DUTY-FREE refers to the sale of goods without import, sales, value-added, or other taxes sold. It is usually aimed at encouraging trade and tourism.

In 2019, Pulau Pangkor was made a duty-free island to realise its true potential.

Langkawi was unknown before the government awarded it duty-free status in 1987 to make local tourism more affordable while attracting international visitors.

Forest City , a mega development on four man-made islands in the Iskandar region, was accorded duty-free status in 2016. To promote the project to foreigners, the government made it a special financial zone with incentives including multiple entry visas and special income tax rates.

The main market was speculative buyers from China, who might also be interested in purchasing a holiday home. 

Forest City promises to be an “idyllic and technology-driven” utopia with a planned population of 700,000. Eight years after it was launched, it is only 15% constructed with an occupancy rate of less than 1%. Location-wise, Forest City is isolated and far from the city of Johor Baru. The developer, Chinese property giant Country Garden, is sitting on the edge of bankruptcy.

The problems started in 2017, when the Chinese government suddenly imposed capital controls. Then came the pandemic years.

Currently, the developer estimates that 80% of the 9,000 population are tenants, many of them working in Singapore or a nearby container port, while the rest are homeowners.

A property consultant once said that any project that is owned by more than 40% foreigners is doomed to failure because the owners do not live and spend money in Malaysia.

We can provide incentives and special tax rates but the developer is facing an uncertain future. Without funding – the rest of the construction is projected to cost RM85 billion – it will be a monumental task to complete Forest City.

Last year, Country Garden was forced to abandon two projects in Australia, selling off unfinished developments in Melbourne and Sydney.

Is this a classic case of blind ambition versus reality? 

What say you… – July 23, 2024.

* Saleh Mohammed reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.