Archive for the 'Economy' Category


Turkey Of The Year: Why did FELDA buy 37% of Eagle High?

Turkey Of The Year: Why did FELDA buy 37% of Eagle High?

IT came as a surprise when the Federal Land Development Authority (FELDA) was reported to be in talks to acquire a 37% stake in PT Eagle High Plantations Tbk from Tan Sri Peter Sondakh’s Rajawali group. The deal was concluded for US$505.4 million or RM2.26 billion in April.

While FELDA attempted to justify the purchase — among other things, saying it got a 30% discount from Rajawali — most market watchers, analysts and industry players questioned the merits of the deal.

After all, FELDA’s 33% unit Felda Global Ventures Holdings Bhd (FGV) had scrapped plans to buy the same block of shares upon the advice of two separate advisers, Bank of America and JP Morgan, for a variety of reasons. So why buy an asset its own unit had walked away from?

Apart from that, Peter Sondakh is known to be well connected in Malaysia, giving rise to talk that the deal may have been politically motivated.

To recap, in June 2015, FGV signed a heads of agreement with Rajawali to acquire a 37% block in Eagle High for US$680 million in a mix of cash and shares.

In 2015, the average crude palm oil (CPO) was RM2,258 per tonne, compared to RM2,670 so far this year — which indicates the offer to FGV would have been overpriced if a 30% discount was given after a rise in the CPO price.

The fact that it was FELDA Investment Corp (FIC) Properties Sdn Bhd — originally mandated to acquire non-plantation assets — that acquired the shares also raised eyebrows. Most would think FGV would be the natural choice to invest in plantation and agriculture-related assets.

So, did FIC Properties step in because FGV was advised against buying Eagle High?

The US$505.4 million for the 37% stake works out to IDR580 a share — a whopping 95% premium to Eagle High’s closing price at the time. With Eagle High now trading below IDR180, it means FELDA is sitting on a paper loss in excess of US$326 million.

Now, eight months after the acquisition, Eagle High’s market capitalisation is just below US$420 million, which means FELDA’s 37% is valued at just US$155.4 million — less than one-third what it paid.

Attempts by FELDA chairman Tan Sri Shahrir Samad to suggest that FELDA was an intermediary for the Malaysian government did not come across as a strong justification for the acqusition.

“We are representing the government of Malaysia on two levels — the management and board of directors of Eagle High,” he said in August.

FELDA officials also explained that the acquisition was made with government funding, which raised the question as to whether the agency would have been able to obtain the funding on its own.

But what is not clear is why this acquisition is so important that FELDA had to pay more than RM2 billion for it via a loan from the government?

Turkey Of The Year: Why did FELDA buy 37% of Eagle High?
January 01, 2018 –


The sad tale of Felda and FGV

The sad tale of Felda and FGV

Instead of becoming rich and comfortable, settlers are now in a constant tussle with Felda over their rights and benefits.


By TK Chua

Federal Land Development Authority (Felda) was one of the rare successes of socio-economic engineering in our country.

It has brought a decent life to many settlers from its inception in the 1950s.

It was established as a statutory body and for years Felda was managed by technocrats. The objective was modest — to bring about poverty alleviation, especially among the rural poor.

Over time, Felda became a very rich and well-endowed organisation, more due to its large holding of land throughout the country when land was acquired at a pittance.

In tandem, the settlers and the government should have become very rich too, benefiting from income and capital appreciation from their investment.

But what happened in recent years was most unfortunate. For reasons which are quite beyond my comprehension, settlers are now saddled with endless borrowings and debts.

Instead of becoming rich and comfortable, the settlers are now in a constant tussle with Felda over their rights and benefits.

Instead of becoming independent, based on what they own, they are now in constant need of “special bonus/payments” from the government.

The problem did not stop there. With corporate bigwigs, consisting of former politicians, indulging in “investing” and “venturing”, the problems in Felda have became bigger.

Almost everything they touched has become mud so far.

I have thought Felda settlers should have been given their free shares when FGV was first listed.

Instead, it was loans in exchange for shares in FGV. Did Felda settlers own anything at all in Felda before FGV was listed?

