Originally published at: https://apparelinsider.com/land-grabs-the-new-red-flag-for-uzbek-cotton-...

Written by Lynn Schweisfurth

Apparel brands are said to be eyeing Uzbekistan as a potential source of cotton, particularly with Xinjiang cotton now the subject of US sanctions. A process of reform has made significant progress on forced labour issues in Uzbekistan, but now another issue has arisen: land-grabs.

In this special piece for Apparel Insider, Lynn Schweisfurth, a consultant for Uzbek Forum for Human Rights, suggests the privatisation Uzbekistan’s cotton sector is seeing huge tracts of land being transferred to private operators for cotton cultivation, with farmers coerced into “voluntarily” giving up their land leases, with devastating effects on rural livelihoods.

TASHKENT – Mirziyoyev’s liberal economic reform process has driven the swift privatisation of Uzbekistan’s cotton sector, facilitating a grand scale transfer of hundreds of thousands of hectares of farmers’ land to private operators who have monopolised entire districts. The transformation of the agricultural economy has left many farmers destitute and rural communities in poverty.

A broken Soviet-style agricultural system that oversaw the forced labor of children and adults to pick cotton for decades, has been at the forefront of President Mirziyoyev’s reform programme. While the government has made significant progress in reducing the number of people forced to pick cotton, a land ‘optimization’ programme carried out by Government decree in January 2019, has resulted in the transfer of land leases from farmers to so-called “cotton clusters,” private, vertically integrated enterprises that combine the production of raw cotton with processing and/or manufacture of yarn or textiles.

According to latest data, the Government of Uzbekistan has approved 96 clusters covering 907,783 hectares in a process that has seen the direct transfer of control of some 27.5 per cent of Uzbekistan’s cultivable land to clusters, mainly for the growing of cotton. Farms that are not being operated directly by private companies (direct farming) are now under contract to grow cotton for them (contract farming). In general, only one cluster operates in each district of Uzbekistan’s 13 regions, which has created a monopoly situation in which farmers have no choice over whom they can produce cotton for, leaving them vulnerable to exploitative practices. 

In April 2020, Uzbek Forum for Human Rights reported on abusive clusters that impose below-market prices for cotton, unrealistic production targets, inflated costs for inputs such as fuel and seeds and failure to pay for delivered cotton, leaving many farmers in crippling debt.

Deconstructing the Rural Economy

However, there are other negative impacts of the privatisation of the cotton sector which are impacting the lives of the 25 per cent of Uzbekistan’s working population that is employed in the agriculture sector. Indeed, a new era of land-grabbing appears to be underway which is having a devastating effect on the country’s rural population.

Farmland in Uzbekistan is leased from the state, generally for a period of not less than 30 years and land leases cannot be involuntarily terminated without a court order. Private cluster operators have been able to take over vast swathes of farmland without having to pay a penny in compensation to farmers for their losses because, according to Uzbek law, there is no legal obligation to pay compensation as long as the land lease terminations are voluntary. Compulsory land lease terminations may only be carried out through a court order with sufficient evidence that the land lease agreement was breached. So what could have motivated farmers to willingly give up their farms and livelihoods?

In many cases, land transfers have been carried out by hokims (local officials) on behalf of clusters to ensure that the terminations were ‘voluntary’ and would incur no compensation for loss of land, assets or income. However, the term ‘voluntary’ in an authoritarian setting such as Uzbekistan describes the degree of coercion exercised by government officials who wield disproportionate and arbitrary power. In some cases, farmers were instructed to write statements in which they voluntarily signed away the lease to their land or were simply notified by hokims that their land leases had been terminated without further explanation. Overnight, farmers have lost the basis of their livelihoods and the ecosystem of rural income, whereby rural residents often rent small parcels of land from farmers to cultivate food, either for their own consumption or for sale at markets.

The following cases demonstrate the procedures by which clusters have gained land from farmers with the support of government officials to create local monopolies and the lack of protections for farmers to defend their rights.

Surxon Cotton Textile Cluster LLC

At the end of December 2020, the head of the Kizirik district of Surkhandarya region confiscated the land of 475 farmers and entrepreneurs of the district for the benefit of Surxon Cotton Textile Cluster LLC which was established on December 1, 2020. The company received 22,400 hectares of land which was seized from the farmers overnight.

Surxon Cotton Textile Custer LLC is owned by Petromaruz Limited which positions itself as “a major private investor in the economies of Uzbekistan, Russia and Britain, uniting more than 25 businesses.” The owner of Petromaruz Limited is Murtazo Rakhmatov, a member of the Senate of the Oliy Majlis and recently appointed head of the newly established Association of Cotton Textile Clusters. The director of Surxon Cotton Textile is Saidkul Arabov, formerly chairman of the State Committee for Land Resources, Geodesy, Cartography and State Cadaster of the Republic of Uzbekistan.

