For the palm oil sector in Sarawak, Soppoa said allocations under Budget 2020 only showed more emphasis and focus must be given to overcome the challenges of the industry here. — AFP photo
KUCHING: The Sarawak Oil Palm Plantation Owners Association (Soppoa) says measures in Budget 2020 failed to meet most of the more urgent requests which are critical to the sustainability and development of the palm oil industry in Sarawak.
In a statement yesterday, the association said the industry continues to face difficulties such as high shortage of labour, low crude palm oil (CPO) prices and high production costs.
“The lack of tax incentives to invest in mechanization and automation to push work productivity, value added downstream activities, R&D and building a more much needed competent work force to endure challenges ahead is not encouraging and forthcoming.
“As a result, the industry here will still be lagging behind on innovation, creativity, productivity and value creation on its upstream and downstream activities.”
For the palm oil sector in Sarawak, Soppoa said allocations under Budget 2020 only showed more emphasis and focus must be given to overcome the challenges of the industry here.
For example, the Locals@Work incentive of RM350 or RM500 per month for two years for companies hiring locals to replace foreign workers “fails to take cognition of the fact that locals still shun plantation work due to the 3D mentality – ‘difficult, dirty and dangerous’ nature of plantation work – as compared with plenty of other opportunities in other sectors to secure employment,” Soppoa highlighted.
Another area of concern for the industry is the extension of minimum wage increase to RM1,200 from RM1,020 for major cities which Soppoa said “should not be even considered for anywhere for plantations.”
“This will further impact the bottom line of palm oil companies operating in Sarawak irrespective of whether upstream or downstream activities,” it underscored.
“The low price of CPO, lower yields of the oil palm and high cost of production will cause the Plantation industry in Sarawak to be further burdened with more loans financing and other commitments.
“As reported by many public listed palm oil companies from Sarawak for 2018, many are showing losses and further increasing labour costs and production cost will only accentuate the losses of these companies for the coming years.
“There was also a rapid and sudden increase in minimum wage to bring in line with Peninsula only just recently. Any increase in wages should come with higher productivity should be deliberated and agreed by all stake holders.”
With regards to RM30 million allocated for R&D matching grants for collaborations to develop higher value added downstream uses of palm oil in tocotrienol in pharmaceuticals and biojet fuel, Soppoa said this fails to address the much-needed grants for other investments in other fields like food processing and related products for Sarawak which will boost the industry.
With the reduction of the Pan Borneo Highway construction costs, Soppoa also said priority should be given to improve existing feeder roads infrastructure and connectivity to the Pan Borneo highway with the funds available apart from connecting a new highway to the proposed new capital of Indonesia in Kalimantan.
“To improve work productivity by investing in mechanisation and more efficient work methods, field infrastructure access and all-weather roads for machines mobility must also be in place to succeed.
“This is to support infield machineries and need huge capital outlay. Purchasing expensive agriculture machineries and land development costs will need a longer period to break even especially with the lower yields and higher production costs in Sarawak.”
Meanwhile, Soppoa requested for tax incentives to purchase and deploy machineries to improve work productivity and subsequently reduce dependency on foreign workers by abolishing import tax for such agriculture machineries imported from overseas.
“There must be a clear guideline for these tax exempted items and without any hindrances from other ministries once approval is obtained from the single approving Ministry,” the association said.
“This will gradually help to speed up and increase land-man ratios from current 1:7.5 to 1:10 at the least.”
Soppoa also called for an extension of accumulated business losses and unutilised capital allowances from a proposed seven years be expanded to 14 years to enable the industry to remain competitive and not continue to suffer losses or help to recover – but this was not apparent in Budget 2020.
“The bulk of the new oil palm development or expansion was mostly from recent years and are more costly than in other parts of the country. The prolonged low CPO price, lower early yields and high cost of production need a much longer recovery period than just seven years.”