Malaysia set to launch Forest City Financial Zone, but will it lure businesses?

Industry insiders say the government must go beyond tax incentives to attract the firms needed to revive the troubled US$100 billion project

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A welcome sign stands at a roundabout in front of residential apartments in Chinese developer Country Garden’s Forest City in Johor Bahru, Malaysia. Photo: EPA-EFE

Published: 2:45pm, 19 Sep 2024

Malaysia will need to go beyond tax incentives if it hopes to convince financial and insurance players to sign up to its plans to revive the troubled multibillion-dollar Forest City project, experts and industry insiders say, as the government prepares to launch its special financial zone on Friday.

The Forest City Special Financial Zone (SFZ) is Prime Minister Anwar Ibrahim’s attempt at breathing fresh life into the US$100 billion Chinese-led mega-project, which has suffered long delays and tepid demand as prospective buyers from China grapple with capital controls and an economic slowdown that has all but killed interest.

The government will announce incentives and packages at the launch to stimulate interest among insurance and finance firms to set up shop in the SFZ, Johor state executive councillor Lee Ting Han said on Monday.

However, a lack of official details so far has done little to spur enthusiasm among companies exhausted by Forest City’s repeated setbacks, despite their interest in finding more affordable alternatives to Singapore to expand their operations, according to one Malaysian insurance industry veteran.

“Earlier statements [by the government] mentioned some kind of low taxation regime for workers and companies that set up their headquarters there,” the industry source told This Week in Asia, requesting not to be named due to the sensitivity of the matter.

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“If it’s just those two areas, it’s not likely to attract many insurance firms.”