Shtaltovna, Anastasiya & Anna-Kathrina Hornidge. 'A Comparative Study on Cotton Production in Kazakhstan and Uzbekistan'. Bonn: Center for Development Research University of Bonn, 2014.

Shtaltovna, Anastasiya & Anna-Kathrina Hornidge. A Comparative Study on Cotton Production in Kazakhstan and Uzbekistan. Bonn: Center for Development Research University of Bonn, 2014.

• Both nations inherited their cotton production systems from the Soviet Union and face similar issues such as:
• 'Brain-drain' or the lose of expertise from out-migration
• Worn out technical infrastructure, including irrigation and drainage systems in Kazakhstan
• Degrading quality of lands,
• Price and quality competitiveness,
• Lack of product diversification,
• Poor marketing and packaging of agricultural products,
• Low quality of products,
• Bureaucracy and corruption in state institutions,
• Limited institutional capacity in the agricultural sciences (Baffes 2007: 54; Veldwisch 2010, 2008; Hornidge et al. 2011)
• Outdated agricultural machinery
• Underdeveloped skills in private decision-making on the farm level (due to the overbearing command-administrative system). 
• Due to dependence on flow from upstream rivers, and often only a singular water source, both nations face chronic water shortages in cotton production. This is not helped by an inefficient irrigation system which remains chronically underfunded.
• Cotton is much more critical crop to Uzbekistan's population and economy than the case in Kazakhstan. In Uzbekistan it employs 80,000 farmers on 5.3 million hectares. Of this, roughly 40,000 farmers and 3.8 million hectares are still state owned.
• Uzbekistan still continues to employ the command economy when it comes to cotton and wheat production. Farmers sell crops at state-mandated prices after reaching a certain quota. Moreover, the provision of agricultural services (fertilizer, machinery, etc.) is entirely run by state enterprises.
• The single state-owned company O'zpaxtasanoat purchases all raw cotton in the country and is entirely responsible for the processing of the material. No cotton gins exist the country that are not owned by O'zpaxtasanoat.
• Both Uzbekistan and Kazakhstan would benefit from the further professionalization of farmers, especially through the formation of representative and independent farmer's associations to promote their interests. Additionally, the cotton monoculture should be replaced where possible with more diverse crop production. Local processing of cotton should be encouraged to increase efficiency and allow farmers to benefit from moving their product further up the value chain.
• In Uzbekistan in particular, the government should limit its intervention into cotton production, increase the price paid to farmers by O'zpaxtasanoat, simplify the tax system for farmers, increase entrepeneurial connections for farmers, increase access to agricultural education, improve access to agricultural services, and create conditions where state and private cotton production can coexist.
• A combination of privatization of production and services, and state efforts to create pathways from harvesting to textile production within Kazakhstan have resulted in a massive increase in cotton production; from 85,000 tons in 1991 to 380,000 tons in 2012.
• Most of this is private family farms of an average size of 15 hectares, which accounts for 70% of land and 95% of all cotton production. The remainder are collectivized farms of around 600 hectares.
• Fluctuations in global cotton price, together with the fact that only 5% of cotton is processed in-country, continue to undermine cotton in Kazakhstan as a viable industry. The government is currently undertaking a program to replace cotton with vegetable and fruit cultivation, which will provide farmers with a more stable income from domestic markets and improve soil quality.
• Uzbekistan has gone through three stages of cotton-production reform. Between 1991 and 1998 kolxoz and sovxoz (state-owned farms) where split into smaller and locally-managed shirkat (co-operatives) and joint-stock companies. From 1998 to 2003, these shirkatlar were privatized to local farmers, but usually only partially sold off due to lack of funds to entirely buy out the government. Performance in private production between 2003 and 2009 decided whether the government allowed the continuation of private production or disowned the farmer and incorporated his land into a larger collective plot.
• Whether state owned or privatized, production quotas were always set by the state and all cotton was always sold to O'zpaxtasanoat or its predecessor corporation.
• Especially following the privatization and destruction of sovxoz and kolxoz farms, the vast majority of farmers had no formal training and -- due to education under a command economy -- had little to no idea about how to handle the basics of expenses or business management. Corruption also undermined productivity, as connected individuals tended to receive larger private plots, regardless of ability.
• All land for cotton production is still owned by the government and effectively leased to farmers, usually for periods of 50 years. However, failure or alleged failure to meet state quotas or other infringement on the farmer's side of the agreement lead to land confiscation and redistribution. This is often performed by corrupt local officials to favour their cronies with larger plots and punish political opponents. This has lead to a lack of stability in land tenure, undermining investment.
• Utterly inefficient and outdated irrigation systems in Uzbekistan mean that water resources are even more strained than usual. Current inefficiencies result in a water consumption of two or three times the necessary amount.
• Cotton production in Kazakhstan is partially subsidized to help farmers keep lower costs and further develop the industry. Loans are available from the state and some micro-finance firms, but high collateral and deposit prices make them unappealing to many farmers. Costs for agricultural machinery also remain prohibitively high.
• Loans for input prices are available at a standard 3% interest rate to farmers in Uzbekistan, however the amounts are strictly controlled through joint meetings between the Ministry of Finance, Ministry of Water and Agriculture, and local banks. Additionally, only a portion of these loans are actually made available to farmers, with around 40% being kept by the bank as collateral. How that loan money is spend is also carefully monitored by local governments and banks. 
