Forest City’s revival plans reel in crypto bros

They are all attending The Network School, an “internet university” for those interested in the concept of a “network state”, created by American crypto advocate Balaji Srinivasan. His idea, first introduced in 2022, envisions a “decentralised country” for individuals discontented with their societies, defined by shared ideals and goals rather than geographical boundaries.

All he needed was a location. The Edge Singapore found that Srinivasan initially aimed for Singapore, reaching out to various hospitality providers and the state’s tourism board for hosting opportunities. Ultimately, he chose “a beautiful island near Singapore”, he wrote in a post on his website dated Aug 17. “It’s beautiful and sunny and less than an hour from a major city with an international airport. That means you can head down during the week, head into the city on the weekends for fun and get to just about anywhere in Asia within the same day.” 

The Edge Singapore visited Forest City in late September, shortly after the launch of The Network School and found it far from the utopia Srinivasan had portrayed on his website. Instead, silence echoed from the main shopping boulevard, Forest City Commercial Street, to the largely unoccupied 26,000 housing units on the island.

Amid restless restaurant and shop employees sitting in empty dining halls and fully stocked grocery shops, a few mainland Chinese families wandered the deserted streets. In contrast, Srinivasan’s Network School “students” stood out with their American accents as they explored the lobby of the Forest City Marina Hotel.

See also: Centurion likely to be ‘clear winner’ of JS-SEZ; Malaysia to benefit more in near-term: CGSI

American crypto advocate Balaji Srinivasan chose Forest City as the spot to host his Network School. It is unclear whether the investor benefitted from any financial incentives. Photo: Khairani Afifi Noordin/The Edge Singapore 

Crypto clan, assemble 
Attendees of The Network School need only pay US$1,000 ($1,288) a month for a room with a roommate or US$2,000 for a solo room at the Forest City Marina Hotel. The Edge Singapore also learnt that this cost includes meals. 

See also: 'I am excited to work with Singapore', says Anwar at annual investor conference by Bursa Malaysia

According to Srinivasan’s website, there are three components to the school. First, “students” will solve a problem of the day to win a crypto credential in the form of a non-transferable, non-fungible token as a “proof-of-learn” to build up a “crypto resume”. 

The website adds that the "students" will engage in a daily workout alongside fellow attendees and enjoy a "healthy meal" crafted by anti-ageing tech entrepreneur Bryan Johnson. Additionally, they can earn currencies by tackling daily “bounties” worth US$1,000 and will have the opportunity to attend occasional talks by “visiting technologists".

The Edge Singapore confirmed that The Network School primarily operated in two locations within Forest City. Attendees stayed, dined and exercised at the Forest City Marina Hotel, while classes took place a kilometre away in a commercial unit on the first floor of a residential building.

During the “school” sessions, attendees convened in private rooms, while others worked in the lobby, resembling a sparse co-working space. At breakfast, around 30 individuals gathered after their morning exercise, some wearing shirts with The Network School logo. An organiser, a naturalised Singaporean from Malaysia, noted that most attendees were content creators, developers, entrepreneurs or digital nomads with remote jobs aligned to US time.

At the Forest City sales gallery, a crypto company founder — invited by Srinivasan to meet the Network School attendees — revealed that Srinivasan wants to transform the island into a Silicon Valley for crypto entrepreneurs. Their projects are expected to attract investors, particularly drawn by the recently announced 0% tax rate for single-family offices.

Perhaps it is early days, but visualising Srinivasan’s vision amid the island’s emptiness is challenging. It remains unclear whether he received any incentives for establishing The Network School in Forest City. The Edge Singapore reached out for clarification but had not received a response by the time of publication.

The presence of a crypto founder in Forest City underscores Malaysia’s commitment to addressing the US$100 billion challenge at its border with Singapore. But how will it revitalise the uninhabited Forest City and avoid its “doom”?

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The main shopping street of Forest City had hardly a single visitor. The commercial area featured a mix of duty-free shops, Chinese restaurants and grocery stalls, all fully stocked. Photo: Nicole Lim/The Edge Singapore  
 

Visits by The Edge Singapore revealed an average of 5 to 10 units lit per block of flats in Forest City at night. Photo: Khairani Afifi Noordin/The Edge Singapore  

Making Forest City great 
Since Anwar Ibrahim became Prime Minister in 2022, significant efforts have been made to revitalise the abandoned island of Forest City. This initiative marks a notable shift from his predecessor, Mahathir Mohamad, who served from 1981 to 2003 and again from 2018 to 2020 and was less welcoming to foreign investors, including those from mainland China.

Conversely, Anwar introduced the Forest City Special Financial Zone (SFZ) in August 2023, aimed at reducing the cost of doing business by offering various incentives. This initiative extends benefits previously available in Iskandar Malaysia, Johor, to include Forest City.

