Analysis: Politics, business viability, diplomacy make purported casino in Malaysia’s Forest City a risky bet

ISKANDAR PUTERI, Johor: Media reports of Malaysia allegedly mulling a new casino in Johor’s beleaguered Forest City property development have seized public attention in recent weeks, prompting denials by the government, as well as police investigations and the arrest of individuals embroiled in the saga.

Amid the controversy over whether high-level talks did take place over a purported new casino, analysts say such a scenario would have been a hard sell politically, especially amid rising Islamic sensitivities, and also a risky gamble economically given the challenges in building gaming-related infrastructure and attracting the target clientele.

Experts CNA spoke to also suggested that Malaysia’s bilateral ties with neighbour Singapore and economic giant China may be impacted if it was indeed toying with the casino idea, given that both governments have taken active steps to deter gambling among its citizens who are potentially among the target clientele.

Regional gaming industry expert Ben Lee, managing partner of Macao-based casino consultancy IGamiX, told CNA: “Bear in mind that China is bearing down on any jurisdictions which have casinos and they have announced a couple of times that they have a blacklist of gambling destinations in Southeast Asia. 

“So I don't think having a casino and wanting to target Chinese citizens is going to win you any brownie points with China.” 

SUBSEQUENT DENIALS, POLICE PROBES 

The idea of a potential casino in the residential development located in the southwestern part of Johor first surfaced in a Bloomberg report published on Apr 25.

It claimed that Malaysian Prime Minister Anwar Ibrahim had met with Mr Vincent Tan, founder of conglomerate Berjaya, which has specialist interests in property development, and Mr Lim Kok Thay, CEO of multinational hospitality and resorts specialist Genting Group, as well as a representative of the Malaysian King. The report went on to allege the group held preliminary talks over granting Forest City the country’s second-ever casino licence.

The news was picked up by several Malaysian and foreign media outlets, including Singapore daily The Straits Times, which cited unnamed sources in reporting that the casino was among Malaysia’s proposals for the Johor-Singapore Special Economic Zone (SEZ). 

The denials came swiftly. On the same day, Mr Anwar denied that the government was considering the casino proposal, telling reporters at an event: “There is no such thing … The issue of (the) casino licence is a hoax. Not true,” while holding out his arms in an X sign.

Genting Group and Berjaya have also denied the claims, with the latter stressing that the Bloomberg report contained statements that were “false”, “untrue” and “unwarranted”.

Mr Anwar was later quoted by Bernama as urging the companies mentioned in the Bloomberg report to “take the necessary action” against the New York-based news agency.

Communications Minister Fahmi Fadzil on May 8 said the directive to initiate investigations against Bloomberg did not come from the government and that Berjaya had lodged a police report on the issue through its legal firm, reported the New Straits Times.

On Apr 28,  Badrul Hisham Shaharin, a Malaysian political activist known as “Chegubard”, was charged with sedition for a Facebook post which reportedly insinuated that this alleged new casino was the “financial hub” Mr Anwar had previously announced in August 2023.

He was referring to the prime minister’s plans for Forest City to be redesignated as a special financial zone to stimulate investment and economic growth in the state. 

On Monday (May 6), local media reported that Malaysian police recorded a statement from a Bloomberg journalist Ram Anand over the article. According to Inspector-General of Police Razarudin Husain, the investigations were being done for sedition, criminal defamation and the misuse of network facilities.

ANWAR, KING, UNLIKELY TO SUPPORT CASINO DUE TO ISLAMIC SENSITIVITIES: ANALYSTS

Analysts CNA spoke to said that while opening a casino could potentially rake in tourism dollars and give a big boost to the country’s economy, it would be politically difficult for Malaysia’s leaders to endorse given the religious sensitivities.

More than 60 per cent of Malaysia's population are Muslims and Islam is enshrined in the constitution as the country’s main religion. Islam prohibits gambling and also regards proceeds from gambling activity as illicit revenue. 

According to the Bloomberg report, Malaysia’s king Sultan Ibrahim Sultan Iskandar, who is also Johor’s ruler, controls 20 per cent of the Forest City joint venture with China-based Country Garden, the master developer. 

However, the King’s role in Malaysia’s constitution is also defined as the country’s defender of Islam and the custodian of Malay heritage. 

