KUCHING: Plantation associations want the revised minimum wages implemented in an orderly manner, set against data driven discourse of socio-economic impact assessments.
With due all-encompassing consultation involving all relevant stakeholders using prevailing processes already in place, it would permit the revised minimum wage to be managed in a more systematic and transparent manner, allowing softer landing in its implementation and bonded in inclusivity in line with the aspirations of Keluarga Malaysia.
In a joint press release by the Malaysian Estate Owners’ Association (MEOA) and 10 other associations on Wednesday (Apr 6), they said they were supportive of the revision in the minimum wage, but asserted that the correct approach needed inclusive stakeholders’ engagement under the National Wages Consultative Council (NWCC) to find the right balance between workers’ welfare in wage increase on the one hand and the impact on employers of wage increases on the other.
“Until then, we are calling for a postponement to the revised minimum wage followed by its phased implementation to provide soft landing on its impacts.
“Any increase in gazetted minimum wages cannot be retracted once implemented, and will invariably have a bearing on production costs, including the competitiveness and viability of businesses in Malaysia.
“The plantation sector is no exception,” they said.
The National Association of Smallholders (NASH) as well as Sarawak Oil Palm Plantation Owners Association (SOPPOA), East Malaysian Planters Association (EMPA) and Palm Oil Millers Association (POMA) also agreed that all economic sectors in Malaysia required adequate time to make the necessary adjustments following the worst of the COVID-19 pandemic, and time as well to find solutions to the higher costs of essential materials resulting from the Russia-Ukraine conflict.
Together with the Malaysian Oleochemical Manufacturers (MOMG), Malayan Edible Oil Manufacturers’ Association (MEOMA) and the Malaysian Biodiesel Association (MBA), they said any proposed wage increase must address another key issue impacting the Malaysian oil palm industry.
“This relates to expediting the return of guest workers for the plantation sector.
“The time has now come for the relevant authorities to take decisive action to ensure our Malaysian economic recovery is unhindered,” said Incorporated Society of Planters (ISP), Sabah Employers Consultative Association (SECA) and the Tawau Agricultural Association (TAA).
They further said addressing the return of guest workers would help to curb crop losses and thereby drive-up production through enabling plantation rehabilitation works and replanting of areas with old palms.
“On-going maintenance and renewal programmes at estates are essential for sustaining the economic growth and contribution of this sector to the Malaysian economy, including the sector’s significant contribution to the government’s coffers.
“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.
“Many remark that the palm oil sector, particularly the upstream players, are currently enjoying substantial profits with the record-high prices of palm oil.
“This is true – but this trend cannot be expected to continue forever,” they added.
They said that the palm oil hit a record high of above RM7,100 a tonne in early March 2022, supported by ta ight supply due to the drought season in South America that affected soybean production, and supply bottlenecks for sunflower oil in the Black Sea region.
Within one-month, Malaysian palm oil futures have already plunged close to 20 per cent or RM1,300 to around RM5,900 a tonne.
They added that many stakeholders failed to appreciate that the palm oil sector was a commodity business.
“As such, the sector remains a price taker and not a price maker. We do not and cannot set the price of our products.
“Our prices are determined in the global market; with its multitude of confounding supply-demand factors along with its other competing edible oils, we cannot pass on the increase in cost of production, such as any wage hike, to customers or buyers, unlike many other businesses which can do so,” the associations lamented.
Thus, they said, when commodity prices plunged, margins would diminish and there would be occasions that the cost might run higher than the selling prices.
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 capability to implement the new minimum wage amid high crude palm oil (CPO) prices, the same planters will be severely disadvantaged when the CPO price dives.
Aside from the current global geopolitical situation, which supports commodity prices, the Malaysian palm oil sector is finding it increasingly difficult to maintain its competitiveness due to agriculture being one of the most protected and heavily subsidised industries in many parts of the world.
They said agriculture production subsidies, export assistance programmes and governmental policies, including anti-palm oil campaigns, continued to undermine its competitiveness and sustainability.
“The 36 per cent 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, shortage of workers, movement restrictions and higher cost of inputs.
“It’s 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 ripple or knock-on effects across the board on cost of production that cannot be retracted once introduced.
“In addition to the oil palm skilled harvesters, the plantation sector still has a sizeable number of unskilled workers in some tasks related to general maintenance and planting, and also other unskilled works throughout the supply-chain,” they said.
If the unskilled workers were given a hike of this magnitude in their basic minimum wage, they said skilled workers across the entire supply chain, including staff and management, would also expect similar wage treatment to account for their difference in skill levels and experiences.
They added that this matter would trigger an inflationary spiral throughout the industry that could not be countered because once the wage was increased, gazetted and implemented, it could not be withdrawn.
“Hopefully over the 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.
“Without upgrading skills and sustaining improvements in productivity, increasing minimum wages now will have unwarranted repercussions with respect to competitiveness,” the associations said.
The 11 associations called out 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 said.
Large government-linked company (GLC) plantation houses with better financial resources have indicated that they will roll out the wage hike come May 1.
Early adopters could be set to go, but there was no need to hurriedly roll out the new minimum wage order across the board within the Malaysian palm oil supply chain, they added.
“There are differences in holding sizes in the Malaysian oil palm sector, especially the smallholders and other small and mid-sized oil palm plantations.
“Thus, postponing with phasing the implementation for the smaller ‘SME-like’ smallholders and planters would be the better and fairer approach.
“In the Prime Minister’s announcement on March 19, he said that discussions would be held to look into delaying the implementation of the new minimum wage for small and micro businesses.
“This being the case, would the small- and mid-sized planters without the economies of scale of big planters qualify for exemptions?
“And if it is deemed that the implementation of the new minimum wage should be prioritised for companies operating in large cities where the cost of living is higher, then it should again be stressed that most planters are operating in rural areas,” the plantation associations said.
They further said in addition to their wages, plantation workers were provided by their employers with free and subsidised benefits such as housing, electricity, water, medical treatment and crèche facilities.
All these benefits were added-on costs to operations but provided the workers substantial savings, they said.
“It is estimated that these benefits cost the employers up to RM 500 per worker per month. Why shouldn’t these benefits form part of the minimum wage?”
For the record, Datuk Sri Ismail Sabri Yaakob announced on March 19 that the government had agreed to increase the monthly minimum wage from the current RM1,100 or RM1,200 threshold levels in practice to RM1,500 per month effective May 1.
“These increases of 36 per cent or 25 per cent respectively are very significant for any country in the world recovering from the COVID-19 pandemic of the past two years.”
The last revision in the minimum wage order was only implemented on Feb 1, 2020, and since then the country has been hit by the COVID-19 pandemic and currently by the escalation in prices of many goods resulting from the Russia-Ukraine conflict.
