TOMORROW, Putrajaya is expected to unveil plans to rescue Felda – the historic land scheme that once lifted thousands from poverty but which now struggles to provide its participants with a decent income. 

The plans are expected to be tabled in Parliament in the form of a white paper detailing what went wrong with the 63-year-old agency and its business units.  

Felda, or the Federal Land Development Authority, was the brainchild of second prime minister Abdul Razak Hussein to lift thousands of Merdeka-era, landless Malaysians, out of poverty.

But decades of mismanagement drove Felda into debt to the point that it cannot even pay its settlers on time for their harvests.

There are about 112,000 first-generation settlers in about 269 schemes spread across the peninsula.

It is estimated that together with children and grandchildren of the original settlers, there are now about one million people living in these schemes and who depend on Felda’s revenue from palm oil and latex.

Pakatan Harapan’s plans to turn around Felda is necessary to ensure that settlers and families can continue to gain a decent income from the scheme during a challenging time for the country’s palm oil industry.

The white paper will reveal strategies to make Felda viable in the face of increasing competition from Indonesian palm oil and the potential loss of the European Union as an export market.    

Below is a brief explainer on Felda and its problems.

How did it get so bad?

Each settler was given 10 acres (4.1ha) to plant either oil palm or rubber, as well as a small plot of land to build a house. Harvests from these cash crops would be sold to Felda.

As Felda made millions of ringgit from high palm oil prices, the agency diversified its business activities and went into logistics, property and hospitality.

The agency set up corporate entities, such as Felda Global Ventures Holdings (FGVH) and Felda Investment Corp (FIC), to handle its non-plantation-related businesses.

Things started to go sour during the term of chairman Mohd Isa Samad, a Najib Razak ally, from 2011 to 2017.

Among the controversial and loss-making deals under Isa’s term were:

* Listing FGVH in 2012. It was one of the largest initial public offerings of that year but the shares have lost 60% of its value since then.

* Purchasing a 37% stake in Indonesian plantation company Eagle High Plantations. Felda is estimated to have lost RM1.7 billion in the deal. It is now ending the partnership and demanding RM2 billion from the Jakarta-based firm.

* Buying a string of hotels and luxury properties in Kuching, Kuala Lumpur and the United Kingdom. It is now selling off these properties.

* The Kuala Lumpur Vertical City project (KLVC), which is supposed to house Felda’s new headquarters. Felda is recovering ownership of the project after it was mysteriously transferred to the developer.

After Isa’s ouster, his successor, Shahrir Abdul Samad announced plans to reverse almost all of the former’s decisions.

In December 2018, Isa was charged with criminal breach of trust and receiving bribes over FIC’s purchase of the Kuching hotel. 

Former Pandan MP and Felda critic Rafizi Ramli revealed that in 2011, Felda had RM3.9 billion in cash reserves. In 2016, that amount had dwindled to RM434 million.

In 2009, when Najib became prime minister, the plantation group’s debt was RM1.5 billion. By 2018, it rocketed to RM8 billion.   

What needs to be fixed?

Settlers’ groups told The Malaysian Insight that the top most concern is to solve Felda’s cash-flow problem stemming from the above deals.

Felda’s money troubles has crippled its ability to pay settlers on time, said one settlers’ welfare group, Suara Generasi Kedua Felda (SGK2F) chairman Zulkefli Nordin.

Settlers typically harvest and sell their fresh fruit bunches to Felda twice a month. A few years ago, Felda would pay them after each harvest.

These days, the agency struggles to pay them on time even once a month, said Zulkefli.

Mazlan Aliman, who heads an umbrella association of settlers’ groups, said it is critical that Felda comes clean about the total loans that settlers owe.

Some of these loans were taken to replant old trees while others were for renovations.

Settlers and their children have long complained that Felda has been evasive about releasing loan statements to borrowers. This has fuelled suspicions that the agency is collecting money from them even after they’ve paid up their debts.

“We also need a plan on how to legalise who inherits a settler’s holdings after the first-generation dies. Currently there is no real system to manage inheritances,” said Mazlan.

Does Felda have a future?

Mazlan’s last point connects to an even bigger and arguably more important question regarding Felda today – can a plantation system that was crafted more than 60 years ago remain relevant today?

Mohd Ashraf Mustaqim Badrul Munir, the grandson of a Pahang Felda settler, said more than 10 years ago, Felda did not have to contend with any real competition in the region when it came to palm oil.

“Indonesia took just 10 years to overtake us in palm oil. Not only is their palm oil cheaper, their plantations are more efficiently run,” said Ashraf, an activist with PH party Bersatu.

The growth of Indonesia’s palm oil industry means more palm oil in the global market and this is one factor that has pushed prices down.

A glut in world supplies and weakened demand from major importers pushed prices to a three-year low in 2018.  

If the EU goes ahead with its plan to ban palm oil for biofuels by 2020, Malaysia will lose access to a region that has been the third largest importer of the commodity.

Sensing that the shine from the golden crop is fading, the government is moving to get planters, especially small holders and Felda settlers, to stop their dependence on palm oil.

That involves a transformation of the Felda system itself, which has historically been set by the group settlement act, said Mazlan.

But such a transformation cannot happen without changing the rules about who owns settlers’ estates and what can be done on these holdings, he said.

“The old system cannot work any more as it was created for an era that is long gone. We need a new system if Felda is to survive.” – April 9, 2019.