When the farmers – understandably – refused to ‘voluntarily’ surrender their land, local authorities began to use threats, as reported by farmers in an open appeal. Police officers went to each farmer separately demanding that they write an application to voluntarily surrender their land and close down their farms. When most of the farmers still refused to give up their land, the local administration (hokimiyat) sent tractors to destroy the crops that had already been planted and confiscated property built on the land.

On January 18, 2021 the farmers travelled to Tashkent to meet with the Prime Minister of Uzbekistan, where they were promised a commission to consider the legality of the land seizures. According to the law on farming, land can be withdrawn only by a court decision when there has been inefficient use and failure to fulfill contractual obligations over a three-year period. The hokim’s decision on the mass confiscation of land in favor of the cluster, regardless of any other factors and bypassing a court decision, is illegal. A lawyer of the Farmers’ Council, a government body ostensibly representing farmers’ interests, confirmed this publicly at a meeting with farmers.

Most of these farmers had long-term land leases for at least 30 years and had taken out bank loans to invest in their land and production. Many of them had contractual agreements to supply agricultural products for export which they are now at risk of losing. The farms that have been confiscated were not subject to any inspections to determine how efficiently the farms were run or how the land was used, that is, no legal grounds were provided for the confiscation of their lands other than that the cluster needed them.

At the meeting with farmers, senator Murtazo Rakhmatov, the owner of Surxon Cotton Textile Custer LLC, said that the reason for transferring the land to the cluster was to increase the efficiency of land use, attract investment to the district and create 14,000 jobs in the future. He promised that the cluster would invest funds to improve irrigation, introduce new technologies in agriculture, and establish the production of textile products for export to Europe, which would significantly increase tax revenue for the district budget. Similar promises have been made by other cluster operators, but have not been honored.

On January 30, 2021, blogger Otabek Sattoriy, who supported the farmers and had conducted hours of interviews with them, was arrested on spurious charges of extortion. His colleague, Fazliddin Mehmonov, released a video statement describing the circumstances of Sattoriy’s arrest and how he too had been intimidated by security agencies.

Tashkent Cotton Textile Cluster (TCT)

In December 2018, it was announced that the British company, Paraglide Limited, and the Russian company, Petromaruz Capital, would create a modern agrarian-industrial cluster in the Kuyichirchik district of Tashkent region. Another government decree granted TCT “permanent possession” and usage of 35,400 hectares of irrigated land and 3,100 hectares of fishponds in Kuyichirchik district of Tashkent region. 

Furthermore, TCT Fish Cluster, which is part of TCT, received the ownership of a large fish enterprise, Balikchi JSC, at zero cost on the condition that the cluster would create new jobs and attract investments of US$8.2m. Abdukamol Abdukhalilov, one of Balikchi’s 640 shareholders, said in an interview with Ozodlik that it resembled a ‘raid’. “Why is the enterprise being transferred at zero value? The company has 40 billion soums on its account, 450 employees, effectively uses 3.5 hectares of land, and suddenly from nowhere an order of the Prime Minister appears to create a cluster.”

Shortly afterwards, in February 2019, Abdurakhim Pirvaliev, the head of JSC Balikchi, was arrested on charges of corruption while desperately trying to challenge the decision to transfer ownership of his company to the cluster.

Indorama Group

In 2018, a Government decree ordered the transfer of 50,000 hectares of land in Kashkadarya and Syrdarya regions to Indorama Agro, part of the Indorama Group, where 2,897 farms operated. Of these, 1,068 farms are now under the control of Indorama Agro LLC, acquired via ‘voluntary’ land lease terminations. Indorama Kokand Textile, part of the Indorama Group, has operated in Uzbekistan for ten years, during which time it has come under fire for using child and forced adult labour.

Farmers who were required to give up their leases were promised employment with the company. They would become ‘direct farmers’ working for Indorama with training in modern farming techniques, full time pay, benefits and security, certainly a tempting alternative to scratching out a living in a sector that retains significant government involvement. Two years later and, according to one official in Kasbi, unemployment and the number of those receiving social assistance has tripled.

The hardship of rural communities is compounded by Indorama’s refusal to allow residents to rent small parcels of land, as they have traditionally done, to cultivate fruit and vegetables, graze their cattle or use remaining cotton stalks for heating and cooking to supplement their incomes. The situation is bleak and the most vulnerable are becoming increasingly desperate. For many in the rural population, the only alternative will be to return to countries like Russia where they will find employment as migrant workers, often menial and under harsh conditions. As Eltuz, an Uzbek-language satirical news outlet succinctly put it, Singapore investors in Uzbekistan’s cotton sector are keeping Russia’s streets clean.

Silverleafe International LLC

Another presidential decree in November 9, 2018, handed an initial 2,000 hectares of farmland in the Pakhtakor district of Jizzakh region to a cluster belonging to US-based Silverleafe International LLC, a subsidiary of the US Silverleafe Capital Partners Group. A subsequent decree indicates that the amount of land was increased to 11,700 hectares. Under this arrangement, the cluster was awarded significant tax exemptions and land grants in return for investments of US$344m. According to the decree, farmers were to receive compensation for the costs of seeds and cultivation on 921 hectares of their land which were plowed and destroyed by the cluster. Although the farmers were reimbursed for their crops, they received no compensation for the loss of their land leases or livelihoods.

