MALAYSIA’s reputation as a global production base and investment destination is in jeopardy if the Government does not act on allegations of forced labour in its supply chain, said experts.
According to a report by the South China Morning Post, they said that such allegations can affect Malaysia’s stock prices too as more international investors are prioritising a firm’s compliance with environmental, social and governance (ESG) guidelines for their operations these days.
“The pandemic had served as an accelerator for ‘responsible investment’ and this was clear from movements in the financial markets.
“Companies with the best ESG ratings tend to see a higher volume of shares traded, showing that investors were more ‘aware of the ESG implications of their investments’.
“While this is no guarantee of future strength, the clear recent outperformance of ESG best-in-class stocks both in the US and in Europe should prompt more companies to integrate ESG in their models and heighten interest in ESG criteria,” said European asset manager Amundi’s head of ESG research, engagement and voting policy Caroline Le Meaux.
In the last two years of the pandemic, the US Customs and Border Protection (US-CBP) had cracked the whip on companies alleged to have been using elements of forced labour in their supply chain.
With that, the US authority had sanctioned products from Sime Darby and FGV Holdings, prompting others buyers to block both companies’ products too.
Top Glove Bhd, the world largest medical glove manufacturer, also received a ban in July 2020 but the sanction was lifted after the company improved working and living conditions for their employees.
On Tuesday, Canada terminated its sourcing contract with another Malaysian glove maker Supermax Corp following allegations about forced labour.
On that note, Sunway University’s economics professor Yeah Kim Leng warned the Malaysian Government that such sanction could become “harmful” if European countries starts emulating the US in terms of enforcing ESG and its sustainability practises.
“The ban by the US also highlighted how the Malaysian Government was unable to prevent elements of forced labour, particularly by reputable firms.
“In terms of direct losses by companies who faced the bans, these could be in the ‘hundreds of millions’ although actual losses could be lower if the goods were diverted to other markets,” Yeah opined.
Worst case of forced labour practises
Independent migrant worker rights specialist Andy Hall said that he was primarily focused on forced labour issued in Malaysia, calling it “the word migrant situation he had ever experienced”.
“I have submitted information to major law enforcement agencies in North America, alleging forced labour in several Malaysian manufacturers.
“I focused on Malaysia as it’s the worst migrant situation I have ever experienced, anywhere in the world,” he claimed.
Malaysia has around two million documented foreign workers with another estimated two million being undocumented. Many come from Indonesia, Bangladesh and Nepal, according to the International Organisation for Migration. – Jan 20, 2022.
