Lim Sue Goan

PETALING JAYA (SIN CHEW DAILY/ASIA NEWS NETWORK) - In the absence of accurate official explanations on the collapse of the Bandar Malaysia deal, the various speculations have since sparked tremendous market concerns.

Malaysian state-owned firm TRX City said in a statement last Wednesday (May 3) that the collapse of the deal was a result of China Railway Engineering Corporation (CREC) and Iskandar Waterfront Holdings (IWH) unable to fulfill their payment obligations. However, the joint-venture company said it had performed all its payment obligations and that TRX City's accusation was unsubstantiated.

There are currently two kinds of rumours circulating in the market, that Malaysia's ruling party Umno has steered a dramatic U-turn for the sake of election for fear of anti-Chinese sentiment among the Malays; and that Beijing is imposing capital control to restrict Chinese companies' investments overseas.

TRX City said in the statement that the Malaysian Finance Ministry would retain 100 per cent ownership to ensure Malaysians would benefit from the development, which is consistent with the ruling party's political interests.

However, as the national economy is now facing serious threats from a host of domestic as well as external factors, we need the support of funds from China more than ever.

As a matter of fact, Chinese funds have indeed relieved the debt pressure of state fund 1Malaysia Development Berhad (1MDB). Moreover, Prime Minister Najib Razak has always held in very high regard the country's ties with Beijing, and is about to visit China again later this month.

If the U-turn has been effectuated out of political considerations, it could leave a negative mark on the mutual trust already established between our two counties, which is not a very smart thing to do.

China imposed capital control measures to restrict capital outflows as a result of the yuan falling to its lowest levels against the greenback in eight years at the end of 2016. Such a policy will invariably affect the overseas acquisitions of Chinese companies, including real estate development projects.

Nevertheless, Bandar Malaysia is not just another ordinary investment. It also entails China's national interests because the project will facilitate China's bid for the Kuala Lumpur-Singapore High-Speed Rail (HSR) project. Staying away from Bandar Malaysia will risk the HSR project eventually falling into the hands of the Japanese.

As such, these two guesses are not really very logical. In its stead, a report by The Star perhaps gets closer to the fact. It was reported that the abortion of the deal was due to Malaysia finding itself unable to fulfil Beijing's "shopping list" that would include an assurance on China's HSR bid, as Malaysian officers could not commit to many of the proposed terms due to national interest and social reasons.

The report has explained the doubts we had, namely that Umno leaders are concerned that the issue of Chinese funds will dampen the party's chances of winning the election, while the Chinese authorities are applying pressure on Malaysia owing to the strategic importance of the KL-Singapore HSR project.

The government's announcement of the deal's collapse was made in a hurried manner, otherwise Mr Najib would not have cancelled his visit to Bandar Malaysia at the last minute.

The deal cancellation will nevertheless have negative impact on the country's development.

1. The 1MDB debt restructuring exercise could be at stake. An out-of-court settlement was reached between 1MDB and Abu Dhabi's International Petroleum Investment Company (IPIC) whereby 1MDB would pay IPIC US$7.01 billion (S$9.9 billion) whereas 1MDB would raise US$7.41 billion from the sale of Bandar Malaysia shares.

Uncertainties surrounding 1MDB's debts will deal a severe blow on the local currency, along with Mr Najib's political risks.

2. If the issue eats into the bilateral relationship between Malaysia and Beijing, it will affect other major Chinese investments in this country, including the East Coast Rail Line (ECRL) project.

It is absolutely necessary for the government to provide a clear explanation on this matter before it erodes other investors' confidence in the country.

Can Mr Najib once again harness his diplomatic acumen to persuade Beijing to maintain the current cordial relationship between our two countries?

3. Given the government's past records and competency, will it be able to fully unleash the economic potentials of Bandar Malaysia, or will the project be reduced to just another white elephant?

Against the backdrop of sluggish sales of KL's commercial and luxury residential units, Bandar Malaysia may not be a hen that lays the golden eggs in the absence of any value-added and innovative solution.

Bandar Malaysia is one of the mega projects that will portrait the country's vision for the future. The collapse of the deal proves that mega projects will not necessarily assure the country of its future without us putting in some real effort.

It appears that everything is within our grip, from 1MDB to Bandar Malaysia, but unfortunately these projects have lagged far behind the dramatic changes taking place in our world!