FELDA - The Next 1MDB

FELDA – The Next 1MDB

M. Bakri Musa

www.bakrimusa.com

 

FELDA (Federal Land Development Authority), the massive plantation development scheme that was Tun Razak’s brainchild and crown jewel of his rural development program, threatens to rival the massive scandal of 1MDB in terms of corruption, grand larceny, and inept management. 

 

     Its new head (now former, with UMNO’s rout in the May 2018 elections), one Sharil Samad, admitted that title to the prime property on which its head office is sited was transferred to a developer without his or his agency’s knowledge! This character claims to have an MBA but his private venture up till then was to run a laundromat. He in turn had replaced the scandal-ridden Isa Samad (no relation) who earlier was found guilty by UMNO for “money politics.” 

 

     FELDA is now a large, diversified agro-based GLC having morphed from its origin as a modest federal agency. It boasts revenues (2017 figures) in excess of RM17B. The profit picture however, is another story and best reflected by its stock prices which languishes at about a third of its initial offering price. When FELDA was listed in 2012 as FGV (FELDA Global Ventures), it was the largest in Asia and globally second only to Facebook.

 

     Visit FELDA’s settlements today and compare them to the 1960s or 70s. Nothing much have changed. The settlers’ standard of living has not improved. If there is any economic enterprise on those settlements, they would be under the control of FGV. The social and economic dynamics of those settlements resemble the old company town, except that the company here, FGV, is not in the least benevolent. 

 

     There is one significant change which the settlers are not even aware of, or if they are, not appreciate the full financial and other ramifications. Whereas before they had title to their land (about 16 acres each), today that has been subordinated to FGV as part of the IPO. When FGV shares tumbled, those settlers’ assets went with it. 

 

     Those settlers as well as FELDA managers do not understand such sophisticated financial instruments as dividends, stock offerings, and capital gains. FGV should have emulated Nestlé and invested in its settlers and not be enthralled with pseudo high finance. FELDA is uniquely positioned to execute that as its leaders and managers are Malays, as are the settlers. As such there would be no cultural barriers in appreciating their problems, unlike Nestlé’s European managers had with their African growers. 

 

     FELDA has done little to stimulate entrepreneurial activities among its settlers. It has not encouraged them through funding or training to be FELDA’s vendors, suppliers, or subcontractors, nothing beyond harvesting the palm nuts and tapping their rubber trees. 

 

     I would have expected that with the huge profits FELDA often brags about, the schools and clinics in its settlements would be among the best so as to give those settlers’ children a flying head start, as those of Nestle’s African cocoa growers. Instead FELDA schools perform below average. Regrettable considering that the mission of these GLCs is “national development foundation,” in particular that of Bumiputras. FELDA has only recently set up a residential school exclusively for the children of its workers. Over half a century later, and only one school! 

FELDA brags ad nauseum about the few successful “AnakFELDA” (children of FELDA). They are outliers, not the consequence of enlightened policies.

 

     As for the settlements, few have electricity or piped water, much less a clinic. Again, compare that to what Nestlé is doing to those African cocoa growers. Those Malay managers and executives at FELDA ought to be ashamed of themselves and their lousy performances! 

 

     FELDA has introduced little innovation to make the settlers’ lives and work more bearable and less dangerous. Oil palm is harvested in the same old, crude, and dangerous manual ways as it was in the 1960s. FELDA have not introduced hydraulic lifts (like the ones telephone repairmen use to fix overhead lines) to make the harvesting of palm nuts more efficient. Those workers still use pitchforks and bare hands to collect those nuts. Not only do the pitchforks damage the nuts, their sharp shells often scrape the workers’ hands giving rise to painful tumor-like growths (granulomas). Those chores are archaic and literally backbreaking; they should have been mechanized. 

 

     Only through such innovations could you increase your workers’ productivity, not endlessly exhorting “work harder!” or “be more efficient!” 

 

     FGV is the largest employer of unskilled laborers, meaning, illegal immigrants. Instead of investing in the skills and productivity its workers, as well as modernizing its plantations to be less dependent on unskilled workers, FGV took the easy way out by importing them and with all the attendant social problems. 

 

     There is also little research done on maximizing the use of land, as with growing flowers and vegetables or raising livestock in between the trees to raise the settlers’ income. 

FELDA has many subsidiaries. All look impressive until you examine their activities; few materially advance the settlers’ plight. Those subsidiaries are but crass opportunities for politicians and civil servants to earn extra-lucrative directorship fees by being appointed to their boards, all at the poor settlers’ expense. 

 

     With the resources it has and freed from the micromanagement of the the civil service, FGV could have superb build schools to benefit the settlers’ children. 

 

     These GLCs as exemplified by FGV have failed in their primary mission of developing Bumiputra human capital. They succeed only in duplicating existing governmental programs, and adding to the costs. They do not bring in added value despite the tremendous resources, financial and otherwise, expended on them.  Good enough reason to get rid of them.