FGV - The Settlers' Road to Serfdom( 2/2)

The UMNO president has turned football commentator. 6-0, 7-0, 14-0. Absolutely no class. Shouting here and there. Frothing at the mouth.  Well, he can say Gol, Gol as many times as he likes. Gol is the Pahang slang for mati or die! He will win only 3 states. So, we will let him drown in footballers’ stool. He’s speaking in front of UMNO crowd. His speech reported by Utusex Malaysia, carried by Berita Hairan, aired by TV ¾. What can we expect?

Let’s get back to FGV where he wants to rake in RM 6 billion to pay his way through the next General Elections.

 There are so many questions unanswered by the FGV listing. People like PNB, EPF, Tabung Haji are asked to take up to almost 20% of the shares. 5 state governments including my home state of Pahang are also arm-twisted into taking up shares. These (state own funds and state governments) will take up almost 30% of the shares. Why these people? Why is a high portion of existing shares unloaded into the market? Where is the investor demand that gives us the confidence that this FGV listing is going to be spectacular? One has the feeling; these entities are brought in solely for the purpose of shoring up the FGV counter.

What the public hasn’t been told is, only 20% of FELDA top management supported the idea of FGV’s IPO. 65% of the FGV staff thought FGV simply isn’t ready to list. This is a rush job. We must keep asking why?

The FGV prospectus is fast acquiring the stature of the bikini version of statistical information- what it reveals is suggestive but what it hides is vital. We have not been told, that only 3% of FELDA land bank is RSPO certified (Roundtable on Sustainable Palm Oil). This means in future, we may find it difficult to sell CPO to the world market because much of the land bank from where the CPO comes from is not RSPO certified. Also, because we haven’t shown commitment to RSPO, FGV’s plan expansion of plantations in places like Indonesia, Africa may not progress as fast as FGV wants.

How did FELDA end up employing a person seen largely responsible for the loss of RM 120million in the company he worked previously? Now, he is helming FELDA and FGV together with a former teacher who is largely responsible for allocating state land to cronies in Negeri Sembilan? Will the Boston Consulting group, Hay and Aeon Hewitt recommend the government to terminate the employment of FELDA’s CEO?

This rush up job is likely to end FELDA and FGV like what ails MAS presently. The starting idea should have always been how to fortify FELDA and shape it up. We have saying right from the beginning, if settlers’ welfare and economics are the prime concern, then allow KPF buy out FGV. Then KPF owns 100% of FELDA holdings and all the assets therein. What is stopping KPF from forming or hiring a first rate management company to run its business?  KPF as the settlers’ keeper will then look after settlers’ welfare directly. FELDA doesn’t even have to list FGV as it’s out of orbit completely.

What is the immediate effect of the FGV IPO? It allows 94.5 % of the subscribers who are not even FELDA settlers ride on the broken backs of FELDA folks. That’s the immediate effect. FELDA settlers get 91 million shares. 1.3 billion shares are taken up by state governments, glcs, cornerstone investors. Inside that quantity, 420 million shares are set aside for rich individuals who must show they have a least RM 3 million in assets and companies worth RM 10 million.

The FELDA people whom everybody says the IPO is meant to benefit are left beached. FELDA Holds back 40% share. When people kept pressuring Cikgu Isa, he says 20% of the FGV shares will be parked under a trust Fund. In other words- gua takda caya sama itu koperasi bolo punya orang.

If we didn’t ask, he will not tell. His failure to tell suggests that` we will create a trust fund for settlers’ is an afterthought or an off the cuff reaction by a sly politician to get out of a sticky situation. What is the name of the trust fund? FAHc? 

Meanwhile, KPF the settlers’ cooperative is treated like a leper- FGV listens to the advice of the consultants not to touch cooperative. The settlers must now adjust themselves to the fact that they own nothing in FGV but holds 50% of FAHc. They derive profits and dividends from there – not directly from FGV. To put it bluntly, they have been suckered.

The settler ends up getting 810 units of shares. If the premium is RM 1, they get RM 810 less 200, they get RM 610 nett. Plus the RM 15,000 they got earlier because Najib is being charitable, they get RM less than RM 16,000. The Melayus who never set foot on FELDA land and who will touch FELDA folks with a 10-foot pole can get millions of Ringgit. So, so much for placing FELDA people first. They are first indeed, but first in the food chain of UMNO predators.

The first generation settlers need to think about the new wave of settlers too. With 360,000 hectares of corporate estates leased to FGV for 99 years, 2^nd and 3^rd generation settlers are forever denied the opportunity to own and cultivate land. 360,000 hectares can sustain some 80,000 more settlers. Where will they go? Not everyone goes to colleges and universities. Some FELDA born may want to become settlers as well as other landless and jobless in the villages.

They better start thinking hard. FGV will now own the corporate estates of about 360,000 hectares plus all the land not owned yet by FELDA. These include land that has been set aside by states for development purposes- the town areas in FELDA schemes, the land on which schools are built, community halls are constructed, land on which suraus and masjids are erected, even the land on which the new futsal fields are located. These are all taken over by FGV. You may need to pay commercial rates to play futsal now.

