Nation Building – The Felda Model Introduction The story of Felda started with a dream by one man. That man was Tun Abdul Razak, the first Deputy Prime Minister of independent Malaysia and the second Prime Minister of the nation. His dream was that there would be “land for the landless” and “jobs for the jobless”, and his belief was that this was crucial in order to eradicate the poverty which was prevalent in the rural sector then. The year was 1955 and a new nation, Malaya was on the verge of gaining its independence from British rule, the spirit of nationalism was strong among the leaders of the day and they realised very early on that the only way for the rakyat to break free from their vicious circle of poverty was “for planned and coordinated development of land so as to ensure that economic development goes hand in hand with social development”... (Tunku Shamsul & Perera, 1977). Tun Razak, being the great leader that he was, realised that no dream can become a reality without action and responsibility. Thus, in August of 1955, he proceeded to crystallise that dream and that belief into action by the setting up of a Working Party to study the means by which this vision could best be achieved. The Genesis of Felda (Rokiah Talib, 2009) True to his belief, the findings of the Working Party confirmed that poverty was rampant then with about 50% of the population living below poverty level, in particular the rural people. The hunger for land was acute as evidenced by the large number of applications filed in the various land offices of all states. It was estimated at the point the country gained independence in 1957, there were 200,000 such applications. Before the birth of Felda, land development was a commercial enterprise undertaken by private companies for their own profit. A number of commercially run plantations were owned by foreign companies such as Harrison and Crosfield, Guthrie, Sime Darby and Highlands and Lowlands. The local population that owned land had small uneconomic lots which were planted with rubber or cash crops but due to lack of financial resources and expert knowledge were not commercially managed and returns from these lots were low. The Working Party came up with the conclusion that public intervention in land development for the socio‐economic benefit of the rakyat was necessary. It was also concluded that it was better to have regulated development of land rather than allow a free reign of uneconomic land clearance. In July 1956, the Land Development Act 1956 came into force and Felda or Lembaga Kemajuan Tanah Persekutuan (LKTP) was born. The Land Development Act 1956 provided that “It shall be the duty of Felda, to promote and assist the investigation, formulation and carrying out of projects for the development and settlement of land in the Federation.” Felda thus started off with a very clear and simple objective of developing land to resettle the poor. To quote the words of Tun Abdul Razak....... The Authority should aim to provide opportunities to those living by the margins, to those who have initiative, rather than to provide charity. The best land for the best people should be the basic principle. (August 8, 1956 during the first meeting of Felda....New Straits Times, 7 July 2006) 1 | P a g e What is the Felda Model? The vision thus was that the government should provide whatever resources necessary, be it financial, land or management and administrative capabilities, to enable the rural poor to break free of their circle of poverty. Tun Razak envisaged that the deserving poor would ultimately be owners of cultivated land that would provide them with a source of sustainable future income streams. In those early days of nation building, the management of Felda found that it had no ready model that it could follow or work on that would best fit the situation that the country was in then. In a nutshell, we can list the challenges faced by Felda then as follows: 1. Land and its allocation was under the jurisdiction of the state and Felda thus had to seek approval from 12 (excluding Penang) state governments each time it needed to acquire land for development. 2. Finance was provided by the federal government which exercised a tight control over the projects it funded. 3. Resource capabilities were in short supply. In those early days post merdeka, qualified personnel in agriculture development and agricultural extension work were scarcely available throughout the whole nation, let alone among the rural poor. Felda’s challenge thus was to always maintain a delicate balance between the interests of the state and that of the federal authorities and work closely with both. That Felda was able to succeed in this area speaks volumes for the level of cooperation then and willingness of both parties to compromise for a greater goal and it strengthened our faith in what we were doing and drove us to persevere. This close relationship was not only confined to the political decision makers but was also evident at the various state and federal departments and agencies down to the district levels. They facilitated the work of Felda and contributed significantly to the success of the early programmes. At the same time, Felda had to organise and manage the projects on the ground to develop a viable model for continuous land development and settler emplacement. There was an initial phase of experimentation with various models of development and emplacement which can be summarised under four main phases: 1. Phase 1 (1955‐1961): Felda as a financier to channel funds into state government land development projects for settlement Felda’s initial responsibility was to channel federal funds to state governments to develop land. The state governments formed their own state land development board to execute and manage the state land schemes. Those were the early pioneering days when settlers were involved in all the early aspects of land development from jungle clearing to crop planting and subsequent maintenance and harvesting. Felda was purely an adviser and a dispenser of loans to the state governments which were responsible to start and manage their own land schemes through the state land development boards. Settlers were identified from day one to clear the land, build their own houses, plant the selected crops and subsequently maintain and harvest the crop. They were expected to subsequently repay their loan from the government once their land was in production. 