Malaysia Revives 1MDB-linked Mega Project as it Strengthens Economic Ties with China
The Bandar Malaysia mega-project appears to be active again after the Malaysian government signed a new deal with a Chinese consortium to continue the Bandar Malaysia project's development. The project was marred by its connection to the now-infamaous1Malaysia Development Berhad (1MDB) scandal, which is global in scope.
TRX City, which is a subsidiary of the Malaysian Finance Ministry, told media that it had entered into a new agreement with IWH-CREC, which is a consortium comprised of China-owned China Railway Engineering Corporation (CREC) and a local developer, Iskandar Waterfront Holdings. The consortium plans to continue the development of the 48-acre Bandar Malaysia mega-project.
Originally designed to be a transport center where more than 10 highways and rail line meet, the Bandar Malaysia mega-project would also serve the Singapore-Kuala Lumpur high-speed rail link.
The project was announced in 2011 by former Malaysian premier, Najib Razak. The ex-premier is presently on trial for numerous counts of corruption and other charges related to the billions of USD that were stolen from the 1MDB sovereign wealth fund.
Current Malaysian Prime Minister Mahathir Mohamad commented that the reactivation of the Bandar Malaysia mega-project was, "testimony to both Malaysia and China working out a collaboration that will benefit our peoples".
A New Era for China-Malaysia Relations
According to Prime Minister Mahathir Mohamad, the Bandar Malaysia mega-project is unique. Unlike other projects that are connected to China's Belt and Road Initiative (BRI), such as the East Coast Rail Link, the Bandar Malaysia mega-project is part of, "a larger context of forging and underlining long-term bilateral and trade relations between Malaysia and China".
Prime Minister Mahathir Mohamad expanded on his views:
"It (the Bandar Malaysia mega-project) is undertaken with a very clear objective - that such a project provides premium economic value to the country. The revised plan for Bandar Malaysia takes into consideration the government's policy of ensuring that such a massive development project will be people-centric, add substantial value to the country's economy and (is) in tandem with the philosophy of our Shared Prosperity Vision 2030 that it must boost the country's economic growth”.
Although he went on to say that the Kuala Lumpur-Singapore rail link that ends at the Bandar Malaysia mega-project will need "some adjustments" in order to drop the price of the project.
China Backs Malaysia's Development
The ceremony that reopened the development of the Bandar Malaysia mega-project was attended by Malaysian Finance Minister Lim Guan Eng, Transport Minister Anthony Loke, Economic Affairs Minister Azmin Ali. On the Chinese side, Ambassador to Malaysia Bai Tian, and Chen Yun, who is the President of China Railway Group were in attendance.
Finance Minister Lim commented that IWH-CREC's openness to continue with the project was a direct result of the Malaysian government's efforts to, "quarantine, rationalise and detoxify the project that had been marred by the 1MDB corruption scandal,” after a previous deal hit a wall.
The project has been especially sensitive for former prime minister Najib, as the land used for it was connected to the 1MDB organization. After a series of disagreements between the former government and developers, the contract was terminated in 2017. An attempt to attract Chinese developer Dalian Wanda also failed at the time, as the Chinese government was wary of expanding overseas ventures.
According to Finance Minister Lim, the new terms will see a share-sale agreement that includes land sale dividends split on a 50/50 basis between the developer and the government. The number of affordable homes has also been doubled, from 5,000 to 10,000. There will also be an 85-acre park space, which will be the largest in Malaysia.
Interest From Major Chinese Companies
The revitalization of the Bandar Malaysia mega-project has caught the attention of large Chinese companies, like Alibaba and Huawei. Both companies are interested in creating Bandar Malaysia-based hubs according to Finance Minister Lim, who also mentioned that the area is expected to have a Gross Development Value (GDV) of 140 billion Malaysian ringgit over the coming twenty years.
Malaysia and China have been successful in cultivating economic ties for many years, despite the ousting of the China-friendly Barisan Nasional administration by the Mahathir-led Pakatan Harapan coalition last May.
The current Malaysian administration did appear to be more conservative toward BRI-based projects, but with the successful renegotiation of the ECRL, which is a rail line that will cross Peninsular Malaysia's easterly coast, Malay-Sino relations appear to be in an upswing.
Bandar Malaysia's resurrection came within a week of the ERCL deal, which may be a sign of more economic cooperation to come. China is the largest trading partner of Malaysia, and trade grew by 8.1% in 2018 to 313.8 billion ringgit, which is almost 17% of Malaysia's total trade.