• Corrupt state companies responsible for agricultural services, such as those responsible for fertilizer or fuel procurement, abuse their position to overcharge or undersell products in collusion with local governments. They then save resources which can be sold off illegally (with the difference pocketed by local officials and service providers) or given at lowered prices to cronies for their farms.
• The Uzbekistani government also frequently fails to pay farmers before taxes are due. This leads to a situation where farmers cannot pay and thus accumulate back taxes, leading to further decline in profits.
• State officials responsible for monitoring compliance with state cotton plan frequently abuse their positions to receive bribes under the threat of issuing negative reports or falsely increasing tax debts. Payment of bribes can eat up whatever profit still existed for the farmer.
• Importantly the Uzbekistani farmer never actually get to handle their cash in a physical forms. They receive credit from the government to regional and local banks, which then is transferred to approved institutions on the farmer's behalf by the bank. Bribes to bank workers are needed to carry-out most of these transactions, and spending on non-approved services is rarely allowed. 
• For example, instead of getting money and paying the fertilizer company, the Uzbekstani farmer must go to the bank and tell them that they have such a size of farm and ask for a transfer of a pre-approved amount of money to the fertilizer company. The bank then transfers that from the farmer's account directly to the company's account, where it is often equally inaccessible.
• Poor morale and a fatalism among farmers is common in Uzbekistan. This is largely in comparison to the kolxoz system under the Soviet Union. Now farmers face a low standard of living with practically no labour mobility due to constant debts to various input companies or back taxes. Under the Soviet system, collectivized farm workers had a relatively high standard of living and more leisure time. Now cotton production may cover bare necessities paid for by the state -- housing, heating, food, taxes, etc. -- but any private income has to come from using the limited supplies to farm private crops, such as rice or vegetables.
• Access to all agricultural services in Kazakhstan, including processors and holding companies, is relatively free and transactional. Usually farmers receive a service in return for a promised future payment following production and sale of the cotton. Lack of reliability undermines service provision, as many services either demand large deposits or are unavailable.
• Labour for cotton in Kazakhstan is highly competitive. Most labour is provided by migrant workers from Uzbekistan and Tajikistan, who are willing to work at significantly lower wages than Kazakhistanis. They often arrive as families registered with local authorities and provide other household services to Kazkahstani farms. Tajikistanis and some Uzbekistanis are illegal migrants, who are often susceptible to human trafficking.
• Agricultural service providers in Uzbekistan struggle to provide basic services and maintain profitability. They have been largely turned into self-managing joint-stock companies, but are expected to meet state quotas while maintaining profitability. A lack of business management experience has left many incapable of this task outside of corruption.
• Due to a lack of knowledge about the role of their organization and a general lack of business management, those service providers not subsidized by the state (i.e., all services accept processing, fuel, and fertilizer) take on a number of new responsibilities to make the state production system work. Their non-privileged position, however, leads to a chronic non-payment for services rendered -- made even more common by lack of cash available to farmers or service providers -- and can lead to insolvency in many cases.
• Despite being less corrupt, these service providers still cannot provide high quality services. Rather, they are often more important as informal agents of state control and council to farmers on agricultural issues, than they are as service providers.
• The services not controlled by the state have gradually become privatized and provide fair-quality specialized services to agricultural workers in the commercial sectors (e.g., rice, animal husbandry, vegetables). There is still a gap in service, however, as private enterprise catches up to the gap left by state-owned services.
• Farmers on the state plan for wheat or cotton production cannot take advantage for additional value-adding services or risk-prevention such as crop insurance because they already cannot fully afford the necessary services due to the complexity and inefficiency of the system as it stands.
• The state price for cotton harvest is approximately 27 so'm (1 cent USD) per kilogram of cotton. This is half or a third of the price per kilogram for labour in Kazakhstan, leading to a chronic labour shortage during cotton harvest. The state has to make this up by coercing farmers, as well as huge numbers of civil servants, to pick cotton by threatening to dock benefits and/or pay for those who refuse.
• In the past, schools also closed down for about a week during the cotton harvest so that children could harvest cotton to make up for the labour shortage. Following internationally outcry, this practice was finally ended around 2010.
• Through O'zpaxtasanoat, Uzbekistan processes roughly 3.5 million tons of cotton per annum, which represents significant undercapacity inhibited by poor infrastructure; around 80% of all cotton gins are outdated and need to be replaced.
• The price paid for cotton is artificially low and all byproducts (i.e., cotton seeds, cotton oil, etc.) are kept by O'zpaxtasanoat to be sold back to farmers at inflated costs. This further robs Uzbekistani farmers of a potential way of generating cash to be used outside of the command economy.
• Growing cotton in Uzbekistan is often linked to land tenure and an essential condition for working state land. Beyond that it is entirely unprofitable. In most cases, it actually costs money in the form of debts and taxes for farmers to grow and cotton and personal finances depend on profits from private crops and/or animal husbandry.
• Often the only benefits for cotton production are continued land tenure and good relationships with local authorities, which is extremely important and may lead to the way to increased personal and professional opportunities through networks of patronage. 
• The author provides three possible reforms for Uzbekistani cotton sector. One on market capitalism, one on state procurement, and one under complete collectivization. They are on page 31 to 33.
• Concluding remarks and executive summary are available on pages 33 to 37.