New Zealand has thanked Malaysian authorities for intercepting a modified tanker carrying illegal immigrants bound for New Zealand and Australia.

Malaysian police rescued 127 Sri Lankans and arrested 16 other people – Indonesians, Malaysians and Sri Lankans - in the operation early today, according to media reports.

Disrupting the people-smuggling attempt sent a clear message to those involved, Immigration Minister Iain Lees-Galloway said.

"I can confirm that New Zealand was not involved in the operation but the Malaysian success in disrupting this attempt sends a very clear signal to any people involved in people-smuggling.

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"Exploitation of individuals and families by people-smugglers is repugnant and will not be tolerated.

"This sort of venture would put lives at extreme risk in the most vast and treacherous ocean in the world. We thank the Malaysian authorities for their efforts," Lees-Galloway said in a statement.

Further details were a matter for Malaysian authorities, he said.

Malaysian police intercepted a tanker full of illegal migrants bound for NZ and Australia (Photo: Royal Malaysia Police)
Malaysian police intercepted a tanker full of illegal migrants bound for NZ and Australia (Photo: Royal Malaysia Police)

The Etra was carrying 131 Sri Lankans - 98 men, 24 women and nine children - when it was stopped off the coast of Malaysia by Malaysian police, according to reports.

Four Sri Lankans were arrested and the other 127 would be charged for not possessing legal travel documents, according to the New Straits Times.

Three Indonesians and four Malaysians who were on a fishing boat which was believed to have been used to ferry the immigrants to the tanker, were also arrested.

The fishing boat was aboard the tanker.

Five Malaysians believed to be linked to the people-smuggling syndicate were also arrested, according to Singapore-based Channel News Asia.

"With these arrests, the Royal Malaysia Police has successfully foiled a large and cunning human-smuggling syndicate," police chief Mohamad Fuzi Harun said.

"This syndicate has been operating since mid-2017 and has international connections across Sri Lanka, Australia, New Zealand, Indonesia and Malaysia," he said.

Lees-Galloway said New Zealand was strongly committed to regional efforts to combat people-smuggling.

"It's common knowledge that New Zealand has been mentioned as a target in the past," he said.

The Ministry of Foreign Affairs said on its website that people-smuggling and human trafficking was an "increasing concern" regionally and at home.

"Continuing conflicts, political oppression and economic factors have led to a dramatic increase in irregular migration regionally and around the world," the ministry said.

In December last year, the Government said there had been no suggestion of a credible attempt by people-smugglers to reach these shores by boat following a reported intelligence leak to Australian media that its border officials had stopped four boatloads of asylum-seekers who said they were heading to New Zealand.

"It's simply not credible for someone in a rickety old boat, designed for at best two or three days at sea, to say they're going to sail from Indonesia down to New Zealand. I've seen nothing credible to say that is possible," said Andrew Little, Minister responsible for intelligence agencies the GCSB and the SIS, at the time.

In 2015, then-prime minister John Key was accused of scare-mongering when he said people-smugglers were now using steel-hulled ships capable of getting to New Zealand.