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Last Updated: 20 March 2024

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A World Trade Organization (WTO) panel ruled earlier this month on a complaint brought by Malaysia against the European Union over the bloc's plans to phase out the import of palm oil as biofuel because of environmental concerns.

Malaysia, the world's second largest producer of palm oil after Indonesia, brought a case to the WTO in early 2021 against the EU, France and Lithuania.

The Southeast Asian country contested that the EU had violated international trade rules in its policy to phase-out the import of palm oil as a biofuel due to deforestation and emissions risks under the EU's second Renewable Energy Directive (RED II).

Indonesia also filed a case with the WTO but asked for it to be suspended a day before the result of Malaysia's case was announced.

What was the WTO decision based on?

The three-person panel voted by two-to-one in favor of the EU's ability make rules against imports of crop-based fuels for environmental reasons.

However, it also said that the EU was at fault for how it had prepared and published its policy, which amounted to "arbitrary or unjustifiable discrimination" against Malaysia.

Much of this revolved around how the EU defined its assessment of emissions, along with indirect land use change (ILUC), which measures the impact of diverting agricultural land previously designed for food production to biofuel production,

The WTO panel found the EU's study on the ILUC risk of palm oil, using data from 2008 and 2016, was potentially outdated.

It also said an arbitrary choice was made to assess emissions from palm oil production over a 10-year period, when palm trees usually survive for up to 30 years.

"There are deficiencies in the design and implementation of the low ILUC-risk criteria," the WTO panel noted in a 348-page report published on March 5.

EU relations with Malaysia, Indonesia at risk

One dissenting panelist also offered greater support to Malaysia's appeal that the EU policy is protectionist, since it is accused of singling out palm oil while overlooking the environmental impact of biofuels produced within Europe, such as rapeseed.

Chris Humphrey, executive director of the EU-ASEAN Business Council, said that the WTO ruling will be "viewed by both the EU and Malaysia as a victory given the mixed outcome."

"While we await the delayed WTO ruling on Indonesia's complaint on palm oil, it is clear that dialogue between the EU and these key ASEAN partners is the only way forward in dealing with the concerns that both Indonesia and Malaysia have," he added.

The EU Directorate-General for Trade said in a statement that the bloc "intends to take the necessary steps to adjust the Delegated Act."

The European Commission did not respond to requests for comment.

Daniel Caspaty, an MEP and chair of the European Parliament's committee on relations with ASEAN states, told DW that the WTO panel's findings "marks a significant moment in the debate on trade policy and environmental protection."

"This decision will undoubtedly have implications for the EU's relations with Indonesia and Malaysia, particularly concerning the palm oil dispute," he added. 

Caspaty said Europe must urgently find a resolution, as well as with other conflicts such as discussions surrounding nickel.

Reactions to WTO verdict

Malaysia's government responded to the WTO verdict as though it had emerged victorious.

Abdul Ghani, Malaysia's minister of plantation and commodities, called it a "vindication" of Kuala Lumpur's "pursuit of justice" for its palm oil sector.

Speaking to local media, he argued that the WTO ruling "clearly finds fault with the EU's rules on indirect land use change to ban palm oil biofuels," adding that it "also finds fault with the EU's approach to notifying and consulting with other economies when introducing new trade measures."

Indonesian policymakers, meanwhile, will take "cold comfort from headlines celebrating the ruling about discrimination," said Jakarta-based analyst Kevin O'Rourke from the consultancy Reformasi Information Services.

It remains to be seen whether Indonesia's president-elect, Prabowo Subianto, will alter Jakarta's stance around this issue when he enters office later this year.

Humphrey from the EU-ASEAN Business Council said he now hopes "the ruling draws a line under the dispute," and that the EU, Malaysia and Indonesia can now focus on working out their differences through the ad-hoc joint task force setup last year.

The task force last met in February and is expected to reconvene for more talks in September in Brussels.

