Labour curbs seen costing Malaysia's palm industry $3bln in annual revenue

The shortage of workers has led to an annual loss of 17.14 million tonnes of palm fruit bunches

  
A worker arranges palm oil fruit bunches at a factory in Tanjung Karang, Malaysia August 14, 2020.

A worker arranges palm oil fruit bunches at a factory in Tanjung Karang, Malaysia August 14, 2020.

REUTERS/Lim Huey Teng

KUALA LUMPUR - Malaysia's palm oil sector stands to lose an estimated 11.83 billion ringgit ($2.89 billion) in revenue for each year that pandemic curbs restrict the supply of workers, an industry grouping said on Monday.

The world's second largest palm producer relies on foreigners for 70% of its plantation workforce, but the flow of workers from nations such as Indonesia and Bangladesh has dried up since border closures in the middle of March last year.

"The labour-intensive plantation sector has been registering a net outflow of foreign workers, especially over the past one year, as and when their employment contracts expire," the grouping of 12 industry bodies said in a joint statement.

Many workers also chose not to extend their contracts, the grouping, which spans associations of growers, refiners and millers, added.

The shortage of workers has led to an annual loss of 17.14 million tonnes of palm fruit bunches, or a reduction of 20% in yield, as well as an annual loss of 3.43 million tonnes of crude palm oil production and 857,000 tonnes of palm kernel, it said.

"The opportunity loss amounts to an estimated 11.83 billion ringgit of revenue a year, and profit of 4.37 billion ringgit ($1.07 billion) a year," the grouping said.

Its calculation assumed prices of crude palm oil and palm kernel at 3,000 ringgit and 1,800 ringgit per tonne each, the statement added.

The pandemic curbs mean the government also faces a loss of 896 million ringgit in income-tax revenue each year, it said.

Tight supplies have helped drive Malaysia's benchmark crude palm oil prices FCPOc3 to a 10-year high of 3,903 ringgit a tonne on Monday.

But planters are not able to fully exploit the high price as a severe lack of harvest workers means estate production cannot be optimised, the grouping said.

National yields will fall below potential if staffing stays insufficient by the beginning of the peak production season in June, it warned.

It appealed to the government to lift curbs on entry and recruitment of foreign workers after Malaysia's key palm planting state of Sarawak reopened to the migrants last week. ($1=4.0880 ringgit)

(Reporting by Mei Mei Chu; Editing by Clarence Fernandez) ((meifong.chu@thomsonreuters.com; +6-139-492-9424; Reuters Messaging: @meixchu on Twitter))

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