Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly, on October 26 - November 1, 2015.

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The increase in the minimum wage is expected to raise the production and operation costs of oil palm and rubber planters, albeit by a minimal amount.

CIMB Investment Bank analyst Ivy Ng says a 10% increase in the minimum wage will increase production cost by 3% to 5%.

“It will raise labour cost. I believe it will affect planters,” she says.

Prime Minister Datuk Seri Najib Razak announced last Friday that the national minimum wage will be raised to RM1,000 from RM900 per month for Peninsular Malaysia and RM920 from RM800 per month for Sarawak, Sabah and Labuan.

The new minimum wage, effective from July 1, 2016, will be implemented in all sectors except for domestic services, or maids.

Public Investment Bank analyst Chong Hoe Leong says the impact could be minimal for the oil palm sector, with the operating cost for planters expected to rise by 1% to 3%.

“Most of the workers are already earning more than that. Harvesters’ salaries are based on yield performance. Only 10% to 20% of the palm oil industry will be affected,” he adds.

He says Sime Darby Bhd will gain from Budget 2016 as its property arm is expected to benefit from the initial investment for Malaysian Vision Valley on 108,000ha stretching from  Nilai to Port Dickson, as well as the government’s initiatives to increase affordable housing.

According to Chong, Sime Darby owns 55,462 acres of the land.

As part of the government’s effort to boost domestic demand, Malaysia Vision Valley, an integrated economic development area announced under the 11th Malaysia Plan, is expected to receive an initial RM5 billion in 2016.

Government-linked companies will be tasked with building affordable houses in the vicinity of the proposed mass rapid transit (MRT) station in Bandar Kwasa Damansara. Kwasa Land Sdn Bhd, owned by the Employees Provident Fund, is to build 800 units and Sime Darby Property Bhd, 4,600 units.

Felda Global Ventures Holdings Bhd group president and CEO Datuk Emir Mavani Abdullah lauded Budget 2016, saying that it reaffirms the government’s commitment to enhance rural redevelopment and boost the oil palm industry.

Under Budget 2016, RM200 million has been allocated to improve roads in Felda settlements.

The government also wants to build 20,000 homes for second generation Felda settlers and reduce the prices of Felda houses to RM70,000 from RM90,000.

“As Felda settlers play a key role in the development of our country’s oil palm and rubber industries, we strongly believe that the initiatives announced under Budget 2016 will further motivate and reinforce the oil palm and rubber industries’ growth and prosperity,” he says.

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