Telegraph (UK) 7th Dec 2023: Shimano bike parts ‘made by modern slaves’ in Malaysia sold to commuters
Shimano bike-parts manufacturer investigates Malaysian supplier after Telegraph uncovers labour abuse allegations.
Original source: The Telegraph by Samuel Lovett, Deputy Editor of Global Health Security – 7th December 2023
Shimano, a bicycle-parts manufacturer that supplies commuters and Tour De France competitors, has allegedly sold gears produced by ‘modern slaves,’ the Telegraph can reveal.
The multi-billion pound Japanese company sources the components from a Malaysian supplier that has been accused of exploiting migrant workers from Nepal.
(For Malaysian government response see 20th Dec 2023: FMT – Human resources ministry to probe slavery allegations at Shimano’s Johor factory – Investigation begins after a British newspaper accuses a Shimano supplier of wage theft and threats of abuse)
The biking giant provides brakes, gear shifts, chains, pedals and more to the world’s best-known cycling brands, including Specialized, Giant and Trek.
Many of these bikes are sold across Britain by high-street retailers such as Halfords and Evans Cycles. Shimano’s products also equipped an array of bikes used at this year’s Tour de France.
Workers at Shimano’s Malaysian supplier, Kwang Li Industry, say they have been subject to physical abuse and threats, unlawful salary deductions and recruitment fees, and unpaid suspension.
Shimano’s products equipped many of the bikes used at this year’s Tour de France CREDIT: THOMAS SAMSON/AFP via Getty Images
Due to the salary deductions, those working at the company earned less than Malaysia’s monthly minimum wage, leaving them unable to pay off expensive recruitment costs – equivalent to seven months of salary – tied to their employment.
The Telegraph’s investigation draws from first-hand interviews with current and former workers at Kwang Li Industry and analysis of salary slips, contracts and correspondence exchanged between the company and Nepal’s embassy in Malaysia.
In response to this paper’s disclosures, Shimano has launched an investigation into Kwang Li and said it is working to remediate the workers “as soon as possible”.
Malaysia’s labour sector has a long history of importing migrants on cheap wages to work in its factories.
These workers are procured by agents from some of the world’s poorest countries, such as Nepal and Bangladesh, and promised employment in well-paid jobs. They are often charged expensive recruitment fees in the process, paid for by high-interest loans.
Yet such promises come to nothing. Upon arrival in Malaysia, the workers are stripped of their passports, meaning they are unable to leave the country, and typically housed in poor company accommodation. Many are abused and paid below minimum wage.
Those trapped in this situation, known as debt bondage, carry on working in an attempt to pay off their debts. The phenomenon was rife in Malaysia’s rubber glove industry during the pandemic, when countries raced to secure PPE supplies from poorly-regulated companies.
Labour rights specialists say the separate alleged abuses at Kwang Li Industry, which regards itself as an “outstanding” Shimano vendor, also amount to modern slavery and fear that the workers will be further exploited as they seek to pay off their debts.
The Malaysian supplier recruited 207 Nepalese migrants in January and February 2023. They were tasked with assembling Shimano’s famed range of groupsets – the mechanical components of a bike involved in braking, changing gear and running the drivetrain.
During the Covid pandemic, demand for bikes surged as people worldwide took up cycling to stay active – and entertained – in lockdown.
This demand percolated throughout the cycling industry’s supply chain, with component manufacturers like Shimano – and their smaller suppliers – inundated with orders.
Global cycling sales boomed during the pandemic CREDIT: JULIAN SIMMONDS/JULIAN SIMMONDS
Shimano notably posted a record sales increase of 44 per cent in 2021, making £2.8 billion in turnover. The following year, the Osaka-based company recorded a further 16.6 per cent increase in sales, with the global appetite for cycling still high at the tailend of the pandemic.
Against this backdrop, Kwang Li Industry seemingly moved to ramp up its operations.
In September 2022, it instructed a Nepalese recruitment agency to find 251 male workers for its factory in south Malaysia. The men would be paid “at least” the minimum wage of Malaysia – 1,500 Malaysian Ringgit (RM) per month, roughly £410 – and be employed on a two-year contract.
In a document produced by Kwang Li in October 2022, and certified by Malaysian labour authorities, the company agreed to pay the recruitment agency a service charge for sourcing the workers.
However, the workers allege they have been forced to pick up this cost. Several told the Telegraph they had taken out high-interest loans to pay 300,000 Nepalese rupee (£1,855) in recruitment fees – covering medical screening, flight tickets, service charges and more.
This is a breach of a memorandum of understanding signed by Nepal and Malaysia in 2018, which states that all labour recruitment costs must be borne by the employer.
A representative of the recruitment agency, Worldways Manpower, said the workers had paid one month’s salary (£410) in fees and a further £660 to cover the processing costs it was owed by Kwang Li Industry. He said he did not recognise the £1,855 figure cited by workers.
