Archive for January 2013

FGV: Start using B10

This is written by my colleague Zaidi Ismail.

KUALA LUMPUR: MALAYSIA must implement the use of B10 biofuel now to help lift weak crude palm oil (CPO) prices as well as reduce national stockpile.

The B10 is a mixture of 90 per cent diesel and 10 per cent palm methyl ester, which can trim carbon emissions in the environment as well as reduce dependency on fossil fuels.

Felda Global Ventures Holdings Bhd (FGV) president and chief executive officer Datuk Sabri Ahmad said the government must start using B10 because current low CPO prices may weaken further by October, if no positive measures are taken soon.

October, November and December are traditionally high production months for oil palms, which may put a dent on CPO prices. The commodity is currently hovering at RM2,400 a tonne compared with an average of above RM3,000 last year.

"Once B10 is implemented, it can take out one million tonnes out of the 2.6 million stockpile.

"This will help stabilise CPO prices which are currently on a downtrend," Sabri said during a visit to the New Straits Times Press headquarters here yesterday.

Malaysia mooted the use of B5 (95 per cent diesel and 5.0 per cent palm oil) in 2006 and was supposed to implement its use nationwide by end of last year.

But to date, the green oil has yet to be used on a large scale due to the high cost of production, heavy subsidies incurred by the government, as well as poor demand from export markets.

In June 2012, the Plantation Industries and Commodities Ministry announced revival of the plan and to ramp it up to B10.

Currently, the ministry is in consultations with various parties to revive the programme, which covers the central region such as Putrajaya, Malacca and Negri Sembilan, Kuala Lumpur and Selangor. It will power up government vehicles before being sold at petrol stations nationwide. Sabri said industry players are currently undertaking a study on how it can assist the government to implement the B10.

This year, Sabri said FGV, which is the world's largest producer of CPO, expects to maintain its performance. FGV made a lower pre-tax profit of RM900 million in the third quarter ended September 2012 compared with RM1.5 billion a year ago, due to lower CPO prices.

Having raised RM4.4 billion from its initial public offering in June last year, FGV plans to use a portion of the proceeds to buy agriculture land in Myanmar and Mindanao in the Philippines to plant rubber and oil palm trees.

Mexico's vegetable oil tax move offers opportunities


KUALA LUMPUR: Mexico's decision to exempt import duties on various types of vegetable oils opens up greater opportunities for Malaysian exporters venturing into the market, says Malaysia External Trade Development Corporation (Matrade).

The exemption, to be effective March 1, covers vegetable oils such as soyabean oil and fractions, palm oil and its fractions, safflower oil and its fractions, coconut oil, palm kernel or babassu oil and its fractions, as well as fats and oils, animal or vegetable and their fractions.

Matrade's trade commissioner in Mexico, Remee Yaakub, advised Malaysian firms planning to enter the Mexican market to capitalise and strategise effectively as they have to compete with regional players.

"Malaysian companies may collaborate with local partners to introduce products through new product launches. With palm oil included in the exemption, they may introduce the health benefits of palm oil and market their products through an assertive awareness promotion," Remee said in a statement. ---Bernama

The high cost of minimum wage

MEF talks on behalf of oil palm planters in Peninsular Malaysia, Sabah and Sarawak.

Planters, especially smallholders who depend on contractors hiring foreign workers to harvest fresh fruit bunches, are feeling the brunt of the minimum wage policy. This is because their income has dwindled as palm oil in the futures market continue to trade at a low price band of between RM2,200 and RM2,500 per tonne, in the last four months.


PETALING JAYA: Food inflation and higher outflow of money are the consequences of the implementation of the minimum wage law, which came into force four weeks ago.

From January 1, employers must pay a minimum wage of RM900 a month in Peninsular Malaysia and RM800 a month in Sabah, Sarawak and Labuan.

In an interview with Business Times here recently, Malaysia Employers Federation (MEF) executive director Shamsuddin Bardan estimated that foreign workers, on average, send back some RM700 each month, which is half of their take-home pay that include overtime claims.


