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PETALING JAYA: Malaysian companies that rely heavily on foreign labor need to strengthen their practices, as reports of forced labor have emerged in the country.
Most developed countries are placing emphasis on environmental, social and corporate governance (ESG) initiatives to measure the sustainability and social impact of companies and are strengthening their labor practices as part of ESG measures, which previously focused more on environmental issues.
The new approach is having a significant impact on Malaysian businesses as the US Customs and Border Protection (CBP) has banned imports of palm oil and palm products from FGV Holdings Bhd.
following an investigation into allegations that he uses forced labor.
The US agency said the ban was the result of a year-long investigation that “revealed signs” of forced labor by the world’s largest producer of crude palm oil.
This comes on the heels of Top Glove Corp Bhd, the world’s largest producer of rubber medical gloves, received an arrest warrant from its CBP subsidiaries, also for alleged forced labor problems in July.
CGS-CIMB Research Director of Research Ivy Ng (pictured below) noted that CBP’s palm oil import ban would restrict FGV’s access to other markets and affect other palm oil players as well.
“The concern is that this may lead other countries or FGV clients to reassess their purchase of palm oil from the group as a result of ESG concerns,” Ng said in a report.
“This may have some implications for other palm oil players as well, as Brenda Smith, executive assistant commissioner of CBP’s trade office, has said that CBP had received allegations about the palm oil industry in general and asked the US importers to investigate the labor practices of their suppliers, “he added.
In 2019, FGV obtained 5.3% of its total revenue from the US and Canada, Ng noted.
Most of its revenue, about 56%, came from Malaysia, 10% from India, 7% from Pakistan, 4.3% from China, 2.5% from Europe and 15% from others markets, mainly in Asia.
According to a news report, Human Resources Minister Datuk Seri M. Saravanan revealed that another “major” palm oil plantation company could face the same fate as FGV.
He said the ministry will seek detailed information on the alleged use of forced labor by FGV in its production process.
FGV, in response to CBP, said it has been taking concrete steps over the past few years to demonstrate its commitment to respect human rights and uphold labor standards.
In a statement yesterday, FGV expressed its disappointment at CBP’s decision despite steps taken to show its commitment to human rights and respect labor standards.
FGV said several efforts have been made to honor that commitment, including strengthening its procedures and processes in hiring migrant workers.
The group said it adopted its Guidelines and Procedures for Responsible Recruitment of Migrant Workers in 2019 in line with international standards. He stressed that he did not participate in any recruitment or employment of refugees, nor did he retain the passports of his workers.
FGV said that over the past three years, it had invested around RM350,000 to improve housing facilities for its workers by building new residences on its plantations across the country.
“Since August 2019, FGV has been communicating with CBP through our legal counsel and has presented evidence of compliance with labor standards. He will continue to collaborate with CBP to clear the FGV name, ”he said.
Malaysian Palm Oil Association (MPOA) Executive Director Datuk Nageeb Wahab (pictured below) said Malaysia’s plantation industry was subject to the principles of Malaysia’s Sustainable Palm Oil Certification Scheme (MSPO), a mandatory standard endorsed by the Malaysian government.
“Any non-compliance with these standards will result in the withdrawal of certification and they will not be able to operate,” he said.
He said the MPOA recognized that Malaysian planters have generally adhered and observed high standards of business behavior.
“However, there may be a handful of rogue elements that may be violating Malaysian laws by hiring illegal workers.
“These rogue elements are the exception in an industry that is highly regulated and closely watched.”
Malaysia came under the microscope of the United States in July when an arrest warrant was issued on products of Top Glove Corp Bhd subsidiaries. The company said last month that it had submitted an audit report to CBP in relation to the forced labor allegations filed against it.
In a statement yesterday, Kossan Rubber Industries Bhd It said it has finalized a remediation plan for its migrant workers after thoroughly investigating the situation and consulting with multiple stakeholders.
“The total remediation fee to be paid to migrant workers is estimated at RM50 thousand,” the company told the stock exchange yesterday.
The first payment amounting to about RM10,000 will be paid in November, Kossan said.
The remediation payment program will be completed within 18 months.
“Kossan is committed to ensuring that migrant workers are free from debt bondage or forced labor in line with our previous implementation of the zero-cost hiring policy,” he said.
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