KUALA LUMPUR: Economic Affairs Minister Mohamed Azmin Ali told the Dewan Rakyat today that the Barisan Nasional (BN) administration led by former prime minister Najib Razak diverted RM2.7 billion from Felda, meant to upgrade its plantations, to buy support for the coalition in the last general election.
He said the money came from the listing of Felda Global Ventures Holdings (FGV), the commercial arm of the land development agency, which generated RM10.5 billion in cash, and where Felda earned RM6 billion.
“Felda’s earnings were supposed to have been utilised to develop capacity for its future, to develop its plantations as well as for its modernisation programme involving technology, and research and development.
“Unfortunately, RM1.4 billion from the revenue earned by Felda through the listing was spent on dubious investments involving shady transactions.
“RM2.7 billion, on the other hand, was used to buy support in the 14th general election,” Azmin said in his speech when tabling the Felda white paper today.
The Felda white paper is to obtain a complete picture of the mismanagement under the previous administration which reportedly led to the many financial troubles suffered by the land development agency.
Azmin (PH-Gombak) said while Felda had billions of ringgit in its coffers in the past, its cash flow was now at a critical level.
He said the agency’s cash balance had plunged from an average of RM2.5 billion between 2007 and 2011 to only RM400 million in 2017.
As of May 9 last year, Azmin said, Felda only had RM35 million left.
“Such cash flow constraints have rendered Felda unable to cover its operating expenses, replantation costs, aid as well as loans for settlers,” he said, adding that the issue of cash flow deficit had also been raised in the Auditor-General’s Report since 2016.
Azmin said before FGV’s listing, Felda was generating operational revenue through the management of its commercial farms spanning 400,000 hectares. Between 2007 and 2011, Felda recorded net profits of between RM200 million and RM1.1 billion annually.
For the purposes of FGV’s listing, Azmin said Felda had handed over management of the farms through a land lease agreement (LLA) for a period of 99 years.
“After FGV’s listing, specifically from 2013, Felda’s financial performance began to deteriorate. Felda continuously recorded losses, the highest coming in 2017 at RM4.9 billion.”
Under the agreement, Felda was supposed to receive land lease payments totalling RM248 million a year, as well as profit sharing at 15% as returns for the lease in commercial land.
But Azmin said Felda only received an average of RM400 million a year from FGV, compared to the minimum of RM800 million a year needed to manage the farms and ensure the welfare of settlers.
“Felda’s financial standing worsened due to continuous wastage through asset purchase at rates higher than market price. For instance, the acquisition of Eagle High from PT Rajawali Capital International (owned by Peter Sondakh) at a rate of 96% higher compared to the market price then.
“As of March this year, the RM2.3 billion investment only had a market value of RM500 million,” he said.
Azmin also said the forensic audit found conflict of interest, most apparently when Isa Samad was given the post of chairman in Felda, Felda Investment Corporation Sdn Bhd (FIC), FGV Holdings Berhad, and 39 subsidiaries under Felda and FGV.
He said conflict of interest worsened when Isa held executive power as Felda chairman.
“For instance, the acquisition of Park City Grand Plaza Kensington in London was done by Isa, without the approval of the Felda board, above market price and in violation of Felda’s investment policy.
“Isa bought the property at RM331 million while the market price for the property at the time was only RM128 million,” he said.
Park City Grand Plaza Kensington was among eight Felda investments that came under scrutiny during a forensic audit for the white paper.