Mr Anwar and his unity government have also been walking on eggshells when it comes to religious issues as it is vying for the Malay vote. 

Recent results at the state elections and by-elections indicate that the opposition led by Islamist party Parti Islam Se-Malaysia has strengthened its influence over the majority Muslim voter base. 

Political analyst Azmi Hassan told CNA that both the King and prime minister are likely to reject any casino proposals because of how betting is an illegitimate activity in Islam and due to political sentiments today. 

“Opening casinos is a very sensitive issue, and the Johor sultan has stressed that no way one will be established in Johor, and this includes Forest City. It involves gambling, and riba (exploitative gains) which is a no-no among Muslims,” said Dr Azmi. 

“If ever a casino is approved to be built, the government would also face brickbats from the Malay community - not only among the Muslims in northern states like Kedah and Perlis but also more urbanised areas like in Selangor and Johor,” added the senior fellow from the Nusantara Academy for Strategic Research.

In a statement issued on Facebook, Johor chief minister Onn Hafiz Ghazi stressed that the Johor royal family has been consistent in its stance against casinos being operational in the state. 

“History shows that during the reign of Sultan Sir Ibrahim (Johor’s ruler between 1895-1959), three casinos were shut,” said Mr Onn Hafiz. 

He added that the current King Sultan Ibrahim has “stated that His Majesty will not allow the opening of any casinos in the state of Johor”.

IGamiX analyst Mr Lee told CNA that what stands out is the “vehemence” in how Malaysia's prime minister and the two companies denied that talks took place.

“It's interesting that a simple denial wasn't enough that the PM has urged the two private companies (to make police reports) and go after the individuals or news organisations for the report,” said Mr Lee.

“You would have thought that they would have just rubbished the news, denied it and moved on. So the vehemence of the denial is news in itself,” he added.

Analyst James Chin, Professor of Asian Studies at the University of Tasmania, told CNA that the denial from Mr Anwar specifically has been vehement because of the precarious position of the unity government in trying to garner support from the Malay Muslims. 

“The reason why this is highly sensitive is because Anwar is trying to court the right wing Islamic vote so obviously he cannot be seen to be supporting the casino,” said Prof Chin. 

The purported proposal at Forest City is for Malaysia’s second casino licence after the application to open one in Resort World Genting was approved in 1969. 

Genting’s casino licence needs to be renewed every three months and is subject to the discretion of the finance minister. Mr Anwar currently holds the finance portfolio. 

Since 1983, Muslims have also been barred from entering the casino area of the resort. 

However, Dr Azmi stressed that the casino in Genting Highlands was opened during a period when the Muslim population may not have been as sensitive to the gambling issue as it is today. 

“At that particular time, the sentiments among Malay Muslims were not as strong as it is now, the nature of Islamic politics is different today. The government knows this and hence, I don’t think this particular project will kick (off) and come to fruition,” he added. 

FOREST CITY MUST FIRST SHRUG OFF “GHOST TOWN” LABEL 

Industry experts also cite concerns about whether Forest City is a suitable location for a casino investment to be viable in the first place. 

Despite its initial grand ambitions, Forest City has made headlines among international media as an “abandoned ghost town” and analysts said the development would need a major overhaul in terms of connectivity and infrastructure to be a competitive gambling and leisure option.

The development, located in a relatively remote corner of southern Johor, is unlikely to attract international visitors who will favour more established options such as the two integrated resort casinos in Singapore - Marina Bay Sands and Resorts World Sentosa - as well as Resorts World Genting near Kuala Lumpur, experts said.

IGamiX’s Mr Lee pointed out that Johor’s Senai international airport for instance is not a strong aviation hub, and international tourists and high-rollers may find the area cumbersome to access. 

The airport currently only operates a handful of international flights, connecting with the likes of Guangzhou, Bangkok and Ho Chi Minh City. 

He added that the Forest City development must also be raised to international class standards to attract tourism dollars, and this may include building an ecosystem, including world-class hotels and a theme park as well as upgrading airport facilities. 

“If it’s done properly to international class standards and they were to mix it with other elements of entertainment (such as) F&B (food and beverage) outlets ... yes it could work,” said Mr Lee. 

“But Forest City will never be an international draw card … Why would any international visitor land in Singapore and then drive a couple of hours to go across to JB (Johor Bahru) when they have two international world-class casinos right there in Singapore?” he added. 

