Rising costs, outdated regulations: Sarawak oil palm planters seek SST, labour policy reform

KUCHING (Dec 21): The Sarawak Dayak Oil Palm Planters Association (Doppa) has called for urgent reforms to key state and labour policies, warning that rising costs and outdated regulations are undermining the competitiveness and sustainability of Sarawak’s oil palm industry, particularly among independent smallholders.

Doppa in a statement urged the state government to review the Sarawak Sales Tax (SST) framework and the Foreign Workers Transformation Approach (FWTA), saying both policies must be recalibrated to reflect current economic realities and operational challenges faced by growers.

Its president Dr Napolean R Ningkos said the existing SST thresholds no longer correspond with today’s production costs and market prices, placing an increasing financial burden on planters.

According to figures from the Malaysian Estate Owners Association (MEOA), Sarawak’s oil palm industry generated RM886 million in SST revenue in 2024, from the production of 4.17 million metric tonnes of crude palm oil (CPO) and 380,332 metric tonnes of crude palm kernel oil (CPKO).

Currently, SST is imposed at 2.5 per cent on CPO when prices exceed RM1,000 per tonne, and five per cent on CPKO when prices go beyond RM1,500 per tonne.

However, Napolean noted that average market prices in 2024 stood at RM4,172 per tonne for CPO and RM5,475 per tonne for CPKO — far above thresholds set more than two decades ago.

“The SST was introduced in 1998 when production costs were about RM750 per tonne. Today, costs have risen to between RM2,800 and RM3,000 per tonne due to higher input prices, labour expenses and administrative costs,” he said.

“The threshold values must be revised to align with current realities.”

Doppa proposed that the state consider a mechanism similar to the federal windfall profit levy and exempt independent smallholders from SST to ease financial pressure on smaller operators.

The association also raised serious concerns over labour-related costs following the introduction of the FWTA, which imposes a new fee of RM1,854 per foreign worker.

Napolean said the additional charge would further strain smallholders already grappling with rising operational expenses.

Compounding the issue, he highlighted problems arising from the transition from the Monitoring System on the Employment of Non-Sarawakian (MSEN) to the Sarawak Advanced Non-Sarawakian Online Labour System (SANSOLS).

Under the current arrangement, foreign workers previously registered under MSEN are required to return to their home countries, mainly Indonesia, to re-register under SANSOLS when renewing work permits.

“This requirement is unnecessary, costly and disruptive,” he said, noting that it leads to additional travel and recruitment expenses, delays in permit renewals and potential labour shortages.

Doppa has urged the state government to allow direct transfer of worker data from MSEN to SANSOLS to streamline the renewal process, reduce costs and ensure workforce continuity.

The association also called on the government to utilise SST revenue to fund the maintenance and enhancement of industry systems and infrastructure, rather than introducing new charges to the sector.

“With the oil palm industry subject to multiple levies — including the windfall profit levy, Malaysian Palm Oil Board cess, SST and corporate tax — cumulative taxation is weighing heavily on stakeholders, particularly smallholder farmers,” Napolean said.

“The oil palm sector remains a key pillar of Sarawak’s economy, supporting employment and rural development. Policy reforms are essential to safeguard its long-term sustainability and competitiveness,” he added.