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Sakmongkol ak 47

Thursday, 22 December 2011

Listing of FGV- looking out for settlers interests.

I am more interested in establishing credibility in a proposition, idea or plan. Accordingly I am not fixated over an idea nor feel xenophobic on having to change my position if necessary, in the interest of achieving credibility. For example, while I am not immediately taken in by the idea of listing Felda Global, the rational economist in me accepts that it makes good business and economic sense to restructure Felda’s business to unlock value. I think, even while some of us differ in our views, this principle of restructuring, reorganizing, changing in order to arrive at better value, is acceptable. Also I am not averse to having experts run and operate the business. Example- KPF is the investment entity in Felda Holdings. The members of KPF get dividends, handouts, charity, assistance etc. they are able to enjoy because the commercial entity, Felda Global Ventures Sdn Bhd does the business for them. KPF’s and the interests of others- public spirited individuals, minders (paid or unpaid) are to ensure the managers of the business do their work efficiently and create shareholder value.
Except that, I will always be circumspect about the term ‘unlocking value’. Translate that into action and practice, what does the term mean? This term ‘unlocking value’ has taken different meanings in the context of business in Malaysia. It can mean anything. In the sad case of MAS for example, unlocking value has meant the sale of assets and the management of balance sheet bypassing managing the operations of the business.  The truth is, a business depends more on managing its operations.
My understanding in unlocking value is however somewhat more basic- it means you produce more per acre if you are in the business of planting something, you get better price, you produce better quality, produce new products, become more productive, keep costs down. It’s a bricks and mortar view of how an economic enterprise operates. You operate the real economy. Goods and services. It’s the business operations.
As an analyst or investor I will look at these variables and parameters. At the same time, I have this cynical bias- no business unit can sustain profit on paper shuffling and share manipulations without the support of the business fundamentals. I am always suspicious at the managing balance sheet approach. You want to arrive at a clean balance sheet; you manage the assets and liabilities. You are fixated at the over consuming idea of having more value at assets over liabilities.
In felda’s case that means to me, making sure plantations produce more and high quality yields, marketing, managing more efficiently and so forth. Creating prosperity through share manipulations, IPO and the stuff are initial spurts. What comes later- working on the fundamentals is what sustains long term benefits.
A close friend sent me a text. He says he doesn’t understand why I oppose the FELDA Global ventures (FGV) listing. Don’t I empathize with FELDA settlers? The indirect owners of the 880,000 hectares of palm oil trees are going to enjoy a windfall and you are objecting?  Settlers are passive investors through their cooperative. The business and commercial aspects of the business has always been handled by Felda Global Ventures SB. That is the organization that operates and manages the business. Doesn’t it make good business and economic sense to restructure the business into a single entity and create upstream and downstream business entities?
The most important element of this business in my mind is the land area. Now, these 880,000 hectares comprise of what? The land already owned by settlers or land not already owned by settlers or both? Since 1990, Felda doesn’t enlist settlers anymore. Land not already owned by settlers or were not given out were all placed under Felda Plantations. These are not operated by settlers. They are run directly by Felda through their plantation business units.
Now, that itself was a contentious position. Land was set aside by the various states to be given to settlers. Felda serves as the authority in selecting settlers in order to give individuals land to cultivate. That was the original intention of Tun Razak when he established Felda in 1956. Of course we are not going to be sticky about his original intention. He is dead anyway and his idea is opened to improvements and even revision. The infallibility and absolute completeness and un-changeability of an idea do not appeal to me and I believe that should apply to others too. There must be reasons for not giving out land to would be settlers.  I don’t think not doing so, renders the whole idea of Felda into total disrepute.
But it will be prudent to keep a look out where we can go wrong. A less than spirited board representation for example can put a damper on good business operations. Look at what happened to Sime Darby for example. Clearly on an overall basis, the board hasn’t played a good oversight and supervisory role. The business operations must be run by quality managers and staff. The organization needs to be nimble in spirit. Maybe the idea of concentration of authority and power needs to be relooked. Power and resources need to be dispersed in order to unlock value.
My other worry is this. After the IPO, FGV becomes a behemoth. It will be bigger than Sime Darby I think. Where lies the danger? The danger lies in it becoming a large bureaucratic held-back business organization.  It becomes a government unto itself. That may turn FGV into an unwieldy centrally planned business. This possibility is fraught with dangers. Central planning is not good for business. Concentration of power, monopoly and similar ideas are antagonistic to free enterprise, competition, acquisitive tendencies and this idea of limited interference. The age of big government or government knows best must be given its real meaning in practice. If FGV is to succeed, ideas supportive of power dispersion, free enterprise, competition will have to be enhanced not curtailed. We don’t need a commissar mentality to run FGV. We will talk about this at other times.