2 | P a g e 2. Phase 2 (Post 1961): Felda as a developer of land for eventual settlement by settlers The progress under Phase 1 was found to be slow as settlers were inexperienced and unprepared for the extreme labour of felling trees and building their own houses. They found the challenges formidable and hence settler attrition rate was high. State governments were also involved with other equally important state matters and moreover lacked the expertise on land and agricultural development. This prompted the government to re‐examine the model for land development under the state land schemes and following this review, the Land Development Act was amended and Felda was directed to manage all the land schemes originally managed by the state boards and to take over the total responsibility for land development in the country. The pioneering concept where settlers came in and had to carry out land clearing and build their own houses was found to be not feasible. Under Phase 2, settlers were only brought into the land schemes after all major land clearing works and planting of crops had been completed and they were required to maintain the planted acreage and harvest the crop. They were provided with housing and basic amenities such as water supply and infrastructure such as roads and later rural clinics, provision shops and schools. Thus, when settlers came into the Felda scheme with their families, housing was ready together with the basic social amenities and they were relieved of hard physical labour. Although the financial cost of such a change in model escalated and translated into a higher loan repayment for the settler, it was found to be a more viable proposition from all aspects. Felda, being the sole land development agency entrusted with this responsibility, found itself having to manage three major aspects in the whole spectrum of land development and settler emplacement. Firstly, they had to manage and implement the early stages of jungle clearing and land development which was undertaken by contractors who were awarded the contracts on a tender basis. Secondly, they had to ensure effective and orderly settler emplacement programmes right from ensuring the right people were selected to be settlers up to providing appropriate settler social development programmes to ensure the entire settler family was successfully acclimatised and orientated to life in Felda schemes. Felda’s objective was to transform the schemes into economically viable rural communities which retained their traditional culture and at the same time were socially progressive, cohesive, modern and forward looking. Thirdly, and just as important, was Felda’s task of ensuring the settlers themselves were equipped with the right skills to eventually operate independently as landowners. These range from skills in agricultural techniques and practices to management skills to handle their own agricultural lots and manage the schemes as commercially viable estates. This model proved successful and the government adopted it and set very challenging development targets for Felda under its various 5‐Year Plans as shown in the table below: 3 | P a g e Area Developed Target (ha) 1st Malaysia Plan (1966 – 1970)
Achieved (ha) 61,513
72,474
nd
159,856
162,711
rd
202,350
214,392
th
141,640
168,029
2 Malaysia Plan (1971 – 1975)
3 Malaysia Plan (1976 – 1980)
4 Malaysia Plan (1981 – 1985) It should be noted that Felda was able to meet the expectations of the government because there was a political will to see the programme succeed. This was particularly evident at the ground level for government support was always forthcoming when it was needed to resolve major problems. The same was true in respect of Felda’s settler emplacement programmes. This enabled Felda to meet the government’s targets for settler emplacement. In all a total of 113,000 settlers were emplaced in 275 land schemes scattered throughout Peninsular Malaysia, Sabah and Sarawak and with the inclusion of their dependents, a settler community comprising around three‐quarter of a million people was created. Evidently, this was the most successful modus operandi for Felda and this model of land development was adopted by Felda right up to 1990 when the government made a landmark decision to stop future intake of settlers. 3. Phase 3 (Post 1990): Felda as a developer of commercial plantations with profits channeled back for settlers’ social projects By the late 1980s and early 1990s, the incidence of rural poverty was not as prevalent as in the 1950s and 1960s. This was obvious from the rise in per capita income of RM812 in 1960 to RM6,298 in 1990. The hunger for land among the rural villagers was no longer as acute and the number of poor people coming forward to be resettled on new settlements declined steadily. In view of this, the government made a momentous decision in 1990, to stop further intake of settlers and that some 350,000 hectares being developed then, 225,000 in Peninsular Malaysia and 125,000 in Sabah and Sarawak would be managed by Felda as commercial estates. This was indeed a bold and visionary step. It saw Felda develop a new model for its operations where it adopted a more commercial slant in its activities. These estates have since become a major contributor to Felda’s finances. These estates were developed at a total cost of RM4.7 billion. By the end of 2008, the total net income generated by Felda had exceeded development cost by RM3.7 billion. The value of the estates is conservatively estimated to be in excess of RM10.2 billion. The estates continue to perform well though the major risks continue to be volatile commodity prices and the vagaries of weather. At the same time, as the plantation operations of Felda grew in size, there was the need to provide milling, processing, marketing, transport, shipping and related engineering services. In the sixties, there were no entrepreneurs to provide these services. Felda had to undertake these functions as a natural extension of the growth momentum it had created from the accelerated planting of oil palm and rubber on a large scale. 