KUALA LUMPUR: Felcra Bhd has received scathing appraisals from some economists over its ability to recover and repay its massive RM3.67 billion debts.
Felcra, they said, is incapable of repaying the debts it owes to the government in the short term as it is lacking good governance, regular monitoring and transparency.
Of the RM3.67 billion owed to the government, Felcra's subsidiaries Felcra Properties and Semarak20 account the most at a combined RM1.39 billion.
Doris Liew, an economist and assistant research manager at IDEAS Malaysia, said addressing the issue is not just about recovering the debts from its subsidiaries but also restoring public trust as well as ensuring sustainable and responsible management of public funds.
"Debt consolidation is urgent and necessary, yet it is highly unlikely that the debt can be recovered in the short term as these are infrastructure projects that have been incurring losses for years," Liew told Business Times.
According to her, Semarak20 projects, which started in 2011, received an additional injection of over RM500 million from the government in 2020 to continue, despite the project's fiscal unsoundness.
She said early analysis had suggested that the project would likely incur huge costs due to a property overhang in Kuala Lumpur, a warning that went unheeded.
"It is baffling why the government would inject additional capital into a project mired in significant cost overruns and chronic mismanagement," she said.
Liew pointed out that Felcra is not an isolated case as the Auditor-General's Report also revealed that PR1MA has also been incurring losses due to inefficiency and mismanagement.
She said reliance on government bailouts without accountability fosters a culture of inefficiency and financial imprudence.
"Moving forward, it is crucial to establish rigorous oversight mechanisms including transparent financial reporting, performance-based accountability, and regular comprehensive review of ongoing projects to assess their viability and fiscal soundness to prevent further wasteful expenditure," she added.
Meanwhile, a fellow at the National Council of Professors Prof Dr Azmi Hassan pointed out that most of the debt were caused by the subsidiaries' operational losses which are unrecoverable.
"The board of directors should play their part in advising and giving direction to the management, who must be capable and expert in the business that they are venturing.
"The Rural and Regional Development Ministry should have pay more attention to the advices given to Felcra on particular subsidiaries as they have incurred lossed for quite some time," Azmi said, adding that the losses could have been avoided if early steps are taken.
Universiti Kuala Lumpur Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid said Felcra has a strength in its huge acrage of land that has not been optimised to benefit the stakeholders.
He said Felcra has many projects related to livestocks and food industries that were considered very crucial to the country's food security but now has ceased operation.
He suggested that it should be reactivated through strategic collaborations with successful multinational companies.
"The management and control must be raised to respectable profesional level in order to attract potential collaborative international partners for joint ventures and foreign direct investment.
"This will reduce the dependancy on the government funding as well as taxpayers' money wastage. It also will certainly help the small farmers within Felcra whose livelihood are at stake," he added.