SOPPOA wish list for Budget 2021 to enhance the economic sustainability of the Oil Palm Industry in Sarawak

Wednesday, 11 November 2020

The Sarawak Budget 2021 will be announced soon by the YAB Chief Minister and the Sarawak Oil Palm Plantation Owners Association (SOPPOA) has compiled a wish list for the Sarawak State Government to consider which would greatly assist in assuring the sustainable development of the Palm Oil Industry in Sarawak.

1. Setting up of a Palm Oil Industrial Cluster (POIC) in Bintulu, Sarawak.
   To encourage investments and to provide funding to spur further downstream activities related to the palm oil industry in Sarawak, there is a need to establish a POIC Sarawak located near a port, preferably in Bintulu, to facilitate manufacturing and export of finished high-value downstream products to other countries. This will also provide oleochemicals and related products from the industry for other applications in various spin-off industries. With the cluster in place, services and supply link industries will converge on the area to provide the required services and logistics for the cluster industries around the POIC. Apart from the current excellent port facilities and availability of cheaper hydropower, there will also be new jobs creations for the locals.



2. With the completion of the Pan Borneo Highway expected within the next five years, the government will also need to consider funding to improve accessibility of feeder roads linked to the highway. Currently the feeder roads to the main trunk roads are in need of urgent upgrading works to enhance connectivity and mobility of heavy vehicles. This is essential for movement of palm produce, fertilizers, chemicals, machinery, building materials, etc.; needed for the plantation and mills. It is timely that well maintained and accessible feeder roads are upgraded from these rural settings to provide the much-needed supporting road infrastructure for the plantations as well as for the local residents in the rural areas.



3. To consider setting up Oil Palm Plantation Academies in Sarawak customized for the needs of the palm oil plantation sector in order to maintain a constant and sustainable supply of local professionals/technicians to meet the demand of the expanding industry. Out sourcing these employees from outside of Sarawak is now posing difficulties as they are fewer professionals willing to work in Sarawak as terms and conditions of employment offered in neighboring countries are far more lucrative. Logistic constraints are also an issue for expatriated families. The proposed Academies could be linked to one of the local universities. Provisions from the Human Resource Development Fund can also be utilized for the training activities of the Academies or for the upscaling the competency level of the current employees for the industry.



4. Proposal for setting up of a government run One-Stop-Centre for foreign workers recruitment for Sarawak to reduce the bureaucracy of government agencies and to expedite the recruitment process for the plantation sector. The small population of Sarawak is the main reason why foreign workers are still necessary for development of the state, from infrastructure to other industries; a One-Stop-Centre for foreign workers recruitment involving all governmental ministries, agencies to facilitate the recruitment process will enhance all industries in the state. With current progress made in ICT development in Sarawak, there is every reason why a modern, technologically advanced One-Stop-Centre in Sarawak will hugely benefit all employers and sectors in the state where recruitment and legal documentation of foreign workers can be made faster without much delay. This One-Stop Centre will also house a quarantine center and Covid-19 testing facilities by KKM, to ensure that all new recruits are healthy and Covid-19 free with proper monitoring.



5. Review of CPO Sales Tax threshold – The Sarawak CPO Sales tax was implemented since 1998 about 22 years ago when production costs were low; today’s production costs have risen exponentially and the current sales tax structure does not reflect the situation faced by oil palm companies in Sarawak. In fact, based on the latest study by SOPPOA to appeal to the State Government, a review of the Sales Tax threshold will bring much greater benefit to the state and its people with the potential to generate higher income jobs, bring stability to the palm oil sector caused by the fluctuations of the Ringgit and achieving greater economies of scale through better logistics and high technology advancement through mechanization , automation and 4IR innovations.



6. Research and Development allocations for oil palm Pest and Disease control, peat management studies, pollination affecting low yields and low OER in Sarawak. Crop yields of oil palms in Sarawak is generally lower than those in peninsular Malaysia and Sabah; one reason is planting in peat which is still not fully understood and researched. This is pertaining to low crop yield and low mill OER (Oil Extraction Rate) and hence warrants more R&D on commercial scale to find better solutions. Another contributing reason for low yields could be the poor insect’s pollination effects caused by high rainfall which certainly needs more R&D studies as it can directly impacts yields due to poor bunch formation.



7. Incentives for 4IR innovation and implementation in plantations. As Sarawak is rapidly moving into digital economy, it is also timely for the palm oil sector in Sarawak to be provided incentives for 4IR activities to reduce labor requirements, better productivity and lower cost of productions. Such incentives will lead to a more competitive palm oil industry in Sarawak as compared with counterparts in peninsular and Sabah where crop yields is higher in comparison and it is envisaged that an effective development and commercial usage of digital technology in these fields can close the gap between these competitors. IT network connectivity infrastructural development should be also given priority to the rural areas where most of the plantations are located so that there is no impediment to implement 4IR technology to improve work operations in the rural areas.



8. Funding of Green technology capex investments in plantation in the form of tax incentives or subsidies and to waive import duties of such capex should encourage industry to move into this new norm of environment friendly business undertakings. This is to further enhance best practices in environment conservation and keep palm oil sustainable.



9. Funding for setting up adequate land and bulking facilities at Bintulu Port for proposed CPO futures trading. For CPO to be traded in Bintulu Port of deliverySarawak, sufficient tanks for refined or Crude Palm Oil storage to store CPO prior to dispatch via Bursa Malaysia Futures contract. These storage and warehouse must be made available for sellers to store their CPO which are shipped out when the buyers’ ship come to the port.