Felda is openly defying one of the main thrusts of the Federal Government's ETP

Felda is openly defying one of the main thrusts of the Federal Government's Economic Transformation Plan(ETP) of divestment of non-core assets with its recent investment of nearly RM 700 Million in local and London hotels. Felda and its 39 percent-owned subsidiary Felda Venture Global Holdings (FGV) has raised questions whether such open defiance is related to the UMNO party polls following the acquisition of:-

  • The four star Grand Borneo Hotel, located in Kota Kinabalu for around RM86 million,

  • 25% stake in Bursa listed Iris Corp that makes smart cards and agricultural villages for RM110 million, and

  • Grand Plaza Service Apartments for 98 million pounds (almost RM497 million) in London, United Kingdom.

What has operating and owning eight hotel properties spread out across Perak, Terengganu, Negeri Sembilan, Sabah and London, any remote connection to oil palm plantations? How does investing RM 700 million into running hotels here and in London benefit the lives of more than one million people living in the Felda settlements across Malaysia?

Chairperson Isa Samad has suggested that it will be important for Felda to diversify its plantation portfolio, which is now subject to the vagaries of the international crude palm oil market. Whilst diversification is a common corporate practice, it must be tied or related to either its core businesses or where there is expert management experience.

The corporate world is littered with the carcasses of reckless or irrational investments in businesses that the parent company possess little knowledge, much less expertise. Felda has no knowledge whatsoever in running hotels. What makes Felda think it can do a better job than experienced hoteliers and get a better rate of return for its RM 700 million investment in non-core business than investing in the oil palm plantation where it has intimate knowledge?

ETP's mention of divestment is borne out by my experience in running the Penang state government. When we first took over in 2008, we were shocked that the state government and its subsidiaries were heavily involved in non-core activities which it has no expertise such as operating oil palms, rubber plantations, fish farms, hotels, educational colleges and even a golf course. All these ill-considered ventures were making losses.

Through a policy of divestment and outsourcing through open competitive tenders, these heavy annual operating losses were turned instead into yearly profits. However these operating losses could be quickly turned into profits because the properties were already owned by the state government. In other words there was no capital expenditure(capex) involved.

With the RM700 million capex by Felda, it is unlikely that even if Felda make profits, the profits will justify the cost of investment. For this reason, BN leaders should not treat public monies as their private holdings but justify in the interests of accountability and transparency, the financial benefits of investing in non-core businesses to the people.

Lim Guan Eng DAP Secretary General & MP for Bagan