Indentured servitude, Hong Kong-style

Sitting on a picnic blanket in Hong Kong’s Victoria Park with fellow Indonesian domestic workers on a Sunday in October, 34-year-old Arida is holding back tears. Moneylenders have demanded she turn over almost all her HK$3,740 ($483) monthly salary to pay debts totaling more than $5,000 that she incurred finding a job, she says. When she stopped paying in July after labor advocates told her that fees she had been charged are illegal in Hong Kong, debt collectors harassed her and the family that employs her as a live-in helper. “This loan will be impossible to repay,” Arida says, giving only her first name for fear of losing her job. “I fear this will never go away.”

Thousands of women in Hong Kong with similar stories, most from Indonesia and the Philippines, are working off debt by turning over almost all their pay for months to loan companies and agencies that place them with families, according to interviews with a dozen workers, four nonprofit groups that handle complaints, and academic researchers. The moneylenders, part of Hong Kong’s shadow-banking system, are helping circumvent laws intended to protect the women, they say. “Employment agencies are in collusion with moneylenders and with employers, and they’re all in it to save money or make money at the cost of domestic workers,” says Holly Allan, founder of the nonprofit Helpers for Domestic Helpers, which received more than 5,000 complaints last year. “It is definitely indentured servitude, modern-day slavery.”

In Hong Kong more than 300,000 domestic workers cook, clean, and take care of children and the elderly. While the city’s rules governing their employment don’t set a limit on hours, they do grant them one day off a week and cap the commission that agencies can charge them at 10 percent of one month’s salary. Other fees, including those for medical checkups, insurance, visas, and airline tickets, are supposed to be paid by employers. To get around those restrictions, agencies often charge domestic workers for training and expenses incurred before they leave their home countries. Hong Kong doesn’t prohibit such practices. Licensed moneylenders, some of which offer free phones or TVs to encourage borrowing, can charge as much as 60 percent annual interest under Hong Kong law.

Arida moved from Indonesia to Hong Kong in August 2011 to work as a live-in helper. Along with a placement fee, she was charged for training, including instruction on using a washing machine. About three months after she arrived, Arida says, she lost her job, still owing fees that equaled several months’ salary. She says Wang Fullco, the Hong Kong employment agency that placed her, took her to licensed moneylender Toyo Finance & Credit, had her take out a new loan big enough to pay off the old loan and cover fees for finding her a new job, and pocketed the cash. Wang Fullco director McLean Ng says his agency doesn’t take workers to lenders. The firm legally keeps 10 percent of one month’s salary as a commission and charges the same amount if there’s a new contract, he says. Gilbert Ng, a manager at Toyo Finance who isn’t related to McLean Ng, declined to comment.

In the past two years, the number of licensed moneylenders listed in Hong Kong’s Companies Registry increased 20 percent, to 938. The firms are unregulated by the Hong Kong Monetary Authority, which doesn’t track lending outside the city’s 23 loan-issuing banks and 25 deposit-taking companies. To obtain a license, lenders pay the equivalent of $1,382 for a one-year, renewable permit approved by Hong Kong’s Licensing Court. The Licensed Money Lenders Association, which represents about 40 Hong Kong companies, declined to answer questions, saying in an e-mail that its members abide by a code of conduct designed to promote “good moneylending practices.”

Since 2010, domestic workers have filed about 2,000 complaints a year with the Philippine consulate in Hong Kong, seeking help to recoup placement fees after losing their jobs, says the consulate’s labor attaché, Manuel Roldan. Hong Kong Labor Department spokeswoman Lily Chan says her department received 54 complaints last year and 27 in the first nine months of 2012 about overcharging by employment agencies. Two firms were convicted, resulting in fines of HK$50,000 and a loss of licenses, she says, adding in an e-mail: “We are concerned about this situation and have raised this issue to the relevant governments’ attention.”

Almost 8,000 domestic workers arrived in Hong Kong from January through June, according to Immigration Department statistics. Most will face situations like Arida’s, says Eni Lestari, spokeswoman for the Asian Migrants Coordinating Body, a group that says it represents about 20,000 domestic workers in Hong Kong. “They have all the data of your family and employer,” Lestari says. “If you decide to run away from the agency, they will continue harassing you.” –Sheridan Prasso and Cathy Chan, http://www.businessweek.com/articles/2012-11-15/indentured-servitude-hong-kong-style