Insight: MPOB Interview

Oleochem Analytics – Malaysia has been one of many countries seriously affected by the Covid-19 pandemic and it has lived with strict movement restrictions since March 2020. Regarding Malaysia’s extended labour shortage in the palm industry, OA spoke with Dr. Ahmad Parveez Ghulam Kadir, Director-General Malaysian Palm Oil Board (MPOB), to discuss the current labour challenges the palm plantation industry is seeing.

OA: How have palm oil plantations yields been affected since the beginning of lockdowns in Malaysia?

Dr. Parveez Ghulam Kadir: Total lockdown started in Malaysia in March 2020 because of Covid-19. Work activities in the palm sector, including palm oil seed producers, nursery operators, palm oil plantations and fresh fruit bunch (FFB) dealers, were allowed to operate at a 100pc capacity. But because of the national border closure and strict Standard Operating Procedures (SOPs), the plantation sector is facing a challenging labour shortage.

The impact of Covid-19 restrictions was not as prevalent in 2020 and CPO production declined by only 3.6pc as compared to production in 2019. During this period, the labour situation was still manageable as it was in the early phase of national border closure and many foreign workers opted to remain in the country. But, as the pandemic is into the second year of restrictions, the lack of workforce in palm oil plantations has worsened, significantly affecting palm oil production.

OA: How do you think Covid-19 restrictions are affecting 2021 palm oil plantations yields?

Dr. Parveez Ghulam Kadir: The national border closure has interrupted the intake of new foreign workers and exacerbated the labour shortage in the plantation sector. The palm oil sector in Malaysia is known to be dependent on foreign labour.

To cope with this situation, plantation companies have decided to hire the local population to ensure that plantation operations continue. MPOB thinks that the dependency on local workers is not enough to support the vacuum left by foreign workers in the longer term and that it will continue to affect the productivity of the industry.

During January-August 2021, FFB yield at palm oil estates declined by 10.5pc to 9.90 t/hectare (Ha) as compared to 11.06 t/Ha achieved in the same period last year. The decline came as a result of low yields on the lack of workforce in palm oil plantations. Consequently, CPO production was as 8.9pc to 11.59mn t down from 12.72mn t during the same period in 2020 and marked as the lowest level since 2017.

OA: And how does it affect the price of palm oil?

Dr. Parveez Ghulam Kadir: Reduced palm oil production has limited Malaysia’s capacity to export palm oil and other palm-based products despite stable demand from importing countries. Exports of palm oil during January-August 2021 were down by 13.6pc to 9.64mn t from 11.16mn t in the corresponding period in 2020.

The tight supply of palm oil has put pressure on palm oil stocks in Malaysia. Palm oil monthly closing stocks declined between 12pc-25pc year-on-year throughout 2021, except for August. This situation has pushed prices of palm oil and other palm-based products in 2021 to record highs.

OA: What is a possible solution?

Dr. Parveez Ghulam Kadir: The acceleration of the Covid-19 vaccination program in Malaysia is expected to improve the contagion levels and move the country toward re-opening the borders. A relaxation on restrictions would allow the inflow of the foreign workers, and ease logistics, improving the Malaysian palm oil industry performance, particularly in the plantation sector.

MPOB through the Ministry of Plantation Industries and Commodities has been aggressively promoting the adoption of mechanisation and automation. MPOB’s R&D has produced more than 50 technologies that are ready for adoption and commercialisation. R&D products cover all activities in the field including harvesting of palm oil fruit and evacuation, and some are suitable for the smallholders’ application.

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