Malaysia's alleged labour abuse a risk to export growth model

Malaysia's alleged labour abuse a risk to export growth model ...

KUALA LUMPUR, 21 December - This story rights the company unit name in paragraph 29 to Fitch Ratings, not Fitch Solutions) (in this article)

The government and companies of Malaysia must acquire about a widespread allegations of workplace abuse of migrants or threaten their export-reliant growth model.

Malaysia has relied for decades on migrants to power mainstay manufacturing and agriculture; also becoming a global supplier of products as diverse as semiconductors, iPhone components, medical gloves and palm oil.

The unemployment rate has increased by a lot of foreign workers, but complaints of excessive working conditions and poor living conditions are prevalent among workers from Indonesia, Bangladesh and Nepal.

The third largest economy in Southeast Asia must reform its labour laws and improve its enforcement, while companies should invest to ensure better conditions, says one analyst, analyst, rating agency, researcher, senior consultants, and activists interviewed by Reuters.

Last month, seven Malaysian firms faced harsh labor accusations over exploitation. The world's biggest glovemaker and palm oil producer suffered from severe flooding.

That's a wake-up call," said Anthony Dass, Head of AmBank Research in Kuala Lumpur. "If Malaysia doesn't change and global emphasis on environmental, social and governance practices, businesses can move to other countries."

The labour department of Malaysia declined to answer the questions about the amendment of the labour laws, and the trade ministry declined to answer the question about potential investment losses.

Human Resources Minister Saravanan said that "forced labour issues" "hook up foreign investors' confidence in Malaysia's supply of products." He warned companies that they should protect workers' rights and welfare.

What the problem is: the world will be a terrible country for a difficult economy, said Rosey Hurst, of a London-based ethical trade firm, Impactt. "For some, it is beginning to start to do economic damage."

Hurst said complaints regarding Malaysia's labour practices have increased, and a lot of investors complain about the move.

Asian manufacturing centers such as China and Thailand face similar complaints of labour abuse. But investors have already recently been looking at Malaysia, and this could affect future foreign direct investment and supply contracts, analysts say.


According to the International Labour Organization (ILO), Malaysian officials acknowledged the effects of a disproportionate overtime, unpaid wages, absence of rest days and unhygienic naive dormitories. The conditions are part of an 11-figure index of forced labour.

Malaysian law allows 60 hours of work per week less than widely accepted and allow work on what are supposed to be rest days.

"The legal framework in Malaysia permits and many times insists on practices he has done against the ILO eleven, that indicate the compulsory labourer's rights", Hurst said.

Malaysia last month launched a National Action Plan on Forcible Labour to save such practices by 2030.

The country is the second-largest palm oil exporter. The chip-assembly industry is one of the largest in the world's chip trade. Malaysia was full of two million foreign workers in late 2020 and 10 percent of its workforce was doubled last year's total of twenty years, according to the Ministry of Statistics. The government estimates 4 million more illegal immigrants are working in this country.

Foreign workers are based on manufacturing, agriculture, construction and services.

Although the country's electronics and palm oil companies shy away from work-intensive work, the country's industry is increasingly relying on migrants, who gaining treatment.

Malaysia has had the most US border and customs bans after China. In June, Washington took a decision to take advantage of the China and North Korea, since Labour trafficking is the lowest.

Dyson terminated its contract with the ATA IMS Bhd just months after the Malaysian company posted record profits. ATA acknowledged some, made some and said it now complies with all regulations and standards.

ATA told Reuters it is increasing practices to keep the industry in balance amid its concerns about the company and Malaysia.

"For ATA, this meant rethinking some of the nifty standards, not just in Malaysia, but also abroad, for example, excessive overtime and more engagement between management and rank and file employees," said company.


When the United States last year banned Top Glove Corp, the world's biggest medical glove maker agreed to pay $33 million to workers to reimburse the jobs they paid in their native countries for which activists say result in debt bondsage.

Customs ban lifted after Top Glove made the changes.

Top Glove told Reuters that exporters should follow the best practices of the world as customer expectations have grown, without a doubt, adding that it wasn't enough for the business to just be cost-efficient.

The peers also decided to pay salaries for the recruiting.

The oil producers in Malaysia, the world's largest exporter of widely used products after neighbouring Indonesia, have spent tens of millions of dollars on the project to improve workers' lives a second time.

To be sure, the cost of improving working conditions may not necessarily drive away investors.

"Companies that operate in Australia, the United States, the European Union and some U.S. states violate modern slavery standards." said Nneka Chike-Obi, director of sustainable finance at Fitch Ratings. "So they may have to accept higher costs in exchange for less supply-chain risk."

The impact on the electronics industry, which accounts for about 40% of Malaysia's exports, is, in particular, possible for the economy.

Dell Inc, Samsung Electronics Co and Western Digital Corp are manufacturing facilities in Malaysia, while Apple Inc uses local suppliers.

The other companies didn't respond to the request made by Reuters about their Malaysian customers' suppliers.

"If companies start looking and pulling out contracts" from electric and electronics companies, it will really affect the economy," said Dass.

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