21/02/2024 (New Straits Times) - There are signs that the Federal Land Development Authority (Felda) is now treading a new growth path.

This should be good news for the thousands of Felda settlers pining their hope on Felda.

The new management at Felda has decided to embrace the circular economy model to take the organixation forward. Many see the decision as a wise move.

The chairman of Felda, Datuk Seri Ahmad Shabery Cheek, recently announced new directions for the agency.

The new proposals have three aspects which include agricultural transformation to improve food security, a just transition of the Bumiputera economy, and land use to drive a high impact circular economy.

Palm oil has for years been the breadwinner for Felda. It has been through wise investments in the palm oil value chain including refineries, oleochemicals, and bulking facilities that have catapulted Felda's success in the early years.

The advice to stay focus on palm oil has been strongly echoed by the Minister of Plantations and Commodities, Datuk Seri Johari Abdul Ghani. A timely advice for Felda as the agency negotiates the new business challenges.

As a minister who is no stranger to the business world, Johari has also taken steps to move the sectors under his ministry to be in line with global challenges and opportunities. The looming climate crisis is fast changing the game of global business.

There is no running away from complying with the new demands associated with sustainability and net zero. Businesses must embrace the ESG discipline to remain attractive to investors.

The palm oil business is not spared. By embracing ESG and the green business, much economic opportunities also await the sector.

This is where the circular approach of harnessing the by-products of the palm oil business can generate extra returns. The oil palm empty fruit bunch (EFB) is one by-product of palm oil milling that many find promising.

As one of the leading palm oil producers in the world, Felda generates huge amounts of EFBs from her mills. But it is not economically viable for a single mill to process the EFBs for added value.

A few mills must come together to collect enough EFBs to justify the economy of scale. This explains why the recently launched National Biomass Action Plan under the Ministry of Plantations and Commodities has proposed the establishment of EFB collection centres to provide feed materials for the biomass business.

There have been attempts in the past to create the EFB to electricity projects under the Small Renewable Energy Programme. A few companies entered the business. Not many have been able to deliver the agreed megawatts. Though the uncertain supply of EFB is one factor, many failed because of management problems.

If Felda intends to venture into the EFB business, the agency should be wary of the risks involved going by the experience of many companies in the past. Though the raw material EFBs come from the palm oil mills, it is a different business than what is core within the palm oil industry.

The business needs a different kind of management skills. But there is no denying that Felda stands to gain by participating in such business. As advised by some business experts it would be wise for Felda to enter partnership with a proven biomass company rather than going it alone.

That way, the risks in the new largely unchartered biomass business can be shared.  This is where choosing the right partner is critical.

One thing is clear though. The biomass industry is set to be another revenue channel for Felda. There is no doubt that, with the right business partnership, the extra value gained will eventually trickle down to the settlers.

*The writer is a professor at the Tan Sri Omar Centre for STI Policy, UCSI University

https://www.nst.com.my/business/insight/2024/02/1015771/circular-economy-can-be-boon-felda