Demand for Migrant Agricultural Workers to Heat Up - Part #2

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.

Note: (1) 1 United States Dollar equals  4.46 Malaysian Ringgit (MYR); (2) ILO Global Estimates on International Migrant Workers: The ILO estimates that 169 million people are international migrant workers. International migrant workers constitute 4.9 per cent of the global labour force. Source: PalmTrack - Khor Reports, 4 Aug 2022, Khor Yu Leng (yuleng@segi-enam.com)

Links: [1] No problem for RM1,500 minimum wage in plantation sector; [2] Indeed.com: Farm Worker salary in Malaysia; [3] Jobted: Farm Worker Salary in Australia

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.

Demand for Migrant Agricultural Workers to Heat Up - Part #1

Migrants workers have been a dominant feature of the economies of Malaysia, Singapore, and Thailand, with especially strong reliance on massive flows of workers in sectors like construction and agriculture; and their role permeates other sectors too. Asia has seen big flows of workers and we expect some changes as the post-Covid recovery drives policy shifts. We focus on Malaysia’s palm oil sector as a major destination for migrant workers and a scenario for competition from Taiwan and Australia agriculture with a strongly pro-labour compliant Indonesia considering requests for migrant workers.

Malaysia palm oil issues, challenging Indonesia rules, others will reform

Indonesian migrant workers have been greatly depended on by Malaysia plantations and they are they are also the core of the country’s construction sector skilled labour force. Indonesia has been moving to protect the interest of its migrant workers, especially domestic workers where abuse cases have caused much concern. An expert notes especially the struggle to get judgment against errant employers, even in some extreme cases. Labour specialists tell us that this is due to very strict interpretations by Malaysian judges and this is seen as a rather awkward technical legal problem.

There has been less concern from Indonesia about agricultural and other economic sector workers; we think for rather practical and obvious reasons—they work together in larger groups, in formal and informal settings. With the shortage of labour in Malaysia, employers are bidding and paying up and according to work hours and overtime, and Malaysia implementation of regulations on working conditions are improving, and employers have been talking about the higher costs. 

However, the recent 2022 US Trafficking in Persons or TIP report still ranks Malaysia low. It is looking for stronger statistical evidence of implementation including investigations and prosecutions. The treatment of migrant workers by local law enforcement has been notorious and widely discussed in Malaysia but with so-far limited political will for change.

And there is a huge number of undocumented workers. After years covering this topic, we realise that a big “tell” is the discussion about daily wages rather than monthly wages or earnings for migrant workers. Other issues are worker safety, excessive overtime, living conditions and another forced labour issue, the cost of recruitment. These are official and customary costs; some companies deem the latter as illegal or corruption and this reduces the amount that they are willing to pay for restitution or reparation on recruitment cost. This seems to drive the sub RM5,000/migrant worker offered by some palm oil companies versus average toward RM15,000 offered by some rubber glove companies. But it is widely thought that migrant worker do NOT face significant total cost differences based on which economic sector they end up in. 

Workers are still moving internationally in the millions, hoping for higher wage and a big pot of savings, and many achieve this and this demonstration effect drives others to do so. But for those who fail in their quest the outcome is sad and it can even be tragic. A few years ago, I was told by a plantation labour specialist that suicides happen before a worker’s term is up and due to go home, and he realises he has not saved enough. These figures are said to be unreported and in the last 15 years, I’ve not observed this being discussed at an industry level. 

Importantly, there has been a drive for legislation and regulation to protect migrant workers, including in labour supply countries like Indonesia and Bangladesh. And more will do so, especially in light of increased international competition for migrant workers. At the implementation stage, it is a great time for supply countries to leverage demands on behalf of their workers.  

On the demand side, we see the regional competition for agricultural workers rising and expanding. We expect the Covid recovery to drive change toward a more formal and compliant agricultural labour supply.

While Western markets have been worried about labour standards in supply markets such as Malaysia palm oil; their own farm sectors have been notoriously reliant on informal seasonal labour with substandard conditions, e.g. third world-like agricultural worker slums in Spain reported in The Guardian and other news media. This should be gradually cleaned up at labour destinations and we look to Taiwan and Australia as agricultural product export case studies, but we think continental EU and US might still lag as much of their produce is consumed domestically. 

The restart of mass cross-border people movement has been used by key labour origins to bargain for better labour standards implementation, notably for Indonesia. The political-economic landscape is changed with the agro-commodity price boom—albeit with major price swings—and those who have had a relatively easy time sourcing massive amounts of migrant workers should wake up to better compliance and new competition.

Read Part 2 about the outlook for demand for Southeast Asian migrant workers from Australia and Taiwan.

Sneak Peak: Indonesia's Internal Migrants by Khor Reports

We have also been working on Indonesia migrant workers data, looking at the internal movement of people. Indonesia has a long history of movement out of Java from the Dutch Colonial days. Post independence, there has also been large-scale migration via Transmigrasi programmes.

Khor Reports is also working on sub-province socio-economic data indicators for Indonesia, in addition to sub-state indicators for Malaysia. Please contact us for data overlays of oil palm vs non-oil palm and other commodity or business landscapes. Data covers major SDG indicators.

Figure 1: Indonesia's internal migrants - % in-migrants by province by Khor Reports

Source: Khor Reports Data: BPS and Khor Reports estimates

(c) 2018 Segi Enam Advisors Pte Ltd. All rights reserved.

Figure 2: Indonesia's internal migrants - number by province by Khor Reports

Source: Khor Reports Data: BPS

(c) 2018 Segi Enam Advisors Pte Ltd. All rights reserved.

#Labour #MigrantWorkers #PalmOil #Sustainability #RSPO #Riau #Jambi #Kalimantan #Papua #Indonesia #SoutheastAsia #KhorReports #SDG #Data #DataScience

Malaysia's Structural Reliance on Foreign Labour: A Data Report (Khor Reports)

We've released a new data report on our analysis of Malaysia's structural reliance on foreign labour. To access the full data report, sign up for our newsletter in the form below to receive your exclusive password to the report! The report is accessible at this link. Malaysia's Structural Reliance on Foreign Labour (Khor Reports)

A preview of the report

---

We analysed some interesting data on foreign labour in each Malaysian state and district from the Department of Statistics Malaysia (DOSM) - using data on citizen and non-citizens - and found some surprising results. Sabah's share of foreign labour was the highest in the country, at approximately 37%, followed by Selangor at 11%. 

View fullsize

Non-Citizens and Citizens (2016) by State

(c) 2018 Khor Reports - Segi Enam Advisors Pte Ltd. All Rights Reserved.

#Labour #MigrantWorkers #PalmOil #Sustainability #RSPO #Johor #Sabah #Malaysia #SoutheastAsia #KhorReports

To access the full report and to receive more insights and exclusive access to future reports, sign-up for our newsletter!

The full data report is accessible at this link. Malaysia's Structural Reliance on Foreign Labour (Khor Reports)

Subscribe to our newsletter to access this report and receive access to more exclusive content!