KUALA LUMPUR (Jan 24): Palm oil output in Malaysia, the number two supplier, could rise 5% this year after the government allowed plantations to hire foreign workers, said Joseph Tek, chief executive of the Malaysian Palm Oil Association.

The admission of new workers potentially means that an additional 5.2 million tonnes of fresh fruit bunches can be harvested, the top growers’ group said in a statement. That translates into 1 million tonnes of crude palm oil, Tek said.

The extra tonnenage would also generate revenue of close to RM4 billion, bringing “significant relief” to the industry, which is grappling with a substantial shortage of 40,000 workers, the group said. The news pressured benchmark palm oil futures in Kuala Lumpur trading.

The government has been trying to reduce reliance on cheap foreign labor across many industries including manufacturing, construction and plantations, and seeks to regulate admission processes to prevent any issues like forced labor, worker exploitation and human trafficking.

In March last year, the country temporarily suspended the application and approval process for foreign workers under a quota system in order to speed up the entry of workers already approved.

Chronic shortage

Malaysia’s palm oil industry is heavily reliant on foreign labour. A chronic shortage of workers resulted in revenue losses estimated at RM20 billion in 2022 and continued to curb growth in output last year.

Palm oil production in Malaysia totaled 18.55 million tonnes in 2023, and earlier this month the Palm Oil Board, which regulates the industry, predicted output of 18.75 million tonnes for this year. That’s less than half the supply from top producer Indonesia, where output has expanded steadily in recent years.

The association represents over 40% of the oil palm area in Malaysia. Members include some of the top plantation companies such as Sime Darby Plantation Bhd, Kuala Lumpur Kepong Bhd, IOI Corp and FGV Holdings Bhd.

Palm oil futures in Kuala Lumpur climbed as much as 0.9% to RM3,985 a tonne on Wednesday, before paring gains to RM3,955 by midday.

The higher output estimate is capping the rally, said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental. The move to allow more foreign workers “adds to supply woes,” he said.

https://theedgemalaysia.com/node/698490

Sumber : The Edge Malaysia