One step forward, two leaps back: Are Malaysia’s development projects too ambitious to be successful?

Photo: Azharsofii/CC BY 4.0

As plans for Malaysia’s most ambitious development project yet in Negeri Sembilan are unveiled, has the government learned the lessons of the many previous failures?

By John Pennington

Plans for the Malaysia Vision Valley (MVV) development in Negeri Sembilan are the country’s most ambitious yet. With work slated to begin later this year, the government hopes it will attract investment, create jobs, and boost the economy.

“MVV is a planned, smart and inclusive development to ensure all segments of society reap the benefits of this development,” Prime Minister Najib Razak said of the project, which has a budget of RM260 billion (US$59.9 billion) and is due for completion in 2045.

It was first mooted back in 2009, but work never began due to the weak global economy, minimal interest from investors and budget constraints. Razak revived the plans in 2016 and they will now go ahead. But for a country that has more than its fair share of “monuments to failure”, what guarantee is there that second time around things will be any different?

The jury is still out on Bandar Malaysia and Iskandar Malaysia as both projects face big problems. Other developments – such as Bukit Berantung – failed so badly they left ghost towns behind.

Bandar Malaysia is becoming another 1MBD scandal it doesn’t need

Iskandar Waterfront Holdings (IWH) and China Railway Engineering Corp (CREC) secured the rights to the Bandar Malaysia property development in 2015. The deal, worth US$1.7 billion, was meant to ease the debt burden of 1Malaysia Development Berhad (1MBD).

The government claimed IWH and CREC failed to keep up with payments on its 60% stake. The consortium denied these claims and it appears that Razak made the final decision to dump IWH and CREC before turning to China for help. He is now expected to sign a deal with Wanda Group, making them master developers for the project, pending approval from Chinese financial regulators.

The fallout continues. Second Finance Minister Johari Abdul Ghani and 1MDB President Arul Kanda Kandasamy are reportedly no longer involved in 1MBD developments including Bandar Malaysia and Tun Razak Exchange. IWH boss Lim Kang Hoo headed to China to petition Razak to reinstate them as master developers, according to reports.

Already heavily in debt and under investigation for money laundering, more unwanted attention on 1MBD is another setback. Terminating the agreement without warning is a sure-fire way of discouraging potential investors from working with them on other projects.

Iskandar Malaysia started well but is struggling

Iskandar Malaysia looks on track to reach its investment targets. Having committed RM222.4 billion (US$51.2 billion), the halfway point of a target of RM383 billion (US$116.8 billion) by 2025 is in sight.

This, however, doesn’t tell the whole story. The project started well only for investor confidence to be shaken by limits on land sale to Chinese investors and sudden withdrawals from major projects. Property oversupply has dogged the area for years. The numbers of properties and offices being built outstrips the demand.

Malaysians are not keen to relocate to the area and skilled workers prefer to go abroad, where they are better paid. Yet, the mood among developers remains cautiously optimistic. They anticipate more people and businesses arriving in the coming months, which will ease the oversupply problem.

“By the end of next year, we will have 1.5 million to 1.8 million commercial spaces ready in Medini, not including the adjacent areas in Puteri Harbour, and the commercial space should be enough to drive about 18,000 people into the city itself, and maybe just about right to balance the supply between residential and commercial property,” projected Gerard Kho, chief marketing officer of Medini Iskandar Malaysia (MIM), one of the project’s master developers.

Meanwhile, Malaysian High Commissioner to Singapore Datuk Ilango Karuppanan believed that the development could soon benefit from its proximity to Singapore.

“Singapore’s petrochemical and electronics’ industry may not find it very easy to remain in Singapore for long, because it requires water which is a major limiting factor in the city state, so they will eventually move to Iskandar,” he said.

Other projects failed – sometimes spectacularly – but what was learnt?

Cyberjaya was meant to be Malaysia’s equivalent of Silicon Valley. Critics say it is now home to little more than low-level employment – although the government claims otherwise. Billions were poured into the project but it failed to establish itself as a feasible alternative to Kuala Lumpur. It never stood a chance. Not enough attention was paid to the needs of businesses and individuals. How can it compete on a global scale, when Malaysians continue to be subjected to stricter and stricter online censorship?

Attempting to mimic what worked in the US was an abject failure. The challenge facing Cyberjaya is now whether innovation instead of imitation can save the area from becoming a ghost town. “Now we’re going to be a tech hub that’s self-sustaining,” Melissa Teh, Cyberjaya’s business development lead, said.

Ghost towns are a legacy of Malaysia’s failed development projects

The internet of things and smart city technology may yet save Cyberjaya from total ruin and desolation but elsewhere, it is too late.

Bukit Beruntung translates as “Profitable Hill” but it is now a prime example of how Malaysia’s failed development projects can lead to total ruin. The area declined sharply once it missed out on developments such as an Islamic university and the Kuala Lumpur International Airport, which was built in Sepang instead.

Today, crime and homelessness is rife. Property lies abandoned and house prices have dropped 10-fold. Decades ago, ghost towns were an unavoidable consequence of mine closures; communities dependent on them were forced to go elsewhere to find work. Modern-day ghost towns are the result of how poorly the Malaysian government has planned, implemented, and maintained development projects.

Demand was overestimated and as a result areas were over-developed. Resources and money were wasted. The Federation of Malaysian Consumers Associations (FOMCA) called for a task force to prepare a report on the ghost towns. Such a report should be required reading for the government and assist them when planning future developments.

Malaysia’s ambition is not matched by its application

Malaysia’s ambitious development projects were supposed to boost the economy, increase job creation, and attract investment. Instead, many have left entire areas of the country devoid of prospects and opportunity.

It is vital that the government considers the successes and failures of the past when planning and managing developments. Yet huge changes of direction partway through development and a reluctance to consult and communicate with partners show that little seems to have been learnt and the same mistakes are being made.

There is nothing wrong with ambition. Malaysia must press forward with development. However, even the most ambitious plans must sometimes be tempered. It is absolute folly to charge forward without pausing to learn from the mistakes you – and others – have already made. Yet that is exactly what Malaysia continues to do.