"With a conservative estimate of two million foreign workers here, that works out to be RM1.4 billion flowing out of Malaysia to their home countries every month.

"Starting this year, with the blanket implementation of the minimum wage law, the outflow of money from Malaysia is likely to swell to RM2.1 billion every month," he said.

The government's decision to introduce the monthly minimum wage, as part of its efforts to propel Malaysia into a high-income nation, may also result in higher food bills.

Right now, employers in food and beverage businesses have yet to feel the brunt of the minimum wage law. 

"Come July 1, they will no longer be exempted. Small entrepreneurs such as restaurant hawkers, wet market and stall operators will then seek to pass on the extra cost by raising food prices. That is when we will experience costlier teh tarik and roti canai," Shamsuddin said.

Another side effect of the blanket implementation of the minimum wage law is that local workers' interests are being undermined. "A Malaysian gets the same basic wage of RM900 but a foreign worker enjoys free housing, water, electricity and transport. For the same minimum wage, a local does not enjoy these benefits," he said.

In view of this, the MEF is appealing to the government that such subsidies and benefits as provided by employers be included in the minimum wage to rebalance the interests of local workers.

Members of the Malaysia Corrugated Carton Manufacturers' Association (MCCMA), which are predominantly small and medium enterprises, have seen half of their profits shaved off as a result of the minimum wage law.

"We are at a crossroad. How are we going to survive? Those who are not financially strong will have no choice but to close shop and relocate to a more competitive and business-friendly environment like Myanmar," MCCMA chairman Henry Low reportedly said.

Similarly, the Malaysian Rubber Glove Manufacturers Association (Margma) said in a statement the minimum wage law had forced glovemakers to increase glove pricing by up to 7 per cent.

"The direct cost on labour will add another US$1.25 (RM3.80) per 1,000 pieces of gloves. We hope our overseas customers will be able to accept the costlier pricing," said Margma president Lim Kwee Shyan.

Shamsuddin said if the government allows employers to factor amenities costs into the minimum wage, the money will be spent in Malaysia instead of being repatriated to the foreign workers' home countries.

Apart from easing employers' burden, the move will have a multiplier effect on Malaysia's economy as it will generate higher domestic demand for house rentals, food and beverages, and public transportation, he said.

Shamsuddin noted that since April 2009, employers have been made to pay foreign workers' levy to the government. "The government imposes foreign worker levy as a form of income tax it is entitled to collect. Since local workers pay income tax, it is only right that foreign workers do the same, too," he said.

Separately, the Malaysian Trades Union Congress (MTUC) Sarawak Division secretary Andrew Lo, in a statement, said "the proposal to include amenities costs would encourage unscrupulous employers to continue to employ more foreign workers at huge social, security and cost to the country." The MTUC is the umbrella body representing workers in the private sector.

Sime Darby sets benchmarks


KUALA LUMPUR: SIME Darby Bhd, which saw a strong demand for its first US dollar-denominated islamic bond, has priced the US$800 million (RM2.43 billion) two-tranche sukuk at record low yields, setting new benchmarks.

The sukuk was oversubscribed by more than 10 times, with orders amounting to more than US$8 billion, said the country's largest conglomerate.

It priced its inaugural US$400 million five-year sukuk issue at 2.053 per cent a year, and its US$400 million 10-year issue at 3.29 per cent a year.

It achieved the lowest ever coupon rate by any corporate issuer globally in the US dollar sukuk market, reflecting the strong demand for both offerings.

The transaction was closely watched as Sime Darby is the first Malaysian issuer and the first sukuk issuer globally in 2013 to tap the international US dollar debt capital markets.

The issues, which are part of a US$1.5 billion multi-currency sukuk programme that Sime Darby established earlier this month, will be listed in both Malaysia and Singapore.

