THE recently-announced 2024 Budget has brought optimism to the oil palm sector, especially for smallholders. The government has introduced a range of incentives aimed at ensuring increased productivity within the oil palm industry.
Mechanisation and automation play a crucial role in oil palm plantations, with the primary goal of enhancing productivity and reducing the oil palm industry's reliance on foreign labour. The government and the Malaysian Palm Oil Board (MPOB) are consistently implementing measures to achieve these objectives.
In the 2024 Budget, the government has proposed to expand the scope of automation tax incentives to cover the plantation commodities sector to increase the productivity and reduce the dependence on foreign labour through mechanisation and automation.
We hold a positive outlook on the impact of these tax incentives, as they are expected to drive the adoption of advanced technologies, including drones and self-driving vehicles, within oil palm plantations.
This initiative is poised to bolster productivity while concurrently decreasing reliance on foreign labour, as technological implementation will lead to higher fresh fruit bunches (FFB) production.
Moreover, apart from elevating productivity, it will potentially attract local community participation within the oil palm industry.
The oil palm sector relies heavily on labour. During the Covid-19 pandemic outbreak, the sector experienced a rather critical shortage of workers when the government implemented a freeze on the hiring of foreign workers from March 2020 to July 2022. This had resulted in a shortage of 55,000 workers in the oil palm plantation sector in December 2022.
While the government's decision to lift the freeze on foreign labour has alleviated the labour shortage to some extent, the oil palm plantation sector continues to grapple with this issue. This persistent challenge can be attributed to the fact that many foreign workers, primarily from Indonesia, tend to remain in employment for less than three years, leading to a high turnover rate among the workforce.
In August 2023, the total shortage of workers as reported by the plantations was 41,733 workers, a decrease of 24 per cent from that in December 2022 as the withdrawal of the freeze by the government allows plantation companies to bring in foreign workers.
The government has encouraged the oil palm plantation sector to increase the level of mechanisation but the percentage of mechanisation adoption in the sector is still low especially for the harvesting activities and hence, affects the yields of the FFBs produced.
MPOB statistics showed that the national average yield of FFB in 2022 slipped by 7.0 per cent to 15.49 tonnes per hectare from 16.73 tonnes per hectare in 2020.
The implementation of mechanisation and automation in oil palm plantations is expected to mitigate the impact of the labour shortage while simultaneously changing the perception of the oil palm industry among local youth.
Historically viewed as a sector associated with challenging working conditions, the introduction of mechanisation and automation will not only enhance productivity but also make job opportunities in the industry more appealing to the local workforce.
Self-driving vehicles can carry out the activities of unloading the FFBs, spraying pesticides and spreading fertilisers which can be controlled by the local youths through teleoperation that does not burden the operators.
This technology can be adopted in the oil palm plantations as it has been successfully used in other countries or in other agricultural sectors. Additionally, the oil palm manufacturing sector also needs to adopt automation technology to improve quality and productivity.
The private sector should cooperate with the government in inventing viable technology to improve plantation operations. The oil palm sector also faces a challenge in hiring the local workers who are skilled in automation technology.
Therefore, incentives that can encourage highly skilled local workers to be involved in the sector should be considered.
Meanwhile, the government's move to provide the RM100 million palm replanting programme incentive allocation through grant and loan to 7,000 independent oil palm smallholders will enable them to replant unproductive and low yield oil palm trees.
Old palm trees that are more than 25 years are expected to cover an area of more than 560,000 hectares by 2027 and this will adversely impact the productivity of FFBs with losses of up to RM7 billion a year.
Due to the current high investment cost, smallholders are delaying their oil palm replanting schedules which lead to declining yields. This will affect their income and in turn the government's revenue.
We applauded the government's initiatives for the oil palm sector proposed in the budget which will enhance productivity, reduce labour dependency, promote technology adoption and improve the well-being of the smallholders. These actions are geared towards fostering long-term sustainability and broadening the industry's appeal to a wider workforce.
* The writer is the director-general of Malaysian Palm Oil Board