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Consulting Study 12: the Felda Case Study

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Consulting Study 12: the Felda Case Study Consulting Study 12: The Felda case study December 2015 Authors This study was conducted between March to April 2015 by Yuleng Khor of LMC with research associates Dr Johan Saravanamuttu and Deborah Augustin. LMC International Ltd 4th Floor, Clarendon House 52 Cornmarket Street Oxford OX1 3HJ United Kingdom. Tel: +44 1865 791737 Fax: +44 1865 791739 [email protected] https://www.lmc.co.uk/ © The High Carbon Stock Science Study 2015 This work is licensed under the Creative Commons Attribution 4.0 International License. You are free to reuse, reprint, or republish the work, in whole or in part, without written permission, provided that the source is acknowledged. To view a copy of this license, please visit http://creativecommons.org/licenses/by/4.0/ This report has been independently prepared by the authors for the High Carbon Stock (HCS) Science Study. It is part of a series of consulting studies on high carbon stock, in the areas of biomass estimation, soil carbon dynamics, remote sensing, and socio-economics. Together, these consulting studies provide background information for the HCS Science Study’s synthesis report, but also they constitute stand-alone research that aims to shed light on this critical area of enquiry. Contents Introduction 06 Background & Methodology Abbreviations 08 Executive Summary 10 • Expectations in the next decade and broad lessons from Felda • Positive & negative socio-economic outcomes for stakeholders 11 • Socio-economic impacts of plantations and future expansion 12 • Institutional features and mechanisms in context of HCS regulations • Smallholder certification, the need for assistance and incentives to participate in sustainability • Felda’s lessons on corporate farm-smallholder ratios and micro-management 13 • Felda’s lessons on the need for rural planning and stakeholder relations 14 Conclusions and questions for further research 15 Part 1: Overview of the Felda Smallholder Project 16 Preamble • Development stage 1 - Financial assistance to state land development boards, and its 19 own new programme for pioneer farm exporters • Development stage 2 - Felda pre-eminence and centralised management 20 • Development stage 3 - Novel systems revert to individual land ownership, a “package deal” of smallholding with house plus social services • Development stage 4 - Last settlers emplaced in 1990, the development of commercial 21 estates and the growth of an agribusiness group • Development stage 5 - Public listing of Felda Global Ventures 22 • Felda case studies - Jengka in Pahang, Johor Tenggara, Sahabat in Sabah 23 Summary 25 Part 2A: The Felda Settler and Settlements 26 Synopsis The Felda settler • Settler origins • Felda settler main income, costs and preferential loans, grants and transfers 27 • Felda settler secondary incomes 31 • Felda settler as economic agents - FFB grading, sustainable certification, replanting 32 • Felda settler land ownership • Felda settler ageing - migrant labour and share cropping 33 • Felda settler - family structure and development 34 • Second generation issues - education, migration, employment, social issues • Felda settler outcome - creation of a modern farmer and a rural middle class? 35 The Felda settlement 36 • Felda settlement - green field and brown field sites • Felda settlement - social services • Felda settlement - local economy linkages 37 • Felda settlement - the local environment Summary 38 Consulting Study 12 The Felda case study Part 2B: Felda and its Institutional Context 39 Synopsis • Policy, administration and external linkages • Felda, state administration, management and politics 41 • Felda Group - local economic linkages 43 • Felda Group - ancillary, upstream and downstream activities 44 • Felda’s position in the national palm oil sector 47 • Felda’s economic multiplier effect and business linkages • Felda and socio-environmental policy 50 Summary 53 Part 3: Synthesis and Evaluation 54 Evaluation Expectations in next decade from the perspective of Felda 59 Socio-economic outcomes for stakeholders at settler and institutional levels Socio-economic impacts of plantations and future expansion 61 How carbon stock thresholds are affected in expansion 62 Mitigating the impact of industry expansion Institutional features and mechanisms in context of HCS regulations Smallholder certification: the need for assistance and incentives to participate in 65 sustainability Conclusions and questions for further research 67 Appendix 1: References and Bahasa Malaysia Literature Survey 68 References Interviews 70 Appendix 1A: A Selected Listing of Socio-economic Literature on Felda from Key Universiti Malaya 71 Libraries and the Felda Library Appendix 1B: Selected Literature Listing – Universiti Malaya and Felda libraries 75 List of Tables Table ES.1: Estimated monthly income sources for 4 ha oil palm settler (RM) 11 Table ES.2: Felda settler costs, income and resourcing indicators 13 Table 1.1: Felda key development stages 18 Table 1.2: Felda settlers by state of origin, 