This report by Bloomberg highlights to us in Malaysia about requirements imposed by 2012 Obama's executive order, and other standards. It also highlights the standards followed by some of the Brands which also must be followed by all in its supply chain. The efforts of Cam Simpson, the author, is appreciated. Maybe all electronic and other companies must be also compelled to keep informed the various Unions and groups that work with workers and migrant workers. Maybe even simplified translations of these matters in the language of the migrant worker/worker must also be placed on notice boards at the workplace, and also through pamphlets to workers - even on websites. There should also be information of what to do in the case of non-compliance.
Migrants' Fate: $1,000 Debt for 12-Hour Factory Shifts
A
foreign factory worker smiles on a 'worker bus' at the Majestic
Heights, Paya Terubong in Penang, Malaysia. Photographer: Goh Seng
Chong/Bloomberg
Sita
Magar is a single mother of four who earns whatever she can wring from
six goats and the muscle of a rented water buffalo. After paved roads
end, it takes four hours to reach her farm along a trail where felled
trunks, like twisted balance beams, span a raging stream. Even so, a
recruiter feeding migrant workers into the global electronics industry
found Magar in her mountainside Nepalese village last year. He convinced
her to borrow more money than she’d ever seen, about $1,000, and pay
him to get her daughter a position at a factory in Malaysia.
Migrant workers recruited through such practices make electronic components that are critical to companies building defense and aerospace systems, medical devices, industrial technology and virtually everything else incorporating microchips and circuits, according to interviews with workers and supply-chain data compiled by Bloomberg.
An unregulated network of thousands of brokers induces workers into buying their jobs with fees often equal to a year’s wages at home. At the factories, employers often take their passports. If they want to leave, workers often have to hand over months of wages to get them back.
Buying Jobs
The Magar family is one of tens of thousands from some of Asia’s poorest corners who were sold on the idea of going deep into debt to buy jobs on production lines in Malaysia, a manufacturing hub for the global electronics industry. Interviews with 60 Nepalese workers from 22 companies showed that the transnational system for recruiting them is rife with abuses -- and extend far beyond the making of consumer devices, such as Apple Inc (AAPL:US).’s iPhone, and into virtually all of the technology running the modern world.Purna Kumar Tamang, 31, borrowed more than two years of earnings in his Himalayan village to pay a broker for a job at a Western Digital plant on the Malaysian island of Penang. Not long after he arrived, his wife grew seriously ill, trapping him between two grim options inside the hard-drive maker’s factory: leaving her alone so he could stay and work off their debt, or returning to care for her and face financial ruin.
“Those days were very hard,” Tamang said.
Obama Order
The companies that rely on these workers, either directly or through suppliers, include U.S. government contractors who now may be in violation of an executive order signed by President Barack Obama last year. Titled “Strengthening Protections Against Trafficking in Persons in Federal Contracts,” it bans the selling of jobs, no matter how big or small the fees, to overseas workers for companies that provide any goods or services to the U.S. government, according to lawyers who represent federal contractors and those who help trafficking victims. It also applies to subcontractors.While rules for enforcing the order are still being written, experts said the no-fee provision will be included and could have a dramatic effect on an industry that both touches so many products and relies so heavily on workers paying brokers for their jobs.
“The executive order says no recruitment fees,” said W. Barron A. Avery, who represents government contractors and subcontractors at the Washington-based law firm Wiley Rein LLP (1292L:US).
Jennifer Plitsch, a partner in the government-contracts practice group at Covington & Burling LLP (1175L:US), agreed on the potentially widespread impact. “Most industries have long supply chains,” Plitsch said, “and these rules will apply all the way down.”
Zero Enforcement
The no-fees provision of Obama’s order was “a huge victory for the anti-trafficking community,” said Martina Vandenberg, a former partner at Jenner & Block LLP (1180L:US) who established the Human Trafficking Pro Bono Legal Center last year. Enforcement will be crucial, she said, adding that human trafficking provisions have been “on the books for a decade, and there has been almost zero enforcement.”Electronics makers operating in Malaysia, including Sony Corp. and the $17.7 billion hard-drive maker Western Digital, rely almost exclusively on foreign migrant workers for production, according to interviews with workers, recruiters, and industry and Nepalese government officials.