But not only that, the price of FGV has plummeted from RM5 a share at the time of listing to less than RM2 a share at present.

Did other plantation companies listed in the exchange suffer the same fate as FGV during the same period?

We should ask why, instead of making the settlers richer, we have made them more in debt and poorer.

Then what about their so many other devious and dubious investments, from luxurious hotels in London to a sturgeon fish project in Malaysia. I hope the investigations into them are still going on.

And before we can get on top of all this, we have been handed another bombshell — their prime land on Jalan Semarak in Kuala Lumpur is now embroiled in a controversy and uncertainties.

You know what; I am not optimistic at all that the latest problem in Felda and FGV will be resolved soon.

Label me a pessimist if you wish. In fact, I wish I was wrong.

The sad tale of Felda and FGV
December 25, 2017 – FMT


Property freeze: Why does govt not listen to Bank Negara, asks Pua

Property freeze: Why does govt not listen to Bank Negara, asks Pua

DAP MP says halting new approvals for high-rise residential properties over RM1 million does nothing to address the glut.

PETALING JAYA: Petaling Jaya Utara MP Tony Pua wants to know why the government implemented the luxury property freeze instead of heeding advice from Bank Negara Malaysia (BNM) on tackling the supply-demand imbalance.

Calling the freeze another example of the government’s tendency to ignore expert policy advice in favour of knee-jerk reactions, he said BNM’s report on the matter had outline six different recommendations for dealing with specific issues in the property market.

“Why doesn’t the government just adopt the advice already given to it by BNM?

“It is difficult to understand why the government has chosen to ignore BNM’s relatively sound advice to address these problems,” he said in a statement today.

The government’s decision to freeze luxury property developments valued at over RM1 million followed a BNM report warning that unsold residential properties were at a decade-high level.

BNM added that the glut could worsen if the current supply-demand conditions persisted.

The directive, which came into effect on Nov 1, covers high-rise condominiums, shopping malls and commercial units.

Pua said the central bank had suggested increasing encouragement for the rental market to address the high level of unsold residential properties.

It also recommended that the government increase its efficiency in providing and allocating affordable homes.

To address the large incoming supply of commercial properties, he said, BNM had suggested better management, including ensuring a thorough assessment of the projects’ viability and making certain that developers are cognisant of demand conditions.

The report also recommended the repurposing of vacant commercial buildings to alleviate the problem of high office vacancy rates and low rental rates in existing buildings, and increasing demand for existing space through rental rebates or greater efforts to attract foreign business.

“The government’s halting of new approvals for high-rise residential developments over RM1 million does nothing to address these issues,” Pua said.

“Unlike these policies, the government’s knee-jerk ban will only halt the approvals for future high-end developments without managing the already-severe level of oversupply.”

The DAP national publicity secretary urged the government to immediately take heed of BNM’s recommendations, and conduct a thorough study on the matter with all stakeholders and think tanks.

He also repeated his criticism of the government’s seemingly inconsistent stand on the property freeze, saying it had now made a “near complete U-turn” on the issue.

Based on the latest announcements by Urban Wellbeing, Housing and Local Government Minister Noh Omar and Second Finance Minister Johari Abdul Ghani, he said, property developers could now appeal to ministers for project approval on a case-by-case basis.

“Basically, the ministers have now granted themselves full discretionary powers to approve projects for developers who can sweet-talk their way to winning the hearts of the ministers.

“The arbitrary nature of this new policy will have serious consequences for short and longer term investments by both foreign and domestic investors in Malaysia,” he said.

Property freeze: Why does govt not listen to Bank Negara, asks Pua
December 8, 2017 – FMT


The risks of easy financing for MRT3

The risks of easy financing for MRT3

A QUESTION OF BUSINESS | While Mass Rapid Transit Corporation (MRT Corp) CEO Shahril Mokhtar’s attempts to get the lowest possible price for MRT3, estimated to cost RM40 to RM50 billion, is laudable, some key questions involved go beyond his brief and need answers from his boss Prime Minister Najib Abdul Razak, who is also the finance minister. MRT Corp is wholly-owned by the Minister of Finance Incorporated.

