A Danwatch investigation

The labour supply chain: how foreign workers end up indebted in Malaysia

Workers’ hostels in an industrial area on the outskirts of Kuala Lumpur

Photos: Amin Kamrani

Editor: Jesper Hyhne

Research: Sara Kaas-Petersen
28. June 2019
Young workers from around Asia may end up paying more than 4.000 euros to get employed in Malaysia. A whole “syndicate” of agents profit from this business which results in “ridiculous amounts of money being paid under the table”, according to experts.
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Since the 1990s, Malaysia’s manufacturing industries have been highly dependent on the cheap labour of foreign workers. Last year, there were 2,2 million registered migrants in Malaysia and the number of undocumented migrant workers was estimated to be between 2 and 4 million according to the International Organization for Migration. Today those workers mainly originate from Bangladesh, Nepal, Myanmar and Indonesia.

About the investigation

Danwatch has been to Malaysia to meet some of the hundreds of thousands of migrant workers that play a vital part in the country’s electronics industry.

In Malaysia, we interviewed 12 workers from three different factories and have since conducted a number of interviews with workers via video calls.

The investigation was supported by the EU-funded project Make ICT Fair and published in collaboration with Setem.

While high-skilled and semi-skilled migrant workers are often recruited at high cost by employers, uneducated low-skilled workers mostly have to pay for their work and recruitment in Malaysia.

These workers often end up paying extortionate fees for recruitment into low-skilled work, which may plunge an entire family into debt and make workers vulnerable to debt bondage in Malaysia.

Workers like Alina and Binsa, who Danwatch interviewed, claim to have paid 950-1100 euros in recruitment fees – the equivalent of 4-5 months’ basic wages, which they used their first year in Malaysia to pay off.

But Malaysian media investigations frequently expose how workers – especially from Bangladesh – have payed up to around 4.200 euros just to get work permit approvals and a flight ticket to Malaysia.

“Ridiculous amounts under the table”

The reason recruitment fees can grow to such a size is mainly because of the amount of various actors making money from the migrants on their route from their countries to Malaysia, workers rights advocates in Malaysia claim.

According to Andy Hall, a migrant worker rights specialist in Southeast Asia, a whole “syndicate” of recruitment agents and sub-agents in both Malaysia and the origin countries result in “ridiculous amounts of money being paid under the table.”

Hall explains that most often, the first actor in the labour supply chain is the Malaysian company recruiting the worker, who tries to secure the highest amount of profit by offering a so-called ‘labour demand letter’ to the highest bidder amongst Malaysian recruitment agencies.

The Malaysian agent then sells the demand letter to the highest bidding recruitment agent in the migrants’ country of origin, and this agent then forwards these costs down the supply chain to a number of subagents.

The subagents then go to villages and towns where they recruit migrant workers and ask them to pay excessive fees, covering the profits of all the actors involved.

If the worker cannot pay that amount immediately, he or she then often have to work off the fee when arriving at the factory in Malaysia. Here, the employer may also be unwilling to pay the official Malaysian levy for employing foreign workers. Since 2018 the employer is supposed to cover this cost, though this is per 2018 supposed to be covered by the employer.

“On top of this, there may be corruption costs at each stage of the recruitment process including for visa and other documents as well as additional expenses for housing and transportation – all paid by the worker”, Andy Hall says.

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