Forest City Phoenix International Marina Hotel
Skyline of Forest City

1°20′N 103°35′E / 01.34°N 103.59°E / 01.34; 103.59

Forest City street view

Forest City is an integrated residential development and private town located in Iskandar Puteri, Johor, Malaysia. First announced in 2006 as a twenty-year investment project mostly financed by a consortium of mainland Chinese private real estate developers, pitched under the Belt and Road Initiative.[1]

It was officiated by then Prime Minister of Malaysia Najib Razak in 2016, with the approval of the Sultan of Johor, Sultan Ibrahim Ismail.[2] Forest City is a joint venture between Esplanade Danga 88, an affiliate of state government subsidiary Kumpulan Prasarana Rakyat Johor (KPRJ), through a joint venture, Country Garden Holding Ltd (CGPV), with CGPV holding 60 percent of shares, while KPRJ holds the other 40 percent.[3] Forest City is under the management of the Iskandar Puteri City Council and the Iskandar Regional Development Authority.

The development of Forest City is contentious. The project was not targeted at local Malaysians but rather at upper-middle-class citizens from China who were looking to park their wealth abroad, by offering relatively affordable seafront properties compared to expensive coastal cities within their country such as Shanghai.[4][5] However, initial strong sales from China collapsed after its leader Xi Jinping implemented currency controls, including a $50,000 annual cap on how much buyers could spend outside the country.[5][6] Such lackluster sales were exacerbated by the 2020–2022 Malaysian political crisis and the COVID-19 pandemic, with the project being described as a "ghost town" in 2022.[7][8] The project, which is located on reclaimed land, has also been criticised for causing large amounts of habitat destruction in the vicinity.[9]

Controversy

Location map of Forest City as showcased in its sales center, stating its close location with Singapore as a selling point

Environmental impact

Despite being marketed as "an energy-efficient, ecologically sensitive, land-conserving, low-polluting offshore city", the development has had significant negative environmental impact, with irreversible damage due to reclamation of ecologically sensitive coastal wetlands.[4][10]

The area within which Forest City lies is protected as an Environmentally Sensitive Area (ESA) Rank 1 area, where no development is allowed except for low-impact nature tourism, research and education.[11] Chief to this designation are two areas of international ecological significance, the Tanjung Kupang intertidal seagrass meadow, the largest of its kind in Malaysia, and the Pulai River Mangrove Forest Reserve, designated as a wetland of international importance under the Ramsar Convention.

Reclamation began in January 2014 without the legally required Detailed Environmental Impact Assessment (DEIA).[12][13] Residents from Kampung Tanjung Kupang, a traditional fishing village, complained of reduced catches and other issues to the local and Johor State authorities to no avail.[10][14][15]

Malaysia had also not informed Singapore as required under their 2005 International Tribunal for the Law of the Sea-mediated agreement on reclamation works and other treaties.[10][16][17] Singapore subsequently sent a diplomatic note in May 2014 to the Malaysian Federal government requesting clarification on issues including: potential changes in water current speeds and the subsequent impact on navigational safety; possible erosion that might affect shoreline and Malaysia-Singapore Second Link bridge infrastructure; and changes in water quality and morphology that might affect the coastal and marine environment and local fish farms. Following this and an accompanying outcry by international environmental watchdogs, the Environment Ministry sent a request for the DEIA to Country Garden on 6 June 2014, and issued a stop-work order on 17 June 2014, although it was reported that work continued despite the stop-work order.[11]

The DEIA was issued in January 2015, confirming that the regulations had been side-stepped and contained 81 directives, including a reduction in size from 1,600 hectares to less than 405 hectares. It acknowledged that the seagrass ecosystem had been split into two and "will be heavily impacted by the proposed development" despite these measures.[10][11][5][18] Country Garden subsequently announced that it was downsizing the project by a third and dividing it into four islands, although there was subsequent evidence that some of these measures were not implemented, including photographs where silt curtains were absent and of buffer zones that were less than 100m (as opposed to the agreed 300m).[12] Concerns also remained about the permanent impact on the seagrass, water hydrology, and loss of traditional fishing grounds, which these measures will not fully alleviate.[11]

Other environmental concerns include claims that sand from local hills was being used at the project site and fears of stress on local water sources and sewage discharge.[11]

Fishermen also reported the reduced space for fishing in the Johor Straits due to the land reclamation work had forced them further out into the sea, resulting in occasions where they were accused of crossing the international boundary line with Singapore. [19]

Safety considerations

Cracks began to appear in the Show Gallery, hotel buildings and roads soon after construction. There were claims that the speed of the land reclamation did not allow time for the soil to settle and stabilize, with a building consultant opining that the land was sinking, and would likely continue to do so.[11]

Coverage and criticism

Following the 2018 change in Malaysian government and subsequent political uncertainty, the worsening geopolitical environment between Malaysia and China, and suspension of the Malaysia My Second Home long term visa scheme, some Chinese nationals (who formed the majority of buyers) decided to leave the development and sold their units at steep losses, further adding to the supply overhang.[20][21]

