Australia & Taiwan demand for Indonesia workers, implications for Malaysia palm oil

We case study Australia that is looking for many more agricultural workers, reportedly now focusing on Indonesia as well as Oceania, and Taiwan that has opened up for agricultural labour workers from Southeast Asia in 2020 (see table below, agricultural sector workforce sizes with migrant worker numbers policies to be clarified). Indonesia has been restrictive of migrant workers for agriculture, but we should expect a review and change of this policy, especially balanced against its urban-industrial workforce needs and plantation worker needs in more remote areas.

These countries will be offering significantly higher wages (see table below, indicative monthly earnings comparisons) with their higher value-add farm/agricultural sectors and better conditions than the likes of Malaysia.

Moreover, Malaysia’s recruitment permit system dominated by agencies and concessionaires and this will be an ongoing red flag for labour specialists. And worse, Malaysia’s overall high cost system approach may be an economic disadvantage if and when other countries rollout straightforward pro-labour G2G MOUs with the likes of Indonesia.

Our view: While oil palm plantations have enjoyed relatively high margins and been profitable year-in year-out (for most but the most marginal producers or those who ran into balance sheet and other internal problems), it is an extensive crop and its labour needs are big at about one person per eight hectares, across several million hectares. Wages are set by the Malaysia palm sector-designed piece rate/productivity system where workers are often incentivized to harvest and deliver one tonne of palm fruits per day with limited mechanisation.

The less-than-formal seasonal agricultural in several key exporters are becoming more formalized and may offer more international demand competition for Southeast Asian workers, just as workers are attracted into domestic industrial and service sectors and are unwilling to take on poorly remunerated dirty, difficult & dangerous (DDD) work. In this regard, it is worth noting:

1. the willingness of Malaysians to take on well paid DDD jobs overseas;

2. the 50% higher pay in the palm sector of Latin America; and

3. Taiwan’s 32% higher pay for local versus migrant workers in its livestock sector (note: the details of benefits in kind also need to be reviewed). 

Indonesia labour excels in agriculture and in semi-skilled roles and we expect it is being approached by big agri-food exporters to discuss labour sourcing in order to regularise labour and for them to expand production amidst booming demand and prices. Malaysia palm oil employs and needs about 500,000–700,000 workers and on skill-matching about ⅔ are from Indonesia, thus 300,000–460,000 Indonesians, in reality and theory. If the likes of Australia and Taiwan lobby for Indonesian agricultural workers and Malaysia is not concerted in reforming to be an attractive employer, palm oil will need to significantly change its strategic plan for workers—perhaps sooner rather than later.

Australia and Taiwan seeking more Indonesia agricultural workers? Here are a couple of news links:

• Nov 2021, Australia: Over 22,000 more workers are still needed to fill labour shortages across the agriculture industry. “Statistics from the latest Australian Bureau of Statistics (ABS) Labour Force Survey (LFS) indicate that the Australian agriculture, fisheries and forestry sector employed 325,000 people on average over 4 quarters to August 2021, with the horticulture and broadacre (livestock and cropping) industries accounting for the vast majority of workers. However, the ABS LFS only accounts for the Australian resident civilian population and is therefore an underestimate of total agricultural employment due to the significant number (>35,000) of overseas workers employed on farms.”

• Taiwan has been formalising its migrant agricultural workers system in recent years. Mar 2022, Taiwan: “The Council of Agriculture (COA) said on Monday (March 14) that it had approved the entry applications of about 2,400 migrant agricultural workers…

  “The Ministry of Labor (MOL) on Feb. 15 reopened the country’s borders to migrant workers from the Philippines, Vietnam, Thailand, and Indonesia, Tsai noted. However, she said Indonesia does not allow its people to work as agricultural laborers overseas, and therefore there will be no Indonesians among this group of 2,400 migrant agricultural workers.”

For Part 1, click the following link: Demand for Migrant Agricultural Workers to Heat Up - Part #1.