Azhar: Palm oil productivity level still stagnant

Oil certification standard, and for timber, the certifications are issued by the Malaysian Timber Certification Council.

Meanwhile, FGV Holdings Bhd chairman Datuk Wira Azhar Abdul Hamid ( pic) has made a spot on analysis of the oil palm sector.

At the Finance Ministry event, he raised issues on the stagnating productivity and lack of incentives in the value-added downstream activities, as well as the negative perception of palm oil in the world market.

“All the above issues can be resolved by technology-driven initiatives,” says Azhar.

The country’s average fresh fruit bunch (FFB) yields remain at 17.9 tonnes per ha per year, crude palm oil (CPO) at 3.5 tonnes per ha per year, while the oil extraction rate is at 19.72%.

“Despite significant improvement in the clonal varieties and new agronomic practices, our palm oil productivity level is still stagnant,” he notes.

“As industry players, we must ratify these situations via mechanisation, better management of agronomic practices to increase the FFB yields, develop better planting materials and get involved in genomics initiatives,” suggests Azhar.

Another cause for concern is the increasing cost of production.

He points out that there is not much difference in the way the local oil palm sector operates currently compared with 50 years ago – which is still labour-intensive.

“There are some improvements, but we are still harvesting (the palm fruits) in the same way, while the cost of transportation, fertilisers and labour continues to go up,” Azhar points out, adding that planters can reduce their average cost of production if they are able to improve on productivity and efficiency.

Currently, Malaysia has about 400,000 foreign workers in the palm oil sector and labour accounts for about 50% of most planters’ operating cost.

While the new government is committed to increasing wages for workers, “there will be an immediate bottom line impact to plantation companies from this increase,” he adds.

Azhar points out that the government will need to clearly define the wages in certain sectors of the economy.

In the plantation sector, planters actually pay more than the basic wage and also provide other benefits to their estate workers.

To further reduce dependency on labour, Azhar proposes that the plantation sector adopts mechanisation to further improve the efficiency in the value chain.

On the lack of growth in the downstream sector, he hopes there will be more incentives from the government to support the sector.