The think tank IDEAS says in a report that FGV, the commercial arm of FELDA, made the Federal Land Development Authority more vulnerable to financial uncertainty.
FGV’s listing and the transformation of FELDA demonstrated poor track record of commercialisation, it says.
“The listing of FGV is a clear indication of a poor track record in commercialisation. The listing of FGV under a new FELDA business model was introduced in 2010 during Najib Razak’s era,”
In the report, IDEAS says FELDA shifted its focus to commercialisation since the 1980s and 1990s.
This was the result of less rural households showing interest in resettlement.
The focus on commercialisation has some merit in terms of trying to diversify income sources.
However, the new subsidiary companies did not make FELDA resilient to palm oil price fluctuations.
The various businesses under FELDA were to generate profit. It was also to help FELDA complete the value chain of its core activities.
But the extent of their contribution to FELDA’s profitability and benefits to its main stakeholders remains questionable.
The main stakeholders are the settlers.
This included the settler’s co-operative Koperasi Permodalan Felda or KPF.
Prior to the listing, 51% of FELDA, settlers were holding the shares through the KPF.
The transfer of KPF to FGV caused settlers to lose their shares in FELDA.
FELDA also submitted its commercial land management activity via a 99- year land lease agreement (LLA) to FGV.
This was in return for fixed amount of payment for lease and a share of FGV profits which was below expectation since FGV did not do well.
FELDA’s commercialisation activities, particularly the listing of FGV failed to promote diversification, It also contributed to serious financial problems.
FGV was the biggest IPO in Malaysia in 2012. However, FGV’s stock price fell 72% from its IPO price trading at RM4.55 apiece in 2012 to RM1.29 as at July 2020.
This includes the acquisition of Grand Plaza Kensington Hotel, London and the Merdeka Palace, Kuching.
These transactions were done at an inflated price under Felda Investment Corporation (FIC).
There are allegations of political interference in FGV, including the contentious acquisition of Asian Plantation which resulted in FELDA former directors facing court trial.
READ THE FULL STORY ON WORLDFUTURE BUSINESS