KUALA LUMPUR - A Malaysia-China joint venture that was dropped from buying a stake in Malaysia’s largest property project has rejected the government’s unilateral claim that the agreement had lapsed because of failure to meet payment obligations.

The consortium of Malaysia’s Iskandar Waterfront Holdings (IWH) and China Railway Engineering Corporation (CREC) on Friday (May 5) refuted the allegation by Malaysian state-owned firm TRX City, and called the decision “unacceptable”.

The consortium said it had “fulfilled all the required payment obligations under the share sale agreement”, adding that it had “sufficient financial resources and capabilities to ensure the smooth and successful execution and implementation of the development of Bandar Malaysia”.

TRX City, a Ministry of Finance company that owns Bandar Malaysia, said on Wednesday that its deal with IWH and CREC has been terminated. Under the agreement unveiled in December 2015, IWH and CREC would pay for a 60 per cent stake of the RM7.41 billion (S$2.4 billion) project, with the remaining 40 per cent to be held by TRX City.

TRX City said it is looking for a new master developer but will now opt for full ownership of the project.

The 197ha Bandar Malaysia land, located at the edge of downtown Kuala Lumpur, is to house the terminus station for the high-speed railway (HSR) from Singapore and become the country’s biggest transport hub with the MRT line, KTM Komuter intercity trains and the airport’s Express Rail Link line converging there.

The Minister in the Prime Minister’s Department tasked with economic planning, Mr Rahman Dahlan, told reporters that plans for Bandar Malaysia would still proceed. “We were informed by the Prime Minister during the Cabinet meeting (on Wednesday) that a new company will be invited to be the master developer for Bandar Malaysia,” said Datuk Seri Rahman, according to local daily The Star.

He said that while Prime Minister Najib Razak had not announced the name of the new master developer, it was possible that foreign companies, including those from China, would be involved.

TRX City is a former subsidiary of troubled state fund 1Malaysia Development Berhad (1MDB) before it was placed under the Ministry of Finance last year as part of the government’s plan to reduce 1MDB’s US$11 billion (S$15.4 billion) debt.

Sources said a myriad of factors led to the collapse of the deal, with CREC caught unawares by the announcement. The factors include the government’s unhappiness with IWH owner Lim Kang Hoo’s slow progress on the Bandar Malaysia project and apparent promise to CREC that it would be awarded the HSR project.

“It’s no secret that CREC wanted to invest in Bandar Malaysia mainly due to HSR,” said Mr Loong Chee Wei, analyst for Affin Hwang Capital.

Tan Sri Lim’s competitors are also believed to have applied pressure to get a leg in and provided negative feedback on the project’s progress, culminating in the aborted deal – which is believed to have been directly ordered by the Prime Minister’s Office.

The announcement by TRX City to terminate the agreement came during a visit by high-ranking Japanese officials promoting their high-speed rail. Other countries interested in bidding for the system include China, South Korea, the United States and France.

Last November, Mr Najib assured Japanese Prime Minister Shinzo Abe that the decision for the HSR contract “would be done in an open, transparent and objective manner”.