bruno,  22 December 2011 at 08:58  

Dato,usually when directors or major shareholders take their companies public,it is usually to tap new capitals for expansion,or to make a killing for shares set aside in proxies names to be sold on the day of listing.It is usually for monetary gains to the big shareholders.

But in the case of FGV,it just doesn't make monetary sense,at least on the small Felda settlers side.Just look at the number of shares the majority of Felda settlers own.If they were to sell all their shares how much would they make.And if they were to sell all their shares,then they would have to leave the settlement.And where will they go with a small sum of money.Nowhere.

And the beauty of it is with palm oil prices so high,why does a profitable company flushed with cash like Felda want to go public.To be a good samaritan and share your profits with strangers whom you have never set eyes on.A lot of questions have to be asked why do Felda have to go public.Of course there will be answers from the backers.Answers that will never made sense.

Pak Zawi 22 December 2011 at 09:27  

At its zenith Felda used to have more than RM 40 billion in reserve which recently has dwindled down to RM4 billion and the latest I heard on the grapevine is that it is now to just a mere RM100 million. Then Felda could just continue without the need of any government spending to carry out all of its development and social programs. But sadly Felda will be hard put even to survive now and may have to depend on Government funding again. What is happening to Felda? Hope this listing of FGV isn't the last hurrah for this organization.

Kimgen 22 December 2011 at 09:34  

If you openly sell your shares than people who never worked will enjoy your labour.

Anonymous,  22 December 2011 at 09:42  


the money is in the plantation assets. why merge it with FGV which is filled with toxic bleeding assets and acquired at inflated prices? if listing is to benefit the settlers, then why dont they do a direct listing of the plantation assets? surely, the settlers will get a better price without being burdened by non-performing assets under FGV.
The suspicion is too large to ignore when a politician caught with his pants down for money politics is given the rein. What more, they just removed a blue-blood Felda General Manager to pave the way for the listing.

bruno,  22 December 2011 at 09:59  

Dato,the questions the sharks at FGV have to answer is why have the EPF got to lend Felda six billion ringgit,when Felda itself is profitable and flushed with cash.And who stand to gain most with the listing of FGV,since it is not the Felda settlers.

Assuming that the listing of FGV goes on as planned.Is the management going to be fully loaded with family members or cronies of Umnoputras,for example like Isa Samad himself,an unqualified crook suitable to be standing inside public restrooms collecting quarters.

Or unqualified family members positioned there in higher management collecting humongous exorbitant salaries.Like in the case of NFC when the Shahrizat family members were paying themselves huge salaries.Then buying themselves upscale condos,highend cars,land and going on overseas vacations.

Or using the newly tap capital to build white elephants,without open tenders,with the project going to cronies.Another PKFZ in the making?

Suara Ampang Puteri 22 December 2011 at 10:51  

Is Isa Samad the actual problem here? How much has Isa really squandered or this former SDAR teacher is now punished for a relative small mistake compare to KJ made but go free unpunished. Many things I heard about ISA is hearsay.

Anonymous,  22 December 2011 at 10:56  

Dato', Good observation and comments from you.Felda management can take into consideration from your point of view to ensure that FGV listing is a success for all settlers to share.

