Johor’s Forest City teeters over China property giant’s woes
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Prime Minister Anwar Ibrahim has stepped in to try to save Forest City as it threatens to become a white elephant.
PHOTO: AFP
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JOHOR BAHRU – On the approach to Malaysia’s US$100 billion (S$135 billion) island mega project backed by Chinese investment, a collapsed bridge forces drivers to detour before they reach an artificial city emerging from palm oil trees where condos, roads and shops stay empty.
Aimed at middle-class Chinese buyers, Forest City has weathered scant sales, Chinese currency controls, a pandemic shutdown and public anger at Beijing’s growing influence in Malaysia.
But its future is in doubt again because of the financial woes of Chinese property giant Country Garden.
It posted a record loss for the first half of 2023 but won creditor approval to extend a key bond repayment deadline, narrowly avoiding a potential default that imperilled thousands of developments in and outside the world’s second-largest economy.
Another deadline looms in coming days over an unpaid multi-million-dollar interest payment that again leaves it at risk of default.
“I hope Country Garden can overcome their financial difficulties,” said 29-year-old Zhao Bojian from Chinese province Henan, who bought one of 26,000 Forest City apartments five years ago.
“If nobody comes to Forest City, we cannot do business here.”
Sitting across from Singapore, the sprawling project in Johor state was one of Country Garden’s many ambitious gambles that took the company to great heights but now risk crashing it back down to reality.
Launched under China’s Belt and Road Initiative with a company partly owned by Johor’s sultan, Forest City houses around 9,000 people, way below its 700,000 target.
Construction workers chip away at the island city by day while an eerie silence falls over its deserted four-lane highway at night.
Only a small number of lights shine from windows by evening across the project’s more than two dozen high-rise towers.
Below sit rows of shuttered shopfronts, some with court documents stuck to doors demanding outstanding payments. Inside, rubbish is strewn across the floors.
Many buyers do not live in the artificial city, a security officer told AFP.
Model sculptures of the project sit in the lobby of a sales showroom to attract potential buyers, guided by Chinese, Malay and English road signs.
A view of closed shops in a mall at Country Garden’s Forest City development.
PHOTO: REUTERS
Previous governments have opposed residency for expatriate investors, criticising the project as built only for foreigners.
Prime Minister Anwar Ibrahim has stepped in to try to save Forest City as it threatens to become a white elephant.
He has announced the creation of a “special financial zone”
Observers say Forest City faces an uphill battle regardless.
“The liquidity pressure could have an impact on their capability to complete overseas housing projects,” said Mr Bernard Aw, chief Asia-Pacific economist at credit insurance firm Coface.
A three-hour drive from Kuala Lumpur, the project attracts visitors who want to catch a glimpse of the space-age towers or buy duty-free alcohol.
“Everyone comes here for the liquor,” said Singapore-based technician Denish Raj Ravindaran, 32. “I will not stay here, it is a ghost town. The road is dark and dangerous and there are no street lights.”
Much of the activity comes from foreign workers – many from Nepal or Bangladesh – maintaining the bushes, sweeping roads or guarding the towers.
An artificial sand beach littered with beer cans, where families picnic under coconut trees, bears a sign warning would-be swimmers about crocodiles.
At one 45-storey tower, an official says only two floors are occupied while the rest are for sale.
As Country Garden fights for its survival, drastic efforts will likely be needed – from both Beijing and Kuala Lumpur – to get Forest City on its feet.
“I came here for a holiday after seeing TikTok videos,” said retail clerk Nursziwah Zamri, 30, from Melaka.
“If you ask me if I would live here, the answer is no.” AFP
