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Malaysia Looking At RM12 Billion Loss Due To Palm Oil Workers Shortage

Malaysia Looking At RM12 Billion Loss Due To Palm Oil Workers Shortage

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The economic impact of the Covid-19 pandemic has a new victim in the palm oil industry where worker shortages means that farmers are set to lose 25% of their annual production, which translates to a staggering loss of USD2.8 billion (~ RM12 billion).

Bloomberg reports that the tightened restrictions on travel for workers and deportation of migrants as the industry relies heavily on documented and undocumented workers, especially from Indonesia, Bangladesh and India.

Dutch financial services and banking company Rabobank estimates that over 70% of Malaysia’s palm oil workers are migrants.

Chief executive at the Malaysian Palm Oil Association Datuk Nageeb Wahab told the news agency that when people left in the past, new people also came. However, with the Movement Control Order (MCO) in place, there is no one coming in and there may be more leaving soon after.

Analysts at Fitch are also expecting the government to implement stricter immigration regulations to battle the pandemic. They say this will likely aggravate the labour challenges in the palm oil industry.

Despite being Malaysia’s most important agricultural crop -it is the largest agricultural contributor to the Gross Domestic Product – there is little progress in the way of automation, largely due to the fragility of the fruit.

Palm oil is mostly harvested by hand, the trees need regular pruning and the fruits need to be harvested quickly or the rotting will increase the acidity of the soil.

The industry is also facing stiff competition from Indonesia where the growing industry offers higher wages.

Bloomberg states that in better times, farmers might have raised wages to attract labour but with the economic turbulence and volatility of the market, it’s simply not an option.

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