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Uzbekistan moves to lower cotton cost for manufacturers
09 May '20
2 min read
Pic: Shutterstock
Uzbek cotton will now be sold at a rate pegged to prices on the New York Mercantile Exchange following a May 6 presidential decree. The move towards a market-based price mechanism is likely to reduce the cost of raw cotton for textile companies by around a tenth. The decree lengthened payment deadline for raw cotton from 90 days to 150 days.
The government has also committed to simplifying the process whereby producers get value-added tax rebates once they ship their goods out of the country.
This effort is in line with a broader Uzbek government strategy of moving toward the production of more valuable exports, like fabrics and clothes, instead of simple raw cotton, according to Uzbek media reports.
According to official figures, there are more than 2,000 companies in the country working in the textiles sector that offer jobs to at least 365,000 people.
President Shavkat Mirziyoyev said at a government meeting in April that he wanted to see the output of finished textile products rise four- or five-fold in the next five years. He had said $300 million in credits were being allocated through the government Reconstruction and Development Fund for textile enterprises in the Namangan, Samarkand and Tashkent regions for that purpose.
As more raw material is parlayed toward domestic yarn production, the expectation is that raw cotton exports will accordingly be dropping to a minimal level over the coming year. The ambition is to dispense with raw exports altogether in the short term.
Russia remains the top buyer of Uzbek cotton, followed by Kazakhstan.
In March, Mirziyoyev signed a decree ordering the abolition of the state-order system for cotton crops, which in effect ended a decades-old arrangement that encouraged forced labour. As of this year, the quota for the production and sale of cotton has been scrapped, leaving farmers who rent land from the state free to cultivate alternative and more lucrative crops.
The government has also committed to simplifying the process whereby producers get value-added tax rebates once they ship their goods out of the country.
This effort is in line with a broader Uzbek government strategy of moving toward the production of more valuable exports, like fabrics and clothes, instead of simple raw cotton, according to Uzbek media reports.
According to official figures, there are more than 2,000 companies in the country working in the textiles sector that offer jobs to at least 365,000 people.
President Shavkat Mirziyoyev said at a government meeting in April that he wanted to see the output of finished textile products rise four- or five-fold in the next five years. He had said $300 million in credits were being allocated through the government Reconstruction and Development Fund for textile enterprises in the Namangan, Samarkand and Tashkent regions for that purpose.
As more raw material is parlayed toward domestic yarn production, the expectation is that raw cotton exports will accordingly be dropping to a minimal level over the coming year. The ambition is to dispense with raw exports altogether in the short term.
Russia remains the top buyer of Uzbek cotton, followed by Kazakhstan.
In March, Mirziyoyev signed a decree ordering the abolition of the state-order system for cotton crops, which in effect ended a decades-old arrangement that encouraged forced labour. As of this year, the quota for the production and sale of cotton has been scrapped, leaving farmers who rent land from the state free to cultivate alternative and more lucrative crops.
Fibre2Fashion News Desk (DS)
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