Friday 29 Mar 2024
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This article first appeared in Forum, The Edge Malaysia Weekly on June 17, 2019 - June 23, 2019

It is public knowledge that the Federal Land Development Authority (FELDA), as an agency for its settlers, was successful, with billions worth of assets, until the listing of Felda Global Ventures Holdings Bhd (FGV) came about.

FELDA was reported to have posted a net profit of RM5.5 billion in 2012, but in 2017, it suffered a net loss of RM4.9 billion.

FGV is not a fully private company as it claims to be as its business backbone is the settlers (through Koperasi Peneroka Felda or KPF) and the land lease agreement between FELDA and FGV. FELDA’s land is public land while the settlers are FELDA settlers with or without FGV.

Hence, it is clear that FGV (be it the old or new entity) is answerable to the public and small-holders, apart from its shareholders.

But as reported in the press, FGV had strayed from its social role and got involved in some shady deals and investments, which were meant to enrich certain individuals (politicians and executives).

The “how” and “why” of these deals can be traced and justice will be served. The serious oversight cannot be forgiven.

The fundamental issue that was oblivious to the policymakers all those years is the role of the parent agency and its subsidiaries in improving the settlers’ livelihood. This oversight is the cause of the FELDA debacle.

The subsidiaries were supposed to bring in profits to be channelled to the smallholders, but they failed to do so. This role has to be re-evaluated.

Even in good times when FELDA was making billions of ringgit, the average smallholder’s return was no more than the income of the B40 group — about RM3,000 a month. With the massive mismanagement at FELDA, it leaves little hope for a better future for the settlers and their next generation.

The recent decline in crude palm oil prices has left them with meagre incomes. Some of them have even fallen back into poverty despite having worked their smallholdings for more than five decades.

While FELDA and its subsidiaries made big profits from downstream activities and non-oil palm businesses (such as catering, properties, caviar production and hotels), very few settlers have moved beyond their status in the last 50 years or so. In short, there was very little upward and horizontal mobility for them despite FELDA’s success.

Till today, most of them remain as primary producers of fresh fruit bunches. They are not involved in the milling and value-added processing sector, which brings big profits.

Yes, the settlers hold shares in KPF and receive dividends. But the cooperative is run by FELDA officers with little involvement of the smallholders, who merely use the cooperative’s facility. A true cooperative is one that fulfils the three principles of user-owner, user-control and user benefits. In other words, those who own and fund the cooperative are those who use it. Similarly, those who control the cooperative are those who use it. And the cooperative’s sole purpose is to provide benefits to the users on the basis of their use.

The settlers have been getting a Hari Raya bonus every year since 2003 from the profits made by FELDA. This is a short-term benefit. It does not provide long-term capacity building such as skill or capital enhancement. Despite receiving the bonus for 15 years, their well-being has barely improved.

Clearly, the paths of FELDA and the settlers are diverging, rather than converging. The profitable subsidiaries have also failed to uplift the settlers’ livelihood.

 

How does one resolve these problems?

It is as clear as day that the placing of FELDA under the Prime Minister’s Department in 2003 and involvement of politicians in FELDA’s financial matters are the factors that breed corruption.

Tan Sri Mohd Isa Abdul Samad was appointed chairman of FELDA as well as its three important subsidiaries — FGV, Felda Investment Corporation (FIC) and FIC Properties. Clearly, the governance structure is conducive to manipulation as there is no demarcation between the executive and the implementer. This is the number one lesson learnt and the first structural change needed. The standard operating procedure for good governance is clear — just follow the book.

The betrayal of the settlers can be quickly stopped by going back to FELDA’s fundamental role of enhancing their livelihood so that they are able to chart their own destiny without continuously relying on FELDA.

How long more will FELDA need to support them? How long more will the settlers’ lives remain unchanged, to the extent that their children refuse to continue their work?

FELDA must use its resources to help the settlers become independent. This should be its ultimate aim.

A few strategies have been recommended. The most effective one would be to allow the settlers to venture into downstream activities and agribusiness to enable them to increase their income and, hence, attract the younger generations to continue their work in the sector. The best business model would be a new cooperative called “forward (and backward) integrated cooperative”, run by the farmers and for the farmers, based on the true principles of a cooperative, as discussed earlier. The cooperative should be fully run by the farmers and not political appointees or government officers.

This entails providing comprehensive training in technical and entrepreneurial skills for the settlers. A large investment is needed to build their capacity to enable them to move up the supply chain.

FELDA should channel some funds for research and development as well as improving the socioeconomic conditions of the settlers through farm diversification, certification, knowledge of information communications and technology, Internet of Things (including blockchain), mechanisation and automation. Currently, a lot of R&D is focused on large estates.

Huge investments overseas will not change the future of the settlers, but capacity building will go a long way towards producing independent, sustainable and progressive settlers.


Prof Datin Paduka Fatimah Mohamed Arshad is a research fellow at the Institute of Agricultural and Food Policy Studies, Universiti Putra Malaysia

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