A U.S. $100 billion waterfront development that targeted moneyed investors from China is in limbo after Malaysian Prime Minister Mahathir Mohamad said Monday that foreigners would be barred from purchasing any of the properties.
The Forest City project, a mixed-residential development launched in 2013, overlooks Singapore and sits on reclaimed land off the coast of Johor, at the southern tip of the Malaysian Peninsula.
“One thing is certain, that city that is going to be built cannot be sold to foreigners. We are not going to give visas for people to come and live here,” Mahathir told reporters in Kuala Lumpur.
Upon completion, about 700,000 people will call the Forest City complex home. It will have parks, shopping malls and hotels, creating 220,000 jobs and contributing an estimated 200 billion ringgit (U.S. $50 billion) to the nation’s GDP by 2035.
Mahathir said his government was objecting to the project because it was built for foreigners, not for Malaysians.
“Most Malaysians are unable to buy those flats,” he said, referring to reports that two-bedroom apartments under the project carried a starting price of U.S. $170,000.
It was not immediately clear how Mahathir would put a stop to foreigners buying properties in the project, a joint venture between Hong Kong-listed Country Garden Group and local partner Esplanade Danga 88, a company partially owned by Sultan Ibrahim Ismail of Johor.
The new twist appears as a setback to the developer, realtors said, as controversy arose over reports that about two-thirds of the owners of Forest City units so far were Chinese. Other investors were from Indonesia, Dubai and Thailand.
In its response, project developer Country Garden Pacificview (CGPV) on Monday denied that it was issuing permanent residency status to foreign buyers. The firm insisted that it had complied with all laws and regulations.
“A foreign citizen or a foreign company may acquire land in Malaysia subject to the prior approval of the State Authority has been obtained,” CGPV said in a statement.
It said Mahathir’s comments “may have been taken out of context,” and company officials were seeking clarification from the Prime Minister’s Office.
“It is as what he said,” an official at Mahathir’s office told BenarNews late Monday, without elaborating.
Mahathir’s statement dealt a major blow to the project, which was struggling to revive demands after Beijing launched a crackdown on capital flight and applied stricter rules on foreign currency outflows last year. The properties were first marketed in China, but Country Garden shifted its focus on selling to other foreign investors.
While leading the opposition bloc to a victory in the May 9 general election, Mahathir targeted Forest City and other major projects backed by Chinese financiers. He has repeatedly accused his predecessor, Najib Razak, of selling Malaysia’s sovereignty to China by allowing foreign nationals to live in the country through the purchase of a property in Forest City. Najib has denied such allegations.
Prior to the election, demand for Forest City apartments had already slowed down, with sales falling 20 percent in 2017, Reuters reported.
Mahathir was in China from Aug. 17 for a five-day official visit during which he met Chinese President Xi Jinping and Prime Minister Li Keqiang to renegotiate Malaysia’s commitment to Beijing’s investments in the country under Najib’s leadership, saying the projects were too costly.
Issues involving national sovereignty
Mahathir could have been saying that the Forest City land should remain Malaysian territory despite property ownership by foreign nationals, according to Barjoyai Bardai, a financial analyst with the International Center for Education in Islamic Finance.
“The government is learning about what had happened in certain African countries, as well as Sri Lanka, where, through mismanagement and strategic purchases, entire cities became the property of foreign countries, in this case, China,” Barjoyai told BenarNews.
“It can cause problems later on as this is a matter of national sovereignty,” he said.
Awang Azman Awang Pawi, a political analyst from the Universiti Malaya, said Mahathir needed to be careful about making statements that could be read as contradicting prior official statements. As the analyst sees it, such flip-flopping affects the confidence of foreign investors.
“According to reports last year, 70 percent of the properties sold there were bought by foreign nationals from China. Do we now need to pay compensation to them?” Awang Azman told BenarNews.
“Perhaps he learned something from the Chinese government in his recent trip to Beijing that made him change his mind,” he said, “but such decisions should be made and announced by the cabinet officially.”