Many
companies say they try to regulate recruiters’ behavior to mitigate
abuses, though interviews with the 60 factory workers show what happens
when principles collide with business needs: Even companies with strict
human-rights policies can create conditions that worsen the exploitation
of migrant workers. As previously reported by Bloomberg News, 40 other
Nepalese sent home from a Malaysian plant that made iPhone cameras
experienced similar treatment.
Off-Shoring Hub
Malaysia,
following its independence from British Colonial rule in 1957, turned
itself into a center for the rapidly off-shoring American technology
industry. International Business Machines Corp. (IBM:US)
and other semiconductor makers were among the first to build facilities
there. By last year, about one-third of the southeast Asian nation’s
total exports, or $72.3 billion, came from electronics.
In the
past quarter-century, the country’s prosperity has reduced unemployment
to 3.1 percent for Malaysian citizens. Their poverty rate sits at 1.7
percent, down from 15.5 percent in 1989. That has meant they’re largely
unwilling to take menial jobs, leaving the country’s electronics
factories to rely on foreign migrants for production. Other industries,
including construction and agriculture, do as well.
Human Exports
Nepal,
one of Asia’s most impoverished nations, is the second-biggest source
of foreign workers in Malaysia, behind neighboring Indonesia.
Groups
such as Verité, a Massachusetts-based nonprofit that conducts audits
for Apple in Malaysia and Taiwan, have for years warned that debts and
passport seizures can keep migrants entrapped as “bonded laborers” on
factory floors.
Purna Kumar Tamang is one of them.
Last
year, the promise of foreign wages from an American technology company
reached his village, a three-day walk from the nearest drivable road in
the Himalayan Mountains of northeastern Nepal. Tamang, his wife and two
children were living on the food they could grow and the roughly $50 he
made each month doing odd jobs. That put them on the edge of what the
World Bank defines as extreme poverty. It wasn’t hard for a recruiter in
a neighboring village to persuade him he could do better. Tamang
borrowed more than $1,300 to pay for a job at Western Digital’s plant in
Penang. “I had to earn some money because we’re poor,” he said.
Paying Agents
The
recruiters were working with a Malaysian manpower broker, which in turn
was working for Western Digital, company officials said.
Tamang
was among more than two-dozen men recruited from Nepal and sent to the
Penang plant in August and September 2012, according to interviews with
Tamang, 13 other workers and Western Digital (WDC:US) representatives. Each man said he paid the equivalent of $1,300 to $1,800 to Nepalese labor agents.
The
12-hour shifts at the plant were long, but Tamang was happy with the
money he was earning. It supported his family back home, serviced the
interest on his broker debt, whittled down the principal and paid some
of his expenses in Malaysia. Then, earlier this year, Tamang’s wife,
Manika, began to suffer severe uterine pains. By the spring, doctors
feared she might need a hysterectomy. She called him in Malaysia two or
three times a day, often in pain, never daring to ask him to return.
Daily Calls
“I
want to be home,” he said when he first met a reporter in Malaysia in
late May. The only thing keeping him in Penang, Tamang said, were the
debts from buying his job -- fees that were illegally excessive even
under the little-enforced labor laws of Nepal.
By July, he
couldn’t bear his wife’s daily calls any longer. He negotiated his
return home with the Malaysian manpower broker, which made him pay about
$600 (1,400 MYR) for his return ticket. Now back in Nepal, Tamang still
owes more than $300, plus monthly interest payments. The principal
alone is about six months of earnings in his village.
In an
initial interview, Michael Meston, Western Digital’s vice president for
human resources in Asia, said the company had eliminated the involvement
of Malaysian manpower agents in its recruitment process for the foreign
workers among its 24,000 employees in Malaysia. The company also
started paying all fees for foreign migrants, he said, giving Western
Digital one of the strongest policies against bonded labor in the
industry.
