KUALA LUMPUR: Sarawak Oil Palm Plantation Owners Association (SOPPOA) appeal to the government to allow oil palm planters to use the more justifiable 'piece rate system' in workers remuneration.
In a statement today, SOPPOA noted the government's plan to increase minimum wages to RM1,050.00 a month or RM5.05 per hour, effective January 2019, will adversely affect Sarawak's nascent oil palm sector.
Currently, the Minimum Wage Order 2016 provides for minimum wage rates of RM1,000 a month for Peninsular Malaysia and RM920 a month for Sabah, Sarawak and Labuan.
Sarawak is the last frontier of oil palm expansion in Malaysia, having only started to plant oil palms in the last 30 years.
This is comparably new to planters in Peninsular Malaysia who have had longer experience and had accumulated financial reserves to tide over tough times.
SOPPOA explained its members are not against the government raising of minimum wage but appealed for the implementation to be in tandem with productivity, such as through the 'piece rate system'.
"The current low price of palm oil, averaging at RM2,500 per tonne is posing serious challenge to the industry in Sarawak because as commodity suppliers to the export market, we’re price takers. We’re not in any position to just pass on cost increases to overseas customers just like that," it said.
In times of low oil palm pricing, SOPPOA said its members face difficulties in meeting burgeoning cost and yearly reinvestment commitments such as the replanting of oil palm with higher yielding clones.
"The yield per hectare for Sarawak is around 16 tonnes per year, which is below the national average, despite the best efforts of the planters and the country's research authority Malaysian Palm Oil Board (MPOB) to improve the yields here," SOPPOA said.
With the lower yield and low prices, SOPPOA said its members are just about break-even while those with bank loans and young palms will continue to face difficulties in the coming years.
SOPPOA said oil palm planters are facing fierce competition with other industries for workers and this impending wage increase will definitely hit its members' bottomline.
"It is a fact that the cost of doing business in Sarawak is much higher compared to other parts of Malaysia. Coupled with the impending minimum wage hike, Sarawak oil palm planters will become worse able to compete in the palm oil export market," SOPPOA said.