Association wants proof of labour abuse incidents so that action can be taken to clear Malaysia’s image

by RAHIMI YUNUS & SHAHEERA AZNAM SHAH / pic by RAZAK GHAZALI

THE Malaysian Palm Oil Association (MPOA) demands proof on the allegations of human rights abuse and forced labour allegations that led to the US imposing a palm oil ban on FGV Holdings Bhd.

MPOA CEO Datuk Nageeb Abdul Wahab said alleged labour abuse incidents, if occurred, could be isolated cases.

“While we cannot say it is not true, let us know and show us the evidence. We can investigate and if it is proven true, the authorities can take action,” Nageeb told The Malaysian Reserve yesterday.

Although the ban is specific to a company and not a blanket ban against Malaysia, Nageeb said it could impact other companies and damage Malaysia’s reputation as a palm oil exporter.

He noted that the US is buying a small volume of palm oil from Malaysia and the impact may be negligible, but the association still has concerns and “cannot brush aside what they say”.

As it is, he said MPOA is looking to engage the US Embassy and the US Customs and Border Protection (CBP) immediately to seek clarifications about the detention order issued against FGV’s palm oil. MPOA has a total of 122 members including FGV, which represents 40% or 1.85 million hectares of the Malaysian palm oil industry.

Malaysian Palm Oil Council CEO Datuk Dr Kalyana Sundram declined to comment on the CBP’s action against FGV when contacted.

On Wednesday, CBP said it will detain palm oil and palm oil products made by FGV and its subsidiaries and joint ventures effective Sept 30 at all US ports of entry.

CBP’s Office of Trade directed the issuance of a Withhold Release Order against palm oil and palm oil products made by FGV based on information that reasonably indicates the use of forced labour.

FGV said in a statement that it is disappointed with such a decision as the company has been taking concrete steps over the past several years to respect human rights and uphold labour standards.

The state palm oil firm said since August 2019, it has been communicating with CBP through its legal counsel and has submitted evidence of compliance of labour standards as committed by FGV.

“It will continue to engage with CBP to clear FGV’s name and is determined to see through its commitment to respect human rights and uphold labour standards.” the company said.

CGS-CIMB Securities Sdn Bhd analyst Ivy Ng Lee Fang said the ban will limit FGV’s palm oil market access to the US and could trigger reviews by other countries or customers of their palm oil purchases from FGV.

She also said there are potential implications for other palm oil players.

“This may also have some implications for other palm oil players, as Brenda Smith, executive assistant commissioner of CBP’s trade office, has said that CBP had received allegations regarding the broader palm oil industry and asked US importers to look into the labour practices of their suppliers,” Ng said in a report yesterday.

The analyst said FGV derived 5.3% of its total revenue from the US and Canada, while the bulk or 56% of revenue came from Malaysia, 10% from India, 7% from Pakistan, 4.3% from China, 2.5% from Europe and 15% from others, mainly Asia.

She added that in 2019, the US’ share of total global palm oil imports was not big at 2.7% or 1.49 million metric tonnes (MT).

“However, the concern is that this may lead other countries or customers of FGV to reassess their purchase of palm oil from the group as a result of concerns about environment, social and corporate governance practices.”

FGV closed at RM1.05 yesterday on Bursa Malaysia, down 8.7% or 10 sen with a market capitalisation of RM3.8 billion.

Malaysia and Indonesia are the world’s top producers of palm oil at about 85% of global output. The former exported 542,161MT of palm oil to the US last year, placing the country at eighth top export markets, according to MPOC data.

The palm oil industry has been heavy criticised for alleged human rights and forced labour issues, adding to the headache that it already suffers from a European palm oil curb based on deforestation issues, among others.

Meanwhile, the Domestic Trade and Consumer Affairs Ministry will step in to address the import ban by the US on palm oil and palm oil-based products by FGV should the matter continue.

Minister Datuk Alexander Nanta Linggi said the trade restriction is deemed as “punitive”, not just to the planter, but to the entire Malaysia’s palm oil industry.

“We regret the action taken by the US, which is punitive to our plantation industry and harsh to FGV. At the moment, we hope FGV could resolve and address the matter and fix the negative perception.

“As this is directed solely to FGV, let the company manage it first. Should (it be) necessary, we will step in to help address the issue,” he said at the Buy Malaysian Products Campaign and Malaysia Sale Programme in Kuala Lumpur yesterday.

Alexander said so far, the planter has not sought assistance or support from the ministry to help resolve the matter at the government-to-government level.