‘Difficult Decision’
Meston
then said he remembered that the company deviated from those practices
after a chain of events beginning with floods in Thailand two years ago
that crippled the company’s plants there. Western Digital, based in
Irvine, California, moved to quickly boost production for a critical
component on a new line in Penang last year.
Because of a
tight labor market and “the need to rapidly ramp up the manufacturing
facility, we made the difficult decision to make an exception to our
newly established process” at the Penang plant, he said, adding that
Western Digital hired a Malaysian broker who, in turn, worked with
recruiters in Nepal.
Tamang’s case exemplifies what the company
wants to avoid, Meston said: “The whole reason that we adopted, why we
changed our recruitment practices and our whole process for employing
people from overseas, is exactly to avoid the scenario you just
characterized, which is employees being charged excessive recruitment
fees and effectively having them feel like they can’t leave because they
have this massive debt.”
Partial Reimbursement
Meston
said the Nepalese men were supposed to have received about $600 extra
from Western Digital’s Malaysian manpower broker by the end of June --
almost a year after they arrived -- to reimburse a portion of the fees.
He said the company also was examining whether further compensation was
appropriate.
Only a handful of European and American electronics
companies pay the full cost of recruiting their foreign workers and
bringing them into Malaysia, said Shirley Lua, a senior marketing
manager for the Kuala Lumpur-based Winbond Group. The few who do in some
cases, including Western Digital, do it either because of human-rights
concerns, or because they need people quickly, and no-fee offers can get
workers on production lines faster, said Lua, whose firm runs
worker-outsourcing and recruitment agencies for manufacturers across
Malaysia.
Everybody Pays
Much more common, Lua said, is
requiring migrant workers to pay brokers in their home countries for
their jobs. That way, it’s the workers themselves, not the
manufacturers, who pay all costs associated with their own recruitment
and importation, as well as the premiums collected by agents at home.
“They
have to pay,” Lua said in her office this summer. “Every worker, they
come, they will pay.” In Nepal, they’re recruited through more than 750
officially registered foreign-employment agencies and a vast network of
unofficial channels. Each registered agency can extend its reach into
remote villages through dozens, if not hundreds, of sub-agents who
workers say often demand their own fees.
Such agents have helped
make the Nepalese people one of their country’s top exports. Nepalis
abroad wired home about $5 billion last year, or about one-quarter of
Nepal’s gross domestic product, according to World Bank estimates.
Although legal caps for how much brokers can charge exist on paper in
Nepal, the fees actually collected are virtually unregulated in both
Nepal and Malaysia, according to a report this summer from Verité, the
Amherst-based nonprofit that runs bonded-labor audits for Apple.
Conduct Code
Nepal
and Malaysia have no formal agreement on regulating the trade in
workers. Nepal faces severe resource constraints in trying to protect
its workers, as well as corruption, Verité, said in a report this year,
in part citing 2010 research for the World Bank.
Almost every
electronics company today has a code of conduct on the rights of
workers, or it subscribes to one established by the Electronic Industry
Citizenship Coalition, or EICC, based in Alexandria, Virginia. Its first
provision covers “freely chosen employment” and bars “excessive fees”
for workers that lead to conditions of bonded labor.
For Apple,
any worker in its 250 supplier-factories who is charged more than one
month’s net pay is considered a bonded laborer. If violations are caught
in subsequent audits, Apple pushes suppliers to compensate the workers
-- a policy that spokesman Chris Gaither said is tougher than any of its
competitors.
Excessive Fees
Fees paid by all but one of
the 60 people working for other companies and interviewed for this
story exceeded Apple’s limits. For at least 49 of them, the amounts they
said they paid were four times their monthly factory wages in Malaysia.
More than four of every five workers interviewed said they paid
fees greater than the most generous definition of “excessive” often
relied upon by the industry -- the roughly $800 maximum set by Nepal for
workers heading to Malaysia. Even that amount can be a year’s worth of
work or more in remote villages like Tamang’s.
