Thursday, October 30, 2014

MALAYSIA:::Business case of better management of migrant workers in Malaysia

The labour conditions of migrant workers in Malaysia have been under the international spotlight in recent months. First was a riot in an IT factory involving Nepalese workers. A month later, a report on the working conditions of labour in the electronics sector found conditions that were headlined “modern day slavery” in international press.

There are an estimated two million documented migrant workers in Malaysia. The two incidents brought to light working conditions that are considered bonded labour. Unlawful passport retention, high and hidden recruitment fees resulting in workers being indebted and trapped in their jobs, deceptive recruitment practices, constrained freedom of movement, poor living conditions, fines and other penalties that prevent workers from being able to resign, and inadequate legal protections.

In our engagement over the years with a range of companies, labour conditions of workers is generally quite low on the radar of companies. There is little understanding of what constitutes bonded labour and of the working condition of workers in their supply chain. As many workers are hired through agents or employed by subcontractors companies to do not believe that this is within their sphere of responsibility.

In Malaysia, some sectors have stepped up, in particular oil palm, where growers who are members of the Roundtable on Sustainable Palm Oil have clear criteria on defining sustainable palm oil, which include their vast migrant labour force. It is more than mere legal compliance but ensuring that their social and physical well-being are addressed. The construction, manufacturing and the service sector remain weak.   

However, there is likely to be increased pressure for this to change. Companies in Malaysia are manufacturers to the world; manufacturing accounting for approximately 25% of the nation’s GDP. The international brands that are the customers of Malaysian companies are increasingly committing themselves to universal principles and commitments on human rights and better working standards for workers, especially the most vulnerable. Addressing traceability further down their supply chain is not a passing trend, but is the way that companies will be doing business. For Malaysian companies to qualify to be a 2nd or 3rd tier supplier, decent working conditions, including for migrant workers will be a business requirement.

The Malaysian Stock Exchange will very likely launch an Environmental Social Governance Index in mid-December. This will give us a glimpse into the sustainability disclosure performance of the Top 200 Malaysian companies by market capitalisation. Though it won’t indicate how they manage their migrant workers, it would help to point out the leaders in overall disclosure and allow for deep dive into management of migrant workers in their supply chain.

Managing of foreign workers in their immediate operations and along their supply chain is a growing issue that Malaysian companies need to recognise. There needs to be more disclosure and sharing of good practices between companies, industries and business association on how to address challenges together but also map out the business benefits of treating migrant workers with basic decency.


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