Malaysia labour abuse is a shot in economic foot

Malaysia should be booming as manufacturers exit China. But it isn’t, and its own short-sighted labour policies are to blame.
For decades, Malaysia served as an export manufacturing hub, boosted by location and access to low-cost migrant labour. Those migrants haven’t returned as the Covid-19 pandemic eased.
According to a recent analysis by Reuters, as of June the country was short 1.2 million workers in key sectors, including manufacturing, semiconductors and palm oil. Understaffed firms are forgoing billions in sales and preventing their country from taking full advantage of China’s turn inward.
Diplomats for countries that supply workers to Malaysia have cited poor labor conditions as a key factor in restraining labour’s return. It’s not a new accusation. Addressing Malaysia’s long history of mistreating migrant labourers is both a human rights imperative and a matter of economic self-interest.
Malaysia’s modern economy grew quickly during the middle decades of the 20th century, boosted by its proximity to major trade routes, its openness to foreign investment and relatively stable governance.
By the mid-1990s, the country had achieved full employment and boosted educational attainment. Locals once willing to work in factories and plantations earned the credentials and aspirations to seek jobs that offered better pay and working conditions.
But even as opportunities opened, Malaysia’s economy relied on cheap labour for everything from plantation work to hotel housekeeping. So the country opened its doors to migrants. In 1995, there were around 1.2 million foreigners working in the country, mostly in low-skill jobs like agriculture and manufacturing, and in service-sector jobs like maids.
Over three decades, the demand for low-skilled labor hasn’t declined: the World Bank estimated there were as many as 3.26 million migrant laborers in Malaysia in 2019, comprising around 20% of the workforce.
Many migrants arrive legally, sponsored by employers. But legality has its drawbacks, including the need to pay back recruitment fees, contracts that bind workers to employers exclusively, and the ugly tendency of employers to seize migrant passports and wages as leverage against demands for better conditions.
For example, Malaysia’s rubber glove companies, key suppliers to medical facilities worldwide, have repeatedly been found subjecting workers to forced labour, forced overtime and crowded, unsanitary living conditions — all while withholding wages and passports. In 2020 and 2021, the situation was so dire for these thousands of workers that the US government repeatedly barred imports of gloves from top Malaysian manufacturers, despite Covid-related needs. It’s not just gloves, either.

—Bloomberg