4 | P a g e The provision of these services added value to the settlers’ primary produce by converting it to processed and semi‐processed form. Another reason was to eliminate the middlemen, viewed then as the unscrupulous profiteers who exploited the simple rural folks. Felda’s corporations were set up to provide all these support services. In the 1970s and 1980s, these services were further diversified through the establishment of upstream and downstream joint ventures with local and foreign partners. Not only did these provide value‐add and cheaper inputs, they also gave the group access to new technologies and markets. All these ventures complemented one another and supported the core activities of the group. The companies functioned as independent strategic business units with most of the intra‐group transactions being conducted at ‘arm’s length’ basis. This ensured that the settlers were provided services at competitive rates that were benchmarked to the market. One of the unique features of Felda’s development model is that the settlers, the primary beneficiaries of its services, not only own their agricultural holdings but collectively, they also own the commercial enterprises of the group through their investments in the Felda Investment Cooperative (FIC) or Koperasi Permodalan Felda (KPF), which is the principal shareholder of Felda Holdings Bhd, the investment holding company of the group. The FIC was set up in 1980 with the primary purpose of encouraging the settlers to adopt a culture of savings and thrift and to provide an investment vehicle for their surplus income. More than 90% of the membership of the cooperative comprises settlers. Likewise, more than 80% of the capital is contributed by the settlers. Since its establishment, the cooperative has shown remarkable growth with the members’ capital having increased more than six times in the last 13 years from RM234 million in 1995 to RM1,409 million in 2008. Likewise, over the same period, its income, derived mainly from the profits of the Felda Holdings group, expanded from RM36 million to RM254 million. In view of its robust performance, the FIC has consistently declared cash dividends to its members, ranging from 10% to 15% per annum. These are extremely high rates compared to the current average of 2.5% on bank deposits and dividend yields of less than 4% on Malaysian stocks. By maintaining sterling performance and rewarding its members with high yields, the FIC has been successful in supplementing the settlers’ incomes and motivating them to continue to save for their future. The challenge facing the FIC is how to sustain earnings and continue to pay out dividends in the range of 10% to 15% as it has done in the past. This, no doubt, would require the effective management of its funds through viable investment initiatives. 5 | P a g e 4. Phase 4: The Felda of today Today, the Felda group operates as a partnership between three entities, namely Felda, Felda Investment Cooperative and Felda Holdings Bhd which at this point in time is being restructured into a new entity called Felda Global Ventures, which will spearhead the group’s drive to be a globally integrated and diversified multi‐crop agribusiness MNC. The original Felda remains as a government body responsible for the continuous improvement of the economic well‐being of the settler communities. Through the Felda Investment Cooperative (FIC) or Koperasi Permodalan Felda (KPF) which is managed by a board comprising both Felda staff and settler leaders, settlers and staff savings are channeled into investment projects mainly related to palm oil. It is hoped that dividends declared by FIC will provide a source of non‐farm income to supplement settlers’ income derived from their agricultural holdings. The third component of the Felda group is Felda Holdings Bhd (FHB) which being restructured into Felda Global Ventures. FIC is currently the 51% shareholder of FHB. The model has proven suitable to the current environment that Felda is operating in and I believe that for so long as the government and the staff and settlers themselves remain as major stakeholders in Felda’s projects, it will have a better chance of success than if the stakeholders were private entities. How did the development of Felda assist in Nation Building? To a leader of a young nation like Malaya which had just obtained its independence and freedom after decades of colonial rule under the Dutch and British, the term nation building must encompass many areas of human endeavour from building a national identity to building an economically viable nation, where its people are free from ignorance, disease, inequality of opportunities etc. But Tun Razak rightfully chose freedom from poverty as the driving force for nation building throughout his short career and he looked to Felda together with his RED (Rural Economic Development) programme to spearhead that drive to eradicate poverty among the rural poor. Allow me to focus on those major distinctive areas where I would like to believe that Felda has managed to meet Tun Razak’s expectations and in the process assisted in nation building. 