Sunday 19 May 2024
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This article first appeared in The Edge Malaysia Weekly on February 12, 2024 - February 18, 2024

AFTER more than two years since the US Customs and Border Protection (CBP) imposed an import ban on FGV Holdings Bhd, the group aims to get it lifted as early as the end of the year.

Group CEO Datuk Nazrul Mansor says the company is targeting to submit its petition to the US CBP by June this year with all the measures it has in place to address the gaps identified by its audit firm.

“The latest right now is that our auditors are doing a verification where they will verify all the gaps that were identified earlier. Once the verification is completed, they will write a report and will let us know if there are still gaps.

“From there, we will send a petition to the US CBP, which we are targeting to lodge in June. Once this petition is lodged, we foresee that it would take the US CBP between six and eight months to go through the report and validate our estates,” Nazrul tells The Edge, adding that FGV has been in continuous engagement with the US CBP.

FGV, one of the world’s largest crude palm oil (CPO) producers, was banned by the US CBP in 2020 due to allegations of forced labour on its estates. The company then engaged an audit firm to review the labour conditions.

About eight Malaysian companies have been slapped with withhold release orders (WRO) by the US CBP in the past two years due to allegations that they used forced labour. These companies are mainly manufacturers of rubber gloves and palm oil products.

Sime Darby Plantation Bhd was allowed to ship palm oil to the US in February last year following a two-year ban on the grounds of using forced labour.

Glove makers banned from exporting to the US included Brightway Group and Supermax Corp Bhd, although only the WRO on the former remains.

Among the things that FGV has done, according to Nazrul, is upgrading workers’ housing facilities, compensating its foreign workers who paid recruitment fees and managing working hours.

He says the company has spent more than RM100 million on reimbursing some 20,000 of its foreign workers who had paid recruitment fees to agents to secure jobs.

Under International Labour Organisation (ILO) rules, migrants should not pay any recruitment fees to agents as this may result in debt bondage, which is identified as forced labour.

“At some plantation companies, I know estate workers are still regarded as estate workers or migrant workers. We are changing the notion at FGV because we need them so much.

“I mean, we’ve got to face the fact that Malaysia is reliant on foreign workers to do estate work as we can never get Malaysians to do it no matter what the income because they prefer to work in the cities and towns.

“That is something we must recognise and accept. If they (estate workers) don’t bring the fruits down, nothing will happen,” Nazrul says.

Efforts to get the CBP import ban lifted has been a drag on FGV’s earnings, which can be seen in its rising cost of production.

Its CPO production cost, ex-mill, had jumped to RM2,780 per tonne as at Sept 30, 2023, compared with RM1,801 per tonne in 2021, due to the increase in labour cost.

Thus, says Nazrul, it is important for FGV to go further downstream to get better margins to improve its profitability.

In addition, due to rising demand for sustainable practices, FGV is working on de-carbonsing its operations, including developing biomass power plants at its mills.

“It has been very daunting, time-consuming and cost a lot of money. But at the end of the day, I think it is key for us to undertake these investments because we also want to be able to differentiate our products.

“When we have a nice or unique story to tell, we’ll be able to differentiate our products from the products that come from our next-door neighbour because we cannot at all compete on a pricing perspective and volume.

“We have spent so much money on being sustainable and we must be able to sell what we produce as sustainable products because there are markets out there that will pay a premium for sustainable products. Our advantage is that we have not fully capitalised on the smallholder stories,” Nazrul says.

FGV plays a significant role as an off-taker for smallholders by purchasing their fresh fruit bunches (FFB). Based on the group’s 3QFY2023 results, almost one million tonnes (29%) of FFB came from its own estates, 1.36 million tonnes (41%) from FELDA settlers and the remaining 1.05 million tonnes (30%) from smallholders.

On the recruitment of estate workers, Nazrul says FGV has changed its process to ensure that the workers are clear of any form of modern slavery. “The challenge here is to actually get sustainable sources because the workers whom we employ must be free of debt from not paying any recruitment fee to anybody to be employed by FGV. The process that we have undertaken includes sending teams to the source country and appointing independent auditors to validate the fact that the workers don’t pay any form of fee.

“We are working with agencies that can give us the assurance that the workers they supply are free from any form of recruitment fee.” 

 

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