On Sept 23, the Malaysian government announced a “competitive package” of incentives to make Forest City “a magnet for international capital”. Specifically, a concessionary corporate tax rate between 0% to 5% and a special individual income tax rate for knowledge workers and Malaysians who choose to work there. 

“Now, Forest City will also be the first location in Malaysia to offer a zero tax rate for family offices,” said Anwar on Sept 26 in his keynote address at the Invest Malaysia annual event for investors.

To qualify for the initial 10-year period of the Single Family Office (SFO) scheme, the Single Family Office Vehicle (SFOV) must set up and operate out of the Forest City SFZ, holding assets under management (AUM) of at least RM30 million ($9.2 million). It must also meet minimum local investment in eligible and promoted investments of at least 10% of its AUM or RM10 million, whichever is lower. Additionally, the SFOVs need to have a local operating expenditure of over RM500,000 annually, among other eligibility requirements.

The one-day Invest Malaysia conference on Sept 26, organised by Bursa Malaysia, took place in Johor for the first time rather than in Kuala Lumpur. This is a clear move to showcase Johor’s investment potential. “It’s Malaysia’s southern gateway with economic growth and attractive investment incentives and opportunities,” says a Bursa spokesperson. 

The enthusiasm for Forest City is closely tied to the recent surge of interest in Johor as an investment destination. Several factors have contributed to its emerging status as a rising star in the nation, including a rush to develop data centres driven by spillover demand from Singapore and the highly anticipated signing of the Johor-Singapore Special Economic Zone (JS-SEZ).

Additionally, many are optimistic about the progress of the Johor Bahru–Singapore Rapid Transit System (RTS), a railway shuttle that has taken years of negotiations to develop and is expected to be completed by 2026. Once operational, it will reduce travel time along the causeway to just 10 to 15 minutes, including customs and immigration.

This year’s Invest Malaysia included Prime Minister Anwar Ibrahim (centre), major Malaysian financial institutions and Johor state organisations managing the special economic zone. Photo: Bursa Malaysia  
 

Efforts to revitalise the Forest City are gaining traction, with some investors now considering property purchases following the recent initiatives announced. Photo: Bursa Malaysia  

What defines success? 
Against this backdrop of improved connectivity, wealth managers are beginning to praise the SFZ’s SFO-friendly policies. However, will the country succeed in capturing a share of this wealth? In his speech, Malaysia’s Finance Minister II Amir Hamzah Azizan noted that there are an estimated 8,030 SFOs globally and this is projected to grow by 75% to more than 10,720 by 2030. The total estimated AUM of family offices is expected to rise from US$3.1 trillion to US$5.4 trillion.

CIMB CEO of group wholesale banking Chu Kok Wei believes the incentive will “definitely encourage” the set up of new SFOs in the Forest City SFZ, particularly for the segment of high-net-worth (HNW) Malaysians who may not have reached the ultra HNW (UNHW) category, which is typically served in offshore financial centres. 

The establishment of a comprehensive ecosystem of services, including legal, trust, banking and custodial services, will enhance skill sets and product offerings, paving the way for an expanded client base in Malaysia. This, Chu says, would position Forest City SFZ as the destination of choice.

The Forest City SFZ incentives include special deductions on relocation costs for the banking and insurance sectors, enhanced industrial building allowances, and withholding tax exemptions. Locally incorporated foreign banks will also have regulatory flexibility to expand their presence within the SFZ, along with foreign exchange benefits for offshore borrowing and investments.

These features of the new scheme are friendly towards the yet-to-be UHNW, especially with the lower requirements of eligibility. The minimum AUM of RM30 million is significantly lower than the requirement for Singapore’s S13O fund tax exemption regime and Hong Kong’s SFO tax concession regime, which requires a minimum AUM of $20 million and HK$240 million ($39.8 million), respectively. The local operating expenditure of RM500,000 annually is also lower than Hong Kong’s HK$2 million and Singapore’s $200,000. 

Yet, lowered fees might only have a limited impact on attracting SFOs to Forest City, says Insead’s associate professor of finance Ben Charoenwong. He thinks it is unlikely to substantially threaten Singapore’s well-established position as a premier financial hub.

“For most family office investors, particularly those from regions like China, Taiwan and beyond, Singapore continues to offer compelling advantages that will be challenging for Johor to replicate in the short to medium term. Chief among these is Singapore’s renowned political stability and certainty, which are crucial for wealth preservation and long-term investment strategies,” Charoenwong says.

In an era of political tensions, Singapore’s commitment to neutrality and years of strong governance offer a sense of security that many HNW individuals and families value, Charoenwong notes. The city-state also boasts a robust financial ecosystem, featuring a sophisticated network of professional services, including specialised lawyers, along with a strong private banking sector, which enhances its appeal over other jurisdictions.

