PRESS STATEMENT

3rd April 2020
APPEAL TO LIFT MCO IN PLANTATION SECTOR AS SUPPLEMENTARY TO
THE PALM OIL REFINING SECTOR

We refer to the recent shutdown of six oil palm plantation areas in Sabah by the State Government in its effort to contain the spread of Covid-19 virus among its workers there. Whilst we appreciate and commend the effort undertaken by the authorities in combating this disease, we are at the same time concerned about its impact on the palm oil industry in
particular and on the nation's economy in general.

By restricting plantation workers from harvesting the oil palm fruits which otherwise would be left unattended and eventually disposed off due to deterioration in quality will have dire consequences in the supply chain. Needless to say, when Fresh Fruit Bunches (FFB) cannot be harvested and transported to the mills for processing into Crude Palm Oil (CPO), the refineries will be choked with no supply for refining into cooking oil and other bakery/confectionery fats which are essential food products highly sought after by the consuming public and in short supply particularly during this period of need.

Whilst appreciating the need for social distancing to break the virus chain, it is also necessary to recognise the behaviour pattern of the plantation workers. Without any work to do, thousands of these workers are unlikely to sit at home but congregate in groups, thus defeating the purpose of the lockdown. It will be a herculean task to police and monitor the
movement of such large numbers of workers. The objective would probably be better served by keeping them gainfully occupied at work, where their movements can be much better coordinated and monitored under hygienic conditions.

As we are all aware, Crude Palm Oil is the lifeline of the refining industry. Without which, there is no cooking oil available let alone any of the consumer necessities mentioned above.

We, the Palm Oil Refiners Association of Malaysia (PORAM), therefore are in full support of the appeal and the move made by the Malaysian Palm Oil Association (MPOA), the Malaysian Estate Owners Association (MEOA) and other entities including individual companies such as FGV, Sime Darby and Wilmar to allow the plantation sector to continue to function albeit under certain conditions and precautionary safety measures. The varied reasons given by them are self-explanatory and unnecessary for us to repeat here.

Like any business entity, the palm oil refining industry has to remain viable, productive and more importantly to be able to put its nose above water as a matter of survival especially in difficult times like this. Without a constant supply of CPO, the refineries have to shut leading to loss of revenue, layoffs and a host of other problems not mentioning a cut-off in the supply of cooking oil in the domestic market.

Similarly, palm oil mills particularly the smaller ones with no plantation back-up and support to sustain their business during the MCO period are in the same predicament. Without a constant supply of FFBs, they are equally vulnerable.

In so far as external trade is concerned, many refineries had earlier sold and entered into forward contracts with their buyers overseas and these have to be honoured and fulfilled lest they be defaulted. As a consequence, the national economy will suffer through a loss in foreign exchange. In 2019, the export revenue earned by the palm oil industry amounted to RM 67b and due to the current crisis which has triggered a softer market sentiment with lower prices, the revenue for 2020 is expected to be reduced.

We also have to take into consideration the plight of those in the ancillary services such as trading companies which do not have manufacturing facilities but they play a vital role in connecting the refinery to the overseas end buyer. They too have orders to fulfil, i.e. to get their supplies from the refinery for onward shipment to their destination buyer. Other key services include inland transportation/haulage, freight forwarding, bulk installations, cargo surveying/inspection, analytical laboratories and so on.

Once again, we appeal and call on the Sabah Government to allow the palm oil industry and its supply chain to work in unison so as not to disrupt it for the benefit of the consumer and the economy as a whole.

Thank you.

Jamil Haron
Chairman, PORAM
PERSATUAN PENAPIS MINYAK SAWIT MALAYSIA