Foreign Labor Shortages in the Malaysian Palm Oil Industry: Impacts and Recommendations

Malaysia’s plantation industry and economy, as a whole, has benefitted from foreign labor and remains crucially dependent upon it. Yet, this dependence can prevent optimum productivity by disincentivizing mechanization and innovation. Furthermore, foreign workers have historically filled gaps left by Malaysians seeking higher education and higher-income jobs, but evolving policies and practices in Malaysia’s plantation sector, occurring alongside expansion of Indonesia’s plantation sector, are changing the nature of the mechanization-versus-cheap labor dichotomy that has long affected the industry. While there has been a fair amount of research dedicated to technical advancements in palm oil harvesting, as well as quantitative analyses of economic impacts of migrant labor across multiple industries, the current discourse lacks primary qualitative data on the impacts of recent migration trends on mechanization, productivity, safety, and worker turnover in plantations. This paper explores these questions through interviews conducted with key stakeholders from several levels of Malaysia’s palm oil industry, including individuals affiliated with plantation companies, government ministries, non-governmental organizations, and universities/research institutions. Results of this analysis suggest that foreign worker inflows are insufficient to satisfy labor requirements, even as technology and farming best practices are increasingly adopted. Increased focus on genetic innovation and diversification, as well as social and educational program improvement, are necessary to address labor and productivity challenges. Moreover, a focus on replacing foreign labor with local labor is not maximally effective and should instead be shifted to retaining foreign labor and, where relevant, training Malaysians for more technical and managerial positions in the industry.