Palm oil producers losing up to 25% of potential yield due to labour shortage

The industry’s heavy reliance on foreign workers must be addressed particularly when more than 500,000 workers is said to be involved in the plantation sector

pic by TMR FILE

LABOUR shortage, a long-standing issue in the domestic plantation industry, has caused Malaysian planters to lose up to 25% of potential palm oil yield, according to the Malaysian Palm Oil Association.

Its CEO Datuk Mohamad Nageeb Wahab said the losses would increase in the coming months if the government freeze on foreign labour recruitment is not lifted.

“The labour shortage situation is dire, especially for Malaysia. Even before Covid-19, we were already short by about 36,000 workers, and the shortage has resulted in us not realising our potential production of another 10% to 25%,” he said during a panel session at Invest Malaysia 2020 in Kuala Lumpur yesterday.

Loss of yield was also a result of unfavourable weather conditions and limited usage of fertilisers.

“During the Movement Control Order (MCO), we managed to retain the number of foreign workers. What we are more concerned about is post-MCO, especially with the government’s recent policy on foreign labour,” Mohamad Nageeb said.

Last month, Human Resources Minister M Saravanan said the government would not allow any new intakes of foreign workers until year-end to prioritise jobs for locals amid the Covid-19’s economic repercussions.

Malaysia is the world’s second-largest producer of palm oil after Indonesia, making the crop a major revenue source for the nation.

The industry’s biggest issue that must be addressed is its heavy reliance on foreign workers, Mohamad Nageeb said.

“Today, 84% of plantation workers consist of foreigners,” he added.

As of March 31, 2020, it was estimated that more than 500,000 workers are involved in the plantation sector.

While some plantation firms have begun to leverage on automation, there are still duties that require manual work such as fruit harvesting, which planters have not been able to find a mechanised and commercially viable substitute.

Mohamad Nageeb admitted that Malaysian companies, including palm oil producers, are “too complacent” when hiring foreign workers due to their availability.

“When Malaysians shun working for plantations, the companies know there is an alternative. The industry doesn’t have a choice but to focus on resolving the labour issues if the players want to survive,” he said.

Ahead of the upcoming national budget, Mohamad Nageeb recommended the government raise the windfall tax threshold to curb the high operating business.

“The plantation sector is paying the highest taxes to the government. Besides the corporate tax of 24%, we have to pay the windfall tax, levies, property assessment tax and even railway crossing business tax.

“There should be radical changes in the tax structure. Tax should be implemented when companies are making money. We have requested for the threshold to be raised to RM3,000 or RM2,750,” he said.

The windfall tax is currently imposed on palm planters in Peninsular Malaysia, whereby firms are subject to a 15% levy if crude palm oil (CPO) prices exceed RM2,500 per tonne.

In Sabah and Sarawak, planters are subjected to a 7.5% rate if CPO prices rise above RM3,000 per tonne. A separate sales tax of 7.5% is also imposed on planters in Sabah and 5% on those in Sarawak.

For 2020, Mohamad Nageeb expects the price of CPO to range between RM2,400 and RM2,500.

Separately, Deputy Plantation Industries and Commodities Minister Willie Mongin said Malaysia is drafting strategic solutions to resolve labour issues relating to various malpractices allegations in Malaysia.

“It will be a continuous effort by the government to expel these allegations and eradicate labour issues that plaque the commodity sector,” he said, adding that Malaysia does not condone forced labour.