BY PHAR KIM BENG
South China Morning Post
9 APR 2017

The controversial listing of the Federal Land Development Authority’s commercial arm has left many of the Malaysian government’s key supporters – the rural poor – rethinking their allegiances

Viewed from afar, Malaysia’s ruling party, the United Malays National Organisation (Umno), might seem nigh-on unchallengeable in the general election expected as early as this year. After all, it has been in power since the country’s first such election in 1955 – two years before the country’s independence from Britain.

Yet, while it is undeniably strong, its armour is not without chinks. The party cannot afford to lose the support of Malaysia’s rural constituencies – a dependency that has entwined its fate with that of the Federal Land Development Authority (Felda) for the past 60 years and may now represent just such a weak spot.

Felda was created by Umno a year after its maiden election win to handle the resettlement of rural poor into newly developed areas and smallhold farms. It went on to alter the development of Malaysia beyond recognition as large swathes of unused land became well-irrigated plantation schemes that transformed both agricultural exports and the incomes of its rural communities.

Settlers on Felda land have remained fiercely loyal to Umno, which forms the backbone of the ruling coalition Barisan Nasional (National Front), ever since and have played no small part in defending Umno’s grip on power. Of the party’s 86 parliamentary seats, 54 are from constituencies on Felda-developed land.

But there are signs Umno’s grip may now be loosening with opinion among its erstwhile diehard support base now deeply divided by the government’s handling of the listing of Felda’s commercial arm – Felda Global Ventures (FGV) – on the Kuala Lumpur Stock Exchange in May 2012.

While savvy investors who bought FGV shares in November 2016 may be laughing all the way to the bank with returns of 36 per cent (the uptick followed a management reshuffle), those who bought at the time of the listing have seen their investments cut in half.

So bad has FGV’s performance been that rumours have swirled for the past month that it may be delisted from the exchange completely. If that happens, it will only further undermine the trust of many first- and second-generation Felda settlers in the government of Prime Minister Najib Razak, a leader already under fire for alleged links to a corruption scandal at the state firm 1Malaysia Development Berhad.

Critics say Najib’s government was oblivious to the risks when it placed 360,000 hectares – out of Felda’s total of 508,000 hectares – on 99-year leases as collateral for the listing on the stock exchange.

The president of Anak (the Malay acronym for the National Felda Settlers’ Children Society), Mazlan Aliman, says the move has exposed Felda to a perpetual cycle of debt-servicing.

And it’s hard for Najib to claim he wasn’t warned. When the initial public offering (IPO) was first announced in the budget of 2011, more than 65 per cent of senior officers working in FGV were opposed. Yet Najib pushed ahead, much to Anak’s chagrin.

Increasingly, there are signs of wider scale political disillusionment. Discontent was palpable when the Felda stronghold constituency of Rompin, Pahang, held a by-election in May 2015. Of its 16 polling districts, two returned a majority for the Pan-Malaysian Islamic Party – the first time in history a district in a Felda constituency had not backed the Umno candidate.

Although the Umno candidate, Hasan Arifin, still won by a majority of more than 8,000 votes, the final tally showed a 50 per cent drop in support.

Such a reversal of fortunes has set the alarm bells ringing at Umno and Najib has since tried to win over Felda settlers with soft loans that have given some the opportunity to borrow up to US$22,000. That tactic has had mixed results, increasing indebtedness among settlers rather than bringing them swift financial redemption.

Meanwhile, those settlers who bought in to FGV in 2012 have found themselves vulnerable, exposed and unable to sell.

Given these circumstances, it’s perhaps unsurprising that Najib, who is also the finance minister, is shaking up the FGV management, replacing his former ally Tan Sri Isa Samad, widely seen as an ineffective chairman, with Tan Sri Sharir Samad from Johor, a Malaysian state in which Felda has a strong presence. Those changes may have produced initial results, with the uptick in shares, but whether they will be enough to stop the rot in the long term remains to be seen.

The personnel changes reflect the high stakes to both Umno and Najib personally. Were Najib to hold all the Felda constituencies with sizeable majorities in the next general election he would further consolidate his power in the party and become, in effect, unchallengeable.

The opposition is well aware of Felda’s importance, and has courted the settlers relentlessly in moves that will not have been lost on Najib, who counts Felda as part of his father Tun Razak’s legacy.

While the creation of Felda predates the late Tun Razak’s time in office, it was he who did much to secure the lasting success of the authority, encouraging young and able-bodied Malay men to hack their way into the thick forests of Malaysia, often with their wives and family in tow. Their efforts transformed the idle lands and catapulted Malaysia to the fore of the developing world.

Felda blossomed in the 1970s, coinciding neatly with Tun Razak’s six years as prime minister, from 1970 to 1976. That this blossoming came about following the peak of the Malayan communist insurgency in the 1960s is largely beside the point.

Central to the Felda narrative is the extent to which the lot of the rural Malays systematically improved. Within 10 years of Tun Razak coming to office, Malaysia was making strong and sustainable yields in rubber, palm oil and other agricultural products and the income growth of Felda settlers started to track that of urban Malaysians. Against this backdrop, Felda settlers have traditionally backed Umno to the hilt, even when the party under the former prime minister, Mahathir Mohamad, was bent on transforming Malaysia into an industrial economy.

But if Felda once represented Umno’s suit of armour, its recent reversal in fortunes may provide the chink for its opponents to exploit as the election looms.

Umno may not have lost a general election since 1955, but its populist support has been flagging since 2008, if not before. It must confront the possibility that it faces the sort of crisis once faced by Japan’s Liberal Democratic Party or Taiwan’s Kuomintang – once unassailably dominant political parties that eventually tasted defeat due to voters’ rising disenfranchisement.

By allowing FGV to wallow, Umno’s competencies are now being seriously challenged, not only by Felda settlers, but an opposition that is waiting in the wings. ■

Additional reporting by Tashny Sukumaran