KUALA LUMPUR, July 1 — The US State Department will downgrade Malaysia to the worst ranking in its closely watched annual report on human trafficking to be released later today, two sources familiar with the matter told Reuters.

The downgrade comes after a string of complaints by rights groups and US authorities over the alleged exploitation of migrant workers in plantations and factories.

Malaysia will fall to “Tier 3” after spending three years on the “Tier 2 Watchlist” in this year’s Trafficking in Persons (TIP) report, said the sources, who did not want to be identified as they were not authorised to talk to media.

The State Department ranks countries in Tier 3 for failing to comply with the minimum standards for eliminating trafficking or make significant efforts to comply. A Tier 3 ranking could affect Malaysia’s access to some US aid.

Malaysia’s Home Ministry did not have an immediate comment. A senior police official told Reuters this week that forced labour was not a widespread problem.

The US embassy in Kuala Lumpur declined to comment ahead of the report launch, scheduled for 1700 GMT today.

Reuters contacted the State Department, but could not reach a spokesperson outside of regular US business hours.

The South-east Asian nation has close to two million foreign workers, and rights groups say there are millions more who are undocumented.

It is also home to more than 170,000 registered refugees and asylum seekers, most of them Rohingya from Myanmar.

Migrant workers typically get to Malaysia by paying a high fee to recruitment agents in their home countries, which activists say leads to debt bondage.

Large organised crime syndicates are responsible for some instances of trafficking in Malaysia, the State Department said in its 2020 TIP report.

Import bans

In the past year, the United States has imposed import bans on three Malaysian companies over allegations of forced labour in their operations, including the world’s top glove maker and two palm oil producers.

The glove maker, Top Glove, said in April it had resolved all indicators of forced labour found at its factories.

The other two firms hit with bans by the US Customs and Border Protection agency — Sime Darby Plantation and FGV Holdings — said they had appointed auditors to evaluate their practices and would engage with the agency to address the concerns raised.

Independent migrant worker rights specialist Andy Hall welcomed the decision to downgrade Malaysia.

“The Government of Malaysia is a key actor that should take the lead to combat modern slavery and forced labour within its borders,” he said.

Malaysia was in Tier 3 — the lowest ranking in the TIP report — until 2015, when it was upgraded to the Tier 2 Watch List, a move that drew criticism in both Malaysia and the United States.

The 2020 TIP report said that while Malaysia was taking steps to eliminate trafficking, official complicity undermined anti-trafficking efforts.

The number of labour trafficking investigations was also low compared to the scale of the problem, it said. — Reuters