"I think demand for the issues will remain strong. It's a rare sector as most issuances are in the banking sector. Plus, demand always outstrips supply in the sukuk space," a chief investment officer who helps manage fixed income funds told Business Times.

The sukuk programme was accorded an "A" rating by both Fitch Ratings and Standard & Poor's Ratings Services, and "A3" by Moody's Investors Services.

Sime Darby, which is among the top three largest plantation firms in the world, plans to use the net proceeds from the issues to finance the group's capital expenditure, working capital requirements and general corporate purposes.

By geography, the five-year issue attracted 184 orders across Asia (83 per cent) and the Middle East/Europe, while the 10-year issue attracted 192 orders across Asia (57 per cent) and Middle East/Europe.

"We are extremely pleased with our debut issuance and the robust investor response we have received. 

"The confidence the market has placed in us is clear testament to the strength of the group, especially in the longer term," said its president and group chief executive officer Datuk Mohd Bakke Salleh in a press release yesterday.

He said the transaction also represented the lowest ever US dollar coupon in sukuk format by an Asian issuer, and the lowest ever by a Malaysian borrower in the US dollar market, in both the five-year and 10-year tenures.

Citi, HSBC, Maybank and Standard Chartered were the banks involved in the transactions.

'Moratorium on oil palm planting unacceptable'


As calls to stop planting oil palms on peat soil resurface, lawmakers tell OOI TEE CHING that timely communication of facts and figures of peat agriculture is imperative for the good of Malaysia's economy.


LAST week, opposition leader Datuk Seri Anwar Ibrahim outlined Pakatan Rakyat's policy in taking care of oil palm planters' interests, should the opposition come into power at the federal level.

In his bid to win the hearts of oil palm planters, which make up a significant vote bank, Anwar unwittingly struck a raw nerve when he lobbied Malaysia to stop planting oil palms on peat soil, pending studies on carbon emissions and sequestration.

When met at Putrajaya yesterday, Plantation Industries and Commodities Minister Tan Sri Bernard Dompok, who is also Penampang Member of Parliament, rejected Anwar's lobby.


"This is not acceptable. Anwar's lobby for a moratorium seems to be echoing that of western environment non-governmental organisations' (WENGOs) mantra," he told Business Times after officiating at the close of "Branding of Malaysian Palm Oil" workshop yesterday.

Time and again, WENGOs like Greenpeace and Wetlands International, and their local affiliates, have claimed that oil palm planting on peatland causes tremendous pollution in the form of greenhouse gas (GHG) emission when water is drained from the soil.

These groups, however, fail to provide any credible scientific evidence to support their allegations.

"For Anwar to lobby a move that echoes the WENGOs' shows that he is not guided by logic. How can planting oil palms be highly polluting when these trees, like any other forest species, produce oxygen for us to breathe?" he asked.

"Sarawak is Malaysia's final frontier in oil palm planting. If Anwar is a responsible lawmaker serving the best interest of the rakyat, he should go to Sarawak and see how the oil palms, nurtured with good agricultural practices, are thriving on peatland," Dompok said.

The minister also said GHG emission is not really an issue as Malaysia is a net carbon sink country with more than 80 per cent of tree cover provided by permanent forests and plantation crops, including oil palms, rubber, cocoa and coconuts. 

Dompok then sought tighter support from media practitioners to convey the facts and figures of sustainable practices by oil palm planters to quash baseless claims by irresponsible people who have vested interests to lobby against oil palm planting in Sarawak's 1.6 million hectare of peatland.

In a separate telephone interview from Sarawak, Kapit Member of Parliament, Datuk Alexander Linggi, concurred with Dompok that it is of national economic interest that progress studies of sustainable peatland farming is communicated to the relevant channels and done in a timely manner so that investors understand how best to optimise what is available in Sarawak.

Linggi spoke of higher economic potential of oil palm planting compared with other cash crops. 
"Nobody criticises pineapple planting on peatland. So, why are there unfair attacks from environment activists when my people want to plant oil palms?" he asked. 

