FGV Dairy Farm Sdn Bhd, the vehicle for FGV Holdings Bhd’s planned dairy venture, was wound up five years after the investment. The group had invested about RM10 million into the company.

FGV Dairy Farm and its wholly-owned subsidiary, FGV Dairy Industries Sdn Bhd, now owe about RM4 million to more than 100 vendors and farmers.

Relatively modest in scale, the episode may be viewed as a minor misstep in contrast to FGV Holdings’ much larger, multibillion-ringgit acquisitions.

A businessman, who declined to be named, says: “I don’t understand what’s going on. In the past, Felda and FGV [Holdings] couldn’t seem to get their act together doing big deals and business. Now, even small ventures such as dairy farming are proving to be challenging. What’s going on?”

In the broader scheme of things, however, the following instances are among the investments that failed to bear fruit and, in some cases, resulted in losses.

In August 2014, FGV Holdings, which has since been taken private by the Federal Land Development Authority (Felda), announced plans to acquire Asian Plantation Ltd (APL) via a voluntary conditional cash offer at £2.20 per share.

The offer represented a 295% premium over APL’s net asset value per share as at Dec 31, 2013. FGV Holdings also assumed APL’s RM517 million in debt, bringing the total acquisition price to RM1.1 billion.

APL was then listed on the Alternative Investments Market of the London Stock Exchange and delisted after the voluntary general offer.

There were murmurs that FGV Holdings might have paid too much for APL, which owned 24,622ha of oil palm plantations across five wholly-owned estates in Miri and Bintulu, Sarawak.

According to news reports, as much as 40% of APL’s land, or about 7,300ha, was unplantable and close to 2,600ha was encumbered by Native Customary Rights claims, meaning that as much as 9,900ha, or 40%, of APL’s 24,622ha cannot be developed for planting.

A forensic investigation, which commenced in January 2018, confirmed the high price tag. FGV Holdings subsequently initiated legal proceedings in the Kuala Lumpur High Court against 14 defendants, comprising former directors and employees of FGV Holdings.

FGV Holdings sought damages totalling RM514 million for losses arising from the acquisition of APL, among others, on the grounds that the directors failed to discharge their fiduciary duties, duties of fideli­ty and duties to exercise reasonable care, skill and diligence in relation to the 2014 purchase of APL.

It is almost ironic that FGV Holdings’ initial public offering in June 2012 was the second largest in the world after Meta Platforms Inc. The flotation boosted its cash pile of RM5.09 billion. Since 2015, however, it has fallen into a net debt position.

In 1999, Felda set up Sutrajaya Shipping Sdn Bhd to transport its own crude palm oil (CPO) cargo. The move into shipping initially appeared strategic, with plans to charter vessels from owners to better manage costs and mitigate risks.

A shift in the business model a few months later, however, saw Sutrajaya acquiring its own tankers. In mid-2002, it purchased two vessels — the 7,800-deadweight tonne Hosho, built in 1994 for US$6.2 million, and the 8,400dwt Oshamu, built in 1996 for US$9.2 million — and rapidly expanded its fleet to five ships within a short span of time.

At one point Sutrajaya was reportedly operating an additional 15 chartered vessels over and above the five it owned.

By June 2006, international shipping publications reported Oslo-listed Camillo Eitzen & Co acquiring Sutra Empat, a 7,800dwt chemical tanker built in 1994, for US$10.25 million, and in August that year, Sutrajaya disposed of the 8,400dwt Sutra Satu, built in 1990, to a South Korean shipping outfit, and buyers were being sought for MT Sutra Tiga and MT Sutra Lima, with Felda looking to exit the shipping business.

Since a ship’s value typically declines with age, Sutrajaya is likely to have sold its vessels at a loss.

There are few public reports on this venture and little explanation as to whether it succeeded or what led Felda to exit the shipping business after such a short period. It remains unclear whether there was a lack of planning or what challenges prompted the decision to abandon the initiative.

Nonetheless, the episode has drawn attention as another instance where aspects of Felda’s investments and missteps appear to have been swept under the carpet.

Perhaps Felda’s most publicised blunder is its acquisition of a 37% stake in plantation outfit PT Eagle High Plantations Tbk from Tan Sri Peter Sondakh’s Rajawali group for US$505.4 million in late 2016.

