Of Forest City and sovereignty

FACT CHECK Since late last year, Parti Pribumi Bersatu Malaysia (Bersatu) chairperson Dr Mahathir Mohamad has been on the warpath against the Forest City project in Johor.

Mahathir claimed that the sale of local real estate to foreign interests would undermine Malaysia's sovereignty. In turn, Prime Minister Najib Abdul Razak and Johor Menteri Besar Mohamed Khaled Nordin refuted this argument.

Is the land leasehold or freehold? What does sovereignty have anything to do this this? Malaysiakini wades through the noise, and examines what has been said to separate fact from fiction.

The background

The Forest City project comprises a mix of commercial and residential developments in Johor's Iskandar region, which is being built just west of the Malaysia-Singapore Second Link.

The project site sits on top of four man-made islands spanning 1,386 hectares. The project will be developed in phases and reclamation work for the first island is still underway.

When completed in 2045, the four islands are supposed to house 70,000 residents. The gross development value of the project is estimated at RM450 billion.

The project developer is Country Garden Pacificview Sdn Bhd (CGPV), which in turn is a joint venture between China-based developer Country Garden Holdings Ltd (66 percent stake), and the Johor-linked Esplanade Danga 88 Sdn Bhd (34 percent stake).

Esplanade Danga 88 is majority owned by Johor Sultan Ibrahim Ismail, while the Johor state-owned Kumpulan Prasarana Rakyat Johor (KPRJ) holds a minority stake.

The influx of foreigners

Mahathir had reportedly claimed, during a ceramah in Krubong, Malacca, on Nov 26 last year, that 700,000 foreigners, mostly Chinese nationals, would be housed in Forest City and would be given identity cards so that they could vote in the 14th general election.

There is a differing account of what Mahathir actually said at the ceramah. Free Malaysia Today reported Mahathir as claiming that 5,000 foreigners would be given identity cards to vote in marginal seats.

In this account of his speech, Forest City was mentioned as a separate issue, whereby Mahathir reportedly expressed concern that it would become an enclave for foreigners, since Malaysians would find it unaffordable.

Regardless of which version is correct, Mahathir subsequently defended the former and argued that it is possible for 700,000 foreigners to be illegally given identity cards to vote.

Mahathir's claim: "To just give identity cards and register 700,000 foreigners is easy for him (Najib). Perhaps it would not reach 700,000, perhaps it could exceed it, but it is not a problem for Najib... Therefore it is not impossible for 700,000 foreigners to vote in the 14th general election.

Khaled's rebuttal: "Perhaps there would be 700,000 foreigners in Johor 30 years from now, but it is inconceivable for all of them to be Chinese."

The facts: As far-fetched as it sounds, there is no way to fact-check a hypothetical scenario where foreigners are illegally given identity cards en masse to influence elections, even though such allegations have arisen before.

However, it is impossible for 700,000 people to be housed at Forest City anytime soon, as reclamation work for the first of four islands is still underway.

As noted above, the project is slated for completion in 2045, when it would finally reach its full capacity to house 700,000 residents. The 14th general election should be held by the middle of next year.

As for the suggestion that Forest City would be occupied entirely by foreigners, there appears to be no legal impediment to this.

All states in Malaysia have imposed quotas on how many units of properties may be sold to foreign interests. For residential properties in Johor, developers are only allowed to sell no more than half of their non-bumiputera properties to foreigners.

However, because of Iskandar Malaysia's special economic zone status, such restrictions do not apply to Forest City, which is part of the zone.

The influx of foreigners is also raised in the Detailed Environmental Impact Assessment (DEIA) for the Forest City project, which warned that this could exacerbate social and cultural conflicts with the existing residents in the area.

"Considering the fact that the majority of the new residents will be outsiders, the magnitude of the social impacts would be enormous. The impacts could be further exacerbated if a large number of this new population is made up of foreigners," the DEIA report says.

For comparison, the entire mukim of Tanjung Kupang - which Forest City would be connected to through bridges - has only 10,972 people, according to the 2010 census. This includes 1,343 foreign nationals.

