Not just Forest City: a look at Malaysia’s Chinese-backed projects that have faced uncertainty, controversy

Under ex-PM Najib Razak’s tenure, Malaysia saw billions of dollars of Chinese mainly belt and road investments, some of which were later axed
Others have ‘been revitalised’, such as the Melaka Gateway port, Bandar Malaysia railway and the East Coast Rail Link, expected to open in 2027

Malaysia

Joseph Sipalan

Published: 2:00pm, 13 Jan 2024

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The Forest City mega-project in Johor has faced years of scrutiny over project delays, low uptake and controversy. But in the see-sawing fortunes of Chinese investment in Malaysia, it is by no means the only one.

The country saw billions of dollars of Chinese investments – some pledged, some real – during the tenure of jailed former prime minister Najib Razak, who sought to bolster Malaysia’s flagging fortunes by pulling in foreign funds for major infrastructure projects, chiefly via China’s Belt and Road Initiative.

But several of those projects ended up facing long periods of uncertainty, with some ultimately cancelled, after Najib’s previously undefeated Barisan Nasional coalition suffered a shock loss in a 2018 general election on the back of the multibillion-dollar 1MDB corruption scandal.

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Domestic politics aside, the projects also faced stumbling blocks from strict capital controls imposed by Beijing since 2017 and onerous red tape in Malaysia, according to Oh Ei Sun, a senior fellow at the Singapore Institute of International Affairs.

Despite the troubles, China remains a key source of investments for Malaysia. Last year, Prime Minister Anwar Ibrahim secured nearly 200 billion ringgit (US$43 billion) in pledged investments from Chinese firms covering everything from manufacturing to green technology, energy and the digital economy.

Melaka Gateway

Long before any government intervention, the Melaka Gateway port and special economic zone plan was already riddled with delays. First mooted in 2014, it took a further three years before a deal was struck with the Melaka state government to get the project off the ground.

While not strictly a belt and road project, the 43 billion ringgit (US$9.3 billion) Melaka Gateway rode on the wave of Chinese infrastructure investments pouring in.

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Funded primarily by Chinese state-owned energy firm PowerChina, the 246.7-hectare maritime development envisaged new port facilities, economic parks and tourist attractions constructed across three artificial islands.

The port and cruise terminal segments of the project, however, were cancelled in 2018 by the federal government, before being reinstated a year later. Then in 2020, the Melaka state government terminated the project on grounds that the developer, KAJ Development, had failed to complete it.

But it was not the end for the Melaka Gateway. In September last year, KAJ Development, which is backed by the Sultan of Johor, announced in a statement that the project “has been revitalised” with support from both state and federal governments.

Pipeline projects

In 2018, Malaysia’s then-prime minister Mahathir Mohamad ordered the suspension and eventual cancellation of three oil and gas pipeline projects being built by China Petroleum Pipeline Engineering (CPP).

The three projects – two in the peninsula and one in eastern Sabah state – would have cost nearly US$1.8 billion to complete. The cancellations were part of severe cost-cutting measures that Mahathir implemented soon after starting his second stint as prime minister, to deal with a 1 trillion-ringgit debt pile that he blamed on state debts accrued via the scandal-riddled 1MDB fund, crafted under Najib.

A year later, Mahathir said the country had taken back over US$243 million from CPP for the unfinished pipelines, which the government said were only 13 per cent complete when the projects were suspended.

Bandar Malaysia

Anwar announced in October that his government would take over the Bandar Malaysia project, after a slew of aborted attempts by the previous developer to get the railway scheme going over the past decade.

The project, proposed by Najib’s administration in 2011 as the country’s terminus point for the now-shelved Malaysia-Singapore high-speed railway, was awarded nine years ago to a consortium that included local developer Iskandar Waterfront Holdings (IWH) and its Chinese partner, China Railway Engineering Corp (CREC).

The government, however, cancelled the deal in 2017 following disputes over payment. Attempts were made to revive the project, which held an estimated gross development value of 140 billion ringgit (US$30 billion) and at one point drew interest from Chinese property giant Dalian Wanda.

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It was later revived in 2019 under Mahathir, with IWH-CREC again winning the tender, but this attempt also failed, after the consortium was unable to meet conditions for a 7.41 billion ringgit acquisition of 60 per cent equity from the government, the two companies said in a joint statement in 2021.

In its latest incarnation, Anwar said Bandar Malaysia’s development would now focus on providing affordable public housing and green spaces for residents of capital city Kuala Lumpur.

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China-built East Coast Rail Link project continues in Malaysia

East Coast Rail Link

The East Coast Rail Link (ECRL) is arguably the only belt and road project in Malaysia that has seen significant progress. But it has not been without its fair share of troubles amid the multiple changes in government over the past five years.

As with other China-linked mega-projects, Mahathir suspended the ECRL not long after returning as prime minister in 2018.

It was allowed to resume a year later after the China Communications Construction Company agreed to restructure the cost of the 640km-long rail line to 44 billion ringgit, down nearly a third from the initial 65.5 billion-ringgit price tag.

A change of administration in 2020, however, led to yet another review of the ECRL under new prime minister Muhyiddin Yassin, after he had led a political coup that brought down Mahathir’s government.

The project will now cost an estimated 50 billion ringgit.

Transport Minister Anthony Loke said in December that the ECRL was 56 per cent complete. The entire line is expected to be fully built by December 2026, and is scheduled to start operations in January 2027.

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