Felda’s wholly-owned property arm, FIC Properties, executed the acquisition, paying IDR775 per share — or a 95.86% premium over Eagle High’s prevailing market value.

In a press release on Christmas day 2016 defending the acquisition, Felda said: “This is the last opportunity for Felda/Malaysia or any other foreign parties to acquire an Indonesian company with a massive land bank. The Indonesian government agrees to a one-time exception to this deal.”

So far, there has been no evident benefit to Felda from the acquisition of the 37% stake, and many have questioned the merits of the investment.

It is also noteworthy that Peter Sondakh was a close associate of former prime minister Datuk Seri Najib Razak, and that the acquisition by FIC Properties was undertaken during Najib’s tenure as prime minister.

FGV Holdings was in fact the first party to be approached to seize what was described as “the last opportunity to buy plantation estates in Indonesia”. It ultimately avoided the deal after plans changed as concerns grew that minority shareholders were unlikely to approve the acquisition at such a high price for a non-controlling stake and given that FGV Holdings would not have control of Eagle High after such an expensive acquisition.

Peter Sondakh retained a 37.7% stake via PT Rajawali Capital International, and Felda secured no board representation on Eagle High.

To enable the acquisition of Eagle High, FIC Properties secured a RM2.77 billion loan from GovCo Holdings Bhd and is still servicing it under a 20-year Tawarruq financing agreement, scheduled to mature in 2043.

Last Thursday, Eagle High was trading at IDR78, almost 90% lower than the IDR775 paid in late 2016. Its market capitalisation stood at US$137.73 million (RM567.11 million), implying Felda’s 37% stake had a market value of US$50.96 million, or just 10.08% of the amount paid in late 2016.

Interestingly, there was a put option that was part of the agreement between FIC Properties and Rajawali for the former to sell its 37% stake in Eagle High back to Rajawali group at US$505.4 million, with an additional 6% interest a year. Felda has yet to enforce an arbitration award in its favour, as the Rajawali group filed a petition to block its enforcement in the Indonesian courts.

How Felda hopes to enforce the put option against the Rajawali group in Indonesia is anyone’s guess.

In June 2014, FIC Properties acquired a 72.27% stake in developer Encorp Bhd (KL:ENCORP) from Tan Sri Mohd Effendi Norwawi at RM1.55 per share, 55 sen per warrant and RM1.55 for Encorp’s redeemable convertible unsecured loan stocks, forking out a total of RM306.11 million. Mohd Effendi was a known associate of former premier Najib.

Last Thursday, Encorp ended trading at 11.5 sen and had a market capitalisation of RM36.4 million, which means Felda’s 67.13% stake in the company today is worth only RM22.66 million (less than 10% of the sum it invested), and the development authority is sitting on a hefty paper loss.

Encorp has not been performing well financially. The company has suffered six consecutive quarters of losses. For its first financial quarter ended March, it recorded a net loss of RM5.24 million on revenue of RM13.99 million. In the corresponding quarter a year earlier, the property deve­loper posted a net loss of RM2.96 million on revenue of RM18.75 million.

As at end-March this year, Encorp had other investments of RM180.98 million and its cash balance was at RM3.33 million. Its long-term debt commitments amounted to RM193.17 million and short-term borrowings were at RM175.09 million.

On Nov 21, 2014, Felda Investment Corp Sdn Bhd acquired 73.5 million shares, or 9.73%, in Barakah Offshore Petroleum Bhd for RM99.96 million, or RM1.36 apiece.

Nearly four years later in June 2018, Felda Investment Corp started selling its Barakah shares and ceased to be a substantial shareholder on June 20. The shares were trading at below 20 sen then, meaning Felda Investment Corp’s 73.5 million shares would have fetched about RM14.7 million (at 20 sen each) — a loss of RM85 million on back-of-the-envelope calculations.

Felda’s investment in Barakah was intended to serve as a launching pad for the development authority to tap the growth of the domestic oil and gas industry. The move raised questions over its diversification from palm oil into fossil fuels.

