KUALA LUMPUR, Dec 21 (Reuters) – Malaysia’s government and companies must address mounting allegations of workplace abuse of migrant labourers who fuel the country’s economy, or face risks to its export-reliant growth model, experts warn.

Malaysia has for decades banked on migrant workers to power mainstay manufacturing and agriculture, becoming an integral part of the global supply chain for products as diverse as semiconductors, iPhone components, medical gloves and palm oil.

But as the reliance on foreign labour has increased, so have complaints of abusive working and living conditions for workers, who come mainly from Indonesia, Bangladesh and Nepal.

Southeast Asia’s third-biggest economy must reform its labour laws and improve enforcement, while companies should invest to ensure better conditions, said 11 analysts, ratings agencies, researchers, corporate consultants and activists interviewed by Reuters.

In the past two years, seven Malaysian firms, including the world’s biggest glove maker and palm oil producer, have faced U.S. import bans over allegations of forced labour. Last month, high-tech home-appliance maker Dyson Ltd cut ties with its biggest supplier, a Malaysian firm, over labour conditions.

“It is a wakeup call,” said Anthony Dass, head of AmBank Research in Kuala Lumpur. “If Malaysia does not change and with the global focus on environmental, social and governance practices, businesses could move to other countries.”

Malaysia’s labour department did not respond to questions about changing the country’s labour laws, and the trade ministry did not reply to questions on potential investment losses.

Human Resources Minister M. Saravanan acknowledged early this month that “forced labour issues” had “affected foreign investors’ confidence towards Malaysia’s supply of products.” He urged companies to protect workers’ rights and welfare.

“Malaysia has become the poster child” for forced labour issues, said Rosey Hurst of London-based ethical trade consultancy Impactt. “And that starts to do economic damage. Real change needs to happen.”

Hurst said queries from global investors about Malaysia’s labour practices have increased, including from asset managers and private equity firms.

Other Asian manufacturing hubs, including China and Thailand, face similar accusations of labour abuses. But investors have taken an immediate interest in recent scrutiny of Malaysia, and this could affect future foreign direct investment and supply contracts, analysts say.

FORCED-LABOUR INDICATORS

Malaysian officials have acknowledged excessive overtime hours, unpaid wages, lack of rest days and unhygienic dormitories. Those conditions are among 11 indicators of forced labour, according to the International Labour Organisation (ILO).

Malaysian law allows more than the widely accepted maximum of 60 hours of work a week and allows work on what are supposed to be rest days.

“The legal framework in Malaysia allows, and indeed sometimes insists on, practices which are on a collision course with the ILO 11 indicators of forced labour,” Hurst said.

Malaysia last month launched a National Action Plan on Forced Labour to eliminate such practices by 2030.

The country is the world’s second-largest palm oil exporter and its chip-assembly industry accounts for more than a tenth of global chip trade. Malaysia had about 2 million foreign workers in late 2020, 10% of its workforce and double that of 20 years ago, according to the Department of Statistics. The government and labour groups estimate as many as 4 million more undocumented migrants work in the country.

Foreign workers are concentrated in manufacturing, agriculture, construction and services.

As Malaysians shy away from lower-paid, labour-intensive work, the country’s electronics and palm oil companies especially are relying on migrants, whose treatment is gaining scrutiny.

Malaysia has had the most U.S. Customs and Border Protection bans after China. In July, Washington put Malaysia on a list with China and North Korea for limited progress in eliminating labour trafficking, its lowest ranking.

Dyson terminated its contract with parts maker ATA IMS Bhd just months after the Malaysian firm posted record profits. ATA has acknowledged some violations, made some improvements and said it now complies with all regulations and standards.

ATA told Reuters in a statement it is stepping up practices for sustainable and equitable growth amid scrutiny of the company and Malaysia.

“For ATA, this has meant relooking at some of the practices that have long been a norm, not just in Malaysia but overseas too, for instance, excessive overtime and more engagement between management and rank and file employees,” the company said.

‘MODERN SLAVERY’

When the United States last year banned Top Glove Corp , the world’s biggest medical glove maker agreed to pay $33 million to workers to reimburse recruitment fees they paid in their home countries – which activists say result in debt bondage.

U.S. customs revoked the ban after Top Glove made the changes.

Top Glove told Reuters in a statement that exporters must “follow the best global practices as customer expectations have changed over the years,” adding it was “no longer sufficient for businesses to just be cost-efficient”.

Its peers also decided to repay recruitment fees.

Palm oil producers in Malaysia, the world’s biggest exporter of the widely used product after neighbouring Indonesia, have spent tens of millions of dollars to improve workers’ living conditions following similar bans.

To be sure, higher costs from improving working and living conditions may not necessarily drive away investors.

“Companies operating in Australia, the UK, the EU and some U.S. states are subject to regulations that address modern slavery in supply chains,” said Nneka Chike-Obi, director of sustainable finance at Fitch Solutions. “So they may have to accept higher costs in exchange for less supply-chain risk.”

The impact on the electronics industry, which accounts for nearly 40% of Malaysia’s exports, in particular could have a multiplier effect on the economy.

