Is Lee Kuan Yew’s strategic vision for Singapore still relevant?


April 12, 2019

Is Lee Kuan Yew’s strategic vision for Singapore still relevant?

Author: by Han Fook Kwang, RSIS
 

ttps://www.eastasiaforum.org/2019/04/10/is-lee-kuan-yews-strategic-vision-for-singapore-still-relevant/

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The thinking of Singapore’s late founding prime minister Lee Kuan Yew has shaped the country’s foreign policy since its independence in 1965. But the world is changing with the shifting geopolitical balance of power, disruptions caused by digital technology, the rise of populism and the backlash against globalisation. Is Lee’s thinking and strategic vision still applicable in this new world?

On the fourth anniversary of his passing, the question looms large for Singapore. As a small state dependent on the outside world for economic growth, and on larger powers to keep the regional peace, it is particularly vulnerable to how the international order is changing.

There are four elements of his approach to foreign policy that continue to be relevant but will also come under great pressure in the years to come.

First is the idea that a small state like Singapore needs a credible armed forces to deter would-be aggressors. It was a priority when the country suddenly became independent in 1965 and found itself having to build an army from scratch.

 

Image result for lee kuan yew and mahathirLee’s firsthand experience of Japanese occupation in 1941 as well as the 1965 forced separation from Malaysia had a profound impact on his thinking about security. Singapore has since been unrelenting in building up its armed forces, allocating 30 per cent of government expenditure this year on defence, security and diplomacy.

Developing this military capability has also meant closer ties with the United States from which Singapore buys most of its military equipment, including advanced fighter aircraft. Singapore’s close security ties with the United States are a key part of Lee’s strategic vision but will also come under pressure as the balance of power shifts to a rising China.

Whatever happens, Singapore’s commitment to its own defence that Lee first defined will not change. ‘Without a strong economy, there can be no defence’, Lee asserted, ‘[without] a strong defence, there will be no Singapore. It will become a satellite, cowed and intimidated by its neighbours’.

The second pillar of Lee’s foreign policy stems from his realist view of how a small state can best survive in a world dominated by more powerful actors. Creating space for Singapore has been an unending effort for Singaporean officials, resulting in the many linkages the country has internationally, and its support of multilateral organisations such as ASEAN, the ASEAN Regional Forum and the Comprehensive and Progressive Agreement on Trans-Pacific Partnership.

Lee believed regional peace and stability was best achieved by having the major powers engaged in the region. Not just the United States but also China, Japan, Australia, India and European countries.

Despite the United States being the pre-eminent power in Asia throughout his years in office, he did not anchor Singapore solely in the US camp. Instead he worked hard to expand Singapore’s international space, for example working closely with Chinese leaders to expand economic and political ties.

But China’s rise and its growing assertiveness in pursuing territorial claims in the South China Sea will test how ASEAN, including Singapore, manages the new reality. For Lee the answer lies in continued US engagement in the region. ‘If there is no counterbalance from the US, there will be no room to manoeuvre for smaller Asian countries. When you have two trees instead of one, you can choose which shade to be under’. If Lee were alive today, he would continue looking for more shade.

The third element of Lee’s strategic vision is how to realise Singapore’s strategic goals through developing close relationships with leaders that mattered to Singapore. The best example was Lee’s personal friendship with then Indonesian president Suharto.

They could not have had a worst start after Singapore executed two Indonesian saboteurs in 1968. But the two leaders worked at it, the friendship blossomed and they met regularly over two decades to resolve issues between the two countries.

China–Singapore and US–Singapore ties similarly benefited from Lee’s personal relationship with many of their leaders who respected his deep insights and forthright views. When the world is more uncertain, it is even more important to be able to reach out to reliable friends.

Finally, Lee’s strategic vision of Singapore’s place in the world cannot be divorced from how he saw the country’s own identity: a vulnerable nation that had to be exceptional in Southeast Asia to survive. ‘I decided we had to differentiate ourselves from [others] or we are finished’, he reflected.

Exceptionalism has profound implications for Singapore’s foreign policy and will invariably create problems with neighbouring countries from time to time. When you are different you have to work harder at your relationships, and Singapore’s leaders will have to manage them deftly.

But the greatest challenge to Lee’s vision of Singapore’s exceptionalism will come internally. Can its people and government maintain the high standards, even as other countries progress to narrow the gap? If they do not, all the other elements of Singapore’s foreign policy fall apart. That is what it means to say that foreign policy begins at home.

