Malaysian oil palm associations call for govt to postpone revising minimum wage

Malaysian oil palm associations call for govt to postpone revising minimum wage
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KUALA LUMPUR (April 6): Eleven associations representing the interests of the Malaysian oil palm supply chain on Wednesday called for a postponement of raising the minimum wage to RM1,500 a month, and urged for a phased implementation so that the industry is less hit.

In a statement, the associations said that they are supportive of the revision of the minimum wage, but asserted that the correct approach needs to engage stakeholders under the National Wages Consultative Council (NWCC) so that a right balance can be struck between workers' welfare via a wage increase and the impact such a hike would have on employers.

"Any increase in gazetted minimum wages cannot be retracted once implemented, and will invariably have a bearing on production costs and the competitiveness and viability of businesses in Malaysia. The plantation sector is no exception," they said.

They noted that all economic sectors in Malaysia need adequate time to make the necessary adjustments following the worst of the Covid-19 pandemic and to find solutions to the higher costs of essential materials resulting from the Russia-Ukraine conflict.

"The roll-out of any minimum wage policy should be done in an orderly manner to ensure all business sectors, including the palm oil supply chain, are able to sustain the economic growth of the nation without adding inflationary pressure," they said.

While many said that the palm oil sector, particularly the upstream players, are currently enjoying substantial profit given record-high palm oil prices, the associations maintain that the trend cannot be expected to continue forever.

They also said they do not and cannot set the prices of their products which are determined by the global market with its multitude of confounding supply-demand factors along with other competing edible oils.

"We cannot pass on increases in costs of production, such as any wage hike, to customers or buyers, unlike many other businesses which can do so. Thus, when commodity prices plunge, margins will diminish and there will be occasions that the costs may run higher than the selling prices," they said.

According to the associations, at present, planters are operating amid other very high input costs such as historically high fertiliser prices along with agrochemicals and fuel.

While it appears that planters at present have the financial capabilities to implement the new minimum wage amid high crude palm oil (CPO) prices, they said the same planters will be severely disadvantaged when CPO prices dive.

They said setting aside the present global geopolitical situation which renders support to commodity prices, by and large it is becoming ever more difficult for the Malaysian palm oil sector to maintain its competitiveness due to agriculture being one of the most protected and heavily subsidised industries in many parts of the world.

Trade distorting measures in the form of agricultural production subsidies, export assistance programmes, governmental policies and anti-palm oil campaigns continue to challenge its competitiveness and sustainability, they added.

They said the 36% increase in minimum wage by May 1, 2022 is a significant hike for planters in rural areas recovering from the Covid-19 pandemic amid crop losses, shortages of workers, movement restrictions and higher costs of inputs.

Its roll-out will also entail the recalibration of hourly or daily rates and revision of previous benchmarks used for wage calculations including for piece-rated work.

"There will be rippled or knock-on effects across the board on costs of production that cannot be retracted once introduced."

In addition to oil palm skilled harvesters, they said the plantation sector still has a sizeable number of unskilled workers in some tasks related to general maintenance and planting, and also other unskilled work throughout the supply chain.

A delay in implementing the revised RM1,500 minimum wage, followed by a staged or phased approach on its incremental hike would help address the increase in minimum wage in a systematic and inclusive manner, they argued.

"Hopefully, over time, wages will need to be attractive along with other benefits to entice more locals to join the palm oil sector while all stakeholders strive for implementation of effective mechanisation to increase productivity."

They said without upgrading skills and sustaining improvements in productivity, increasing minimum wage now will have unwarranted repercussions with respect to competitiveness.

"The associations call for an inclusive and immediate stakeholder engagement using the existing gazetted platform, in particular the NWCC, or by enhancing its scope and representation."

The NWCC, enacted by an Act of Parliament under the National Wages Consultative Act 2011, should be the consultative conduit to deliberate on the minimum wage, they added, noting there are differences in holding sizes in the Malaysian oil palm sector, especially smallholders and other small- and mid-sized oil palm plantations, which they argued would benefit from the fairer approach of postponing the wage hike, followed by a phased implementation.

"In summary, the associations are of the view that the revised minimum wages need to be implemented in an orderly manner, set against data driven discourse of socio-economic impact assessments, and with due all-encompassing consultation involving all relevant stakeholders using prevailing processes already in place."

The 11 associations are the Malaysian Estate Owners' Association, the National Association of Smallholders Malaysia, the Sarawak Oil Palm Plantation Owners Association, the East Malaysia Planters' Association, the Palm Oil Millers Association of Malaysia, the Malaysian Oleochemical Manufacturers Group, the Malayan Edible Oil Manufacturers' Association, the Malaysian Biodiesel Association, the Incorporated Society of Planters, the Sabah Employers Consultative Association, and the Tawau Agricultural Association.