More than
7 out of 10 electronics workers in Malaysia interviewed for this story
said that in order to pay agents for their jobs, they had to borrow
funds. Others used family savings.
The possibility of bonded
labor across the global electronics supply chain could be especially
troublesome for defense and aerospace contractors, as well as their
component makers, if Obama’s order is enforced. That’s because weapons
systems, satellites and aircraft are loaded with specially made
electronics.
Motorola Workers
Migrant workers in Malaysia for Motorola Solutions (MSI:US)
Inc., which makes walkie-talkies and other communications devices for
government and private-sector clients, said they paid fees and had their
passports taken. So did workers at two of its local suppliers.
Tama
McWhinney, a spokeswoman for Schaumburg, Illinois-based Motorola
Solutions, said it will investigate. In e-mailed statements, she said
the company pays all recruitment fees for workers, and “is proud of its
outstanding commitment to corporate responsibility and is committed to
ensuring that its workplaces and those of its suppliers comply with
legal requirements and appropriate labor rights and standards.” She also
said Motorola Solutions last year found four suppliers in violation of
its policy on bonded labor, and took quick corrective actions.
Passports Taken
Workers for Plexus Corp. (PLXS:US),
a U.S. company with $1.3 billion in market capitalization and four
connected plants in Penang, paid some of the highest fees among workers
interviewed. They also said they had their passports taken. Plexus’s
manufacturing operations are anchored in Penang, which accounted for 35
percent of its revenues in 2012, according to data compiled by
Bloomberg. Many of its customers sell to the U.S. government, including
several whose biggest clients are federal agencies, such as Raytheon Co (RTN:US)., General Dynamics Corp (GD:US)., Honeywell International, BAE Systems Plc., and Motorola Solutions, Bloomberg Industries data show.
Plexus
also provides contract manufacturing for smaller firms, including
Minelab Americas Inc., the U.S. unit of an Australian company that sells
metal-detecting equipment to the U.S. government. On Sept. 27, 2012,
two days after Obama signed his anti-human trafficking order, the U.S.
State Department awarded Minelab a contract for mine-detection gear,
according to federal contracting data. On Oct. 27 of this year, the
company received a shipment from the Plexus Penang complex of more than
four tons of “metal detectors and parts,” separate U.S. Customs records
show.
‘Serious Problem’
In an e-mail, Angelo Ninivaggi, a
senior vice president and the chief administrative officer for Neenah,
Wisconsin-based Plexus, said, “We do not believe that any items we
manufacture in Malaysia are sold under a U.S. government contract or
subcontract.”
He also said that media attention to the issue “has
positively raised industry awareness to a serious problem.” The use of
brokers “is common in Malaysia and many other countries and, if done
ethically, creates positive economic opportunity for individuals,” he
said.
Plexus’s own use of labor agents has been “in compliance
with laws, including U.S. laws,” Ninivaggi said.
“We remain committed to
principles of social responsibility, including the fair treatment of
all of our workers, and we will continue with a proactive and
comprehensive review of our practices in this area to ensure that abuses
do not exist with any individuals working in a Plexus facility.”
Brothers Bound
Among
those who worked for Plexus, Dambar Adhikari, a 29-year-old father of
two boys, said he paid more than $1,400 last year for a job at a
Malaysian electronics company called Nationgate Technology. So did his
brother, who went with him. Shortly after arriving, the men found they
were working for an outsourcing firm. Before long, they said, they were
reassigned to Plexus’s complex in Penang. Other Plexus workers said they
had paid fees of up to $1,700.
Earlier this year, Adhikari’s
youngest son, who is 3, was struck by a motorcycle on a roadway back
home in Nepal, where streets are clogged with people, cattle, buses and
scooters. After his wife pleaded with him on the phone, Adhikari said he
decided to swallow his debt and return home.
He spent more than a
week trying to get his passport back. The main challenge was figuring
out who had it. It was a man at a firm in Penang that handled his pay
for Plexus. He wouldn’t release it until Adhikari paid the man’s firm
about $800, Adhikari said, even though he had produced medical reports
detailing his son’s condition. Adhikari said his brother is now trapped
in Malaysia by both of their debts.
