Forest City, Malaysia

 

                                                                                                              

 

 

 

 

 

 

 

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March 12, 2023

 

Forest City is a mega development project located in Johor Bahru, Malaysia, spanning over 30 square kilometers. The project, spearheaded by Country Garden Pacific view, aims to build a sustainable, smart city that integrates nature and technology. This project has attracted global attention and investment due to its scale, ambition, and potential benefits for Malaysia's economy.

However, our evaluation reveals that the Forest City project faces environmental, social, economic, and governance issues. The project's massive scale, complexity, and technological advancements pose significant risks that require effective management, coordination, and stakeholder engagement. The project and program management approaches must be improved to address the identified gaps, reduce uncertainties, and ensure successful project delivery.

Additionally, the project's governance needs to be strengthened, and the procurement and contract management systems must be streamlined to avoid potential biases and fraud. The project team should focus on delivering value for money, enhancing capital efficiency, and improving the change management processes to minimize disruptions.

We recommend that the project team adopt best practices in project and program management, governance, procurement, and contract management to minimize the identified risks, enhance the value for money, and deliver a sustainable and successful project.

Construction on the Forest City project began in 2016 and is expected to continue for several years, with a total investment of around USD 100 billion (New Strait Times, 2020). Once completed, the development will span an area of 30 square kilometers and include residential, commercial, and industrial zones, as well as educational and healthcare facilities (Country Garden Pacific View Sdn Bhd, 2021).

One of the critical features of Forest City is its focus on sustainable design and environmental conservation. The development includes a large central park and a network of green spaces and water features designed to promote biodiversity and mitigate the impact of urbanization on the surrounding ecosystem. Additionally, the project incorporates various advanced technologies and waste management systems to minimize its environmental footprint.

The Forest City project represents a significant investment in Malaysia's economy and infrastructure, potentially generating significant job opportunities and spurring growth in the surrounding region. However, it has also been controversial and criticized, with concerns about its potential impact on the local environment and economy.

The Forest City will be analyzed and evaluated using five concepts: Project Management and Program Management in Mega and Complex Projects/Programs, Complex Business, Organizational and Commercial Environment, Multiple Stakeholders priorities and complexities – dealing with Government and Private Entities, Strategic Misrepresentation of the inherent benefit and value of this Mega Project, and its Governance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 1 – Forest City concept map

      Source – Williams, 2016

The Forest City project is a highly complex mega-development that involves a significant financial investment, advanced technologies, and sustainable design principles. One of the significant complexities of the project is its scale, with an expected total investment of around USD 100 billion and a development area of 30 square kilometers (New Strait Times, 2020). Additionally, the project involves the creation of four artificial islands, which require extensive engineering and construction expertise. The project also has complex environmental and social considerations, including potential impacts on the local ecosystem and economy and the need to ensure social inclusivity and community engagement (Tan, 2019).

Despite the significant potential benefits of the Forest City project, several potential issues and challenges could impact its success. One of the critical challenges is the potential impact on the local environment, including concerns about land reclamation, water quality, and biodiversity (Tan, 2019). The project also faces criticism from some environmental groups, who argue that the development may exacerbate the effects of climate change and other environmental issues (BBC News, 2019). Additionally, there are concerns about the potential displacement of local communities and the need to ensure inclusive and sustainable development practices (Tan, 2019). Finally, the project also faces the risk of financial instability, given the high level of investment required and the potential for economic downturns or market fluctuations (New Strait Times, 2020).

The Forest City project presents significant opportunities for project management professionals to demonstrate their expertise in managing large-scale, complex developments. Given the range of stakeholders involved in the project, including investors, developers, contractors, and local communities, effective project management will be critical to ensuring successful delivery. The project presents opportunities for professionals to demonstrate their skills in risk management, stakeholder engagement, cost control, and schedule management (Pande, 2018; CIOB, 2019). Additionally, the project's focus on sustainability and advanced technologies presents opportunities for project managers to develop innovative solutions and promote best practices in sustainable development. The project involves multiple interrelated components, including residential, commercial, industrial, and educational zones, infrastructure, and environmental features (Country Garden Pacific view Sdn Bhd, 2021). Effective program management ensures coordination between these components and that the project meets its objectives.