EU should set 'realistic' standards for other countries

The EU is nearing the end of free-trade talks with Indonesia and has been in talks with Malaysia about restarting negotiations for a bilateral free-trade pact.

However, Brussels has recently come under attack from more third parties over how it classifies its rules related to deforestation.

For Jakarta-based analyst O'Rourke, greater clarity can benefit Indonesia and Malaysia.

"Unlike some of their competitors, the two nations are able to achieve compliance in many instances and that will constitute a form of competitive advantage over the long term. And, of course, without such rules, climate change will imperil these as well as all other countries," he said. 

This is likely to require the EU to alter how it approaches trade with partners.

Frederick Kliem, a research fellow and lecturer at the S. Rajaratnam School of International Studies in Singapore, said Brussels currently applies "a very detailed, highly bureaucratic approach to such matters."

"This is OK internally, where the EU is well understood, appreciated and policies are well communicated. This is, however, not the same for third parties," he added.

"If the EU does not moderate its high standards and make them more realistic for third parties to achieve, I fear it will be very difficult to achieve further free trade agreements."

https://amp.dw.com/en/eu-palm-oil-ban-malaysia-indonesia-seek-trade-justice/a-68606071

Sumber : Nature and Environment Malaysia

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Last Updated: 12 July 2024

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KUALA LUMPUR: The recent increase of foreign labour is anticipated to significantly enhance Malaysia's palm oil production this year and in the future. 

This increase follows the implementation of the country's Labour Recalibration Programme (RTK) 2.0, which allowed employers to hire foreign workers until May 31, 2024. 

Datuk Dr. Ahmad Parveez Ghulam Kadir, director-general of the Malaysian Palm Oil Board (MPOB), noted a positive correlation between labour and palm oil productivity.

Unquestionably, the recent rise in the number of foreign workers has increased production, he said.

"This can be seen in the first five months of 2024 with the rise in fresh fruit bunch (FFB) production," he told Business Times.

However, Ahmad Parveez believes that a sustainable and balanced approach is necessary, as the palm oil sector is heavily reliant on foreign labour. 

He noted that while foreign workers have helped boost production, MPOB is also focused on exploring and encouraging initiatives that can reduce this dependency in the long term. 

He said this includes improving mechanisation and enhancing local workforce participation.

Sunway University economics professor Dr. Yeah Kim Leng said that as one of the main sectors that rely heavily on foreign workers, the recent influx of foreign labour is expected to result in higher oil palm production.

He noted that the palm oil sector has been experiencing labour shortages since the COVID-19 pandemic in 2020–2022, causing production to decline. 

"Higher demand for unskilled labour is also evident in the pick-up in farming, construction, maiding, and other manual service activities," he said.

Sharing a similar sentiment, economic analyst Dr. Zulkufli Zakaria expects an increase in palm oil production correlating with the influx of foreign workers, not only from Indonesia but also from Bangladesh. 

He said the reason for dependency on labour is due to some work scopes, such as harvesting and plant maintenance, being difficult to mechanise. 

Hence, he noted that the influx of foreign labour could significantly increase the national palm oil industry.

"The numbers of foreign workers have always been high since before COVID-19. The plantation and construction industries have been dominant in attracting foreign labour, although recently farming has also shown an uptrend.

"In the palm oil industry, the number of foreign workers in Malaysia increased from approximately 2.1 million in 2022 to 3 million in 2023, making up almost nine percent of Malaysia's population.

"Since 2018, there has been a significant increase in the influx of workers for the palm oil industry in Malaysia, mainly from Indonesia.

"During COVID-19, there was a critical shortage of approximately 55,000 workers by December 2022. 

"Government efforts in August 2023 showed some recovery, reducing the shortfall to 41,733. Despite these efforts, turnover in this industry remains very high," he noted.

Risks of foreign labour dependency Ahmad Parveez said Malaysia's heavy reliance on foreign labour for its palm oil industry does come with certain risks. 

He said, for instance, that production can be disrupted if policies restrict the entry of foreign workers, as we saw during the pandemic when international borders were closed, leading to severe labour shortages and significantly affecting FFB production. 

