Palm oil industry facing collapse

Oil palm planters facing ruin as pandemic halts recruitment of foreign workers

KUCHING (July 11): Sarawak’s palm oil industry is teetering on the brink of collapse because of crippling labour shortage and restrictions of the standard operating procedure (SOP) imposed to curb the Covid-19 pandemic.

Labour shortage is a perennial problem besetting the industry, because locals generally shun jobs in the industry forcing refineries, oil palm estates and smallholders to depend heavily on foreign workers.

Before the advent of the Covid-19 pandemic, recruiting foreign workers had always been a hassle the industry players had to bear with, now the situation is exacerbated by additional restrictions imposed to comply with the measures to curb cross-border spread of the disease. As a result the industry is suffering unprecedented decline in productivity and yields.

Statistics from the Malaysian Palm Oil Board show that Sabah and Sarawak collected a total of 15.246 million tonnes of fresh fruit bunch (FFB) from January to May this year.

This marked a drop of 970,350 tonnes or about six per cent from the same period last year.

This drop consequently raised the prices of computed FFB prices from RM381.81 per metric tonne in 2019 to RM516 in 2020 and RM802.71 this year. Palm oil companies also face a rise in average oil extraction rate (OER) from RM19.06 in 2019 and RM26.30 in 2020 to a high of RM40.50 in 2021.

To recap, there has been a freeze on the intake of foreign workers since the first movement control order (MCO) was imposed on March 18, 2020. During this period, foreign workers who have returned to their home country were not allowed to re-enter Malaysia.

As announced by Deputy Chief Minister Datuk Amar Douglas Uggah Embas on December 23, 2020, the Sarawak Disaster Management Committee (SDMC) had decided to allow the recruitment of foreign workers into Sarawak with effect from January 1, 2021.

However, sources revealed that the Indonesian government has not reopened its borders yet, stopping foreign workers to go overseas, including to Malaysia.

“Indonesia’s borders are still closed, their (Indonesian) government does not encourage their citizens to work overseas,” the source told thesundaypost, requesting anonymity.

“We still cannot apply for visas at immigration as their systems are still locked by federal office. The Malaysian government has also yet to approve to allow foreign worker recruitment even though Sarawak government had announced to allow foreign worker recruitment.”

According to a pre-MCO survey by the Malaysian Palm Oil Board, there was a shortage of 31,021 harvesters among its respondents, which represents 76 per cent of the industry players.

“The labour shortage issue remains unresolved and is getting worse, resulting in production losses,” commented analysts with CGS-CIMB Research.

“The shortage of workers translated into a production loss of 3.4 million tonnes and 0.86 million tonnes of crude palm oil (CPO) and palm kernel, respectively.”

Meanwhile, AmInvestment Bank Bhd (AmInvestment Bank) warned that the labour shortage in the industry may soon widen to 20 per cent or more as the peak production period, which usually occurs in the second half of the year, approaches.

“Presently, only existing workers who have returned to Indonesia, are allowed to reenter Malaysia. However, the workers have not arrived yet due to the Covid-19 outbreak.

“To mitigate the shortage of harvesters, general workers have been tasked to collect loose fruits in the oil palm estates so that harvesters can focus on harvesting FFB,” it said in a sector outlook on Thursday.

Sarawak’s tedious steps to bring in foreign workers

The process to bring foreign workers into Sarawak has several steps. First, employers need to apply for approval in principle (AP) from the Department of Labour Sarawak through the Monitoring System of Employment of Non-Sarawakian (MSEN).

After the AP is approved at the One Stop Centre, the employer can proceed to apply for a labour licence under the AP through MSEN at the Department of Labour Sarawak.

Based on workers’ name in the labour licence, employers need to apply for a calling visa (CV) and a mytravel pass through the Immigration Department of Sarawak.

When the CV is approved, employers then need to apply for ‘myentersarawak’ through the Sarawak Disaster Management Committee (SDMC). New workers must have valid RTPCR Covid-19 negative test results before entering the state, from which employers need to arrange for their new workers’ entry process.

