KOTA KINABALU: The palm oil industry in Sabah is facing a difficult period with a decline in fresh fruit bunch yield and oil extraction rate.
A shortage of plantation workers has caused a significant amount of fresh fruit bunches and loose fruits to be left unharvested, according to Thomas Lim, deputy chairman of the East Malaysia Planters’ Association.
“The Covid-19 pandemic exacerbated the situation, with total revenue losses estimated to be as much as 20%,” he told FMT.
Labour shortages are not new to the industry. Plantations in Sabah are only allowed to employ foreign workers from Indonesia and the Philippines, and the shortage is estimated to be in excess of 20%, mainly for harvesters.
This is compounded by the fact that local workers only account for around 15% of the workforce in the plantations.
The preference for foreign hands is mainly because they are more experienced and skilled in harvesting the fruits and are able to work faster than the locals.
Foreign workers are also more willing to work in remote areas where many plantations are.
The association had previously suggested that women migrant workers be allowed to work as tractor or machine operators. But this has yet to be given the green light.
Sabah Plantation Industry Employees Union secretary-general Jawaria Sima said undocumented workers, particularly from neighbouring countries, were “often paid less than the minimum wage and do not get any benefits or protection under the law”.
Jawaria sees no quick solution because the current foreign workers quota system “just does not work in Sabah.”
For one, the manpower department’s estimation of worker quotas for smallholders is usually far less than the actual need.
“Sometimes, the blame also rests with plantation owners as they tend to forget they need more workers at certain times, such as harvests. This has led to an increased need to outsource, which further reduces their profit margin,” she said.
Outsourcing can be costly and also lead to a decline in the quality of the harvested fruit, affecting the profit margin.
Other challenges are the rising production costs and a fluctuating crude palm oil (CPO) market.
“The costs of fertilisers, agrochemicals, transportation and labour have all increased significantly in recent years, which has added to the already high cost of production per tonne of CPO,” said Lim.
Additionally, the CPO market is subject to fluctuations and volatility, which can make it difficult for producers to plan viably. Producers are also subject to various taxes and levies.
He said smallholders were hoping for a reduction in input costs and a more stable CPO price.
Lim hoped the 2023 federal budget will provide relief to the Sabah oil palm sector.
“Easing the restriction on the number of source countries for foreign workers will be a step in the right direction. Additionally, providing financial assistance and incentives to smallholders in the industry will also help alleviate their financial burden,” he added.