http://www.feer.com/articles/2001/0112_06/p026region.html

MALAYSIA

A Problem to Settle

The Federal Land Development Authority has settled hundreds of thousands of landless Malays. Now it wants to make some money

By S. Jayasankaran/LURAH BILUT and KUALA LUMPUR

Issue cover-dated December 06, 2001

IN A COUNTRY THAT PRIDES itself on setting records, Malaysia's Federal Land Development Authority claims an impressive one--the world's biggest plantation owner and manager. It's a far cry from the 1950s when it was set up to alleviate widespread poverty. Today its ultimate aim is to create wealth for itself--though it would never admit it.

Felda, as it's commonly known, was set up in 1958 and played a vital role in helping secure political stability and economic growth in the first two decades of independence from Britain by settling hundreds of thousands of landless paupers--almost all of them ethnic Malays--on vast areas of plantation hacked out of the jungle.

It stopped settling people in 1988 and the landless are no longer a major problem. Indeed, in the rapidly industrializing Malaysia of the 1980s and 1990s many of the better-educated, more ambitious second-generation settlers no longer wanted to work on the palm oil and rubber plantations that Felda helped their parents set up.

Those that remain are being hit by low rubber and palm oil prices. This poses a problem for Felda, which must reconcile its original goal of poverty-reduction with its unstated mission to make money--and it's been making a lot of that.

NICE LITTLE EARNER

With a turnover of 7.9 billion ringgit ($2.1 billion) last year, it made a profit of 488 million ringgit. It is also the country's single largest producer of palm oil and rubber. According to company figures, it accounted last year for 22% of Malaysian exports of crude palm oil and 10% of rubber production. Moreover it has ample cash reserves and has paid off all its domestic and international debts.

Felda's merchandise is produced on settlers' land and on territory it continues to open up for development. Indeed, the slightly more than 100,000 settler families, or about half a million people, now occupy just 55% of the 811,000 hectares developed and managed by Felda.

That's not necessarily bad news for Felda. Primary Industries Minister Lim Keng Yaik believes the authority's long-term future lies in the consolidation of holdings under Felda management with settlers, or their heirs, allowed shares in the new entity. "Ultimately, the holdings should be combined and run estate-management style," says Lim. "Settlers would participate as workers and shareholders."

But first it must address the realities on the ground and consider the political implications of any radical change.

Hassan Ali, a 75-year-old Muslim, was one of the original beneficiaries of the government's land-development scheme. He's too old to work now, but the former soldier in the British army came to Lurah Bilut in central Malaysia's Pahang state in 1959 to take part in Felda's first project. Today he's paid off his loan to Felda and owns seven acres of rubber trees. Like other settlers, he sells the latex to Felda.

Hassan's left with 350 ringgit a month after he's paid the hired help who work his land. "I need very little," he says. "And my children help me out." But he's resigned to the fact that his only son, who works as a factory supervisor in the nearby town of Bentong, will not return to farming. "He doesn't show any interest," he sighs. "So he will probably be an absentee landlord. But that won't be my problem, I suppose."

The pattern is being repeated all over. The average age of settlers on Felda schemes is 60, and more than 60% of second-generation settlers aren't interested in farming. The industrialization of the past two decades has lured many away. But the dread of rural poverty, as commodity prices sag, has also proven a strong deterrent.

It's this second problem that has forced Felda to advance cautiously on the road toward collectivization. While it no longer has to worry about settling the landless, it can't afford to ignore the settler families that remain today.

"Thirty years ago, it was all right," says cabinet member Lim. "Not now. Some, if not all, Felda settlers are living in poverty. Palm oil settlers are a bit better off. The rest are languishing." Early this year, when palm oil prices plummeted more than 60% from a peak of more than 2,400 ringgit a tonne in 1998, the media reported cases of children of Felda settlers skipping school because they couldn't afford it.

It's not the first time commodity prices have fallen, but the government knows it cannot afford to ignore the plight of the settlers--some 95% are ethnic Malay and most used to be firm supporters of the ruling United Malays National Organization. But, since the downfall of former Deputy Prime Minister Anwar Ibrahim in 1998 and the return of hard times, many have shifted their votes to the Islamic Party, or Pas. "Felda settlers used to support Umno completely," says a ruling party official. "Now many have abandoned Umno for Pas."

Commodity-price fluctuations have always been a political issue, with Umno and Pas lawmakers trying to present themselves as the champions of the settlers. In the end, however, the agency has always pitched in. Among the remedies this year: grants from Felda, the writing-off of settler loans and increasing fertilizer and replanting subsidies.

That's why Felda's consolidation blueprint has been kept on the back burner for almost three years. But Malaysia is unlikely to go backwards--Felda will continue opening up new land that it manages itself amid a diminishing pool of settlers, who will continue to be helped out every time commodity prices drop. Thus, consolidation will be possible in the distant future.

Meanwhile, resettlement has created thousands of small rural businessmen and children of Felda settlers have gone on to become educated professionals, swelling the ranks of Malaysia's growing middle class.