1967, 1976, 1986 19 Table 1.3: Emplacement of Felda settlers by state, area and crop, 1987 20 Table 1.4: Monthly settler obligations for 4 ha rubber plot and 4 ha oil palm plot, 1986 21 Table 1.5: Sources of Felda funding, 1990-2004 22 Table 2A.1: Felda Settlers by State of Origin, 1967, 1976, 1986 26 Table 2A.2: Emplacement of Felda settlers by state, 1987 27 Table 2A.3: Daily rates for Felda settlers Table 2A.4: Cost of resettling one family, 1976 and 1986 (RM) 28 Table 2A.5: Settlers’ average monthly net income (RM) 1979-2004 29 Table 2A.6: Settlers’ average monthly net income for 4.1 ha of oil palm 30 Table 2A.7: Estimated monthly income sources for 4 ha oil palm settler 31 Table 2A.8: Number of unsettled Felda inheritance applications in selected districts 33 04 High Carbon Stock Science Study Consulting Study 12 The Felda case study Table 2A.9: Pension rate for Felda settlers, Sungai Koyan, 1991 Table 2A.10: Malaysian citizens and non-citizens in FELDA Peninsular Malaysia, 1989 34 Table 2A.11: Kindergarten facilities in Felda settlements across Malaysia Table 2A.12: Level of education settlers aspire to for children in Felda Semarak Jengka 15, Pahang, 35 2011 Table 2A.13: Land developed by Felda and state development programmes, 1961-1995 36 Table 2B.1: Felda smallholders and plantation area by crop, 2005 40 Table 2B.2: Felda settler costs, income and resourcing indicators Table 2B.3: Felda Group employees, 2005 41 Table 2B.4: Sources of Felda funding, 1990-2004 43 Table 2B.5: Profits of Felda companies, 2002-2004 46 Table 3.1: Felda key data and facts 55 Table 3.2: Felda key outcomes and policy evolution, 1950s to 2010s 56 Table 3.3: Felda smallholder project’s macro lessons for current HCS issues 63 Table 3.4: Indicative costs for smallholder plot and home, Malaysia and Indonesia, 2015 (RM) 66 Table A1: Literature highlights on Felda settler socio-economics 72 Table A2: Selected Literature Listing on Felda and Felda Smallholders 75 List of Diagrams Diagram ES.1: Oil palm and Malaysia total crop hectarage, 1961-1991 10 Diagram ES.2: Felda and Malaysia oil palm hectarage, 1960-2014 Diagram ES.3: National Felda settlers’ average net monthly income, 1979-2004 12 Diagram ES.4: Jengka multi-settlement, an example of the Felda approach 14 Diagram 1.1: Oil palm and Malaysia total crop hectarage, 1961-1991 16 Diagram 1.2: Felda and Malaysia oil palm hectarage, 1960-2014 Diagram 1.3: Felda locations in Malaysia - estates, mills and installations 18 Diagram 2A.1: Layout of typical Felda village 36 Diagram 2A.2: Layout of typical Felda house lot 37 Diagram 2A.3: Jengka multi-settlement Diagram 2B.1: Felda organisation chart, 1991 (a) and 1993 (b) 45 Diagram 2B.2: Felda Global Ventures’ organisation chart 48 Diagram 3.1: National Felda settlers’ average net monthly incomes, 1979-2004 59 High Carbon Stock Science Study 05 Consulting Study 12 The Felda case study Introduction Background & Methodology evolution of the internationally highly-regarded Felda programme. The challenge was to tease out from nearly There has been mounting pressure by NGOs on six decades of history, the nuances of Felda’s micro and sustainability and by the health fraternity against the macro-level lessons for present day oil palm expansion use of palm oil. This pressure is increasingly evident under the emerging high carbon stock (HCS) regimes. in the European Union. It has also been a long standing issue in the United States of America with In addition, 10 primary interviews were conducted the opposition to palm oil as part of the broader anti- with Felda and industry sustainability specialists to tropical oils campaign. The purpose of this study is fill in gaps in historical understanding (notably on to provide some clarity on the design, evolution and socio-environmental policies including deforestation outcomes of the Felda scheme for its smallholders and and indigenous peoples), as well as to understand its position within the Malaysian economy and socio- the challenges for Felda settlers (and other Felda mill political sphere. It also seeks to examine the situation suppliers) fitting into the evolving NGO cum processor- of the Felda smallholders and Felda commercial entities trader driven sustainable and traceable supply-chains within the regional, national and global trade and use of for palm oil. edible oils. In this review: NGO pressures on sustainability point to lower future production and consumption growth, but it is likely that • Part 1 provides a history of the Felda project this will not happen in a straightforward manner and indicating how its unique model of the resettlement there will be many unanticipated consequences. The of landless farmers began in 1956 and has over concept of sustainability has been made operational some five decades succeeded in raising smallholder via certification and traceability systems designed household incomes considerably above the national primarily for larger corporate users. There has been poverty line, prompting some observers to consider limited attention on equitable economic and market it as one of the most successful land settlement access.
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