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After Abu Dhabi, Saudi Arabia halts investment in Johor

07-Feb-2017


Al Gerard de la Cruz, Property Report

The withdrawal of Saudi Arabian Oil Company (Saudi Aramco) from a multibillion-dollar investment in Johor has dealt a blow to the Malaysian state’s thrust to become an economic development juggernaut, Straits Times reported.

The petroleum giant pulled out from the USD27-billion Refinery and Petrochemical Integrated Development (RAPID) project in Pengerang, Johor, a joint venture with Petroliam Nasional Bhd (Petronas), Malaysia’s Second Finance Minister Johari Abdul Ghani revealed to reporters last week.

Saudi Aramco has not stated an official reason for the withdrawal, but its decision mirrors a growing list of fossil fuel companies scaling back on expansion plans worldwide due to the oil price slump. Petronas’ wherewithal to forge ahead with the project has been put into question, with the company having announced last year that it would cut spending by up to MYR50 billion ringgit (USD11.27 billion) over the next four years.

Embattled Malaysian Prime Minister Najib Razak counted on the infusion of Middle Eastern capital into Johor as a potent employment generator and boost to the country’s faltering economy. Malaysia’s GDP dipped from USD10,737 per capita in 2014 to USD10,222 in 2015.

The pullout follows that of several Abu Dhabi investors from the Tun Razak Exchange real estate development near Kuala Lumpur in the wake of a dispute between the Malaysian state investment fund 1MDB and Abu Dhabi’s International Petroleum Investment Company (IPIC).

Mubadala Development Group and Aldar Properties, both real estate developers in Abu Dhabi, and Kuwait Finance House, have backed out of plans to develop a 930-hectare, mixed-use development called Medini, envisioned as a financial hub in Johor. A 2013 pledge by Abu Dhabi’s Sheikh Mohammed bin Zayed to set up a USD7-billion oil storage facility in Tanjung Piai has also stalled.


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