In view of these risks, he said the government, with the support of industry players, is accelerating mechanisation programmes in order to reduce the sector's vulnerability caused by its high reliance on foreign labour.

Nevertheless, Ahmad Parveez said the government is indeed working on strategies to address this issue. 

"MPOB believes that any plans that are in the pipeline will surely be implemented gradually to ensure that production remains stable while we transition. 

"Our goal is to move towards a more sustainable and balanced workforce by incorporating initiatives such as mechanisation and enhancing local workforce participation," he said.

Meanwhile, Zulkufli mentioned that one of the biggest risks of foreign labour dependency is the outflow of funds from Malaysia, which could amount to billions of ringgit annually if each worker sends home only RM500 per month. 

He said this could, to some extent, negatively impact the government's efforts to strengthen the ringgit. 

"The second issue, following the first, is the social problems arising from the large numbers of foreign workers and polarisation issues. 

"Especially notable are those not from Southeast Asia; these differences in culture and ethical practices could exacerbate social tensions," he explained.

Nevertheless, Zulkufli said the government has made efforts to reduce dependency on foreign workers by adopting new technologies such as drones, self-driving vehicles, and automating labour-intensive harvesting processes. 

He noted that the government has also introduced local programmes to train local workers using new technologies and automation on plantations. 

"The government has allocated RM60 million for mechanisation and automation research for the palm oil industry in 2021.

"In line with that, the Mechanisation and Automation Research Consortium of Oil Palm (Marcop) was established with the aim of reducing foreign workers and, in return, increasing productivity and efficiency," he said.

Dr. Yeah opined that the palm oil industry is highly labour-intensive, especially in planting, tending, and harvesting activities. 

He said that despite decades- of research and development, the industry is still unable to mechanise and automate its fieldwork operations, especially at the harvesting stage.

"There are machines, including robots, available to perform these tasks and reduce reliance on foreign workers, but the costs remain prohibitive and outweigh the productivity gains. 

"The large plantation companies have been able to increase yields and productivity through mechanisation and process improvements, but the smaller plantations and smallholders are still largely reliant on foreign workers," he added.

As such, Yeah stressed the need for more concerted investment in research and development (R&D) and ongoing innovations by large firms. 

He said cost reduction is also crucial to achieving mass deployment of automation and labour-saving technology, which can reduce the country's dependence on foreign labour.

Improving foreign labour policies in the palm oil industry 

In terms of optimising foreign labour policies, Ahmad Parveez believes that the government has continuously been improving policies related to foreign labour for the betterment of all industries in Malaysia. 

He said the check and balance on achieving an optimal balance between local and foreign labour is regularly reviewed and adjusted through relevant policies.

"As the guardian of the Malaysian palm oil industry, MPOB believes that training programmes are crucial for improving the skills of local workers so that the gap left by foreign workers can be effectively filled. 

"Besides human development programmes, MPOB is also actively promoting the adoption of automation and mechanisation in oil palm operations. 

"The advancement in mechanisation and advanced agricultural technologies not only reduces the reliance on foreign workers but also decreases the dependence on manual labour as a whole and additionally improves productivity," he said.

He added that these efforts, combined with continuous policy improvements, aim to create a more sustainable and resilient palm oil industry in Malaysia.

Zulkufli, on the other hand, believes that optimising the benefits of foreign workers is a crucial effort that the government could undertake from time to time. 

However, he said research must be conducted after each policy's pre- and post-implementation phases to understand the efforts made. 

"These efforts include optimising benefits such as enhancing workers' rights as mentioned in international law, ensuring fair wages, safe working conditions, and access to healthcare. 

"They should also integrate training focused on agricultural skills and the use of modern technologies," he noted. 

Additionally, Zulkufli believes that employment contracts should be reviewed periodically to ensure they are updated based on changes in life and tasks. 

