PETALING JAYA: China’s new measures to control flight of capital from its shores contributed to the recent move in Malaysia where the share sale agreement (SSA) over the Bandar Malaysia project was aborted.
Economist Hoo Kee Ping was reported by Channel News Asia (CNA) yesterday as saying that China refused to give permission for its China Railway Engineering Corporation (M) Sdn Bhd (CREC) to participate in the purchase of the project’s shares due to the stringent capital controls.
He said the project, which has an estimated cumulative gross development value of RM150 billion, was among those committed to by China without fully understanding the economic implications.
“All these projects China committed to from 2015 until now were committed without fully understanding China’s worsening financial conditions,” he was quoted as saying.
“(So now), Chinese projects, whether state owned enterprises or private, as long as they’re not strategic, they’re out. There must be a strategic meaning to China’s geopolitical interests.”
On May 3, TRX City Sdn Bhd which comes under the Finance Ministry, announced that the SSA with Iskandar Waterfront Holdings Sdn Bhd and CREC regarding the sale of 60% of the issued and paid-up capital of Bandar Malaysia Sdn Bhd had lapsed.
It said this was due to the failure of the purchasing parties to fulfil payment obligations.
The urban development project is planned on the site of the current Simpang Airport in Kuala Lumpur which has been used by the Royal Malaysian Air Force.
Developed as a public-private partnership initiative, it is expected to be completed over the next thirty years.
It will also house the terminus of the planned KL-Singapore High Speed Rail (HSR) project which is expected to be ready by 2026.
In an interview published by FMT on March 13, Hoo had cautioned of a surge in abandoned property projects in Johor, Kuala Lumpur and Penang following China’s crackdown on capital flight.
He had said China’s aggressive measures will affect both local and international property developers.
The CNA report added that the Bandar Malaysia investment may no longer have strategic importance for China.
It also cited sources as saying that Malaysia is confident it has enough time to find a better buyer with more favourable conditions.
Hoo was also quoted as saying that China may not have wanted to continue with the Bandar Malaysia deal as they believed they would not get the HSR project that Japan has a better chance over.
The planned 350 km railway system with a 90-minute travel time between KL and Singapore is estimated to cost RM43 billion. Featuring a brand-new line with dedicated tracks it would allow trains to travel at 270 km per hour.