Uzbekistan’s cotton clusters in the context of the industrial policy debate

In 2018, Uzbekistan initiated a clustering policy in the national cotton sector. Based on case studies, this paper investigates the recent changes in cotton production under the emerging clusters. Our findings show a mismatch between the meaning of clusters in the industrial policy literature and practice in Uzbekistan. The supervision of cotton growing passed from the state to private enterprises (clusters). This transformation has perpetuated monopsony conditions under which farmers have no alternative marketing channels. The input markets have been disconnected from state agencies, however farms lack access to private input markets, since clusters supervise the input use. Our analyses show that forced and child labor has receded. In general, the cluster reform hardly took into account the principles of industrial policy. For example, the establishment of clusters among farmers widely lacked transparency. Instead of a hastened establishment of clusters in large scales, an institutional environment that enables bottom-up initiatives should be promoted. Overall, from the farmers’ perspective, recent reform steps led to moderate changes at best, while clusters started to play a dominant role in the cotton sector.