Han Fook Kwang is Senior Fellow at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore. He was co-author of several books on Lee Kuan Yew including The Man and his Ideas and Hard Truths to Keep Singapore Going. As then Managing Editor of Singapore Press Holdings, he led the editorial team for One Man’s View of the World.

A version of this article originally appeared here on RSIS.

Sorry, Singapore: Malaysia dumps assets to cope with US$245 billion debt


March 29, 2018

Sorry, Singapore: Malaysia dumps assets to cope with US$245 billion debt

  • Malaysia is holding a fire sale of its ‘non-strategic’ assets.
  • Critics fear the moves will privilege an elite group and worsen ties with neighbouring Singapore.

Malaysian Prime Minister Mahathir Mohamad. Photo: Xinhua
Malaysian Prime Minister Mahathir Mohamad. Photo: Xinhua
A year into a new ruling administration, Malaysia continues to grapple with a whopping 1 trillion ringgit debt (US$245 billion) – but as it goes on a selling spree of “non-strategic assets”, questions are being asked over who is benefiting from the exercise and whether the moves could cause ties with neighbouring Singapore to take a further hit.

Government-linked investment company Khazanah, which has resolved to pare down its “non-strategic” assets, has so far got rid of its stakes in telcos, health care groups, banks and properties. Reports have indicated larger projects, such as the popular theme park Legoland, may also be up for grabs for the right offer.

 

In parliament earlier this week, Finance Minister Lim Guan Eng said a tower building in Hong Kong – which once housed the Malaysian Consulate-General – was being sold for 1.6 billion ringgit (US$392 million). This came just days after Khazanah was reported to be selling the 39-storey Duo Tower in Singapore, owned by M+S – a joint venture by Khazanah and its Singaporean equivalent, Temasek Holdings. Last month, Malaysia’s Axiata Group, in which Khazanah has shares, announced it would sell its stakes in Singapore’s M1 telco.

The DUO tower, in Singapore. Photo: Ole Scheeren
The DUO tower, in Singapore. Photo: Ole Scheeren

 

 

Khazanah also last year began selling shares in CIMB Bank, and dumped a 16 per cent stake in Malaysian-Singaporean private health care group IHH Healthcare. This move has raised eyebrows among analysts and opposition politicians, who have criticised the ruling Pakatan Harapan coalition for vague economic policies and failing to focus on remedying wealth inequality, with others commenting the sale reflected a cooling of interest in joint Singapore projects.

 

Khazanah, which is managed by the Minister of Finance Inc and modelled after Singapore’s Temasek Holdings, last year posted its first pre-tax loss in 13 years, partly due to its takeover of the loss-riddled Malaysia Airlines.

It attributed the 6.27 billion ringgit loss in 2018 – compared with a profit of 2.89 billion ringgit in 2017 – to both the resetting of the government’s mandate as well as global and domestic developments.

IHH Healthcare's Mount Elizabeth Novena Hospital in Singapore. Photo: Bloomberg
IHH Healthcare’s Mount Elizabeth Novena Hospital in Singapore. Photo: Bloomberg

 

In line with the new government’s strategy, Khazanah split its assets into “commercial” and “strategic” holdings, with managing director Shahril Ridza Ridzuan telling local media the commercial fund was “really gearing up towards being a long-term real return provider for the government”, as the government needed it as an alternative source of revenue.

 

Disgraced former prime minister and sitting Member of Parliament Najib Razak has fiercely questioned Khazanah’s new strategy, saying it was illogical to reduce investments, citing its annual growth rate of 14.7 per cent from 2008 to 2017.

 

“Even if this is to pay government debt, where is the logic in selling assets which generated a profit of 14.7 per cent each year to pay debt which has interest charges of 3.8 per cent per year?” said Najib, who served as both prime minister and finance minister when Malaysian debt rose to an all-time high. Najib is currently facing scores of charges of corruption and money-laundering over his role in the 1Malaysia Development Berhad (1MDB) financial scandal.

Meanwhile, observers have questioned whether the asset sale strategy will truly benefit the nation, or backfire by creating oligarchies because of the administration’s concurrent focus on a Bumiputra economic agenda.

 

In Malaysia, ethnic Bumiputra – Malays and indigenous peoples – make up about 69 per cent of the population, and are constitutionally granted special privileges: affirmative action that takes the form of enhanced access to scholarships, civil service positions, land, and real estate purchases.

