Worker levy hike may cost planters RM1.03b

OIL PALM planters in Malaysia are concerned that the proposed hike in foreign workers levy would increase their cost of production and affect their competitiveness.

Labour is the single largest cost component for them, making Malaysia the highest cost producer among other plantation crop producers in the region.

The Malaysian Employers Federation (MEF) and the Malayan Agricultural Producers' Association (Mapa) have estimated that the proposed increase in levy and security bond for foreign workers would expand the industry's cost to over RM2 billion from the current RM200 million in levy and security bond.

They expect the higher levy will cost the plantation sector some RM1.17 billion a year in 2015 from the current RM138.4 million, based on 256,382 foreign workers employed in the sector.

"The proposal to increase the existing security bond of RM25O per worker to RM4,000 per worker will cost the industry about RM64.01 million currently, to RM1.03 billion," MEF and Mapa said in a joint statement issued late last night.

They are responding to the proposal by the Cabinet committee on foreign labour, chaired by Deputy Prime Minister Tan Sri Muhyiddin Yassin to increase levy for unskilled workers by next year. The committee was also weighing the introduction of security bonds to ensure employers are more responsible for their employees.

Government-linked companies involved in the sector include Felda Plantations, Sime Darby Plantation, Tabung Haji Plantations, Felcra, Risda and state-owned corporations.

According to MEF and Mapa, labour is critical for sustainable growth of palm oil sector and the plantation industry is still labour-intensive. The upstream and downstream activities within the plantation sector contributed RM65 billion and RM50 billion in net export in 2008 and 2009, respectively.

"Therefore, the government should not heavily tax and burden this strategic industry. As an example, soya bean and rapeseed oil producers in North America and Europe are given subsidies," they said.

MEF and Mapa said the hiring of foreign workers contribute significantly to the expansion of the agriculture sector. An oil palm harvester is estimated to contribute RM195,700 a year to the sector, after deducting salary, housing and amenities, medical and recruitment expenses.

"Based on the approximate figure of 230,000 foreign oil palm harvesters, the total contribution per annum is about RM45.01 billion per year," they said. The proposed hike in levy and security bond would further increase production cost, which could not be passed on to the consumers as plantation companies are price takers and not price setters.

"The government, therefore, should further facilitate and not frustrate the industry. Please let our golden goose continue to lay golden eggs peacefully," MEF and Mapa said.

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