FOR government agency Federal Land Development Authority (Felda) – which has been entrusted with the livelihood of 112,635 settlers and their families nationwide – having strong sustainable income is crucial.

Back in 2012, Felda listed its subsidiary, Felda Global Ventures Holdings Bhd (FGV), with the intention of unlocking the value of the world’s largest crude palm oil producer that would eventually provide a sustainable source of income for Felda via a fixed land lease agreement and 15% share of its profits plus dividends.

While all seems good on paper, FGV’s performance and its contribution since the listing has failed to generate the much-desired results for Felda, which is the single largest shareholder with a 34% stake in FGV.

More recently, the boardroom crisis between FGV chairman Tan Sri Mohd Isa Abdul Samad and FGV group president/CEO Datuk Zakaria Arshad has also opened up several glaring issues linked to the leadership, management and operational discrepancies within the listed entity.

This led to the government appointing Pemandu Associates Sdn Bhd CEO Datuk Seri Idris Jala as an independent party to probe and establish the facts behind the boardroom crisis within FGV.

In an interview with StarBizWeek, Felda chairman Tan Sri Shahrir Abdul Samad harbours hope that all the issues will be put to rest with the government stepping in to look into the affairs of the FGV group.

“I hope the solutions and measures to be put forward will be the right ones so that they will help to improve the overall FGV operations. We must go back to the basics. Bear in mind, FGV is a government-linked company (GLC) and not Felda.

“As a GLC (FGV), the government has the leeway or latitude – by putting in Idris – to make sure things are progressing well.

“So, I hope the eventual result will bring the much-needed changes to FGV so that we can look forward to a better future.”

Basically, if FGV were to adhere to a high level of corporate governance and the best practices in management, which is expected once it becomes a corporate entity, then it will perform better in terms of future profits and dividend payments.

This is, of course, on the assumption that commodity prices are also performing well, adds Shahrir.

Shahrir also stresses that FGV must be able to measure up to its peers in the plantation industry.

“This would mean that FGV will need to adopt best practices, good corporate governance and good leadership.”

Then only Felda, as the single largest shareholder of FGV, will be truly satisfied and happy.

So, what went wrong with the promise of a sustainable income from FGV?

After unlocking RM6bil from its initial public offering (IPO), Shahrir points out that there were many unnecessary investments which FGV undertook, such as acquiring hotels in London and several local public-listed companies.

While some people may say the original sin is in the listing, “I don’t agree with that”.

“FGV has been given the RM6bil funds (from the IPO), so in the true sense, the company should be wise in making the right investments and be able to sustain itself and not otherwise,” he adds.

Having said that, the leadership within the FGV group is also seen as a pressing issue.

On Zakaria, who is currently on an indefinite leave of absence at the request of the FGV board, Shahrir says: “As an investor (Felda), I will read on the chairman’s statements in FGV’s recent annual reports.

“The FGV chairman in his statements in the 2015 and 2016 annual reports was full of praise for Zakaria for his efforts particularly in turning around Delima Oil Products Sdn Bhd as well as strict cost-cutting measures to improve the overall operations of FGV.”

So, it was rather baffling when Zakaria and three other FGV senior management officials were suddenly instructed to take an indefinite leave of absence, pending an internal investigation pertaining to Delima Oil and its long-term business partner, Afghan-based Safitex Trading LLC.

“While I do not want to dwell much on this matter, as Felda is the largest shareholder, I just want FGV to get its act right and get it together,” says Shahrir.

On whether an active politician should be heading a GLC, Shahrir says there should be no harm “as long as he knows what he is doing and not for the purpose of increasing his political base, where he starts spending for the wrong reasons”.

“I am a politician and don’t mind heading FGV, but then, I am already the Felda chairman.

“Basically, if you are a true leader going into the corporate sector, then you will have to provide the best-needed wisdom and values in the corporate sector.”

Shahrir also says that FGV’s current structure could also be “tweaked” for greater improvement, but that will be another story for him to tell.

Source: The Star