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.
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.
The
recruiters were working with a Malaysian manpower broker, which in turn
was working for Western Digital, company officials said.
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.
“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.
‘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 reporter on this story: Cam Simpson in London at csimpson13@bloomberg.net
To contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.net
Source:
Bloomberg News, 25/11/2013, Migrants' Fate: $1,000 Debt for 12-Hour Factory Shifts
Zahid (right)
told the Dewan Rakyat that only 10 to 15 percent of serious crimes in
the country were committed by foreign workers in the country, while a
large majority of the crimes were still carried out by Malaysians.
