KUALA LUMPUR (Bloomberg) -- Oil palm planters in Malaysia, the world’s second-largest grower, warned that closing estates in its top-producing state may exacerbate the spread of the coronavirus by creating a flood of economic migrants, while tightening food supplies.
The state government of Sabah, which has 1.54 million hectares of oil palm planted area -- more than 21 times the size of Singapore -- has ordered estates and mills in six districts to shut through April 14 after some workers tested positive.
The shutdown affects about 75% of the state’s palm production and about 100,000 workers, according to growers’ groups.
But instead of containing the virus, the closures may have the opposite effect.
Plantations and smallholders that can’t afford to pay workers may be forced to lift their own voluntary lockdowns, leading to an exodus of "economic migration” into neighboring towns or out of the country, according to Jeffrey Ong, president of the Malaysian Estate Owners’ Association.
Growers are worried about the "nightmare” of the social impact caused by the shutdown order, compared to if workers were working within estates that have implemented strict safety measures, said Joseph Tek, chief executive officer of Sabah-based planter IJM Plantations Bhd.
"Large numbers of jobless plantation foreign workers numbering tens of thousands may end up leaving their plantations looking for job opportunities elsewhere or wander out for other purposes,” Tek said.
"There will be movements of workers without the authorities realizing and along the way, they may even stay with their friends or in villages. If they encounter any carriers of the virus, then the spread would be quick and very silent.”
The economic impact could also be big.
Closing the six districts may impact as much as 9% of Malaysia’s monthly production and cut April reserves, while slashing earnings of planters such as FGV Holdings Bhd. and Hap Seng Plantations Holding Bhd, according to Ivy Ng, CIMB’s regional head of agribusiness research.
FGV and top-planter Sime Darby Plantation Bhd are appealing the decision, while Wilmar International Ltd, the world’s biggest palm oil refiner, said the shuttering would impact refineries .
"The irony is that the closure of oil palm estates and mills will have a direct impact on the ability of the refineries to operate,” Wilmar said Thursday. "This will inadvertently impact the supply and production of food products and cooking oil that are essential items in Malaysia, which is what we are trying to avoid in the first place.”
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