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 The two countries account for about 85 percent of the global output
of palm oil — used in foods ranging from margarines and biscuits to
instant noodles — and Indonesia's booming economy also poses a
longer-term threat to its own palm oil output as urbanisation drains
rural workers.
Malaysia has long relied on plantation workers from neighbouring
Indonesia to harvest fresh fruit bunches from oil palm trees that
can grow up to 20 metres (66 feet) tall — jobs that are proving hard
to replace with mechanisation.
But the number of Indonesians willing to leave their homes and
families for the gruelling work is dwindling due to higher wages at
home and rapid urbanisation in Southeast Asia's biggest economy.
Indonesian applicants for jobs in Malaysia's palm oil sector plunged
to 38,000 in 2013 from more than 120,000 in each of the previous two
years, according to data from the Indonesian embassy in Kuala
Lumpur.
"Some are not interested (in working on plantations) anymore," said
Abdul Rahim, a 32-year-old Indonesian working on a 2,000-hectare oil
palm estate in Malaysia's Selangor state neighbouring the capital
Kuala Lumpur.
"If I have the means, I will go home and open up my own business
there."
Industry officials and analysts estimate that planters lose up to
5-10 percent of their fruit each year due to labour shortages,
cutting Malaysia's total export revenues by about 2.5 billion
ringgit ($766 million) annually.
In 2013, Malaysia's palm oil exports dipped to 45.27 billion ringgit
($13.85 billion), its lowest since 2010, from 52.99 billion ringgit
a year before. Palm oil accounts for about six percent of the
country's total exports.
Faced with a labour shortage, Malaysian planters face an unpalatable
choice between paying more to hire and keep workers — hurting their
already thin profit margins — or cutting harvesting rounds and
leaving fruits to rot.
"The Malaysian palm industry is losing billions (of ringgit) in net
export earnings in the form of missed-out bunches due to the chronic
labour shortage," said Carl Bek-Nielson, the CEO of Danish-Malaysian
United Plantations <UTPS.KL>.
"We just can't get enough employees to come. If one can get
sufficient labor, it will make everything more effective, from
harvesting rounds to reducing losses."
NARROWING WAGE GAP
Of the 550,000 Indonesian plantation workers currently in Malaysia,
about 95 percent are in the oil palm industry, embassy data showed.
About 80 percent of Malaysia's palm oil workforce are Indonesians,
with Indians accounting for most of the rest.
Planters prefer Indonesians because they are seen as harder working,
may have had prior experience in palm oil estates, and share a
somewhat similar language.
A plantation worker can earn an average of about 900 ringgit ($280)
per month in Malaysia, up to about 2,000 ringgit, compared to an
average of about 700 ringgit in Indonesia. But a foreign worker in
Malaysia may also have to pay more in taxes and for utilities.
But salary was not the only factor for workers, said Mohd Emir
Mavani Abdullah, chief executive of the world's third-largest palm
plantation operator Felda Global Ventures Holdings <FGVH.KL>.
"They're looking at social benefits, wellbeing and so on," he said.
Robust economic growth in Indonesia, averaging an annual 6 percent
in recent years, has boosted consumer confidence and opened up more
jobs outside the agriculture industry and narrowed the salary gap
between the two countries.
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The capital Jakarta, one of 505 administrative districts and with a
population of about 10 million, raised its minimum wage level by 11
percent late last year and 44 percent in 2012.
Agriculture contributes about 15 percent to the GDP of Indonesia,
with around 35 percent of the 240 million population dependent on
agriculture for their main source of income.
McKinsey Global Institute (MGI) estimates that the share of the
population living in cities could reach 71 percent in 2030, from 53
percent now as people seek greater opportunities and higher paid
jobs.
"Urbanisation could result in about eight million fewer farmers by
2030," said MGI, the research arm of consultancy McKinsey & Co.
That could eventually strain the labour force in Indonesia's palm
oil sector as well as Malaysia's.
"It will be a problem for the next five years if the government is
not careful," said Wahyu Widodo, director of wages and worker's
social security at Indonesia's Manpower and Transmigration Ministry.
"It will be dangerous for Indonesia's agriculture."
TECHNOLOGY LAGS
Major palm oil firms operating in Southeast Asia include Malaysia's
Sime Darby <SIME.KL>, PT Sinar Mas Agro Resources and Technology <SMAR.JK>,
and Wilmar International <WLIL.SI>.
Malaysia is expected to produce between 19.5 and 19.7 million tonnes
of palm oil this year, only slightly higher than 19.2 million tonnes
in 2013, while Indonesia is forecast to churn out 28-30 million
tonnes.
Malaysia's average yield of crude palm oil per hectare was 3.85
tonnes in 2013. Growers said a lack of labour would limit programmes
such as planting superior seeds that can boost yields up to 7.0
tonnes a hectare.
Harvesting palm fruit bunches that weigh up to 25 kilograms (55
pounds) each is labour intensive, especially as trees mature and
grow taller each year.
While mechanized tools are widely used in manuring and to cut fruit
from shorter trees between 3 and 8 years old, robotic technology to
harvest from mature trees does not exist.
A Malaysia-based inventor whose company specializes in labour-saving
devices in the palm industry told Reuters his team is working on a
mechanical cutter for trees above 8 meters tall that may be ready in
the next three years.
"If this works, it can increase productivity by about 100-200
percent. So far we have had some drawbacks, but we are still doing a
lot of research and development," said the inventor who did not want
to be identified. The cutter would still have to be operated by a
worker.
(Additional reporting by Anastasia Arvirianty in Jakarta;
editing by
Stuart Grudgings and Richard Pullin)
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