1. Felda was an important component of Tun Razak’s RED (Rural Economic Development) programme In 1960, Tun Razak initiated his well known RED programme. In contrast to Mao Tse Tung’s Red Book which espoused political ideology, Tun Razak’s RED programme had a simple objective, which was to fast track the development of rural areas through the building of infrastructure such as roads, bridges, schools clinics and community halls in these areas. The opening of Felda schemes in remote locations provided the impetus for the acceleration of the RED programme and both projects implemented together was able to achieve significant results that uplifted the economic status of the rural areas and its people. 6 | P a g e 2. Felda contributed towards the development of the palm oil industry in Malaysia By 1990, when Felda ceased its land development activities, it had developed a total of 853,313 hectares of land out of which 608,100 hectares was planted with oil palm. In the process Felda had pushed Malaysia into a leading position as the largest producer of palm oil in the world. In 1998, Felda contributed 25% of palm oil produced in Malaysia and 9% of world palm oil production. It was only in 2006 that Malaysia’s position as the world’s largest producer of palm oil was overtaken by Indonesia. In 1997, during the Asian financial crisis when Malaysia suffered the effects of a downturn in various sectors such as electrical and electronics, tourism and property sectors, palm oil prices remained high and the agricultural sector emerged as the second largest contributor to GDP after petroleum. 3. Felda schemes provided an answer to the problem of communist insurgency in the early years It is also worth mentioning that Felda’s mission in those early days was especially critical because the country was facing a security threat from the communists and most of the commercial plantations were then owned and managed by foreign controlled companies. Land alienation to the poor from the rural areas rather than to foreign controlled plantation houses was thus a strategic decision to win the hearts and minds of the people and to prevent them from falling prey to the subversive propaganda of the leftists. 4. Felda assisted in the redistribution of the country’s population The impact of Felda’s settler emplacement programme allowed the government to record a significant redistribution of population from population surplus states to those with surplus land for development. Accordingly, there was a net gain in population in Pahang, a sparsely populated state but with the largest number of new land schemes. Settlers from virtually all the states flowed into Pahang. Similarly, there was also a positive inflow into Negeri Sembilan, especially from Malacca and Northern Johore. The migration was voluntary unlike the forced transmigration that had taken place in some countries. It led to a more uniform development of the country by releasing pressure from the more densely to thinly populated areas. In Sabah, there was a shift of population to an entirely new frontier, the Dent Peninsula since renamed Sahabat, which at that time was uninhabited save for occasional shifting cultivators, and Umas‐Umas. Other settlements were deliberately designed and located on the fringes of jungles and high security areas like Grik in Perak, close to the Thai border. This was done to check the influence of communist insurgents. It is worth noting also that the migration of landless villagers into Felda schemes also altered the electoral landscape of Malaysia and in a way changed the voting patterns in various constituencies. Eventually, there emerged from the Felda project this significant sector of the population called “Felda settlers” which formed a relatively strong pressure group which could influence the vote for or against the government of the day. 5. Felda’s settler emplacement programme brought together settlers of varying cultural backgrounds and succeeded in integrating them Social development programmes ala Felda were successful forums for integrating the settlers. It should be noted that these settlers although mainly Malays originated from different states with their own local dialects and cultural practices. The institutional frameworks set up by Felda such as the Scheme Development Committee, Cooperative Society, Youth Club and Women’s Affairs Institute were all great avenues for 7 | P a g e integration and to‐date Felda schemes have remained peaceful communities, free from any instances of disunity or friction of any sort. The concept of 1Malaysia advocated by Prime Minister Dato’ Sri Najib Razak lately was prevalent in Felda schemes even then. 6. Felda’s second generation settlers provided a talent pool of Human Resources for Malaysia During the 1980s and 1990s, there was intense focus on providing educational opportunities for settlers’ children. No efforts were spared to ensure those children who were bright and able to study did not find themselves handicapped because of having to study within Felda schemes which might lack proper facilities. Towards this end, Felda built hostels in major towns and provided funding to enable settlers’ children to study in premier schools in the urban areas. Scholarships were provided for those who did well to pursue their education right up to university level. Today, many among those settler children who were provided with these educational opportunities are holding high positions in government and private sectors and constitute a talent pool of resource capabilities for the nation. What Lessons can be learnt from the Felda Experience? Felda has now been in existence for 53 years. That it continues to be acknowledged as a success story both as a project in land alienation and poverty eradication as well as a commercial venture fills me with a sense of humble pride and quiet satisfaction having been associated with the organisation for 35 years, first as its director general and later its chairman. However, I would be failing in my duty if I did not refer its success back to its ultimate initiator, Tun Abdul Razak, and make mention of the lessons I have learnt and adopted from interaction with him that has enabled Felda to be deemed successful. 