Malaysia palm planters face labour shortage as Indonesia workers stay away

[KUALA LUMPUR] Malaysian palm oil planters say they are bracing for a severe labour shortage, with workers who typically stream over the border from neighbouring Indonesia to harvest crops staying away due to the weaker ringgit and increased opportunities at home.

A dearth of workers in the world's No 2 producer could delay harvests and curb output as extraction rates fall when palm fruit is picked late, hurting the country's top commodity export industry but potentially offering some support to prices that have dropped nearly 15 per cent this year.

Malaysian palm oil planters estimate about 70 per cent of the industry's workforce comes from Indonesia, with staff traditionally drawn by the chance to earn higher wages in a culture with many similarities to their own.

But Malaysia's ringgit currency has plunged in value over the last few years as weaker energy prices hit one of the world's top gas producers, falling 15 per cent against the Indonesian rupiah since the start of 2015.

That, along with increased demand for labour in Indonesia as new plantations open there, is cutting the number of Indonesians prepared to head for Malaysia, planters said. Some also cited tighter employment regulations in Malaysia as it brings in stricter immigration procedures for foreign workers.

"This year, output will be impacted by (the shortage of) workers," said Zakaria Arshad, chief executive of Felda Global Ventures Berhad, one of Malaysia's largest palm plantation operators.

"Workers are more difficult to get now, especially from Indonesia."

Plantation workers usually make little more than minimum wage, which is around RM1,000 (S$316.30) in peninsular Malaysia and 3.35 million rupiah (S$352.36) in Indonesia.

"The fluctuation of the ringgit is not encouraging Indonesian workers to come to Malaysia," said a Malaysian planter, who declined to be identified as he was not authorised to speak with media.

"The situation now is very bad compared to a few years ago," he said, adding that recruiting workers from other countries such as Bangladesh would take months to arrange.

And, with palm output due to peak between the third and fourth quarters, the impact of the labour shortage is set to intensify.

"Ideally we have to speed up labour intake before the high crop season towards the end of the year," said the director of another Malaysian palm oil operator, who also wished to remain anonymous.

Indonesia is the world's top producer of palm, churning out 31.8 million tonnes last year. Malaysia produced 17.3 million tonnes of the tropical oil, used in everything from cosmetics to chocolate and biofuels.

"We certainly recognise that the Malaysian plantations are finding it much harder to source field hands," said Nicholas J Whittle, chief financial officer at Indonesian palm firm PT Sawit Sumbermas Sarana Tbk.

"We expect this to add to pressures on the supply side... which may have some knock on effect (on palm prices)."

REUTERS