Felda Global's IPO: Could be worse than Facebook?

Malaysian oil palm plantation company Felda Global Ventures Holdings (FGVH) aims to raise RM 9.95 billion (€ 2.5 billion) by its listing on June 28, making it the world’s second largest IPO this year after Facebook. But a closer look at the company raises concerns over another listing debacle, which may turn out worse than Facebook’s IPO. Investors should be cautious as an accumulation of environmental, social and governance risks will result in serious financial risks.

Set up in 2007 as the overseas branch of the Federal Land Development Authority (FELDA), FGVH now is the third largest listed oil palm oil company globally. By taking control of its parent’s landbank, it has a total of 424,995 ha of land in Malaysia and Indonesia under management. In addition, the company is the largest crude palm oil (CPO) trader globally, as it also sells most of the CPO produced by 113,000 Malaysian settlers on another 522,000 ha. FGVH also is the leading refined sugar producer in Malaysia and has interests in downstream processing in various countries around the world.

Despite these impressive figures, investors buying FGVH shares will face significant environmental, social and governance risks, which are likely to create financial risks. Tension between the company’s ambitions and the Malaysian rural poor is rising because of alleged systemic undervaluation of oil palm fruits and the use of power politics to grab their land. The settlers owned 51% of a company which managed FELDA’s land, but FELDA signed a new lease contract with FGVH. While social unrest would cripple part of its operations, the prospectus does not disclose how the government assures that the settlers’ cooperative is going to be involved in the future of the company.

The company does not demonstrate a strong sustainability record, with only 3% of its landbank RSPO certified. 50% of IPO proceeds will be used to develop plantations in vulnerable areas in Africa, Indonesia and elsewhere. The company’s expansion plans are likely to trigger NGO protests and conflicts with local communities.

Malaysia’s ruling political party, UMNO, controls the company management and lines up state-controlled investors to inflate share demand. Share prices can be expected to drop when this artificial demand dries up. Opposition parties favour redistributing FGVH’s landbank under the rural poor. With elections upcoming, changes in the political landscape may affect FGVH’s access to land and income streams.

Furthermore the suggested profitability of FGVH has to be questioned as palm fruit yields on FGVH plantations are below average and half of the plantations are in need of replanting. The planned replanting is too low, which means that either productivity will drop or more investments in replanting are needed. Both will influence the company’s bottom line.

After Facebook’s IPO in May, many investors complained that the underwriting syndicate (including Morgan Stanley and JP Morgan) had not revealed all relevant facts. The same two banks, together with Deutsche Bank, are involved in FGVH’s underwriting syndicate. And this prospectus also fails to provide some facts: details are missing on the environmental, social and governance risks of an investment in FGVH, including their possible financial implications.

Meanwhile, the IPO itself is likely to create new risks, as there is widespread fear that the government’s proceeds of the IPO (€ 1.4 billion) will be used by UMNO to buy a favourable result in the upcoming general elections, further undermining Malaysia’s fragile democracy. For investors who expect sustainable returns on the short and middle term, FGVH’s IPO could become more disappointing than Facebook’s. 

Lawas police and government found liable for false imprisonment and assault

Limbang, June 23, 2012: Three men, including two students, have succeeded in a suit against the Police and the government of Malaysia for assault and false imprisonment.

The case arose from a futsal match between the Police team and the Bada Buda Team from a local school, during which a disagreement occurred.

The second defendant, (a police officer L/P Jamel Fernandez Mohamad) ran onto the field and assaulted one of the players.

The first plaintiff, Umar Selutan, stopped the assault and the game was aborted.

The following day, the Umar was called to the Lawas police station to explain the incident, but was accused of starting the fight and put in lock-up without being told of the reasons for his detention.

He was released after 55 hours in detention without any charge being proffered against him.

The second and third plaintiffs (Awangku and Steven) and another player were picked up from their school by police officers the day after the match and taken to the police station, where they were accused of assaulting the police team.

L/P Jamel and the first defendant Inspector Khairul Anuar bin Omar then assaulted Awangku in the office of another officer.

The two schoolboys were put in lock-up and were released 28.5 hours later without any charges being proffered against them. 

Awangku only received medical treatment for the injuries sustained from the assault after he was released from lock-up.

All three plaintiffs were not given the opportunity to consult a lawyer at any time.

