Dyson splits with Malaysia supplier, stoking concern over migrant worker treatment

A security guard stands near the gate of Dyson office in Senai, Johor State, Malaysia, November 28, 2021. Picture taken November 26, 2021. REUTERS/A. Ananthalakshmi

A short drive across the border from Dyson’s new headquarters in Singapore is the boomtown built around its business: a Malaysian industrial area dominated by its biggest supplier, ATA IMS Bhd (ATAI.KL).

ATA, one of Malaysia’s top electronics manufacturing services providers, rode Dyson’s success in high-end vacuum cleaners and air purifiers, supplying parts for a company that came to account for 80% of its revenue.

In interviews over the last two months, the employees also say ATA, which analysts say is Dyson’s biggest global contract manufacturer, hired thousands of foreigners without work permits.

ATA said in a statement it was audited by the Responsible Business Alliance (RBA), a body widely engaged by electronics firms to conduct factory audits. RBA hires third-party auditors for the inspections. It declined to comment.

ATA declined to comment, and referred Reuters to its recent public statements.

Dyson said on Tuesday it wouldn’t comment because the accusations related to ATA.

Malaysia on Wednesday said it would charge ATA over complaints it had received through the labour department. It did not say what the charges or complaints were about or whether they related to the workers’ accusations about its Dyson factories.

The country’s human resources minister, M. Saravanan, said forced labour allegations at Malaysian companies were hurting foreign investors’ confidence in products manufactured there. He had earlier said the government was investigating Dyson’s decision to split with ATA.

After Dyson’s move, ATA shares dropped 60%. Some analysts have raised doubts about ATA’s ability to attract new customers, and on Nov. 29 a statement from the firm forecast revenue declines and cost cuts.

With Dyson’s departure, six workers and shopkeepers interviewed in the Johor Bahru industrial area said they feared they might lose their livelihoods.

“There is no guarantee of a job here anymore,” said one off-duty ATA worker, wearing his royal-blue factory work shirt on a recent Sunday. Like others, he asked not to be identified for fear of reprisal.

ATA officially employs around 8,000 workers, although four ATA workers and the former executive estimated its workforce had been as high as 17,000 until recently, including those without permits. Most of 17,000 were from Bangladesh and Nepal, according to the workers and executive.

RECORD REVENUE

ATA’s factories are concentrated in adjacent industrial parks in suburban Johor Bahru, a 30-minute drive to Singapore, where Dyson is headquartered.

ATA posted record revenue of 4.2 billion ringgit ($991.74 million) for the fiscal year that ended in March. Dyson, owned by British billionaire James Dyson, accounted for nearly $800 million of that.

Analysts say the increased scrutiny of Malaysia could increase production costs and deter investors. The United States has banned six Malaysian firms in the last two years over accusations of forced labour.

“Cost will definitely move up because a lot more care has to be taken into account, not just on recruitment but also worker accommodation. The ramifications are significantly higher costs for labour,” said Vincent Khoo, head of Malaysia research at brokerage UOB Kay Hian.

Malaysia, which makes everything from iPhone components to semiconductors, is reliant on electrical and electronics manufacturing in particular for exports and economic growth. Between January and October 2021, such products accounted for 36% of total exports.

Foreigners make up about 10% – 1.48 million – of Malaysia’s work force, according to government data, though that percentage is higher in the manufacturing sector. The government and labour groups estimate millions more undocumented migrants.

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