"The oil palm is an economic security crop for Sarawak and the country," he said, in reference to Malaysia's annual US$20 billion (RM60.8 billion) palm oil exports which support some two million jobs and livelihoods along the sprawling value chain.

Johor Bahru Member of Parliament Tan Sri Shahrir Abdul Samad, who is also chairman of the Malaysia Palm Oil Board, noted that zero burning, good water management and palm nutrition are imperative when planting oil palms in peat soil.

"The intensity of drains depends on the topography of the field and planting density but the primary objective is to keep the water levels at 50 cm to 75 cm from the surface at most times," he said.

This is achieved through a series of stops, weirs and water-gates. Periodic flushing of the acidic and excessive storm water during the rainy season is also carried out, he added.

Shahrir highlighted that in Peninsular Malaysia, oil palms planted on peat soil by United Plantations Bhd is being carried out in an environmentally sustainable manner, even after three generations.

QSR, KFC privatisation to conclude soon

This is written by my colleague Zaidi Ismail.


KUALA LUMPUR: The RM5.2 billion privatisation of KFC Holdings (M) Bhd and its parent QSR Brands Bhd will be completed on Monday, subsequently paving the way for the de-listing of both firms.

QSR Brands managing director Datuk Ahmad Zaki Zahid said KFC and QSR shareholders will be paid on January 23 and January 25, respectively. 

“The RM5.2 billion privatisation cost is being paid by Johor Corp Bhd (JCorp), the Employees Provident Fund (EPF) and CVC Capital Partners,” Ahmad Zaki told reporters here yesterday at the launch of Pizza Hut’s latest offering, the Golden Harmony Feast.

He, however, declined to comment on how much each party will get from the privatisation exercise as well as the delisting date.

UK-based CVC Capital Partners in December 2011 had teamed up with JCorp and the EPF in a massive RM5.2 billion buyout offer for KFC and QSR, which was approved by the shareholders of both listed firms.

KFC and parent QSR Brands will be taken private by Massive Equity Sdn Bhd at RM4 for each KFC share and RM6.80 for each QSR share, which also include RM1 for each KFC warrant and RM3.79 for each QSR warrant.

Massive Equity is a special-purpose vehicle owned by the companies' ultimate parent JCorp, private equity firm CVC Capital Partners and the EPF.

JCorp and CVC made the buyout offer in December 2011 with the EPF joining in the bid later in May.

The privatisation of both companies is the largest private equity deal in Southeast Asia. Stocks of both companies have been suspended since January 4 to facilitate the capital repayment.

Ahmad Zaki said QSR Brands, which is the franchisee for Pizza Hut, plans to spend RM35 million to open 45 new Pizza Hut restaurants and upgrade 12 existing ones nationwide this year.

He said with the expansion plan, Pizza Hut will have a total of 300 branches by year-end. He also said the restaurant owner and operator is also upgrading its online order and delivery system that had started last year. It is expected to be completed and operational by the second quarter of this year.

"We hope to receive online orders up to 30 per cent of total orders from 12 per cent, at present," said Ahmad Zaki.

Pizza Hut has allocated RM1.3 million to promote the Golden Harmony Feast, in conjunction with the Chinese New Year next month. This meal comprises a Golden Crab Claw pizza, a Golden Platter and the Fizz Golden Passion drink.

Another month of zero tax on CPO exports


This is written by my colleague Sharen Kaur.

KUALA LUMPUR: THE government will maintain the current zero export tax on crude palm oil (CPO) for February as the base price is still below RM2,250 a tonne, says Plantation Industries and Commodities Minister Tan Sri Bernard Dompok.

"There will be another month of tax-free CPO if the price does not reach RM2,250 a tonne," he told reporters here yesterday, after officiating at the opening the Palm Oil Review and Outlook Seminar 2013.

Effective January 1 2013, the export taxes on CPO are between 4.5 per cent and 8.5 per cent, down from the previous average of 23 per cent. It is being fixed on a monthly basis. 

