KUALA LUMPUR , April 10 — The government will allocate RM6.3 billion to rescue the ailing Federal Land Development Authority (Felda), according to an Economic Affairs Ministry’s White Paper tabled in Dewan Rakyat today.
The document said that the infusion is needed to manage Felda's RM14.4 billion in liabilities as the agency has critical cash-flow problems.
The bailout will be channelled via grants, loans and government guarantees.
The Felda White Paper also appended a forensic audit report by international audit firm, Ernst & Young, on eight assets invested in by Felda and Felda Investment Corp (FIC) Sdn Bhd.
In its report based on Felda's audited financial statement ended December 31, 2017, the firm said the overall value of the assets fell by almost half, from RM4 billion to RM2.2 billion.
It added that Felda and FIC also did not include explanations on its financial statements for certain years.
“The forensic audit into several projects also found a failure in management and overall internal control weaknesses in Felda and FIC.
“Among them, the board of directors or management failed to conduct a detailed and overall study before finalising investments. There are also several investments and purchases which were approved by the Felda board of directors and FIC which did not go through due diligence, projection studies/possibility and no detailed information/ detailed information with regards to the projects on the work paper which was tabled to the Felda and FIC board of directors.
“In addition, there were no records of meeting minutes to proof there were discussions and explanations on the decisions of the Felda and FIC board of directors, despite being pointed out about risks in the due diligence report , or additional research which was tabled to the Felda and FIC board of directors,” the White Paper said.
It added that the culture of weak and inconsistent compliance to policies and internal controls in Felda and FIC.
Both Felda and FIC's management also broke laws by making several decisions on purchases without approval from the directors’ board, or in direct contradiction with the decisions made by the directors board or investment committee.
The White Paper revealed that Felda was expected to delay its RM1.98 billion debt repayment this year, with another RM9.3 billion to be paid periodically in eight years, between 2020 and 2028.
It said that the cash flow issues resulted in the state-owned palm oil agency being unable to cover its operating, replanting and interests, as well as its outstanding payments owed to creditors.
The White Paper also suggested a restructuring of Felda's companies and investments, advising the GLC to get rid of non-strategic assets and shutter non-active enterprises.
Yesterday, business daily, The Edge, quoted Felda director-general Datuk Othman Omar as saying that Felda was duped into buying a 37 per cent stake in Eagle High Plantations TBK (EHP) at higher-than-market prices during the Barisan Nasional's (BN) administration because of orders from the top.
Citing a police report filed yesterday by Othman, The Edge reported that the order to purchase EHP shares from Indonesian conglomerate the Rajawali Group came from former prime minister Datuk Seri Najib Razak, in a Finance Ministry letter dated December 8, 2015.
Najib was at that time both the prime minister and finance minister.
Othman claimed in his police report that the Rajawali Group chairman Peter Sondakh was a friend of Najib's.