Macro

Meso

Micro

·       Employment opportunities

·       Malaysia’s economic growth

·       Government Agencies

·       Investors

·       Contractors

·       Local Community

·       Design

·       Construction

·       Financing

·       Marketing

Figure 2 - Macro, Meso & Micro factors

               Source – Authors own work

Forest City has significant implications for Malaysia's regional and national economies at the macro level. The project is expected to attract billions of dollars in foreign direct investment, generate employment opportunities, and boost the country's economic growth (Ramli et al., 2021). At the meso level, the project faces challenges coordinating various stakeholders, including government agencies, investors, contractors, and the local community. Finally, the project's success at the micro level depends on efficiently managing various components, including design, construction, financing, and marketing.

The organizational complexities of Forest City are primarily related to the involvement of multiple stakeholders, each with its objectives, interests, and priorities. The project is led by Country Garden Pacific View, a joint venture between Country Garden Holdings, a Chinese property developer, and Esplanade Danga 88, a Malaysian consortium. However, the project involves numerous contractors, consultants, suppliers, and government agencies, each with roles and responsibilities (Azmi et al., 2018). The project's complex organizational structure can lead to communication, coordination, and decision-making challenges. Moreover, the involvement of multiple stakeholders can create conflicts of interest and power struggles, which can impede the project's progress.

The structural complexities of Forest City are related to the unique engineering and architectural challenges posed by the development of artificial islands in the Johor Strait. The project involves recreating land from the sea, constructing sea walls and breakwaters, and installing extensive infrastructure, including roads, bridges, water supply systems, and waste management facilities (Azmi et al., 2018). These structural complexities can lead to challenges in the project's design, construction, and maintenance. Moreover, the project's location in a seismically active region can create additional challenges related to the project's structural integrity.

Forest City involves complex institutional relationships with various stakeholders, including the Malaysian government, regulatory agencies, and the local community. The project's success depends on efficiently managing these relationships, including obtaining necessary approvals and permits, managing environmental and social impacts, and addressing the concerns and needs of the local community (Ramli et al., 2021). However, these institutional-level relationship complexities can lead to challenges related to compliance with legal and regulatory requirements, managing public relations, and mitigating conflicts with stakeholders.

The commercial complexities of Forest City are related to the project's large-scale financing and contractual arrangements. The project involves a significant investment from Chinese and Malaysian investors, including banks, pension funds, and real estate firms. Moreover, the project's contractual arrangements involve multiple parties with contractual obligations and risks (Azmi et al., 2018). These commercial complexities can lead to project financing, risk management, and contract administration challenges. Moreover, the involvement of multiple parties with different cultural, legal, and business backgrounds can create additional complexities in contract negotiation and enforcement.

The project's development on land reclaimed from the sea has raised concerns about environmental degradation and the loss of marine habitats. The Malaysian government has been criticized for failing to enforce environmental regulations and allowing developers to conduct land reclamation projects without conducting proper environmental impact assessments (Tiong, 2018). Moreover, the legal status of foreign property ownership in Malaysia has also been a contentious issue, with some experts expressing concerns that the project could lead to a large-scale influx of foreign buyers and a potential loss of control over the country's property market (Loh & Choong, 2017).

Figure 3 – Initial Forest City reclamation depicting damages to sea grass

Source: Forest City DEIA Vol. 3

Forest City requires careful planning, coordination, and execution across multiple teams and stakeholders. The project management team must adopt a strategic and proactive approach to identify potential risks and challenges early on and develop contingency plans to address them (Goh et al., 2018).