The new tax structure is meant to facilitate refiners market cooking oil, oleochemicals, specialty fats and biodiesel at competitive prices to the global marketplace. 

On news that Indonesia, the world's largest palm oil producer, was considering reducing export taxes too, Dompok said it was a positive strategy for the industry.

"Malaysia and Indonesia are the two biggest producers of palm oil and any move by them will have an impact on the economy and CPO prices. We will continue to engage with our counterparts in Indonesia on this.

"During a meeting in Thailand, we both agreed that there are a lot of good things that can be done through cooperation on supply management and price stabilisation," he said.

Meanwhile, Dompok said the government is upbeat that implementation of the 10 per cent palm biodiesel blending (B10 programme) for the non-subsidised sector will help ease the current record high palm oil stock.

Last week, the Malaysian Palm Oil Board reported that the December 2012 palm oil stock had increased 2.41 per cent to 2.63 million tonnes from November.

"We expect the full implementation of the B10 programme by the end of this year. This will help ease the palm oil stock to a more comfortable level of below two million tonnes. 

"The government has spent over RM50 million to set up blending facilities and most of them would be operational by the end of this year. We expect about one million tonnes of CPO to be taken off the market," Dompok said.

The minister is bullish on growth in the palm oil industry in the current year, citing improvements in the global economy. "I think the industry can only improve. Malaysia has more than 160 food items using palm oil. We can do better," Dompok said.

Sarawak oil palm planters to cut jobs


KUALA LUMPUR: Oil palm planters in Sarawak will be forced to cut jobs if employers' burden is not eased as the minimum wage law came into force two weeks ago.

Effective January 1, employers must pay a minimum wage of RM900 a month in Peninsular Malaysia and RM800 a month in Sabah, Sarawak and Labuan.

This essentially means the basic daily wage in Sarawak has gone up from RM18 to RM31. 

"Of course, everyone wants higher salary, but what about business survival? That's a 70 per cent jump in labour cost. How can we stomach that?" Ta Ann Holdings Bhd group managing director and chief executive officer Datuk Wong Kuo Hea asked.

"If the situation does not improve, we'll have to cut jobs. We have no choice," he said.

When met at a Malaysian Palm Oil Board's seminar in Kuala Lumpur yesterday, he said as the government sought to propel Malaysia into a high income nation by introducing monthly minimum wages, it may have overlooked the possibility of locals being discriminated.

"Picture this... a Malaysian gets the same basic wage of RM800, but the foreign worker enjoy free housing, water, electricity and transport. So, for the same minimum wage, a local gets less benefit," Wong said.

All along, employers from the plantation sector is already providing free housing, water, electricity and healthcare for its workers at the estates. 

In view of the minimum wage law coming into force, planters have appealed for these subsidies be included in the minimum wage to rebalance the interests of local workers.

Last week, at the National Economic Council meeting, MCA president Datuk Seri Dr Chua Soi Lek lent his support that transportation and housing costs for foreign workers be included in their wages. 

He also said he had instructed four MCA ministers to raise the issue in tomorrow's Cabinet meeting with Prime Minister Datuk Seri Najib Razak.


Wong said these costs, including the annual RM1,135 (timber) and RM695 (plantation) levy in Sarawak, should be regarded as part of the minimum salary so as to ease employers' burden.

In a telephone interview with Business Times from Kuching, Sarawak Oil Palm Plantation Owners' Association (Soppoa) chairman Datuk Abdul Hamed Sepawi estimated that the proposed relief would translate to a 30 per cent increment in labour cost for oil palm planters in Sarawak, instead of the current 70 per cent drastic jump.

Hamed highlighted the cost of getting food ingredients from farm to table have gone up, but planters are not able to testify the same for productivity.

This is because oil palm planters are price takers of the world's commodity markets. "We're not in a position to pass on additional costs to clients," he said. A planter's earnings have always been at the mercy of pricing in the world's commodities markets. 