In July 2013, Felda and South Korea-based MMC Hassed Co Ltd announced the construction of a RM120 million sturgeon farm to produce caviar, in either Jerantut or Jengka in Pahang, as part of the East Coast Economic Region (ECER) project.

According to an ECER statement, the project was expected to help boost the income of about 1,300 Felda settlers and generate a monthly income of roughly RM10,000 for them.

“At full production capacity, the farm can produce up to 30 tonnes of caviar per year with a potential revenue of nearly RM100 million,” the statement said.

Roughly three years later, the Auditor-General’s (AG) Report 2015, tabled in the Dewan Rakyat, disclosed that Felda had yet to obtain returns, assets or technology transfer from the project. Worse, the sturgeon could not be sent to Pahang, as the aquaculture farm had yet to be built, as the Pahang Department of Environment had withdrawn its approval for the project site.

The AG’s report stated that the contract signed by Felda for the sturgeon business was lopsided and unfavourable to Felda.

In January 2017, the Malaysian Anti-Corruption Commission detained three serving and two former staff of Felda over suspected corruption linked to the sturgeon farming project. A month later, two were charged with four counts of criminal breach of trust involving RM47.6 million, though the charges ultimately did not hold.

Several transactions at Felda raised eyebrows, including Felda Investment Corp’s acquisition of The Merdeka Palace Hotel and Suites in Kuching, Sarawak, for RM160 million between late 2014 and early 2015 — despite professional valuers CH Williams Talhar Wong & Yeo Sdn Bhd estimating its value at only RM80 million.

Another initiative involved Savaro, a concept store venture established through a joint venture with Schneeballen Korea Co Ltd, to produce and distribute schneeballen pastries. Savaro began operations in July 2013 but went into liquidation in April 2016, resulting in losses of RM2.24 million — a relatively modest sum compared with other failed ventures. Questions were raised, however, over irregularities, including rental payments being directed to the outlet mana­ger’s account rather than the building owner’s designated bank account.

Against this backdrop of repeated setbacks and blunders, the latest dairy farm fiasco — which has left more than 100 farmers and vendors out of pocket — is unlikely to prove the catalyst for any meaningful change at the agency.

THE Ministry of Agriculture and Food Security has set an ambitious target — a self-sufficiency ratio (SSR) of 100% for fresh milk production by 2028. To achieve this target, the ministry has allocated RM30 million to expand the livestock population and provide modern equipment.

FGV Holdings Bhd, a 90%-owned unit of the Federal Land Development Authority (Felda), invested in a dairy farm in 2020, a move that appeared to be in line with the ministry’s ambition. However, the dairy business turned sour after five years.

The operation housed under FGV Dairy Farm Sdn Bhd was shut down and the outstanding sums owed to more than 100 vendors and farmers have yet to be settled. Bank Pertanian Malaysia Bhd (Agrobank) wants to auction off the farms to recover the outstanding loans (see “Bitter lessons from dairy venture with Felda” on Page 54).

The SSR for fresh milk production stood at 66.7% in 2024, with the country still dependent on imports to meet domestic needs. It is encouraging that the SSR has increased over the years, from 57.3% in 2022, as local production grew.

In tandem with this, the import dependency ratio (IDR) — which measures the level of the nation’s exposure to risks associated with global supply chain disruptions — declined to 57.9% in 2024 from 63.6% in 2022.

The SSR, according to chief statistician Datuk Seri Dr Mohd Uzir Mahidin, functions as a key indicator in measuring the nation’s food supply security. A high SSR value signifies that local production is able to meet domestic demand, which reduces reliance on imports.

Nevertheless, a high SSR does not necessarily reduce imports or result in a falling IDR. This is because food producers may also export more, particularly when they can fetch higher prices elsewhere.

Concerns about food security have reignited again following the war in the Middle East. The recent reopening of the Strait of Hormuz has brought relief to economies globally, but uncertainties still linger given the fragile state of geopolitics in the current environment.

While shelves are stocked and there is no shortage of essential items, the worry now is that the blockage over the last few months, which has driven the prices of items such as animal feed and fertiliser higher, could potentially impact the production of food supply.

The last time the topic of food security raised such concerns was during the Covid-19 pandemic, when delayed shipments and the corresponding higher prices of food items exposed just how much Malaysia relies on imported food supply.

