Malaysia Says It Will Act Against Palm Oil Firms Violating Labor Laws

Updated at 12:22 p.m. ET on 2020-10-02

Malaysia said Thursday it would take action against companies that violate labor laws and would send a comprehensive study on the situation in the country’s palm oil sector to the United States to avoid further American restrictions on the commodities.

The Malaysian government was responding to a ban announced a day earlier in Washington on palm oil and related products made by Malaysia-based FGV Holdings Berhad, which U.S. officials said had used forced labor on its plantations.

Human Resources Minister M. Saravanan said he would ask his officers to look into the situation at FGV Holdings that led to the U.S. Customs and Border Protection (CBP) agency blocking the firm’s palm oil products through a so-called withhold release order.

“It [action] is long overdue, action will be taken,” Saravanan said, adding that the ban on FGV was of great concern to the government.

“At the moment the country relies very much on the export [of goods], especially palm oil, for our revenue and it [the ban] is not a good sign for the country.”

The government is also working on a “comprehensive study” of the labor situation in the Malaysian palm oil plantation sector, said Mohd. Khairuddin Aman Razali, Minister of Plantation Industries and Commodities (KPKK), in a statement to the media responding to the ban on FGV Holdings.

The study is being conducted in collaboration with the International Labor Organization, the U.N. agency which serves as the technical consultant on the study, he said.

“In 2009, the U.S. Department of Labor (DOL) included Malaysia in the department's List of Goods Produced by Child Labor or Forced Labor list, as stipulated under the country's Trafficking Victims Protection Reauthorization Act (TVPRA),” Khairuddin’s statement said.

“The final report on the comprehensive study will be presented to both the DOL and ILO as an initiative to remove the Malaysian palm oil industry from the TVPRA list. This, hopefully, will help prevent further restrictions on agro commodity products in the future.”

The ILO told BenarNews that the Malaysian government had requested some technical advice on the study, which it offered.

“The Malaysian government is the writer and owner of the report,” said Steve Needham, a spokesman in Bangkok for the ILO’s Regional Office for Asia and the Pacific.

According to Khairuddin, child labor and forced labor, especially where foreign workers are concerned, is a complex issue “because it involves unique and different determining factors for each country” and is closely related to socio-cultural structures, local rules and laws.

“Following several recent incidents involving the suspension of Malaysian agricultural product exports to the United States by the United States Customs and Border Protection, the Ministry of Plantation Industries and Commodities (KPPK) would like to provide an explanation of the labor situation in the oil palm plantation sector,” he said.

Talking since August

Meanwhile in a statement issued on Thursday in response to the American ban, FGV Holdings Berhad revealed that it had been in contact with U.S. customs officials for the last 13 months.

“Since August 2019, FGV been communicating with CBP through our legal counsel, and have submitted evidence of compliance of labor standards as committed by FGV,” the statement said.

“It will continue to engage with CBP to clear FGV’s name, and is determined to see through its commitment to respect human rights and uphold labor standards.”

The CBP confirmed to BenarNews that FGV Holdings did contact the agency.

“Due to the public nature of the allegations, FGV previously contacted CBP through third parties (third party intermediaries) to address the forced labor allegations,” Nate Peeters, a spokesman in Washington for the U.S. agency, said in an email.

FGV said it was “disappointed” that the CBP had decided to ban its palm oil and related products “when FGV has been taking concrete steps over the past several years in demonstrating its commitment to respect human rights and to uphold labor standards.”

The CBP responded to this comment from FGV Holdings, saying it would need adequate evidence that forced labor wasn’t being used on the company’s plantations to remove the U.S. block on its palm oil and palm oil products.

“CBP will not modify or revoke a Withhold Release Order until all the indicators of forced labor identified by the agency are sufficiently addressed and it is demonstrated that prison and/or forced labor is no longer being used to produce the goods targeted by the order,” Peeters said, adding that any change, if made, would be announced on its website.

In announcing the ban on Wednesday, the CBP said its investigation into FGV Holdings, one of the world’s largest producers of palm oil, uncovered a host of labor abuses, including physical and sexual violence, retention of identity documents, withholding of wages, debt bondage, abusive working and living conditions, and forced child labor.

FGV on Thursday denied CBP’s allegations that it retains workers’ passports, and said it had installed more than 30,000 safe deposit boxes for workers to store their documents safely.

FGV Holdings didn’t directly comment on the charge of withholding workers’ wages. It said it had implemented an electronic wallet cashless payroll system “which gives empowerment to the workers, acts as a more convenient and efficient way for workers to manage their finances.”

Commenting on the CBP’s statement that it found workers in “abusive working and living conditions,” FGV Holdings said that it had invested approximately 350 million ringgit (U.S. $84.3 million) during the past three years to upgrade housing facilities and construct new residences on its plantations nationwide.

The palm oil producer also categorically denied recruiting or employing refugees.

An Associated Press (AP) investigative report last week said reporters found that stateless Rohingya had been trafficked onto Malaysian palm oil plantations where they were being forced to work.

Hundreds of thousands of Rohingya fled Myanmar three years ago after decades of oppression, and a brutal crackdown in the wake of deadly attacks carried out on police and army posts by Rohingya insurgents.

FGV and Sime Darby Plantation shares fall

Saravanan said Wednesday’s ban on FGV Holdings’ products stemmed from labor issues mainly on the company’s plantations in the Malaysian Borneo states of Sabah and Sarawak. He said he was given this information by the U.S. ambassador to Malaysia, Kamala Shirin Lakhdhir.

“The workers there [in Sabah and Sarawak], they have their families there, and their children may help them out on the plantation,” Saravanan said.

BenarNews contacted Lakhdir’s office for comment but didn’t hear back.

In its announcement on Wednesday, U.S. customs officials didn’t specify which FGV Holdings plantations were found to be rife with labor abuse.

Labor violations at palm oil plantations in the country have been taking place for a long time and are nothing new, the minister said, echoing the findings of numerous rights groups over the last decade or so.

Shares of FGV Holdings and another Malaysian palm oil producer, Sime Darby, took a beating on Thursday following news of the U.S. ban.

FGV Holdings shares tumbled 8.7 percent and Sime Darby Plantation’s shares fell 5.2 percent, according to Reuters.

‘Another big firm will be banned’

Meanwhile, the human resource minister also said Thursday that he expected another “big” Malaysian palm oil producer to be banned by the U.S. over forced labor issues.

“What I was told was that after FGV, another big firm will be banned by the U.S.,” Saravanan said, without specifying who gave him that information.

When asked which company he expected would be banned, he declined to name one.

“I know which one. One of the biggest planters,” he said.

CBP declined to comment on Saravanan’s claim.

“CBP as a matter of policy does not comment on whether specific firms are subject to forced labor investigations,” the agency told BenarNews.

This article has been updated to include responses from the U.S. Customs and Border Protection and the International Labor Organization.