Malaysia is dependent on foreign labour based on 2022’s employment numbers by the Statistics Department, 11.6% of its workforce comprised foreigners.
PETALING JAYA: It is crucial that Malaysia continues its efforts against human trafficking and forced labour given its dependency on labour, says Hong Leong Investment Bank (HLIB) Research.
The research house said that failure to do so could lead to economic ramifications such as Tier-3 countries may face certain sanctions by the US pursuant to the Trafficking Victims Protection Act and Customs and Border Protection imposing import restrictions on goods that have been produced using forced labour.
Malaysia is dependent on foreign labour based on 2022’s employment numbers by the Statistics Department, 11.6% of its workforce comprised foreigners.
HLIB Research added that it could also face reputational risk leading to lost trade opportunities, especially in current times of heightened environmental, social and governance (ESG) scrutiny.
“Economic sectors in Malaysia that have a high ‘dependency ratio’ – and thus exposed to higher risk of trafficking and forced labour – are agriculture (33% of workforce are foreigners), construction (18%) and manufacturing (15%),” it said.
Looking forward, Malaysia’s Home Minister had said that while he welcomed the recent tier upgrade, more work needs to be done and the country is committed to improving and achieving Tier-1.
In the recent 2024 Trafficking in Persons (TIP) report, Malaysia was upgraded to Tier-2, from Tier-2WL previously – its second consecutive upgrade under the unity government’s administration.
“This tier places Malaysia at par with most of its Asean and global peers. Overall, Malaysia saw increased law enforcement efforts but maintained mixed efforts for protection and prevention.
“We believe that the back-to-back tier upgrade for Malaysia will help repair its ESG profile on migrant workers, which was tarnished during the pandemic. Nevertheless, the same sectors continued to be flagged in the 2024 TIP report – plantation, gloves, construction and electronic manufacturing services – which are key risk areas to watch out for with regard to trafficking and forced labour,” it added.
To recap, Malaysia was rated Tier-3 (lowest tier) in 2021 and 2022, before moving up to Tier2WL in 2023, and subsequently to Tier-2 this year.
“We highlight that Malaysia’s upgrade in the 2024 TIP report was a crucial one as its previous ‘lifespan’ in Tier2WL (2023) was only limited to one year and failure to move up the tier in 2024 would have necessitated an automatic downgrade to Tier 3,” HLIB Research said.