Dell Inc, Samsung Electronics Co and Western Digital Corp have manufacturing facilities in Malaysia, while Apple Inc uses local suppliers.

Samsung declined to comment. The other tech firms did not respond to Reuters’ requests for comment on their Malaysian operations or suppliers.

“If companies start scrutinising and pulling out contracts” from electric and electronics companies, “it will have a knock-on effect on the economy,” said AmBank’s Dass. – Reuters

PARIS – Qatar Airways said on Monday it had started proceedings in a UK court against planemaker Airbus in a bid to resolve a dispute over skin flaws on A350 passenger jets, bringing the two sides closer to a rare legal showdown over aviation safety.

The companies have been locked in a row for months over damage, including blistered paint and corrosion to a sub-layer of lightning protection, which Qatar Airways says has now led to the grounding of 21 A350 jets by its domestic regulator.

Airbus insists the carbon-composite passenger jets are safe to fly despite some “surface degradation,” while Qatar Airways says it is too early to say whether safety has been compromised.

The dispute came to a head last week when Airbus, in what experts called an unprecedented move, accused the Gulf airline of misrepresenting the problem as a safety issue and threatened to call for an independent legal assessment.

On Monday, Qatar Airways hit back, saying it had taken its complaint against Airbus to the High Court in London.

“We have sadly failed in all our attempts to reach a constructive solution with Airbus in relation to the accelerated surface degradation condition adversely impacting the Airbus A350 aircraft,” it said in a statement. “Qatar Airways has therefore been left with no alternative but to seek a rapid resolution of this dispute via the courts.”

In a statement late on Monday, Airbus confirmed it had received a formal legal claim. “Airbus intends to vigorously defend its position,” it said.

A spokesman earlier reiterated it had found the cause of the problem and was working with customers and Europe’s safety regulator, which has said it has not identified a safety issue.

Qatar Airways denies that the surface flaws – which witnesses say have left some of the jets with a pock-marked appearance – are properly understood and said on Monday that it wanted Airbus to mount a “thorough investigation”.

JETS GROUNDED

Several industry executives said such a public legal fight between two of aviation’s leading players is unprecedented.

The row widened this month when documents seen by Reuters revealed at least five other airlines in varying climates had complained about paint or other surface problems since 2016. Airbus had until recently maintained the problem was focused on paint on Qatar‘s A350s, based in the Gulf.

Reuters also first reported that Airbus was looking at changing the anti-lightning system.

The planemaker has said it is proposing interim solutions ranging from repairs to repainting and has accused Qatar Airways of ignoring those proposals without reasonable justification.

Qatar Airways reiterated on Monday it could not be sure whether proposed repairs would work without deeper analysis. Its chief executive has questioned why Airbus is still working on a solution if a reliable fix is already available.

The 21 grounded jets represent 40% of its current fleet of A350s, for which it was the launch customer with the biggest order. Other airlines still operate the jet, saying its airworthiness is not affected by what they term cosmetic issues.

The row meanwhile looks set to cost Airbus a big Qatar order for a new A350 freighter version. It received the first firm order for the model on Monday, confirming a previously tentative order for four planes from France’s CMA CGM.

Qatar Airways Chief Executive Akbar Al Baker told the South China Morning Post last week he had previously looked at placing a large order for the cargo A350. Sources now expect Boeing to win the order to replace Qatar‘s 34-35 freighters. – Reuters

LONDON/SHANGHAI – Britain, the United States, Canada, Australia and New Zealand expressed grave concern over the erosion of democracy in Hong Kong in a joint statement issued on Monday following Legislative Council elections in the former British province.

“We, the Foreign Ministers of Australia, Canada, New Zealand, and the United Kingdom, and the United States Secretary of State, noting the outcome of the Legislative Council elections in Hong Kong, express our grave concern over the erosion of democratic elements of the Special Administrative Region’s electoral system,” the statement said.

A spokesperson for the Chinese embassy in Britain called the comments “irresponsible” and said they distorted facts and maliciously discredited the election, which “gravely interfered in China’s internal affairs and violated the basic norms governing international relations.”

“The Chinese side expresses firm opposition and strong condemnation,” the spokesperson said in a statement on the embassy’s website. – Reuters

The International Monetary Fund said on Monday its executive board has extended Fund debt service relief for 25 eligible low–income countries for another three months until April 13, 2022.

The approval of the fifth and final tranche of debt service relief totaling about $115 million follows four prior tranches approved in April and October of 2020 and 2021, the IMF said in a statement on Monday.

The tranche completes the two-year COVID-related debt service relief first approved in April 2020, providing relief worth about $964 million to eligible countries.

Countries receiving debt service relief in the fifth tranche under the Catastrophe Containment and Relief Trust include Benin, Burkina Faso, Burundi, Central African Republic, Comoros, Djibouti, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kyrgyzstan, Lesotho, Liberia, Madagascar, Malawi, Mali, Nepal, Niger, Rwanda, Sao Tome and Principe, Sierra Leone, Solomon Islands, and Tajikistan. – Reuters