Published by Malaysiakini, image from Malaysiakini.
On April 10 2019, Minister of Economic Affairs Mohamed Azmin Ali tabled the Federal Land Development Authority (Felda) white paper in parliament.
The Felda white paper is a report detailing Felda’s financial situation between 2007 and 2017, as well as new initiatives by the government to tackle the problems faced.
Revelations by the paper were horrifying. Between 2007 and 2011, Felda profited with values ranging from RM 200 million up to RM 1.1 billion. In 2012, FGV Holdings Berhad (formerly known ad Felda Global Ventures Holdings Berhad), a commercial arm of Felda was publicly listed in Bursa Malaysia Securities Berhad. The initial public offering generated RM 10.5 billion.
From that point on, Felda suffered losses each year until it reached a low of RM 4.9 billion in 2017. According to the paper, Felda through its arms, FGV and Felda Investment Corporation (FIC), indulged in “aggressive” and “uncontrolled” investments that did not generate expected returns.
One of the many examples is its acquisition of a 37 percent stake in PT Eagle High Plantations Tbk (EHP), an Indonesian oil palm company owned by the Rajawali Group. The market value for such a stake is US$114 million. However, it was bought at a price of US$505.4 million in 2016. The head of Rajawali Group, Peter Sondakh is said to be a close friend of the former prime minister Najib Abdul Razak.
According to Azmin, then board chairman for Felda, FIC and FGV, Mohd Isa Abdul Samad, acquired Park City Grand Plaza Kensington in London without the approval of the Felda board, above the market price and in violation of Felda’s investment policy. The white paper stated that decisions were made without planning or due diligence.
To call this a simple case of mismanagement by the top brass is too tame.
This is clearly a matter of corrupted integrity and unethical work practices. However, this is no time to point fingers and jest. The lives of many will be affected if the government does not put its best foot forward in handling this issue. So, what’s next?
The Next Steps
Fortunately, the Felda white paper also outlined several initiatives by the Pakatan Harapan (PH) government to recover Felda’s financial standing, fix management and administrative issues and improve settlers’ welfare.
Azmin said that Felda is currently examining non-core assets to be liquidated. Perhaps a number of those 100 new cars jammed pack at Felda HQ could be sold off (). The government is also proposing a business model where Felda will rent and utilise land from settlers on a long-term basis. Emphasis has been put on the need to be independent of oil palms and the move towards alternative crops.
A process review will also be carried out on Felda Technoplant Sdn Bhd (FTP) which has been suggested by many to have had mismanagement issues.
During the tabling, Azmin stated that Felda is currently recruiting new leadership amongst professionals, looking into restructuring the corporate structure and introducing a check and balance mechanism to prevent abuse of power and corruption.
In the previous administration, cost of living loans and revenue advance schemes given out by Felda were borrowed from financial institutions at interest rates ranging from 4-6 percent. This cost was then transferred to Felda settlers by imposing an effective interest rate of 3.8 percent on the loan and advance.
Now, the Pakatan Harapan government is allocating RM 2 billion to abolish the interest payments imposed .
Furthermore, RM 250 million will be allocated to revive the New Generation Housing Project (PGBF) scheme for projects that are 70 percent complete. This is expected to complete 4,794 houses.
RM 1 billion will also be allocated over a period of 4 years towards smart farming and precision agriculture, aiming to help reduce dependency on oil palms and maximise crop yield.
In total, the PH government has decided to inject RM 6.23 billion worth of grants, government guarantees and loans into Felda in an attempt to resuscitate it. Since such a huge sum is to be poured into Felda, I agree with PKR president Anwar Ibrahim’s view that there must be a detailed plan on how much is to be allocated for expenditure, paying off debts so on and so forth. This is to help curb any form of corruption.
For now, at least there is a solid mainframe that can serve as a blueprint. The more details that are released about this plan the better, as the government looks to move forward.
Eyman Hadi is Research Analyst at EMIR Research, an independent think-tank focused on strategic policy recommendations based upon rigorous research.
