KUALA LUMPUR, Oct 11 -- Shortage of labour, high reliance on foreign workers and acreage limitation are among the challenges facing the oil palm subsector.

According to the Economic Outlook 2020 report released by the Ministry of Finance today, fluctuating global commodity process coupled with protectionist measures imposed by major markets, affect the performance of the subsector.

“The subsector is highly labour intensive with low adoption of technology and mechanisation, especially in harvesting and collecting fresh fruit bunches (FFB). It is also dependent on foreign workers, constituting about 77% of 431,000 workers, which majority are from Indonesia (63%), Nepal (19%), Bangladesh (7%), Philippines (5%) and India (4%).

“The high reliance on foreign workers poses a threat to the sustainability and stability of the industry, especially during harvest seasons,” according to the report.

According to the report, the subsector now faces land limitation for future expansion due to extensive land use in the past, besides the government is committed to capping oil palm planted areas to 6.5 million hectares by 2023 to ensure forest conservation.

“As a result, many local companies especially government-linked companies seek investment in other countries such as Brazil, Indonesia and Papua New Guinea that have an abundance of affordable land with similar soil and climate,” according to the report.

Meanwhile, the oil palm crop is facing intensified scrutiny from environmental groups and consumers amid allegations on indiscriminate land clearing for the crop resulting in deforestation, despite the crop utilising only 0.4 per cent of world agricultural land compared with other agricultural produce.

Furthermore, the report stated that since 2006, commodity prices including crude palm oil (CPO) have been recording high fluctuation mainly due to uncertainties in the world demand and supply, which dampens its production.

The report, however, stated that despite facing the limited land for agriculture, boosting productivity through the usage of digital technology and mechanisation will increase palm oil yields.

According to the report, acknowledging the importance of oil palm subsector to the economy, the government has undertaken various measures to boost production and expand the market for palm oil which include introducing mechanisation, diversifying export markets, endorsing biodiesel and complying with international standards.

-- BERNAMA