Forest City: From $100 Billion Ghost Town to Special Financial Zone

A City Built on Sand — and Ambition

The brochures promised everything. Gleaming towers rising from reclaimed islands on the Strait of Johor. A futuristic eco-city for 700,000 residents, just minutes from Singapore's gleaming skyline. Parks, malls, golf courses, international schools — and, above all, the prospect of affordable seafront living for China's aspiring upper-middle class, who could not afford Shanghai's waterfront but might manage Johor's.

The developer was Country Garden Holdings, then one of China's largest property companies. Its partner was Esplanade Danga 88, a company affiliated with the Johor state government — and, critically, 64 percent owned by Sultan Ibrahim Iskandar, who is today Malaysia's King. The project, launched in 2013 and formally officiated in 2016 by then-Prime Minister Najib Razak, carried a jaw-dropping $100 billion investment figure. It was pitched under China's Belt and Road Initiative, a global infrastructure campaign that, at its peak, seemed capable of remaking Southeast Asia.

Forest City was not intended for Malaysians. The units were priced in line with China's then-booming housing market — far beyond the reach of local buyers. The pitch was directed at Chinese citizens eager to park wealth offshore, and for a while it worked. Then Beijing moved. In 2017, President Xi Jinping tightened currency controls, imposing a $50,000 annual cap on overseas spending. Overnight, the flow of Chinese capital dried up. By the end of 2019, only 15,000 units had been sold against a target of 700,000. As few as 500 people lived on the island.

The Malaysian political crisis of 2018 brought a new government hostile to Chinese mega-investments. The Covid-19 pandemic closed borders and froze the global property market. Country Garden meanwhile slipped toward financial catastrophe in its home market, caught in the implosion of China's real estate sector. The result was the image that would define Forest City for half a decade: empty apartment towers, deserted commercial streets, a shopping mall where half the units never opened. Foreign Policy called it a "massive boondoggle." Other outlets used a starker phrase: ghost city. Today, only one of the four planned islands has been built, containing approximately 28,000 residential units. Occupancy rates remain in the single digits.

The Pivot: From Ghost Town to Financial Zone

The Malaysian government had every reason to want Forest City saved. The King himself holds a 25 percent effective stake. Johor's economic credibility was on the line. In late 2023, Prime Minister Anwar Ibrahim said Forest City would be repositioned as a special financial zone. The formal incentive package was then announced in September 2024, marking a complete repositioning: instead of selling luxury apartments to Chinese retirees, Forest City would become a tax-advantaged hub for global wealth management, fintech, and high-value business services.

The headline incentive — a zero percent tax rate for single family offices for up to 20 years — was a direct challenge to Singapore, which had built the world's fastest-growing family office ecosystem, expanding from 50 offices in 2018 to an estimated 1,400 by end of 2023. Singapore requires a minimum of S$20 million (~RM65 million) in assets under management to qualify for its comparable program. Forest City sets the bar at RM30 million — roughly half the Singapore threshold. Additional incentives include a 5% corporate tax rate for eligible businesses for up to 15 years, a 15% flat income tax rate for qualifying knowledge workers for 10 years, stamp duty exemptions on commercial property, and accelerated capital allowances.

The comparative picture is stark. On minimum AUM, Forest City requires RM30M (~US$6.5M) versus Singapore's S$20M (~US$15M). Corporate tax is 0% for single family offices versus Singapore's ~17% standard rate. Knowledge workers pay 15% flat for 10 years versus up to 24% in Singapore. Land costs are significantly lower, and Singapore proximity — 2 km by road or water — is an inherent advantage. The trade-off is ecosystem maturity: Singapore has 1,400+ established family offices; by late 2025, Forest City had more than 30 expressions of interest and six conditionally approved family offices.

Malaysia's Securities Commission has set a target of RM2 billion in family office assets under management at Forest City by end of 2026. Banks have begun opening branches inside Forest City to serve the anticipated client base. The Securities Commission has engaged advisers and regulators in a consultative process — a softer, more responsive regulatory posture than Malaysia has traditionally offered foreign wealth. Still, the gap with Singapore remains vast. Singapore has a mature legal system, an established financial ecosystem, and decades of trust from global family offices. Forest City has a beautiful beach, empty towers, and a tax rate. The question is whether the combination of lower costs, regulatory innovation, and Singapore proximity can bridge that gap.

The Risks That Remain

Any bullish case for Forest City requires clear-eyed acknowledgment of the structural risks that remain unresolved.

Country Garden's financial distress. The developer's ongoing difficulties in China create persistent uncertainty about its ability to maintain and develop the Forest City asset. A formal bankruptcy or forced restructuring could complicate ownership, construction timelines, and investor confidence.

Legal and residency pathways. Family offices require clarity on long-term residency for principals and key staff. The Securities Commission is working with immigration authorities on dedicated visa tracks, but a structured permanent residency pathway has not yet been established. Without it, ultra-high-net-worth families are unlikely to make Forest City a primary domicile.

Ecosystem maturity gap. Singapore's family office ecosystem has a generation's head start: 1,400-plus established offices, a full financial services legal framework, global banking relationships, and institutional trust. Forest City has only a small number of conditionally approved family offices and a zero-tax rate. The gap is measurable, and closing it will take years.

The 'ghost city' stigma. Investor psychology matters. Forest City carries reputational baggage that tax incentives alone cannot overcome. A sustained, visible increase in activity — restaurants open, offices lit, people walking the promenade — is as important as any policy announcement.

Scenarios to 2030

Partial Revival as Wealth Management Niche (~50% probability): The most likely near-term outcome. The SFZ attracts a modest but growing number of family offices from Malaysia, Southeast Asia, China, and the Middle East. The RM2 billion AUM target for 2026 is met. Occupancy rates improve toward 12–18%. Forest City sheds the ghost city label but functions as a specialized, tax-efficient satellite to Singapore rather than a standalone hub.

Breakthrough as AI and Crypto Hub (~25% probability): Contingent on continued AI infrastructure investment in Johor and the RTS Link completion, the SFZ attracts a cluster of crypto-native and AI-adjacent businesses — digital asset firms, AI compute operators, and fintech startups. Occupancy could reach 25–35% by 2030 and AUM could exceed RM10 billion.

Structural Failure Persists (~25% probability): The structural problems — single-digit occupancy, a developer in financial distress, units priced for buyers who cannot move capital freely, and a lack of organic economic community — prove too deep. Tax incentives alone cannot create the vibrancy that makes a city function. The JS-SEZ boom benefits broader Johor but Forest City specifically remains a niche oddity through 2030.

Forest City is the most consequential blank slate in Southeast Asia — two kilometers from Singapore and available to whoever is bold enough to use it. The sand is the same as it was in 2013. The ambition, for once, might be warranted.