29/08/2023 (Malaysia) - Despite recent financial setbacks, China's leading private real estate developer, Country Garden, confirmed the steady progression of its ambitious $100-billion project in Malaysia. This assurance comes amid rising apprehensions regarding the company's monetary solidity due to its current debt challenges.
Earlier this month, the company failed to meet two dollar coupon payments, amounting to $22.5 million. This has ignited concerns that China's existing property debt situation might hinder broader economic rejuvenation and potentially impact international markets.
Country Garden's regional units in Singapore and Malaysia emphasized the robust sales performance and standard operations of their Malaysian ventures. The company assures that its activities in the Southeast Asian region are "safe and stable." While details remain undisclosed, the developer indicated the consideration of various debt management approaches to alleviate short-term liquidity pressures and safeguard its prolonged developmental prospects.
Malaysia's central bank, Bank Negara Malaysia, informed that Malaysian banks have marginal exposure to Country Garden. The bank further noted that the developer's Malaysian arm has been consistent in servicing its loans. The recent developments concerning Country Garden in China are not anticipated to have a significant effect on Malaysia's property market dynamics and valuation.
The mammoth Forest City project, Country Garden's prime overseas venture, stretches across four artificially reclaimed islands in Johor, adjacent to the affluent city-state of Singapore. Despite challenges since its inception in 2016, the ambitious project, presently housing approximately 9,000 residents, aims to accommodate 700,000 individuals by 2035. The expansive development encompasses office towers, shopping malls, educational institutions, and residential buildings.
Malaysian concerns about potential housing surplus and ecological degradation stemming from the extensive land reclamation efforts have been noted. Furthermore, the project witnessed a drastic decline in demand, owing to China's measures to curtail capital outflows and the global implications of the COVID-19 pandemic.
In a recent turn of events, Malaysia's Prime Minister Anwar Ibrahim proclaimed the Forest City project as a "special financial zone." This designation seeks to magnetize investment and reduce business costs within the area. In a bid to lure companies and skilled workers, Anwar announced enticing incentives, including a preferential 15% income tax rate and provisions for multiple entry visas.
Industry analysts anticipate these incentives to be favorable for the developer. RHB's Loong Kok Wen predicts the new categorization will draw businesses and residents from the comparatively pricier Singapore, potentially rejuvenating the image of Forest City. Echoing this sentiment, Steven Leung, Director of UOB Kay Hian based in Hong Kong, believes that Malaysia's incentives will be immensely beneficial for Country Garden.
The developer regards the incentives from Anwar's administration as a testament to its confidence in the project. Country Garden's shares exhibited a brief surge of up to 9% on Monday before settling flat.
It's noteworthy that Forest City is a collaborative venture between Country Garden and Esplanade Danga 88, a Malaysian private entity supported by the Johor government and the state's sultanate.