Shovot Tekstil and Textile Finance Khorezm Clusters

In Khorezm region, 78 farmers have protested their treatment at the hands of Shovot Tekstil and Textile Finance Khorezm, two clusters belonging to the Uztex Group, owned by Uzbek entrepreneur, Farhod Mamajonov. The farmers complain that the clusters control the pricing and access to inputs needed for farming and have the support of local hokims who are hampering the efforts of the farmers to establish their own cooperative and extricate themselves from their ruinous contracts with the clusters.

The farmers appealed to the President in a letter dated November 6, 2020 in which they reiterated their wish to create a cooperative and their reasons for doing so. On December 14, 2020, they received a reply from Hakimboy Otakhanov, hokim of Shovot district,

stating that farmers can only establish cooperatives in districts where there is no cotton-textile cluster. Since the cluster had also purchased the only cotton gin in the district – also via a Cabinet of Ministers’ decree – the farmers would have no means of processing their cotton. The government’s preferential treatment of clusters has effectively prevented any opportunity for the farmers to create a cooperative.

Xatirchi Export Klaster LLC

Following an Uzbek Cabinet of Ministers decree on land optimization of 2019, the hokim of Xatirchi district, Gofur Aliyev, backed up by police, forced farmers to surrender their land leases to the state. In August 2019, the hokim then transferred over 216.2 hectares of land to Xatirchi Export Klaster LLC.

One of the affected farmers, Habibullo Mamadiyorov, told Uzbek Forum that he has been successfully farming vineyards on 4.8 hectares of land since 2006. However, following the loss of his land in 2019, the cluster now demands that he surrender 50 per cent of his grape harvest.

In a video appeal sent to Uzbek Forum, Mamadiyorov begs the president to give the land back to small farmers. “We can grow our own quality products for the domestic market and for export. We pay taxes, but the cluster, which is only an intermediary, forces us to work on its terms, producing nothing and living at our expense. Numerous complaints go unanswered and are not properly investigated. We are tired of the redistribution of land. Three of my sons are without work”.

The Internet in Uzbekistan is full of similar stories of land confiscations. Farmers say that along with their land, they lose their property, their investments, and family members who would otherwise work on the farm, are now out of work.

These cases are deeply troubling examples of the power of the private sector, with full backing of government officials, to determine the economic prospects of the rural population. The system now resembles a new kind of feudalism which is being ruthlessly exploited.

State Aid to ‘Develop’ the Agriculture Sector

The privatisation of the cotton sector has been facilitated through multi-million-dollar loans from international financial institutions, including the International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD) and the World Bank. Foreign Direct Investment in Uzbekistan grew from US$1.6bn in 2018 to US$4.2bn US in 2019. Uzbekistan’s Finance Ministry is predicting US$7.81bn US in Foreign Direct Investment for 2021.

Project documents for loans to modernise the agriculture sector acknowledge the potential negative impacts, including job losses. However, Impact Assessment Reports which outline measures to mitigate the harsh realities of transition to a free-market economy, do not appear to grasp the Uzbek agricultural context, much less the far-reaching consequences of handing stewardship of the land to private businesses, many of whom have no agricultural experience, and whose ultimate goal is to make as much money as possible.

In one example, a company intends to create new employment opportunities by planting mulberry trees that will provide feed for farmers to cultivate silkworm cocoons. However, silk cocoon production remains entirely under the control of the Uzbek Government and for many farmers, it is not a profitable business. Faced with orders from local officials, often under threat of penalty, such as loss of their land, to deliver silk cocoon quotas set by the state which they must sell at prices set by the state, they simply cannot refuse. Given that the government has set ambitious production targets to dramatically increase the production of silk, these ill-conceived mitigation measures may well perpetuate and reinforce another form of forced labor, leaving farmers even deeper in debt.

In view of the impact of some of these investments, present and potential, it is imperative that international financial institutions conduct sufficient due diligence that ensures that projects do not violate human rights and deliver their stated aims of improving and not ruining the lives of rural communities. Indeed, proposed new EU legislation to impose stricter due diligence obligations and penalties on companies for non-compliance may expedite their willingness to do so.

The Right to Land

The evolution of Uzbekistan’s agriculture sector is racing ahead without due consideration of the impact on rural populations and raises serious questions about the right to access land. In December 2018, the United Nations General Assembly adopted the Declaration on the Rights of Peasants and Other People Working in Rural Areas (UNDROP) to protect peasants’ right to land, affirming the right of people in rural areas to access and use natural resources in their communities, including land, in a sustainable manner as required for adequate living conditions. Uzbekistan, which is effectively stripping farmers and rural communities of the ability to use land to support their livelihoods, is failing to meet this essential standard.

In 2019 and 2020, the UN Human Rights Committee referred to the UNDROP to protect the right to land in two important cases in Paraguay and Argentina.

Uzbekistan may be next.