Govt guarantee to enable Felda to restructure loans
KUALA LUMPUR: The government wi l l issue a Government Guarantee to enable the Federal Land Development Authority (Felda) to restructure its loans with financial institutions, says Economic Affairs Minister Datuk Seri Mohamed Azmin Ali.
He said the guarantee is part of the government’s efforts to develop a new and sustainable financial system for Felda in line with the latter’s transformation plan, besides preventing the entity from having to bear a high debt burden.
“Failure to restructure Felda’s loans will lead it to having to repay debts and interest amounting to RM2.5 billion for 2019,” he said when tabling the Felda White Paper at the Dewan Rakyat yesterday.
He said last year alone, Felda had to pay RM1.4 billion in debt payments and interest to financial institutions.
He said Felda will also rationalise its assets in order to improve its current financial situation.
“Felda is now in the process of identifying strategic assets with potential to be liquidated in order to generate the best cash flow,” he said.
Mohamed Azmin said Felda’s financial constraints were caused partly by cash flow problems due to its low income compared to its operating costs after signing a Land Lease Agreement (LLA) with Felda Global Ventures Bhd (FGV) to list FGV on Bursa Malaysia’s Main Board.
He said before FGV’s listing, Felda generated annual net profits of between RM200 million and RM1.1 billion from 2007 to 2011 from managing its commercial plantations covering about 400,000 hectares.
“After FGV’s listing, especially from 2013, Felda’s financial performance began to deteriorate.
Felda reported continuous losses, with the highest at RM4.9 billion in 2017,” he said.
On average, he said, Felda received only RM400 million a year from FGV compared to at least RM800 million a year needed to manage its plantations and to guarantee settlers’ well-being.
He said Felda’s transformation plan also focuses on improving governance and operations based on transparency and accountability in order to restore settlers’ confidence and to strengthen Felda’s position.
These measures include appointing a new Felda leadership comprising professionals with credibility and integrity, and corporate restructuring to enhance its effectiveness and efficiency.
He added that Felda will also introduce a system of checks and balances to prevent abuse of power and corruption.
It will also formulate a new business model to manage settlers’ land through a long-term rental arrangement, enabling the land to be optimally consolidated and efficiently managed, with economies of scale reducing operating costs and raising productivity, he noted. — Bernama