Forest City had some challenges and issues regarding stakeholder management. According to Lam et al. (2018), there have been several protests from residents and environmental groups against the Forest City project due to concerns about the impact on the environment and local communities. This highlights the need for better stakeholder engagement and communication to address the concerns and expectations of stakeholders.

Moreover, the project has been criticized for lacking transparency and consultation with the public regarding its development plans and progress (Lam et al., 2018). The project's stakeholders include the Malaysian government, investors, contractors, local communities, and the environment. Therefore, it is crucial to identify and prioritize the stakeholders, understand their concerns and expectations, and engage with them effectively to address any issues that may arise.

The priority level should be aligned with the level of complexity when dealing with mega projects like Forest City. High-priority issues that are also highly complex require more attention and resources than low-priority issues that are less complex. A study by Loo et al. (2018) suggests that identifying a mega project's complexity level is crucial to developing effective project management strategies.

In the case of Forest City, several issues and challenges are both high-priority and highly complex, such as stakeholder management and environmental sustainability. Therefore, these issues should be prioritised and allocated the necessary resources and attention to ensure successful project outcomes. On the other hand, low-priority issues that are less complex can be given less attention and resources but still should be addressed to avoid potential issues and challenges that may arise.

Strategic misrepresentation of the inherent benefit and value of a Mega Project can lead to various issues and challenges. In the case of Forest City, concerns have been raised regarding the miscalculated risk and value of the Mega Project. Studies have pointed out that the projected benefits and values may need to be updated or clarified, leading to a misrepresentation of the actual worth of the project (Maher et al., 2021; Chan & Leung, 2019).

One of the reasons for this misrepresentation can be the lacking comprehensive risk assessments. Mega projects like Forest City often have complex risk profiles that can have cascading effects on the project's outcomes. Therefore, it is essential to have a detailed risk assessment framework that considers various factors like social, environmental, financial, and legal risks. However, studies suggest that these factors should be considered in Mega Project risk assessments, leading to misrepresenting the project's inherent risks (Flyvbjerg, 2017).

Another factor contributing to misrepresenting the project's benefits and values is the lacking transparency and accountability. Mega Projects like Forest City involve multiple stakeholders, including private investors, governments, and the public. Therefore, there needs to be clear communication regarding the project's objectives, goals, and expected outcomes (Maher et al., 2021).

Governance plays a critical role in ensuring the success of any mega project. The project is governed by various government agencies and departments, such as the Ministry of Housing and Local Government, Tourism, Arts and Culture, and the Economic Planning Unit. In addition, the project is also governed by the Johor State government through the Johor State Investment Centre (JSIC) and the Iskandar Regional Development Authority (IRDA) (Furqani et al., 2019).

It has been reported that the land reclamation process for the project was done without proper consultation with relevant stakeholders, including local communities and environmental groups (Al Jazeera, 2018). Moreover, some stakeholders have expressed concerns regarding the environmental impact of the project, including potential damage to marine life and ecosystems (Tan & Teo, 2018).

Forest City has established its management team to oversee the project's implementation and operations. The management team includes representatives from Country Garden Pacific view Sdn Bhd, the developer of the project, as well as consultants and contractors. However, there have been criticisms regarding the need for more involvement of local communities and civil society organizations in the project's decision-making process (Tan & Teo, 2018). The Forest City project's bidding schedule is complicated, with multiple stages and a diverse range of stakeholders involved. This complexity can lead to delays and conflicts during the project's delivery phase. According to a study by Wang et al. (2019), effective communication, collaboration, and stakeholder engagement can help streamline the bidding process and ensure timely project delivery. Studies suggest that a lack of coordination and communication between these centers can lead to mismanagement of project funds, cost overruns, and delays (Nawaz et al., 2018; Wang et al., 2019). Thus, establishing a centralized system of coordination and communication can help mitigate these challenges and ensure effective project management. The Forest City project's procurement activities must provide real value for money, and the procurement process must be transparent and fair. A study by Zhang et al. (2018) suggests that a robust procurement strategy that prioritizes cost savings, efficiency, and quality can help address this challenge.