Where are the fundamentals to support the business? The productive trees? The market? The price? The industry?

Over 50% of the trees in FELDA plantations need to be replanted. That translates into higher costs. The cost of cultivating a new field is about RM15, 000. If 53% of 355,864 hectares need to be re-planted, it will cost RM2.8 billion on replanting alone, spread over 5-years. And if you find additional planting areas, you can only reap what you sow in 3-4 years.

New areas to be planted means more cost and a waiting period. Demand from big buyers is slowing down. China and India for example are cutting back their purchase of CPO. Malaysia isn’t the only supplier of CPO. Indonesia is becoming more competitive and can unload its CPO into the market dampening the price of Malaysian CPO.

The fundamentals are not favorable. That being the case, you can’t sustain the price post listing for long.

Whatever profits they make will depend on the premium at opening day. Wait longer, the price may fall below RM4.55/unit and the settler ends up owning the bank money. But UMNO and BN don’t care about this. All they are interested is the price on the opening day so that they and their cronies and fortunate and deep pocket members of the public can make a killing on that day.

Out of the whole exercise, the settler makes RM 15,000(paid in 3 tranches) and the proceeds from the sale of the FGV shares which they bought. One settler gets 810 shares while those not related to FELDA at all make a killing at the stock market, riding on the backs of the FELDA folks.

The interest of FELDA folks is looked after by their cooperative. But where is KPF which owns 51% of FELDA Holdings- whose assets are absorbed into FGV in the scheme of things?

Someone asked where is the FELDA Asset Holdings Corporation (FAHC) in my earlier article? It will soon come. It will hold the 40% of the shares not traded. Isa Samad has said that we will allocate 50% of the FAHC shares to KPF.

Read carefully. KPF which will give up its 51% in FELDA Holdings will be given 50% shares in FAHC. What does this mean? This means, later KPF will get its profits share and dividends from FAHC not FGV. Here now is a middleman created to take care of settler’s interest on trust. Isa Samad and the whole gang do not believe KPF can look after the interests and welfare of settlers and employees.. Because, the existence of the FAHC or a trust fund wasn’t mentioned in the IPO prospectus, that is worrying.  

Where will the RM 10billion be parked? I suspect, FELDA will get only RM 4 billion. The bulk goes to the minister in charge of FELDA. Maybe it goes to the UMNO war chest whose last remaining arsenal in its armory, is to buy out its way through. That’s something which the UMNO president is an expert in.

Even if FAHC, the holder of the 40% of FGV shares, gets RM4 billion, KPF will not see any money. It was supposed to be cashless transaction. What FGV gets is 50% in FAHC which has 40% equity in FGV. It won’t get cash but only promises of future dividends and share of profits. Maybe that RM 4 billion is held in the accounts of FAHC to finance at least one year’s of whatever is left of FELDA’s operations.

What about the 5 states which have provided irrevocable pledge to subscribe to the FGV shares? Pahang State Government – 5% (182,407,575 shares), Sabah State Government – 5% (182,407,575 shares), Terengganu State Government – 0.28% (10,000,000 shares), Negeri Sembilan State Government – 0.16% (5,837,070 shares). Perak State Government – 0.40% (14,957,421 shares)

How do these state governments pay for the shares? In the form of land set aside for FELDA plantations? If the payment is in the form of land converted into equity, does the cessation of land violate the terms of the GSA? Under the General Settlement Act( GSA 1960), FELDA is entrusted to develop land on behalf of settlers and not own land itself. Since 1990, when it stopped recruiting new settlers, it has done precisely that.  That’s the 360,000 hectares of land it manages through FELDA Plantations.

I suppose its land already assigned to FELDA’s current cultivation that is converted. Now that FGV is taking over, make sure all the premiums have been paid. So that the states can get money and pass it on to the rakyat.

Settlers have voices only in FAHC. They don’t realize the moment FGVH is listed; they have practically no say whatsoever as all the 360,000 hectares of land and all assets therein in FELDA Holdings and in 12 other subsidiaries are leased to FGVH for 99 years. According to the terms of the lease, FGVH must pay FELDA RM248.5 million (or RM698.24 / hectare) annually together with a fixed percentage of FGVH’s plantations operating profit. But remember, the rental is revisable at 20 year intervals.  And compare this lease fee for example to what Boustead pays at RM3, 500 / hectare, then you realize that the settlers were made suckers for such a cheap leasing rate.

That is, you jump up and down when your FELDA is underpaid by a whopping 400%!

As I have said, what’s not said in the prospectus is more important. The FGV prospectus is like the bikini or the G string. What it reveals is suggestive but what it hides is vital!

This is the con job that will consign PM Najib to the dustbin of the rogues’ history.  He is deep into pork barrel politics nowadays- now he’s giving out RM 520 to taxi drivers to buy tyres. That’s bribery by any name. Who is supplying the tyres? Some ketua Bahagian UMNO somewhere?