How Dispute Resolution Transformed Conflict Into Collaboration in the Uzbek Cotton Sector
Washington, December 05, 2024 – Following the successful implementation of agreements between human rights monitors and two IFC clients—Indorama Kokand Textile and Hamkorbank—CAO has concluded a dispute resolution process addressing concerns about forced and child labor in the cotton sector in Uzbekistan.
CAO’s process addressed a 2016 complaint filed by a coalition of non-governmental organizations (NGOs)—the International Labor Rights Forum (ILRF), the Uzbek-German Forum for Human Rights (UGF), Human Rights Watch, and the Cotton Campaign—on behalf of local human rights defenders and alleged victims of forced labor in the country's cotton fields. The complaint raised concerns about forced and child labor in Indorama’s supply chain and concerns that Hamkorbank was financing companies involved in, or benefiting from, forced labor in the cotton sector.
When the complaint was filed, IFC had an active investment in Indorama to support the company to expand its capacity in Uzbekistan to increase exports of local cotton yarn. After the complaint was filed, IFC also started providing advisory services to the cotton sector in Uzbekistan through the Sustainable Cotton Supply Chain Development project. IFC’s support for Hamkorbank comprised equity and loan investments to support the bank’s micro, small, and medium enterprise (MSME) business, as well as a Global Trade Finance Program (GTFP).
Uzbekistan is the sixth largest cotton producer in the world. The country has embarked on reforms in recent years to modernize its agriculture sector, and combat forced and child labor in the annual cotton harvest.
At the start of the process, the complainants organized themselves into a "Group in Mediation" and, with the support of professional mediators, CAO set up separate dialogue processes with Hamkorbank and Indorama. IFC’s country office in Tashkent introduced the CAO team to the Uzbek government to help pave the way for a constructive dialogue. This engagement helped ensure free movement of the Group in Mediation to engage in the CAO process and mitigate their concerns about reprisal risks. Additional support was provided by Peace Nexus, a Swiss foundation, which contributed capacity-building expertise, funding, and logistical assistance.
Several years of dialogue followed, navigating complex political, business, and human rights issues. For IFC’s clients, the process provided an opportunity to sit face-to-face with the complainants and improve their business reputation and systems. For the Group in Mediation, the dialogue created a safe space through which formerly dispersed human rights monitors could harness their collective energies to leverage change. All agreed to work together to improve the situation in the cotton fields. This meant monitoring labor conditions in the fields and delivering information and data the companies could act on.
“With the help of the CAO, we were united as one team, as a family. Now we are very close with other human rights activists and the CAO. We exchange our opinion, our views. We consult with each other. We are more knowledgeable,” said Uktam Pardaev, Human Right Activist.
Notably in 2019, monitoring by the Group in Mediation found no direct or indirect forced labor among Hamkorbank’s employees, leading to the positive resolution of that aspect of the case in 2020. The dialogue continued with Indorama focused on the potential presence of forced and child labor in fields where the company sourced cotton. The Group in Mediation monitored the 2020 and 2021 cotton harvests and found no systemic forced or child labor in the Indorama fields covered by these activities. After signing a final agreement in 2022, the parties continued working together to monitor working conditions during the 2022 and 2023 harvests. In May 2024, they confirmed the successful implementation of the agreement, concluding CAO’s involvement in the case.
To commemorate the positive outcomes from the process, CAO hosted a panel discussion in Tashkent in September 2023. The event brought together representatives from the Group in Mediation, Indorama, Hamkorbank, IFC, and the government of Uzbekistan. The event highlighted the power of dialogue to transform conflict into collaboration, build partnerships, and enhance business sustainability. As Amit Jain, Chief Financial Officer of Indorama Kokand Textile, remarked, “The CAO process helped us strengthen our grievance system. We can now proudly say it is one of the best in Uzbekistan.”
In closing the case, CAO has released a Conclusion Report documenting the dispute resolution process and outcomes.
Learn more about the story of this case and its outcomes in this short film, which includes interviews with the parties.
