South Korea's Daewoo International Comes Under Pressure Regarding Uzbekistan Fields

About 8% of Uzbekistan's export revenue comes from cotton. Here, women picked cotton in Urgench, Uzbekistan, last year. Corbis
A South Korean trading company has become a target of human-rights activists for using cotton that it admits is produced by child labor and forced adult labor in Uzbekistan. While the company says it has asked the country's government to stop the practice, it says it has no plans to stop using the cotton.

Activist network Cotton Campaign is demanding that Daewoo International Corp. , a subsidiary of steelmaker Posco , 005490.SE +0.76% POSCO S. Korea: KRX KRW332,000 +2,500 +0.76% Aug. 14, 2014 12:58 pm Volume (Delayed 20m) : 79,161 P/E Ratio 18.67 Market Cap KRW28,379.31 Billion Dividend Yield 1.20% Rev. per Employee KRW3,731,730,000 332000330000328000326000 08/13/14 Posco Unit Admits Using Cotton... 07/28/14 Adani Gets Australia's Approva... 07/24/14 Strong Currency Hits Corporate... More quote details and news » 005490.SE Your Value Your Change Short position withdraw its investments from the Central Asian country. The network says that would exert more influence on the Tashkent government to stop what some people believe may be the continued coerced adult and child labor at state-controlled cotton harvests. Two campaign members—anti-slavery group Walk Free and Seoul-based Advocates for Public Interest Law—submitted a petition at Daewoo's headquarters last month.

Daewoo runs some of the largest cotton-processing plants in Uzbekistan and has become the symbol of Uzbek cotton in the eyes of the Cotton Campaign, according to a Walk Free official. The activist network has named a pledge after the company, urging apparel companies to stop buying cotton from Daewoo. Some Western clothing brands recently pledged not to knowingly use products containing Uzbek cotton in general, citing concerns about forced adult and child labor.

Daewoo declined to comment on the pledge, to which the company isn't a signatory.

A Daewoo spokesman said the company didn't use forced or child labor at its Uzbekistan-based operations, though the company is aware of the use of forced labor and child labor during harvests and confirmed that it acquired cotton picked by such workers. He said the company has voiced concerns to Uzbek government officials about forced labor. The spokesman said the company has asked Tashkent to stop the practice. Daewoo declined to comment on how the company knew of forced labor or when it knows it was used.

The Uzbek embassy in Seoul didn't respond to requests for comment on Daewoo's concerns.

U.S. officials who met last month with the Uzbek government said Tashkent officials acknowledged privately for the first time that children had been recruited at least in past harvests but disagreed that work was coerced. Tashkent until 2012 had denied the existence of forced labor, child or adult, the officials said. The meeting was a first between the U.S. Labor Department and the Uzbekistan government, the officials said.

The U.S. Labor Department lists Uzbekistan among users of the "Worst Forms of Child Labor," as defined in U.S. and international regulations, saying children as young as 10 were sent to harvest cotton in 2012 with irregular access to sufficient food, clean water or sanitation facilities. The Uzbek officials at the meetings, while acknowledging its history of recruitment of children, disagreed with the rating, the U.S. officials said.

The U.S. Trade and Development Act and the United Nations' International Labor Organization define the worst forms of child labor as slavery and trafficking, child prostitution or pornography, use of children for illicit activities such as drug production and trade, and work "which, by its nature or the circumstances in which it is carried out, is likely to harm the health, safety or morals of children."

After an inspection through last year's harvest season—from August to September—the ILO said systematic use of child labor didn't take place that year, though it found child labor to a limited extent. An ILO spokeswoman said the findings didn't apply to other years and that proving or disproving whether adult labor was involuntary was difficult.

Uzbek farmers worked in a cotton field in the village of Chinaz, about 50 miles west of the capital Tashkent, in 2005. Reuters
Uzbek law prohibits forced labor, according to the U.S. Labor Department. A department official that participated on the 10-day trip late last month said adoption of ILO conventions and legislation in countries such as Uzbekistan doesn't mean human-rights violations have stopped.

Uzbekistan has ratified ILO conventions that state the minimum working age as 15 years and that forbid the worst forms of child labor.

"It's too soon for us to assess how much has changed in terms of child or forced labor," the official said. "In terms of ratifying the conventions, [some countries accused of forced labor] are sometimes better than the United States," the official said, while noting progress in Tashkent's cooperation with the Labor Department and the ILO.

The trip included meetings with government officials, local journalists and activists but not field visits, the official said.

The Uzbek embassy in Seoul didn't respond to requests for comment on its role in the annual harvests but said last month that it had allowed full access to ILO investigators last year involving more than 800 unannounced visits to schools, farms and cotton fields, as well as nearly 1,600 interviews. The Uzbek statement said the government and public and private agencies were working with the ILO to fight forced and child labor and make regular reports to the body, which the U.N. agency confirmed.

"It's not the legislation that's a problem. It's practice," the ILO spokeswoman said.

The Uzbek embassy's four-page statement didn't address whether forced labor has been used during cotton harvests. It said the government plans to mechanize 80% to 85% of its harvests, without specifying a schedule. The embassy didn't respond to requests for additional comment.

One of South Korea's largest trading companies, Daewoo runs two Uzbekistan-based cotton-processing operations, which produced $151 million in goods last year, according to the company's website. The company plans to double that figure by 2020, the site said. The company also runs a joint venture with South Korea's minting authority, manufacturing cotton pulp in Uzbekistan used for specialized paper such as bank notes, gift certificates and passport pages.

A Daewoo spokeswoman said the company financially supports after-school classes for children involved in harvests and makes monthly visits to those schools to check their compliance.

Daewoo subsidiary Daewoo Textile Fergana LLC exports yarn and fabric to Russia, China, Iran and Turkey, according to the website.

A spokesman for government-owned Korea Minting & Security Printing Corp. said it was aware of the concerns and plans to purchase 1,000 mechanical cotton pickers for the joint venture's source of cotton in Uzbekistan. The company has used Uzbek cotton pulp to print South Korean and Peruvian currencies, the spokesman said.

Cotton was a major source of revenue for Uzbekistan when it was under Moscow's rule from 1876 to 1991, but its importance in the country's economy has waned since its independence, with production falling 35% in the same period, according to the U.S. State Department. About 8% of Tashkent's export revenue comes from cotton, most of which is sold in a less lucrative unprocessed form to countries such as Russia, China and Bangladesh.