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What future for Malaysia –China cooperation under Mahathir?

What future for Malaysia –China cooperation under Mahathir?

Image: High Speed Rail – Courtesy of New Eastern Outlook

By Charles F. Moreira, Editor

Following the unexpected first-time victory of the Pakatan Harapan group of opposition parties in Malaysia’s 14th general elections on 9 May 2018 and the swearing in of Tun Dr. Mahathir Mohammed as Malaysia’s 7th Prime Minister; some quarters have expressed doubts over the future of China-financed infrastructure projects and investments under Malaysia’s new government.

In the months and years before the recent general elections, Tun Dr. Mahathir had criticised his immediate predecessor, Dato’ Sri Mohd. Najib Tun Razak as being too accommodating to China with regards the terms and conditions of the latter’s investments in Malaysia and the concessions granted by the Najib government.

Mahathir had promised that if elected, his government would review and if necessary renegotiate the terms and conditions of these projects, including ongoing ones such as the East Coast Rail Link, to ensure that they favour and benefit Malaysia.

At a press conference on 12 May 2018 together with the first three members of his cabinet, Tun Dr. Mahathir said that Malaysia will maintain friendly relations with all countries and he reiterated his commitment to review these infrastructure contracts in Malaysia’s favour.

Malaysia’s Finance Minister Lim Guan Eng said that all such contracts would be reviewed to ensure that they benefit the Malaysia’s people and businesses.

Meanwhile, on the day of Mahathir’s inauguration – i.e. 10 May 2018, the China-based Global Times expressed confidence that despite his earlier criticism of Chinese investments in Malaysia during his predecessor’s tenure, Mahathir was unlikely to reverse China-Malaysia ties.

“I don’t think it is correct to call Mahathir ‘anti-China’ as some have in the media. When he was prime minister, he was friendly with China and visited China several times. At that time, Mahathir was a fervent critic of the US,” Zhu Zhenming, a professor at the Yunnan Academy of Social Sciences, told the Global Times.

Zhu believes that some of Mahathir’s criticism of Chinese investments may have been part of his election campaign to beat Najib in the elections.

“China’s trade volume is too large to be ignored. Cooperating with China is not an option but a mutually beneficial trend that cannot be reversed,” said Zhu.

In fact Mahathir had told a press conference on 10 May that he basically supported China’s Belt & Road initiative but reserved the right to renegotiate the terms of some agreements with China, if necessary.

However, some Chinese investors are concerned. For instance, businessman Li Minglong from Guangxi Zhuang Autonomous Region who imports bird’s nest from Malaysia, told the Global Times that he fears that the election results might impact his business in the short term, whilst businesswoman, Wu Wanrong, said that her business with Malaysia will continue but she hopes that processing of her import papers won’t be postponed by the new administration in office.

“The current comprehensive strategic partnership between China and Malaysia enjoys a sound momentum and the cooperation is generating fruitful results. This has brought concrete benefits to the two nations and peoples and both sides should cherish it,” China foreign ministry spokesperson Geng Shuang said.

However, some analysts believe that Mahathir may diversify foreign investments in Malaysia to make Malaysia less dependent on China economically.

“Elections aside, Mahathir’s comments reflect some of his concerns that are not uncommon in Southeast Asia. Many of these countries are still adapting to China’s rise,” said Zhu of the Yunnan Academy of Social Sciences.

It’s believed that the new Mahathir administration may postpone the high-speed rail (HSR) project between Kuala Lumpur and Singapore, since he had told The Sunday Times that Malaysia would have to study its feasibility and decide whether Malaysia really needs this HSR link with Singapore.

As it stands right now, Malaysia has a fast Electric Train Service running at 140 km/h between Padang Besar on the Malaysian-Thai border Kuala Lumpur and Gemas in Johor, with plans to extend the service from Padang Besar to Hat Yai in Thailand and from Gemas down to Johor Baru.

According to Global Times, some analysts also believe that the Mahathir administration could shelve the US$13 billion East Coast Rail Link which will connect Malaysia’s towns and ports on Peninsular Malaysia’s underdeveloped east coast to Kuala Lumpur and to Port Klang.

A debt-trap?

Meanwhile, one of the fears expressed by some Malaysians over these infrastructure projects in Malaysia financed by low-interest loans from China is that Malaysia could get caught in a debt-trap to China if these projects, once completed, do not generate enough revenue for Malaysia to repay the loan.

