KUCHING: The oil palm industry in Sarawak cringes at the thought of the fast approaching 2013 for it will be a year filled with a myriad of hurdles.
Sarawak Oil Palm Plantation Owners Association (SOPPOA) said the recent SOPPOA Council Meeting held here raised issues such as the introduction of health insurance scheme for foreign workers, implementation of minimum wage, and rising cost in production processes.
It said in a press statement yesterday that SOPPOA wrote to the Minister of Health and State Secretary last month to object to the implementation of the insurance scheme and appealed for the oil palm industry here to be exempted.
But thus far they had yet to receive a reply.
Foremost to the objection of the health insurance scheme is the fact that only Sarawak oil palm industry is subjected to implement it as those in the peninsula and Sabah had been exempted from the scheme.
As such, they considered the implementation of the scheme here as “unfair and totally unjust” as it would only add to the ever increasing cost of production on the young industry here which was still recuperating their massive capital investments over the past years.
The Minimum Wage Act, which would come into force on 1st January 2013 in Malaysia, would further add to the woes of the oil palm industry in Sarawak, it stated.
While stating that the industry did not oppose the implementation of the Act, SOPPOA said the implementation should also see a corresponding increase in workers’ productivity, otherwise it would not lead to Malaysia’s aspiration of becoming a high income economy.
In the case of Sarawak, where over 80 per cent of the workers in the oil palm industry are foreigners, the impact would be even more acute as more money would continue to be channelled away to foreign nations while productivity remained stagnant.
Over the years, SOPPOA observed that productivity had stagnated in the industry and so something significant had to be done in order to make the industry competitive again or else Sarawak would be left behind.
Currently, the oil palm industry is facing a slump in prices of CPO (Crude Palm Oil) and the depressing prices would make it harder for companies here, especially when many plantations are new and have young trees which are either not producing or not producing at their optimum yet, the statement added.
Regardless, these companies still have to service their bank loans and other financial undertakings as it takes a minimum of seven to eight years after planting for the trees to produce at reasonable yields.
On top of the drop in CPO prices there are other inflationary factors which would add to the burden of running these plantations.
According to industry standard in Sarawak, plantations which are currently getting less than 18 metric ton of FFBs (Fresh Fruit Brunches) per hectare would experience negative cash flow in their business as cost of production, wages outstrip returns.
This negative return is not only affecting the plantation companies but also the smallholders who would get low prices for their FFBs and were likely to operate at a loss.
With the implementation of the Minimum Wage Act in 2013 and added inflationary factors, palm oil millers in the state will see a corresponding increase in cost of production for the coming year.
This coupled with the impending implementation of the health insurance scheme would further increase the overall production cost at the mills.
Due to these additional increase in cost, SOPPOA informed that millers in Sarawak had no other alternative and planned to increase processing fees by RM5 per tonne of FFB from Jan 1, 2013.
The oil palm industry in Sarawak is one of the biggest contributors to the state’s economy and also one of the largest employers in the state, and so with the various schemes to be implemented in the coming year, the industry will see more challenges and rising cost which makes the industry less competitive.
Taken from The Borneo Post