Forced Labour Linked to World Bank Corporate Loan
(Washington, DC, July 6, 2016) – A victim of forced labor in cotton production and three Uzbek human rights defenders filed a complaint on June 30, 2016, against the World Bank’s private lending arm, the Cotton Campaign coalition, the Uzbek-German Forum for Human Rights, International Labor Rights Forum, and Human Rights Watch announced today.
The complaint against the International Finance Corporation (IFC) was filed with the Compliance Advisor Ombudsman, an independent accountability unit attached to the IFC. It seeks an investigation into forced labor connected to a $40 million loan to Indorama Kokand Textile, which operates in Uzbekistan, The forced labor victim, who requested confidentiality, and the rights defenders Dmitry Tikhonov, Elena Urlaeva, and a third who requested confidentiality, presented evidence that the loan to expand the company’s manufacturing of cotton goods in Uzbekistan, allows it to profit from forced labor and to sell illicit goods.
“The IFC should support sustainable rural development in Uzbekistan, not projects that perpetuate the government’s forced-labor system for cotton production,” said Tikhonov, who fled official retaliation against his human rights advocacy and is in exile in France. “The ombudsman should investigate the IFC loan to Indorama, which we believe violates international law and the IFC’s own policies prohibiting forced labor.”
The IFC loan to Indorama is the latest in the World Bank’s increasing support for Uzbekistan’s coercive cotton system, amounting to more than US $500 million. The complaint also raises concerns that the IFC’s support for the country’s banks does not address the banking sector’s role in supporting the government’s forced labor system.
The World Bank approved the loan in December 2015, despite a report from the International Labour Organization reaffirming the problem of forced labor and the United States’ opposition to the loan, due to “forced labor in the cotton sector.” Last week the US government gave Uzbekistan’s government the lowest possible ranking in its annual Trafficking in Persons Report, stating “government-compelled forced labor of adults remains endemic during the annual cotton harvest.”
The Uzbek government controls all of the country’s cotton production and sales. Officials force farmers each year to grow the national cotton crop, and then force more than one million citizens to harvest the crop, all under threat of penalties. While global pressure led the government to significantly reduce forced child labor in 2014, since then officials have increased forced labor for adults. The government has not addressed the root causes of forced labor, including the corrupt financial incentives for officials to use coercion and repression of citizens who report labor abuses.
For Indorama and other cotton processors in Uzbekistan, the sole source of cotton is the government’s forced-labor production system. The complaint says that the goods Indorama and other cotton companies in the Uzbekistan process and sell to global companies are made with this forced labor.
“Until the Uzbek government stops using coercion and forced labor, companies doing business in Uzbekistan’s cotton industry like Indorama cannot meet fundamental human rights standards or the IFC’s labor standards,” said Urlaeva, the elected leader of the Human Rights Alliance of Uzbekistan.
The Uzbek government’s denial of freedom of association and repression of human rights monitors enables it to operate its forced-labor system. Over the last year, officials retaliated brutally against Tikhonov, Urlaeva and other rights defenders for reporting about forced labor. Police arrested, beat and filed charges of “disorderly conduct” against Tikhonov, the same day his home office was destroyed by arson, eventually forcing him to flee the country. Officials have arrested Urlaeva five times and subjected her to body-cavity searches twice. In this climate of fear, only one victim of forced labor dared sign a complaint to the IFC, and only anonymously.
“The IFC loan to Indorama creates new incentives for the Uzbek government to try to silence citizens who speak out in defense of their rights,” said Umida Niyazova, director at the Uzbek-German Forum for Human Rights. “Why should public funds benefit Indorama at the expense of victims of repression and forced labor?”
In Uzbekistan, income from the sale of cotton to cotton processors like Indorama disappears into a secret account known as the Selkhozfond” (Agricultural Fund), which is housed in the Finance Ministry. The Selkhozfond is a completely non-transparent account that is not included in the state budget. Only the highest level of government officials have access to the fund and knowledge of its use.
“This loan risks further fueling corruption at the highest levels in Uzbekistan,” said Brian Campbell, legal adviser to the Cotton Campaign, “The World Bank Group should help address corruption in the industry before sinking more money into it.”
The Cotton Campaign is a global coalition of human rights, labor, investor and business organizations dedicated to eradicating child labor and forced labor in cotton production.
“The IFC is setting a dangerous precedent by funding a company that knowingly processes forced labor cotton,” said Jessica Evans, senior researcher and advocate on international financial institutions at Human Rights Watch. “The World Bank should realize that it can’t end Uzbekistan’s use of forced labor by flouting its labor commitments and investing in the country’s most abusive industry,”
In the European Union, Dmitry Tikhonov (Russian): email@example.com
In Uzbekistan, Elena Urlaeva (Russian and Uzbek): firstname.lastname@example.org