Patrick 22 December 2011 at 11:02  

The FELDA bubble is about to pop. A lot of people do not read this FGV listing properly. If one cuts out all the 'fat' and zoom in, one will realise that the listing exercise is the best platform for non-FELDA sharks to hijack the business without any effort expended. Overnight, the lucrative FELDA business, and part of Malaysian economy, will be in the hands of a few individuals who will reap the commercial benefits of the mass settlers without breaking a sweat.

The biggest losers will be the FELDA settlers. The listed vehicle will have the sole discretion to run the business to its own device. Concentration of power of half the palm oil industry will be in the hands of the few. Going by track record to date, this will mean increase in all business costs and ultimately, market prices. The powerful few 'shareholders' can and will suppress settlers rights further, dominate settlers will and thinking and set FELDA on the path of destruction. The rot in FELDA is currently simmering, but will explode upon listing

FELDA should not be listed as it claims to be well managed and cash rich. It can raise capital anytime without the need to go public, if it claims to be truly lucrative.

The sharks, or cronies, have been maneuvering into FELDA surreptitiously, for the last few years, in the name of progress for the settlers and Malaysia. Palm oil is the last bastion of global commercial hope and sustenance for the Malaysian economy. Once the sharks gather in FELDA, the feasting and destruction begins. With PETRONAS infested with sharks, what else will Malaysia have, naturally, to sustain its foreign income economic future? Sand? Iron ore? Frozen durians? Mangosteen juice? With the listing of FGV, Indonesia is set to be the global leader in palm oil and its derivatives. Not Malaysia.

OneMalaysian,  22 December 2011 at 11:10  

Dear Sakmongkol

I think the basic vision of Tun Razak in forming FELDA is still valid. He wanted to give rural folks a new economic opportunity through ownership of land on which a profitable crop – oil palm – can be cultivated. At that time in the early 1960s, the income of rural Malaysians was very low, and they depended on subsistence farming. Today, rural incomes have risen, but when we compare them with urban incomes they still lag far behind. In short, in a relative sense, much more could and should be done for the rural people who make up a substantial portion of the 40% whose household income is less than RM1000 per month.

The government’s ambition is to try make Felda Global Ventures (with most of the Felda land inside) more like Wilmar, IOI Corporation, KLK and Sime Darby. What it forgets is that these are all private enterprises, and they have different objectives and different management structures and business models. Felda, run as it is, can never hope to match the efficiencies of these private enterprises.

In the palm oil business, 80% of the profits are earned at the estate level, that is in the production of fresh fruit bunches and the production of crude palm oil. The rest of the 20% is earned by refining CPO into RBD olein, RBD stearin, and further downstream oleo-chemical products. However, the investment in downstream refineries and oleo-chemical plants is capital intensive. In short, cultivating oil palms and producing CPO is much more profitable (and easy to do) than going downstream where margins are low and return on investment is also low.

What is the business model suitable for Felda? That depends on what its corporate and social objectives are. I think that rural poverty is still a very big problem. It is particularly severe in Sabah and Sarawak, where ironically the rural people are still so poor when land is plentiful but given or sold cheaply to private investors. Should the government not revamp Tun Razak’s original idea to fit modern times and extend this scheme extensively into more rural areas especially into East Malaysia? Since palm oil cultivation is no rocket science, and it creates lots of rural jobs and contributes to the rural economy, should we divert Felda resources to the upstream side rather than the less profitable downstream side? We don’t need another IOI or KLK or Sime Darby. Let’s stick to Felda’s original social goals but extend its benefits to more Malaysians. There is a highly profitable oil palm company called United Plantations. It has no downstream operations and only sells CPO, but its FFB yields are the highest in Malaysia, at 26-27 tons per hectare, compare to Felda’s 17-18 tons. Felda has lots of challenges just to up its game at the plantation level. Do the easy bits first before trying to match the big players in the international arena. That will most certainly help the settlers, not some fancy corporate game.

