Pooling Commodity Related Resources To Create Better Opportunities

PRIME Minister Datuk Seri Najib Tun Razak’s call for Felda, Felcra and Risda to form a consortium to jointly explore downstream projects and other mutual cooperations could not have come at a better time. The idea to pool the resources of the three largest agriculture-based government agencies is a good strategy and has the potential to create bigger opportunities at maximising the returns for these agencies in their upstream and downstream activities. Felda, Felcra and Risda were set up with similar missions to help improve the livelihood of smallholders as well as encourage the hardcore poor and landless to venture into rubber, oil palm, padi and cocoa cultivation, among others.
It is said that smallholders contributed about 94% of the country’s total rubber production, 52% of total palm oil production and 75% of total cocoa output. Felda, in over 50 years of its existence, has prospered into a dynamic diversified conglomerate with annual revenue estimated at about RM10bil to RM12bil. It has strong palm oil upstream and downstream activities with major businesses abroad. However, Felcra which focuses on palm oil and rubber; and Risda, mainly in rubber, are said to be still dependent on government grants to carry out their operations. For Felda, such a consortium will benefit it in terms of production cost dilution from the pooling of resources given the higher palm oil and rubber volume (tonnage) generated from the output of both Felcra and Risda. The additional palm oil output can help support the conglomerate’s sprawling downstream activities namely palm oil mills, refineries, rubber factories, cooking oil and oleochemical plants in Malaysia and overseas. Felcra and Risda, meanwhile, can tap into Felda’s plantation technology to improve on their palm oil and rubber yields, manufacture more value-added goods and utilise Felda’s massive marketing network overseas to sell their products. Other synergistic projects suitable for the proposed consortium include clean development mechanism projects under the Kyoto Protocol whereby waste from palm oil mills and rubber processing mills belonging to the agencies holds good prospect in providing steady income streams via sales of energy generated and certified carbon emissions or “carbon credit”. Best of all, at the end of the day, all these lucrative “ventures” by the three agencies will benefit the smallholders, which are mostly members of the cooperatives that hold shares in Felda, Felcra and Risda. On the other hand, one question that comes to mind about the setting up of such a consortium is whether the Government has “bigger” plans ahead to merge these agriculture agencies similar to the merger of government-linked plantation companies Kumpulan Guthrie Bhd, Golden Hope Plantations Bhd and Sime Darby Bhd. While plans to list Felda is still up in the air although the idea was mooted in 2003, could the Government now be toying with the possibility of creating a new special purpose vehicle to list another plantation giant via the merger between Felda, Felcra and Risda? Source : The Star by Hanim Adnan

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