
Malaysia’s Prime Minister Najib Razak and Singaporean Prime Minister Lee Hsien Loong (right) have cooperated on promoting the Iskandar zone
On February 28th, China state-run real estate developer Greenland Group announced plans to invest RMB 20 billion (US$3.26 billion) to develop projects in Malaysia’s Danga Bay.
But amidst the press releases and media coverage, perhaps the biggest milestone went unannounced – the beginning of a new level of competition between Chinese and Singaporean real estate developers in Asia.
While legally located in Malaysia, Greenland’s Danga Bay site is just 10 minutes from the border of southeast Asia’s wealthiest nation, and the mixed-use development is likely to target buyers from China and Singapore as much as the local Malaysian population.
In this way, the Greenland deal can be seen as the latest (and biggest) encroachment of Chinese companies into a market where Singapore’s biggest developers had until recently held the inside track.
Before Greenland moved in, the biggest ticket in the Iskandar region surrounding Danga Bay had been a planned US$2.52 mixed-use project by Singapore’s government-linked CapitaLand and government investment company Temasek Holdings announced in February last year. Singapore’s sixth richest man, entrepreneur Peter Lim, has also reportedly invested US$1.16 billion in property projects in Iskandar.
Chinese Developers Buying on the Singapore Border
In addition to Greenland’s project, a number of other Chinese developers already have developments underway in the Iskandar region.
Guangzhou-based Country Garden Holdings has a 21 hectare project already marketing homes in Danga Bay, and another southern China developer, Guangzhou R&F Properties spent RM4.5 billion (US$1.4 billion) to acquire six sites in Johor Bahru in November of 2013.
Beijing’s Macrolink Real Estate also said in January this year that it plans to acquire RMB 300 million (US$49 million) worth of land in Johor Bahru, and Chinese-owned Singaporean firm Hao Yuan Investment announced a US$491 million mixed-use project in December.
In many cases, these Chinese projects are aimed at marketing homes to Singaporean buyers, with Country Garden last year deploying a fleet of buses to locations across Singapore to carry prospective buyers to a tour of its model units at Danga Bay.
The Hinterland Fights Back
In 2001 during his National Day address to the citizenry, then Singaporean Prime Minister Goh Chok Tong, urged his country’s citizens to look to China as an unexplored “hinterland” which companies and entrepreneurs from the resource scarce city-state could develop to build their businesses.
This strategy of using the corporate muscle derived from Singapore’s status as the bankers of southeast Asia, combined with the population’s entrepreneurial zeal, has helped companies from southeast Asia’s richest nation win major deals in many regional markets.
Now 13 years later, real estate developers from what Singapore looked at as an undeveloped region are competing head to head with some of Singapore’s largest corporations right in the city-state’s backyard, as well as internationally. Greenland specifically, has been among China’s most prominent global investors in the last year, taking on projects in New York, London, Los Angeles, Sydney and Melbourne during that period.
And while the Danga Bay projects are legally in Malaysia, many of the buyers are expected to come from across the border. One current developer in Iskandar reports that among its clientel, 74 percent were from Singapore.
Taking Pages from the Singaporean Playbook
Greenland is only the latest of China’s real estate companies to use their well-developed bank accounts and extensive customer lists to exploit opportunities for real estate development in southeast Asia, but this is a playbook that should be familiar to observers of Singaporean business.
While Singapore has a strong reputation for free-market policies, many of its largest corporations have extensive government ties, and have often been able to win deals through their superior access to affordable credit through these government relationships.
Now, state-run Chinese companies like Greenland, and even mainland private companies such Country Garden and Guangzhou R&F which maintain solid relationships with Chinese government-owned banks, are using their own deep pockets to execute deals regionally and globally.
So less than 13 years after being portrayed as a hinterland ripe for exploitation by its wealthier Asian neighbors, China is competing with southeast Asia’s wealthiest nation, right in its own backyard.
Note: an essentially similar article by the same author was published earlier on Forbes.com
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