Bring back the professionals
LATELY the nation has been consumed by news of the mismanagement of government-owned entities. The sad part is that such government companies were created to support the poor. The two prominent ones which have made headlines recently are Felda and Tabung Haji (TH).
Felda, which gained world recognition as a viable poverty alleviation scheme, one that many poor countries wanted to emulate, was suddenly hit with problems. The irony is that when Felda was managed by true professionals, the agency was the envy of the world.
TH was another brilliant idea, one that came from our own renowned academic, Royal Prof Ungku Aziz Ungku Abdul Hamid. The TH concept involves pooling together funds from Muslims who want to perform the haj, while investing the funds wisely to generate reasonable returns for the contributors, and thus helping them to offset the rising costs of doing the haj. For years, TH was professionally managed, gaining the confidence of the mainly poor contributors. Many other Muslim countries wanted to adopt a similar scheme.
Felda, too, did well in the beginning. The original idea was to allocate land to the poor to grow cash crops under the guidance of professionals. The two crops promoted were rubber and oil palm. However, over time and as a result of better returns from oil palm, areas planted with rubber declined; the scheme is now dominated by oil palm.
With the support of professional advice and management, the pro- ductivity of the oil palm and rubber smallholders would be enhanced. But the scheme was not just about selling low value crude commodities. Felda was also tasked with adding value to the commodities with downstream activities through refining and other higher value products. Through such value addition, the returns to smallholders would multiply. This would never have happened if small farmers were left to just produce the oil palm fruits and sell to processors.
Felda was supposed to be a business platform to process the fruits into higher value derivatives for the growing world demand. This went very well when Felda was managed by professionals. It invested in mills, refineries, bulking stations, and other downstream products of the palm oil. It even went into oleochemicals and shipping logistics, all with the aim of generating better returns for the small farmers.
Things changed when the professionals were no longer in charge. Felda started venturing into investments that were alien to the core business of palm oil and rubber. These included buying up hotels, putting money into nutraceuticals, nanotechnology and even caviar – it was not equipped with the necessary business expertise to deal with the risks of such ventures.
The outcome is as expected.
It is now public knowledge that such misadventures have bled Felda dry and left the small farmers suffocating under losses. At the point at which the professionals were replaced, Felda had a very healthy bank balance. It now has to sort out losses that run into bil- lions of ringgit.
Fortunately, the current government recognises the true factors that put Felda into the middle of such a financial mess. The government has brought back the professionals to manage Felda. Hopefully, with more professionalism and better corporate governance, Felda will once gain see glory days.
Unlike Felda, which was tasked with managing and delivering better returns to small farmers, TH is more of an investment company. TH is tasked to judiciously invest the deposits of mostly poor Muslim families so that they will enjoy reasonable returns to help them offset the costs of performing the haj. TH is more akin to entities like the EPF and PNB.
TH did pretty well in the early years when it was managed professionally. Things only got out of hand in the last few years. According to reports, poor investment decisions are partly to blame. The low performance was also partly attributed to the poor returns from TH’s investment in palm oil, as a result of the low palm oil prices.
Professional management is what Felda and TH need if both are to achieve sustained success. It is time for both Felda and TH to return to their core mandates: Felda to efficiently manage its vast land assets, TH to judiciously invest its rich cash deposits.