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The pandemic is forcing the Malaysian palm business to rethink reliance on international labor

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© Reuters. A worker collects oil palm fruits on a plantation amid the coronavirus disease (COVID-19) outbreak in Klang

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From Mei Mei Chu

KUALA LUMPUR (Reuters) – Malaysia's palm oil producers are launching a rare recruitment offensive to hire locals and accelerate the mechanization of the industry as they grapple with a severe shortage of overseas labor due to the coronavirus pandemic.

As the main production season, September through November, approaches, companies are putting up banners near plantations and posting online job ads with free housing, free water, and other real estate living benefits to entice workers into doing anything from driving Tractors to harvest.

Due to travel and movement restrictions, the second largest palm oil producer in the world is already facing a shortage of 37,000 workers, which is almost 10% of the total workforce. The Malaysian Palm Oil Association (MPOA) estimates that if the borders are reopened, 70,000 workers could be affected.

"This is the first time we've made such a big effort to recruit Malaysians, but it's also the first time we've faced COVID-19," Imran, real estate manager at Sime Darby Plantation, told Reuters after looking at potential applicants interviewed at a recruiting day near Kuala Lumpur.

Industry fears that the labor crisis will affect palm oil production this year by delaying the harvest of perishable fruits and giving an advantage to bigger rival Indonesia, which has no such labor problems.

According to analysts, the average production costs in Malaysia at USD 406 to 480 per ton are already slightly higher than in Indonesia at USD 400 to 450 per ton.

Countries like Indonesia and Bangladesh provide nearly 85% of plantation workers for palm companies like Sime Darby, IOI Corp and United Plantations.

While employing more Malaysians could save the hiring fees and levies required to fly foreign labor, planters fear that native workers, who typically avoid plantation work as dirty and dangerous, are not getting involved in industry or taking on the toughest jobs.

"It is possible that recruiting more locals could lower production costs, provided those locals are as productive as they (migrant workers)," said Nageeb Wahab, executive director of the MPOA. "That's a big question mark."

Despite a rising unemployment rate, Imran said most of the recruitment day's interest was in general duties like drivers or mechanics, rather than the tax and critical task of harvesting.

As foreign workers leave the company, some severely understaffed smaller companies that are less able to retain migrant workers have resorted to poaching workers from competitors.

"It's bad, but I have to do this to survive," said an official at a medium-sized Sarawak estate who refused to be named.

REQUIREMENTS FOR THE MECHANIZATION

The labor shortage increases the urgency of long-standing plans to mechanize industry.

Sime, the world's largest palm oil company by land size, told Reuters it was accelerating development and attempts to use "light machinery" to help maintain the site, remove harvested crops and apply fertilizer.

It is also about remote sensing and artificial intelligence to advance "precision farming" and to use farm inputs and field workers as efficiently as possible.

IOI said it has a "revitalized mechanization plan" that aims to mechanize fertilization and spraying of pesticides, as well as automate the operations of the mill, while FGV Holdings plans to mechanize an additional 30,000 acres over the next three years.

Malaysia allocates an average of one worker per 8 hectares, but the MPOA wants a "quantum leap" in technology that doubles the land area for each worker to 16 hectares. This would reduce dependency on labor, which accounts for around 30% of production costs.

"Imagine inventing a drone that can fly under the canopy of palm trees with a scanner to identify ripe fruit clusters and a laser to cut the cluster," said M. R. Chandran, a seasoned industry professional who became a consultant.

"By completely modernizing plantations with drones, artificial intelligence and robotics, we can also make plantation work more attractive for locals."

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