Malaysia: Protecting workers in a volatile global economy

Malaysia has developed from a producer of raw materials in the 1970s into an upper-middle-income country with a thriving, multi-sector economy. Malaysia’s exports of electronics and commodities such as oil, gas and palm oil have been key drivers of the country’s economic growth.

Despite a positive GDP growth (+4.6% estimated for 2019), Malaysia is vulnerable to a drop in world commodity prices and to shocks to the global economy, including the US-China trade war and the COVID-19 pandemic. Malaysia is also a nation divided politically and ethnically: the majority Muslim ethnic Malay are dominant politically, and benefit from positive discrimination in business, education and the civil service, but a large ethnic Chinese minority holds economic power.

In light of these volatile circumstances, we recommend companies ensure that suppliers in Malaysia, especially high-risk suppliers located in remote areas and in low-skilled industries, have dedicated resources to raise awareness of health and safety standards. Implementing worker surveys can also help protect workers during turbulent times, especially migrant and minority workers.

Malaysia Supply Chain Risk Profile

Source: ELEVATE (2019). EiQ

Our recommendations

Health and safety (H&S) is the largest area of risk. In addition to raising awareness of H&S standards, we also recommend that companies ensure that suppliers have established H&S committees in their factories that include workers’ participation. We recommend brands collect verified and detailed data from their suppliers about injuries / sick leave, and identify and act on H&S hazards.

Environment is the second-largest area of risk. Companies need to inform suppliers about their expectations and need to run periodic assessment focusing on verification of air emission, wastewater management and environmental compliance certificates.

Labor is the third-largest area of risk. We recommend companies conduct assessments with worker engagement technology to better assess migrant worker-related risks such as withholding passports and unethical recruitment practices. This is especially true among high-risk suppliers who recruit migrant workers from high-risk countries, such as Myanmar, Nepal, and Bangladesh. Unauthorized subcontracting is also a high area of risk that exposes brands to migrant worker-related risk in second-tier factories. Companies need to run production audits to evaluate the supplier’s capacity to fully process orders. We also recommend enhancing surveillance checks and expanding audit scope to 2nd tier subcontracting factories for greater transparency.

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These blogs are written by ELEVATE staff members or associates and the views and opinions expressed are not necessarily those of ELEVATE.