Kuala Lumpur 30 January, 2002 (Business Times) - THE ongoing flap overreducing the number of Indonesian workers appears to be a storm in ateacup, going by the share price movements of plantation companies whichare among the largest employers of these workers.

Plantation stocks stayed firm despite uncertainty over policy changes onhiring foreign workers. Analysts said this was largely due to expectationsthat the sector would maintain the exemptions it had secured so far.

The Kuala Lumpur Stock Exchange Plantation Index was the second bestperformer yesterday after the Technology Index, and gained 0.52 per centafter rising as much as 0.85 per cent earlier in the day.

Activity was focused mainly in two oil palm planters, IOI Corp Bhd andKuala Lumpur Kepong Bhd. IOI gained 10 sen or 2.3 per cent to RM4.52 with2.45 million shares traded, while KLK rose five sen or just under one percent to RM5.50 with 1.69 million shares done.

Palm oil futures, however, have eased between 1.4 per cent and 1.6 percent since Friday, mostly due to falling prices of soybean, a substitutefor palm oil. Crude palm oil for February fell RM20 or 1.7 per centyesterday to RM1,170 a tonne.

Indonesia yesterday imposed a temporary freeze on Malaysian recruitment ofworkers from the republic, which will stay in place until the twogovernments meet to clear up the issue.

The move followed remarks over the weekend that the number of Indonesianworkers would be cut over growing concern sparked by a riot in NegriSembilan last week.

"Most people don't think it's realistic to cut the Indonesian workforce onplantations. It's not likely to happen, especially since palm oil is oneof the country's major exports," said an analyst.

Any change in the policy will affect the profitability of the palm oilplantation sector, which employs roughly 45 per cent of the foreignworkers here, and Indonesian workers make up the bulk. Forty per cent ofthe cost of production of palm oil is labour costs, which makes cheap andreliable workers crucial to the sector.

Unlike natural rubber, Malaysia's other significant plantation crop, oilpalm is perishable and must be harvested fast, said M.R. Chandran, chiefexecutive of the Malaysian Palm Oil Association.

"Fresh fruit bunches must be harvested within 15 days or the quality ofthe palm oil extracted will be poor. There will be a whole chain oframifications if that happens, especially if plantations are short ofworkers," he said.

Plantations may not yet feel the worst of the current shortage of workers,caused by an earlier decision last July to limit some workers' time hereto three years.

"Luckily, it is the low crop season until February so estates may notreally feel the pain... ,"he said.

He estimates the sector could see losses of almost RM400 million for 2001,following Immigration's decisions last July and September to repatriateworkers who have completed three years here.

This, however, will swell to just over RM1 billion this year after takinginto account the crop losses due to a shortage of trained plantationworkers that will occur once these decisions take effect.

"The new workers recruited to replace (those) repatriated will not be ableto reach maximum productivity for at least the first six months of theiremployment."