Sarawak oil palm planters to cut jobs

KUALA LUMPUR: Oil palm planters in Sarawak will be forced to cut jobs if employers' burden is not eased as the minimum wage law came into force two weeks ago.

Effective January 1, employers must pay a minimum wage of RM900 a month in Peninsular Malaysia and RM800 a month in Sabah, Sarawak and Labuan.

This essentially means the basic daily wage in Sarawak has gone up from RM18 to RM31. 

"Of course, everyone wants higher salary, but what about business survival? That's a 70 per cent jump in labour cost. How can we stomach that?" Ta Ann Holdings Bhd group managing director and chief executive officer Datuk Wong Kuo Hea asked.

"If the situation does not improve, we'll have to cut jobs. We have no choice," he said.

When met at a Malaysian Palm Oil Board's seminar in Kuala Lumpur yesterday, he said as the government sought to propel Malaysia into a high income nation by introducing monthly minimum wages, it may have overlooked the possibility of locals being discriminated.

"Picture this... a Malaysian gets the same basic wage of RM800, but the foreign worker enjoy free housing, water, electricity and transport. So, for the same minimum wage, a local gets less benefit," Wong said.

All along, employers from the plantation sector is already providing free housing, water, electricity and healthcare for its workers at the estates. 

In view of the minimum wage law coming into force, planters have appealed for these subsidies be included in the minimum wage to rebalance the interests of local workers.

Last week, at the National Economic Council meeting, MCA president Datuk Seri Dr Chua Soi Lek lent his support that transportation and housing costs for foreign workers be included in their wages. 

He also said he had instructed four MCA ministers to raise the issue in tomorrow's Cabinet meeting with Prime Minister Datuk Seri Najib Razak.

Wong said these costs, including the annual RM1,135 (timber) and RM695 (plantation) levy in Sarawak, should be regarded as part of the minimum salary so as to ease employers' burden.

In a telephone interview with Business Times from Kuching, Sarawak Oil Palm Plantation Owners' Association (Soppoa) chairman Datuk Abdul Hamed Sepawi estimated that the proposed relief would translate to a 30 per cent increment in labour cost for oil palm planters in Sarawak, instead of the current 70 per cent drastic jump.

Hamed highlighted the cost of getting food ingredients from farm to table have gone up, but planters are not able to testify the same for productivity.

This is because oil palm planters are price takers of the world's commodity markets. "We're not in a position to pass on additional costs to clients," he said. A planter's earnings have always been at the mercy of pricing in the world's commodities markets. 

If palm oil prices were to plunge below RM2,000 per tonne, Hamed said planters will definitely lose money. "Many of our members borrow money from banks and issue bonds, of which bankers and insurance companies are subscribers," he said.

Depending on the year of planting, Soppoa calculated that palm oil production cost of these heavily-geared planters ranges between RM1,200 and RM3,000 per tonne. "If palm oil prices were to fall further from the current RM2,300 per tonne, some planters may face difficulties in repaying the banks. 

"They'll then hire less hands and there'll be less harvest. With less cooking oil available, consumers will have to contend with inflationary food bills," said Hamed. Every year, the government pays more than RM1 billion in subsidy to keep cooking oil price at an affordable level of RM2.50 per kg.