1. There was sincerity of intention and single‐mindedness of purpose. Anyone who has worked with Tun Razak will agree that he was a man driven by an overriding sense of mission and that was to attain development for Malaysia. Although Tun has been hailed as the architect of many institutions in Malaysia, namely the MIDF, Pernas, MARDI, FAMA to name a few, his main preoccupation in the early 1950s and 1960s when he was Deputy Prime Minister and later Prime Minister, was essentially rural development and poverty eradication. He took the courageous step to launch Felda and injected government funds into the project because he strongly believed it was the answer to rural poverty and he was sincere in wanting to eradicate poverty. To this day, Felda remains as a testimony to what the government can achieve when intentions are sincere and implementation efforts are focused. His son, Dato’ Sri Najib Razak, now Prime Minister of Malaysia, is well aware of what his father has achieved by his vision for Felda when he mentioned at a recent book launch on The Architect of Felda…. “………despite the early trials and difficulties it encountered, Felda has succeeded as an organization that has transformed the landscape of Malaysia, not only physically but the socio economic landscape as well. 113,000 settler families have been freed from the bondage of poverty because of the deeds, efforts and achievements of Felda.” 8 | P a g e 2. There was a hands‐on and diligent approach in implementation Again, anyone who has worked with Tun will know how hands‐on, diligent and relentless he was in pursuing his goals. “Tun Razak is not by disposition a patient man; he wants practical no nonsense results and he wants them fast”.....(Milton J. Esman, 1972). To achieve that, he was willing to get down to the ground and push for the desired results. He spent countless days visiting the new projects in Felda and by doing so he sent a signal to all the relevant government officers that he was serious about achieving his mission. That in no small way eased the way for Felda in its dealings with government departments and developed operators/implementers who were equally diligent. In the process of his push for Felda to develop land into commercially run plantation holdings and the frenetic pace at which it was done, there emerged within the nation a core body of the populace who had garnered vast experience in land development from jungle felling to crop planting and agricultural best practices. These ranged from contractors skilled in all these activities to agricultural experts in the oil palm markets etc. Much of this expertise were later transferred to and employed in land development projects elsewhere. 3. Malaysians irrespective of race will persevere for results if they believe the cause is good. Tun Razak was a good judge of competency and had impeccable skills when it came to selecting the right people for the jobs at hand. I have observed that he surrounded himself with competent and trustworthy people irrespective of race and depended on them to deliver the results. My own experience in Felda has been that Malaysians are capable of scaling the highest mountains and reaching the highest peaks if they are convinced their cause is worthwhile. Felda was a project which benefited mainly the Malays as they were the majority among the rural poor. And yet, many of the management team who have stayed the course and journeyed with me on this mission were not Malays. They stayed not because the money was good but because they believed that this was a job that was worthy of their time and effort. In fact, in those early days when staff salaries were mediocre compared to the mind boggling numbers we read of today, Felda staff endured the hardships of working in remote locations away from their homes because they were well aware of the importance of their tasks to develop land to emplace settlers. Indeed, their success in developing 853,313 hectares of land has changed the landscape of rural Malaysia. Felda schemes located in Malaysia are now thriving townships equipped with modern facilities and amenities. The many nearby towns like Temerloh, Kuantan, Kota Tinggi, Bahau to name a few, also developed into bustling and prosperous townships through providing ancillary services to Felda schemes. The 113,000 settler families who were previously classified as the rural poor now enjoy a reasonable quality of life. Certainly, these early group of Felda staff were the unsung heroes of Felda’s journey and I am sure they saw their reward not in terms of any personal recognition they might get but more in the satisfaction of seeing Felda’s success and watching it grow from strength to strength. 9 | P a g e Conclusion Ladies and gentlemen, this lecture has been essentially, a walk through the past. It has often been said that reflecting on the past is only useful if it helps to shape a better future and that those who fail to heed the lessons of the past are doomed to repeat its mistakes. I have attempted to the extent possible to enlighten you on the Felda model and the role of Felda in nation building. In the process, I have included what I see are the significant lessons we can learn from the Felda experience more in the context of nation building and the issues we are faced with today. It is my sincere hope that the future leaders of this nation, many of whom I am sure are in this hall today, will find the learning points from this lecture useful and applicable when the time comes for them to play their part in building this beloved nation of ours. Thank You.
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