This article first appeared in The Edge Malaysia Weekly on April 27, 2026 - May 3, 2026

FORMER Klang member of parliament (MP) Charles Santiago has proposed that the government replace the current system of signing memorandums of understanding (MoUs) with source countries that supply labour to Malaysia with binding bilateral labour agreements (BLAs).

Santiago, a three-term MP, says that MoUs are fraught with flaws, and function more as a political and administrative arrangement than a legal safeguard.

“MoUs are not legally enforceable as opposed to BLAs, which are a grievance mechanism. The terms of MoUs are not transparent and there is no legal structure on the fees that can be imposed on workers,” he says.

Under a BLA framework, both employers and workers will have access to legal recourse in the event of wrongdoing. For instance, workers can seek intervention from the Malaysian authorities if they are abused, if their salaries are not paid or if they have been charged excessive recruitment fees for non-existent jobs, he explains.

A BLA also provides a safety net for businesses. “As for employers, the BLA gives them a recourse against agents and any intermediary that they have used in bringing in the foreign workers. Under the current MoU system, the weight of any violation falls on the employer. This was evident when Malaysian companies had to fork out remediation fees or face the prospects of their products being stopped at the borders of the US and Europe,” says Santiago.

At the height of the pandemic in 2021, five major glove companies in Malaysia and two plantation giants came under intense scrutiny because of foreign labour violations. Among the charges the companies faced were the withholding of worker passports, poor living conditions and the imposition of exorbitant recruitment fees.

The companies, however, argued that they paid agents or middlemen to handle the recruitment and denied holding on to the workers’ passports. The agents, however, were not held accountable and faced no charges.

Subsequently, the glove manufacturers and plantation companies could not export their products to the US and Europe. In the end, they had to pay a total of RM472 million in remediation fees to their foreign workers to lift the export bans.

Santiago says employers are “tired” of being made to pay for the misdeeds of unscrupulous agents and are prepared to adopt a binding BLA for the recruitment of foreign workers.

“For employers, remediation represents a double burden. They pay for recruitment-related costs to secure labour and later compensate workers for fees imposed by unscrupulous intermediaries.

“As for the workers, justice arrives only after prolonged hardship and frequently only as a result of external intervention,” says Santiago, who has written a paper on why the Malaysian government should adopt binding BLAs instead of MoUs.

Aishwarya Visvanathan, who is a fellow researcher on the subject, says the MoUs signed with the different countries that send their workers to Malaysia do not have a uniform structure.

“The MoUs have a different structure for each host country. For instance, Bangladeshi workers pay more compared to workers from Nepal to come to Malaysia. Nepali workers’ migration cost is equivalent to three months of their wages in Malaysia whereas for the Bangladeshi worker, it is equivalent to seven months’ wages,” she says.

While the employer-pays principle is explicitly stated in the MoU with Nepal, it is vague in the agreement with Bangladesh. “The lack of uniformity complicates compliance for Malaysian employers, who must navigate differing obligations depending on the workers’ nationality,” she adds.

Malaysia had previously signed MoUs with the governments of Bangladesh and Nepal to regulate the import of foreign workers to Malaysia. More than once, its agreement with Bangladesh has resulted in controversy.

In February 2016, the then home minister Datuk Ahmad Zahid Hamidi suspended the entry of Bangladeshi workers just one day after the then human resources minister Datuk Richard Riot inked an MoU with the Bangladesh government to allow the entry of 1.5 million workers into Malaysia over a three-year period until 2018/2019.

In 2021, an MoU signed under the then human resources minister M Saravanan for the recruitment of 220,000 workers until the end of 2026 initially restricted the recruitment to only 10 Bangladeshi companies. Following protests in Dhaka, the number was expanded to 102.

Santiago says the export of manpower to foreign countries is a big business in Bangladesh, and that employment agencies in that country are usually connected to politicians. “There is governance failure and entrenched corruption from cartelised recruitment networks. These structures systematically transfer costs and risks to the migrant workers while generating substantial rents for politically connected intermediaries.”

A binding BLA would, to a large extent, mitigate the problems of agents and well-connected recruitment companies profiting at the expense of workers. Properly structured, these agreements would establish institutional architecture capable of regulating both state and private power across recruitment corridors, he says.

Malaysia has no choice but to reform its migrant labour system, Santiago stresses.

“The need for reforms is no longer determined by domestic considerations only. It is increasingly constrained by intensifying external regulatory scrutiny from Europe and the US. In particular, European buyers of products are required to identify, prevent and remediate human rights abuses throughout their supply chains,” he adds.

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