Najib Ups Battle for Malaysian Farmer Votes With Handouts

(Bloomberg) -- Malaysian Prime Minister Najib Razak raised the stakes in his efforts to secure the votes of palm oil farmers, announcing hundreds of millions of dollars in aid ahead of an election that could come within months.

Farmers who come under the auspices of the Federal Land Development Authority, or Felda, will get cash handouts from the end of August, and have some debts erased, Najib said in a speech on Sunday. The package, which includes grants for replanting, totals about 1.6 billion ringgit ($373 million).

Felda, the world’s largest crude palm oil producer, has been hit by financial scandals and the share price of its unit Felda Global Ventures Holdings Bhd has fallen, causing upset among farmers, long the mainstay of the ruling coalition. Many of them took out loans to buy Felda shares. They have also expressed frustration about late assistance payments from the state-backed company.

Najib needs those farming votes if his coalition is to extend its 60-year grip on power. While the next election is not due until mid-2018, politicians and analysts have indicated it could come by the end of this year as Najib seeks to capitalize on an opposition in disarray.

Felda farmers make up the majority of voters in 54 out of 222 federal seats, and Najib’s coalition, known as Barisan Nasional, won all but six of those seats in the 2013 election, according to a ruling party lawmaker.

‘Close to My Heart’

Najib highlighted the symbiotic relationship between the farmers and the government in a speech at the tail end of a three-day carnival for Felda families in Putrajaya, the country’s administrative capital. The families, known as settlers, were given land decades ago during Malaysia’s independence.

"Felda’s agenda is close to my heart," Najib said. "Without the Felda community, it’s not possible that Putrajaya would be held by the government. And without the government, what place would Felda settlers" have in a wider scheme of things, he said.

Felda traces its roots to a 1956 grant from the World Bank and is virtually synonymous with government aid to rural Malaysia. About 95,000 settlers will get 5,000 ringgit in cash, Najib said, a move that will cost the government almost 475 million ringgit. He said about 986 million ringgit will be allocated to provide grants and forgive debt incurred during replanting activities.

Najib on Sunday urged more than 17,600 settlers who have fallen out with Felda over various issues to return to the fold, and said they stood to enjoy the same benefits. Some farmers have stopped selling produce to Felda, while others are suing it, he said.

FGV is about 62 percent below its listing price in 2012. Najib said settlers who took loans to buy shares will see part of their outstanding debt forgiven. That is expected to total 128.1 million ringgit and benefit almost 78,000 farmers. Those who had repaid their loans will get about 1,800 ringgit.

Felda’s Woes

"If there are any shortcomings, we will fix them together," Najib said. "We are determined, no matter what, we will defend Putrajaya."

FGV has been wracked by graft probes and a leadership struggle in recent months. The Anti-Corruption Commission is probing several cases involving FGV and the company’s board ordered Chief Executive Officer Zakaria Arshad to go on leave pending an internal probe. 

Zakaria, who denies wrongdoing, has urged the anti-graft agency to examine alleged improprieties at FGV and said he often disagreed with then-chairman Isa Samad on how the company was managed. Isa resigned last month.

Zakaria, a planter’s son, is popular among farmers. FGV has announced that Khairil Anuar Aziz -- born and bred on a Felda settlement -- will take over CEO duties as an officer-in-charge.

To contact the reporter on this story: Anuradha Raghu in Kuala Lumpur at araghu3@bloomberg.net.

To contact the editors responsible for this story: Shamim Adam at sadam2@bloomberg.net, Rosalind Mathieson at rmathieson3@bloomberg.net.