Core Violation
Under
corporate and industry standards, as well as U.S. law governing federal
contractors and subcontractors, taking and holding passports of foreign
migrant workers is a core violation of their human rights.
Yet
Lua, the senior marketing manager for Winbond, said it’s standard for
her firm. “Our driver will deliver the workers -- 10 workers, 10
passports -- through HR, to human resources,” she said. Employers keep
passports, Lua said, so workers don’t become “runaways.”
Hundreds
of Sony workers from Nepal also owe debts to labor agents back home,
according to interviews with seven workers and the former Nepalese labor
attaché to Malaysia, Surya Bhandari, who worked with Sony. The company
recruits women from Nepal to work at the Sony EMCS audio plant in
northern Malaysia. They are not supposed to make up-front cash payments
to get their jobs, the workers and Bhandari said.
Double Dipping
Instead, each woman was required to
sign a “foreign worker loan agreement” with the Nepalese manpower agency
that sent her to Malaysia. In them, the women agreed “to make repayment
for the loan to the agent,” even though they never received any funds
from these so-called loans, according to the interviews and a copy of
the agreement obtained by Bloomberg News.
Sony then automatically
deducted “installment” payments for the Nepalese manpower agents from
the women’s monthly checks, according to the loan agreement, Sony
payroll records and interviews with workers.
The deductions went
up 35 percent this year, according to the workers. Even with the
agreements, four of the seven Sony women interviewed for this story said
the Nepalese labor recruiters double-dipped by also forcing them to pay
from $260 to $300 before leaving.
Female Preference
In
an e-mailed statement, Sony spokesman George Boyd said the company was
“looking into the matter” and that the company’s policy is to “adopt
sound labor and employment practices and to treat its employees at all
times in accordance with the applicable laws and regulations of the
countries and regions in which it operates.”
Many factory
operators in the region prefer to hire women because they are viewed “as
more controllable,” said Dionne Harrison, a London-based executive for
Impactt, a consultancy that has worked with Apple and other companies on
labor issues. “They tend to be more loyal and they make less trouble.”
Women
can face special indignities, including harassment and mandatory
pregnancy testing that can lead to their firing, Harrison said.
In
the case of the Magar family, their daughter was dismissed and sent
home to her mountainside village in July after failing a pregnancy test.
That happened before her mother had a chance to repay the $1,000 they
borrowed to send her.
Because the girl was 16 and couldn’t
legally work in Malaysia, her mother said the recruiter persuaded her to
borrow $500 more to falsify a passport listing the girl’s age as 21.
Each extra year cost $100, she said.
Falsified Documents
The
girl went to work for a Malaysian company called JCY International,
records show. It has supplied hard-drive components to Samsung, Western
Digital, Seagate and others.
In an e-mail, Calvin Lim, a
spokesman for JCY and its financial controller, said falsified documents
make it impossible for the company to detect the true age of a worker.
He said the company has “a very clear policy of not hiring underage
workers, and this message had been conveyed to all recruitment agents.”
He also said JCY would try to further tighten recruiting practices.
He
also said that Malaysian immigration authorities won’t allow pregnant
workers to renew their annual work permit. “We have no choice but to
send her back to Nepal upon finding out that she had tested positive
during her mandatory annual medical,” Lim said. “We were at all times
not aware that she was underage.”
Lim said JCY didn’t know “the
exact amount foreign agents charge, and the way the workers raise their
money.” But he said the company would investigate and, “if there is any
wrongdoing, we will ask the agent or make other necessary arrangement to
refund or compensate the worker and family.”
The firing of
Magar’s daughter, now 17, gave her a chance to finally meet the man who
had bankrolled the family’s broker fees. After hearing her daughter had
been sent home, he showed up at their farm unannounced and demanded his
money, with interest. “He threatened us,” she said.
Now that her daughter isn’t working, she has no idea how she’ll come up with the payments.
To contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.net