This is a terribly convoluted project – it most likely involves massive amounts of foreign financing, interest rates to be set and whether they are floating or not, a minimum moratorium of eight years and a minimum repayment period of 30 years.

Last week, we explained why the tender terms favour China contractors. The focus here will be on the risks that MRT3, as tendered, poses to the country in general.

First, there are few bona fide organisations which are able to provide a 90 percent loan for a minimum period of 30 years. Even if they could, the nation faces horrendous risks in terms of movement of exchange rates and interest rates.

As an example, in 1980, one US dollar was worth 2.4 ringgit – now it’s about 4.2. That’s a depreciation of some 40 percent! If the ringgit depreciates against the currency in which the loan is taken, then the repercussions can be serious.

Former prime minister Dr Mahathir Mohamad lamented endlessly in the 80s about the fall of the ringgit against the yen when he took billions of ringgit equivalent in cheap (low-interest rate) yen loans to finance his heavy industrialisation programme. When the yen appreciated, there were huge foreign exchange losses which more than mitigated the low-interest costs.

And then there is the interest rate – one cannot assume that the interest rate will continue to be low. Few, if anyone, can hedge interest rates to provide a fixed rate for a period of at least 38 years – which is the minimum period for the moratorium and the repayment combined.

Also, low-interest financing is usually provided by governments or their agencies in return for sourcing products and other services from the host country. In the 80s, in return for easy financing, Japan required that products and services be sourced from the country.

Financial prudence out the window

The other danger of easy financing is that financial prudence gets thrown out of the window. Since one worries about repayment only much later, when one is no longer in power and accountable, the leadership more or less throws money away, especially if there are kickbacks and other corrupt practices involved.

It is a sad fact of life that powerful, developed and developing countries have often thrown whatever moral leanings they have aboard into some deep ocean so long as their self-interest and their hegemonic intentions are served by getting nations overly into debt to them.

On top of that, like moneylenders since time immemorial, they then swoop down on the poor borrower, in this case Malaysia, if they can’t repay and demand land and other assets far in excess of what is owed to them, extracting their pound of flesh in the end.

It is no exaggeration to say that we could pawn our country and jeopardise our future for many generations to come if we are not prudent about borrowing. There is also the considerable opportunity for corruption and pilferage of the country’s precious resources, which can impair good judgment.

Many companies cannot provide both a great financing package and a low, non-binding project cost which allows the cheapest possible and the most beneficial sourcing. As such, those that can provide the financing already have an advantage and are bound to inflate costs and other arrangements in their favour to compensate for favourable financing arrangements.

The financing may be in the name of MRT Corp, but without government guarantees – as in the loans for 1MDB – the financing cannot be arranged. And this loan, although effectively the government’s, does not get counted as government borrowing, again leading to rather loose financial controls. This is what we saw in 1MDB.

The risks of easy financing for MRT3
Nov 2017 – malaysiakini


1MDB suit: London consent award has element of fraud, says lawyer

1MDB suit: London consent award has element of fraud, says lawyer

Mohamed Haniff Khatri Abdullah says High Court should hear the merit of the suit as the court can declare the award reached between 1MDB and IPIC invalid under local arbitration law.

KUALA LUMPUR: A lawyer says the High Court should hear the merit of a suit brought by 10 opposition members against Prime Minister Najib Razak, the government and 1MDB for paying US$1.2 billion to Abu Dhabi-based International Petroleum Investment Company (IPIC) as there is an element of fraud.

Lawyer Mohamed Haniff Khatri Abdullah added in his submission before Justice Hue Siew Kheng that Second Finance Minister Johari Abdul had said the government had made part payment to IPIC and its “subsidiary”, Aabar Investment PJS Ltd.

He said Johari, in July last year, had said the government would fight tooth and nail in an arbitration proceeding with IPIC, following a dispute over the payments, in London.

“However, in April, it was revealed that the finance ministry decided not to contest, and entered a consent award to pay US$3.5 billion to the original Aabar,” he told Hue.