Kwang Li Industry said it “had no knowledge that the workers were asked to pay any recruitment fee [at] any point during the process.”
The recruitment of the workers ultimately seems to have been misjudged. By February 2023, Shimano warned that “the strong interest in cycling during the Covid-19 pandemic” was showing “signs of cooling down”.
Illegal monthly deductions
This fall in demand has been reflected on the factory floor at Kwang Li Industry, where, some weeks, workers are only needed for three or four shifts, they say. “The company only pays for the working days,” one worker said.
Illegal monthly deductions are also being made to the workers’ wages, salary slips show – an indicator of forced labour, according to the International Labour Organisation.
In some instances, workers lost a third of their monthly wage to deductions, including for the use of the factory canteen and a generalised “saving” fee, which is claimed to cover a security deposit.
As a result, in May, one worker was paid just 916.46 RM for a month’s work – well below the national minimum wage and equivalent to just £160.
“There was no agreement about these deductions,” another worker said.
Under Malaysian law, such deductions are not allowed without workers’ consent, while in a letter sent by Kwang Li Industry to the Nepal Embassy in October 2022, the company said workers “shall not be deprived of basic salary in case of failure of the employer to provide employment”.
In private emails later sent by Kwang Li on November 21, and shared with the Telegraph by their recipient, the company said the practice of deducting for canteen use and savings had ceased from June 2023 after being advised by the Malaysian government.
Workers also say they have been issued with unpaid suspensions, lasting up to 15 days, for making mistakes or failing to meet production targets. Those who spoke with the Telegraph said they have “seen so many workers facing these kinds of suspension”.
Factory managers have threatened the workers with deportation back to Nepal “if you cannot meet a target,” they add.
On one occasion, a Bangladeshi worker was struck across the face by his supervisor for making a “very small mistake,” according to two workers who said they witnessed the incident. The man was subject to further verbal abuse by one of the factory managers, they say, and later suspended for a month without pay.
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The ILO also considers threats and acts of this nature – “strongly” denied by Kwang Li – to be an indicator of forced labour.
In a bid to cut costs amid falling demand, Kwang Li Industry is alleged to have forced 82 workers to resign over the summer – nearly 18 months before the conclusion of their two-year contracts.
One former factory worker, who moved over from Nepal to Malaysia in January, said he had been forced to resign after just six months of work.
The company told him that he would need to ask his family for money to eat “because we won’t be able to pay your basic wage,” he claimed. “‘We don’t have work so you have to go back. You should resign and go back.’ So that’s how they forced me to resign.”
The worker, aged 21, said he had taken out a loan worth 300,000 Nepalese rupees to pay the recruitment fee but only paid off a third of his debt.
“The lender is asking to pay back the loan but I don’t have any income, any job, any work,” he said. “I don’t know what to do and how to pay back the loan.”
‘Akin to modern slavery’
Andy Hall, a British labour rights specialist, said the workers reportedly forced to resign were vulnerable to further exploitation as a result of their “acute debt and desperation”.
Kwang Li Industry rejected the allegations of mass forced resignations but said in private emails obtained by the Telegraph that it felt “sympathy” for the 82 workers and indicated that it was “willing to give fair and reasonable compensation”.
Mr Hall said this was “hopefully a sign the company, and Shimano, are willing to accept responsibility for the alleged wrongdoing that has occurred here”.
He added that the experience of the workers at Kwang Li Industry met several of the ILO indicators of forced labour and was “akin to modern slavery”.
Sian Lea, Business and Human Rights Manager at Anti-Slavery International, said the allegations uncovered by the Telegraph “bear all the hallmarks of how employers, and others, can exploit migrant workers and trap them in modern slavery.”
“Recruitment fees, in particular, have long been identified as a critical driver of modern slavery,” she added.
A spokesperson for Shimano said: “This is a serious accusation and it stands against what we believe in at Shimano. We are currently investigating the matter with the relevant parties and will use appropriate action to ensure the situation is resolved.”
A spokesperson for Kwang Li Industry said: “We vehemently deny all the false allegations made against us … this includes but not limited to the allegations of physical abuse and threats, illegal salary deductions and recruitment fees, and unpaid suspensions.
“We wish to state that our company has adhere[d] to all the requirement and regulation of the labour law in Malaysia, which governs various aspects of employment, including working hours, minimum wage, and other related matters.”
A Halfords spokesperson said the company has a “very strict ethical sourcing code which all our direct suppliers must adhere to,” adding that it was investigating whether any components produced by Kwang Li Industry are used in Halfords’ bikes.
The Malaysian labour department and Embassy of Nepal in Kuala Lumpur were approached for comment, as well as Specialized, Giant, Trek and Evans Cycles.
See more: 26th Oct 2023: Malaysian PM Office’s Minister Azalina says govt to complete national action plan for business and human rights by 2024 amid global spotlight on systemic migrant forced labour in the country