The Federal Land Development Authority (FELDA), the government agency that owns FGV Holdings Bhd, is one of the largest producers of oil palm in the world. It is also one of the country’s biggest beneficiaries of government bailouts. It still owes more than RM8 billion, according to the latest Auditor-¬General’s Report (AG’s report).
A recovery plan aimed at turning it around included a RM6.23 billion bailout from the government in 2019 which failed to deliver anticipated results. The agency has not reported an annual profit since 2013.
In 2022, the government awarded grants of RM214 million to FELDA. This was down by 37.4% from the RM342 million provided in 2021. The drop in grant was mainly due to lower allocation from the Ministry of Finance (MoF) in 2022. However, FELDA, which falls under the purview of the Prime Minister’s Department, remains in crisis mode and continues to rely on federal funding through grants to continue its operations and service its debt. But how much taxpayer’s money will be used to resolve its crisis?
The National Audit Department said the agency owes RM7.97 billion to a number of lenders, and some RM686 million to the federal government. These loans were part of measures to restructure its debt from 2018 to 2022.
FELDA is not alone in its struggle with debt. Of the 24 federal agencies with loan balances totalling RM123.14 billion in 2022, FELDA’s loan balance of RM8.66 billion is the third highest, after the Public Sector Home Financing Board’s RM62.08 billion and the National Higher Education Fund Corp’s RM41.5 billion.
The National Audit Department also flagged FELDA’s ability to continue as a going concern. It pointed to the agency’s cash balance of RM808 million as at end-December 2022, against its commitments totalling RM1.561 billion. These include commitments amounting to RM50 million per year under a Tawarruq Financing Facility agreement entered into by FELDA’s subsidiary FIC Properties Sdn Bhd in 2017 with Govco Holdings Bhd (GovCo), a company under the Minister of Finance Inc, for the first five years, starting in 2024, with the outstanding amount of RM2.595 billion scheduled over 15 years beginning in 2029. FIC Properties has been making losses from 2020 to 2022.
FELDA had secured the loan to support its US$680 million purchase of a 37% stake in Indonesia’s PT Eagle High Plantations Tbk from Indonesian tycoon Tan Sri Peter Sondakh’s Rajawali Group in 2015. That deal that raised a lot of questions as FELDA’s 81.9%-owned unit FGV had scrapped plans to buy the same block of shares upon the advice of two separate advisers, Bank of America and JP Morgan.
According to the AG’s Report, FELDA’s net loss was mainly attributable to impairments amounting to RM742 million on investments, outstanding amounts from subsidiaries and settlers’ debt.
With a loss of RM990 million in 2022, the Electricity Industry Fund was the second largest loss-making federal agency, followed by Railway Assets Corp (net loss of RM484 million), Kumpulan Wang Amanah Negara (KWAN) (RM353 million) and Kuala Lumpur City Hall (RM283 million).
The AG’s report also flagged uncertainty around state-owned PR1MA Corp Malaysia’s (PR1MA) status as a going concern.
The National Audit Department warned that PR1MA would not be able to meet all its impending Islamic bond (sukuk) repayments on time based on its liquidity position.
The agency’s cash balance as at Dec 31, 2022, fell to RM428 million from RM820 million a year earlier. It lost RM257 million in 2022, as its residential and commercial sales revenue fell 33.7% to RM857 million in 2022 from RM1.292 billion in the previous year.
PR1MA, which is under the purview of the housing and local government ministry, will have to repay sukuk worth a total of RM3.79 billion up to 2027. This includes Tranche 2 of a sukuk amounting to RM1.75 billion due to mature in October 2024.
There is a need for some third-party to assist MoF to sort out all these problems. Otherwise, we are waiting for a blow-up not a bailout!
Reference:
Malaysia-land of endless bailouts, Kang Siew Li, The Edge Malaysia, 18 March 2024
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