Mergers – how the plantations began

Saturday January 20, 2007, the star

Mergers – how the plantations began

1. Is the plantation mega merger a good idea? In this article, Tan Sri Basir Ismail ( pic), who passed away last Friday, looked to the past to highlight the importance of experience and the personal touch in management of the plantation industry.


2. READERS follow the news and often the question is being asked: “What do you think of the merger of Sime Darby, Guthrie and Golden Hope?”
   Usually the person would look at my face and I could sense that he was waiting for me to disagree, with answers such as:
   “It is a big mistake.”
   “Bigger is not always better.”
   “Look at the company I buy shares in. Their results are excellent. They don’t have to be that big. Try it their way first.”


3. In this situation I would need time to think and trace back the progress of the plantations.
   When they started they were small, and the people who made them grow were the workers, and the leadership came from the assistant managers and estate managers who were planters.


4. These planters were there because they loved their jobs. They were free to attend to basics, walked for hours while checking the field, and some even talked to the trees.


5. In the rubber plantations they would check the rows of young trees and see how many of them had reached the girth of 20 inches to set the date when tapping should begin. In the mature areas, they would check to see that the spouts were tapped into the bark just so with the least damage to the tree. The cup-hanger had to be anchored so the cup was precisely in place below the spout. There should be no spillage and soon the planter would know his favourite tree that gave the most latex. He wanted the yield of all trees to be like that without injuring the bark so that the same side of the tree could be tapped again a few years later.


6. The planter would know which tree was sick, he checked the bark with a knife and then called his pest and disease headmen to tell their workers what to do. Remedial treatment was decided by eye. He learnt from his experience, to add to the textbook knowledge such as from A.T. Edgar’s “Manual of Rubber Planting.” He also discussed problems with the older planters at the clubs or in their bungalows with large dinner parties, going far into the night.


7. Yet the planter would attend muster each morning when before dawn the workers reported for work. That was the time when he could check in one place if their pails were clean and they wore shoes and not slippers. Later he would go and check their work as he followed the tasks, to see if the black dots had been put in place and not too far apart which would mean the bark consumption was too high, and also prick with the tip of a knife into the panel to see to if the tapping depth was good enough to win the latex and not past the cambium that would injure the tree.


8. He took their tapping knives and used his fingers to feel if the blade was sharp. A very sharp knife would increase the yield by at least 5% over the other knives. He would want only the Jebong knife to be used; the other one was the gouge knife but the bark consumption could be high. His aim was to get the yield of the tree, and yet make it last through the years. Even if he used stimulant such as ethrel or calcium carbide in the early days, he would be careful how much stimulation the trees could take, and how often they could be tapped. Some had intervals of three days, and even four days on D3 or D4, while some clones could be tapped on alternate days or D2, and yet not many trees would go dry.
   The clone I liked most of all was PR107, which had a bark that was easy to tap, and the latex would drip nearly all day. It had thick foliage after wintering and I would ride in that field in the open Land Rover just after rain, not only to see how the water ran in the drains, but also to enjoy the fragrance of the rubber flowers fresh in the air.


9. In the afternoon the planter was out again, this time to check that the workers’ houses were repaired, and the grass was cut, and the water supply was clean. The workers had to be fit, and in some estates the manager was also responsible for a group hospital, with its doctor and nurses.


10. Back in the office he would go over the day’s mail and made his plans for the next planting or replant. He would need to decide if he was going to use budded seedlings or stumped buddings, and how much time he would need to get them ready, the lining had to be precise so he could get it correct with the planting distance and planting density. The terraces would have to be in place on the slopes. He asked himself if on top of the pure cover he should also plant Flemingia, or Tephrosia, two legumes that could add to the fertility of the soil.


11. He would also use these two plants when the estates converted to oil palm, for they were legumes and could fix nitrogen in the soil. In the case of Flemingia, it helped with interrupting the flights of the rhinoceros beetles and helped to limit the damage done to the young seedlings in the field.


12. In the oil palm areas, an estate manager would be in charge of about 5,000 acres, or 2,000ha. There were estates that were big but they got divided up such as OPM (Oil Palm of Malaya) in Layang Layang that eventually got split into three estates. Even in those days the owners realised the need to keep the estates small and that the estate manager had the time to check on details about his area. The owners would fly in from Britain and visit each estate, staying overnight in each one to see how the managers were coping with their problems, and making it easier for the managers to present their ideas.


13. Some of these ideas included the introduction of the harvesting sickle, which meant that the harvesters could stop climbing the tall palms to harvest the bunches with an axe, and therefore it avoided the falls that harvesters used to suffer, some ending with broken backs. In the field the idea of insect pollination first came from a planter, Leslie Davidson, who noted the introduction of the oil palm tree to the East was incomplete without the insect pollinators which he had seen were working hard in Africa.


14. In Malaysia thousands of workers were recruited for pollination work and despite the high costs, the fruit set was still low. He persuaded the planting industry to follow up on his idea and with a scientific study done by Dr Rahman A. Syed, it led to the introduction of the weevils, and rapid expansion of oil palm in the East became feasible.


15. In the mills, there were changes too, with the presses progressing from the traditional top-loading method to screw presses promoted by engineers such as the late Tan Sri Borge Bek-Nielsen from his early days in United Plantations Ltd.


16. He was among the first to extend his business into downstream processing in edible oils and making shortenings, ghee, margarines, and red palm olein, with the collaboration of the Tata Group from India, while the Europeans at that time were still reluctant to make similar investments in the country.


17. The pace of their investments was slowed with the Emergency when the terrorists tried to destroy the economy. Some of investors sold out, and Malaysian investors began to take over the plantations. One of the early acquisitions was Tebrau estate in Johor, which was a very profitable business that paid for itself within a few years.


18. It was also the beginning of a transition when Malaysian managers were being trained by the universities and by Mara at its Institute Technology Mara, apart from those who had joined directly as cadets. In the estates they were trained to go into details on the basics of the work, attend to the trees and to the people as well, and the companies saw to it that they were rewarded for their work and given the respect they deserved.


19. In return, they had to work long hours, and even on Sundays, attending to the community, and being at weddings, and visiting households during the festivals, take part in the club activities and on family days, all of which would keep the team spirit high with no distinction between workers who were on check-roll or on contract. They contributed their efforts equally to the production of the estate. Some managers would know most of them by name and even the names of their children.


20. Naturally keeping contact at that level is valuable for the management of the estate, and it is a useful reminder now that the plantation companies are being merged. There is a risk that the personal touch will be gone, and that not enough walking around will be done by management. In this case the productivity that is expected is not likely to happen.


21. Performance can rise only with attention to detail, and therefore plantations should be kept to a manageable size for the estate managers. In the past rubber estates could be smaller than 800ha, but for oil palm estates the optimum size can be around 2,000ha. A good manager should be left to do his work for a minimum of four years so that he could see what he could do, do it, and then fine-tune it with the team he would have had in place.
    For example if he sees the potential for mechanisation such as in-field transport of bunches, he would have time to introduce it, get the system accepted, and implement it successfully. It is a concern that industrialists in control of merged plantations companies may overlook these points and can be tempted to increase the size of estates and move managers frequently.


22. Another area of concern is that fewer people will have a chance to have key jobs in the plantations business, as there would be only one head office, and positions will be limited. It will mean that the opportunity will be limited for the young executives to get exposure that they need so they too can lead an organisation one day.
    Trained in agriculture, Tan Sri Basir Ismail had been deeply involved in the palm oil industry, notably as chairman of United Plantations Bhd and the Malaysian Palm Oil Board.

This article was written with plantations consultant Mahbob Abdullah