SINGAPORE (Sept 3): On Sept 1, the Legacy Golf Course, designed by golfing legend Jack Nicklaus, will be the first of three 18-hole courses to open in the sprawling 2000-acre Forest City Golf Resort. The resort, billed as being “just a stone’s throw” from the Tuas Checkpoint in Singapore, is in turn part of Forest City, the expansive four-island project by Chinese developer Country Garden. The project includes a high-tech industrial zone, CBD, condominiums and coastal villas, and is replete with plastic seals on man-made beaches.

The success of the whole US$100 billion ($137 billion) development now hangs in the balance.

Just a few days earlier, on Aug 27, Malaysian Prime Minister Dr Mahathir Mohamad created yet another stir when he said, without much preamble, that Forest City would be forbidden to foreigners.

He made the remarks at a press conference after his five-day trip to Beijing, where he met Chinese President Xi Jinping and Premier Li Keqiang but, as some observers noted, returned empty-handed. Mahathir cancelled three China-linked mega infrastructure projects — namely the RM81 billion ($27 billion) East Coast Rail Link and two gas pipelines worth RM9.4 billion.

Mahathir said he had explained to the Chinese leaders that Malaysia could not afford the projects. The Malaysian Finance Ministry had flagged several issues with the China-linked infrastructure deals undertaken by the previous administration, namely costly contract irregularities.

But Mahathir’s take on Forest City came as a surprise. His office later issued a clarification, saying that Malaysia imposes certain conditions on properties purchased by foreigners. A day later, Malaysian Housing and Local Government Minister Zuraida Kamaruddin said the decision was not official, and that a committee would be formed to study and review the terms of the project. That was similar to the response issued a day after Mahathir announced the cancellation of the East Coast Rail Link. Zuraida also reportedly urged Country Garden to write in to discuss the conditions for sales to non-Malaysians.

The restrictions on Forest City would impact not only China. While two-thirds of the apartments sold so far were snapped up by Chinese buyers, there are a number that have been bought by people from other countries, including Singapore. Malaysians accounted for 20% of the sales.

Importantly, other projects in Malaysia that are dependent on foreign investment could now be in flux, at least from the point of view of foreign investors.

In media interviews since taking office, Malaysian Finance Minister Lim Guan Eng had highlighted the importance of foreign investment, noting that cleaning up the country’s finances and being transparent about the state of affairs would reassure investors. “If we can show the world that the government of the day is now transparent and can be trusted, investors will be convinced and return to invest in our country,” Lim said in a June 4 interview.

But how can investors be assured of the security of their investments and returns? In fact, the former Johor chief minister, Khaled Nordin, has said that any restrictions on foreign property ownership should not be limited to Johor. At the other end of Peninsular Malaysia, Penang has also been very attractive to foreigners, particularly the Chinese. The state attracted the most foreign direct investment, of RM8.5 billion, in the country in 2017. Johor was second with RM 5.1 billion in FDI.

Malaysia, so far, has been welcoming of foreigners. There is a government-run scheme, Malaysia My Second Home, which promotes property as a choice investment for foreigners. The MM2H website highlights, for example, that Malaysian property is still among the cheapest in Asia, with stable rental yields of between 4% and 5% annually.

Non-Malaysians who buy property under the MM2H scheme can also apply for a 10-year, renewable, residency visa. However, ­Johor Chief Minister Osman Sapian has since said that there is no guarantee of the visa.

At the Aug 27 press conference, Mahathir said: “We are not going to give visas for people to come and live here.” The MM2H scheme was introduced in 2002, the penultimate year of Mahathir’s previous term as prime minister, before he stepped down in October 2003.

It may be a proposed ban on residential property purchases now, but there is no telling what restrictions on other types of investment could arise. Whatever the case, foreign buyers would certainly be thinking twice before buying a property in Malaysia to call their home.

This commentary appears in The Edge Singapore (Issue 846, week of Sept 3) which is on sale now. Subscribe here