If palm oil prices were to plunge below RM2,000 per tonne, Hamed said planters will definitely lose money. "Many of our members borrow money from banks and issue bonds, of which bankers and insurance companies are subscribers," he said.

Depending on the year of planting, Soppoa calculated that palm oil production cost of these heavily-geared planters ranges between RM1,200 and RM3,000 per tonne. "If palm oil prices were to fall further from the current RM2,300 per tonne, some planters may face difficulties in repaying the banks. 

"They'll then hire less hands and there'll be less harvest. With less cooking oil available, consumers will have to contend with inflationary food bills," said Hamed. Every year, the government pays more than RM1 billion in subsidy to keep cooking oil price at an affordable level of RM2.50 per kg.

Minimum wage: Decision on inclusions next week


KUALA LUMPUR: THE government is unlikely to backdate the implementation even if the Cabinet agrees to a proposal to include several costs and the RM1,250 annual levy into the minimum wages.

Effective January 1, employers must pay a minimum wage of RM900 a month in Peninsular Malaysia and RM800 a month in Sabah, Sarawak and Labuan.

Human Resources Minister Datuk Seri Dr S. Subramaniam noted that having a national minimum wage in Malaysia is a new development and as such, there are bound to be some difficulties. 

He noted the government is determined to transform the economy to be less reliant on cheap labour. "At the same time, we also take note of employers' burden." 

All along, employers from the manufacturing and plantation sectors are already providing free housing, water, electricity and healthcare for its workers.

In view of the minimum wage law coming into force, employers from the manufacturing and plantation sectors have appealed that the subsidies that they have been providing for their workers be included in the minimum wage.

"With this in mind, the Cabinet will decide on what is to be included in the calculation of minimum wages next Wednesday," he told reporters after the launch of the 150th birth anniversary of Swami Vivekananda celebrations here yesterday.

Asked if there is a need for the government to re-gazette the new way of calculating minimum wages, Subramaniam replied, "no, there is no need to".

To another query if the Cabinet would backdate its decision should it agree to the proposals put forth by employers, the Human Resources minister shook his head and said, "unlikely".

Asked if this essentially means daily-waged workers who had received RM34.62 a day since 1st January get to keep their salary, he nodded in agreement.

Rising costs worry oil palm planters


The minimum wage law, which took effect on January 1, is meant to incentivise corporate Malaysia to be less reliant on cheap labour. However, the Malayan Agricultural Producers Association tells Ooi Tee Ching that planters will lose money and consumers, would face higher food bills, if palm oil prices were to fall below RM2,000 a tonne


KUALA LUMPUR: OIL palm planters, including smallholders, will bleed red ink if palm oil prices were to dip below RM2,000 per tonne, said Malayan Agricultural Producers Association (Mapa).

Following the introduction of the monthly RM900 minimum wage in Peninsular Malaysia, palm oil production costs have gone up to between RM1,200 and RM1,900 per tonne.

In an interview with Business Times, Mapa executive director Mohamad Audong explained that the higher cost of production is mainly due to costlier fertiliser, more expensive foreign worker recruitment fees, higher transportation cost and various taxes imposed by the federal and state governments. 


"When the government set the monthly minimum wage at RM900, palm oil prices were trading at around RM3,000 per tonne," he said. 

As the minimum wage law is currently enforced by the Human Resources Ministry, palm oil prices are averaging RM2,300 per tonne. 

"If prices were to drop below RM2,000 per tonne, oil palm planters, including smallholders, will be in big trouble."

Planters who do not comply with the minimum wage risk a maximum fine of RM10,000 per worker. For continuous offenders, they will be fined RM1,000 per day and repeat offenders would face a RM20,000 fine or five years' jail or both.

Mohamad went on to highlight that as the government sought to propel Malaysia into a high income nation by introducing monthly minimum wages of RM900 in Peninsular Malaysia and RM800 in Sabah and Sarawak, it may have overlooked the possibility that planters could suffer severe profit erosion while consumers face higher food bills.

