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Commentary: Debt Bondage Payouts Flow to Workers in Malaysia’s Glove Industry

For years, debt bondage risks have been rampant in Malaysia’s glove industry, the world’s biggest, due to exorbitant recruitment costs for its migrant workforce. Now, the industry is weeding out that risk by repaying recruitment fees to its employees...

Top Glove, maker of a quarter of the world’s 360 billion disposable gloves annually, is leading by example. A year ago, Malaysia’s “Big 4” manufacturers – Top Glove, Kossan, Hartalega, and Supermax – announced repayments of $36 million, $12.5 million, $9.5 million, and $5.5 million, respectively. Now, they have completed unprecedented repayments to over 20,000 workers. Some have more to come.

How did such exceptional developments happen within a year? Are workers truly free of bondage? What about the other forced labor risks haunting the industry? ...

Everything changed on July 15, 2020, when the U.S. government banned disposable glove imports from Top Glove due to forced labor concerns... CBP also opened investigations into forced labor allegations at Supermax and Hartalega

In early 2021, CBP’s concerns were upgraded to a conclusive finding that Top Glove “is manufacturing disposable gloves with forced labor and that such merchandise is likely being imported into the United States.” In May 2021, Top Glove shipments of millions of gloves were seized by CBP in Cleveland and Kansas.

Three days before the ban, the glove maker had confidently issued a press release titled, “Top Glove ensures no debt bondage among foreign workers.” Three weeks after, Top Glove promised repayments. Other manufacturers quickly followed suit with similar promises to eliminate debt bondage risks...

In mid-September 2021, the U.S. CBP lifted the import ban on Top Glove and said there was satisfactory evidence that the disposable gloves were no longer manufactured with forced labor...

Professionals involved in audits of glove makers, requesting anonymity, say that the debts due to recruitment fees issue is well-known, but not traditionally considered a forced labor indicator...

Ethical recruitment approaches gained further momentum after the U.S. ban on Top Glove. Following the ban in mid-2020, some of Malaysia’s major glove makers contracted renowned consultancies to monitor repayments and offer advice on recruitment...

Some industry experts with years of experience in Malaysia, speaking on condition of anonymity, consider the glove industry’s evolving ethical recruitment standards considerably more robust now compared to Malaysia’s other manufacturing industries, such as apparel and electronics. 

Other industry experts said that remedying workers for past fees is a necessary part of ethical recruitment, but not the solution, which must focus on prevention, i.e. monitoring the recruitment process to ensure that workers don’t pay in the first place...

Many mid-sized and smaller glove manufacturers fly under the radar, as bigger glove makers are attempting to weed out debt bondage risks. Attention is also lacking on the industry’s raw material suppliers, where fees and exploitation are endemic but rarely remedied, according to multiple industry sources.

Also unaddressed, at least publicly, is debt bondage for subcontracted workers, i.e. indirect employees working side-by-side with direct employees, even though the practice was made illegal in 2019...

The import ban was effective because it hit the companies where it hurts: their revenue...

Recent criticism of the import ban model focuses on its unclear and unpredictable procedures (e.g. why was only Top Glove banned?), the lack of transparency of the evidence burden for revoking bans (e.g. how much more did Top Glove need to reform or disclose?), and claims that U.S. importers of forced labor-made goods were not adequately engaged. 

The U.S. CBP has the authority to issue civil penalties against importers, even without first issuing import bans, but it has almost never done this. Such fines could contribute to worker remedies...

Even though forced labor is illegal in many countries, it is perfectly legal to buy and sell goods domestically made by forced labor abroad. But momentum is increasing to make companies legally accountable for abuses at foreign suppliers...

The U.S. import ban model and the European due diligence model are all about defining violations, responsibilities, and remedies for damage done, but are vague about prevention: Who should monitor abuses? How to replace, or at least supplement, the flawed private audit paradigm? 

For now, it seems that the fragmented efforts by civil society organizations, including corporate watchdog groups, media investigations, and shoe-string activists, remain the only independent monitors and public awareness raisers. Their budgets are far below the millions of dollars pocketed by the audit industry, but sometimes it takes just one person to initiate change. The Malaysia glove case is a textbook case of just that.

Note: This piece is a follow-up to a 2019 article by the author, available here.

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