Labour shortage worsens in oil palm sector amid pandemic
08.08.2020 (www.thestar.com.my) - AS we enter the peak production period for oil palm in September, lasting till December, the industry is grappling with the issue of an acute labour shortage.
While the labour issue has been the bane of the industry for many years, it is set to take a turn for the worse amid the peak season, the freeze on the intake of new workers, and the difficulty in recruiting such workers due to the outbreak of the Covid-19 pandemic.
Prior to the coronavirus episode, the labour-intensive oil palm sector was already facing a shortage of about 36,000 workers, of which 31,000 were harvesters or palm fruit collectors in the estates.
It is estimated that the labour shortage in the sector will likely double or escalate to 62,000 if left unchecked by the end of this year.
According to industry expert M R Chandran, the oil palm sector is now caught in a perfect storm.
Of the six million ha of planted oil palm area in Malaysia, about 700,000ha-800,000ha are immature and about 5.2 million ha are mature areas. In recent years, more plantation companies have accelerated their replanting exercise with higher yielding materials, resulting in the need for more general workers, apart from maintaining the harvesters’ workforce.
“The current acute labour shortage has resulted in planters having to extend the harvesting rounds to a 20-day interval compared with the usual 10-12-day intervals, or 2.5 to three rounds of harvesting per month.
“The extended harvesting interval will affect the quality of the crude palm oil (CPO) produced, given the delay in collecting the fresh fruit bunches (FFB).
“All these are the operational hazards of planters, ” he points out.
Chandran also projects the local oil palm sector to suffer some 3.3 million tonnes of CPO losses from the labour shortage issue this year.
“Should CPO trade at RM2,500 per tonne, this will translate to some RM8.25bil loss in revenue for the plantation sector.
“But then, CPO is currently trading much higher at about RM2,700 per tonne. So I expect the loss could be much higher, ” says Chandran.
A bigger repercussion is the loss of revenue to government coffers, as the plantation sector is also among the most heavily-taxed industries.
He also expects that the Malaysian Palm Oil Board’s (MPOB) bullish target of a 20-million-tonne CPO production this year will not be achieved. For this year, CPO production is slated to be about 19.3-19.4 million tonnes, which is much lower than the 19.8 million tonnes recorded in 2019.
On a labour-to-land ratio basis, the oil palm industry’s average now is one man to eight ha (1:8ha).
According to Chandran, the labour-to-land ratio in the sector has improved over the years through mechanisation, but “all planters should strive to do better”.
He says the best-managed estates by planters such as IOI Corp Bhd
, Kuala Lumpur Kepong Bhd (KLK), Sime Darby Plantation Bhd and United Plantations Bhd have achieved a 1:10ha labour-to-land ratio. “Now these big planters are targeting to achieve 1:12ha by 2025, and later 1:15ha by 2030 – all via mechanisation, ” says Chandran.
Hence, this can only be done if all parties – the plantation industry and the public sector such as research institutes like MPOB and universities – collaborate in coming up with better mechanisation tools or gadgets for harvesting oil palm.
“This will be the answer to the sector’s labour shortage woes. We must seek long-term solutions to address the harvesting issue, as otherwise, the industry will no longer remain sustainable, ” says Chandran.
Meanwhile, Malaysian Palm Oil Association (MPO) CEO Datuk Nageeb Wahab points out that the current labour shortage has put planters in a dilemma, whereby they cannot fully optimise the current high CPO price trading at RM2,700-RM2,800 per tonne. “Planters are severely short of FFB harvesters, who are mostly foreign workers from Indonesia.
“A shortage of harvesters will delay the palm fruit harvesting and curb the CPO output, especially during the upcoming peak production season in September onwards, ” explains Nageeb.
This will also have an impact on planters’ bottom lines. “Unlike 10 years ago, our FFB harvesters or collectors are mostly sourced from Lombok, Indonesia.
“But the situation has drastically changed, given that Indonesia has turned into the world’s largest CPO producer actively planting and in need of harvesters as well.”
Malaysian planters are now deprived of Indonesian harvesters, who have opted to stay put, given the booming oil palm sector in the republic.
“Then, the already severe (labour shortage) situation in the local palm oil sector has been further impacted by the current Covid-19 pandemic, ” adds Nageeb.
Thousands of workers have already left the estates for home as borders closed, while plantation companies have not been able to replace those who have left.
Malaysian Agricultural Producers Association (MAPA) president Mohamad Helmy Othman Basha notes that the government must recognise that the employment of foreign workers in the plantation industry is “a necessity rather than a matter of choice”, as many local workers shun such manual work.
“To stay competitive, plantation companies will need to have sufficient numbers and a timely supply of foreign workers to improve their productivity, and have sustainable prices and cost of production, ” he said at MAPA’s AGM recently.
If the severe labour shortage continues, the loss of productivity is estimated to be over RM16bil per year.
“This is a big loss not only to the plantation companies, but also to government coffers, ” Helmy points out.
He further adds that planters would likely reach a point where it may no longer be profitable for the industry to accommodate further increases in the labour cost.
The plantation fraternity is also appealing to the government to seriously consider a multi-tier system based on the “land-to-labour ratio” principle.
“This is more suitable for the plantation industry, as it would encourage mechanisation, thus reducing reliance on foreign workers and at the same time increasing productivity.”