He explained that oil palm planters are price takers. A planter's earnings have always been at the mercy of pricing in the world's commodities markets. If palm oil prices were to plunge further, planters will definitely lose money. 

"Don't forget, many of our planters borrow money from banks and issue bonds, of which bankers and insurance companies are subscribers." 

Depending on the year of planting, Mapa calculated that palm oil production cost of these heavily-geared planters ranges between RM1,248 and RM2,975 per tonne.

"If palm oil prices were to fall further, some planters may face difficulties in repaying the banks. They'll then hire less hands and there'll be less harvest. 

"With less cooking oil available, consumers will have to contend with inflationary food bills." Every year, the government pays more than RM1 billion in subsidy to keep cooking oil price at an affordable level of RM2.50 per kg.

"As you can see, the minimum wage policy works best if commodity prices are on the uptrend, not when prices are falling," he said.

Mapa represents 184 plantation companies in Peninsular Malaysia, with estates spanning across 700,000ha. These oil palm planters employ some 125,000 workers at the fields, of which 80 per cent are foreigners.

Last year, profits of plantation companies listed on the stock exchange declined by an average of 40 per cent as palm oil prices fell from a high of RM3,600 per tonne to a low of RM2,200 per tonne. 

The loss of profits was also compounded by the RM200 monthly wage increment to workers of plantation companies since September 2011.

Mohamad noted the cost of getting food ingredients from farm to table have gone up but planters are not able to testify the same for productivity.

With the minimum wage law taking effect this year, daily wage has gone up from RM27 to RM34.62. Following this, Mapa estimates that plantation companies' profits are likely to shrink by another 10 per cent or so, provided that palm oil prices do not plunge further from the current RM2,300 per tonne.

UOBKayHian, in its latest recommendation to investors, downgraded the plantation sector to "underweight" from "overweight", citing that the new minimum wage will raise pressure on production costs and compress planters' operating margin.

Meanwhile, MCA president Datuk Seri Dr Chua Soi Lek, having proposed that transportation and housing costs for foreign workers be included in their wages at the National Economic Council earlier this week, said he will instruct four MCA ministers to also raise this issue in the next Cabinet meeting with Prime Minister Datuk Seri Najib Tun Razak. 

He said these costs, including the annual RM1,250 levy, should be regarded as part of the minimum salary so as to ease employers' burden.

In a recent statement, Malaysian Employers Federation executive director Shamsuddin Bardan concurred that the RM1,250 annual levy on foreign workers should be shifted back to the employees in view of the minimum wage policy.

As it is now, oil palm planters are already providing free housing, water, electricity and healthcare for its workers in the estates.

In response, Mohamad said planters welcome the proposal but noted it would take a long while for it to take effect, even if all parties agree to it.

"Even if the National Economic Council were to agree to the proposal, it would still need the agreement from the National Wages Consultative Council. Following that, it will also take a few more months for the government to re-gazette the new way of calculating minimum wages."

When contacted, a National Union of Plantation Workers spokesperson said the minimum wage policy is being enforced by the government and "it is most appropriate that the Human Resources Ministry comment on this matter".

Human Resources Minister Datuk Seri Dr S. Subramaniam could not be reached for comment as he is on overseas travel.


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Lessening employers' minimum wage burden

KUALA LUMPUR: The government will assess the severity of manufacturers' burden following the implementation of the minimum wage law, said Deputy Plantation Industries and Commodities Minister Datuk Hamzah Zainuddin. 

Effective January 1, employers must pay a minimum wage of RM900 a month in Peninsular Malaysia and RM800 a month in Sabah, Sarawak and Labuan.

Hamzah noted that having a national minimum wage in Malaysia is a new development and as such, there are bound to be some teething issues.

"Timber and furniture exporters are not opposing the minimum wage law. The dissatisfaction is more of the way the salary is being packaged," he said. "They appeal that subsidies (including transportation and accommodation) be deducted from the RM900 minimum wage." 

