MALAYSIA JOLTS CHINA’S ONE BELT, ONE ROAD

The new Malaysian govt has pledged to review Chinese deals.

Malaysia was once a loyal partner in China’s globe-spanning infrastructure drive, but a new government is now pledging to review Beijing-backed projects, threatening key links in the much-vaunted initiative. Kuala Lumpur’s previous regime, led by scandal-mired Najib Razak, had warm ties with China and approved a string of contracts for Beijing-funded projects, including a major rail link and a deep-sea port.

But the long-ruling coalition was unexpectedly pushed out of power last month by voters disgusted at allegations of corruption and angered at rising living costs.

Critics of the deals say many lacked transparency, fueling suspicions they were agreed to in exchange for Chinese help in paying off debts accrued as a result of a financial scandal that ultimately helped bring down Najib’s regime.

The new government, led by political heavyweight Mahathir Mohamad, has pledged to review Chinese deals seen as dubious, calling into question Malaysia’s status as one of Beijing’s most cooperative partners.

China’s ambitious initiative to revive ancient Silk Road trading routes with a global network of ports, roads and railways – dubbed “One Belt, One Road” – was launched in 2013 and is the economic crown jewel of President Xi Jinping’s presidency.

Malaysia and Cambodia, another Beijing ally, were seen as bright spots of success in Southeast Asia as projects in other countries experienced problems with land acquisition and drawn-out negotiations with governments.

“Malaysia under Najib moved quickly to approve and implement projects,” said Murray Hiebert, a senior associate from the Center for Strategic and International Studies.

Chinese foreign direct investment in Malaysia stood at just 0.8 percent of total net FDI inflows in 2008, but that figure rose to 14.4 percent by 2016, according to a study from Singapore’s ISEAS-Yusof Ishak Institute.

The project in Malaysia was in its early stages and had not yet received any Chinese funding as part of “One Belt, One Road.”

But Chinese companies were favored to build part of the line, which would have constituted a link in a high-speed route from China’s Yunnan province to trading hub Singapore, along which Chinese goods could have been transported for export.

Work has already started in Malaysia on another line, also seen as part of that route, which has received Chinese funding: the US $14-billion East Coast Rail Link, running from close to the Thai border to a port near Kuala Lumpur.

Mahathir has said that agreement is now being renegotiated.

Other Chinese-funded initiatives include a deep-sea port in Malacca, near important shipping routes, and an enormous industrial park.

It is not clear yet which projects will be changed or cancelled but experts believe the results will be positive.

Alex Holmes, Asia economist for Capital Economics, supports cancelling some initiatives, citing “Malaysia’s weak fiscal position,” and the fact “that some of the projects are of dubious economic value.”

The Chinese foreign ministry did not respond to our request for comment.

But a recent commentary in China’s Global Times, a nationalist state-run tabloid, warned Mahathir that if he damaged the interests of Chinese companies, they had the right to seek compensation.

“The Chinese government will also take concrete measures to safeguard the interests and rights of Chinese enterprises,” it said.

Adding to China’s woes, Mahathir has a clear preference for Beijing’s rival Japan, and last week went to Tokyo for his first foreign trip since taking office.

During the visit, the 92-year-old signaled ties with Beijing would cool: “We will be friendly with China, but we do not want to be indebted to China.”

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