Plantation sector’s wish list for Pakatan government

This wish list for the oil palm sector is submitted by the Malaysian Estate Owners’ Association (MEOA). MEOA members own about 1.2 million ha of planted oil palm, or 20% of the total cultivated oil palm area in Malaysia. Our members’ holdings are mainly small and medium-sized plantations, some privately held and some held through listed companies, and they extend through the peninsula, Sabah and Sarawak.

IF there is a single Malaysian product for the nation’s economic wellbeing over the past five decades, it is without a shadow of doubt palm oil.

Unlike petroleum and manufactured products such as electronics and electrical goods, palm oil’s production does not require largescale import of technologically advanced equipment and components from abroad, so that palm oil can proudly claim to be a net export earner for Malaysia.

In 2017, 90% of Malaysia’s palm oil was exported, and palm oil and palm products realised export earnings of almost RM78bil for the nation. The cultivation of oil palms, whether in smallholdings or on a large scale in plantations, has provided employment for millions of Malaysians in the rural areas.

Within a few decades, rural Malaysia has been transformed from scattered pockets of population living in small kampung and isolated labour lines on the estates to thriving mediumsized townships bustling with activity, supplied with schools and health care facilities, linked to one another and the ports by a network of roads.

The road network facilitates the transportation of oil palm fresh fruit bunches to mills for the extraction of palm oil and palm kernel, and from the mills to refineries and kernel crushers usually located at the ports, for export to overseas buyers. Palm oil has provided rural Malaysians with a stable and recurring income.

It has been the catalyst that prevented social disruption in our rural areas during the dark days of the Asian Financial Crisis in 1997 and 1998, and the great Global Recession of 20082009. Today, 650,000 smallholders grow oil palm to support themselves and their families. Palm oil continues to have multiplier effects on other sectors of the economy, and can take credit for employment generation, with 4 million people involved in the sup- ply chain.

Additionally, through investments in research and development (R&D) by both the government and the private sector, the palm oil industry has made available numerous valueadded palmbased products for both food and nonfood purposes. These products include biofuels, green industrial chemicals, biocomposites, nutraceutical and pharmaceutical products.

Malaysia is the second-largest producer of palm oil in the world, contributing 20 million tonnes of palm oil annually, or 30 % of the world’s total palm oil production, and over 11% to the total global supply of 17 different edible oils and fats, all this from 5.8 million ha of cultivated oil palm which constitutes just 0.1% of global agricultural land area.

Oil palm is five to eight times more efficient in its utilisation of land than its nearest competitors – canola, sunflower and soya bean. Malaysia has become a major player in the world’s edible oils and fats market. And palm oil has been one of Malaysia’s enduring success stories.

MEOA’s concern

With so much that we have to thank palm oil for, and given its continuing central role in our economy, we hope for and look forward to an early announcement from our new government of a ministry dedicated to the plantation industry, along the lines of the previous Plantation Industries and Commodities Ministry (MPIC).

Such a ministry would have under its remit not just palm oil, but also other plantation products such as rubber, cocoa, timber, coconuts, sago and pepper. But the major commodity, its main concern, would be palm oil, because this is the nation’s most important plantation commodity crop. We are asking for a dedicated ministry because the challenges we now face are numerous, and looming ever larger. These are challenges present on the global stage, as well as domestically.

Challenges Malaysia is currently dependent on external trade for nearly 90% of the palm oil produced in Malaysia. This makes us extremely vulnerable to volatile commodity prices and competition from the other 16 edible oils and fats, which may be partly responsible for the “bad news” about palm oil.

The current critical issues which must be addressed in order for the industry to remain competitive on the global stage are:

> The image problem – defending against anti palmoil campaigns (mainly on environmental grounds), meeting demands for sustainability and traceability;

> Tackling quality, food safety and health concerns;

> Managing increasing costs of doing business;

> Improving oil yield per unit area, disease resistance, and crop quality; and

> Driving back tariff and nontariff barriers imposed by importing countries.

At the domestic level, we would like to draw attention to the acute labour shortage faced by the industry today, a shortage that results in billions of ringgit in wastage of crop that cannot be harvested and that is left to rot on the palms, because we have neither the skilled labour to harvest nor machines to take over the task, simply because a machine to harvest the fruit bunches on tall palms has yet to be invented.

Progress has been made in mechanising field operations such as manuring, spraying, and loading of harvested fruit bunches onto vehicles for transporting out of the field. But it is mechanisation of harvesting that continues to have the best minds stumped after all these decades.

Until a suitable harvesting machine has been invented, we implore the government to come up with a longterm policy on the employment of foreign workers for the palm oil industry, rather than numerous shortterm policies which are formulated and then implemented without consulting industry and without proper thought given to the longer term consequences of these policies. Often, these policies seem to contradict one another.

A carefully considered longterm policy should recognise the need for foreign labour in the plantation industry because local workers do not want to work in a sector that is dirty, demeaning, dangerous and difficult (the four Ds). It is not that we do not want locals to work for us; locals will not work as labourers on the estates, not even for higher wages, because of the social stigma associated with estate work and the competing lure of the urban landscape.

Help us achieve a stable workforce by promoting wellplanned policies and fair legislation on the employment of foreign workers. We also hope the government will recognise the contribution of the oil palm plantation sector to state and national coffers, and appreciate the fact that we contribute the highest taxes of all the economic sectors. Taking into account the cesses, windfall profit levy, state sales taxes, and statutory income tax paid by oil palm growers across the country, growers in Peninsular Malaysia pay 27% tax, those in Sabah 37%, and in Sarawak 34.0%, with a Malaysia average of 31%. over the past three years, from 2015 to 2017, the palm oil sector has paid about RM21.5bil in taxes (RM5.5bil in 2015; RM7bil in 2016 RM9bil in 2017).

Again we implore the government to relook the taxes on our sector and reduce them to a fair level. Do not kill the goose that lays the golden egg.

Our wish

> We need a dedicated ministry like the former MPIC to support the industry which faces considerable challenges in raising productivity and staying competitive;

> The ministry can lead the drive to mechanise harvesting for tall palms;

> We are short of labour and need help to work out a fast way to get workers in. If the supply is slow, billions of ringgit more are lost due to wastage in the field. MEOA estimates that if 5% of bunches are not harvested, losses could amount to RM2.5bil, and with 10% not harvested, losses could go up to RM5bil. It could mean the decline of the industry;

> More work is needed in doing research to raise productivity yield per hectare, oil extraction rates, and quality of oil. The support of a dedicated ministry could reduce the costs of production;

> The ministry can be the conduit for the problems of the industry to be brought up to the Government. These problems include the increasing number of ways the industry is being taxed;

> The ministry can set standards on safeguarding the environment, rather than leaving it to foreign agencies which might have other motives;

> The ministry is needed to help improve on management skills and supervision and the agencies such as MPOB can conduct courses. The fast expansion of plantations has led to lack of apprenticeships that can result in low standards of control;

> The minister and his team can help lead the fight against the foes of palm oil by conducting publicity drives overseas. The ministry can give the support for lawmakers from abroad including the EU to visit plantations and get a balanced picture of the industry;

> The ministry is needed to work together with similar bodies in other countries to project the good aspects of palm oil; and

> Without the dedicated ministry similar to the former MPIC to provide the support, the industry could well decline and be unable to remain as a major earner of foreign exchange. It will cease to provide employment to many people, and smallholders could lose their income.