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Nusantara Could Be ‘Double-Edged Sword’ For East Malaysia’s Oil Palm Plantations

(From left) Kiu, Surina, Webber, Bursa Malaysia’s derivatives market director Mohd Saleem Kader Bakas, Hameeteman, and Parveez during the panel session.

Key industry experts say the upcoming development of Indonesia’s planned capital city, Nusantara, in Kalimantan could be a double-edged sword for East Malaysia’s palm oil sector.

In a panel session hosted at Bursa Malaysia’s East Malaysia Palm and Lauric Oils Price Outlook Conference and Exhibition 2023 (emPOC 2023), key palm oil industry stakeholders and experts discussed the challenges and opportunities in East Malaysia’s palm oil sector.

Kicking off the discussion on this topic, Malaysian Palm Oil Board (MPOB) Director General Datuk Dr Ahmad Parveez Ghulam Kadir highlighted his belief the arrival of a new Indonesian capital in Kalimantan would act as a catalyst for the region’s palm oil industry growth, especially in the areas of downstream products and its derivatives.

He pointed out that while the market in Nusantara will take some time to grow, its potential market size is far larger than Malaysia’s local market size, which presents an opportunity for local players to potentially capture through export or collaboration.

“I think we know what’s happening in Nusantara, and once they have developed more of a market there, we should try to find ways on how we can actually export some of our downstream products or we can see who are the main players there than we can collaborate with,” he asserted.

Expanding on this, he pointed out that there is still a lot of room for growth in the downstream segment in Sarawak and Sabah and that it was important that local players aim to produce high value downstream products. He noted that there are currently no oleochemical operations here in East Malaysia.

“For Sarawak especially, MPOB will be targeting to organize a transfer of technology seminar next year in hopes of encouraging more players to take an interest and participate in the downstream segment,” Parveez guided.

Touching on the topic of green technology, he shared that as Malaysia’s palm oil sector’s green technology and sustainability efforts are very advanced, it would also be a good opportunity for East Malaysia to participate in proposed Kalimantan Industrial Park Indonesia (KIPI) which is expected to become the largest green industrial area in the world.

Delving deeper into the impacts of Nusantara, Datuk Darrel Webber, founder of DWA Consulting, feared that Nusantara’s development could cause the future Indonesia capital city to become a sponge for labor in the Borneo region, further exacerbating the ongoing labor issues that the local palm oil sector faces.

But looking at the situation from a more optimistic view, he pointed out that stakeholders could instead see this potential pain point as an additional reason to further ramp up their efforts in solving the current labor shortage issues.

Joining in on the conversation, Dr Surina Ismail, group head of sustainability at IOI Corporation Bhd (IOI) highlighted that IOI’s stance on the issue is that they aim to address the issue by targeting more of the local labor force by changing the perception of palm oil related jobs being dirty, difficult and dangerous.

With advancements in technology and adoption of mechanized tasks, she guided that work in the palm oil sector nowadays was very different compared to what it was in the past and that she was confident that the sector would be able to attract the local labor force if its negative perceptions could be changed.

Besides this, she added that another main focus should be on employee retention through employee centric incentives that will provide employees with more monetary incentive and better work and living standards.

Concurring with this, Daphne Hameeteman, General Manager for Sustainability at Wilmar International Ltd (Wilmar) believed that these incentives are not just about providing housing, clean water and safety for plantation workers but also about creating a ‘holistic work-life balance’ for them.

Advocating for the creation of well protected, connected and supplied communities in and around palm oil estates, Hameeteman believes that such spaces are necessary as it allows plantation workers to be able to provide their family members and dependents an environment where they are able to live and thrive in.

While the focus on better work conditions and arrangements will undoubtedly benefit the labor force within the palm oil industry, Sarawak Oil Palm Plantation Owners Association (SOPPOA) chairman Eric Kiu shared that he believed that this would only be a stopgap measure in the shorter-term if stakeholders did not also push themselves further in terms of adopting automation and mechanization in their operation.

Sharing examples of mechanization in both the downstream and upstream sectors, Kiu detailed that he believes that in many ways, the industry on a whole is already quite mechanized and advocates that more industry players need to quickly adopt and capitalize on the existing available solutions.

However, in the longer-term he believes that the industry on the whole cannot be complacent with the current situation and instead continue to strive for more innovation and breakthrough in the field of automation and mechanization.

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