Corruption Probe Puts Malaysia’s Poverty-Busting Agency in Spotlight

A corruption probe at the listed arm of Malaysia’s state-owned Federal Land Development Authority (Felda) and the arrest of a high-profile politician last week have thrown the spotlight on a government agency set up to eradicate poverty among rural Malay farmers.

Today, Felda has blossomed into a mega business enterprise, being the world’s biggest producer of crude palm oil by volume through its listed unit, Felda Global Ventures (FGV).

But FGV has been mired in a scandal over questionable foreign and local deals that could haunt Prime Minister Najib Razak and his United Malays National Organization (UMNO) in upcoming polls, some analysts say.

Corruption busters last week held the former boss of Felda and FGV over a probe into FGV's overpriced purchase of a London hotel and a local hotel, highlighting what some groups believe are possible misappropriation of funds and abuse of power.

Isa Samad, a senior member of UMNO who was once suspended by the party for “money politics,” was remanded for five days for questioning by the Malaysian Anti-Corruption Commission (MACC) before being released over the weekend.

Earlier, four other senior executives had been told to go on an indefinite forced leave pending an internal investigation at the beleaguered FGV.

The unwelcome focus on alleged mismanagement in Felda comes ahead of general elections that Najib must call before the middle of next year. He lost the popular vote in the last elections in 2013 but his UMNO-led coalition managed to win enough seats in parliament to maintain power.

Politically linked

Felda’s humble beginning in 1956 was the brainchild of Abdul Razak Hussein, Najib’s late father and Malaysia’s second prime minister. It was set up to distribute farm land to ethnic Malays under a poverty elimination program.

Najib and UMNO have been banking on votes from rural settlers in Felda schemes to maintain power since the country gained independence in 1957.

ANAK, a non-governmental organization which represents the second and third generations of Felda settlers, said Isa’s arrest indicated evidence of issues related to misappropriation and abuse of power.

The group said it had raised the issues after Najib decided to retain Isa as chairman for five years until 2016.

“It is a huge mistake,” Mazlan Saliman, ANAK’s president and a settler, said in a statement.

“ANAK is extremely sad because the time it took [for the situation to be investigated] was too long …and the resulting [financial] damage was terrible.”

The NGO last month called for a royal commission to investigate allegations of wrongdoings within Felda.

Some believe Felda’s troubles began after the landmark public listing of FGV in 2012, when shares traded as high as 5.46 ringgit.

Many rural farmers had taken loans to participate in the initial public offering, when the firm raised $3.1 billion in Asia’s biggest and the world’s second largest IPO after Facebook.

FGV share price has since plummeted and stood at 1.62 ringgit per share as of Tuesday.

Economist Azrul Azwar Tajuddin when contacted said overvaluation of the IPO could be among reasons why FGV share prices may not regain IPO levels for a very long time.

“Other factors, whether perceived or real, such as the management and board of directors capabilities, various corporate governance-related issues and scandals, being one of the most politically linked public companies, among others, may continue to dog share price performance,” he told BenarNews.

A force to be reckoned with

Although the general election is not due until mid-2018, politicians and analysts have indicated Najib may dissolve parliament by the end of this year to prevent the newly formed opposition coalition Pakatan Harapan from gaining any foothold in rural areas.

Farmers from Felda make up the majority of voters in 54 out of 222 constituencies in parliament. The three states with the biggest numbers of settlers – Pahang, Johor and Negeri Sembilan – are under the control of Najib’s Barisan Nasional coalition.

There are 112,645 registered settlers with Felda nationwide who continue to benefit from subsidized fertilizer and low-interest loans from the government

But the new generations of Felda settlers are close to 2 million, making them a force to be reckoned with in any elections, according to a Felda official who declined to be named.

“A situation close to a real collapse could occur if these rural voters, mostly Felda settlers, can be convinced that the escalating cost of living that they have been grappling with for quite some time now, has a lot to do with everything that has gone awfully wrong with Felda since the FGV listing,” Azrul said.

Ibrahim Suffian, Merdeka Centre for Opinion Research executive director, said although the opposition has increased visits to settler communities, its winning chances are limited.

“Despite concerns over the issue, they are more concerned about their daily lives, debts and financial problems they are facing, and the six incentives announced by Prime Minister Najib Razak has given hope that their problems have been resolved, so their support for BN/UMNO will not decline that much,” he told BenarNews.

Najib announced special incentives in July for Felda settlers, including, among others, an interest-free home renovation loan valued at 40,000 ringgit each for 70,000 settlers.

“… As long as I hold the position of the Prime Minister, God-willing, I will ensure Felda’s progress is improved and the welfare of the settlers are guaranteed,” he said in his blog.

Shifts in Support

Invoke, a research outfit run by the opposition People’s Justice Party’s vice-president Rafizi Ramli, said only seven seats with Felda settlements have seen big shifts in support for the ruling coalition.

At least 46 other seats which had sizeable Felda communities showed a drop in support for the ruling coalition, Rafizi said, citing results of a research project conducted on 200,000 voters including Felda settlers announced in June.

Rafizi said factors that contributed to the declining support were the Felda crisis, the rise in consumer prices and a “national scandal” involving Najib’s administration.

Najib has been linked the scandal-ridden state fund 1Malaysia Development Berhad (1MDB), which is the subject of money-laundering investigations in at least six countries.

Najib denied taking money from 1MDB after it was reported that investigators traced nearly $700 million to his bank accounts. Authorities cleared him of any wrongdoing, saying the money was a donation from Saudi Arabia.

Hata Wahari in Kuala Lumpur contributed to this report.