The Bandar Malaysia project was launched in May 2011; a 197ha development under the real estate arm of Malaysian state fund 1MDB that was meant to be a new business district of Kuala Lumpur as well as a major transport node, housing the terminus of the High Speed Rail to Singapore and perhaps Bangkok.

After the fallout from a scandal at 1MDB, where funds had allegedly been misappropriated, Bandar Malaysia fell under the auspices of TRX City, a wholly-owned subsidy of Malaysia’s Ministry of Finance.

In December 2015, 60 per cent of Bandar Malaysia was sold to a consortium comprising Iskandar Waterfront City and the China Rail Engineering Corporation (CREC), a Chinese state-owned company, at a signed value of 12.35 billion ringgit (HK$22 billion). This consortium thus became the master developer for Bandar Malaysia. The projected market value of that agreement today, based on the illustrated selling price of 2000 ringgit psf, is 42 billion ringgit.

The hidden costs of China’s lifeline in the 1MDB scandal

On May 3, 2017, the contract was terminated by the ministry on the grounds that the consortium had not fulfilled its payment obligations and that it was unable to prove that it had the 1.93 billion ringgit required to move the Sungai Besi airbase.

It was also reported that CREC had not attained the necessary Chinese regulatory approvals. While the consortium disputed these claims, the media added to the confusion by reporting that Arul Kanda, the former Chairman of the Board of Bandar Malaysia and director at TRX City had been removed due to a conflict of interest.

At the same time, Lim Kang Hoo, Chairman and CEO of Iskandar was said to have fallen out of favour with the government due to his efforts to appeal to Chinese officials for their support. It was then announced that the 7.41 billion ringgit deposit paid by the consortium had been returned, paving the way for new invitations for investors in Bandar Malaysia.

While in China for the Belt and Road Summit, Malaysian Prime Minister Najib Razak met with Wang Jianlin, the owner of Dalian Wanda Group, China’s largest real estate developer, and exhorted their ability to bring ‘something extraordinary’ to Bandar Malaysia.

There was no signed confirmation of Dalian Wanda’s commitment to the project. After meeting China’s President Xi Jinping, Najib clarified that the development model would change, with the ministry retaining ownership of the land and possibly more than one Chinese entity involved.

But there is more to this than a mere monetary investment. Chinese contributions to Bandar Malaysia may come with a caveat for the High Speed Rail contract. With Singapore involved in the HSR, an open tender for the job will be expected; Japan has recently upped its bid with promises to ensure local business involvement and development. With the Malaysian elections looming, any episode can be used and/or abused for political positioning and possible electoral gain.

Is Hong Kong’s mystery yacht linked to Jho Low of 1MDB fame?

As we await further updates on this ongoing saga, several questions arise. What will be the real cost of ensuring that the Bandar Malaysia project takes off? Will any of this have any impact on Johor and the business associates behind Iskandar Waterfront Holdings? How will the value of the project change given the new investment model and how accurate will that value be? The next few weeks may reveal the new investment arrangements for Bandar Malaysia, but the answers to these larger questions may not be so easily found.

Serina Rahman is visiting research fellow under the Malaysia programme at the ISEAS-Yusof Ishak Institute in Singapore