Felda spent RM6b from IPO on unprofitable ventures, White Paper reveals

Economic Affairs Minister Datuk Seri Azmin Ali poses for pictures with the Felda White Paper in Parliament April 10, 2019. — Picture by Shafwan Zaidon
Economic Affairs Minister Datuk Seri Azmin Ali poses for pictures with the Felda White Paper in Parliament April 10, 2019. — Picture by Shafwan Zaidon

KUALA LUMPUR, April 10 ― The Federal Land Development Authority (Felda) spent RM6 billion from the RM10.5 billion raised in its investment arm’s initial public offering (IPO) in 2012 on loss-making and unproductive ventures, the Felda White Paper revealed.

It said that the agency should have used the sum for strategic investments for the long-term benefit of Felda settlers, but only a fraction was utilised for that purpose.

“Of the amount (RM10.5 billion) Felda received RM6 billion, whereas the balance of almost RM4.5 billion was distributed to FGV,” the report said, referring to Felda Global Ventures.

“The revenue should have been used for strategic investments to benefit settlers for a long time. However, Felda spent RM1.4 billion (24 per cent) for new investments which are not profitable, and RM4.6 billion (76 per cent) in unproductive spending,” it said.

The White Paper further revealed that FGV spent RM3.3 billion (73 per cent) of the RM4.5 billion on investments and developments which were not profitable, such as the takeover of several companies.

“The balance of RM1.2 billion (27 per cent) meanwhile, was spent on working capital and other expenditures,” it said.

Economic Affairs Minister Datuk Seri Azmin Ali tabled the White Paper in the Dewan Rakyat today.

In August last year, Azmin said that the document is in line with the government’s move to improve the wellbeing of Felda settlers in line with the Land Development Act 1956.

The agnecy has been riddled with financial problems for several years.

FGV shot to global fame as the world’s second largest IPO of the year after Facebook Inc’s US$16 billion listing, and as the biggest listing in Asia for the same year. It was the biggest IPO in Malaysia since 2010’s listing of Petronas Chemicals Group Bhd.

Raising RM10.4 billion through its IPO with shares offered at RM4.55 per piece, FGV debuted on Malaysia’s stock exchange on June 28, 2012, with trading going as high as RM5.46 per share before closing at RM5.30 per share.

Shortly before its listing, Datuk Seri Najib Razak had on May 8, 2012, reportedly announced that RM1.689 billion will be used as a windfall payment from FGV’s IPO proceeds to give out RM15,000 each to 112,635 Felda families.

FGV’s share prices hit an all-time low in August 2015 at a range of RM1.15 to RM1.19 per share, based on different news reports.