Malaysia revives 1MDB-linked mega project as it strengthens economic ties with China

Prime Minister Mahathir Mohamad said the Bandar Malaysia project will underline bilateral and trade relations with China
The Singapore-Kuala Lumpur high speed rail link is back on track, but with adjustments to reduce costs

Malaysia

Tashny Sukumaran

Published: 8:45pm, 17 Dec 2019

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The controversial Bandar Malaysia mega-project linked to the 1Malaysia Development Berhad (1MDB) global financial scandal received a new lease on life on Tuesday after the government signed a deal with a China-backed consortium to continue the venture.

Malaysian Finance Ministry subsidiary TRX City said it had entered into a deal with IWH-CREC, a consortium between the Beijing-owned China Railway Engineering Corporation (CREC) and local developer Iskandar Waterfront Holdings to develop the 48-acre plot of land.

Bandar Malaysia was originally envisioned as a central transport hub for a dozen highways and several rail lines including the stalled Singapore-Kuala Lumpur high speed rail link. It was announced in 2011 by the former premier Najib Razak, who is currently on trial for multiple counts of corruption and abuse of power linked to the 1MDB financial scandal that saw billions siphoned out of the state sovereign wealth fund.

Visitors look at a model of the Bandar Malaysia mega-project ahead of the signing ceremony in Putrajaya, Malaysia. Photo: Reuters

Prime Minister Mahathir Mohamad said at the signing ceremony that the revival of the project was “testimony to both Malaysia and China working out a collaboration that will benefit our peoples”.

Unlike ongoing Malaysia-based Belt and Road Initiative projects such as the East Coast Rail Link, Bandar Malaysia was pursued in “a larger context of forging and underlining long-term bilateral and trade relations between Malaysia and China”, he said.

“It 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,” he said.

The Kuala Lumpur-Singapore rail link, which will terminate at Bandar Malaysia, will also still go ahead but with “some adjustments” to reduce costs, said Mahathir.

The ceremony was also attended by Finance Minister Lim Guan Eng, Economic Affairs Minister Azmin Ali, Transport Minister Anthony Loke, Chinese Ambassador to Malaysia Bai Tian, and Chen Yun, President of China Railway Group.

Lim said IWH-CREC’s willingness to reinvest in the project after the previous deal fell apart was a result of the government’s efforts to “quarantine, rationalise and detoxify the project that had been marred by the 1MDB corruption scandal”.

China Railway Dongfang Group chairman Chen Zhigong and TRX City board member Asri Hamidon exchange documents, witnessed by Malaysia’s Prime Minister Mahathir Mohamad, during the signing ceremony for Bandar Malaysia in Putrajaya, Malaysia. Photo: Reuters

The project was a sensitive issue for Najib because the land on which it was to have been built was linked to the 1MDB state fund. After several disagreements between Najib’s government and the project’s developers in 2017, Najib abruptly terminated the contract.

A last-ditch attempt to rope in Chinese developer Dalian Wanda as a replacement for the original developer also failed, as it came under pressure from the Chinese government to rein in overseas ventures.

Mahathir’s government agrees to revive China-backed Bandar Malaysia project

Lim said improved terms to the share-sale agreement included land sale dividends being split 50-50 between the government and developer, the construction of 10,000 affordable homes instead of the previous 5,000, and 85 acres of park space which will be the single largest development plot in Malaysia.

Already, Chinese corporations such as Alibaba – owner of the South China Morning Post – and Huawei have expressed interest in opening Bandar Malaysia-based hubs, said Lim, adding that the area had an expected Gross Development Value (GDV) of 140 billion ringgit (US$33.8 billion) over the next two decades.

Malaysia's Prime Minister Mahathir Mohamad, Transport Minister Anthony Loke Siew Fook, Finance Minister Lim Guan Eng and Economic Affairs Minister Azmin Ali, are pictured looking at a model of the Bandar Malaysia project. Photo: Reuters

China and Malaysia have nursed close economic ties for several years now, even after the previous Beijing-friendly Barisan Nasional administration was turfed out by the Mahathir-led Pakatan Harapan coalition last May.

Although the sitting administration initially appeared hawkish towards Belt and Road measures, ties soon warmed after the two nations successfully renegotiated the ECRL, a rail link that runs across Peninsular Malaysia’s easterly coast and aims to boost economic development and connectivity.

Mahathir’s belt and road balancing act confirms Malaysia’s ‘middle power’ ambitions

The promise to revive Bandar Malaysia came just a week after the government signed a fresh deal with Beijing to resume the stalled ECRL works.

China is Malaysia’s biggest trading partner, with trade growing at 8.1 per cent to 313.8 billion ringgit (US$75 billion) in 2018, constituting 16.7 per cent of Malaysia’s total trade.

This article appeared in the South China Morning Post print edition as: mega deal with china a sign of firmer ties

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