Parties made submissions in Hue’s chambers, but Haniff later told reporters the salient points of his submission as to why his clients were objecting to an application by Najib, the government and 1MDB to strike out their suit.

Haniff said the court should hear the substantive matter of the suit as it could declare the consent award invalid under local arbitration law.

Meanwhile, Najib’s lawyer Mohd Hafarizam Harun said the Pakatan Harapan youth leaders who filed the class action had no legal standing and did not suffer any damage.

“They are not parties in the arbitration and they are not adversely affected,” he said.

He also said the High Court had no jurisdiction to hear the suit as the arbitration proceedings had taken place in London.

Hafarizam said the plaintiffs were wrong to include Najib as party to the suit as he was not involved in the deal concerning IPIC and Aabar Investments PJS.

Lawyer Tan Hock Chuan represented 1MDB while senior federal counsel Alice Loke appeared for the government.

In July, the group, identified as Gerakan Anakmuda Tolak Najib (Ganti), sought a court order that the settlement agreement on May 11 between IPIC and 1MDB, which is wholly-owned by the government, at the London International Court of Arbitration be declared invalid.

The opposition youth members also sought to compel Najib, the government and 1MDB to provide detailed accounts of all money paid to IPIC and its subsidiary, Aabar Investment PJS.

The group claimed the consent award agreed on between IPIC and Aabar Investment PJS in London was wrong and fraudulent.

The group said it was forced to resort to suing Najib and two others as no action had been taken on those who made the “fraud payments” to the British Virgin Island-registered Aabar Investment PJS Limited or Aabar BVI, which IPIC claimed was not its subsidiary.

1MDB suit: London consent award has element of fraud, says lawyer
November 16, 2017 – FMT


Six months on, is something amiss in Bandar M’sia’s search for a master developer?

Six months on, is something amiss in Bandar M’sia’s search for a master developer?

MP SPEAKS | Like the RM7.41 billion failed sale of Bandar Malaysia to the Iskandar Waterfront Holdings-China Railway Engineering Corporation (IWH CREC) consortium and the subsequent imaginary sale to China’s Dalian Wanda Group, it looks like the current Request For Proposal (RFP) for Bandar Malaysia will suffer the same fate.

In my parliamentary question on Nov 8, I had asked the Finance Ministry for a simple update on the progress of Bandar Malaysia’s search for a new master developer.

The new tender process for Bandar Malaysia’s developer comes following the spectacular collapse of the RM7.41 billion deal with the IWH CREC consortium to acquire a 60 percent stake in Bandar Malaysia in May.

Following that was another dramatic public relations disaster when the Prime Minister Najib Abdul Razak failed to seal an improved multi-billion dollar Bandar Malaysia deal with China’s Dalian Wanda Group.

In an attempt to save face and salvage the project, Bandar Malaysia’s owner, the Finance Ministry, launched a new request for RFP to collect bids for a new master developer for the project.

The new RFP also included more stringent criteria including that the developer needed to be an affiliate of a Fortune 500 company and must have cumulatively generated RM50 billion in revenue in the last 3 consecutive years.

In the Finance Minister’s answer to my question, he only restated information which was already made known to the press for months.

He said that the RFP process had been completed and listed out the same criteria that had been said before.

He added that eight companies had met these criteria and that a final decision will be announced soon.

The reply shows that all is clearly not going to plans with the re-bidding process of Bandar Malaysia.

When the RFP was first announced in May, the new Bandar Malaysia chairman and Treasury secretary-general Irwan Serigar Abdullah said that the RFP deadline would close on June 30 and the final decision would be made by July 14.

The RFP was finally launched on July 5, with a deadline on July 20.

The Singapore Straits Times had reported on July 25 that seven Chinese state-controlled entities and two Japanese firms were in competition for the project.

They included China State Construction Engineering Co Ltd, China Communications Construction Company (CCCC) from China and Daiwa House Industry Group and Mitsui Fudosan Co Ltd from Japan.

Then on Aug 23, Tan Sri Irwan Serigar updated Malaysians with his announcement that “six companies have shown interest and visited the Bandar Malaysia project site”.

