Malaysia says palm oil giant FGV to face action over forced-labour issues in wake of US import ban
The Malaysian government will be taking action to rectify poor labour conditions that led to a recent US ban on palm oil imports from the government-linked agribusiness FGV Holdings, human resources minister M. Saravanan said on Thursday, while admitting to concerns the embargo could have a negative effect on the country's economy.
Saravanan told reporters he was uncertain about the details of the ban - which he said he was told about by the United States' ambassador to Malaysia, Kamala Shirin Lakhdhir - and that he had not expected it to be implemented immediately.
He said issues surrounding the company, which is one of top palm oil producers in the world, were mainly in the Bornean states of Sabah and Sarawak "and involve families, their children", without offering details.
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"Action will be taken," Saravanan added. "The country is at the moment relying very much on exports, and this is not a good sign for the country."
He also said that another Malaysian plantation firm would soon face a US ban, although he did not specify which company.
The order issued by US Customs and Border Protection on Wednesday specifies that all palm oil and palm oil products made by FGV Holdings and its subsidiaries and joint ventures would be detained at US Customs due to indications of the use of forced labour.
US Customs said the order was the "result of a year-long investigation that revealed forced labour indicators including abuse of vulnerability, deception, restriction of movement, isolation, physical and sexual violence, intimidation and threats, retention of identity documents, withholding of wages, debt bondage, abusive working and living conditions, and excessive overtime".
"The investigation also raised concerns that forced child labour is potentially being used in FGV's palm oil production process," it added.
Palm oil fruit at a plantation in Pulau Carey, Malaysia. Photo: Reuters alt=Palm oil fruit at a plantation in Pulau Carey, Malaysia. Photo: Reuters
In response, FGV - which falls under the Federal Land Development Authority, a government agency that organises smallholder farmers who grow cash crops - said it had been working to "correct the situation" since 2015.
"FGV's efforts are well documented and available in the public domain," the company said. "FGV is disappointed that such a decision has been made when FGV has been taking concrete steps over the past several years in demonstrating its commitment to respect human rights and to uphold labour standards."
Malaysia's palm oil exports are one of its key revenue sources, and account for 33 per cent of world's palm oil exports. In the first half of 2020, revenues from palm product exports increased 3.2 per cent to 33 billion Malaysian ringgit, compared with the same period last year.
Hard hit by a months-long Covid-19 lockdown that has seen non-essential businesses shuttered and supply chains disrupted, Malaysia is currently struggling to fully reopen its economy even as coronavirus numbers continue to rise. The country has reported 11,221 cases and 136 deaths since the outbreak.
To aid palm oil producers, the government on July 1 fully exempted export duties on crude palm oil, crude palm kernel oil and processed palm kernel oil until the end of the year.
Malaysian economists warned that the US ban would shrink FGV's market share and could restrict its market access, even though the US market only contributed to 5.3 per cent of the firm's total revenue in 2019.
"In 2019, the US' share of total global palm oil imports was not big at 2.7 per cent," said CGS-CIMB Securities analyst Ivy Ng. "However, the concern is that [the US ban] may lead other countries or customers of FGV to reassess their purchase of palm oil from the group as a result of concerns about environment, social and corporate governance practices."
A worker unloads palm oil fruit bunches at a factory in Tanjung Karang, Malaysia. Photo: Reuters alt=A worker unloads palm oil fruit bunches at a factory in Tanjung Karang, Malaysia. Photo: Reuters
The negative global public perception towards palm oil production, mostly surrounding the issue of deforestation, has proven a challenge for Malaysia to overcome. In 2019, a government-led "Love MY Palm Oil" campaign fell flat, while in July the country said it would be filing a legal action with the World Trade Organization regarding the European Union's restrictions on palm oil-based biofuel.
At the time, the minister in charge of Malaysia's plantation industries, Mohd Khairuddin Aman Razali, described the EU's policy as "discriminatory".
Between them, Malaysia and Indonesia produce about 85 per cent of the world's palm oil. FGV Holdings is one of the largest global producers, supplying palm oil to international outfits such as Procter & Gamble.
Meanwhile, human rights groups have lauded the move by the US government, saying the authorities there should only lift the import ban when concrete change is seen.
"The ban should not be lifted based on FGV's promises to change - we need concrete proof and independent verification that workers' rights are being upheld and that conditions that put them at risk of forced labour have been rectified," Joanna Ewart-James, executive director of Freedom United, a group that works to end modern slavery and human trafficking, said in a statement.
Glorene Das, executive director of the Malaysian migrant rights group Tenaganita, said that Malaysia had to stop prioritising "profit over people".
"All palm oil producers should take proactive steps to ensure the human and labour rights of workers in their plantations are respected and upheld at all time by eliminating forced labour conditions, instead of just reacting to detention holds, investigations and adverse publicity."
Malaysia has long grappled with issues of forced labour and modern-day slavery, this year landing on the Tier 2 watch list of the US State Department's Trafficking in Persons Report for the third consecutive year. Recently, another listed company - the rubber glove maker Top Glove - also saw its goods banned by the US over issues of forced labour.
This article originally appeared on the South China Morning Post (SCMP).
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