There may also be gaps between capital expenditure (CAPEX) and operational expenditure (OPEX) purchasing in mega projects like Forest City. While the CAPEX budget may be sufficient, the OPEX budget may be limited, leading to inadequate maintenance and suboptimal asset performance. A study by Liu et al. (2021) found that addressing this gap requires a comprehensive and coordinated approach to procurement, with a focus on long-term value creation.

Deciding whether to centralize or decentralize procurement is another governance challenge for mega projects. A centralized procurement system can improve efficiency and reduce procurement costs, but it may not be suitable for a project as complex as Forest City. In contrast, a decentralized procurement system may be more effective in addressing local needs and fostering competition. A study by Wang et al. (2019) suggests that a hybrid procurement model that balances centralized and decentralized procurement may be the best approach for a mega project like Forest City.

Cost and time efficiency are critical governance concerns for mega projects, and they are particularly relevant for the Forest City project. The high cost of the project and the need to complete it on time require cost and time-efficient mechanisms. Studies suggest that the use of technology, such as building information modeling (BIM) and project management software, can improve cost and time efficiency (Nawaz et al., 2018; Zhang et al., 2018).

Capital control and capital efficiency opportunities are also essential governance considerations for mega projects. the Forest City project faces challenges and uncoordinated contract centers and cost centers due to the complexity of its procurement process. A study by Jaafar and Salim (2015) found that the procurement process in Malaysian construction projects is often challenged by a lack of coordination between the contract and cost centers, leading to delays and cost overruns. This issue is further compounded by complicated bidding schedules, which can cause delays and inefficiencies in the procurement process (Kadir et al., 2017).

Another potential issue in the procurement process of the Forest City project is the gap between capital expenditures (CAPEX) and operational expenditures (OPEX) purchasing. The procurement team must ensure that the strategic purchasing decisions made during the CAPEX phase align with operational needs during the OPEX phase (Ismail et al., 2015). The challenge here is to balance the long-term benefits of strategic procurement decisions with the operational needs of the project.

To address these challenges, the procurement process in the Forest City project should consider a centralized approach to procurement, where procurement decisions are made at the project level to ensure consistency and alignment with project objectives (Ismail et al., 2015). This approach also allows for greater control over procurement fraud and biasness, which can be an issue in large-scale projects like Forest City (Kadir et al., 2017).

Effective change management is also critical to ensure that the procurement process in the Forest City project is aligned with project goals and objectives. The procurement team must be able to adapt to changes in project requirements and manage any potential risks that may arise during the procurement process (Jaafar & Salim, 2015).

Based on the analysis and evaluation of the Forest City mega project, there are several recommendations that can be made to improve and enhance the practice of management of mega and complex project methods and methodologies, and to achieve value for money from the Forest City project.

Firstly, there is a need for effective stakeholder management, which includes engaging with all relevant stakeholders and ensuring that their interests are addressed. This can be achieved through regular communication, consultation and involvement of stakeholders in the decision-making process.

Secondly, it is essential to adopt a comprehensive risk management approach that considers all potential risks and uncertainties associated with the project. This can be achieved through regular risk assessments, the development of effective risk mitigation strategies, and the allocation of appropriate resources to manage identified risks.

Thirdly, there is a need to improve project governance structures to ensure transparency, accountability and effective decision-making. This can be achieved through the establishment of clear roles and responsibilities, the adoption of robust reporting and monitoring mechanisms, and the implementation of effective project controls.

Fourthly, there is a need to enhance the procurement process to ensure that it is transparent, competitive and value-driven. This can be achieved through the development of clear procurement policies and procedures, the adoption of appropriate procurement methods, and the establishment of effective supplier relationship management practices.

Finally, it is crucial to have effective change management mechanisms in place to manage the complexities and uncertainties associated with mega projects. This can be achieved through the development of clear change management plans, the establishment of effective communication and consultation mechanisms, and the provision of appropriate training and support for all stakeholders.

