they would no longer sign contracts to work through his cotton and textile clusters.

"There were 25 of us who met with his attorney," Bekchonov said. “He told us that we are all entrepreneurs and that we had to reduce our costs. But we can’t reduce our costs any longer because the state has set the prices.”

“I don’t know how right or wrong it is, but it was said that nobody would interfere in the farmers’ activities,” Bekchonov continued.

In reality, he said, the minimum prices set by the state for supplies farmers receive under their cluster contracts is high, while the minimum prices the clusters must pay to farmers for their harvests is low.

“Someone is stealing the money from the farmers’ pockets,” Bekchonov concluded. “Why can’t I set my own price for my harvest according to a market economy?”

Before setting up their new cooperative, the Shovot farmers wrote a formal letter of complaint about their plight to Uzbek President Shavkat Mirziyoev and the head of the Khorezm Regional Cotton Terminal.

That letter claims farmers have been “forced to sign a contract” with clusters that have enslaved them. It also gives examples of how the Uztex clusters have “deceived farmers” with promises to buy their cotton at higher prices than they’ve received.

“In 2020, we signed an agreement on monopolistic terms in the interests of only one party, the cluster Textile Finance Khorezm, under pressure from the district government, and the Agriculture Department,” the letter says.

“Our dissatisfaction with the terms of the agreement was not taken into account at all,” it continues. “As a result, the cluster has plunged us into a swamp of poverty.”

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