Rescue Bandar Malaysia Or Face Fallout - The news on Wednesday that the Finance Ministry (MoF) has called off a deal to sell 60% of Bandar Malaysia – a mega property development project estimated to have a gross development value of RM160bil when completed in 20 years – has sent shockwaves through the country and the region.
This unexpected announcement attracted attention mainly because of the buyers involved, and the possible political and economic implications. It came so abruptly that Prime Minister Datuk Seri Najib Razak cancelled his official visit to the Bandar Malaysia site late Wednesday without giving notice to the media.
The buyers are Iskandar Waterfront Holdings Sdn Bhd (IWH) – owned by tycoon Tan Sri Lim Kang Hoo – and China Railway Engineering Corporation (CREC), controlled by the central government of China.
IWH and CREC jointly signed the deal to buy the 60% stake in Bandar Malaysia from 1Malaysia Development Bhd (1MDB) for RM7.41bil in December 2015. IWH would hold 60% of the venture, while CREC 40%.
TRX City Sdn Bhd of MoF said in a Wednesday statement that “the buyers failed to meet the payment obligations”.
TRX City was originally owned by 1MDB but MoF took control of it last year to restructure the balance sheet of the company.
On the surface, many would immediately conclude that the aborted deal could be another casualty of China’s current capital controls to curb the outflow of the yuan to stop China’s US$3 trillion (RM12.99 trillion) forex reserves from sinking further.
In the past three years, Beijing saw an outflow of US$1 trillion (RM4.33 trillion).
Last March, the Forest City project in Johor was hit when its investors from China were not allowed to remit payments for their purchases.
But the payment due to TRX from CREC is only several hundred million ringgit – an amount that will have minimal impact on China’s vast reserves.
Hence, there have to be other factors as well, even if capital controls is one tangible reason.
A source close to the negotiators tells The Star “there are huge discrepancies in expectations from two sides”.
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