Malaysia: Proposed minimum wage hike could raise palm oil companies’ costs, spur automation push
A proposed minimum wage increase will raise the Malaysian plantation sector’s operating cost and push the companies to spend more on automation, Public Investment Bank said.
The Ministry of Human Resources is planning to propose raising the monthly minimum wage to RM1,700 from RM1,500, Nanyang Siang Paureported, citing unidentified sources. If carried out, Public Investment Bank estimated that the operating cost of plantation companies will rise by up to 3%.
A higher minimum wage will push the labour-intensive industry to allocate capital for “automation of more work processes to reduce the headcount going forward”, including spending on robotic arms, drones, and other specialised machinery, the house said.
“It can also help reduce the high dependency on foreign workers, in which the new hiring quota remains frozen,” Public Investment Bank said.
The government will relook at the minimum wage this year under a law that mandates a review at least once every two years. The last review implemented in May 2022 set a monthly minimum wage of RM1,500 applicable to all sectors nationwide for employers with five or more workers.
For decades, Malaysia has been highly reliant on cheap foreign labour to toil on plantation estates, some of which are on uneven or hilly terrains.
Channel checks by Public Investment Bank showed that general workers such as security personnel, admin clerks, carpenters, drivers, and mechanics who fall under the current RM1,500 wage bracket generally made up about 15% to 20% of the total workforce.
“It will also have knock-on effects on the higher wage brackets,” the house said. “Nevertheless, the impact could be muted if it could translate into higher productivity.”
Alternatively, some companies are “gradually” converting hourly-pay general workers to pay rated on a performance basis, Public Investment Bank noted. “This will also help drive the entire group’s productivity commensurate with higher pay,” the house added.
For now, the house is keeping its ‘neutral’ rating on the sector.
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