“Numerous other family offices foster a community of peers and potential co-investment opportunities. This comprehensive infrastructure is not easily replicated and represents a significant barrier for emerging financial centres like Forest City SFZ to overcome,” says Charoenwong.

There is no official estimate of family offices in Malaysia, whereas Singapore maintains detailed records. The Monetary Authority of Singapore (MAS) says that SFOs granted their tax incentives, which grew 3.5 times to 1,400 as of the end of 2023, compared to 400 in 2020. As of August, the number has reached 1,650. The MAS expects the number of new SFOs in 2024 to surpass the 300 new additions last year.

Momentum building 
Charoenwong also highlights that Singapore’s lifestyle and educational opportunities are significant factors for UHNW families. Many family offices focus on financial management and supporting broader interests, including education for future generations and access to global opportunities. In this context, Singapore’s top-tier educational institutions and its status as a global city provide a distinct advantage.

“It will likely take considerable time and investment to build the comprehensive ecosystem and global reputation that Singapore enjoys,” the professor says. “In the meantime, Forest City SFZ may succeed more in complementing Singapore’s offerings rather than directly competing with them, perhaps by focussing on niche areas or specific types of family offices that might find Malaysia’s environment particularly attractive.”

However, in investor circles, Malaysia’s efforts to revitalise the city are already gaining traction. Henry Soediarko, director and head of portfolio management at First Estate Capital Management, notes that some people in his network and business circles are now considering purchasing property in Forest City following the recent initiatives.

Interests have been piqued, but these individuals are still playing wait and see, he says. Most are looking out for one key criteria — whether SFOs have indeed begun applying to operate out of the man-made island. “There’s certainly [making a move and investing] too early and there are some people who will wait for after the first wave, which is when SFOs start to apply for the zero tax status,” says Soediarko. 

“With Singapore’s MAS slowing down on giving out approvals for applications of SFOs, Forest City presents as an attractive alternative destination within the broader ecosystem,” Soediarko says, adding there is little chance of failure due to the “many good factors”.

He believes there is a buzz of excitement in the air about its potential. “At the [Invest Malaysia] conference, I sat next to a member of a prominent Malaysian bank and I asked her: ‘How is [Forest City] going? Is this for real?’ And she said: ‘Yes, I’ve seen a lot more activity going on,’ I think it’s going to be a success.”

Meanwhile, this year’s Invest Malaysia featured the participation of major financial institutions and Johor state organisations responsible for overseeing the special economic zone. Panellists included the managing director of sovereign wealth fund Khazanah Nasional, the CEO of Retirement Fund Incorporated (KWAP), the CEO of the Employees Provident Fund and the chief executive of the Armed Forces Fund Board. Chief executives from Maybank, CIMB Bank, HSBC and Bursa Malaysia were also present. “It’s very, very symbolic and it’s all very positive,” says Soediarko. 

A Forest City sales manager says that 70% of the 26,000 available units on the island have been sold, with approximately 30,000 active occupants currently residing there. Photo: Khairani Afifi Noordin/The Edge Singapore  
 

CIMB is the only bank with a physical branch in Forest City. HSBC requires approval from Bank Negara, while Maybank stated it has enough branches in Johor but will assess the situation further based on “what makes sense for us. Photo: Nicole Lim/The Edge Singapore

Overgrown vegetation, a sign that nature has reclaimed the uninhabited island. Photo: Nicole Lim/The Edge Singapore  

Hope versus hurdles 
Still, it is difficult to ignore the scepticism surrounding the enthusiasm, particularly in light of past failures to make the Iskandar Development Region a success and the ongoing challenges facing Forest City. At a panel featuring key officials working on the JS-SEZ, moderator Lee Heng Guie, who is the executive director of the Socio-Economic Research Centre and the Associated Chinese Chambers Of Commerce And Industry Of Malaysia, grilled his panellists with a host of factors that might impede the success of the greater Johor area. 

“That’s the thing that we always talk about [regarding] Malaysia… Good on paper, but when it comes to execution, we need to work harder on that… Malaysia’s one-stop centre is always a full-stop centre,” says Lee, addressing the history of the nation’s inability to follow through on the plans that it has announced.

But speaking to The Edge Singapore, Lee admits that “the stars are aligned” this time around. The ongoing geopolitical tensions between big economies, Malaysia’s current internal government stability and its push to grow the economy, alongside its friendliness to other countries, all make up “correct” reasons for success. 

“This is the second take-off, which is very important. We need to make sure we make it; if not we will miss the opportunity again,” says Lee. “The timing is perfect and we must seize the moment. Whatever we’ve planned to do, we must get together and coordinate. Investors are willing to give [Johor] a second chance, they hope this time round you get it right.”

