The finest carpets in South Asia are woven by children because their tiny fingers can tie small, tight knots, and because they are paid just a few rupees. In Pakistan, a 12-year-old boy who protested against child labour was murdered yesterday.

Iqbal Masih, a brave and eloquent boy who attended several international conferences to denounce the hardships of child weavers in Pakistan, was shot dead while he and some friends were cycling in their village of Muritke, near Lahore. A labourer from Iqbal's village has been arrested.

"We know his death was a conspiracy by the carpet mafia," said Ehsan Ullah Khan, chairman of the Bonded Labour Liberation Front, which is trying to stop the owners of carpet-weaving factories from hiring children. Thousands of carpets are sold every year in Britain, Europe and the United States.

Before his murder, Iqbal had received death threats for his outspoken criticism of bonded child labour. Iqbal himself had slaved on the looms from the age of four until he was rescued as a 10-year old by social activists. For working 10 hours a day, tying knots and stretching wool in a cramped, dirty room with other boys, Iqbal was paid one rupee a day. Because his family had borrowed money from the loom owner at extortionate interest rates, Iqbal was still 13,000 rupees (£260) in debt to his boss.

Mr Khan described the 10-year-old boy after being freed as "emaciated and wheezing like an old man". He claimed that Iqbal was murdered because his protests had caused dozens of factories in Pakistan to close.

In Europe, many stores now try to ensure that child labour was not used in making the carpets the shops buy from South Asia. Pakistan and India both have laws to stop children from working, but these are seldom enforced, according to activists. Human rights organisations have persuaded some stores to buy carpets from countries where child rights are protected.

Mr Khan took Iqbal to Sweden last November to speak of the misery of his workmates. "He was so brave, you can't imagine," said Mr Khan.

In India, more than 15 million children are working illegally, while in Pakistan an estimated 6 million boys and girls are so employed. If the children are freed in police raids, the families are so poor they have no choice but to sell their children back into virtual slavery.