A Perennial Offender, Malaysia Need Not Be on U.S. Forced Labor Watch List Forever

By Simon Tran Hudes and Danielle Fallin
In June 2021, the State Department released its annual Trafficking in Persons (TIP) report. At more than 600 pages, it provides official findings on the state of forced labor around the globe. Among the world’s worst offenders this year is Malaysia, which was downgraded from a Tier 2 Watch List designation to Tier 3, the worst ranking. Violations in Malaysia run the gamut from sex trafficking to debt bondage. But the report primarily highlights the forced labor of migrant workers, especially in the rubber manufacturing and palm oil industries.
Malaysia places the burden of victim identification on those who are being forcefully trafficked. Victims who are willing to speak up against their employer face risks including forfeiting potential income, shelter, and work authorization. At worst, they risk criminalization and deportation by Malaysian authorities. The threat of these consequences leaves migrant workers vulnerable to the kinds of exploitation outlined in the TIP report and actively encourages silence among victims of forced labor.
This most recent downgrade came on the heels of a formal U.S. Customs and Border Protection (CBP) finding on March 29 that Malaysia’s Top Glove, the world’s largest rubber glove manufacturer, had violated forced labor standards. This CPB finding was a follow-up to a 2020 withhold release order barring the import of Top Glove products due to violations including, “debt bondage, excessive overtime, abusive working and living conditions, and retention of identity documents.” This is not the first time Malaysia has been in hot water with the United States for violating international labor standards. The country has bounced between Tiers 2 and 3 for years, unable to show convincing evidence of sustained efforts to investigate and prosecute allegations of forced labor.
Figure 1: Malaysia’s Trafficking in Persons Tier Ranking By Year (Source: U.S. Department of State)
At Tier 3, Malaysia could face sanctions which would restrict its ability to receive some foreign aid or loans from multilateral banks. Between 45 and 90 days after submission of the annual TIP Report, President Biden is legally required to decide whether and to what extent these restrictions will be applied. Malaysia, for its part, appears to have taken the downgrade seriously, and so is likely to receive a presidential waiver. Malaysian Human Resources Minister M. Saravanan recently pledged to ramp up anti-human trafficking efforts and increase prosecutions of firms involved in forced labor. But the issuance of a waiver does not remove the stigma of being on the watch list or the threat of future sanctions. Ultimately, it will take more than promises for Malaysia to permanently improve its standing with Washington.
Direct interactions between the Biden administration and the Malaysian government have been limited to date. Former prime minister Muhyiddin Yassin publicly congratulated then-president-elect Biden on his victory and expressed a desire to strengthen the U.S.-Malaysia comprehensive partnership and tackle Covid-19. But the two never spoke directly, and the new prime minister, Ismail Sabri Yaakob, is likely to remain more focused on Malaysia’s domestic political concerns during the early days of his term. Meanwhile, Malaysia has not been included in the three high profile visits to Southeast Asia from Biden administration officials—those of Deputy Secretary of State Wendy Sherman in early June, Defense Secretary Lloyd Austin in late July, and Vice President Kamala Harris’s visit in August. There are likely many reasons for this, among them Malaysia’s political turmoil, accelerating Covid-19 cases, and focus by the administration on regional partners perceived as more strategically vital at the moment. Malaysia’s history of forced labor and mistreatment of migrant workers presents yet another hurdle to closer ties.
The Biden administration’s 2021 trade agenda places workers’ rights at the forefront of U.S. trade policy, prioritizing efforts to deter exploitative labor practices. Numerous Malaysian companies in the last 12 months have come under the scrutiny of CBP for labor violations. In the midst of the pandemic in late July 2020, the Malaysian government limited the employment of migrant workers to construction and agriculture, despite the soaring demand for labor in specific sectors such as rubber glove manufacturing. In response to labor shortages, the Human Resources Ministry announced in August that all industries could hire migrant workers, but only those who are already in the country. The undersupply of labor for low-skilled jobs coupled with increased demand for products led to greater indications of forced labor in exported products to the United States such as rubber gloves and palm oil. Despite the Malaysian government passing the Anti-Trafficking in Persons and Smuggling of Migrants Act (ATIPSOM) in 2007, Malaysia’s forced labor rates have remained stubbornly high. There are many reasons for this, including a lack of transparency, noncompliance and discordance among government agencies, and restrictive labor laws. But the most important factors have been insufficient enforcement of anti-trafficking efforts and the criminalization of trafficking victims.
Malaysia hires many migrant workers to meet increasing production demands. Approximately 84 percent of the palm oil industry’s labor force consists of migrant workers. The cornerstones of modern forced labor are debt bondage and restrictive labor laws. Debt accrued from corrupt recruitment agencies can accumulate exorbitant fees for migrant workers to obtain work permits in Malaysia. The 1959 Immigration Act, mandating fixed-term contracts, prevents migrant workers from easily leaving workplaces with exploitative labor practices. ATIPSOM’s narrow definition of coercion mandates the presence and evidence of physical restraint, which drastically curtails investigations into forced labor violations. This definition ignores the widespread abuse of the 1966 Passports Act that requires employers or other lawful authorities to maintain possession of foreign passports. Employers engaging in forced labor use the possession of passports and the threat of deportation and legal action to beget overtime work, lower wages, and restricted freedom of movement of migrant workers.
In addressing forced labor, the Malaysian government has systematically penalized victims of human trafficking as criminals. Authorities view foreign labor as a threat to security instead of a question of human rights. The government is more likely to find migrant workers to be in violation of local laws rather than victims of forced labor, preventing them from receiving proper state support. Allegations of forced labor often go unaddressed, and the overarching threat of arrest prevents individuals and civil society groups from adequately reporting cases of human trafficking. At the higher levels of government, the Human Resources Ministry’s funding is not proportional to the monumental presence of forced labor in the country. Successful prosecution of forced labor perpetrators is often undermined by the lack of cross-border collaboration with foreign law enforcement agencies to unveil and uproot trafficking rings. Overall, there is insufficient coordination between government agencies, including the Attorney General’s Chambers, anti-trafficking law enforcement agencies, and the Human Resources Ministry. Declarations of meaningful reform are closely followed by a lack of implementation. In 2020, Malaysia’s anti-trafficking council adopted victim identification standard operating procedures but did not report its execution, rendering this effort moot.
The United States’ long-running criticism of Malaysia over forced labor ultimately comes down to Kuala Lumpur’s refusal to take meaningful action, especially with regard to the palm oil and rubber manufacturing industries. Progress on this front would remove one hurdle to U.S.-Malaysia cooperation on other priority areas, including closer coordination on public health and economic recovery efforts.
Simon Tran Hudes is a research associate for the Southeast Asia Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Danielle Fallin is a program coordinator and research assistant with the Southeast Asia Program at CSIS.
Danielle Fallin

Danielle Fallin

Former Research Associate and Program Manager, Southeast Asia Program