These Malaysians are justifiably concerned over media reports that in December 2017, Sri Lanka, which was struggling to pay off its over US$1 billion debt to Chinese firms, ended up having to instead provide China government companies with a 99-year lease on its Hambantota port, in a deal that government critics fear will threaten Sri Lanka’s sovereignty.

However, the same can be said for debts owed to other foreign countries such as the United States or to supposedly international institutions such as the International Monetary Fund and the World Bank, or for that matter, debts owed by businesses and individuals to banks, finance companies or on credit cards.

Or is it geo-strategic rivalry?

Another case cited is the statement by the Djibouti government, that it intends to make a deal with a China state-owned company to run the Doraleh Container Terminal and that in March 2018, Djibouti had signed an agreement to expand the port with a Singapore-based company which works with China Merchant Port Holdings Co., which already owns a large stake in the port.

In February 2018, Djibouti had seized control of the container terminal from the Dubai-based port operator DP World and Djibouti nationalised it.

According to The Washington Post of 7 March 2018, this port is significant not only because it sits next to China’s only overseas military base but also because it is the main access point for American, French, Italian and Japanese bases in Djibouti and is used — because of its strategic location — by parts of the U.S. military that operate in Africa, the Middle East and beyond.

The U.S. military had already been warning that if China gains control of the port, U.S. national security interests will be put at risk, whilst officials expressed concern that Djibouti has been growing closer to China and is becoming increasingly indebted to, the China government.

The Washington Post also reported that on his Africa tour in early March 2018, U.S. Secretary of State Rex Tillerson would try to convince African countries that “the United States is a better partner for Africa than is China, which is rapidly expanding its influence and power in Africa”, and that a key test of that proposition will be whether the Trump administration can prevent the Djibouti government from handing over its main port to China’s control.

The U.S. Department of State website carries a talk on U.S.-Africa relations by Tillerson at George Mason University in Virginia on March 6, 2018, where he touted the U.S. model of foreign development over China’s.

“The United States pursues, develops sustainable growth that bolsters institutions, strengthens rule of law, and builds the capacity of African countries to stand on their own two feet. We partner with African countries by incentivizing good governance to meet long term security and development goals”, said Tillerson.

“This stands in stark contrast to China’s approach, which encourages dependency using opaque contracts, predatory loan practices, and corrupt deals that mire nations in debt and undercut their sovereignty, denying them their long-term, self-sustaining growth. Chinese investment does have the potential to address Africa’s infrastructure gap, but its approach has led to mounting debt and few, if any, jobs in most countries. When coupled with the political and fiscal pressure, this endangers Africa’s natural resources and its long-term economic political stability.

“We welcome other countries’ involvement in the development of Africa; in fact, it is needed. That’s what the free market is all about, competition leading to more opportunities. But we want to see responsible development and transparent free market practices that foster greater political stability on the continent. We hope China will join us in this effort as well”, Tillerson added.


So it’s pretty obvious the United States is actively spreading propaganda against China’s Belt & Road initiative to serve its own geo-strategic agenda.

In his article in New Eastern Outlook of 23 April 2018 entitled, “US Decries Chinese High-Speed Rail in Laos” Joseph Thomas writes:-

“However, while some of China’s projects may be questionable, others offer tangible benefits not only for China, but for the regions they will be interlinking.”

“The real concern in Washington, London and Brussels is regarding infrastructure projects that are successful, bringing profit and benefits to both Beijing and partner nations, allowing them to collectively move out from under centuries of Western primacy.”

“Before Chinese investment picked up in Laos, the capital of Vientiane was diminutive even compared to nearby Thai provincial capitals. The sports utility vehicles of US and European nongovernmental organisations could be seen driving through the small city’s streets, some of which were unpaved. Banners bearing the UN logo encouraged local residents to turn off their lights, making an already eerily dark capital even darker at night.”

“Campaigners funded by Western capitals attempted to obstruct earlier projects, including dams that would have created energy, expanded industrialisation, provided jobs and boosted the economy.”

“Over the past decade, Chinese investment has seen highways built across Laos connecting its isolated capital with its neighbours. Vientiane has seen not only an uptick in Chinese investment, but from Vietnam and Thailand as well.”

“The completion of a high-speed rail network connecting Kunming, China to Singapore, and passing through Vientiane, Laos, will bring even more people, goods and investments into the nation.”


So whilst Malaysia is right to carefully scrutinise all agreements and deals she has with foreign countries, including China, Malaysians should also beware of propaganda spread by rival countries out to serve their own geo-strategic interests.




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