2023-09-13 19:13:42
As we approach Forest City, a $100 billion real estate project in Malaysia led by Chinese giant Country Garden, a collapsed bridge forces motorists to take a detour. And in the city dotted with palm trees, the streets, apartments and shops remain desperately empty.
Targeting middle-class Chinese investors, Forest City has so far survived a trade flop, China’s foreign exchange controls, pandemic lockdowns and public anger over growing influence Chinese in Malaysia.
And its future is once once more clouded by the financial difficulties of the Chinese developer Country Garden, which in a few years has become the largest private real estate group in the country, but which is now crumbling under a colossal debt of 196 billion dollars.
AFP
Country Garden announced at the end of August a record loss for the first half of 2023. Its creditors agreed on Saturday to reschedule a repayment, avoiding at the last minute a payment default which would have jeopardized thousands of projects around the world.
The group is not out of the woods yet. A 30-day grace period, granted in early August when it proved unable to pay $22.5 million in interest to its creditors, expires Tuesday, with a new risk of default.
AFP
“I hope Country Garden can overcome its financial difficulties,” said Zhao Bojian, a 29-year-old Chinese man who bought one of Forest City’s 26,000 apartments for regarding $430,000 five years ago.
“If no one comes to Forest City, we can’t do business here,” he complains.
Built on an artificial island in the Strait of Johor, facing the prosperous city-state of Singapore, Forest City was one of Country Garden’s many exciting bets.
Launched as part of the New Silk Roads, an ambitious infrastructure project intended to strengthen China’s influence in the world, and partially controlled by a powerful Malaysian sultan, the real estate complex has only 9,000 residents, well below of the objective of 700,000 inhabitants.
AFP
At dusk, when the workers who work on the construction sites leave, an eerie silence falls over the island city and its four-lane highways. In the dozens of giant towers, only a few windows are lit.
Deserted sidewalks run past rows of closed stores, some with court injunctions stuck on the doors demanding payments that will never come. Inside, trash litters the floor.
AFP
In a 45-story building, only two levels are occupied and the rest is for sale, says a manager.
Most of the owners do not live there, a security guard told AFP, and bought as an investment.
AFP
Models of the four artificial islands which will make up the city once the project is completed, which is still far from being the case, sit in the hall of a showroom for potential buyers, guided by signs in Mandarin, in Malay and English.
Malaysian Prime Minister Anwar Ibrahim is trying to save the project from sinking. He announced the creation of a “special financial zone,” and incentives such as a favorable resident income tax rate and multiple entry visas.
But analysts are skeptical. Pressure on Garden City to repay its creditors “might have an impact on its ability to complete real estate projects abroad,” said Bernard Aw, Coface’s chief economist for Asia-Pacific.
AFP
Located a three-hour drive from the capital Kuala Lumpur, Forest City attracts visitors curious to observe its futuristic skyscrapers or eager to buy alcohol, which benefits from a tax rebate.
“Everyone comes here for the alcohol,” says Denish Raj, a 32-year-old Singaporean. “I wouldn’t want to live here, it’s a ghost town. The streets are dark and dangerous and there are no street lights.
AFP
Only foreign workers, many of whom come from Nepal or Bangladesh, maintain a certain level of activity by sweeping the streets, trimming the shrubs or keeping the towers deserted.
On an artificial beach littered with empty beer cans, a few families picnic in the shade of palm trees, facing a sign warning swimmers once morest crocodiles.
“I came here on vacation following seeing videos on TikTok,” says Nursziwah Zamri, a 30-year-old government worker from Malacca state. “If you ask me if I would want to live here, the answer is no.”
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