Since Indorama Agro, one of Uzbekistan’s largest cotton producers, began its operations in Syrdarya and Kashkadarya regions in 2018, Uzbek Forum has documented dozens of serious labor rights violations, including mass redundancies, abuse of employment contracts, anti-union activities, and the illegal reclassification of almost 400 employees as “service providers.” In addition, there have been some 50 incidents of retaliation carried out by management and government officials against workers and farmers contracted to deliver cotton to the company who have spoken out against rights abuses.
In January 2024, in the most recent and serious case, an independent rights monitor working on the Indorama Agro project was threatened by government security officials. The monitor was told that their work was “dangerous” and that they would face criminal charges if they did not immediately stop speaking to Indorama workers.
The Indorama Agro project is being financed by the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) with loans totaling $130 million to modernize cotton production, introduce sustainability standards, and create economic opportunities in the region. In 2023, the Asian Development Bank (ADB) awarded the company a further $15 million.
Rights organizations Uzbek Forum and Bankwatch have monitored the Indorama Agro project since 2020 and have repeatedly raised concerns of rights violations and retaliations with lenders and Indorama management directly. Despite their assurances, the situation for workers and farmers has deteriorated and, in August 2023, Uzbek Forum and Bankwatch filed a request for compliance review with the EBRD.
Over the last two years, independent monitoring and reporting on rights abuses at Indorama Agro has become practically impossible as retaliations against workers speaking to rights monitors, and now even against monitors themselves, have escalated. In August 2023, five Indorama workers were invited to participate in a workshop on labor rights in Almaty, Kazakhstan. All were prevented from attending. The passport of one was confiscated before he was due to travel, while two others expressed fear of reprisals as their reason for not traveling. However, the situation turned dramatic when two workers were physically prevented from boarding a plane to Almaty by plainclothes security agents and escorted by car to their homes, a two-hour drive away.
These are not random, isolated events but part of a pattern of retaliation and intimidation to suppress worker organizing and prevent the reporting of rights violations reaching the public domain. They are also clear violations of freedom of association, freedom of movement, and freedom of speech, which also violate the performance requirements and standards of the EBRD and IFC.
Retaliation by Indorama Agro management was first documented in 2020 by Uzbek Forum and Bankwatch when a whistleblower who had reported on corruption at the company was fired. She was subsequently reinstated after appealing her unfair dismissal in court and went on to become one of the leaders of Uzbekistan’s only known democratically elected trade union. She was then subject to harassment and threatening phone calls from government officials and told monitors she feared for her safety.
The union also came under pressure and in May 2022, Indorama Agro attempted to stage an illegitimate election to install a former company manager as chairman. After workers signed a letter of protest to the Federation of Trade Unions of Uzbekistan (FTUU) and the case was amplified by international organizations, workers were able to hold fair elections and elect a new leader in a fair and transparent vote.
The trade union leader has since come under intense pressure from government officials, which has even extended to his relatives. A family business was subject to unnecessary inspections by the authorities. The union leader has since severed all communications with independent monitors and accepted a better paid position, as did his predecessor. Workers complain that the trade union no longer fights to defend their rights. Paying off individual workers is a standard union busting company practice that prevents collective bargaining and fair negotiation of contracts.
Although the democratically elected union in Syrdarya had been successful in securing employment contracts for workers and appealing against unfair dismissals, labor rights abuses are ongoing. Workers complain that there is no effective company grievance mechanism. When they tried to speak to Uzbek Forum monitors, they were warned against speaking to “international organizations,” with Uzbek Forum named specifically.
When some 400 employees were illegally reclassified by Indorama management in December 2022 as “service providers,” denying them statutory employer benefits and, crucially, trade union membership, 44 workers, including the trade union leader, filed lawsuits against the company. Shortly afterward, government officials, including the regional prosecutor, held meetings with Indorama Agro management and workers to “explain” the new contracts to workers. The lawsuits were subsequently withdrawn, and workers accepted contracts that were only slightly improved but still denied them employee status.
