The Prime Minister announced that Forest City would be designated as a financial special economic zone.

On August 25th of this year, the Prime Minister of Malaysia announced the designation of Forest City as a financial special economic zone aimed at promoting investment and economic activities in the Johor region. The government plans to provide special incentive policies within the financial special economic zone to reduce costs and enhance attractiveness. The Prime Minister also emphasized Johor's strategic geographical location, its proximity to Singapore, and its excellent infrastructure, which will attract more investors, especially in light of the rising costs in Singapore.

The origin of Forest City

Forest City is a residential project located in Gelang Patah, Iskandar Puteri, Johor, Malaysia. It was developed by the Chinese real estate giant Country Garden Holdings under the "Belt and Road" initiative in 2014. The initial goal of this residential project was to attract wealthy Chinese individuals who wished to reside in Malaysia and frequently commute to Singapore, with a target population of 700,000 residents.

However, the development of Forest City faced challenges due to factors such as public criticism from former Prime Minister Mahathir Mohamad, concerns about potential immigration influx, a sluggish real estate market, low occupancy rates, and a lack of commercial activity. As of 2022, after 8 years of construction, only about 2,000 people reside in Forest City, most of whom are employees of the developer, students from international schools, and their families.

Johor's economy will be revitalized.

Prime Minister Anwar's move not only resolved the challenges faced by Forest City but also established a central business district (CBD) centered around Johor to attract talent, promote employment, and stimulate the economy. The government will also introduce various incentive policies to support this plan, instilling confidence in the public regarding the development of Johor. This, in turn, has garnered market attention for companies holding significant land assets in the vicinity.

Companies that own land near Forest City are naturally the preferred beneficiaries. Leading the way is UEM Sunrise, which possesses 2,419 acres of land in Gerbang Nusajaya, and also 70% of the company's remaining gross development value is in the Johor region. Following closely are Sunway, which holds 1,602 acres of land in Sunway Iskandar, and SP Setia, with 307 acres of land in Tanjung Kupang. These lands are in the closest proximity to Forest City and will directly benefit from the city's development.

As the city develops, an increase in population is inevitable, which will drive demand. Consequently, the construction of commercial areas, entertainment venues, and public service communities becomes crucial. The development of these buildings will require the involvement of many companies, so some property/real estate companies, such as ECOWLD, E&O, and AME Elite, will also benefit from it. Overall, companies that own land will be the primary beneficiaries and play a crucial role in the city's development, which will not only drive population movement but also create business opportunities, benefit numerous enterprises, and boost the national economy.

Apart from the already announced financial district plan, some previously shelved projects may have the potential to be revived, including the Kuala Lumpur-Singapore High-Speed Rail (HSR) station. This high-speed rail project would reduce travel time between Kuala Lumpur, Putrajaya, Seremban, Malacca, Ayer Keroh, Johor Bahru, Batu Pahat, Iskandar Puteri, and Singapore to just 99 minutes. The HSR project has the potential to drive the flow of people between Kuala Lumpur and Singapore and, at the same time, stimulate economic development in the region. The restart of the HSR will also benefit YTL, HSSEB, MRCB, and WCT.

Meanwhile, the Johor-Singapore Rapid Transit System (RTS) is scheduled to be completed by the end of 2026. In the construction of the RTS, EKOVEST has secured a contract worth RM 1.979 billion and serves as the contractor for the RTS system's engineering, procurement, and construction. When the project is completed, it is expected to increase cross-border human traffic between Johor and Singapore, which will likely have a positive impact on companies in related industries. Therefore, IWCITY and KSL will also benefit from this project.

In conclusion…

According to the current plan, the government intends to simultaneously advance the infrastructure and real estate sectors. A well-developed infrastructure plan can facilitate capital flow, thereby supporting the nation's GDP. It will attract more foreign investors once the infrastructure is successfully built and complemented by well-planned residential and commercial areas. The inflow of foreign capital will further drive economic development, creating a virtuous cycle: Improved national facilities > Increased willingness of foreign investors to invest > Investment stimulates the local economy > Improved economic conditions, leading to increased consumer spending > Increased demand > Simultaneously promoting economic growth...

As investors, our job is to gather this publicly available information and then logically construct the entire narrative to identify which beneficiary companies have higher return potential and lower risk.

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