Felda IPO key to Malaysias ambitions

By Jeremy Grant in Kuala Lumpur Shaharom Zainuddin, a 56-year-old worker on the Felda Keratong 3 plantation in eastern peninsular Malaysia, does not know much about what some are billing as the second largest stock market listing in the world this year after Facebook. But he does know that on Thursday, Malaysias largest palm oil plantation operator, Felda Global Ventures lists on the Kuala Lumpur stock exchange after raising more than $3bn from investors. As one of thousands of workers that were given four-hectare parcels of land by the Malaysian government years ago, Mr Zainuddin is entitled to buy 800 shares in Felda at a discount. We hope that the listing will be successful and whatever benefits will be returned to us, he says, as his wife serves mango slices to guests in the porch of his house. Feldas listing counts as one of the most unusual IPOs of recent times, not merely because it is pressing ahead despite other big ticket listings falling victim to the global market turmoil. Felda and its sprawling palm oil empire are also a prism through which Malaysias ethnically and politically complex future is observable, as crucial elections draw near. The state-owned company is the third-largest producer of a commodity that goes into making cooking fats and soaps. But it is also crucial to the Malaysian governments efforts to lift poor rural farmers out of poverty in a massive social engineering experiment started by the father of the current prime minister, Najib Razak, in the 1950s. Mr Najib wants to sell down the states holding in Felda to 40 per cent as part of a policy to divest stakes in government-linked companies. The idea is built on a series of transformation programmes, for which Mr Najib has gained credit domestically for pushing. The aim is to lift Malaysia out of its middle income trap, boosting per capita income to $15,500 by 2020, from $9,600 last year. Mr Najib hopes also to bolster the credentials of his ruling Barisan Nasional coalition, dominated by the United Malays National Organisation, in power since Malaysian independence in 1957. The first part of the programme to do the social engineering is finished, says Felda Global Ventures chief executive Sabri Ahmad, who draws his expertise from his training by Scottish planters in what used to be British Malaya. Now the PM is looking to the next 50 years.

The election, which could be called by September, will be a tough fight with an opposition reenergised since the acquittal of its leader, Anwar Ibrahim, on sodomy charges. Mr Najibs party lost its two-thirds majority in 2008 for the first time after decades in power. Since then, subtle shifts in Malaysias matrix of rural and urban Malays, ethnic Chinese, Indians and Islamists has made the outcome hard to call. While many Chinese voters have deserted the governing coalition, frustrated at lack of efforts to tackle corruption, and have boosted the opposition, the government has seen urban Malays swing back to it in recent by-elections. Meanwhile Mr Ibrahim is faced with the challenge of managing his coalition that includes an ethnic Chinese party, the Democratic Action party, his own Parti Keadilan Rakyat and the Islamist Parti Islam Malaysia. Against this backdrop Mr Najib will be hoping that the success of Felda, and other cash handouts to lower-income people will help. Last week, Mr Najib had a photo call with taxi drivers, who are set to receive vouchers for new tyres. Kian Ming Ong, a political analyst at UCSI university in Kuala Lumpur, says the IPO is part of a defensive strategy. Even though Felda areas are likely to remain strongly pro-government, having this listing and giving some of the proceeds to the settlers would make it more difficult for the opposition to create a breakthrough in any of the Felda areas around the country, he says. But that has not stopped them from trying. Two hours drive outside the capital, Wong Chen, a lawyer in Mr Ibrahims party, is speaking to a group of 25 Felda settlers at a late-night stop in Mr Najibs heartland state of Pahang. He argues that the IPO, which allocates 2.5 per cent of shares to Feldas 112,635 settlers, leaves them with far less than they are entitled to under an earlier arrangement between a settlers cooperative and the company. We want them [Felda settlers] to understand theyve been cheated by how this listing will effect their lives, he says. FGVs Mr Ahmad rejects opposition claims and says the settlers who are also due to receive M$15,000 (US$4,700) in cash handouts are being rewarded for hardships they have endured for the last 30 years. These people were the pioneers, our palm oil industry would not be the global player it is today without them.
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