MPOA upbeat on CPO outlook
25/10/2022 (The Star Online), Petaling Jaya - While acknowledging the road ahead may still be bumpy for the palm oil sector, Malaysian Palm Oil Association (MPOA) chief executive Joseph Tek Choon Yee is maintaining a bullish outlook, on the back of sustained global demand as well as plans to cooperate with the government for the benefit of the industry.
Among challenges, which the local palm oil industry is facing, are labour shortage, erratic weather patterns brought on especially by the La Nina phenomenon that could affect crop productivity, taxes and levies imposed by the federal and state governments as well as competition from Indonesia.
In an interview with StarBiz, Tek said given the above concerns, the world still needs palm oil to meet its oils and fats needs.
“Oil palm plantations take up 24 million ha of the world’s total agricultural land, which is actually less than 0.5%, but these plantations produce more than 30% of all global oils and fats. If palm oil is removed from the equation, it would be next to impossible to replace it with another oil resource,” he said.
Tek pointed out the palm oil sector is an industry that could use more “appreciation” and understanding from its various stakeholders, including the government, due to what he called its largely “biological” nature, with labour issues that could not be resolved by automation or mechanisation alone.
This gave rise to the need of continuously effective, relevant and inclusive engagement of the stakeholders with the government.
“Moving forward, the action plan would be to participate in discussions with the authorities on two main issues, which are on addressing the labour shortage problem, and the price threshold reviews of state sales tax (SST) and the windfall profit levy (WPL) imposed by the government.
“Many sectors, including the construction and the plantation industries, are facing serious worker shortage concerns.
“However, because of the biological nature of the palm oil sector, the concerns could not be resolved with automation.
“For instance, how can you easily get a machine to harvest palm fruits from trees? It is a journey, no magic bullet, no one size fits all,” he said.
Tek proposed that the more sizeable industries work more closely with the government to come up with industry-specific one-stop centres to better manage hiring initiatives, especially of foreign labourers.
“It is great that the government is looking after the interest of Malaysian workers by introducing a tiered levy on the hiring of foreigners in Budget 2023, but for the palm oil sector, the foreigners are not taking over any jobs from the locals.
“We simply do not have enough workers to go around, local or otherwise,” he said.
He suggested that the hiring processes can be decentralised to the one-stop centres to assist the already hectic workload of the Human Resources Ministry, as a means to improve hiring efficiency.
“We used to be working with a ratio of a man to eight ha of plantation. Now we are working with one man on 15ha. With the recruiting of the necessary manpower, we can reduce the wastage on the field,” Tek said.
He pointed out that it would improve competitiveness as Indonesia has its local workers at its disposal as labourers.
Tek said a close relationship with the government for industry players is also essential to tackle a number of other matters including the European Union’s plan in phasing out of palm oil biofuel by 2030.
“Last year, the Malaysian and Indonesian governments have filed a complaint to the World Trade Organisation (WTO) to appeal against this directive. Such matters cannot be undertaken by the private sector,” he said.
Tek noted while the “green agenda” could be a positive influence on the well-being of the planet, it could be camouflaged with sector discrimination and non-tariff barriers.
“There should be an appreciation of trade agreements and international obligations, and the government, through its agencies, need to cooperate well with the private sector to ensure better cohesion and differentiation.
“As in the WTO appeal, Malaysia can work also closely with Indonesia and other palm oil producing nations for such initiatives,” he said.
On taxes and levies, it was reported that Tek had suggested to the government to carry out a review of the SST in Sabah and Sarawak given the present high-cost of production for palm oil, as well as proposing that the government’s WPL imposed on the Sabah and Sarawak’s oil palm growers to be reverted from present 3% to 1.5% in view of the existing SST.
To recap, the Sabah SST on crude palm oil (CPO) took effect in 1999 at the rate of RM50 per tonne of CPO with revisions in 2002 at the rate of 5% per tonne of CPO and subsequently in 2005 at rate of 7.5% per tonne.
Since 1999, the sales tax was levied when CPO price is above the threshold of RM1,000 per tonne of CPO.
In Sarawak, the state sales tax was imposed since 1998 when price threshold was at RM1,000 and RM1,500 per tonne at 2.5% and 5% respectively.
The price thresholds that were set in 1998 and 1999 for Sabah and Sarawak were in order then when the cost of production encircled RM750 per tonne CPO prior to 2000.
The cost of production has increased over the years amid the introduction of minimum wages, and high input costs, especially for fertilisers, fuel and many other unabated cost increases, according to Tek.
“For the start in taxation review, the proposal is to revise to the price threshold, which will not change the present collection of SST set against the current CPO price realised today, but it will put right the tax threshold in recognition of the present cost structure.“We will see if we can continue to engage the government of the day not only on this tax-and-levy issue, but also on the one-stop-centre proposal, to ascertain if we can move ahead with these plans going into 2023 and beyond,” Tek said.