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December 20, 2005
Verite Report Identifies Exploitation of Foreign Contract Laborers in Asia and the Middle East
    by William Baue

The report uncovers placement fees that exceed legal limits, forced overtime, loans with interest rates of up to 60 percent, and so-called runaway insurance deposits that are not refunded.

As you gift-shop this holiday season, imagine if labels said not only "Made in Taiwan" but also added "by foreign contract workers who must take out loans with up to 60 percent interest rates and work forced overtime to pay 'runaway' insurance and placement fees exceeding legal limits." A new report from Verité, a Massachusetts-based watchdog that monitors labor conditions globally, documents this dire plight of foreign contract laborers, or those hired to work outside their homeland by third-party labor brokers promising great financial gains.

"What our report confirms is that the promise of financial rewards is an empty one," said Dan Viederman, executive director of Verité. "These workers are victimized throughout the entire system: by the brokers that place them in jobs, by the factory managers who don't provide them with adequate wages or safe working conditions, and by the legal systems that discriminate against them."

The report, entitled Protecting Overseas Workers: Research Findings and Strategic Perspectives on Labor Protections for Foreign Contract Workers in Asia and the Middle East, draws on Verité's experiences from performing over 1,500 factory audits in over 60 countries.

"Through these experiences, Verité has witnessed a clear pattern of abuse and exploitation that correlates with such foreign contract labor status," the report states.

For the report itself, Verité conducted interviews between June and November 2004 with 150 foreign contract laborers (equal numbers of men and women) doing blue-collar work in countries such as Taiwan, Malaysia, and Jordan. The interviews took place when they had returned to their home countries of the Philippines, Indonesia, Thailand, and Vietnam after contracts of at least a year.

The report attempts to compensate for potential methodological weaknesses, including the nonrandom selection process and the difficulty of validating self-reported information, by consciously advancing a conservative analysis. It also triangulates findings with document research and consultations with legal experts.

"Workers interviewed by Verité for this project demonstrated a lack of awareness concerning, first, the terms of loans they entered into before departure; second, the true conditions of their employment abroad--including type of work, safety, overtime, living conditions, exchange rate, and freedom of movement; and third, 'runaway insurance' withholdings," the report states. "This lack of understanding turns to shock and surprise when workers arrive at their destination."

Specifically, the report finds that "placement" (or "recruitment") fees charged by private labor brokers commonly exceed legal limits and also account for a large portion of workers' earnings, thus representing a significant financial burden. While laws in Thailand and the Philippines stipulate that such fees should not exceed one month's salary, they amounted to 4.8 months of salary in Thailand and 4.4 months in the Philippines.

To finance these excessively high placement fees, foreign contract laborer candidates often must take out loans that are onerous in themselves, adding additional financial burden. Verité interviewed workers who took out loans with interest rates as high as 60 percent in Thailand, with payment periods as short as one month.

Furthermore, while the Philippines outlaws "manpower pooling," or contracting workers before securing jobs for them, the report found that it is commonly practiced there.

"Some Filipino workers interviewed also stated that labor brokers required them to sign more than one work contract," the report states. "One contract contained the actual job title and salary the worker agreed to, and another with better conditions and provisions was submitted to the relevant government agency."

Ironically, labor brokers allow themselves latitude to hire laborers without jobs for them yet, but do not allow laborers similar latitude--they prohibit workers from shopping their services to multiple brokers in order to secure the highest price for their labor. The report illustrates such phenomena with specific examples.

"Rafiq, an Indonesian migrant worker, signed a contract with a recruitment agency to work as an operator of waste management machines in Malaysia," the report reads. "When he arrived in Malaysia, Rafiq discovered that both the type of work and the salary were different than what was stated in his contract."

"He was also required to work overtime without compensation," the report continues. "While Rafiq understood he was being exploited, he felt he was without any other options."

Foreign contract laborer systematically disenfranchises Rafiq and his peers, whose labor is literally exploited by constraining their workers' rights. For example, brokers require laborers to pay surety bonds as an upfront deposit to prevent illegal immigration, but this so-called "runaway insurance" also prevents them from leaving abusive jobs for fear of forfeiting the deposit. Sadly, the report also finds that many brokers refuse to return the deposit even when laborers fulfill their obligations.

"Among Indonesian workers, only nine percent of surveyed workers who reported surety bond deductions received a full refund, with 21 percent receiving a portion and 35 percent receiving nothing at all," the report finds.

The report concludes with a set of recommendations, including all countries (both those sending and those receiving foreign contract laborers) to sign the UN Convention on Migrant Workers.

"Multinational corporations also have a role to play in requiring the full extension of Code of Conduct provisions to foreign contract workers in their supply chains, and in working with factories that use foreign contract workers to raise awareness about the particular vulnerabilities of this worker population," the report concludes.


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