Mr Lee stressed that Forest City’s catchment of visitors will likely be residents who live in the southern part of Peninsular Malaysia - who may find it more convenient to visit compared to Genting Highlands - as well as Singaporeans who are unwilling to pay the levy to access casinos in their home country. 

“Bear in mind that a lot of Singaporeans do go across to JB for the weekend, for retail shopping and dining. This casino will be attractive to them,” he added. 

Construction of the south portion of the Forest City project began in 2015, with an aim to develop four artificial islands covering a total of 20 sq km.

Since then, construction for half of one artificial island - equivalent to 15 per cent of the total area of the Forest City project - has been completed. 

In a press statement issued in August 2023, Country Garden said that the company is “always prepared to review and to re-evaluate Forest City's development plans after 2025” if there is a need to do so. 

The Chinese firm is also riddled with a debt crisis and a liquidation petition has been filed against it to pressure the company to come to the negotiating table for debt restructuring talks. 

Johor Bahru Chinese Chamber of Commerce and Industry president Low Quak Shin told CNA that there is uncertainty on who will finance the development and build land for enough space to house a casino.

“Will any private firm want to take on the investment risk and fund this?” he told CNA. 

He added that the entire area beyond Forest City must be rejuvenated for it to be a viable tourist hub and for a proposed casino to pay off.

“The area is a bit ulu (remote) now. There’s a port there (Tanjung Pelepas Port) and many of the residents there are migrant workers who work at the port,” said Mr Low. 

“There’s a lot of work to be done to transform (Forest City) into a tourism hub with a casino like that in Genting Highlands and in Singapore,” he added. 

RISK OF SOURING RELATIONS WITH CHINA, SINGAPORE 

Industry experts added that if Malaysia were to pursue the alleged casino proposal in Forest City, it could also risk souring relations with China and Singapore.

Forest City is a popular property hub among Chinese citizens, some of whom have purchased apartments there as retirement homes. Chinese companies have multiple property developments in southern Johor and some corporations have set up data centres and manufacturing facilities across the state.

But China has recently warned its citizens to stay away from all forms of betting, stressing that overseas gambling violates its laws. It has issued warnings in three countries in Asia, namely Singapore, South Korea and Sri Lanka. 

Beijing’s stern warnings against its citizens gambling overseas in Asia is an indication that China would not advocate the construction of a casino at a property development invested in by a Chinese firm, say analysts, adding that there’s economic risk for Malaysia in China pulling back investments if it persists with the purported proposal. 

Similarly, Singapore is also sensitive to its own citizens engaging in gambling activity. In 2022, the government passed a Gambling Control Bill which increases penalties for unlawful gambling and imposes stiffer penalties for repeat offenders. 

In 2019, the government also announced a 50 per cent increase in levies for Singaporeans and permanent residents to enter its casinos, with a daily levy raised from S$100 (US$73.92) to S$150 and an annual levy up from S$2,000 to S$3,000. The government then said the move was part of “preventive measures” to “address problem gambling”. 

Against this backdrop, analysts say the Singapore government is unlikely to condone the opening of a casino around 15km from its doorstep, which would also increase competition for its two casinos.

However, Mr Lee maintained that increased competition is not legitimate beef for Singapore to contest against the construction of a possible casino in Forest City. 

“Singapore has gone to great lengths to protect their locals from problem gambling and having a casino across the causeway could (exacerbate this problem). 

“But hey, it's another jurisdiction. What can they do about it? They can’t exactly complain about it, seeing as they’ve got two casinos that draw Malaysians across the causeway themselves. What's good for the goose is good for the gander,” he added. 

Political analyst Prof Chin added that it is also unlikely that the casino proposal would be mooted as part of the terms of the SEZ with Singapore as the zone is focused on bilateral incentives to promote economic cooperation. 

“I doubt the casino can be part of the terms of (the) SEZ. (The) SEZ focuses on economic projects and encourages the opening of factories and manufacturing plants,” said Prof Chin. 

“In any case, this casino proposal is so politically dicey that it is highly unlikely they would openly say they are going to open one. They would have to impose strict rules for it to be palatable to Malaysians, such as imposing levies on locals and barring Muslims from entering,” he added.