2 NEWS

StarBiz, TUESDAY 15 MAY 2012

Help for palm oil industry

Govt to announce measures to ensure its viability in the global market
By HANIM ADNAN nem@thestar.com.my
KUALA LUMPUR: The Government will introduce new measures and incentives to ensure the long-term competitiveness of the local palm oil industry in the world market, said Plantation Industries and Commodities deputy minister Datuk Hamzah Zainudin. He said an announcement would be made soon but declined to give the details. The policy makers will be meeting this week to decide on the proactive measures and strategies after getting the feedback and proposals from the players in the upstream, midstream and downstream sector, Hamzah told reporters after opening the two-day Palm industry Labour: Issues, Performance and Sustainability Seminar 2012 organised by the Malaysian Palm Oil Board (MPOB) yesterday. He pointed out that the Government needed time to identify and analyse the respective proposals in efforts to come up with a win-win solution for the all players. For the past eight months, independent palm oil refiners had urged the Government to come up with an immediate solution to help them counter the impact of the low palm oil tax structure by Indonesia which had affected their profit margins and made their business uncomis heavily reliant on foreign workers. Of the total 491,339 workers in the sector, 76% are foreigners mainly from Indonesia, who were employed as fresh fruit bunches (FFB) collectors and harvesters, fertiliser applicators and weeders. Hamzah said mechanisation such as harvesting machine Cantas has proven to raise worker productivity in harvesting FFB and reducing labour. Others include farm machinery Grabber, harvesting tools and field machinery for FFB including for use in peat areas. IOI Corp Bhd executive chairman Tan Sri Lee Shin Cheng said: For the time being, the Government must allow more foreign workers into Malaysia to work as FFB harvesters and fruit collectors in our plantations. Prior to the introduction of more efficient mechanisation tools and more locals become interested to work as a plantation worker, Lee pointed out that the foreign workforce was inevitable. MPOB chairman Datuk Seri Utama Shahrir Abdul Samad said issues related to the plantation workers had become critical. even in middle management levels such as supervisors, the gap are now filled by foreign workers. He also said MPOB was currently training local youths to attract them to work in oil palm plantations.

Slowing demand from China

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cies.The election was held 18 months before a national vote in which Merkel would be fighting for a third term. Commodities were also solddown on concerns of slowing demand from China. The Chinese central bank said it would lower the reserve requirement ratio for banks by 50 basis points as of May 18. US light crude oil fell US$2.19 to US$93.94 and Brent US$1.78 lower at US$110.48. Gold spot fell 1.18% or US$18.68 to US$1,560.68. Crude palm oil for third-month delivery fell RM95 to RM3,180, the lowest since Feb 13. Among the key regional markets, Japans Nikkei 225 was the only market in the positive zone, up 0.23% to 8,973.84, Hong Kongs Hang Seng Index fell 1.15% to 19,735.04, Shanghais Composite Index lost 0.6% to 2,380.73, South Koreas Kospi down 0.18% to 1,913.73, Taiwans Taiex 0.33% lower to 7,377.18 and Singapores Straits Times Index retreated 0.67% to 2,864.12. The ringgit weakened to a low of RM3.0853, a level reached on Jan 24, before ending at 3.0826 at 5pm. BAT was the top decliner, down RM1.60 to RM51.80 while SAM Engineering lost 47 sen to RM3.18 and MBM Resources 33 sen to RM5. Plantations were the major losers due to the fall in crude palm oil prices. Tradewinds Plantations lost 36 sen to RM5.53, SOP and KLK 26 sen each to RM6.20 RM23.20 and Kluang 20 sen to RM2.60.

Useful gadget: Hamzah holding a Cantas motorised cutter which has raised worker productivity in harvesting FFB. petitive. The move widened the tax gap between processed products and crude palm oil (CPO), giving Indonesian refiners a feedstock-cost advantage over Malaysia. Among the proposals made by Palm Oil Refiners Association of Malaysia was the abolition of the duty free CPO export quota and review of the CPO export tax policy. Earlier, Hamzah said the local oil palm plantation was facing a severe labour shortage of 35,473 workers. There is a need to undergo a paradigm shift from one that is heavily reliant on labour to mechanisation as their industry progresses, he added. In Malaysia, the plantation sector

