FELDA, TH BETTER OFF WITH PROFESSIONALS
LATELY, the nation has been consumed by negative episodes of mismanagement of government-owned entities. The sad part is that such government agencies were created to support the poor.
The two prominent ones are Felda and Tabung Haji (TH).
Felda, which gained world recognition as a viable poverty alleviation scheme, which other poor countries wanted to emulate, was suddenly hit by problems. The irony is that when Felda was managed by professionals, the agency was the envy of the world.
TH was the brilliant idea of renowned academician Royal Professor Ungku Aziz.
The concept involves pooling together funds from Muslims who want to perform the haj, while investing the funds to generate reasonable returns for the contributors, helping them offset the rising costs of the pilgrimage.
For years, TH was professionally managed, gaining the confidence of the mainly poor contributors. Other Muslim countries wanted to adopt a similar scheme.
For Felda, 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. As a result of the better returns from palm oil, the scheme is now dominated by oil palm.
Through the support of professional advice and management, the productivity of oil palm and rubber smallholders was enhanced. But the scheme was not just about selling the low-value crude commodity. Instead, Felda was tasked with adding value to the commodity through downstream activities — 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 the business platform to process the fruits into higher value derivatives for a growing world demand. This went well when the agency was managed by professionals.
It invested in mills, refineries, bulking stations, and other downstream palm oil by-products.
Felda even went into oleochemicals and shipping logistics, all with the aim of generating better returns to the farmers.
Things changed when professionals were no longer in charge. The management began venturing into high-risk investments which were alien to the core business.
These included buying hotels, putting money into nanotechnology and even caviar which they were ill equipped to deal with.
The outcome was expected. Such misadventures bled Felda dry and the farmers are suffering.
Fortunately, the current government recognised what has dragged Felda into a financial mess. The professionals have been brought in to manage it. Hopefully, with more professionalism and better corporate governance, Felda will regain its glory days.
TH, meanwhile, is more of an investment agency. TH is akin to entities like the Employees Provident Fund and Permodalan Nasional Bhd. TH was doing pretty well in the early years when it was managed professionally. Things got out of hand only in the last few years. According to reports, poor investment decisions were 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 to achieve sustained success.