RCEP: Malaysia negotiates better terms from China

By: |
November 16, 2019 3:40 AM

Mahathir has used the electoral mandate and the pro-Mahathir wave to keel predecessor Najib’s pro-China policy into a more centrist one, opening the doors to the possibility of dialogue and renegotiation with China

RCEP, Malaysia, China, Mahathir Mohamed, ASEAN, Belt and Road Initiative, RCEP india, RCEP 2019Malaysian PM Mahathir Mohamed

At 94, and still going strong, Malaysian PM Mahathir Mohamed is somewhat the grand old man of Malaysian politics. Mahathir, has been in the news since his meteoric political comeback from political wilderness, leading the four party coalition Pakatan Harapan (Alliance of Hope) to victory in the May 2018 general election. Instantly, Mahathir became the poster-child not only of senior citizens in the region (Southeast Asia), but also of millennials, who have clamoured to know the secret of his wit and longevity. More recently though, Mahathir has been in the news for reinstating suspended China-backed mega projects in Malaysia—on better terms.

China is Malaysia’s most important trade partner, and Malaysia is one of the biggest beneficiaries of China’s Belt and Road Initiative (BRI). Chinese investment in Malaysia (particularly Malaysian ports that will have countries bypass the notorious choke point, the Straits of Malacca) has also been viewed as a veiled Chinese ambition in ASEAN, no less “at the heart of China’s effort to gain global influence”.
The China-factor has long been in play in Malaysian politics. This is not to be confused with the ethnic Chinese factor (or Malaysian Chinese), who constitute roughly 24% of the population. An academic in Singapore who preferred to remain anonymous said that the Malaysian Chinese (who boast of a political outfit, the Democratic Action Party, DAP) “are pragmatic…more Malaysian than Chinese, who look out more for their businesses than China”. Think tycoon Robert Kuok (Shangri-La chain of hotels), Quek Leng Chan (Hong Leong group) and Ten Hong Piow (Public Bank Berhad).

In Malaysian politics, the Malaysian Chinese factor has been much less at play than corruption and scams, particularly of the outgoing government of Barisan Nasional helmed by Najib Razak (2009-2018). Mahathir (who served as the PM, 1981-2003) rode to power on the back of the unpopularity of former PM Najib. Najib’s  markedly pro-China government stood embroiled in corruption and scams, at the last count embattled in “five court cases and 42 criminal charges for corruption and money laundering” as The Straits Times reported.
Najib’s downfall has been linked to the $4.5 billion 1MDB state investment fund scam and personal excess. In fact, the Hong Kong based Wall Street Journal (WSJ) alleged that China was helping Najib tide over the 1MDB scam in lieu of China bagging other projects such as the Trans-Sabah Gas Pipeline, the Multi-Product Pipeline and the East Coast Railway Link (ECRL).

During the campaign trail, Mahathir assailed Najib for “selling off” Malaysia (to China) in lieu of China’s help to tide over the 1MDB scam. Development projects were slammed as built for affluent “foreigners” (read, affluent Chinese). Mahathir promised to suspend/reassess “unfair”  projects on a case by case basis. Mahthir also threw a spanner in the works of Chinese claims in the South China Sea by supporting “open passage for everybody”.

Najib’s nine-year tenure was seen as pro-China because several heavy-weight China-backed investment projects were approved. This included the $100 billion mega development project Forest City in Iskander (region) in Johor Bahru (capital of Johor state) adjoining Singapore and another such development project, Bandar Malaysia in Kuala Lumpur. There was also the high-profile $13 billion East Coast Railway Link (ECRL), linking Port Klang on the Straits of Malacca to the city of Kota Bharu in the northeast. China also backed Malacca’s $4 billion upgradation of the Kuala Linggi International Port (KLIP) which serves the oil and gas industry and the $900 million expansion of Kuantan port. The $10 billion integrated development project Melaka Gateway was also backed by China. The Melaka Gateway project, the ECRL, the KLIP and the Kuantan port expansion will provide a shorter freight transportation route from the Straits of Malacca to the South China Sea, bypassing Singapore (a key transit point) and the Straits of Malacca (a choke point).

While Singapore was jittery about the projects visibly undercutting its advantage, China-watchers in Malaysia were jittery about the footprint of China’s BRI. Common concerns in the China-backed projects in Malaysia were environmental concerns (land reclamation and land erosion, especially in the port projects), pricing and Chinese overcapacity, raw materials to labour force to contractors. When Mahathir came to power, several of the China-backed projects were suspended. The ECRL was first to be suspended, as was the agreement to have China construct a pipeline. Forest City development project appeared like a ghost-town and there was stasis in the  construction and expansion of Malaysian ports.

But never say never again. In 2019, Chinese companies were back in business. The China Communications Construction Company (CCCC) was on track with the ECRL project because the project was reinstated. So was the China Railway Engineering Corp with the revival of the Bandar Malaysia project. Shenzhen Yantian Port Group and the Rizhao Port group were back at work in the Melaka Gateway project as was Country Garden (Chinese property developer) which backed the Forest City project.

What changed? Mahathir despatched Special Envoy Daim Zainuddin, an old hand in Malaysian politics to make government to government negotiations. G2G negotiations have helped. In the case of the ECRL, the cost was cut to nearly a third to $11 billion. Bandar Malaysia project saw a few changes such as the addition of a peoples park, affordable housing and a pro-bumiputera policy. Other projects factored in Malaysian raw materials, labour and contractors. Mahathir has said as much that he is not against China, but against lopsided, overpriced deals. Some of this has been partly addressed by the G2G negotiations, as well as China cost-cutting with some measures (the railway link, for instance, has been shortened by 40 kms) as also with China’s realisation that pricing and lopsided deals were sending Chinese companies out of business.

While Mahathir has won praise for negotiating with China for better terms, he has not earned fans for keeping mum about China’s large-scale incarceration of a million Turkic Muslims (Uyghurs) in Xinjiang. Mahathir has openly cast himself as the defender of Muslims and has supported Muslim solidarity,  criticising Israel-Palestine as the “origin of terrorism”, accusing Myanmar of “genocide” of the Rohingya Muslims and more recently, India of “invading and occupying” Kashmir. The latter led to a backlash in India with Indian traders boycotting Malaysian palm oil. In China’s case, Mahathir is known to have said “not to antagonise China too much, because China is beneficial to us”. Mahathir has softened his stance with India, offering a sweet deal to import more sugar to offset the trade imbalance.
With his eternal fountain of youth and characteristic political flourish that comes from his long haul in politics, Mahathir has used the electoral mandate and the pro-Mahathir wave to keel predecessor Najib’s pro-China policy into a more centrist one, opening the doors to the possibility of dialogue and renegotiation with China. And Mahathir has done so, without upsetting the applecart of political and economic equations.

Singapore-based Sinologist, and adjunct fellow, Institute of Chinese Studies, Delhi

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