Study finds forced labour in Malaysian electronics industry


A US-funded study has found that at least 28 per cent of workers in a sample of 501 workers in the Malaysian electronics industry “were found to be in situations of forced labour”. Is this the type of investment we want?

You can read the Executive Summary of the study titled ‘Forced Labour in the Production of Electronic Goods in Malaysia’.

The retention of workers’ passports is a major issue. So too the deduction of foreign workers’ levies (payable by the employers) from the workers’ salaries. And the use of outsourced labour provided by external contractors which leaves workers even more vulnerable.

Miti must act ASAP to ensure the survival of Electrical and Electronic Industry in Malaysia

17 November 2014

In 2012, US Labour Department funded a global NGO called Verite to conduct a study whether forced labour exists in Malaysia. In September 2014, Verite published a report called “Forced Labour in the Production of Electronic Goods in Malaysia”.

Read the report here.

In the report, Verite interviewed 501 male and female workers across all major producing regions, electronic products and foreign nationalities. They found about 28% of workers to be in situation of forced labour. The issues they highlighted were:

  1. Recruitment fee charging and indebtedness compelled workers to work.
  2. Deceptive recruitment
  3. Passport retention, constrained in freedom of movement.
  4. Poor living conditions, in housing provided by employers or third party employment agents.
  5. Foreign workers difficult to leave before the end of their work contracts.

This report will be key to US Government’s decision on “International ranking on Forced Labour”. From information provided to me, US labour department will put Malaysia on watch list by 1st December 2014 (less than 2 weeks time). If US Government ranks Malaysia unfavourably, it has potential damning implications for the E&E sector in Malaysia. Some of the implications might be:

  1. US companies maybe prohibited to do business with Malaysian Manufacturers.
  2. Shrinking of future FDIs into Malaysia
  3. E & E export products to US-Europe market affected where labour practice compliance is required.

In short, this is the single biggest threat to the survival of E & E sector in Malaysia.

In the last several years, Malaysia’s agriculture industry had suffered 2 major bans by EU and China. In 2008, EU banned Malaysian Seafood and live fish export that did not meet EU standards. In 2011, China banned Malaysian bird’s nest after failing to comply with China’s permissible nitrite level. Billions of ringgit lost and both industries have not recovered fully since the ban.

We cannot afford to have Malaysian E&E sector placed on watchlist by US authority, because E&E is the largest sector in total export of Malaysia. In 2013, RM236.8 billion export are E&E product, equivalent of 32.9% of total export of Malaysia. E&E currently employs millions of Malaysian including massive downstream industries. It is the major FDI attraction into Malaysia and Penang particularly. Penang now hosts major E&E global companies such as Intel, Western Digital, AMD, Dell, Osram, Motorolla, Agilent Technologies, National Instruments and etc.

Not everything reported in Verite report is entirely true. Malaysia in fact has comprehensive laws and regulations to protect workers, irrespective of whether local or foreign, such as below:

  1. Employment Act 1955
  2. Workmen’s Compensation Act 1952 (Act 273)
  3. Occupational Safety and Health 1994
  4. National Wages Consultative Council Bill 2011 (Act 732)
  5. Factories and Machinery Act 1967 (Act 139)
  6. Passport Act 1966 (Act 150)
  7. Anti-Trafficking in Persons Act 2007

The Electronic Industry also self regulate themselves by creating Electronic Industry Code of Conduct (EICC code) that provides guidelines on social, environment and ethical aspects to the global electronics supply chain. This is to ensure basic working condition for individuals.

In Penang, where most of the E&E companies are located, sample surveys by InvestPenang showed that 4 out of 5 companies are already EICC compliance. EICC imposed higher standards in terms of recruitment process, living conditions, safekeeping of passport and breaking of contract.

However, these improvements are not properly communicated by MITI to US Labour Department. The US embassy has alerted MITI as well as other stakeholders as early as October. However, no feedbacks were presented to counter Verite report by December 1st deadline. That could result into one-sided decision by US Labor Department. The incompetency of UMNO/BN government will make the largest economic sector suffer tremendously, same fate like Seafood blacklisting by EU and bird’s nest ban by China.

I urge MITI to immediately respond to this urgent issue. They must immediately do the following suggestions:

  1. Respond to US Labor Department to counter the issues raised by Verite Report.
  2. Work with American Chambers of Commerce (AMCHAM) to produce counter report.
  3. Strictly enforce existing laws to clean up irresponsible parties.
  4. Assemble all stakeholders including E&E chieftains and labour representatives for emergency meeting to find solutions.
  5. Commit to best practices of labour standards.
  6. Reduce foreign labour dependency and prioritize local workers
  7. Allow E&E sector to set up labour unions to improve workers conditions.

This is a matter of survival for Electrical and Electronic Sector in Malaysia, we can not afford to lose this.

Sim Tze Tzin

MP for Bayan Baru where most E&E companies are located.

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21 Nov 2014 10.51am

In the Sun newspaper LGE called on Miti and HRM to take steps to ensure that the country is not sanctioned due to the negative perception. He has admitted that its the negative perception and our previous BN Gerakan govt has done a good job in not only building up the E & E industries in Penang but have enhanced its image internationally that we were recognized and known as the Silicon Valley of the east. Six years of DAP CAT incompetency and coupled with negative remarks and comments from the oppositions and their supporters such as we have no… Read more »

21 Nov 2014 12.14pm
Reply to  Yang

The problems today is a legacy from Gerakan. Simple as that.

21 Nov 2014 3.17pm
Reply to  Ganesh

This is what the CAT and their supporters are. Play the blame game

20 Nov 2014 3.34pm

Sim is an opposition that is acting like an American agent to destabilize the country. After reading the summary I find that the report is simply outlandish. He seem to have an ulterior motives. The E & E industries in Penang was started by BN Gerakan in the early 70s and has grown into one of the best and niche industries comparable to Silicon Valley in the US having been nicknamed the Silicon Valley of the East. Wages for the E & E is considered as one of the highest and during the course of its 40 years existence it… Read more »

gk ong
gk ong
20 Nov 2014 10.39am

Still insist on low cost manufacturing in electronics sector with cheap foreign labor?

No R&D?

No wonder wages never go up.

How to beat Vietnam in low cost manufacturing? Using forced labour?

So Penang must move away from this old paradigm.

19 Nov 2014 2.02pm

The US has more forced labour than many of the countries in the world mostly Latinos and Black. How exactly do you define forced labour. I would not viewed these workers in electronics factory as forced labour. They come here willingly with pay as stipulated in their agreement. Don`t ever trust these US and Western statistics. To bring in these workers it cost money and resources. If you do not retain their passport they will simply cabut and work in another company illegally. I myself have encountered many such cases.