Country Garden’s ambition in Malaysia backed by Johor’s royal family

Despite concerns over oversupply, leading Chinese developer Country Garden expresses full confidence in its city building plan in Malaysia, which is backed up by a deep relationship with local royalty.

In its second project in Malaysia’s southern state of Johor, the Guangdong-based developer plans to invest a total of 250 billion yuan (HK$296 billion) over 20 years to build a “Forest City” on 14 square kilometres of land.

It is developing the project in partnership with Esplanade Danga 88, an associate company of Kumpulan Prasarana Rakyat Johor (KPRJ), through a joint venture, Country Garden Pacific View (CGPV), with Country Garden holding a 60 per cent stake.

The largest shareholder of Esplanade Danga 88 is Johor’s Sultan Ibrahim Ismail, making Forest City a joint venture between Country Garden and the Johor monarch.

“To survive [in Malaysia], you must have close relationship with the state government,” a senior manager at CGPV said, adding that Country Garden chairman Yang Guoqiang and the sultan were very close friends, meeting and having dinner together about every two months.

The relationship had helped Country Garden achieve smooth communication with governments.

“I used to work for a federal [government] department; it was the sultan asked me to join,” he said. “We have quarterly meetings with state government. Whenever there are complaints or other issues from the Malaysian or Singaporean government, we have channels for talk.”

Country Garden also acquired the land much more cheaply than the prices other Chinese developers have had to pay.

The Forest City project will include apartments, villas, schools, hospitals, an exhibition centre and a financial special administrative region. Country Garden said pre-sales of apartments would kick off in the first half of this year.

The project was challenged by Malaysia’s environment department of Environment in 2014, but the sultan backed Country Garden.

“Such action obstructs the state’s development and causes investors to run elsewhere,” he said in a speech.

Forest City is planned to be built on four man-made islands and there were calls for its suspension due to the lack of an environmental impact assessment. It was restarted last year after obtaining final approval from the Malaysian environmental authorities after an assessment.

“No business can always be smooth sailing,” Yang told Singapore media last year. “The most important thing is that we are law-abiding.”

But the close relationship is not enough for Country Garden to gain a firm foothold in Malaysia.

Local industry insiders said Country Garden’s guts and speed had seen it beat many local developers.

“They work like 24 hours,” said Alan Ho, a local property agent, unlike local developers, whose workers only worked from 8am to 5pm and took three breaks a day.

The senior CGPV executive said: “I’m very impressed with the way Chinese developers do business, they have the positivity to make things happen.”

Country Garden’s fast execution is famous among Chinese developers, which led to success in home sales in China’s third- and fourth-tier cities, where demand is relatively poor.

Country Garden agrees there is a temporary oversupply in Johor, but says it is taking a long view and expect the projects will benefit from economic growth and improving ties between Singapore and Malaysia.

“It’s like we are investing in Shenzhen 10 years ago,” Country Garden president Mo Bin said.