Mahathir takes aim at Country Garden's
giant development in southern Malaysia
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[August 27, 2018]
By Fathin Ungku and Joseph Sipalan
FOREST CITY/KUALA LUMPUR, Malaysia (Reuters) - Malaysian Prime Minister
Mahathir Mohamad on Monday declared that foreigners will not be granted
visas to live in the giant Forest City real estate project on the
country's southern tip, a major threat to the marketing strategy for the
development.
It is not his first broadside against the plan by Chinese developer
Country Garden Holdings Co <2007.HK> to create a new city that was
envisaged to eventually house 700,000 people on reclaimed land near
Singapore, but it could be his most damaging. The company has been
targeting foreigners more than Malaysians for sales of the apartments.
A top official at the project told Reuters last week that in the weeks
immediately after 93-year-old Mahathir came back into power, through a
shock election victory in May, demand for the apartments had weakened,
and that the uncertainty remained a concern.
Mahathir's latest comments are likely to exacerbate those concerns.
"One thing is certain, that city that is going to be built cannot be
sold to foreigners," Mahathir said at a news conference on Monday in
Kuala Lumpur in response to a question from Reuters. "We are not going
to give visas for people to come and live here."
Mahathir, who was Malaysia's leader from 1981-2003, said the
government's objection was "because it was built for foreigners, not
built for Malaysians. Most Malaysians are unable to buy those flats."
Country Garden Pacificview Sdn Bhd, the joint venture between Country
Garden and the Johor state government that is developing Forest City,
said in a statement it is in touch with Mahathir's office as it seeks
clarification. It said it believed Mahathir's comments "may have been
taken out of context in certain media reports" as they do not correspond
with the content of a meeting between the prime minister and Country
Garden Holdings Chairman Yeung Kwok Keung.
In that meeting on August 16, Mahathir "reiterated that he welcomes
foreign investments which could create employment opportunities, promote
technology transfer and innovations that could benefit Malaysia's
economic growth and job creation," Country Garden Pacificview said.
It also said that it has complied with all Malaysian laws and
regulations concerning approvals to sell to foreign purchasers.
Country Garden Chinese buyers now make up about two-thirds of the owners
of the Forest City apartments that have been sold so far, with 20
percent from Malaysia and the rest from 22 other countries including
Indonesia, Vietnam and South Korea.
Mahathir had capitalized on popular disquiet about Chinese investment
pouring into Malaysia during his election campaign. He even suggested in
a speech last December that he hoped Forest City would become an actual
forest with baboons and monkeys as residents, according to local media
reports.
Since becoming prime minister he has put the brakes on a number of
China-backed projects, including the $20 billion East Coast Rail Link
project and a natural gas pipeline project in Sabah. Plans for a high
speed rail link from Kuala Lumpur to Singapore, which was expected to be
a big boost to the Forest City project, have also been suspended.
"GHOST TOWN" QUESTIONS
Forest City's sales have picked back up in recent weeks, and the
developer has been seeking to change the project's image. Country Garden
is trying to make it appear more Malaysian and less Chinese, according
to the official, Ng Zhu Hann, who is head of strategy for Country Garden
Forest City.
Country Garden is also willing to acknowledge for the first time that if
demand does falter it will have to slow down the building of the
development. It is eventually intended to be a $100 billion city, with
apartment blocks, houses, office towers, hotels and shopping centers on
four man-made islands.
"If the demand is there, we will build. If it's not there, we will slow
down," Ng said in an interview at the gleaming Phoenix Hotel, one of the
finished new structures on the first of the reclaimed islands. "So
there's no worry of a ghost town, oversupply - If the demand is not
there, we won't be building."
Mahathir's victory is the second big threat that the development - which
is a partnership between Country Garden and the Sultan of Johor - has
faced in the past couple of years. Beijing's moves to stem capital
outflows imposed after the yuan plummeted in late 2016 hurt mainland
Chinese demand for the apartments.
"CHINESE STIGMA"
Ng said what he called the "Chinese Stigma" is the biggest hurdle facing
the project.
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Residential buildings are seen at Forest City in Johor, Malaysia,
August 20, 2018. REUTERS/Fathin Ungku
"What the Malaysian government does not want is a Chinese enterprise
coming to Malaysia, taking government contracts, affecting the
project opportunities of local developers, making the money and
going back," Ng said.
This has prompted a change in hiring strategy as Forest City seeks
to recruit more Malaysians like Ng into senior management positions.
"My predecessor was a Chinese. In the past, our management had only
one Malaysian, which was head of legal. This (my) position is
usually held by a Chinese, but now I'm here," said Ng, who is ethnic
Chinese but from Malaysia.
Ng said that the political uncertainty had hurt investor sentiment.
"It's not that people don't want to invest, but people are now:
'Let's wait and see. What if they change their policy again?'
Political stability is one, policy stability is another."
After Mahathir's comments, Ng defended the local nature of the
project.
“There are many Malaysians in this project,” Ng told Reuters. “1,100
out of 1,545 of the total workforce are Malaysians."
SKYSCRAPERS ABOVE MANGROVES
At the end of a thirty-minute drive from the crossing from Singapore
through palm oil plantations and jungle, the once sleepy town of
Gelang Patah known for its mangroves and fishing villages now has a
skyline of skyscrapers.
This futuristic development is only half of the first of four
man-made islands envisioned for the development - only 2.7 square
kilometers of the planned reclamation of 20 square kilometers.
Work to build more high rise residential towers, town houses and
commercial buildings is continuing full steam, with dozens of heavy
duty trucks carrying sand and materials while cranes dot a skyline
that is growing taller and denser as high-rise apartments rapidly
approach completion.
Forest City is barely inhabited, with only a handful of staff living
at its service apartments and guests at its hotel.
But earlier this month, an international school opened its doors to
the first 60 students - mostly from China and also from South Korea
- to its 22-acre campus planted with "vertical gardens," an
Olympic-size pool and three yoga studios.
They will be knocking about the Shattuck St Mary's school campus
designed to accommodate 1,000 students as construction roars on in
the backdrop.
Liang Ri Sheng, 44, who runs an electrical services company in
Guangzhou, said he hopes Forest City will be the gateway for his son
to an international life, riding on the strength of China's Belt and
Road regional infrastructure push.
"It will give both eastern and western exposure for my son. I think
it's good for my son's growth and development," Liang told Reuters.
He was speaking before Mahathir's latest remarks.
His family will be one of the first 482 to get the keys to their new
homes by September.
Another buyer, Jackie Chan (not related to the actor of the same
name), who bought an apartment in Forest City last year for around
$140,000, said he hadn't expected such a twist.
"When I bought it I was betting on long-term appreciation and didn’t
expect there would be such a policy risk. But I’m not aiming for
their immigration visa so there’s no impact for me. The investment
amount is small so I’m just going to keep it as a vacation home,"
said Chan, who lives in Hong Kong.
(Corrects name in 32nd paragraph)
(Reporting by Fathin Ungku and Joseph Sipalan; Additional reporting
by Aradhana Aravindan and Clare Jim; Editing by Jack Kim and Martin
Howell)
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