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Azerbaijan: Cotton sector review












​Prikhodko, D., Sterk, B., Ishihara, Y., Mancini, F., Muminjanov, H. & Weissen, H. 2019. Azerbaijan: Cotton sector review. FAO Investment Centre Country Highlights, 37. Rome, FAO.




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    This study was produced under an FAO-EBRD Cooperation project on reviewing the development potential of the tea sectors of Azerbaijan and Georgia. As a result of the joint research in the two countries carried out as part of the project, a similar separate review of the Georgian tea sector was also published under the FAO Investment Centre's Knowledge for Investment (K4I) programme. Tea has a long tradition of cultivation in Azerbaijan and Georgia, dating back to the nineteenth century. The structural changes that followed the collapse of the Soviet Union in the early 1990s led to a dramatic decline of the two countries’ tea sectors. However, interest in tea production in Georgia and Azerbaijan has increased in recent years and, in an effort to revive their once thriving tea sectors, governments have adopted sector development programmes that provide for support to primary tea production. In spite of the long tradition and accumulated know-how of tea production and processing, there is little doubt that investments in both technology and knowledge will be required for the Azerbaijani and Georgian tea sectors to grow in a successful and sustainable way. Production focused on efficiency and quality and mindful of shifts in consumer preferences on global markets, but also of potential environmental risks, will be critical in achieving this goal. This publication is part of the Country Investment Highlights series under the FAO Investment Centre's Knowledge for Investment (K4I) programme.
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    In Burkina Faso and Mali, cotton is the most important cash crop, given its high contribution to the GDP and to the export sector revenue. Export of cotton lint accounted for 60 and 15 percent of the value of national exports, respectively, in 2014. To maintain the level of cotton production, the two Governments support the sector. Indeed, the analysis based on the Monitoring and Analysing Food and Agricultural Policies (MAFAP) methodology show that producers received incentives of 21 and 12 p ercent in Burkina Faso and Mali, respectively, between 2005 and 2012 (Nominal Rate of Protection-NRP). The analysis provides insights on the level of domestic price protection that compensates price distortions resulting from on one hand, exogenous causes namely the international price distortions and the exchange rate misalignment and on the other hand, endogenous inefficiencies such as the high transport or processing costs. Two adjusted NRP are computed, one using an adjusted benchmark price for cotton that is netted out of policy interventions at the international level (Anderson, 2006) and one using an alternate, non-misaligned exchange rate (BCEAO, 2013). The value chain inefficiencies are then discussed, using the Market Development Gap indicator which reveals that higher producer price could be obtained if inefficiencies were corrected through sound investment policies. Finally, a budgetary allocation analysis is proposed, along with the computation of Nominal Rates of Assist ance that reveal the full extent of policy support to the cotton value chain. Price intervention, with other cotton-related budgetary transfers, represented 9 percent of food and agricultural expenditure in Burkina Faso between 2006 and 2012 and 31 percent in Mali.
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