Felda-FGV land lease agreement generates 50% less income than expected

KUALA LUMPUR (April 10): Felda was profitable between 2007 and 2011, with income averaging RM3.1 billion per year and peaking at RM5.9 billion in 2010, according to Economic Affairs Minister Datuk Seri Mohamed Azmin Ali.

In his speech during the tabling of the Felda White paper today, Mohamed Azmin, however, said it generated less than RM1 billion per year between 2014 and 2017, as its land lease agreement (LLA) with FGV Holdings Bhd failed to generate the RM800 million per year which it projected.

Under the LLA, Felda should receive a payment of RM248 million per year and profit share of 15% for Felda's lease of its commercial land for a 99-year period.

"However, Felda only received an average of RM400 million a year from FGV, as opposed to RM800 million required per year in the minimum to manage the plantation and to ensure the livelihood of the settlers," he said.

To put in perspective, Felda could generate net profit of RM1.1 billion in 2008 when crude palm oil (CPO) prices averaged RM2,850/MT, but swung to losses of RM4.9 billion in 2017 when CPO prices averaged 2.11% lower at RM2,790/MT. — theedgemarkets.com

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