The question remains, however, as to how many of Forest City's buyers are foreigners, and how many are Malaysians. Such figures are not publicly available, although it is hard to imagine Forest City attracting only foreign buyers.

For the record, CGPV has sales galleries in Bangsar in Kuala Lumpur and at the Forest City site itself to market the project in Malaysia.

Freehold or leasehold?

To rebut Mahathir's allegations that the Forest City project undermines national sovereignty, Najib pointed to the success of Dubai in drawing foreign investments, and further claimed that the Forest City properties are being sold on a 99-year leasehold basis.

If true, it would give the Johor government more control over the land, particularly in the area of ownership transfers. But is it true?

Najib's claim: "When the Johor government approved Forest City and the land has been reclaimed, we sell it to outsiders on leasehold basis. Leasehold means that for 99 years only when they buy houses, the house is on our land.

"Where does the issue of sacrificing our sovereignty arise, ladies and gentlemen? It's not like we're giving away citizenships."

Mahathir's rebuttal: "Maybe Najib doesn't know. Maybe Najib did not read the (freehold) signs."

The facts: All marketing materials for Forest City properties seem to indicate that these are freehold properties, with no mention of the word "leasehold" at all.

This includes the brochures at its sales galleries, banners (as pointed out by Mahathir), and at its website.

Land and sovereignity

The main thrust of Mahathir's argument is that Forest City would undermine Malaysia's sovereignty because of the influx of foreigners.

This would create an enclave for foreigners that would be difficult to manage, he said, and Mahathir even alluded to the possibility of the Iskandar Malaysia region seceding from Malaysia.

Mahathir's claim: "We are going to see large chunks of Malaysia being developed by foreign buyers and being occupied by them.

"Eventually, they would demand for citizenship and they would participate in Malaysian politics, including in elections.

"Whatever ideology they believe in might change the colour of Malaysian politics."

Najib's rebuttal: "It's not like we're giving away citizenships...

"They are Chinese citizens - the biggest economic powerhouse in the world. They're rich. They have no intention of becoming Malaysian citizens."

The facts: It is hard to speculate - let alone verify - what 700,000 people would do after buying properties in Malaysia in the decades to come, so this Fact Check will instead focus on what they can or cannnot do.

Sovereignty refers to a nation-state's ability to govern its own affairs, with little or no foreign influence.

In Malaysia, one needs to be a citizen to be able to vote, become member in either House of Parliament, or to even hold a public office.

To become a citizen, one would need to have resided in Malaysia for the past 10 out of 12 years, be of good character and have "adequate knowledge" of the Malay language, among other conditions.

Whether these people own leasehold, freehold, or any property at all in Malaysia is irrelevant, as long as they have legally resided in Malaysia for the stipulated time.

Even if their application is successful and they become naturalised citizens, they are not conferred the same rights and protections as the vast majority of Malaysians, who are citizens by operation of law.

If a naturalised citizen is later shown to be disloyal or "disaffected" to Malaysia, for example, Article 25(1)(a) of the Federal Constitution states that his or her citizenship status can be revoked. No such provision exists for those who are Malaysian citizens by operation of law.

As for the property itself, the state still have some rights over it, even though it may have been alienated to the property buyer, such as through restrictions that may be listed in the land title, and through legislation.

One extreme example of this is the Land Acquisition Act 1960, where the state may forcibly acquire private real estate "for any public purpose" as long as the owner is compensated.

Depending on the nationality of the owner, whether his or her country has an investment treaty with Malaysia, and the exact terms of the agreement, the owner may have recourse on the sum of the compensation in an international tribunal, in addition to Malaysia's own legal system.

Even then, it should be noted that some treaties (especially the more recent ones) would exclude homebuyers from the definition of "investor" and hence their recourse to an international tribunal, and at the end of the day, the government can still seize the property.

Conclusion

The row over freehold versus leasehold property appears to be a red herring in the debate over Forest City.

On the other hand, there appears to be some credence to the claim that Forest City would be occupied mostly by foreigners, but the claim that this would undermine Malaysia’s sovereignty needs further substantiation.

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This Fact Check is done by Koh Jun Lin.- Mkini