Anonymous,  22 December 2011 at 11:37  

" business unit can sustain profit on paper shuffling and share manipulations without the support of the business fundamentals." Sak

Wrong. In Malaysia that's possible and has been done. Look at the number of companies that was astronomical heights but now hovering at 20 and 30 sen a share.

Tell me sir, how many non-felda settlers (or those who had not lifted a finger to help them) will be making money from this IPO exercise. That's what I want to know?
Name the sapi not the lembu.(Besides the Sharizat's lembu)

Anonymous,  22 December 2011 at 12:18  

short term gains for the biggies,long term pain for the

Anonymous,  22 December 2011 at 14:14  

I'm of the opinion the BN Govt is trying to kill two birds with one stone.
If the 13th GE is held after the FGV listing, this could be a threat to the Felda settlers to vote for BN. After the listing the Felda settlers will not have any shares in the KPF for they have to swap their 51% KPF share for FGV. As the FGV is now public listed their share values can be manipulated to force the settlers support for BN.
Moreover the BN Govt will have access to all the funds at their disposal and the settlers will now be totally dependent on them as compared to now they only depend on themselves.

The Pumkiner 22 December 2011 at 14:49  

I have a better idea.

In addition to acquiring KPF, FGV should also gobble up NFC.

That way, the value of all cows and Mercs etc can also be unlocked. More importantly, the cows have plenty of land to graze on.

Those CONsultants out there can take up this bright proposal. Just don't forget to credit the idea to me.

penangoikoss 22 December 2011 at 18:30  

Again the poor rural Malays get screwed big time...what a shame where are all the big time pahlawan melayu in Perkasa and Perkida.....probably waiting with bated breath to enjoy......

Anonymous,  22 December 2011 at 23:10  

Felda settlers should own land, not shares of Felda whatever entity it takes.

If I know of a well established property developer, I will buy properties this developer sells. I have no desire to own its shares coz its shares are for the big players who understand the intricacies of equity markets. I know the property I bought is mine whether the developer whom I bought the property from go bust or makes profit four fold, it is not my concern.

Felda setlers should take this stand.


Rauf Hakim 23 December 2011 at 01:26  

There are three main components in this listing business.First the settlers.Second the Felda Plantation that manage the entire felda scheme.Third the Felda cooperative.As far as the land is concerned there are the Felda settlers land,the land that yet to be given the titles to the settlers and land given by states to Felda to take in more settlers.There are still substantial land that are not given the titles to the settlers as a leverage to control them.On top of these all are the multitude of agreements and covenants between Felda Plantation with the settlers in respect of the selling of their produce and hold back sum for future development which is very opaque.Now Felda has borrowed RM6 billion form EPF and none of the settlers knows what was the use of the money borrowed except for the mega headquarter at the posh high class area in which the settlers are too shy to show their faces.If the authority is honest they should appoint a truly independent body to study the implications on the settlers both in short,medium and long term.Felda is a trust company for the settlers who for generations had broke their backs and bones to clear the jungles and create what Felda is now.This is a colossal breach of trust if there are parties who want to list Felda for their personal and cronies greed and gain at the expense of the great majority of the Felda settlers who are in need of honest protector not hyennas and vultures.Rushing through to list as scheduled really show their arrogance and malice of the first degree.The only one man that should take full accountability of all the sins here and the hereafter is Najib and his Cabinet if this listing were to turn out later as a Great Malay Tragedy.The Prime Minister and other ministers concerned are just trustees and are duty bound to act as trustees.They are not corporate players to benefit from this exercise that is sinful to the nth degree.
Settlers cannot speak for themselves about this unlocking of the value exercise without the forceful and vigorous debates by the full spectrum of the Malaysian intelligentsia to defend them.

