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FORCED LABOR IN THE PRODUCTION OF ELECTRONIC GOODS IN MALAYSIA A Comprehensive Study of Scope and Characteristics © Verité September 2014 Verité is a global NGO with a mission to ensure that people around the world work under safe, fair, and legal conditions. Cover photo courtesy of © International Labour Organization ACKNOWLEDGMENTS Verité thanks the United States Department of Labor for financial support of this research under Cooperative Agreement number IL-23980-13-75-K. The statements herein do not necessarily reflect the views of policies of the United States Department of Labor, nor does mention of trade names, commercial products, or organizations imply endorsement by the United States Government. This research would not have been possible without the hard work and dedication of many people in many different locations. Verité wishes to recognize in particular the efforts of the field research team in Malaysia, each of whom made personal sacrifices, working nights and weekends, in order to complete this research and make a contribution toward improving the work and lives of workers in Malaysia. Most importantly, Verité wishes to thank the workers who agreed to participate in this study, each of whom did so at great personal risk. These workers gave two or more hours of their very limited free time to the project, typically agreeing to meet on weeknights after a long day of work, or on their only day of rest. They bravely and altruistically shared their personal experiences, knowing that they would not experience any direct or immediate improvement in their lives from the study, but in the hopes that the shared understandings emerging from the research would serve as a catalyst for change. This report is dedicated to them. Table of Contents EXECUTIVE SUMMARY 8 List of Abbreviations 16 1. INTRODUCTION 18 2. BACKGROUND 21 2.1 The Sector 22 2.2 Demographic Profile of Workers in the Malaysian Electronics Industry 27 2.3 Labor Recruitment and Employment Agent Systems 29 2.4 Review of Research on Working Conditions in the Malaysian Electronics Industry 41 3. IMMIGRATION AND LABOR POLICY CONTEXT 44 3.1 Immigration Policy 45 3.2 Policy Governing the Recruitment, Management, and Labor of Foreign Workers 54 4. RESEARCH METHODOLOGY 59 4.1 Research Design 60 4.2 Sampling Approach 60 4.3 Profile of Study Sample 65 4.4 Data Collection Process 65 4.5 Data Accuracy 68 4.6 Human Subjects Considerations 69 4.7 Limitations of the Study 71 5. DETERMINING THE PRESENCE OF FORCED LABOR: ANALYTICAL APPROACH 75 5.1 Answering the Guiding Research Questions 76 5.2 The ILO Framework 78 5.3 Operationalizing the ILO Framework 80 6. RESEARCH FINDINGS 82 6.1 Demographic Characteristics of the Sample 83 6.2 Factors that Affect the Work and Life of Foreign Workers and Their Vulnerability to Forced Labor 86 6.3 Indicators of Forced Labor by Dimension 98 6.4 Findings of Forced Labor 170 7. DISCUSSION AND CONCLUSION 178 8. APPENDICES 182 Appendix 1: Survey Form 183 Appendix 2: Indicator Formulas and Definitions 204 Appendix 3: Incidence of Menace of Penalty Indicators 209 Appendix 4: Approach to Expert/Stakeholder Consultations 210 Appendix 5: Additional Information on the Analytical Approach to Determining Forced Labor 212 9. REFERENCES 218 BIBLIOGRAPHY 219 ENDNOTES 226 List of Tables Table 2.1 Sub-sectors within the electronics and electrical industry 22 Table 2.2 Number of establishments, employment and gross value output of the electronics sector 23 Table 2.3 Labor migrants in Malaysia by country of origin 28 Table 3.1 Immigration offenses and penalties 46 Table 3.2 Employers’ liabilities for immigration offenses 47 Table 4.1 2008 gross value output and employment of select Malaysian states for ISIC Rev.3.1 industry code 321 - Manufacture of electronic valves and tubes and other electronic components 64 Table 4.2 Major demographic characteristics of the sample 65 Table 6.1 Age of all workers in sample and length of time in Malaysia among foreign workers in sample 84 Table 6.2 Facility characteristics, employment arrangement, products made and job functions performed of all workers in sample 85 Table 6.3 Incidence among foreign workers of encounters with immigration authorities, police, or RELA and nature of such encounters 88 Table 6.4 Workers who paid recruitment fees, and who had to borrow to pay recruitment fees, by country of origin 101 Table 6.5 Ability to change or refuse employment arrangement upon arrival in Malaysia among foreign workers 108 Table 6.6 Incidence of “deception about the nature of the work” and “deceptive recruitment” indicator among all workers and foreign workers according to length of time in Malaysia 114 Table 6.7 Aspects of the job about which workers were deceived 115 Table 6.8 Incidence of “limited freedom of movement” indicator across major demographic variables 118 Table 6.9 Incidence of “forced overtime” indicator using both the legal and industry- standard limits on hours per week 127 Table 6.10 Component analysis of “degrading living conditions” indicator among all foreign workers 132 Table 6.11 Incidence of “no freedom to resign” indicator across major demographic variables 137 Table 6.12 Penalties included in composition of “no freedom to resign” indicator 138 Table 6.13 Incidence of “forced to work for indeterminate period to repay outstanding debt or wage advance” indicator across major demographic variables among workers who reported ongoing debt 146 Table 6.14 Average recruitment fees for workers who had to borrow and workers who did not 147 Table 6.15 Consequences reported by workers if they left their job before paying off their job-related debt 151 Table 6.16 Incidence of clusters of indicators of penalty across major demographic variables 157 Table 6.17 Number of forced labor indicators exhibited by forced labor victims 171 Table 6.18 Average recruitment fees for respondents with positive and negative forced labor determinations 171 Table 6.19 Incidence of forced labor across major demographic variables 172 Table 6.20 Incidence of indicators of forced labor among all respondents 174 Table 6.21 Number of forced labor indicators exhibited by all study respondents 175 List of Figures Figure 6.1 Average recruitment fees by country of origin among foreign workers who reported paying recruitment fees 102 Figure 6.2 Range of recruitment fees paid 105 Figure 6.3 Range of recruitment fees paid by country of origin for top migrant-sending countries 105 Figure 6.4 Years working in Malaysia among respondents who reported ongoing debt 145 Figure 6.5 Average recruitment fee and average monthly wage by country of origin 148 List of Textboxes Box 2.1 Complexity of Electronics Supply Chains 25 Box 2.2 Sample Menu of Services 33 Box 2.3 Foreign Worker Recruitment Consultancy 38 Box 5.1 Operational definition of forced labour 76 Box 5.2 Identification of cases of forced labour of adults 78 Box 5.3 Examples of the use of indicators of forced labor of adults 79 Box 6.1 Case Study: Three Burmese workers detained during January 2014 raids 91 Box 6.2 Case Study: Workers transferred by agent 96 Box 6.3 Bishal: Difficult to pay off recruitment-related debt 104 Box 6.4 Win: Deceived by recruiters, unable to save money to send home 110 Box 6.5 Jan: Deceived during the recruitment process, fired and deported due to fainting spell 111 Box 6.6 Bishal: Deceived about his employer 113 Box 6.7 Win: Passport retention and limited freedom of movement 120 Box 6.8 Bishal: Passport retention 123 Box 6.9 Ravin: Difficulty in retrieving passports 123 Box 6.10 William: Excessive recruitment fees 150 Box 6.11 Raj: Debt burden 152 EXECUTIVE SUMMARY 8 Forced Labor in the Production of Electronic Goods in Malaysia: A Comprehensive Study of Scope and Characteristics © Verité EXECUTIVE SUMMARY Introduction Malaysia’s electronics sector workforce includes hundreds of thousands of foreign migrant workers who come to Malaysia on the promise of a good salary and steady work – an opportunity to make a better life for themselves and their families. But many are subject to high recruitment fees, personal debt, complicated recruitment processes, lack of transparency about their eventual working conditions, and inadequate legal protections. Unscrupulous behavior on the part of employers or third-party employment agents1 can exacerbate vulnerability to exploitation, but the system in which foreign workers are recruited, placed and managed is complex enough to create vulnerability even in the absence of willful intent to exploit. The conditions faced by foreign electronics workers in Malaysia have the potential to result in forced labor. In 2012, Verité received funding from the US Department of Labor to conduct a study to determine whether such forced labor does, in fact, exist in the production of electronic goods in Malaysia. The Study Verité conducted a combination of desk and field research, employing a mixed methods approach to field data collection. A total of 501 electronics workers were interviewed using a quantitative survey form by a team of twelve researchers. The sample included foreign workers from seven countries, as well as Malaysian nationals. A set of longer, semi-structured interviews were also conducted, to supplement the quantitative data. These interviews were used to explore particular aspects of vulnerability to forced labor, and to profile how various risk factors can combine to trap workers in their jobs. Regional and global stakeholders from civil society, government and business were also consulted. Interpretation of the data was guided by the International Labor Organization’s survey guidelines to estimate forced labor. Throughout the process of applying the ILO framework, Verité erred consistently on the side of caution, choosing to define forced labor narrowly to ensure that positive findings were always based on solid, unambiguous evidence – even when this meant leaving additional evidence aside that might also have contributed to a forced labor determination.

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