KUALA LUMPUR -- A consortium involving state-owned China Railway Engineering Corp has been restored as the master developer of a major project in the heart of Kuala Lumpur, in what will be the biggest Chinese investment in Malaysia to date.
The 486-acre Bandar Malaysia project, which has a gross development value of about $33.8 billion, will be 60% owned by a consortium of CREC and its local partner Iskandar Waterfront Holdings. The Chinese company controls 40% of the consortium, giving it an effective stake of 24% in the overall project. The remaining 40% of the project is owned by Malaysia's ministry of finance.
First announced in 2011, the CREC-IWH consortium signed an agreement with Malaysia's previous government in 2015 to acquire 60% of the project from a subsidiary of the finance ministry for $1.79 billion. In May 2016, the government abruptly canceled the stake sale alleging that the consortium had been unable to raise the necessary funds.
Mahathir Mohamad took over as the country's prime minister after winning an election in May 2018. In April 2019, he agreed to revive the Bandar Malaysia project, as an integral part of fostering and cementing long-term bilateral relations between Malaysia and China.
In a revised deal signed on Tuesday and witnessed by Mahathir, the consortium will be sold a 60% stake in Bandar Malaysia for the unchanged price of $1.79 billion. However, it will need to pay an upfront deposit of $299 million -- an increase on the $179 million stipulated in the original agreement.
The staggered payment term has also been shortened from the original seven years to three years, for "the benefit of the Malaysian government".
Speaking at the signing ceremony, President of China Railway Group Chen Yun said that the Bandar Malaysia project would help CREC to make the most of development opportunities in Kuala Lumpur, following patterns of transit-oriented development in central activity zones elsewhere in the world.
"CREC is committed to creating a platform for China-Malaysia strategic cooperation and innovation exchange, establishing a model for central activity zones globally, fostering Malaysia [as a] digital innovation hub, and creating an image for Kuala Lumpur as a world-class city, [connecting] transport, finance, data, cultures, enterprises and industries," he said.
On the site of a former airport, Bandar Malaysia will be a mixed development, including a park, public housing, commercial buildings and a transport hub. It had also been set to be Malaysia's hub for the now-suspended Kuala Lumpur-Singapore high-speed rail project.
Once completed, Bandar Malaysia is expected to attract major multinational corporations and Fortune 500 companies.
"Alibaba and Huawei have already shown interest in opening [bases] in Bandar Malaysia," said Malaysian Finance Minister Lim Guang Eng. "This is in line with the government's policy to attract multinational corporations into Malaysia to invest in high-tech and high-value sectors, and to raise Malaysia's productivity and competitiveness amid a challenging global environment."