We all know Covid-19 does not infect crops like the oil palm directly. But this does not mean it has no impact at all. The truth is the pandemic has also rattled the palm oil industry. As a result of the lockdowns and strict movement control order in affected countries, most economies have suffered setbacks. Many people had become jobless, robbing them of their source of income and reducing their buying power. The world demand for oils and fats, including palm oil, saw a big decline as a result. During the pandemic, a major source of infection came from immigrant labour. Their housing conditions, which make physical distancing challenging, have been cited as the contributing factor. Incidentally, the palm oil industry, especially the upstream plantation sector, has for years been relying on foreign labour to harvest their fruits. The shortage of such labour has been a growing worry for the sector for some time now. There have been reports of heavy losses because of unharvested fruits. The pandemic is making the industry’s dependence on foreign labour more complicated.
Now that some of the major importing countries are back in business buying palm oil, the world demand has returned albeit softly and prices are seen firming up. It is a piece of welcome news for the industry, except that labour remains a problem. With the government’s decision to restrict the import of foreign labour, the poor harvest situation is further exacerbated. So despite the small rise in prices, the shortage of plantation workers is a setback for the industry as it strives to capitalise on the price improvement. Getting local workers to do the job is not easy. Many locals simply shy away from working under the harsh conditions typical of the oil palm plantations. And working as a harvester is even more demanding. Even among the immigrant workers, not all can cope well with the demanding work environment of a palm oil harvester. Only foreign workers from Indonesia have been found to be robust enough to perform the harvesting operation well. They have tried workers from Bangladesh and others. All could not measure up to the high productivity levels of the Indonesian workers.
But there is an issue with the Indonesian workers. They are still here only because of the sizable wage difference with plantations in their home country. But the plantations in Indonesia are making changes to their wage structure. As the largest palm oil producer in the world, Indonesia is constantly strategising to improve their work conditions. Many plantation experts warn that once the wages between the two major palm oil producers are at parity, more Indonesian workers will return to their home country. That will make the palm oil situation in Malaysia even worse. Yes, the industry has thought about solutions and options for years now. Researchers at MPOB have been hard at work evaluating mechanisation, robotics, dwarf palms and more. But so far, nothing viable has come up. Human labour is still irreplacable. There has also been some thinking about non-land based palm oil production commercially. This is using fermenters and microbes, much like wine production. Many are however sceptical that this will ever become reality. There are small laboratory experiments here and there probing the potential of such a production process.
The palm oil industry in Malaysia has almost reached its limits in terms of available land area for cultivation. The most they can go up to is 6 million hectares, without encroaching into the sensitive forest areas. The other option to increase revenue is to venture into more value-added products such as surfactants. Therefore, the sustainability of the industry is not just about meeting strict environmental standards, as espoused by the many sustainability certification schemes. The economic challenge is also a major threat to sustainability. And increasingly, labour economics has emerged as one of the biggest threat to the sustainability of production. Unless research can develop a viable alternative in the form of mechanised harvesting, the industry faces a bleak future if the ban on the import of immigrant labour is strictly enforced. Whatever it is, the future of the palm oil industry is heavily dependent on R&D to come up with solutions. R&D has to be intensified.
