Can Felda regain lost lustre in 2018?

As GE14 looms in, a depleted Felda account and an angry mob of unpaid shareholders set the stage for an interesting ballot


For most of its existence since it was incorporated in 1956, the Federal Land Development Authority (Felda) was the beacon of transformation and reference material for upgrading the lives of people who work the land.

It was one of the Third World’s success stories, and the globe’s most successful land settlement agencies.

That shine has lost some of its lustre over the past few months as scandals over land, accusations of mismanagement and leadership squabbles raised the ire of an important voting bloc in an election year.

The recent scandal involving a secret transfer of Felda’s prime land in Jalan Semarak to a third party was not unique.

There had been other bad deals over the last 12 months.

The public caught a glimpse of what’s wrong with Felda last year when the board of its listed subsidiary Felda Global Ventures Holdings Bhd (FGVH) investigated its CEO in a botched attempt to oust him. As events unfolded, the dirty linen did too.

Zakaria’s appointment as CEO brought hope that the company would make a turnaround (Pic by Hussein Shaharuddin/TMR)

The reason for the board — led by politician chairman Tan Sri Mohd Isa Abdul Samad — to seek Datuk Zakaria Arshad’s removal was over the tardiness in which FGVH was chasing an overdue payment from one of its buyers, an Afghan company called Safitex Trading LLC.

But as it turned out, the claims made against Zakaria over a RM50 million overdue payment were dwarfed compared to FGVH’s other generous deals since it was floated for RM10.4 billion in 2012.

In many transactions, the world’s largest crude palm oil producer was consistently buying at a high price and selling at a loss.

In 2014, Felda Investment Corp Sdn Bhd (FIC) — another Felda subsidiary — was accused of buying hotels in London and Kuching at prices way above prevalent market value.

A four-star hotel in Kensington, London, was bought for RM330 million when the actual worth of the property was said to have been at RM110 million.

The Kuching hotel was bought at RM160 million, which was said to be almost double the value.

That same year, FGVH acquired loss-making Asian Plantations Ltd for RM628 million, or an offer price of £2.20 (RM11.90) per share, a value that is currently being questioned by FGVH’s new and current management and board.

It is said the company paid more than double per hectare against a similar bid made by a rival firm. Other contentious dealings, such as the proposed purchase of a 37% stake in debt-saddled Rajawali Group’s palm oil plantation unit PT Eagle High Plantations Tbk for US$680 million (RM2.9 billion), was put on hold — but not without some boardroom rifts.

A Delicate Role
This is where the delicate FGVH CEO role comes into play.

Before Zakaria took over the position in 2016, the FGVH CEO was Datuk Mohd Emir Mavani Abdullah, who led the company since its 2012 IPO.

Mohd Emir too had run-ins with the FGVH board, including queries on his PhD, before he left the company following the collapse of the Eagle High deal.

When Mohd Emir left, FGVH’s net profit declined substantially to RM117.1 million for the financial year ended Dec 31, 2015, from RM325.5 million the previous year.

Shares also fell to RM1.71, 62% lesser compared to its institutional price offer of RM4.55.

Zakaria’s appointment as CEO brought hope that the company would make a turnaround — all the more because Zakaria was an insider, as his family were Felda settlers and he had risen through the ranks.

Prior to the position, he served the group for 32 years since 1984 including in Felda Rubber Industries Sdn Bhd, Malaysia Cocoa Manufacturing Sdn Bhd, Felda Rubber Products Sdn Bhd and Felda Marketing Services Sdn Bhd.

His credentials were indisputable.

In his first year, Zakaria appeared to make the right moves by cutting administrative costs, facilitating higher yields and pushing mergers and acquisitions to the backburner.

The plan seemed to work as FGVH’s share price picked up to a two-year high of RM2.50 during the period, albeit momentarily.

Despite efforts to right the wrongs, FGVH’s net profit and shares continued to plummet to new lows by year-end.

Zakaria admitted that 2016 had been difficult, but remained optimistic that the reversal plan would eventually bear fruit.

Keeping hopes alive, he believed the worst was over.

However, by 2017, that momentum stalled. The year proved to be a historic one for Felda for all the wrong reasons.

In June, Mohd Isa made a surprise announcement that Zakaria has been suspended from all posts

pending investigations over late payment from Safitex to FGVH subsidiary Delima Oil Products Sdn Bhd.

Mohd Isa insisted that the decision was made by the

In the end, it was Mohd Isa who was forced to leave without the MACC investigation being resolved (Pic By Ismail Che Rus/TMR)

entire board and “not me alone”.

Internal investigations and inquiries by the Malaysian Anti-Corruption Commission (MACC) dominated soon after.

Both Zakaria and Mohd Isa were questioned for hours by the MACC.

But in the end, it was Mohd Isa who was forced to leave without the investigation being resolved.

He resigned as chairman of FGVH and was replaced by Tan Sri Dr Sulaiman Mahbob, while Zakaria resumed his duties on Oct 16 after a four-month leave of absence.

Great Disarray
At the heart of this great disarray lies Mohd Isa.

During his five-year tenure, Mohd Isa sat on the boards of Felda, FGVH and FIC — all of which allowed him to oversee and decide most of the dealings within the organisation, including the obscure ones.

The situation on Jalan Semarak is a case in point.

The RM270 million transfer on plots of land along Jalan Semarak to Synergy Promenade Sdn Bhd in 2015 was carried out without the knowledge of Felda’s board of directors.

Although FIC executed the exchange, the matter was only made known to the board for retrospective approval on Sept 2, 2014 — three months later.

And just like the hotel purchases in London and Sarawak, Mohd Isa’s name keeps popping out.

But to be fair, nothing has been proven. Mohd Isa has denied any claims of wrongdoing and said he would cooperate in investigations.

Is it coincidence though that the 68-year-old former politician is involved in all these transactions? Hardly.

But even so, what is at the end of it? Self-interest maybe, but the real damage is on Felda, which is why the timing of all of these exposés could not have come at a more opportune period.

As the 14th General Election (GE14) looms in, a depleted Felda account and an angry mob of unpaid shareholders set the stage for an interesting ballot.

To have a clearer understanding of the current storm over Felda and why it is important to a lot of people, you need a Malaysian electoral district map.

Felda schemes represent a majority vote in 54 constituencies on Peninsular Malaysia, almost a quarter of the 222 parliamentary seats.

Academics show “an almost perfect correlation” between the seats held by the ruling government with the location of Felda land districts.

One study noted that the 120,000 families that had been absorbed into the scheme until 1990 constituted up to 1.2 million voters by 2013 — a valuable Malay vote bank.

Felda settlers have long shown strong support for the ruling coalition, even as urban Malays tilt the other way.

But as fiscal scandals continue to divide the Malay heartland, that tradition may just change.

The battle for Felda support will likely go down to the wire this year, as both sides of the political divide understand the pivotal point that voters in the country’s oldest land settlement scheme play in any election.

For the incumbent, priority number one is to repair the damage to the reputation that Felda has suffered, while their opponents will seek to highlight them.

For the settlers in the middle, they would need to be convinced that things will be better.

They have worked the land too hard and for too long to take anything less.


Monday, August 13, 2018

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