THE Federal Land Development Authority (Felda) is understood to have identified tracts of land in Cambodia for rubber and sugar cane plantations.

At a meeting with a handful of reporters last week, senior minister of the government of Cambodia, Dr Ly Thuch, said the land had been identified and that Felda had options with regard to its ownership or control over it.

“There are a few options other than a direct purchase of land. Felda can lease the land from the government [for] either 50 or 70 years on a renewable basis,” Ly said.

He explained that there was no need for a foreign company to work with a local partner in order to invest in Cambodia. Thus, Felda could run its operations there as a wholly owned business venture.

“There is also no restriction on capital repatriation with tax exemption for up to nine years, no foreign exchange controls and full import and export duty exemptions,” he said, referring to Felda’s planned investment in Cambodia.      

On the size of the landbank, Ly said, “Felda is a big entity, a big conglomerate … so they (Felda) will look for big landbank.”

He said Felda’s investment is likely to be in rubber and sugar cane, but added that Cambodia’s land is ideal for oil palm and cashew nut cultivation as well.

However, Ly declined to say which Felda unit was involved in the negotiation and what kind of investment the Malaysian outfit was considering. It was explained that the negotiation with Felda was confidential.

Ly also mentioned in passing that Felda could set up mid-stream processing facilities for rubber.

“Felda will play a lead role in agriculture in Cambodia. I am confident that Felda will have a success story in our country, given the fertile land, its expertise and capacity … Cambodia has fertile land, very cheap, [and ideal for] rubber, oil palm and cashew nut. But rubber has the largest plantations (by acreage),” Ly said.

On whether other Malaysian plantation companies were looking at  investing in Cambodia, Ly said, “When Felda invests in Cambodia, the rest of the [plantation] companies will follow.”

The Felda unit involved in the deal could be Felda Global Ventures Holdings Bhd (FGV), its agribusiness unit.

Felda has a 38.66% equity interest in FGV, its flagship company. Koperasi Permodalan Felda Malaysia Bhd holds an additional 5.8% in FGV.

In May this year, FGV reported to Bursa Malaysia that it had entered into a 75:25 joint-venture agreement and a shareholders’ agreement with Cambodian outfit Co-Op Village Co Ltd to carry out the “business of production and export of rubber blocks and other activities incidental and ancillary” as agreed upon by both parties.

The joint venture, however, is subject to the fulfilment of a few conditions, including the completion of a transfer of ownership of land (where a rubber-processing factory is located) from a third-party seller to Co-Op Village; the execution of a sale and purchase agreement for the purchase of a rubber-processing factory by the joint-venture company from the third-party seller; and the execution of a land lease agreement by the joint-venture company with Co-Op Village.

In June last year, FGV’s CEO Emir Mavani Abdullah had said the company was looking to set up rubber plantations in Cambodia.

As far back as November 2011 (before the listing of FGV in mid-2012), Felda chairman Tan Sri Mohamed Isa Abdul Samad had spoken of an offer to cultivate oil palm or other crops on some 160,000ha in Cambodia.

In March this year, Emir had said the company planned to venture into Cambodia, focusing on rubber plantations and processing. However, he did not go into any details.

According to FGV’s annual report, the group is the largest palm oil producer in the world with a total landbank of more than 450,000ha.

Despite its huge landbank, FGV has not been performing well. For the six months ended June 2014, it posted a net profit of RM295.5 million from RM7.8 billion in revenue. This is in contrast to a year ago, when net profit was down 35.7% despite revenue rising 36.8%.

In the financial notes of its annual report, FGV states that the market conditions and pricing of crude palm oil have been challenging.

FGV ended trading at RM3.43 last Friday, giving it a market capitalisation of RM12.5 billion.

This article first appeared in The Edge Malaysia Weekly, on November 17 - 23, 2014.

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