While Country Garden employed some locals, most of Forest City's workforce comprised low-wage labourers from South Asia or white-collar workers from China.[4]

In 2018, Mahathir Mohamad, campaigning on a platform which included criticism of Chinese investment and corruption, defeated the incumbent Malaysian prime minister Najib Razak who had originally approved the project, and issued a "ban" on foreigners buying property.[22] This was subsequently re-structured as changes to the long term visa program in order to mitigate objections and potential legal challenges raised by the developer.[23][24]

Forest City has been described as one of the world's "most useless" megaprojects, and by the American magazine Foreign Policy as a "massive boondoggle".[25][26][4] By the end of 2019, only 15,000 units had been sold,[27] compared to a target of 700,000,[28] and as few as 500 people actually lived in the development.[4] There were multiple allegations of corruption at various levels and multiple stages of the project.[4][11][13] In addition, the residential units were priced according to the then-booming housing market in China, so local Malaysians were unable to afford them. Indicative of its clientele, the road signage was often exclusively written in Chinese while the few schools that opened only taught Mandarin.[29]

In 2020, the COVID-19 pandemic led to increasing economic uncertainty and travel restrictions, severely affecting sales which dropped by more than 90% after March 2020.[27] Following implementation of Malaysia's Movement Control Order, some residents returned to their home countries. COVID-19 restrictions on travel between Malaysia and Singapore presented difficulties for the remaining residents, especially those working in or with children schooling in Singapore. Some tenants also suspended operations or pulled out, citing restrictions due to the Movement Control Order or commercial non-viability.[20][30] The developer subsequently laid-off at least two-thirds of its staff, after having sold less than ten properties in 18 months.[31]

In August 2023, the developer Country Garden joined the ranks of once-strong Chinese property developers in deferring millions of dollars in debt payments.[32][33] This was followed in October 2023 by cross defaults in up to $11 billion of offshore bonds, raising fears that overseas projects and assets such as Forest City would be sold or seized by creditors during the debt restructuring, such as had happened to Risland Australia in the weeks prior to the default.[34][35][36][37][38]

