Aiming another axe blow at Chinese economic influence in his country, Malaysia’s Prime Minister Mahathir Mohamad declared yesterday that foreigners will not be granted visas to live in a giant luxury real estate scheme developed by a Chinese conglomerate for, in the main, Chinese buyers.
The premier’s statement caused shares in developer Country Garden to fall, and cast doubt on the business rationale of its Forest City scheme, a 14-sq-km eco city spread over four reclaimed islands in the Strait of Johor, which separates peninsular Malaysia from Singapore.
"One thing is certain, the city that is being built cannot be sold to foreigners," Mahathir told reporters on 27 August, reports The Straits Times.
He went on: "We are not going to give visas for people to come and live here. Our objection is because the project is built for foreigners, not built for Malaysians. Most Malaysians are unable to buy those flats."
The scheme is being developed by a joint venture between Country Garden and a company backed by the Malaysian state of Johor. Their vision is for 700,000 people to be living in Forest City by 2035.
We are not going to give visas for people to come and live here. Our objection is because the project is built for foreigners– Mahathir Mohamad, Malaysian Prime Minister
The premier’s blunt pronouncement follows similarly precipitous decisions to suspend Chinese-sponsored projects agreed under his predecessor, Najib Razak. These include the $20bn East Coast Rail Link to be funded and build by Chinese entities, and two pipeline projects awarded in 2016 to China Petroleum Pipeline Bureau, together worth $2.3bn.
At Forest City, around 18,000 units have already been sold, the Straits Times reported.
According to Reuters, two-thirds of units sold have gone to Chinese buyers.
Today the Malaysian government said it would appoint a committee to review the terms of the Forest City scheme.
"We will form a committee to study and review whatever terms that were agreed to previously," Housing and Local Government Minister Zuraida Kamaruddin told a press conference, reports Reuters.
"We will engage with all the agencies involved and also the developer. Then we see what is the best way forward," the minister said.
Shares in Country Garden fell 3.5% when trading opened in Hong Kong this morning.
After the prime minister’s remarks, Country Garden pointed to Malaysia’s National Land Code, which stipulated that "a foreign citizen, or a foreign company may acquire land in Malaysia subject to the prior approval of the State Authority".
It added that Mahathir’s remarks may have been "taken out of context", and said it was in touch with his office "for clarifications".
The Nikkei Asian Review comments that the prime minister’s stance contradicts the government’s "Malaysia My Second Home" policy, which aims to encourage foreigners to buy houses in the country, and which says on its website that "any foreigner may purchase any number of residential properties in Malaysia".
It adds that, between January and August last year, some 1,500 Chinese were granted long-term visas through the scheme, accounting for 47% of the total. South Koreans were the second-largest group, with about 300 enrolments, or 9% of the total.
Mahathir’s actions follow on from an election campaign that capitalised on the Malaysian public’s unease with the amount of Chinese capital entering the country’s economy through large-scale construction schemes.
In 2017, about $2.4bn was invested, an increase of almost 350% from 2013, according to DBS Bank estimates.
For the East Coast Rail Link, Mahathir’s government is currently negotiating for a drastic price reduction, and may use Malaysian companies. He has also expressed his willingness simply to cancel the scheme altogether.
Image: Country Garden launched a design competition for Forest City "landmarks" earlier this month (Country Garden)