Upon their arrival at the border’s immigration counter and passing through immigration clearance, these new workers will be issued a 30-day special pass. They will then be escorted to check in at a quarantine centre and monitored by the Ministry of Health for 14 days, inclusive of two RT-PCR tests.

Workers with positive test results will be mandated to get treated at the hospital, with medical fees to be borne by the employer.

Their agents are to make arrangements to repatriate these workers back to their home country.

Workers with negative results will proceed to undergo a medical check up and their passports send to the local immigration office for the endorsement of a working visa.

All these are additional costs to be borne by the palm oil companies bringing foreign workers into the state during this Covid-19 pandemic situation.

The problem for palm oil companies is exacerbated as immigration offices in Malaysia remained closed during the MCO, with the source noting that some have not received approvals for CVs since the beginning of the first MCO.

“The local immigration system is not accepting applications for CVs as it remains locked by the federal side,” the source said.

“When immigration departments are closed during the MCO period, documents for applications for extension of permits cannot be submitted for approvals, and these documents may expire or become invalid when they resume operations.

“Everything is at a standstill.”

Locals still shun oil palm work Palm oil companies remain dependent on foreign workers as their main source of labour as locals still shun the opportunity to be employed in the palm oil industry.

According to the Sarawak Oil Palm Plantation Owners Association (Soppoa) president Andrew Cheng, majority of Malaysians employed in the palm oil industry, comprising some 20 per cent, are in the management and staff levels.

Meanwhile, foreign workers, making up 80 per cent, are in the field operations category.

“Even with the current good price of crude palm oil, farmers cannot benefit as there is an acute shortage of workers in the industry, caused mainly by the current Covid-19 pandemic which had prevented foreign workers from coming in since MCO began in March 2020.

“The acute workers shortage situation in Sarawak is similar to those in Peninsular Malaysia whereby locals are choosy when it comes to plantation work, which locals consider 4-Ds (dirty, difficult, dangerous, demeaning),” he said in a statement.

“Despite putting up advertisements and other job offers in many newspapers, social media, radio broadcasting and so on, the number of locals applying for jobs in plantation companies are still very low.”

The main reasons why foreign workers chose to work in the plantation industry, he added, is because they are willing to work hard and in tough conditions in order to feed themselves and their families in their home countries.

“They are desperate for work as hungry bellies ultimately push them to seek work that will pay well and which guarantee job in the long term as well, some foreign workers had been working here for quite a long time in the industry,” he said.

Cheng also outlined the notion that Malaysian youths today are too complacent and cannot endure the hardship environment of the plantations, even with high pay offers.

“Some of them just do not possess the stamina nor mentality to undertake hardship under the estate field conditions as majority of them are not desperate enough nor hungry enough,” he said.

“Hence, the palm oil industry has no options but resort to hiring foreign workers who are more willing to work in the industry.”

Solutions to keep the industry alive To keep the palm oil industry afloat, the source suggested for the government to look at ways to relax the requirements to bring in foreign workers into the state.

Researchers with Hong Leong Investment Bank Bhd (HLIB Research) said Malaysia’s vaccination process served as a “glimmer of hope” to ease this labour tightness.

“The Malaysian government is now aiming to fast track Covid-19 vaccinations for workers in essential economic sectors, such as construction and plantation sectors.

“We believe such development provides a glimmer of hope in easing labour shortfall issue in Malaysia (once the pace of inoculation picks up), hence resulting in a recovery in palm oil output in Malaysia,” it said in a sector recap.

Another suggestion was to start a campaign to encourage locals who lost their jobs during this pandemic to consider looking towards palm oil plantations for employment.

Soppoa’s Cheng, in particular, called on Malaysian youths to reconsider the opportunities in plantations sectors, especially in this digital era.

“In the digital era, jobs will become less available for those without the necessary IT skills and automation will replace the jobs of thousands in other sectors,” he explained.

“The palm oil sector has proven to be sustainable and ‘life saver’ even in the challenges of global pandemic and economical recession to the business communities and government alike.”