See also

References

  1. ↑ Bloomberg News (23 June 2017). "The $100 Billion City Next to Singapore Has a Big China Problem". Bloomberg. Archived from the original on 2020-10-26. Retrieved 2020-06-12.
  2. ↑ "Malaysia's Forest City to hand over more than 20,000 residential units this year as it unveils new golf course". South China Morning Post. 9 Sep 2019. Archived from the original on 9 June 2020. Retrieved 9 June 2020.
  3. ↑ "Forest City, Country Garden Pacificview". 13 April 2017. Archived from the original on 9 June 2020. Retrieved 9 June 2020.
  4. 1 2 3 4 5 6 Saha, Sagatom (21 November 2019). "Chinese Companies Are Worse at Business Than You Think". Foreign Policy. Archived from the original on 12 June 2020. Retrieved 12 June 2020.
  5. 1 2 3 Schneider, Keith (2 July 2019). "As opposition wanes, a Malaysian land reclamation project pushes ahead". Mongabay Environmental News. Archived from the original on 9 January 2021. Retrieved 8 January 2021.
  6. ↑ Ryan, Ong (14 April 2017). "The Forest City debacle: 4 lessons to learn buying overseas property". 99.co. Archived from the original on 12 April 2021. Retrieved 28 February 2021.
  7. ↑ Descalsota, Marielle. "Malaysia's $100 billion luxury estate was supposed to be a 'living paradise.' Instead, 6 years into development, it's a ghost town full of empty skyscrapers and deserted roads — take a look". Insider. Archived from the original on 7 July 2022. Retrieved 6 July 2022.
  8. ↑ Mohamad Sani, Ahmad Sadiq (16 May 2022). "The ghost town of Forest City". MalaysiaNow. Archived from the original on 25 June 2022. Retrieved 6 July 2022.
  9. ↑ Shaw, Albert; Ourbis, Sylvian. "Malaysia's Forest City and the Damage Done". thediplomat.com. Archived from the original on 15 June 2022. Retrieved 6 July 2022.
  10. 1 2 3 4 Adis, Khalil. "Study: Forest City project has done more harm than good". www.khaliladis.com. Archived from the original on 2021-01-18. Retrieved 2021-02-28.
  11. 1 2 3 4 5 6 7 Rahman, Serina (2017). "Johor's Forest City Faces Critical Challenge". Trends in Southeast Asia Series: WTO Issues. Yusof Ishak Institute. ISSN 0219-3213.
  12. 1 2 Schneider, Keith (6 September 2018). "A civic outcry in Malaysia forces a Chinese builder to live up to its eco-friendly promise". Eco-Business. Archived from the original on 9 January 2021. Retrieved 8 January 2021.
  13. 1 2 Williams, Joseph (2016). "Evaluating Megaprojects: The Case Of Forest City In Johor, Malaysia" (PDF). Malaysia Sustainable Cities Program. Massachusetts Institute of Technology. Archived (PDF) from the original on 2021-02-09. Retrieved 2021-02-28.
  14. ↑ Ourbis, Sylvain (30 Aug 2017). "Malaysia's Forest City and the Damage Done". thediplomat.com. Archived from the original on 28 January 2021. Retrieved 28 February 2021.
  15. ↑ Aw, Nigel (14 July 2014). "The case of Forest City and the Johor sultan". Malaysiakini. Archived from the original on 25 February 2021. Retrieved 28 February 2021.
  16. ↑ Ritikos, Jane (25 Apr 2005). "Malaysia and Singapore to sign agreement on reclamation work | The Star". www.thestar.com.my. The Star. Archived from the original on 13 April 2021. Retrieved 28 February 2021.
  17. ↑ Cheong, Koon Hean (2013). Malaysia & Singapore: the land reclamation case: from dispute to settlement. Singapore. ISBN 9789814342513. Archived from the original on 2021-04-12. Retrieved 2021-02-28.{{cite book}}: CS1 maint: location missing publisher (link)
  18. ↑ Lee, Marissa (15 January 2015). "Forest City environmental impact report: A closer look at what M'sia approved". The Straits Times. Archived from the original on 12 April 2021. Retrieved 28 February 2021.
  19. ↑ Yusof, Amir (8 September 2023). "'Accidentally': Johor fishermen say engine failure, strong currents among reasons why they end up in Singapore's waters". CNA. Retrieved 9 September 2023.
  20. 1 2 "China's middle-class dream of a second home in Malaysia dashed by coronavirus and geopolitical tensions | The Star". www.thestar.com.my. Archived from the original on 2020-11-01. Retrieved 2021-02-28.
  21. ↑ "Coronavirus and geopolitical tensions dash Chinese dreams in Malaysia". South China Morning Post. 20 September 2020. Archived from the original on 12 April 2021. Retrieved 28 February 2021.
  22. ↑ Iwamoto, Kentaro (28 August 2018). "Mahathir foreign-ownership ban rattles $100bn China-led project". Nikkei Asia. Archived from the original on 24 December 2020. Retrieved 16 December 2020.
  23. ↑ "Foreigners can buy Forest City units, but will not be issued residential visas: Mahathir". The Straits Times. 2018-09-05. Archived from the original on 2020-06-12. Retrieved 2020-06-12.
  24. ↑ "Malaysia says committee to study Forest City project". Reuters. 2018-08-28. Archived from the original on 2020-06-12. Retrieved 2020-06-12.
  25. ↑ Leong, Adeline. "Johor's Forest City Ranked World's 2nd Most Useless Mega Project | TRP". The Rakyat Post. Archived from the original on 4 July 2022. Retrieved 6 July 2022.
  26. ↑ CIH, Qistina (17 November 2021). "Forest City enters list of world's 'most useless' megaprojects". The Vibes. Archived from the original on 17 November 2021. Retrieved 6 July 2022.
  27. 1 2 "Coronavirus slows China-funded $100bn city in Malaysia". Archived from the original on 2020-12-15. Retrieved 2020-12-16.
  28. ↑ Saha, Sagatom. "Chinese Companies Are Worse at Business Than You Think". Foreign Policy. Archived from the original on 2020-06-12. Retrieved 2020-06-12.
  29. ↑ "The $100 Billion Forest City In Malaysia by TheRichest". Archived from the original on 2022-07-04. Retrieved 2022-07-07.
  30. ↑ Maloberti, Gregg (16 April 2020). "Covid-19 Update". Shattuck-St. Mary’s Forest City International School. Archived from the original on 12 April 2021. Retrieved 28 February 2021.
  31. ↑ Kaur, Sharen (1 Sep 2021). "Country Garden reduces its headcount by two-thirds due to poor sales at Forest City". New Straits Times.
  32. ↑ Bloomberg News (1 Aug 2023). "Chinese Developer Country Garden Slides as Funding Woes Worsen". Bloomberg. Retrieved 9 Aug 2023.
  33. ↑ Jim, Claire (8 Aug 2023). "Country Garden misses bond payments as China property fears flare". Reuters. Retrieved 9 Aug 2023.
  34. ↑ Bloomberg Markets (25 Oct 2023). "Country Garden Missed Payment Declared 'An Event of Default'". Bloomberg.
  35. ↑ Jim, Clare (17 Oct 2023). "Country Garden on brink of default as payment deadline nears". Reuters.
  36. ↑ Ma, Dorothy (25 October 2023). "China Developer Country Garden Deemed in Default on Dollar Bond for First Time". Bloomberg.
  37. ↑ Chew, Amy (8 September 2023). "Country Garden's Malaysian project in focus amid contagion worries". NikkeiAsia.
  38. ↑ Cole, Michael. "Country Garden Sells Melbourne Project To Frasers After Bond Default". Mingtiandi.
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