Felda must put its own house in order

Why is Felda Global Ventures, which has millions in accumulated losses, now managing Felda Holdings Bhd?

COMMENT

Let’s talk a little about the coming IPO (initial public offering) of Felda Global Ventures Bhd (FGVH).

Let’s humour the sycophants who’ve proposed that FGVH manage Felda Holdings Bhd (FHB).

It’s touted as the next big thing to spruce up Malay economics. What isn’t?

There has never been any economic initiative that is not described glowingly as a facilitator for the betterment of Malay economics.

At the end of the day, the lion’s share in the IPO will go into hands of the select few.

As to the economic facilitators regarded as a boon to Malay economics, usually, in the end, they fumbled and ended up in the hands of non-Malays.

Remember the redevelopment of KTM land in Sentul? Well, that’s YTL country now.

How was the equity breakdown in the YTL deal? Or was the land given up in exchange for an elevated highway?

What about the redevelopment of the Sungai Besi base? That will become a Middle Eastern enclave. And what about the development of Sungai Buloh land?

FGVH has nothing

The only difference between these “projects” and Felda is that the majority of settlers are Malays. That gives the corporate exercise a Malay flavor.

FGVH is going for listing but it hasn’t got the credibility if it goes alone.

FGVH owns 49% of FHB. The balance 51% of FHB is owned by Kumpulan Permodalan Felda (KPF), which incidentally has RM7 billion in its kitty.

FGVH has accumulated losses. Its business forays overseas have bombed but its investment in FHB makes money.

The subsidiaries of FGVH like Felda Iffco Sdn Bhd, Felda Global Technologies through Twin Rivers Technologies US (TRT), Felda Global Ventures Middle East and Felda Global Ventures Arabia have all chalked up accumulated losses of around RM500 million up to 2010.

As such, FGVH hasn’t got a good track record.

Getting FGVH’s management team that loses money to manage a profitable business is like asking a rat to look after the pumpkin.

Riding on Felda Holdings’ credibility

Anyway as the tale goes, FGVH absorbs FHB because it owns 49% of the equity.

To entice the majority owner of the 51% equity, FGVH made a sweetener allowing KPF to own 61% of listed FGVH.

FHB makes money, FGV on its own doesn’t. They operate in different markets and therefore do not compete.

If they compete, it’s a natural outcome that the weaker and less efficient (read FGV) will lose.

That’s the law of free competition any way.

If you force the weaker to team up with the stronger, that act may result in the weakening of the whole new partnership as the culture in the weaker organisation can prevail.

The culture of the city cousin (FGVH) – more worldly and sophisticated – will prevail over the hillbilly culture of the country cousin.

We have to make this analogy so that people understand the possible outcome of the merger between FHB and FGV.

I find the arguments that the new company will benefit from better professional management and all that facetious.

The fact that FHB has done exceedingly well means that the management is all right.

Superior management

It’s definitely better than the cosmopolitan FGV because the latter is not doing that well.

FHB should be allowed to buy out FGV and apply its superior management on the newly acquired asset.

Probably FGV should be allowed to hold only 20%.

But before the listing can come to fruition, Felda must put its own house in order.

The writer is a former Umno state assemblyman and a FMT columnist. This is an excerpt from his blog sakmongkolak47.