11.04.2019 (The Business Times) - Government report blames mismanagement and bad investments for the agency's troubles
MALAYSIA will inject RM6.23 billion (S$2.07 billion) of financial aid into state-owned palm oil plantation agency Felda, after a government inquiry found poor management had sent the company's losses and debt soaring over the past decade.
Tabling a report in Parliament on Wednesday, Economic Affairs Minister Azmin Ali blamed mismanagement and bad investments for Felda's troubles, and accused former prime minister Najib Razak of using the agency for political purposes.
Mr Azmin said Felda will exercise an option to walk back a US$500 million purchase of a stake in Indonesian palm oil firm PT Eagle High Plantations, a deal made during Mr Najib's premiership that was criticised as being too expensive.
The report follows a probe ordered by the government of Mahathir Mohamad, which came to power last year after defeating Malaysia's long-time ruling coalition and which had vowed to look into Felda's financial troubles and alleged graft.
Mr Azmin said of the report's findings: "This is not just negligence; this is a crime that led to the loss of billions of public funds."
The report said Felda's total liabilities had risen 12-fold over 10 years to RM14.4 billion in 2017. Its cash balance plunged from an average of RM2.5 billion between 2007 and 2011, to just RM35 million as of May 2018.
"This cash flow restriction means that Felda has been unable to cover operating costs, replanting costs, or provide assistance and loans to settlers," the minister said.
He also said that Mr Najib's administration spent RM2.7 billion of Felda's funds on garnering political support during general elections.
A spokesman for Mr Najib, who is on trial for separate corruption charges, did not respond to a request for comment on the allegation.
Mr Azmin said that Mr Najib had directed Felda to buy a stake in Eagle High Plantations from Indonesian businessman Peter Sondakh.
Earlier this year, Felda chose to exercise a put option to sell its stake back to Mr Sondakh for the same purchase price plus interest. Eagle High is contesting Felda's decision in arbitration, he told reporters in Parliament, Mr Azmin said.
Eagle High did not immediately respond to a request for comment.
In a Facebook post on Wednesday, Mr Najib defended the purchase, saying that the investment would have been more profitable if palm oil prices were higher last year.
Felda (the Federal Land Development Authority), set up in 1956 to resettle and employ the rural poor in the palm oil industry, grew to become the world's largest state-run palm oil agency.
Its problems, however, have frustrated Malaysia's 650,000 palm oil farmers, also known as settlers, as they have racked up debt on low incomes.
FGV Holdings Bhd, a unit of Felda and the world's largest crude palm oil producer, was listed in 2012. Some of the funds from the listing that went to Felda were spent on "suspicious investments involving shady transactions", Mr Azmin said.
The government report he tabled says that Felda will restructure the principal payment of its debts and delay the repayment of its borrowings of RM1.98 billion this year. The remainder of its RM9.3 billion borrowings will be repaid from 2020 to 2028. The government reiterated on Wednesday that its non-strategic assets would be sold. REUTERS