The plaintiffs claimed that the defendants had violated their duty to uphold the peace but instead had assaulted Awangku.

They further claimed that they had been humiliated and treated like criminals, and as a result, suffered trauma and shame and/or damage and/or injuries as a result of their illegal arrest and false imprisonment.

The High Court in Limbang allowed the claims of the plaintiffs for damages and costs against Inspector Khairul, L/P Jamel and the Government of Malaysia.

The defendants were ordered to pay RM10,000 as damages to each plaintiff and RM5,000 as costs for causing injuries to the second defendant while in police detention.

"We are thankful that justice has prevailed for the plaintiffs in this case, who were innocent (and young, in the case of two) victims made to suffer at the hands of the very people paid by taxpayers to protect them.  

"We hope that court’s ruling will serve to remind those in authority not to abuse their positions of trust," their counsel Baru Bian,who is also State PKR chairman and State Assemblyman for Ba'Kelalan, said in a statement. By Sematong Express

Police reports lodged against Sarawak Energy Berhad for illegal encroaching in Baram

Miri, June 18, 2012:  Two police reports were lodged against Sarawak Energy Berhad (SEB) by a villager from Long Kesseh, Upper Baram and by Save Sarawak’s Rivers Network (SAVE Rivers) for illegal trespassing on Long Kesseh’s Native Customary Land and unlawfully starting works on the proposed Baram Dam.

The first report was lodged by Ding Ngau at the Miri Central Police Station on the 24th May 2012, who complained about an intrusion into the family’s land by a group of workers who were drilling the ground.

"I questioned the workers but I was totally ignored. That is why I made this police report and request the police and relevant authority to take action," said Ding.

The second report was made by Peter Kallang, Chairman of SAVE Rivers on 8th June 2012 also at the Miri Central Police Station.

Peter who also hails from Baram, stated in his report that on the 7th June 2012 at about 3.30pm, while on his way back to Miri from Upper Baram, he saw a tent erected at KM8 on Samling’s logging road, not far from Samling’s logging camp at KM10.

Peter together with representatives from Long Na’ah, Long Anap, Long Liam, Long Laput, Long Kesseh, Long San, Long Tungan and other villagers from Baram decided to investigate the tent.

"We were driving down from Ulu Baram to Miri on the Samling Road when we saw a tent.

"We decided to stop and asked the people at the tent, and they said that they were employees of SEB doing geological studies for the proposed Baram Dam," explained Peter.

In view of so much opposition to the dam, Peter said that the action of SEB starting to conduct geological studies is unlawful and done with complete disregard for the people of Baram.

In the report he stated that the works done by SEB goes against laws like The Sarawak Natural Resources and Environmental (Prescribed Activities) Order 1994 which requires an Environmental Impact Assessment (EIA) to be done and approved before any work is carried out.

The report added that the people of Baram are not aware that any EIA has been done for this project yet.

On 10th June 2012, Mr. Dorus Katan Juman from Long Tap, Upper Baram and on behalf of a group of Baram villagers who called themselves Lepo Telang Usan, made another police report against the Baram Community Chief, Temenggong Pahang Ding Anyi for lying and misleading the public.

In his report, Dorus made the reference to a newspaper article published in the Borneo Post dated 18th May 2012 which were made by the a group of community leaders lead by Temenggong Pahang, complained that Temenggong Pahang told the Deputy Chief Minister of Sarawak, Datuk Patinggi Alfred Jabu Anak Numpang, that the people of Baram have changed their mind and now welcomed the proposed Baram Dam.

Dorus said the statement by Temenggong Pahang as reported in the article is false and reiterated that the people of Baram still oppose the proposed dam. He gave Temenggong Pahang 14 days (starting from the 10th of June 2012) to withdraw his statement and apologise publicly to the people of Baram for making a false statement about them.

The three police reports made within 3 weeks marked a new twist to the controversies surrounding the proposed Baram dam. Before this, the Baram villagers have been campaigning against the dams with various public demonstrations, signature campaigns, erecting banners along the banks of the Baram River, sending post cards, sending petitions to the Prime Minister, Deputy Prime Minister, Chief Minister and the Chief Executive Officer of SEB.

