BUKIT KUANTAN, Malaysia – A planned corporate listing aimed at transforming Malaysia’s vital palm oil industry has been clouded by allegations it could short-change the country’s politically powerful farmers.

Prime Minister Najib Razak touts the plan as a new era for Malaysian palm oil, but charges that farmers will be hurt pose a political dilemma for the premier as he tries to shore up support ahead of elections expected soon.

Najib announced plans in October to float the commercial arm of the Federal Land Development Authority (Felda), an agency that grants land for smallholder farms and is the world’s biggest plantation entity at 850,000 hectares (2.1 million acres).

But vocal farmers and the political opposition have cried foul, alleging smallholders who have tilled Felda-granted plots for decades could lose control of their futures in the complicated scheme – and possibly their land.

“Now my children and I have new fears that our land will be grabbed,” said Osman Abdul Rahman, 80, who began farming in the eastern Malaysian town of Bukit Kuantan in the 1970s, when tigers and wild elephants still roamed.

Felda pioneered resettlement of poor rural Malays onto farmland after it was founded in 1956, and many now enjoy solid incomes and rising land values.

Rocking that boat is considered politically risky.

While multi-ethnic Malaysia has sizeable Chinese and Indian minorities, Muslim Malays or “sons of the soil” make-up up about 60 percent of its 28 million people and their support is considered vital in winning elections.

Palm oil is a key ingredient in soap and a range of food products whose consumption is predicted to soar in coming decades.

The listing of Felda Global Ventures Holdings (FGVH) would be one of Malaysia’s largest ever, part of a plan to attract billions in foreign investment.

FGVH would seek to sell 2.19 billion shares, it told Malaysia’s securities regulator this week, amid estimates it could raise up to US$3 billion (S$3.7 billion), making it one of the world’s largest IPOs this year.

“It is big. It is big, God willing,” FGVH President Sabri Ahmad told AFP.

Analysts say the scheme will help Malaysia’s $27 billion palm oil sector – the world’s second largest – compete with top producer Indonesia.

Under the plan, a profitable palm-fruit producing cooperative owned by Felda’s 112,000 smallholders will be lumped in with other state-held Felda land and assets to form the listed entity.

Felda currently sells palm fruit or crude palm oil to third parties, but the aim is for it to expand into palm oil processing and other downstream businesses to create a more fully self-contained global palm oil player.

“Foreign investors will be cautious due to the dissent,” said Yeah Kim Leng, chief economist with research firm RAM Holdings, but they could be tempted by earnings growth potential “as palm oil is considered green gold”.

A planned May listing was pushed back after a farmers’ group won a court injunction, but it was later overturned and a June date set.

At a recent meeting in Bukit Kuantan, the Felda Settlers Children’s Association, which opposes the flotation, urged dozens of farmers to block it.

“The listing is a way of robbing settlers of their land,” said Mazlan Aliman, the group’s chairman.

But the government dismisses the allegations, saying smallholders’ plots will not be part of FGVH.

Najib has promised farmers a one-off “windfall” from the stock sale and the option of purchasing further shares, as well as future dividends, and many of them welcome the scheme.

“Malays are split now. Those who oppose it do not understand the benefits,” said Bukit Kuantan farmer Abdullah Lotin, 69, who relishes the thought of dividends and capital gains.

Sabri acknowledged change would be “painful” for farmers, but added: “Are we just going to be happy being farmers?”