In January 2025, Indorama Agro abruptly prepaid its loans and walked away from its contractual obligation to implement the EBRD’s E&S standards in Uzbekistan.
Earlier this month in Washington, D.C., leaders of the World Bank and International Finance Corporation (IFC) unveiled sweeping plans to expand private sector investment and job creation. But if they want these promises to carry weight, they must first reckon with a hard truth: development banks are still failing the very people they claim to serve.
Too often, when harm is exposed, banks are letting clients quietly exit loan agreements early, leaving affected communities without justice or remedy.
Consider the case of Indorama Agro, one of Uzbekistan’s largest cotton producers. The IFC and the EBRD poured a combined $130 million into the company in 2019, promoting it as a flagship for sustainable private sector development in a country long plagued by state-imposed forced labor in its cotton fields. The stated goal was to help reboot Uzbekistan’s cotton industry and increase economic inclusion.
However, that vision never materialized. Instead, rights monitors quickly uncovered a host of human rights abuses, land confiscations, massive job losses, wage theft, and retaliations against workers who spoke out. Despite repeated warnings and documented violations, the banks failed to enforce the very environmental and social (E&S) standards that were supposed to guide their investments. And farmers and workers paid the price — the former through loss of land and livelihood without compensation, and the latter through unpaid work under threat of reprisal, forcing many to move away from home in search of employment.
Civil society organizations filed a complaint with the EBRD’s accountability office and last November, the office initiated an investigation. Just months later, in January 2025, Indorama Agro abruptly prepaid its loans and walked away from its contractual obligation to implement the banks’ E&S standards. The timing was suspicious — and devastating for the communities still waiting for remedy for the harms caused. At the time of prepayment, some 60–80 workers were reportedly performing unpaid labor under threat of not receiving new contracts — an indicator of forced labor. Meanwhile, nearly 10,000 farmers who had lost their livelihoods were still waiting for restoration. For Indorama Agro, it was a convenient exit. For the IFC and EBRD, it was an abdication of responsibility.
This is not an isolated incident. A 2023 report by the IFC’s own accountability office found that project exit occurred during 41 percent of cases under review, limiting investigations and undermining accountability. A staggering 88 percent of debt-related exits occurred before loan maturity (“early exit”), and 60 percent of those were due to client prepayment. In other words, when complaints arise, clients often cut and run — with tacit approval of lenders.
To its credit, the IFC has introduced an “Approach to Responsible Exit,” meant to ensure some form of redress before it pulls out of problematic projects. But there’s a gaping loophole: the policy does not apply when clients decide to prepay loans — even when there is clear evidence of harm. That’s a glaring omission, and one that undermines any claim to responsible investment.
The EBRD lacks a formal responsible exit policy, although it claims to “consider” sustained impact when exiting. Under its Operating Principles for Impact Management, it also pledges to monitor impact and take remedial action if needed — but in the Indorama Agro case, this commitment has not been extended to ensure remedy for the affected workers and farmers.
In the case of Indorama, it’s not too late to change course. The IFC and EBRD still have influence over Indorama, which remains a client of these banks in other countries, including Thailand and Nigeria, with a new loan just proposed in Georgia. As argued by 89 civil society organizations in a joint statement last month, the banks must use that leverage to require the company to remedy past harms — starting with fair compensation for unpaid workers and restitution for farmers who lost their land and livelihoods.
More broadly, development banks must stop treating early loan repayment as an easy way out. Exit must come with conditions — and with consequences. At a minimum, this means: requiring clients to resolve outstanding violations before closing out a loan; involving affected communities in designing post-exit safeguards; creating remediation funds and livelihood programs to restore lost income and land; and cutting ties with companies that repeatedly flout environmental and human rights standards.
If the World Bank and IFC are serious about using development finance to promote good jobs and inclusive growth, they must demonstrate their ability to ensure standards that prevent ruthless exploitation of workers and harm to project affected people.
Indorama Agro was meant to be a model of sustainable development. Instead, it became a cautionary tale of how international finance can empower abuse when accountability fails. If the world’s leading development institutions can’t guarantee even basic protections for workers and farmers in their projects, then they are not part of the solution — they are part of the problem.
This article by By Lynn Schweisfurth and Nina Lesikhina was first published by The Diplomat on May 12, 2023
