KUALA LUMPUR: The Federal Land Development Authority (Felda) will issue RM9.9 billion sukuk and take back 351,000 hectares it leased to FGV Holdings Bhd under its new recovery plan.
The proposals had been presented by the special task force chaired by Tan Sri Abdul Wahid Omar at a Cabinet meeting on October 14, said Minister in the Prime Minister's Department in charge of economy Datuk Seri Mustapa Mohamed.
Felda would also restructure debts owed to financial institutions, Mustapa said in a statement today.
Felda's debts stand at a whopping RM10.6 billion.
The Cabinet has agreed with the proposals to restructure Felda's debt as well as increase its core income by terminating the LLA, while increasing the settlers' independency.
The task force, whose members include Felda chairman Datuk Seri Idris Jusoh, was set up by the government to address Felda's financial problems.
Mustapa said the government agency was facing serious problems that need to be addressed immediately as Felda was important for the country's development.
"This team has identified some of the key problems faced by Felda and it is very important to address them immediately."
Felda's woes are blamed at the declining source of income especially lease payments from its 351,000 hectares of farmland and low profit sharing compared to expectations, under the Land Lease Agreement (LLA) signed with FGV in 2011.
FGV group chief executive officer Datuk Haris Fadzilah Hassan recently said it could save about RM1.5 billion in annual operating expenditure without the LLA.
He said FGV's cash flow and borrowings can be improved without the LLA as Felda would then need to take back existing plantations-related workers involving 11,000 workforce.
Under the LLA, FGV must pay RM248 million annual fee to Felda and share about 15 per cent profit from the 351,000 hectares.
Mustapa said weaknesses in governance and financial management had also contributed to the problems faced by Felda.
He said Felda was expected to post a healthy financial performance from 2023, backed by the implementation of the proposed initiatives.
"The solution to the issues faced by Felda will not be completed without strengthening its governance and efficiency in managing the estates.
"Hence, the board of directors and Felda management must be committed to improving the efficiency of its management and governance," added Mustapa.
The implementation of the recommendations by Felda will be monitored by a committee that will report to Prime Minister Tan Sri Muhyiddin Yassin.