Malaysia's national palm grower Felda plans to lobby for higher palm oil prices and sell assets to quell discontent among its ethnic Malay workforce that are key stakeholders in the current government that is preparing for upcoming elections.
Federal Land Development Authority's (Felda) smallholders, or "Felda settlers", have raised accusations of mismanagement and questioned the recent US$505 million (RM2.26 billion) purchase of a stake in an Indonesian company.
Their support, however, is critical for Prime Minister Najib Abdul Razak ahead of a tough election that may be called in the coming months.
Najib appointed veteran ruling party leader Shahrir Samad as Felda chairperson in January, widely seen as a move to win back the settlers' support.
"The overarching issue is how to get palm oil prices at sustainable, reasonable levels so the benefits can go to the smallholders," Shahrir, a former federal minister, told Reuters in an interview.
"We will ensure the welfare of the Felda settlers are taken care of... they will feel the pinch if they get a lesser monthly income," he said.
Salaries in 2016 dipped by five percent from two years ago to RM3,393 (US$771.84).
The settlers are a crucial voting bloc for the ruling party, the Umno, making up the majority of voters in 54 of the country's 222 parliamentary districts.
Najib barely secured enough seats to stay in power in 2013 after losing the popular vote and losing the settlers' votes would pose a leadership and electoral challenge.
Shahrir said Felda, which operates some of the world's largest palm oil plantations, will work with Indonesia on marketing efforts to increase demand for palm oil.
He said Malaysia, along with Indonesia through the Council of Palm Oil Producing Countries (CPOPC), will focus on markets in China, India and Africa, while increasing local utilisation rates via biodiesel mandates.
"The objective is to keep palm oil prices at a high or reasonable level," he added.
Indonesia and Malaysia, who produce about 85 percent of global palm oil, formed the CPOPC in late 2015 to manage prices and create demand through biodiesel mandates.
But industry analysts say that current prices are not sustainable as global output should rebound from damage caused by last year's El Nino phenomenon.
Benchmark palm oil prices have dropped nearly 20 percent this year, and may drop further through the peak output period in August.
Felda will sell non-core assets this year, including hotels in London and land in peninsular Malaysia, to raise funds for settlers' housing subsidies that are estimated at RM400 million (US$91.1 million), said Shahrir.
Electoral gains
Shahrir said he visited six Felda regions and is confident that the settlers are still with the government.
"You see a disconnect between what is said in social media and what is happening on the ground."
Najib's ruling coalition is expected to win the next elections, which have to be called by August 2018. But Malaysians are unhappy with inflation at an eight-year high and the ringgit that has shed a quarter of its value since 2015.
Critics have slammed Felda management's efforts.
"Shahrir has been the chairperson for over 100 days now, but Felda's finances are at such a critical state... I don't see how he can do anything to make a change," said Mazlan Aliman, president of the National Felda Settlers' Children Society (Anak).
- Reuters
