Chinese, Japanese firms face off in bid for Bandar Malaysia project

The multibillion-dollar Bandar Malaysia property development project is finding no shortage of interest, with a stiff contest shaping up between a clutch of China's state-owned entities and two Japanese giants, Daiwa House Industry Group and Mitsui Fudosan.

The Malaysian government has received nine pitches on how to develop the 197ha one-time air force base on the southern fringes of the capital Kuala Lumpur, according to senior government sources.

The seven Chinese state-controlled entities that have submitted proposals to become master developer for Bandar Malaysia are China State Construction Engineering, China Communications Construction Company (CCCC), China Gezhouba Group, Greentown Overseas, China Resources, China Vanke and Australia's John Holland, which is wholly owned by CCCC.

The bids received feature development plans valued between US$7 billion (S$9.5 billion) and US$10.5 billion, according to Malaysian government officials.

They also said several of the Chinese bidders have indicated that they plan to engage renowned Spanish architect Santiago Calatrava to design the integrated township.

The Bandar Malaysia project, which is owned by state fund 1Malaysia Development Berhad (1MDB), had originally been awarded to China Railway Engineering Corp (CREC) and its Malaysian partner, Iskandar Waterfront Holdings (IWH), in December 2015 in a RM7.4 billion (S$2.4 billion) deal aimed at raising funds to tackle 1MDB's massive debt burden.

However, the joint venture's alleged failure to meet key conditions under the transaction - which, among other things, included securing the necessary approvals from the Chinese government and providing proof that the joint venture had lined up the necessary funding - prompted the Malaysian government to unilaterally cancel the contract in May.

The joint venture had disputed the termination, and called it "unacceptable".

The termination of the CREC-IWH contract was particularly controversial because it came at a time when several politically connected Malaysian business groups were privately pushing Putrajaya to revise the Bandar Malaysia project to introduce new players, such as China's privately owned entertainment and real estate giant Dalian Wanda Group.

Senior Malaysian government officials acknowledge that there were preliminary talks with Wanda, but Putrajaya later decided to widen its options by calling for international proposals on how to proceed with the development.

Bandar Malaysia's request for proposal exercise was open only to Fortune 500 companies with combined revenue of RM50 billion or more in the past three years.

The strong interest in the project is largely because it will house the terminus for the multibillion- dollar high-speed rail project that will connect Kuala Lumpur with Singapore, another huge undertaking that could cost more than RM50 billion.

The Japanese and Chinese are betting that the successful bidder in the real estate project would stand a better chance of securing a major role in the KL-Singapore high-speed rail project

Over the past year, Beijing and Tokyo have actively lobbied government officials in both Malaysia and Singapore to promote the interests of their engineering and construction concerns.

The Chinese government and its companies have been the most aggressive, said Malaysian government officials and financial consultants involved in the township and rail projects.

The Chinese have already signed a RM55 billion contract to build the East Coast Rail Line, which is a 620km electrified network that runs all the way from Tumpat, located near the north-eastern border with Thailand, down the coast to Kuantan Port, before cutting through the mountainous central region of Peninsular Malaysia to Port Klang.

China has also finalised a separate deal with neighbouring Thailand to build a high-speed rail line that will connect Bangkok with Nong Khai, on the border with Laos.

The rail project, valued at US$5.2 billion, is part of Beijing's One Belt, One Road global infrastructure development push.

A version of this article appeared in the print edition of The Straits Times on July 25, 2017, with the headline 'Chinese, Japanese firms face off in bid for Bandar Malaysia project'. Print Edition | Subscribe