Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly, on February 6 - 12, 2017.

 

TAN Sri Shahrir Samad’s appointment as chairman of the Federal Land Development Authority (FELDA) comes at a time when the government agency is at a low ebb. In a candid interview with The Edge, Shahrir talks about the problems and concerns that the agency is facing and what needs to be done. However, whether or not he can steer the fumbling giant forward during his three-year tenure remains to be seen. Here are excerpts of the interview.

 

The Edge: How has it been since you became chairman?

Tan Sri Shahrir Samad: It can be worse. I have a simple tagline — it can be worse.

 

What is your mandate from the prime minister? And why do you think you were selected for the job?

Revamp, restructure. But this is not a GLC (government-linked company); this is an agency, so I’m paid only RM8,000 a month (laughs). But then again, I would do it for free. As members of parliament, we are already well paid, and this is interesting work.

But I’m not running for [Umno] vice-pre­sident or any post. If people are angry, tak pe la kan. I don’t have to feed anybody [so] it’s easier. I’m not the typical politician who has to take care of supporters and cronies.

This is not a cushy job. In my case, it’s also easy for me; it’s about putting things straight. I don’t have any baggage, orang Johor Baru… there is no FELDA in Johor Baru.

 

How did the Felda Investment Corp (FIC) board take it when you asked them to resign?

I asked the PM to issue a supporting statement as that is the right thing to do. Anyway we started with FIC: I need to turn them into what they should be — an investment holding; investment management; a fund management company. Then we have to identify a proper CEO, not somebody’s cousin or brother [and] a proper board of respectable professionals, of which we have many. We have put almost RM2 billion into FIC.

 

FELDA was set up to improve the lot of smallholders. Do you think it has achieved this?

With palm oil, yes. First, FELDA was in rubber, then oil palm, [which] really helped, but [as] with all commodities, it depends on the time of the year.

 

FELDA was actually meant to urbanise the rural areas…

The next step would be that. First you set up the community, the settlements and the urban centres, and bring in all the facilities. Naturally, as their incomes increase, their spending power increases and business activities will arise around them. The commercial activities will happen.

 

You are selling FELDA’s shares in Maybank, and others assets, and conducting settlers’ programmes with the funds. Is the model sustainable?

In the past, it was. The question has to be answered by the government: Is FELDA supposed to be on its own? For example, you talk about the second-generation problem with housing. But it’s a universal problem; it’s not just affecting FELDA; it’s in the country.

The government has to try to build afford­able homes for the second generation, and various programmes.

So, what second-generation issues are you trying to solve? Can you even look after the third or fourth gen­erations? When do you stop?

We took a grant from the government for infrastructure — it will help defray some of the costs of the housing programme. Internally, we may not be able to generate the funds. Of course, the issue now is cash flow. We are not getting rid of the family’s silver. It’s not even been used; it’s just been lying there.

 

What is the amount of the grant you are looking at?

We’ve got RM200 million under this year’s budget.

 

And you have Encorp under your belt, your developer…

We have Encorp but it is focused on its own projects at the moment, and is not involved at all in housing for the second generation. ­Encorp is carrying on with its activities; we will let them proceed with what they are doing.

 

During a press conference you mentioned that FELDA is considering letting go of IRIS Corp Bhd. Is that true?

I don’t think we need to let go of IRIS. We consider everything, but I will let FIC handle it. There are suitors as well [for Iris].

 

How do you feel about all this: You come in and there are issues with MACC. And every year, the AG’s report [is] very negative, usually.

Sounds like good fun, isn’t it (laughs)? ­People may say after I came in, people got arrested [the five senior FELDA officials ­arrested by MACC]. But to be fair to FELDA, the whole investigation and internal action were already [in place].

In fact there were internal enquiries; they brought in PwC to do a position review. There was a legal review and the board caught up with them.

 

What are your thoughts on Eagle High?

We got a better price than Felda Global ­Ventures Holdings... FGV was not so keen. FELDA went back to negotiate and we got a better price, and we got better conditions as well, a put ­option, so it’s sort of protected in that sense. My ­additional requests and conditions include the payment of an initial interim dividend within six months.

 

What do you think about the premium paid for the shares? Do you think it is excessive?

I understand why the price is not so high. At one time, there was hype that it was very high, but the palm oil price came down, so earnings came down. But now palm oil price is up again. On average, the trees in FELDA’s plantations are seven years old, so Eagle High looks good.

I think we entered at a time when the palm oil price wasn’t too high, so we got a good price compared with what FGV was supposed to pay.

 

So you are convinced it is a good deal?

I am convinced it is a good deal. I am also ­taking a more global picture.

 

So, you think in the long run, the acquisition will work out?

Provided that it being an investment, I get dividends.

 

There is a lot of distrust [surrounding the acquisition]. Some say that Eagle High controlling shareholder Tan Sri Peter Sondakh is the PM’s friend and that is why the deal is being done.

That is why I focus on it being an investment. There are so many stories. There was one that said Sime Darby (Bhd) rejected it before we were offered. But when I asked Tan Sri Peter Sondakh, he said no. So who do you believe?

 

There is also the question of whether now is a good time for FELDA to make such long-term acquisitions, especially as it is not in a good financial position.

I think Eagle High is being parked with us… I believe this deal has a bigger objective. To me, whatever [the deal], national or regional, any investment has to have dividends.

 

Are you are putting in place a dividend policy?

We need to have a dividend policy, at least above the interest rate.

 

At a recent press conference, it was highlighted that Eagle High is not profitable. So how much dividends can you expect?

Well, we hope that in 2017 the company will be profitable.

 

What about not having control of the company despite having a 37% stake?

They have a bit more [control] than us. But Indonesian companies… maybe we should be more careful. If we have control, we also could have problems.

 

True, but shouldn’t FELDA chart the direction of Eagle High?

I think they want to be like us in palm oil. I don’t know which other direction they want to be in. So, I suppose if we have directors who can represent us well in Eagle High, the ­development [in Eagle High] can be [­attained based] on [our] advice.

 

How many directors do you have?

We have two commissioners and one director.

 

The Eagle High acquisition has come under scrutiny: FGV has lost between RM9 billion and RM10 billion in market capitalisation since listing. FELDA is made up of 54 constituencies, largely Barisan Nasional strongholds. Do you think these issues could affect BN’s popularity?

I don’t think so. You have to disengage the settlers from Eagle High, which is just another FELDA investment on behalf of the government. FGV is FELDA’s investment; we want to see FGV perform. At the FIC level, if I have sustainable returns from investments, then I have enough to improve the cash flow. But we have to stop the leakages.

 

The problem with FELDA is that whenever mistakes are made, heads do not roll.

Well, they are rolling. The only thing we can do internally is to sack them — that we can do, that is no problem. But as I said, if we sack them, questions will be asked: Why didn’t you take them to court?

 

 

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