KUALA LUMPUR: Forced labour allegations recently highlighted by a US-based solar power producer in Malaysia could throw a spanner in the works for the National Energy Transition Roadmap (NETR) if it is not managed properly, leading to a loss of potential investors.
Two weeks ago a sustainability audit report by top US solar panel maker, First Solar, identified unethical practices at its Malaysian manufacturing operations.
The company reported that audits found four onsite service providers in Malaysia practising unethical recruitment, which include payment of recruitment fees in migrant workers' home countries as well as retention of migrant worker's passports.
An industry observer who facilitates foreign investors in the country said with the growing adherence of the industry to environmental, social, and corporate governance (ESG) requirements, any misconduct will not reflect well on the industry as a whole.
The industry observer added that investors will decide where to invest based on the long term return of investment and make the call based on the risk profile that they conducted.
"Along the way while the company makes a decision to invest, and something bad happen…they may pull back the investment.
"If this issue is not handled properly, it could ruin investors' confidence in our adherence or compliance to ESG policies," he added.
"If the allegations are true, investors will turn away from Malaysia if local companies do not abide by the ESG requirements," he said.
The industry observer also pointed out that competition is high as other countries in the region such as Vietnam, Philippines and Indonesia have stepped up their game within the solar industry.
"Good policies and stability continue to become an utmost important component that helps investors make business decisions for the long run as we can no longer dictate what we can offer anymore.
"Foreign investors are likely to monitor our progress and they will also ask around among the stakeholders before they make any decision," he said.
Putra Business School economic analyst Associate Professor Dr Ahmed Razman Abdul Latiff said the report does not come as a surprise as this is not the first reported case of forced labour.
He said it has tarnished Malaysian reputation in hiring foreign labour.
"We have seen an incident where Dyson withdrew their investment in the country because of this issue of forced labour and it could happen again with the solar industry, unless the government started to be more stringent in laws and regulation on the hiring of foreign workers," he told the New Straits Times.
Maxeon Solar Technologies Ltd director of senior counsel Matthew Kasdin on the other hand said the recent forced labour report has prompted a few solar customers to start looking into social auditing.
"This has highlighted the importance of social audit among solar companies to ensure commitment to make solar energy as clean as possible and I think it will go beyond the solar industry," he said.
Meanwhile Natural Resources, Environment, and Climate Change Minister, Nik Nazmi Nik Ahmad when met said the ministry will look into the allegation and act accordingly in adherence to Malaysia's law and policies.
On the report affecting the government's latest commitment to energy transition via NETR, he remained optimistic about investors' interest to the solar industry in the country.