KUALA LUMPUR: The incentives announced with the launch of the Forest City Special Financial Zone (SFZ) may attract financial businesses and residents that could increase around 20 per cent in home sales during the first year of its launch.
Industry experts opined that a successful model of the SFZ can be a prototype of an ideal financial zone that can be adopted in other parts of the country.
Juwai IQI co-founder and group chief executive officer (CEO) Kashif Ansari said if the incentive packages succeed, Forest City could see higher demand for housing and commercial space and an increase in both residents and property investors.
"In the first year, these incentives might attract a couple of dozen new financial businesses, a few thousand residents, a 20 per cent increase in home sales.
"Within five years, you could see hundreds of new businesses, 10,000 or 20,000 new residents, home prices back up higher than the original sales prices, and even plans for new construction being laid," he told Business Times.
Proactive property investors will be the first movers of Forest City as they seek to purchase property before the prices rise, and with the expectation that they will.
"Other investors will wait and see before they purchase, to make sure that the new incentives in fact herald a rebound in the local property market," he said.
Olive Tree Property Consultants Sdn Bhd Samuel Tan said the incentive packages are a good initiative by the government, especially with a tax regime starting at zero per cent.
He underscored the need for legal frameworks to ensure efficiency and transparency.
"What happened to some countries where it was abused must not happen here. And the ecosystem must be right to attract knowledge workers to Forest City SFZ.
"Lower tax itself is insufficient if the quality of living is not up to expectations. In this regard, the stakeholders must ensure the SFZ offers an environment where people find it safe, convenient, and efficient in carrying out their work," he said.
He added the financial zone can be the prototype of what an ideal SFZ should be.
"A successful model then can be adopted in other parts of Malaysia or even internationally.
"Beyond SFZ, the authorities should consider widening its scope to SEZ, where more players can invest. It will make Forest City more vibrant with diverse supporting industries and services," added Tan.
Meanwhile, Kashif added that it is crucial that the financial zone receives regulatory support over the next decade.
"The factors that will be crucial to the long-term viability of the special financial zone are continued regulatory support over the next decade, a successful package of incentives to attract a significant number of family offices and businesses, and additional infrastructure and other support to help turn Forest City into a thriving centre," he said.
The government announced incentive packages to attract international capital to the SFZ , including zero tax on family wealth offices, the first such location in Malaysia.
The Single-Family Office Scheme, coordinated by the Securities Commission Malaysia, aims to attract regional and Malaysian families to manage their family wealth from Malaysia.
Among other incentives are a concessionary corporate tax rate between zero and five percent and a special individual income tax rate of 15 percent for knowledge workers and Malaysians who choose to work there.
Finance Minister II Datuk Seri Amir Hamzah Azizan added that Malaysia's banking institutions, insurance, capital market intermediaries, and other eligible financial sector entities will also enjoy incentives that include special deductions on relocation costs, enhanced industrial building allowances, and withholding tax exemptions.
"Not least, with the support of Bank Negara Malaysia, locally incorporated foreign banks will enjoy regulatory flexibilities to open additional branches within the Special Financial Zone and also benefit from foreign exchange flexibilities for offshore borrowing in foreign currency and investment in foreign currency assets," he said.
Forest City is also envisioned to become a hub for financial global business services, financial technology or fintech, and foreign payment system operators, with the provision of a special five per cent tax rate.
"It also has the potential to mature into a globally recognised financial hub, the likes of Shenzhen in China and Dubai International Financial Centre in the UAE," said the minister.