He said community integration programmes could potentially be introduced to reduce social problems, and highly skilled workers could have a pathway to permanent residency.

Meanwhile, Yeah noted that salaries, wages, and consequently labour costs are expected to rise faster as the country moves forward to achieve its high-income aspirations.

He said the anticipated increase in labour costs will act as a push factor for the industry to adopt technology and increase capital intensity.

Furthermore, he stated that the government is promoting industrial upgrading through greater deployment of digitalization and Industry 4.0 technologies, including robotics, drones, and smart devices. 

"These initiatives will not only reduce reliance on low or unskilled labour but also enhance overall industry efficiency and productivity.

"In the short term, flexibility in the recruitment of foreign workers is necessary to enable the industry to quickly adjust to fluctuations in production and demand," he said.

https://www.nst.com.my/business/economy/2024/07/1074927/foreign-labour-boost-%C2%A0help-palm-oil-production-year#google_vignette

Sumber : New Straits Times

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Last Updated: 29 April 2024

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THE Malaysian government is serious in resolving the issues surrounding the palm oil industry in the country, said Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani.

The issues, particularly environmental and social issues, could affect the RM102 billion export potential when the country produces between 18.5 tonnes and 18.6 tonnes of crude palm oil.

This would go back to both the federal and state governments which are benefitting from the industry in terms of tax collection, almost one million people who are employed by the industry and 450,000 smallholders throughout the country.

“You know we are facing a big issue now in the world. You never see it last time but in the past 15 years people are talking about environment everywhere you go.

“If we can’t address the issue of environment we will be affected. That is why the government is to audit (under the Malaysian Sustainable Palm Oil (MSPO) certification scheme),” he said when opening Sarawak Oil Palms’ (SOP) Refinery and Fractionation Plant 2 at the Kidurong Industrial Estate Area Phase 2 here today.

Johari said Malaysia should not be penalised if the country had been found to be not in compliance with the Roundtable on Sustainable Palm Oil’s (RSPO) principles and criteria.

“I have always stressed to the European Union’s representatives whenever I have the opportunity to talk to them that if they are upset with issues in Malaysia, they should work with us closely on how to make a country like us a benchmark to the world on edible oil.

“Because for every hectare of land that we use, we can produce 3.3 million tonnes of edible oil compared to soy oil, rapeseed oil or sunflower oil that can only produce less than one tonne per hectare of edible oil,” he said.

He added that Malaysia is willing to sit down with the representatives and discuss on how to improve and become an example for the world in edible oil production.

He said palm oil production is an important industry in Malaysia which could boost the country’s economy through its upstream and downstream activities. — BERNAMA / pic AFP

https://themalaysianreserve.com/2024/04/27/govt-is-serious-in-resolving-palm-oil-industry-issues-johari/

Sumber : The Malaysian Reserve

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Last Updated: 26 July 2024

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KUALA LUMPUR (July 25): The Ministry of Plantation and Commodities will consider simplifying the loan process from banks to oil palm smallholders in the upcoming Budget 2025.

Minister Datuk Seri Johari Abdul Ghani said the government, via Budget 2024, had allocated RM100 million via a hybrid scheme in the form of a 50% grant and 50% loan to implement the Smallholder Oil Palm Replanting Financing Incentive Scheme (TSPKS 2.0).

He said his ministry recognises the difficulties oil palm smallholders face when applying for bank loans for replanting purposes, due to several conditions imposed by the banks.

“Although it is a 50% loan and 50% grant, we observed that it is quite difficult for some smallholders to secure financing, because they cannot meet many criteria.

“The ministry is looking into this, and will likely propose in the next budget how to simplify the 50% loan [portion] to facilitate smallholders with trees of over 25 years old,” he said during a question-and-answer session in the Senate on Thursday.

He was replying to a supplementary question from Senator Datuk Lim Pay Hen regarding incentives for oil palm replanting and responses to the TSPKS 2.0 initiative.

https://theedgemalaysia.com/node/720345

Sumber : The Edge Malaysia