Workshops and seminars for the people affected by the dams organised by SAVE Rivers have been very well attended. Just last week SAVE Rivers collaborated in organising a prayer event at the dam site and a dialogue session at Long Na’ah. Both the dialogue and prayer session received an overwhelming support.

The Chairman of the Baram People Action Committee (BPAC), Mr. Philip Jau, said "We together with the villagers, NGOs and concerned individuals in the team will continue to campaign so that our plea for stopping the construction of the mega dam is heard by the relevant authorities."

BPAC is one of the NGOs within the SAVE Rivers coalition. By Sematong Express

No to extension of Legal Profession Act to Sarawak, says Chong Chieng Jen

Kuching, June 13, 2012: Bandar Kuching Member of Parliament Chong Chieng Jen has warned that the state legal profession does not welcome the extension of the Legal Profession Act, now enforced in Malaya only, to Sarawak.

"We do not want to open our legal profession to our counterparts from Malaya," he said in a statement today.

He said as a Sarawakian Member of Parliament, he felt duty bound to participate in the debate in Paliament of the Legal Profession (Amendment) Bill, 2012 although the Act is not applicable to Sarawak. 

"This is because some Barisan Nasional MPs from Malaya have suggested that Sarawak legal profession be opened up," he said.

Chong, a lawyer by profession, said he has stated in Parliament in no certain term that the Sarawak legal profession does not welcome the extension of the Legal Profession Act to Sarawak. 

"We also do not want to open the profession to non-Sarawakian legal practitioners," he said, thanking Batang Sadong Member of Parliament, Nancy Shukri, for supporting him in opposing the extension to Sarawak while debating the amendment Bill.

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 "The special rights of Sarawak legal profession not to allow our Malayan counterparts to practise in Sarawak have been agreed upon at the formation of Malaysia.  This is our constitutional rights.  As such, it is not for a non-Sarawakian to question such rights.

"I have also drawn the analogy of such right to the Bumiputera's special rights, which many politicians have defended strongly. 

"If the Bumiputera's special rights are not to be questioned, likewise, are the Sarawak's special rights which have incorporated in our Constitution," he said.

He reminded non-Sarawakians politicians to leave the matter touching on the Sarawak's special rights alone. 

"Should there be a need to change or even abolish such rights, let it come from a Sarawakian rather than a non-Sarawakian," he said. By Sematong Express

Baram folks seeking divine intervention to stop the construction of Baram Dam

LONG NA’AH, BARAM – About 150 people in 17 longboats from the Kayan, Kenyah and Penan community in Baram have sought help from God to stop the construction of the proposed Baram Hydro-electric Dam project.

They held an hour long prayer session at Nahah Itun Uvek, just below the village of Long Na’ah on June 7 to seek divine intervention to stop the dam project.

During the session, hymns were sung and prayers were said by community members to ask for strength and courage for the people in Baram to continue their struggle to demand from the government to stop the project as well as to ask the Almighty to change the hearts and minds of those people who are favouring the construction of the dam.

According to Peter Kallang, Chairman of Save Sarawak’s Rivers Network (SAVE Rivers), the prayer session went very well and he was happy to see the overwhelming support given by the communities in Baram demanding that the controversial Baram Dam be scrapped.

“I am touched by the support given by the people of Baram. The people that came for the prayer session far outnumbered the people that came for the ‘Mayau Daleh’ ritual last April,” said Peter.

“I also received a lot of calls, short messaging messages (SMS), messages in blogs, Twitter and Facebook all supporting our prayer session and calling for the scrapping of the project,” added Peter.

After the session, Philip Jau, Chairman of Baram Protection Action Committee (BPAC) urged the government and those who are for the dam to reflect on the passage from the Bible from the Book of Genesis on the covenant made by God to Noah to never again flood the earth with a great flood.

“To all those who are Christians, especially our community leaders, I urge you to reflect on the message that God has given us. We should not destroy what God has created by creating our own flood by building the dam,” said Philip.

On the previous night, about 200 people turn up for a dialogue session at Long Na’ah village and those who spoke representing their respective communities together with a few headmen including the headman of Long Na’ah, TK Wan Saging stated clearly their rejection to the said project.

The site where the prayer session was held is also the site where Sarawak Energy Berhad (SEB) together with state government officials and community leaders conducted their ‘Mayau Daleh’ or cleansing ritual last April for the safety of workers that are going to construct the dam. By Sematong Express