Labour shortage hits palm oil export earnings

KUALA LUMPUR: MALAYSIA is losing billions of ringgit in palm oil exports because there is not enough foreign workers to harvest fruit bunches in the oil palm fields.

The Malaysian Palm Oil Board (MPOB) estimates that the industry need to hire another 40,000 foreign workers to harvest the riped fruit bunches in order to achieve the 19.3 million tonnes of oil output target. 

"Current planting materials are already capable of producing six tonnes per hectare in a year, but the country's annual oil yield average is still stuck at four tonnes per hectare," said IOI Corp Bhd executive chairman Tan Sri Lee Shin Cheng. 

"The trees are fruiting, but there's acute shortage of harvesters and this is affecting the country's palm oil export earnings," he told reporters on the sidelines of MPOB seminar titled "Labour - Key Driver For Continued Sustainability of the Oil Palm Industry" held here yesterday.

"If the government approves of another 40,000 foreign workers, we can reduce wastage and surpass the 19.3 million tonne output target easily," Lee said. 

It is estimated that millions of tonnes of fruit bunches rot in the fields because planters are not able to hire enough foreign workers to harvest them. 

Assuming there is a five per cent wastage or loss of a million tonnes of crude palm oil, that works out to five million tonnes of fruit bunches left rotting across the country's oil palm fields. At a conservative pricing of RM3,000 per tonne, it translates into at least RM3 billion loss in export opportunity and millions of ringgit in tax loss to the federal and state governments. 

Many oil palm planters are already mechanising agricultural practices wherever possible and offering better wages in the estates. Despite this, many locals continue to shun plantation jobs. 

Lee highlighted the industry's wastage in the fields is also the government's loss in tax collection.

Deputy Plantation Industries and Commodities Minister Datuk Hamzah Zainuddin, who officiated at MPOB's seminar, acknowledged that the oil palm industry is the most heavily tax sector in the country. 

Planters are paying windfall tax, cooking oil cess, research and marketing cess, sales taxes to the Sabah and Sarawak governments, on top of the usual corporate tax and foreign worker levies.

He pledged support that his ministry will continue to forward the oil palm industry's appeal to the Home Affairs and Human Resources Ministries for an additional 40,000 foreign workers, so the industry can achieve the RM80 billion target in exports again.

"Last year, we did well as palm oil prices were high," he said, adding that MPOB had recently updated 2011's palm oil exports amounted to RM83.4 billion.

In the last five weeks, palm oil prices have been on the decline from a peak of RM3,600 a tonne. Yesterday, the third month benchmark palm oil futures on the Malaysian Derivatives Exchange closed RM125 lower, or 3.8 per cent, at RM3,150 per tonne, the worst single-day loss since February last year. 

When asked to comment, Hamzah replied, "I don't see palm oil dropping below RM3,000 per tonne, this year. Palm oil prices are likely to stabilise in the immediate term as global edible oil supply is still lagging behind demand."

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