Revival of Malaysia’s Forest City, Melaka Gateway would give PM Anwar a boost

After years of neglect by past administrations, the Chinese-backed project is again in the spotlight as PM Anwar Ibrahim eyes investors from Singapore
Renewed interest in Forest City comes amid talk of reviving another Belt and Road Initiative project in Malaysia, the US$10 billion Melaka Gateway

Joseph Sipalan

Published: 10:30am, 15 Sep 2023

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Malaysia’s controversial Forest City mega-project in southern Johor state is once again making headlines, after Prime Minister Anwar Ibrahim declared the creation of a Special Financial Zone to boost interest among potential investors from across the Causeway.

It was arguably the strongest endorsement by the government for the US$100 billion Chinese-built project after years of neglect by past administrations that viewed it as a politically unsafe bet amid rising ethno-nationalism and increasingly unaffordable housing for Malaysians.

Just five years ago, Forest City was a key rallying point for the federal opposition seeking to unseat then-prime minister Najib Razak and his previously undefeated Umno party and the Barisan Nasional coalition it leads.

Mahathir Mohamad, who had mentored both Anwar and Najib, called Forest City an exercise in selling land to foreigners without any consideration for the need to provide affordable housing to Malaysians, particularly the ethnic Malay majority.

Just months into his second tenure as prime minister in 2018, Mahathir imposed a ban on foreign ownership in the project, though he later walked back on it and said that the government would not issue entry visas based solely on ownership of properties in Forest City.

The motivations may have been almost entirely political, but the fallout from the attacks on the project has been palpable.

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Country Garden, China’s largest private developer, launched the project in 2016 as one of the flagships of President Xi Jinping’s ambitious Belt and Road Initiative in Malaysia.

The resistance happened almost immediately. Mahathir – who at that point had quit Umno in protest of alleged corruption under Najib’s watch – stirred local sentiments against what he described at campaign stops as a project built solely for Chinese nationals on Malaysian soil.

Mahathir went so far as to claim that Chinese citizens who moved to Forest City could end up becoming Malaysian citizens and have the right to vote if they stayed long enough, tapping into simmering resentment among local Malays to strike at Najib’s perceived closeness to China.

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The plan to build four artificial islands covering an area of 30 square kilometres (11.6 square miles) – almost three times the size of the touristy Lamma Island in Hong Kong – also raised concerns of potential damage to the environment and fisheries, an important source of income for the local coastal Malay and Orang Asli communities.

The project was dealt a major blow in 2017 when the Chinese government imposed capital controls, disrupting cash flow for Chinese developers with overseas projects and also making it prohibitive for Chinese clients to finalise their purchases in Forest City.

A total of 28,000 condominium units have been completed on the first island under phase one of Forest City. Just 9,000 people are living in the area, a fraction of the population target of 700,000 for the entire project.

The next obvious target market would be the many multinational companies operating just across the border in Singapore.

Anwar’s plan is to establish Forest City as an extended base for these firms to expand or shift some of their operations, offering lower operational and living costs.

Malaysia’s Prime Minister Anwar Ibrahim, who has struggled to garner broad public support since taking the premiership in November, attend the Asean summit in Jakarta on September 6. Photo: Reuters

There have been moves to revive yet another belt and road project – the dormant Melaka Gateway project just a couple of hours north of Forest City, in the historic port city of Malacca.

The developers of the US$10 billion project, which like the master developer of Forest City has the backing of the Sultan of Johor, officially declared on Monday that the Melaka Gateway is back on track. The 246.45-hectare maritime initiative was meant to include port facilities, economic parks and tourist attractions on three artificially constructed islands.

Success in both projects would be a boon for Anwar, who has struggled to garner broad public support since taking the premiership in November, with the potential economic spillovers for local businesses and employment.

The big question is whether his administration can present cogent policies to boost these projects and see through their implementation, or end up wavering over criticism and end up back where they started.

Joseph Sipalan is a correspondent at the Post’s Asia desk.