PETALING JAYA: Sime Darby Plantation Bhd has urged the plantation industry to push the “reset” button as it warns about the crippling impact caused by the ongoing severe shortage of foreign workers in Malaysia.
The world’s largest oil palm planter by land size, which employs over 16,000 foreigners in the upstream division, pointed out that the shortage of foreign labour prevents the company from achieving optimal productivity.
Group managing director Mohamad Helmy Othman Basha revealed that the shortage of foreign workers caused RM10bil to RM12bil in revenue loss for the plantation sector in 2020, with a 20% to 30% shortfall in potential production.
The sector’s loss of revenue, which Mohamad Helmy said is “not recoverable”, was estimated based on an average crude palm oil (CPO) price of about RM2,685 per tonne in 2020.
Sime Darby Plantation had previously said that its workers who had returned to Indonesia, India, Bangladesh and other countries could not be replaced with new foreign workers due to international travel restrictions.
Meanwhile, the several thousand workers who had gone home for their holidays were also not able to return to their jobs in Malaysia.
The group’s upstream operations in Malaysia require more than 32,000 workers. However, only over 24,000 positions have been filled currently.
“The industry should take this opportunity to reset,” Mohamad Helmy said.
In addressing the foreign labour issue, he said Sime Darby Plantation had taken a two-pronged approach, namely, a fast-tracked mechanisation and automation programme and a game plan to recruit more Malaysians.
Mohamad Helmy was speaking during the Palm Oil Economic Review and Outlook seminar 2022 organised by the Malaysian Palm Oil Board (MPOB) yesterday.
MPOB director-general Ahmad Parveez Ghulam Kadir, who spoke at the event, said the temporary suspension on the intake of foreign labour has caused CPO production to fall to the lowest level since the El-Nino attack in 2015 and 2016.
“Palm oil stocks in Malaysia suppressed to below the normal average of two million tonnes.
“A tight supply of palm oil pushes CPO prices to surge to record-high levels,” he said.
Quoting findings by the Malaysian Palm Oil Association, Ahmad Parveez said that about RM1bil worth of fresh fruit bunches were not harvested every month in 2021 due to the labour shortage.
As a “high urgency” action plan to address the problem, he said the Mechanisation and Automation Research Consortium for Oil Palm (Marcop) was established. Marcop is jointly funded by the industry and the government.
On the overall palm oil industry performance in 2021, Ahmad Parveez described it as “mixed”.
He pointed out that the CPO production in 2021 dropped by 5.3% to 18.12 million tonnes, from 19.14 million tonnes in 2020.
The biggest drop in CPO production was witnessed by Sabah at 6.1%, followed by Peninsular Malaysia (5.7%) and Sarawak (3.6%).
Amid the decline in production, CPO prices shot up to dizzying heights.
In 2021, average CPO prices surged by 64.1% to RM4,407 per tonne compared to RM2,685.50 per tonne a year earlier.
“The slowdown in CPO production has limited the capacity of the country to export palm oil and other palm-based products despite a stable demand from importing countries.
“CPO prices reached the highest in palm oil history.
“The record-high prices have influenced total export revenue to reach the highest level despite lower exports,” he said.
In 2021, Malaysia remained as the world’s second-biggest producer and exporter of palm oil, behind Indonesia.
Malaysia contributed about 24% of the total global palm oil production, compared to Indonesia’s 59%.
On the other hand, Malaysia’s share of global palm oil exports was 31%, behind Indonesia’s 56%.
MPOB director of the economics and industry development division Fauziah Arshad pointed out that the rising Indonesian domination in palm oil export has caused Malaysia to lose most of its market share.
Among the countries where Malaysia experienced a major loss in market share were Egypt, Pakistan, the United Arab Emirates and the United States.
For example, Malaysia had a 93.3% market share in Egypt for palm oil exports back in 2000. This had, however, reduced to just 12.3% by 2020.
In contrast, Indonesia’s market share rose to 87.7% from 6.6% in 20 years.
“Malaysian palm oil market share (in Egypt) has eroded since 2011 when Indonesia revised its export duty structure,” she said.
Fauziah added that Malaysia maintains its position in the top-three major markets, namely, India, China and the European Union (EU).
She said that it was timely for Malaysia to introduce relevant policies to ensure that local palm oil continues to remain competitive in the future.
She also noted that Malaysian oil palm production may not grow as strong as before due to the limited plantation area.
However, Malaysia could strengthen its position in the global market by capitalising the export opportunities, according to her.
“Even though Malaysia is able to consistently export 90% of its production, the export ratio between processed and crude has decreased from almost 100% before 2000 to an average of 75% between 2015 and 2021.
“The current negative trend of the refinery’s utilisation rate is not in the best interest of the country.
“Should this backward trend continue, Malaysia would not be able to achieve its target of enhancing downstream expansion.
“Instead, Malaysia should be going forward with our future policies such that it creates an environment favouring the expansion of the downstream sector. This would further industrialise the industry in line with the country’s aspiration of becoming a high-income nation,” said Fauziah.
Amid the ongoing challenges, Plantation Industries and Commodities minister Datuk Zuraida Kamaruddin expressed her optimism that the palm oil industry is set to accelerate this year.
She remained confident on the post Covid-19 outlook of the oil palm industry in Malaysia as supply and demand continue to be stable as well as the expected recovery from labour shortages.
“For 2022, we anticipate a better performance supported by the improvement in production.
“Exports are expected to sustain with better prospects of global oils and fats, and favourable trade policies in competing and importing countries,” Zuraida said.
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