To address these challenges, the project managers need to adopt effective project management methods and methodologies, such as risk management, stakeholder management, and change management. Additionally, the project should adopt cost-effective and time-efficient procurement mechanisms and practices that ensure value for money, transparency, and accountability.

It is also crucial to involve relevant stakeholders in the planning, implementation, and evaluation of the project. This will help in minimizing stakeholder conflicts, managing stakeholder expectations, and enhancing the project's social and economic benefits. Furthermore, the project managers should address the environmental concerns through sustainable and environmentally friendly practices.

 

 

 

 

 

 

 

 

BBC News. (2019). Forest City: The Malaysian Development Built on Chinese Investment. Available at: https://www.bbc.com/news/world-asia-47950856

CIOB. (2019). Understanding Program Management. Available at: https://www.ciob.org/sites/default/files/Understanding%20Programme%20Management_0.pdf

Country Garden Pacificview Sdn Bhd. (2021). About Forest City. Available at: https://www.forestcitycgpv.com/about-forest-city/

New Strait Times. (2020). Forest City: The Challenges, Controversies and Accomplishments of a Mega Project. Available at: https://www.nst.com.my/property/2020/01/557048/forest-city-challenges-controversies-and-accomplishments-mega-project

Pande, S. (2018). Project Management Best Practices for Complex Projects. Project Management Journal, 49(1), 5-17. https://doi.org/10.1177/8756972817745235

Tan, C. (2019). Forest City, A Chinese Mega-Project in Malaysia, Is Becoming A Gordian Knot. Forbes. Available at: https://www.forbes.com/sites/chenchenzhang/2019/04/25/forest-city-a-chinese-mega-project-in-malaysia-is-becoming-a-gordian-knot/?sh=4ab4f4d136e9

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Tiong, R. L. K. (2018). The Forest City controversy in Malaysia: Issues, implications and sustainability challenges. International Journal of Social Science and Humanity, 8(4), 135-140.

Chan, A. P., & Leung, Y. T. (2019). Strategic misrepresentation of project benefits and value: Evidence from Hong Kong. International Journal of Project Management, 37(8), 1017-1030. https://doi.org/10.1016/j.ijproman.2019.05.003

Flyvbjerg, B. (2017). The Oxford handbook of megaproject management. Oxford University Press.

Maher, A., Chen, L., Qureshi, M. I., & Chan, A. P. (2021). Evaluating the performance of public-private partnership projects in developing countries: The case of Forest City, Malaysia. Sustainability, 13(3), 1253. https://doi.org/10.3390/su13031253

Al Jazeera. (2018, June 28). Malaysia: Forest City mega-project under scrutiny. https://www.aljazeera.com/news/2018/6/28/malaysia-forest-city-mega-project-under-scrutiny

Furqani, H., Abubakar, A. M., Jabeen, M., & Abdullah, M. A. (2019). The prospects and challenges of the Forest City project in Johor, Malaysia. Journal of Contemporary Urban Affairs, 3(1), 78-88. https://doi.org/10.25034/ijcua.2018.4681.0901

Tan, L. P., & Teo, P. (2018). Forest City in Malaysia: A real estate mega-project in the Johor Strait. Environment and Planning A: Economy and Space, 50(7), 1424-1441. https://doi.org/10.1177/0308518X18761686

Ismail, N. A., Azmi, I. A. G., & Jamaluddin, M. R. (2015). Procurement practice and performance of contractors in the Malaysian construction industry. Journal of Engineering and Applied Sciences, 10(8), 3030-3036.

 

Jaafar, M., & Salim, R. (2015). Delay mitigation in Malaysian construction industry. Journal of Advanced Review on Scientific Research, 10(1), 19-25.

 

Kadir, M. R. A., Haron, Z., & Razali, A. M. (2017). A conceptual framework on the procurement practices and its influence on project performance in construction industry. Journal of Advanced Research in Business and Management Studies, 7(1), 1-13.