Thursday, March 4, 2010

Cheap Labour and Capital Outflows

In the Star today:

"Malaysia, the world’s No. 2 palm oil producer, will miss its output target of 18.1 million tonnes because of a shortage of foreign labour even as yields recover, according to a top industry official.

Industry regulator Malaysian Palm Oil Board (MPOB) chairman Sabri Ahmad said yesterday Indonesian plantation workers made better pay at home as more palm oil estates started up there while employers in Malaysia had trouble hiring because of a stricter work-permit process."

I find this more than a little ironic. No doubt this will raise the hackles of those who think the reliance on cheap foreign labour is holding back Malaysia from progressing. What makes the irony even richer is the fact that these low-wage workers can now earn more in their own native country – Malaysia is even losing out to less-developed Indonesia in terms of labour earnings.

Be that as it may, what tickled my funny bone was this: as late as 2007-2008 (IIRC), Malaysia was the world’s largest producer of crude palm oil, but we’ve now been overtaken by Indonesia. Here’s the rub – Indonesia’s rapid development as a crude palm oil producer has been fully supported by Malaysian companies using Malaysian capital. Most of our biggest palm oil producers have a significant presence in Indonesia, with up to 50% of their total production coming from there.

So our cheap foreign labour “shortage” in estates is being indirectly caused by the very same companies who are complaining about it. Funny how the world works, innit?

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