Timber manufacturers and exporters had also proposed that the government annual levy of RM1,250 be borne by the foreign worker. 

"We will forward their appeals to the Human Resources Ministry," he told reporters after chairing a dialogue session with furniture and timber panelling exporters here yesterday. Also present were officials from the Home Affairs Ministry and Ministry of International Trade and Industry. 

While the government wants to encourage mechanisation and automation wherever possible, Hamzah said the government endeavours to ease the manufacturers' burden.

China stockpiles hurt CPO prices


KUALA LUMPUR: PALM oil dropped to the lowest level in more than two weeks after a report that buyers in China, the largest consumer of cooking oil, built the biggest-ever stockpiles before the country tightened rules on imports.

The contract for March delivery fell as much as 1.5 per cent to RM2,382 a tonne on the Malaysia Derivatives Exchange, the lowest price for the most-active contract since December 21, and was at RM2,397 at 4:04 p.m. in Kuala Lumpur. Prices fell for the fourth straight day.

With effect from January 1, China imposed more stringent rules on edible oil imports to improve food-safety standards. Palm oil inventory at major ports in China climbed to a record 1.1 million tonnes as of Monday the China National Grain & Oils Information Center said in a report yesterday. 

Malaysia's palm oil reserves reached an all-time high in November. Official data on holdings in December are scheduled on January 10.

"Demand from China may be lower in January," Benny Lee, market strategist at Jupiter Securities, said by phone in Kuala Lumpur. As total sales have also slowed, inventories in Malaysia may expand further, said Lee.


Stockpiles in Malaysia were 2.53 million tons in December compared to the record 2.56 million tonnes a month earlier, according to the median of estimates from six analysts and two plantation companies in a Bloomberg survey published on Monday.

China's imports from Malaysia jumped 24 per cent to 866,340 tonnes in November and December last year from 698,000 tonnes in the same period in 2011, according to data from Societe Generale de Surveillance (SGS). Total shipments from Malaysia fell 7.9 per cent to 1.52 million tonnes in December, SGS said on December 31. 

Palm oil for May delivery lost 1.7 per cent to close at 6,844 yuan (RM3,343) a tonne on the Dalian Commodity Exchange. Soybean oil for May fell 0.3 per cent to end at 8,660 yuan a tonne.

Soybeans for March delivery were little changed at $13.8725 a bushel on the Chicago Board of Trade. Soybean oil for delivery in March lost 0.1 per cent to 49.89 cents a pound.

Meanwhile, palm oil exports from Indonesia may climb about 10 per cent to an all-time high this year as output gains to a record and sales of refined products increase, according to an industry group.

Shipments may climb to 20 million tonnes from an estimated 18.2 million tonnes last year, according to the Indonesian Palm Oil Association or Gabungan Pengusaha Kelapa Sawit Indonesia (Gapki). Output will probably expand 5.7 per cent to 28 million tonnes.

"Export of refined products may be more than 60 per cent of total shipments in 2013, because the tariffs are lower than crude palm oil," Susanto, head of marketing at Gapki, told reporters in Jakarta yesterday. That would compare with 58 per cent in 2012, he said.

Demand for refined products especially from China, the world's biggest edible oil consumer, is promising and will continue to increase, he said. Indonesia exported about 3 million tonnes of palm oil to China in 2011, according to data from Gapki. Shipments in the first 10 months of 2012 reached 2.4 million tonnes, down about 2 per cent from a year earlier.

Indonesia needs to cut its export tax to avoid losing market share to Malaysia in countries such as India and Pakistan that typically buy more of the crude variety, Gapki secretary-general Joko Supriyono said.

Indonesia cut the export tax on crude palm to 7.5 per cent this month from 9 per cent in December, while Malaysia set the tariff at zero. The Indonesian duty for refined products such as palm-based biodiesel and refined, bleached and deodorised palm oil are set at zero for this month, according to data compiled by Bloomberg.