Forest City: A Prime Opportunity for Balaji's Network State
Is a City IPO from Balaji on the horizon?
Just an hour from Singapore, Forest City, Malaysia, is rolling out a game-changing "Special Financial Zone":
• 15% personal income tax
• 0% tax for family offices (with some strings attached)
• 5% corporate tax for sectors like fintech
Critics call it a ghost town with only 9,000 residents out of the 700,000 planned.
Is it a failed real estate project or rather a hidden opportunity?
First, some context:
A major Johor-Singapore Special Economic Zone (SEZ) is taking shape, following an MoU signed between the two governments in January 2024. The details are still being finalized, but it's poised to be a game-changer.
It leverages Singapore's position as a global financial hub and Johor's land availability (which Singapore truly lacks) and labor market, focusing on ease of movement.
Crossing the borders currently takes an inordinate amount of time due to passport controls. Imagine a "Schengen" approach with no passport control between Malaysia and Singapore.
This "city" is literally less than 60 minutes from Singapore city-center.
Now, it's uncertain if Forest City will be part of the broader SEZ deal.
Nonetheless, it's easy to foresee that this new SEZ will benefit the Forest City area due to proximity. The entire area around Singapore will appreciate in value, unlocking its growth potential.
Forest City has faced significant criticism.
A simple reading of the Wikipedia page shows how the whole operation failed for multiple reasons, one above all being China's block on free capital flow. Distressed investors sold apartments at a loss.
However, I spoke with someone attending the Network State school currently held in Forest City who mentioned that basic infrastructure and restaurants are there, although they mostly accept only cash. He considers it an interesting place to live, cutting costs compared to Singapore.
Is this going to become a trend? I think it's likely. Let's look at some key facts:
Balaji is organizing a school at a fraction of the price it could cost within Singapore
It's a newly announced Special Financial Zone
People are already putting this area on the map
With the Johor/Singapore Special Economic Zone, this whole area will see an upside for investment purposes
Are we going to witness a revival of Forest City?
It's extremely hard to say. But since we like to speculate, I'd like to try to predict one of the possible outcomes of this journey.
Forest City presents an exceptional opportunity for Balaji's network state concept:
Prime location: Just one hour from Singapore
Ready infrastructure: Built to accommodate up to 700,000 people with further developments
Distressed real estate operation: Potential for a buyout
Upcoming Johor-Singapore Special Economic Zone (SEZ): Will effectively make the Johor area Singapore-adjacent
ltimately, there are few areas in the world that are both suitable for new Special Economic Zones and well-connected. In this context, Singapore’s proximity positions Forest City as the world’s top location by default.
Most importantly: it's built and distressed. The potential for a buyout at the cheapest prices could be there, removing the friction for most "network state-like concepts".
Overbuilt reality? Failed real estate venture?
Could this be a prime opportunity for a Network State just an hour from Singapore?
What follows is purely speculative…
Imagine if Balaji brings together a group of investors, leveraging Levelsio’s digital nomad community, to help shape the Special Economic Zone (SEZ) framework with a tailored regime for Forest City.
An IPO could be launched to buy out the distressed original developers, paving the way for a new Forest City. Strategic terms could be negotiated with the Malaysian government, alongside Singapore’s involvement. The two governments are already collaborating, and an MoU for an SEZ is already in place.
How would the business model and IPO work?
Here’s a potential framework:
• Zero taxes for 10 years
• Commitment to buy property with a restriction on selling for a set period, promoting land value appreciation
• These commitments could be linked to the IPO structure
• A percentage of land rights could remain with Malaysia and/or Singapore, ensuring both benefit from long-term growth
Benefits for Malaysia:
• Wealth generated from land appreciation
• Indirect economic benefits for Malaysian citizens
Benefits for Singapore:
• Land appreciation in nearby areas
• Singapore’s Sovereign Wealth Fund could take a stake, gaining value from the initiative
Why This Could Succeed:
• Proximity to Singapore
• Safety and established infrastructure
• A potential win-win for all parties involved
Why Could It Fail:
The primary challenge is that people are understandably hesitant to participate in experimental city projects when their family’s stability and safety are at risk.
Current data indicates that the comprehensive network state movement is still in its early stages.
Moreover, the perceived volatility of the jurisdiction could be another critical factor that may contribute to potential failure.
And what about you - would you participate in this hypothetical IPO?
I would personally consider it, as the main obstacle to living in Singapore is the high cost of living. A “Singapore-bis” within an hour’s distance, without taxes, would be appealing to a wide range of people—not necessarily those aligned with the network state philosophy.
Speculations aside, if I were living in this region, I’d definitely be exploring real estate opportunities in both Johor and Forest City, especially with the upcoming Special Economic Zone between Johor (Malaysia) and Singapore.
Of course, there are still significant risks involved, but as the saying goes…high risks, high rewards.
***
Some interesting tweets and conversations about Forest City:
Patrick Freedman shared a video of the Forest City project, showing the full 100B plan. Only 13B has been built so far.
https://twitter.com/patrissimo/status/1838567510628786367
Others agreed with my thoughts that demand could return:
https://twitter.com/pjklife/status/1838531440927216046
Someone else pointed out some challenges in their analysis:
https://twitter.com/keljwong/status/1838596028662005949
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