KUALA LUMPUR: Putrajaya will provide state-owned palm oil plantation agency Felda with financial aid of RM6.23 billion (US$1.52 billion) following a government inquiry into the company whose losses and debt have soared over the past decade.
The agency’s total liabilities had risen 12-fold over 10 years, from RM1.2 billion in 2007 to RM14.4 billion in 2017, according to a white paper released to Parliament today that cited poor management and low integrity.
The report was prepared by the economic affairs ministry after the government of Dr Mahathir Mohamad, who came to power last year after defeating longtime ruling coalition Barisan Nasional, vowed to look into Felda’s financial troubles and alleged graft.
“The report found that operational mismanagement, failure of investment management and low levels of integrity are the main sources that caused Felda’s poor cash flow, and affected its developmental programme,” it said.
Felda, or the Federal Land Development Authority, will also restructure and delay some repayments of its borrowings, said the report, which follows two years of management crises and allegations of corruption under the previous government.
The report said Felda would restructure the principal payment of its debts, as well as delay the repayment of its borrowings of RM1.98 billion in 2019. The remainder of its RM9.3 billion borrowings will be repaid from 2020 to 2028.
Felda’s chairman said last September it would sell assets, restructure loans and try to boost its cash flow in a bid to trim debts by nearly 20% from RM8.03 billion (US$1.93 billion) at mid-2018 to RM6.5 billion by year-end.
Felda was created by Malaysia’s second prime minister in 1956, and aimed to resettle and employ the rural poor in the palm oil industry. It grew to become the world’s largest state-run palm oil agency.
Its problems, however, have frustrated Malaysia’s 650,000 palm oil farmers, also known as settlers, as they have racked up debt on low incomes. The settlers had been a key source of votes for the previous ruling coalition, which suffered a shock defeat in May last year.
The government said it has set aside about RM2 billion to write off debt interest for settlers loans, among other measures to increase estate efficiencies and reduce operational costs.