THE ROLE OF MARKET PRINCIPLES AND FREE PRICING MECHANISMS IN ENHANCING THE ECONOMIC SUSTAINABILITY OF UZBEKISTAN'S COTTON CLUSTERS

Abstract

This paper examines the transformative role of market-oriented principles and liberalised pricing mechanisms in strengthening the economic sustainability of cotton clusters in Uzbekistan. Since the landmark agrarian reforms of 2017–2022, which abolished the Soviet-era state procurement quota system and replaced it with cluster-based contractual arrangements, Uzbekistan's cotton sector has undergone profound structural reconfiguration. Drawing on panel data from the Ministry of Agriculture of Uzbekistan, the World Bank, the Food and Agriculture Organization (FAO), and the International Cotton Advisory Committee (ICAC) for the period 2017–2024, combined with value chain analysis and institutional assessment, the study evaluates the extent to which the transition from administered pricing to competitive market-based price formation has improved cluster-level financial viability, input efficiency, export competitiveness, and farmer welfare outcomes. The findings demonstrate that clusters operating under market price signals exhibit measurably higher total factor productivity, lower unit input costs, and greater integration into global value chains compared to those retaining residual administered elements. However, the study also identifies persistent structural impediments — including asymmetric market information, monopsonistic tendencies in local cotton procurement, and inadequate rural financial infrastructure — that constrain the full efficiency gains of liberalisation. The paper advances evidence-based policy recommendations for completing the price liberalisation process, deepening competitive markets, and institutionalising transparent pricing mechanisms aligned with global commodity market benchmarks.