PETALING JAYA: Reports the United States has banned palm oil imports from FGV Holdings Bhd, following an investigation by US Customs and Border Protection (CBP) into allegations the group uses forced labour, is negative for the group as this will restrict market access for the sale of FGV’s palm oil through its refineries or joint ventures, which are involved in the refining and oleochemical business.
CGS-CIMB Research said FGV derived 5.3 per cent of its total revenue from US and Canada in 2019. At the same time, the US share of total global palm oil imports was not big, at 2.7 per cent or 1.49 million tonnes.
“However, the concern is that this may lead other countries or customers of FGV to reassess their purchase of palm oil from the group as a result of concerns about environment, social and corporate governance (ESG) practices,” it said.
CGS-CIMB pointed out that this may also have some implications for other palm oil players, as CBP’s trade office executive assistant commissioner Brenda Smith said CBP had received allegations regarding the broader palm oil industry and asked US importers to look into the labour practices of their suppliers.
In its report, the CBP said the ban was the result of a year-long investigation that revealed signs of forced labour such as abuse of the vulnerable, deception, physical and sexual violence, intimidation and threats, and retention of identity documents.
The investigation also raised concerns that forced child labour was potentially being used in FGV’s production processes, CBP said in a statement, adding that the ban would come into effect immediately.
CGS-CIMB said it is maintaining its ‘hold’ call on FGV, with a target price of RM1.21 a share, as the higher crude palm oil price and potential special task force report to tackle Felda issues are positive but this is offset by concerns over the perception of its treatment of workers.
Meanwhile, in a statement, FGV said it will continue to engage with CBP to clear its name, and is determined to see through its commitment to respect human rights and uphold labour standards.
“Since August 2019, FGV has been communicating with CBP through our legal counsel and has submitted evidence of compliance on labour standards as committed by FGV,” the palm oil group said in a stock exchange filing.
FGV emphasised that all issues raised have been the subject of public discourse since 2015 and FGV has taken several measures to correct the situation, adding that its efforts are well documented and available in the public domain.
“FGV does not tolerate any form of human rights infringements or criminal offenses in its operations. FGV pays serious attention to any allegation of physical or sexual violence as well as intimidation or threats. Any case of such nature will be acted upon by FGV, including by reporting to the relevant authorities,” it stressed.
FGV said as a participating company in the Fair Labor Association (FLA), it is currently implementing a long-term and comprehensive action plan under its affiliation to FLA that comprises a number of initiatives to further strengthen the various aspects of its labour practices.
FGV’s action plan for 2020 was adopted on March 31, 2020 in consultation with FLA and with various other stakeholders.
“The action plan was adopted at a time when the Covid-19 situation was rapidly worsening globally, including in Malaysia. Despite the challenges posed by the pandemic, FGV remained committed to implementing the action plan, and FGV believes that concrete progress has been made in the six months of implementation beginning April 2020.
FGV is confident that it is on the right track to be able to accomplish the action items due to be completed by the end of 2020.”
FGV said its affiliation to FLA is subject to rigorous validation exercises and public reporting. FLA’s report on FGV’s progress on the implementation of the action plan is published on FLA’s website.
FGV went on to outline various efforts that it has been carrying out over the years to respect human rights and to uphold labour standards.
These include strengthening its procedures and processes in the recruitment of migrant workers with the establishment of four one-stop centres in Malaysia and in source countries namely in India and Indonesia, establishing guidelines and procedures for Responsible Recruitment of Migrant Workers in 2019, adopting international standards, and pioneering the implementation of the electronic wallet (e-wallet) for cashless payroll system for its plantation workers.
“FGV is not involved in any recruitment or employment of refugees. Effective 2020, FGV recruits its migrant workers mainly from India and Indonesia through legal channels and processes, recognised and approved by the Malaysian authorities and the source countries.
“Furthermore, FGV does not hire contract workers as all workers are directly employed by FGV,” it said in its exchange filing.
It also stressed that it does not practise retaining the passports of its workers. However, it does install 32,250 safe boxes throughout all of its 68 complexes as an option for the migrant workers to keep their passports safe.
On housing, FGV has over the past three years invested RM350 million to upgrade housing facilities for its workers by constructing new residences in its plantations all over the country. In addition, it provides health benefits, which cover annual expenses for outpatient care and unlimited allocation for inpatient treatment.
Finally, FGV said it has adopted a Supplier Code of Conduct, outlining the principles and standards relating to sustainability, business ethics and integrity, safety, health and environment and labour, with which its suppliers and vendors are required to comply.
FGV says it will continue to engage with US Customs and Border Protection to clear its name, and is determined to see through its commitment to respect human rights and uphold labour standards.