“We took them for a site visit and they need to submit their proposal by the end of this month,” he said.

However, Irwan said the government does not know how many companies, out of the six, will actually submit their proposals based on the RFP for the project.

Now, it is now four months after the RFP was announced and we have had no further updates as to who might become the master developer for the Bandar Malaysia.

Six months on, is something amiss in Bandar M’sia’s search for a master developer?
14 Nov 2017 – malaysiakini


The controversial contract that can cost BN the Felda vote

The controversial contract that can cost BN the Felda vote

ABOUT 15 years ago, tens of thousands of settlers signed a replanting agreement with Felda that activists claim has led to one of their biggest problems today – crushing debt.

That agreement is now being studied by the settlers’ children, activists, lawyers, and politicians who want to either challenge it in court or use it as fodder for their general election campaigns.

Some of the settlers and their lawyers allege that the agreement is lopsided.

Others are working with politicians in Pakatan Harapan to turn it into a defining issue that could sway the Felda vote which impacts 56 parliamentary seats in the peninsula – most of which are held by Barisan Nasional.

There are 112,635 Felda settlers, not including their wives and children.

“We are forming a committee to study this issue at the party level before bringing it to the Pakatan Harapan presidential council,” said Amanah communications chief Khalid Samad.

Amanah, together with Bersatu, PKR, and DAP, form the PH alliance.

“We hope to go on a roadshow in Felda areas to explain the issue just like we did with the 1MDB (1Malaysia Development Bhd) financial scandal, and offer solutions,” Khalid told The Malaysian Insight.

One of the lawyers studying the agreement, Dr Zulqarnain Luqman said 95% of the settlers signed the contract with Felda so that the agency could replant the holdings.

Hisomuddin Bakar, the son of a settler in Felda Cini, Pahang, said each Felda settler owned a four-hectare oil palm or rubber plantation, and by the beginning of the millennium, many of those trees were too old to bear fruit or latex.

He said Felda crafted an agreement wherein settlers would relinquish management of their estates to the agency so that it could replant the land with new trees.

It took about three years to replant and for the trees to mature, during which the holdings did not produce yields. During this period, each settler was paid a living allowance of RM1,500 per month.

Former plantation manager Shariman Alang Ahmad said oil palms took about three years to reach maturity and produce fruit.

“The optimal fruit bearing age is between eight and nine years, and the yield usually goes down once the tree is over 20 years old,” said Shariman, who worked for a government-linked company.

“At the end of the three years, when the trees started to bear fruit, Felda continued to manage the settlers’ holdings including maintaining the trees and harvesting the fruit.

“Felda did not return their holdings to the settlers because it claimed the settlers needed to repay the cost of replanting which ran into hundreds of thousands of ringgit,” Hisomuddin said.

Settlers were also told they needed to repay the living allowance they were paid during the three years.

Meanwhile, Felda continued to pay them RM1,500 per month while holding on to the holdings.

Settlers have claimed that their debts came up to over RM100,000 and that the agency could be collecting more than what it was owed.

“The question is, when are the settlers going to be done with the debt? Will it be passed on to their children and grandchildren?” said Hisomuddin.

One of the clauses of the agreement stipulates that the settlers may not, for any reason or under any circumstances, terminate the agreement until all debts and payments that are owed , including income advances, have been paid in full to Felda.

The controversial contract that can cost BN the Felda vote
15 Nov 2017 – TMI

What happened to 1MDB’s money? – CNBC Video
Nuclear lessons for Malaysia (Part 1) (Part 2)
BN govt is directing attention to distant past and distant future, in order to distract people from present misdeeds and poor governance
Felda - A picture is worth a thousand words
How the 1MDB Scandal Spread Across the World (WSJ)
We cannot afford ridiculously expensive RM55 Billion ECRL!
All that is necessary
for the triumph of evil
is for good men
to do nothing.

- Edmund Burke
When the people
fears their government,
there is TYRANNY;
when the government
fears the people,
there is LIBERTY.

- Thomas Jefferson
Do you hear the people sing?