New report should solve Felda’s problems

Majlis Permuafakatan NGO Felda says it is crucial to include privatisation of FGV as part of PN’s overhaul strategy

by ALIFAH ZAINUDDIN / pic by TMR FILE

THE government is expected to release the eagerly-awaited report on the Federal Land Development Authority (Felda) next month, following its handing over to Prime Minister (PM) Tan Sri Muhyiddin Yassin in August.

Minister in the PM’s Department (Economic Affairs) Datuk Seri Mustapa Mohamed recently said the report, which he described as a follow-up to the Felda White Paper tabled in Parliament last year, will contain a model to improve Felda’s accounts and ease debts owed by settlers.

Mustapa said the report would also include a plan to raise Felda’s palm oil output from its current production level of between 19 and 20 tonnes per acre per year to 25 tonnes per year.

Majlis Permuafakatan NGO Felda chairman Datuk Mazlan Aliman said it is crucial to include the privatisation of Felda’s listed arm FGV Holdings Bhd as part of the current administration’s overhaul strategy.

He said any plan to help Felda recover will not take shape without the return of some 360,000ha land, which currently is under FGV.

Prior to FGV’s listing in 2012, Felda’s net income stood as high as RM1.1 billion with revenue going up to RM5.9 billion from 2007 until 2011.

Felda has since been in the red with a massive RM5.7 billion net loss in 2018, while turnover continues to hit below the RM2 billion mark.

Felda currently receives a fixed annual payment of RM250 million from FGV, plus 15% share of profits as part of a 99-year land lease agreement signed by both parties in 2012.

“It is not enough. Felda’s annual expenses amount to billions of ringgit each year and the government will not be able to sustain this.

“This new plan must include a way to take FGV private so that the land can be returned to Felda, along with the 68 mills it owns. If not FGV, where else are we supposed to get an income?” Mazlan told The Malaysian Reserve.

According to the White Paper, the bulk of Felda’s expenditure from 2007 to 2017 were on state contributions and financing settlers at RM13.1 billion, while management costs amounted to RM2.7 billion over the 10-year period. In 2017 alone, total expenses stood at RM5.3 billion.

Concerns on taking FGV private, however, lie in its cost, which could go up to about RM15 billion to RM20 billion given its initial public offer reference price of RM4.55 per share.

“The government cannot say there is no money to spend when they’ve pumped billions of ringgit into Malaysia Airlines Bhd numerous times. Even if it costs a lot to take FGV private, it would help Felda and the government in the long term,” Mazlan said.

He said the Group Settlement Areas Act 1960 should also be reviewed to recognise and incorporate new generation settlers.

The Institute for Democracy and Economic Affairs in a recent paper titled “Structural Changes and the Prospect for Felda” outlined key recommendations which should be included in Perikatan Nasional’s (PN) plan.

The report’s co-author Prof James Chin said the government should look at allowing Felda to be run like a real private company competing with the private sector players.

“As it stands now, there is much government interference and they rely on government support and protection if things go wrong. This mentality must stop if Felda is to survive in the long run.”

Co-author Nur Zulaikha Azmi said the government should readjust its strategy as the current model no longer suits Felda.

“The new Felda should diversify into cash crops and livestock replacement programmes, as well as increase settlers’ participation in management level activities to create more attractive job opportunities for the settlers.”

Felda could also offer incentives such as a capital scheme for younger generation start-ups and subsidies for technology adoption to attract new generation settlers into plantation activities.

Nur Zulaikha said Felda should dispose of assets and companies in unrelated and unprofitable sectors, and focus on a strategy to streamline innovation and upgrading efforts.

“This will take time, but a sustainable strategy and commitment to an implementation timeline are required.”