KUALA LUMPUR: Strict compliance with procurement standard operating procedures is critical to ensure sustainability in Felcra's investments, says the Public Accounts Committee (PAC).
The committee tabled a report in the Dewan Rakyat on the follow-up actions taken on Felcra’s procurement of oil palm plantations after it was flagged by the Auditor-General's Report Series 2/2025.
The report details the follow-up actions taken by the Rural and Regional Development Ministry and Felcra regarding the nine recommendations made by the PAC in relation to the governance weaknesses identified in the procurement of four commercial oil palm plantations.
PAC chairman Datuk Wira Mas Ermieyati Samsudin said the committee summoned the Finance Ministry’s deputy secretary-general of the Treasury (Investment), the Rural and Regional Development Ministry’s deputy secretary-general, the chief executive officer of Felcra and officers from both ministries and Felcra to its proceedings.
"The PAC noted the improvements made to Felcra Berhad's SOP for the procurement of new land or estates, which now require external consultants' feasibility assessment reports to be presented to the board of directors.
"Felcra has also introduced a cooling-off period of between 15 and 30 days before any agreement is executed to prevent hasty decision-making.
"However, the PAC stressed that compliance with these SOPs is critical, as their effectiveness has yet to be tested given that no new commercial asset acquisitions have been undertaken," she said in a press conference in Parliament on Wednesday (July 15).
The PAC also noted the revision of return on investment calculations for the four commercial estates of Telupid, Dabong, Sungai Rawit 2 and Aring using more realistic assumptions for crude palm oil prices while taking into account the age profile of the oil palm trees.
"Changes in operating costs and the need for a large-scale replanting programme have shifted the projected return on investment for Telupid Estate from the ninth year to the 19th year (2040).
"Accordingly, the PAC emphasised that future financial simulations should incorporate break-even analysis," she said.
Mas Ermieyati said the committee welcomed the rehabilitation initiatives for underperforming estates, which have begun to deliver positive results.
As Felcra remains approximately 90% dependent on foreign workers, the committee also took note of the company's medium- and long-term strategies.
These include a comprehensive mechanisation plan, the provision of targeted incentives and the upgrading of workers' accommodation to attract greater local workforce participation.
It also took note of Felcra's decision to defer any new commercial land bank acquisitions to reduce its financial burden, with priority now being given to the estate replanting programme, involving an allocation of RM52mil covering 1,846ha.
"To strengthen organisational oversight, the PAC also welcomed the Finance Ministry's proactive measure of utilising the GCAIS 2.0 reporting system, enabling ministry representatives serving on boards of directors to report any critical issues directly and promptly," she said.
In conclusion, Felcra Berhad must be committed to implementing the recommended actions and complying with all statutory requirements.
"The PAC emphasised that strict compliance with the strengthened procurement standard operating procedures is critical to ensuring the sustainability of investments, preventing future financial losses and safeguarding the company's long-term financial stability," she added.
The Auditor-General's Report Series 2/2025 flagged governance lapses in Felcra's RM241.76mil acquisition of four oil palm estates between 2022 and 2024.
The company also went ahead with the RM62.29mil purchase of the Telupid palm oil estate despite a feasibility study concluding that the land was not economically viable due to poor soil and uneven terrain.