The country’s food import bill is huge. In 2024, it stood at RM93.8 billion, according to the Department of Statistics Malaysia (DOSM). This was an increase of 19.1% over the previous year, reflecting the continued reliance on external sources for several essential commodities.The amount was RM55.5 billion in 2020 and RM42.64 billion in 2014.

While one of the main reasons for the high import bill in 2024 could be the foreign exchange rate — the US dollar strengthened significantly against the ringgit then — the fact is that Malaysia still depends heavily on imports for food.

“Malaysia is considerably reliant on external sources to supplement its food supply across most key food commodities. Should input supply run low or a partner country tightens supply, Malaysia can face compounding risks to both domestic production capacity and external supply continuity,” said Khazanah Research Institute (KRI) in a recent discussion paper titled “The Geoeconomics of Food Dependencies in Malaysia/Southeast Asia”.

In terms of SSR, Malaysia is moderately self-sufficient in fish, fruits and milk, with ratios of between 70% and 80%, but still relies on a significant portion from imports to feed domestic demand.

One example is cuttlefish, for which Malaysia has an SSR of 75.1% but also an IDR of 73.1%, according to DOSM’s latest Supply and Utilisation Accounts Selected Agricultural Commodities, 2020-2024 report.

However, if we look at a Malaysian household’s pantry staples, there is a stark reminder of why the country needs to pay more attention to food security.

Rice, for which consumption per capita stands at 75.7kg per year, had an SSR of 52.9% in 2024, lower than the 62.1% in 2020. This comes as rice production fell by 5% to 1.36 million tonnes in 2024 from 1.43 million tonnes in 2023. Correspondingly, the country’s rice imports increased by 17% to 1.5 million tonnes in 2024.

Notably, paddy production fell in 2024 by 5.3% to 2.06 million tonnes, from 2.18 million tonnes in 2023, according to data from DOSM. 

Domestic rice production has actually declined from its peak in 2018, which can be attributed to the shrinking paddy areas in Malaysia and the loss of paddy productivity. Changing weather patterns have also affected production, while overworked fields may have caused soil to be infertile.

The concentration of Malaysia’s rice production in the northern states has been highlighted as a risk for the country — if disease were to strike or adverse climate change were to hit, production would be badly affected.

Staples of Malaysian cooking such as garlic, shallots and onions are fully imported. Beef has an IDR of 83.5% and mutton 92.1%. Meanwhile, mangoes had an IDR of 116.7% and an SSR of 20.6% in 2024.

Notably, there are ongoing initiatives by local farmers, with the support of the government, to reduce dependence on imports of onions. The target is to reduce imports by up to 30% by 2030.

By the Food and Agriculture Organization’s definition, food security has four dimensions — food availability (supply), food access (access to adequate resources), utilisation (obtaining sufficient nutrition) and stability (access to sufficient food at all times).

A researcher points out that the increase in food imports can be a means of ensuring that food is always available and affordable for most consumers. He says if food is economically inaccessible to certain segments of the population because of price, despite a high SSR, it will not mean strong food security.

While import dependency is not necessarily “bad” in itself, KRI says import sources need to be diversified.

“Import dependency is not inherently a weakness if import sources are adequately diversified, such that no single supplier can significantly disrupt supply continuity,” it adds.

One often-cited example is Singapore, which imports more than 90% of its food. However, its imports are diversified, from more than 180 countries in 2025, as part of its food resilience strategy.

KRI says Malaysia’s imports of rice, chicken, beef and milk are concentrated in four or fewer suppliers. Notably, nearly three-quarters of beef supply comes from India and two-thirds of vegetable supply is from China, indicating single-country dependency.

Sourcing from fewer suppliers offers operational efficiencies and cost advantages, but exposes the country to immediate supply or price shocks in the event of supply cut-offs, price control by the main supplier or changes in the import partner’s national policies due to geopolitical dynamics, says KRI.

As Malaysia has an ambitious vision under its National Food Security Policy 2030 to transform its agrofood system into one that is efficient, resilient, sustainable and inclusive by 2030, continuous efforts need to be made to ensure the country’s food security.