Axiata faces headwinds from weaker regional currencies

By LEONG HUNG YEE hungyee@thestar.com.my
PETALING JAYA: In line with concerns over Axiata Group Bhds exposure to regulatory risks in certain markets in south Asia, a Bangladeshi daily has reported that Axiatas unit Robi Axiata Ltd was liable to pay 1.5 billion taka (about RM55mil) to Bangladesh Telecommunication Regulatory Authority (BTRC) for unpaid taxes. Bangladeshs The Financial Express reported Robi Axiata would have to pay the government the amount in unpaid taxes after it lost a legal battle against the telecommunications regulator. The High Court ruled that Robi had no authority to deduct any amount from any account including taxes as the value-added tax, late fees and other taxes from the Spectrum Assignment Fee or the Licence Renewal Fee, as these exclusively belonged to the BTRC. The court also ruled that the operator would have to pay a late fee of 15% on the total payable amount as penalty, Robi executive vice-president Mahmudur Rahman was quoted by the daily as saying it would take further action after getting a copy of the judgement that would take

Until this is received, it is not possible to confirm details of the final amount which would be payable.
AXIATA GROUP
almost two weeks. Axiata is unable to comment at present as we are waiting to receive full details and certified copy of the judgment from the court. Until this is received, it is not possible to confirm details of the final amount which would be payable. Robi will however, consider its position regarding any further legal avenues to resolve its concerns, Axiata Group said when contacted. While the judgement on Robi would not impact Axiata Group, analysts said the telco would continue to face the inherent risks of foreign exchange rate fluctuations and regulatory changes. Analysts said although there were no major change on the regulatory in recent years, there was still lingering issues on spectrum re-farming and allocation. CIMB Research downgraded Axiata to neutral from outperform

given the sharp fall of the rupee, rupiah and Sri Lankan rupee in recent months. Additionally, regulatory risks in India and Bangladesh are rising with potentially exorbitant spectrum prices. Axiatas share price is facing headwinds in the form of weaker regional currencies and rising regulatory risks in Bangladesh and India. This is on top of the slowing revenue and profit growth of its operating units, namely Celcom Axiata Bhd and PT XL Axiata Tbk, as the industry mature, it said. CIMB Research said in the first quarter, the currencies of Axiatas largest overseas contributors depreciated sharply quarter on quarter against the ringgit. Weaker currencies crimped Axiatas ended Dec 31, 2011( FY11) revenue growth by 2.5% to 5%. Based on the currencies yearto-date performance, we estimate the dilution to FY12 revenue to be at double this quantum, it added. CIMB Research said an average 10% devaluation of the regional currencies would trim about 3% from its core earnings per share and 4% from our sum-of-parts-based target price. Its units in Bangladesh, India,

Indonesia and Bangladesh contribute an estimated 34% of Axiatas FY12 core net profit and 37% of our sum-of-parts valuation. Additionally, the research house was also concerned over the rising regulatory risks the company faced. The Indian regulator has recommended a very high reserve price for the revoked 1800MHz spectrum and is restricting the supply of spectrum. In addition, the auction for 3G spectrum in Bangladesh is looming, soon after Robi paid a hefty sum to renew its 2G spectrum. The indicative price is US$300mil for 10MHz of spectrum, a little higher than the US$276mil that Robi paid to renew its 2G spectrum, it said. In FY11, Axiata reported a net profit of RM2.34bil on the back of RM16.4bil turnover. This year the headline key performance indicators (KPI) for revenue is for a 5.3% increase in its revenue growth. Axiata failed to meet all its headline KPI in FY11 mainly due to significant foreign exchange translation differences, challenging competitive environment in all markets, as well as lower-than-expected market growth in Malaysia and Indonesia.

Refiners dependent on CPO feedstock

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pendent refiners are dependent on local and imported CPO feedstock especially from Indonesia. Last year, Malaysia imported 1.30 million tonnes of CPO, mainly from Indonesia, to support its refining utilisation rate. By opting for CIPROM, the source said the Government will not need to abolish the duty-free CPO quota and reduce the CPO export duty structure. It would increase the cess collection among big planters as proposed by some quarters. A London-based consultancy firm hired by MPOB has suggested several options, including for Malaysia to continue maintaining its current policy while increasing its CPO export quotas slowly, and to match in full the incentives by the Indonesian export tax structure by adapting Malaysias current CPO export tax rules to offset the advantages enjoyed by Indonesian exporters.

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