Malaysian Palm Oil Farmers Get Election Year Windfall From IPO
Malaysia’s oil palm farmers will be getting a $553 million election-year windfall from an initial share sale of a giant state-controlled palm oil plantation company, Prime Minister Najib Razak announced on Tuesday.
Najib has been trying to regain political momentum with a slew of government handouts after his ruling National Front suffered an unprecedented setback in 2008 elections.
Felda Global Ventures Holdings (FGVH) is looking to raise $3 billion, when it lists on the Malaysian stock exchange next month, in what would be the world’s second-largest initial public offering (IPO) this year after the Facebook listing.
About a fifth of the proceeds from selling 2.19 billion shares will be handed out to 112,635 farmers who work on land allocated by the Federal Land Development Authority (Felda), Najib said.
While Felda’s listing of its commercial arm brings financial firepower to Malaysia’s $27 billion palm oil sector, giving some of the proceeds to farmers — a key vote bank — is another sign that Najib could be ready to call snap polls within weeks.
The opposition has criticized the listing, saying the farmers’ cooperative will lose control over how the plantation company is run.
“We are not trying to kill the farmers with the listing as the opposition says,” Najib told a gathering of about 10,000 farmers at an oil palm estate in his home state of Pahang in central Malaysia. “We are making history with this windfall.
“The listing marks a new era and is a step forward from my father’s dream,” he said.
Najib’s father, former prime minister Abdul Razak, started Felda in the 1950s, handing out land to impoverished ethnic Malays.
The farms expanded to 880,000 hectares (2.2 million acres) and helped Malaysia become the second-largest palm oil producer in the world.
The listing of FGVH clubs together refineries, plantation management companies and logistics firms as Malaysia looks to build an agribusiness to rival Singapore’s Wilmar International.
Under the windfall payment from the IPO, each farmer’s household will get about 15,000 ringgit ($4,900), which is more than a worker makes in a year under a newly announced national minimum wage of 800 ringgit to 900 ringgit a month.
“Najib is trying hard to maintain his voter base even if he does not explicitly say this is election related,” said Ooi Kee Beng, a deputy director at the Institute of Southeast Asian Studies of Singapore.
Younger Felda settlers had initially opposed the listing, fearing a loss of control over an asset their rural cooperative has invested in for decades.
A legal challenge they filed with backing from the opposition led by former deputy prime minister Anwar Ibrahim was dismissed and the listing was recently approved by the cooperative.
The opposition has now said they will look at other legal avenues to stop the listing.
Both the government and the opposition have been trying to court the farmers, who number about one million out of Malaysia’s 28 million population when their extended families are included.
The Felda settlers form the bulk of the vote in 52 of Malaysia’s 222 parliamentary seats, including Najib’s base in Pahang, and they are ethnic Malays — a key support group for the ruling National Front coalition.
Rural Malays threw more of their votes to the opposition in the 2008 elections, complaining that Malaysia’s affirmative action program had disproportionately favored urban and middle-class Malays.
Government-linked newspapers have reported that in addition to the cash windfall farmers will also hold shares in a trust that owns 20 percent of FGVH worth 3.7 billion ringgit and get first preference in buying more shares in the listed firm.
Reuters reported last week that the third-largest oil palm plantation operator by plantation area has started offering its IPO shares to indigenous “Bumiputras” at an indicative price of 4.65 ringgit per share.
Bumiputra, meaning “sons of the soil” in the Malay language, refers to the majority ethnic Malays and other indigenous people in the country who benefit from the decades-old affirmative action policy that favors them in housing, education and business.