Felda taking back land from FGV “not a fair deal”: Economists

KUALA LUMPUR: The Federal Land Development Authority’s (Felda) possible termination of its 99-year land lease agreement with FGV Holdings Bhd may not be a good deal, economists said.

It would not be a fair business deal if Felda had to pay FGV a reported RM4.3 billion for early termination of the LLA, they added.

They also said Felda should focus on its existing business and assets by coming up with value added propositions, and not interfere with FGV’s turnaround efforts.

Putra Business School associate professor Dr Ahmed Razman Abdul Latif said paying the reported RM4.3 billion would seem like a government bailout instead of fair business deal.

“The rakyat will probably not be happy, as the priority right now is to revitalise the economy and help the affected individuals, household and communities.

“What Felda needs to do is to focus on its existing business and assets by coming up with value added propositions, and not interfering with FGV’s own turnaround exercise,” Ahmed Razman told the New Straits Times.

Economist Tan Sri Ramon Navaratnam said the government can back up Felda in the potential deal by providing transparency and disclosing details to the public as well as the smallholders on the fairness of the deal.

“People are getting the impression that this business deal could be abused. The responsibility now is on Felda, and backed by the government, to explain how is this going to benefit the rakyat and smallholders, as well as how is this deal does not promote monopoly.

“The government keeps talking about shared prosperity, now they need to explain how this wealth is being shared,” he said.

Last week, Berita Harian reported that Felda wanted to take back some 350,000 hectares that it had leased to FGV.

AmInvestment Bank Bhd has estimated that Felda would have to pay about RM4.3 billion to FGV for the early termination of the LLA.

In 2012, Felda leased the 350,000ha to FGV through an LLA for 99 years starting from 2012. The latter had committed to paying RM248 million a year to the former.

Felda chairman Datuk Seri Idris Jusoh reportedly said the board of directors had agreed on the decision and was awaiting the government’s directive before negotiating with FGV.

Idris also claimed that Felda had recorded more than RM1 billion profit annually prior to 2012, but with the existence of FGV as a listed company in 2012, Felda had suffered losses every year with its debt ballooning.

In its counter statement, FGV said the real issue was the use of revenue from its initial public offering (IPO), and not the IPO itself.

“Felda has earned RM5.7 billion from this IPO while FGV has earned RM4.5 billion,” it added.

Unfortunately for FGV, it said part of the proceeds was not well invested and up until the end of 2018, the company had made substantial impairments amounted to RM780 million for those new investments.

“Felda’s statement that it should receive RM800 million a year from the LLA is not correct. In the agreement, it is stated that the amount payable to Felda is RM248 million a year plus 15 per cent of the operating profit from LLA land.”

To date, FGV said its responsibility towards Felda based on the LLA, amounting to RM248 million a year, had been fully met.

“FGV has paid more than RM2.5 billion to Felda from 2012 to 2019,” it added.

Source: NST