White paper

The Federal Land Development Authority (Felda) will soon be in the spotlight again. A White Paper to reveal the status of its current financial position and a strategic recovery plan is slated to be presented in the next Parliament session. Economic Affairs Minister Datuk Seri Mohd Azmin Ali has said that Felda is facing a critical cash-flow problem, while putting the blame on the legacy of weak corporate governance and irresponsible financial management by the previous management.

The priority now will be the restructuring of the government agency’s loans, which has swelled to about RM8.025bil. This task will definitely fall on the shoulders of Felda’s current management team, to be led by its newly-appointed chairman Tan Sri Megat Zaharuddin Megat Mohd Nor. The measures to strengthen the cash-flow position will likely include the disposal of non-strategic assets such as properties, both locally and abroad, as well as other non-performing businesses.

Another important subject to be included in the White Paper is the suspicious “transfer of land” of about 400,000ha by Felda to Felda Global Ventures Holdings Bhd (now renamed as FGV Holdings Bhd) to pave the way for the latter’s listing exercise back in June 28, 2012.

Recall that under the land lease agreement (LLA) signed in 2012, FGV had to pay Felda a fixed amount of RM250mil per year in cash for 20 years and a 15% share of operating profit from the sale of the fresh fruit bunch derived from the estate land leased from Felda.

FGV, however, is said to have problems in paying the dividends and fair profit-sharing to Felda, which is one of the reasons why Felda is facing critical financial management problems.

Therefore, the new government will relook into Felda’s land transfer and will take the FGV management’s view into consideration. It will be interesting to see whether the LLA factor, which some analysts say has been distorting and complicating the fair value accounting treatment on FGV and pulling down its profits, will also be subject for a review soon. Felda currently holds a 34% stake in FGV.