However, Indorama Agro has even violated the terms and conditions of the new so-called Nano Unit Contractor (NUC) contracts and retaliated against those who dared to demand their rights. The contracts stipulated that NUCs would be paid bonuses for exceeding production targets for wheat and cotton and for the supervision of wheat fields after the harvest. In addition, NUCs were guaranteed one hectare of land for personal use. In December 2023, Indorama Agro refused to fulfill the terms and conditions of the contracts and when workers protested, the company responded by refusing to renew their one-year fixed term contracts. The workers are now unemployed.
Farmers under contract to deliver cotton to Indorama Agro often complain about late payments, low prices for their cotton, and inflated prices for inputs such as fertilizers, manufactured at the EBRD-funded Indorama Kokand fertilizer plant in Uzbekistan, which they are obliged to buy. Some farmers have reported that payments are delayed even further when they speak out. In February 2024, one farmer successfully won a court case against Indorama Agro for non-payment for cotton he had delivered during the 2021 harvest. He is now taking the company to court to demand full payment for cotton he delivered in 2023.
Gross negligence of health and safety standards has also been documented, resulting in a horrific, fatal accident in April 2022. The victim’s family reached an agreement for compensation with Indorama Agro, which the company then reneged upon. When Uzbek Forum intervened with lenders and company management on behalf of the family, a company representative warned the family not to speak to international organizations.
After giving interviews to Uzbek Forum monitors, workers have often been interrogated for up to four hours by the police and security officials. Workers have reported the police as telling them, “International organizations cannot help you. Do not speak to them.” The warnings are menacing.
All of these events and many more have been reported regularly to lenders and company management over the last three years. For every incident, Indorama management either has an explanation that does not reflect labor rights obligations, or flatly denies any knowledge of, or involvement in, retaliations, conveniently placing the blame for reprisals with the authorities. In all cases documented by Uzbek Forum, interventions by government officials to silence workers and enforce abusive contracts clearly benefit the company, from enforcing low prices for cotton to ensuring that workers sign exploitative contracts, and crucially, silencing those who speak out through retaliations. It is difficult to accept Indorama’s claims that, as one of Uzbekistan’s largest investors, it has no influence to demand that government officials desist from pressuring workers and employees. In addition, Uzbek Forum has documented no fewer than 15 cases of intimidation and retaliation by Indorama Agro management itself against workers and farmers, including dismissals and withholding pay.
Lenders’ responses to reports of rights violations and retaliations by their client have to date failed to mitigate against reprisals or improve conditions for workers and contract farmers. Despite assurances that the IFC and EBRD have communicated their concerns to their client, lenders have demonstrated a pervasive culture of disbelief when confronted with evidenced-based monitoring findings. They do not appear to accept victim statements, court documents, or disturbing patterns of abuse and retaliation as evidence, which clearly violates their own safeguards. The EBRD and IFC performance standards, including statements on zero-tolerance of retaliation, have had no inhibiting effect on the company’s abusive conduct. On the contrary, since Uzbek Forum and Bankwatch began reporting to lenders, retaliations have intensified and rights violations continue with impunity.
The Indorama Agro project was intended to be the flagship example of a reformed cotton sector in Uzbekistan, proving to international investors, brands and retailers that sourcing Uzbek cotton no longer carried the risk of forced labor or rights violations. The project was earmarked for Better Cotton licensing, which has now been suspended because of labor rights concerns.
The case of Indorama Agro represents a potentially significant liability for multilateral development banks (MDBs). Since 1998, MDBs have invested over $1.5 billion in Indorama and its various subsidiaries, despite similar abuses related to other Indorama investments, which have been the subject of complaints to the IFC.
The human rights due diligence and risk assessment for the Indorama Agro project failed to effectively assess and mitigate the human rights risks in Uzbekistan overall, exposing the weakness of MDB safeguards to protect people negatively impacted by their investments. In light of the serious decline in civic space and freedom of speech in Uzbekistan today, it is essential that MDBs, including the EBRD and IFC, respond decisively when retaliations and rights violations are reported. Without identifying, mitigating, and preventing risks against civil society actors and those who dare to speak out, MDBs are ultimately facilitating and emboldening abusive governments and companies, while deepening their investments in bad actors who undermine the banks’ own development impact goals.