Forest City also cannot thrive without first addressing the elephant in the room — its empty units. A Forest City sales manager tells The Edge Singapore that out of the available 26,000 units across the island, 70% are sold. The secondary market is thriving, as channel checks by this publication found that residential units at Forest City are listed on property marketplaces from as low as RM589 psf. A 515 sq ft unit’s price tag, for instance, stood at RM350,000 ($108,197.73). 

At present, the island can be occupied by up to 70,000 people, although the current active occupants are over 50% less than that at 30,000, he claims. This is because most of the units were bought as vacation homes. Most of the buyers are from Mainland China, while Singaporean buyers are in the minority. One Singaporean owner, Tan Kin Lian, a former presidential hopeful, has been an outspoken supporter of Forest City on his Facebook page and has even organised tours of the development. 

“If you come here at night, a lot of the lights [from the housing units] are on,” says the sales manager. However, The Edge Singapore witnessed an average of five to 10 units lit per block of flats in Forest City, a telltale sign of just how barren the island is.

Perhaps an initiative that could help to sell off the large stock of unsold residential units is the revised Forest City SFZ-exclusive Malaysia My Second Home (MM2H) programme, under which eligible foreigners can maintain long-term residence in Malaysia. 

The programme, which the country’s Home Ministry oversees, was launched in 2002 to allow foreigners to stay in Malaysia for 10 years or more. Based on data from Malaysia’s Ministry of Tourism and Culture, the country granted the MM2H status to 48,471 foreigners from 2022 to 2019. As of May 31 this year, the number of MM2H visa holders stood at 57,608.

Under the revised programme for Forest City SFZ, applicants must purchase a unit worth over RM500,000 directly from the developer. The applicant must hold the unit for at least 10 years unless they resell and buy a higher-value property. Applicants should also have a bank deposit of over US$65,000. In comparison, the MM2H programme elsewhere in Malaysia requires applicants to purchase units over RM600,000 in value and have a bank deposit of over US$150,000.

OCBC chief economist and head of global markets research and strategy Selena Ling says the revision will make the overall Forest City SFZ prospects more attractive. However, it remains to be seen if the SFZ can attract the investments it wants in size, such as the establishment of more family offices and banking units. 

At present, CIMB is the only bank with a branch in the township. Other banks were asked at a panel at Invest Malaysia if they would set up a physical branch in Forest City. HSBC said that it will require approval from the Bank Negara and Maybank noted that it is not short of branches in Johor but will take a closer look at “what makes sense for us”. 

“If it materialises, there will be an organic demand for housing and the MM2H policy can catalyse investments here. However, it will probably be done in conjunction with the broader SEZ. So how smoothly and seamlessly the policy coordination and regulatory environment is implemented for SFZ and SEZ will be key,” Ling says. 

Currently, Forest City is still under development, with only about half of the island completed. The completed areas include Cerulean Bay, Regalia Park, Starview Bay, Carnelian Tower and Ataraxia Park. Shuttle buggies operate between key amenities, such as the international school and various residential towers.

Many F&B outlets remain closed and the island has only one medical centre, which Taiwan’s MJ Health operates. To access additional schools, universities, clinics and bank branches, residents must travel approximately 20 minutes to the more developed and populated area of Iskandar Puteri. Bus services connect Forest City to Tuas Link, Boon Lay and Jurong East MRT Stations in Singapore, with journeys taking under an hour.

The township is approximately a 40-minute drive from Johor Bahru Senai International Airport, which offers direct flights to 17 cities, including Guangzhou, Jakarta, Surabaya, Bangkok and Ho Chi Minh City. Future projects aim to enhance connectivity to Forest City, including a proposed ferry to Tuas, the Rapid Transit System (RTS) and Autonomous Rapid Transit within Johor, as well as a planned High-Speed Rail (HSR) to Kuala Lumpur.

Efficient transportation networks and infrastructure will further attract property investors, says Maybank Securities analyst Wong Wei Sum in his Sept 23 note. The analyst believes that the HSR could also include a station stop in Forest City.  However, competition in the high-rise segment is expected, especially from properties developed by the Bursa Malaysia-listed Eco World, SP Setia, Sunway Group and UEM Sunrise, which will benefit from the increased investment and job opportunities in the Forest City SFZ over the longer term. 

While scouting out The Network School in Forest City, The Edge Singapore spoke with a Singaporean business owner who was looking to rent out a commercial unit near where the school was located. He said over 200 bidders had bid for 70 units in a previous tranche. 

The gallery's sales manager says commercial units were going for RM900 psf, a lower price tag than the average RM1,200 to RM1,600 psf figure for residential units. The business owner has had several businesses wind up in Singapore due to high rental costs and shared that the low rent price in Forest City is “very attractive.” 

When asked about the low footfall in Forest City and its potential impact on his business if he wins the commercial bid, the man stated he was prepared to endure 10 years of losses, believing the island would eventually recover. “Now is the time to buy,” he adds.