Planter Yang Azali,  23 December 2011 at 07:55  

Talking about oil palm plantation industry there should not be any separation of ownership along the line of diversification. This is the normal industrial plantation practice called estate practice. Any attempt to deviate from this normal practice could cause a massive derailment. Just look at the mess caused when ownership of the plantation were separated with milling. Thousands of settlers summoned Fleda to court for oil extraction rate. In a normal plantation company where there is no separation of ownership the messy problem of oil extraction rate were translated into cooperations between the plantation and the mill to produce optimum ripeness ffb for good quality oil. A good quality oil cannot be produce in the mill but must come form the plantation with good organization and control of harvesting techniques. The mill comes under the charge of the plantation management in normal estate practice. Thus, demonstrate the havoc it will caused when attempt were make to separate ownership along the line of plantation industry. This has been the normal practice since the beginning of oil palm cultivation and management. It could clearly be established the real stakeholder in Felda are the peneroka and not Felda. Felda was established to become an Agency House to manage the plantation and not to become partnership of the real stakeholder. That's tantamount to daylight robbery of the stakeholdership and almost a severe destruction to normal plantation industry practices. What more to be said about listing of FGV it's a storm within a storm in the Bermuda Triangle. The real identity of the stakeholder in Felda will be further deteriorated. Just give a thought how come the peneroka has to be indebted for the exorbitant cost of replanting after so long being in the scheme of Fleda ? The profit of milling onward was confiscated by Felda and now FGV is viewing the lucrative free for all benefit on the expense of the real stakeholder the peneroka. Stakeholdership in Felda, a planting industry, has been badly damaged to a stage now that it has become a game free for all. The policy mongers in Felda now consist of people blind and bloke of the planting industry as regard to stakeholder. They would at least widen their mental wisdom if they were to observe other players in the planting industry. Their greed has come to a stage of sacrificing a 100 percent entity of poor bumiputra.

Anonymous,  23 December 2011 at 08:42  


What puzzle me most is why are the Malays so easily misled.Their trust for their so called pemimpin is so strong that not even the relentless explaination given by ANAK can convince them to change their mind.


GoldTrex 24 December 2011 at 00:12  

Dato Sak

Instead of unlocking the value of plantations, refineries and other physical assets, FELDA and the Government should be trying to UNLOCK the HUMAN POTENTIAL among FELDA settlers and their younger generations.

I hope you and your readers would be able to suggest ideas and projects where this could be achieved.


Economist Kampong

INDIGO MIKE 26 December 2011 at 03:20  

SAK 47
Salam Hormat

Brick & Motar Questions
(r u 1 orang umno with rakyat@heart)

I am more interested in establishing credibility in a proposition, idea or plan...the rational economist in me accepts that it makes good business and economic sense to restructure Felda’s business to unlock value

Q. How would you who studied economics, an ex-ADUN, Orang UMNO Pekan go about unlocking Felda's business value?

Q. What is the cost of production per hectare of the best Palm Oil co in the world?

Q. What's is a share holder of 'Felda Berhad' reasonable expectation for value in Ringgits and with Vision2020 in mind?

Q. How many shares would 'Felda Berhad' have?

Q. How would you go it the Halal-Toyibban way, SAK 47?

Well that is it from me for now; I do hope to read your simple answers asap.

And an old song(just the lyrics though):

I've Got To Get A Message To You

The preacher talked with me and he smiled
Said "come and walk with me
come and walk one more mile"
Now for once in your life you're alone
But you ain't got a dime
There's no time for the phone

I've just gotta get a message to you
Hold on, hold on
One more hour and my life will be through
Hold on, hold on

I told him "I'm in no hurry
But if I broke her heart
then won't you tell her I'm sorry?"
And for once in my life I'm alone
And I've gotta let her know
just in time before I go


Well I laughed but that didn't work
And it's only her love
that keeps me wearing this dirt
Now I'm crying but deep down inside
Well I did it to him
Now it's my turn to die

(chorus 2x)

SAK, do you think muay thai can no match silat melayu when the melayu has ibu silat?; but what do i know - only that I love halal trade even more when it is toyyiban all the way.


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