 

Upon coming to power last May, Pakatan Harapan pledged to chart a “new” Bumiputra-centric economic empowerment agenda that would generate growth and allow Bumiputra entrepreneurs to lead the economy – although some senior leaders such as prime minister-in-waiting and democracy icon Anwar Ibrahim have stressed that the government must focus on Malaysia and poverty eradication.

“If they are going to divest and also abide by this Bumiputra agenda, then it limits the cohort of people who can acquire assets such as government-linked companies,” said top political economist Terence Gomez of University Malaya. “Who can afford to do this – and of that group, who are the Bumiputras with the resources to invest? Is the government going to channel even more wealth to a rich elite? Divestment of assets should not be an ethnic issue.”

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Doing so could result in an oligarchy of rich businessmen who run key national services and corporations, Gomez said.

 

 

“When countries like Indonesia democratised by turfing out draconian governments, they also began divestment exercises. But this created oligarchs, which is not a road Malaysia should go down,” he said. “Is this the reform Pakatan Harapan promised? If so, it is just creating new problems that can emerge from this divestment exercise. Wealth inequality is a problem and taking assets from the government and passing them on to only rich people who have the resources will only make the rich richer.”

The divestment strategy can be made even more problematic if the government does not clarify what it means by “non-strategic”, as it could extend to institutions such as banking or utilities which should remain under state control, Gomez said.

 

‘I love Malaysia Airlines, but we can’t afford it’, Mahathir says. Moves such as the selling of Axiata’s stake in Singapore’s M1 and the rumours of Duo Tower being sold down have also raised questions about Prime Minister Mahathir Mohamad ’s often hawkish relationship with neighbouring Singapore, and whether he considers these assets unessential.

“I won’t discount the possibility that Mahathir views such joint ventures with Singapore as being ‘non-strategic’,” said Eugene Tan, a law and public policy expert with Singapore Management University. “There could be the assessment that such investments benefit the Singapore economy more than Malaysia’s public coffers. This, arguably, stems from his perception that many of the deals his predecessor entered into – especially with Singapore – were and are not necessarily in Malaysia’s best interests.

Putting it bluntly, Mahathir could be flagging that he is not confident in the Singapore economy Eugene Tan, Singapore Management University

“But it could be about something simpler: the imperative of the Malaysian government to monetise its assets in order to reduce its budget deficit – and the assets in Singapore are probably best to monetise given the returns,” he said.

 

“Mahathir could also be signalling that the prognosis for the Singapore economy may not be good in the short-term, and so it is best to strike while the iron is hot and fully capture the value of these assets,” Tan said. “Putting it bluntly, Mahathir could be flagging that he is not confident in the Singapore economy.” Singapore-Malaysia tensions put Lion City’s lawyers to the test.

 

Political analyst Mustafa Izzuddin of Singapore’s ISEAS-Yusof Ishak Institute shared a similar view, saying that besides being an economic decision, the sale of stakes in Singapore projects could also be viewed as a “political decision” that reflects Mahathir is not as “genuinely interested as his predecessor Najib was of embarking on joint ventures with Singapore”.

“If the joint ventures are not in Malaysia, as is the case with the Duo office, the Pakatan government under Mahathir are more likely to monetise it, especially if it does not bring direct domestic economic benefits to Malaysia,” said Mustafa.

 

Najib and Singapore Prime Minister Lee Hsien Loong had entered into joint projects in Singapore and in the Iskandar region of Malaysia’s southernmost state of Johor as part of efforts to entwine the two nations with a “prosper thy neighbour” philosophy and place bilateral ties on a surer footing.

 

But the two countries have recently experienced a cooling off in ties following differences of opinion oversea and air borders, as well as disputes over water prices, though their leaders will meet on April 8-9 in Kuala Lumpur for a retreat.
In an attempt to better manage its debt of over 1 trillion ringgit, Malaysia has also cancelled or delayed several infrastructure megaprojects, including the High Speed Rail between Singapore and Malaysia, and several China-backed gas pipeline projects.

Mahathir has urged the people to be patient, saying that if Malaysians “cooperate in an atmosphere of peace and calm, then we can restore the financial position and develop our country”. 

WOMEN WHO SPEAK TRUTH TO POWER


March 26, 2019

WOMEN WHO SPEAK TRUTH TO POWER

Press statement by Kua Kia Soong, SUARAM Adviser 26.3.19

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The obsequious protestations by mainly male politicians over Nurul Izzah’s frank opinion about the Prime Minister in her Straits Times interview brings to mind my article last year: “Thank goodness for daughters!” (9 Jan 2018). At that time it was a breath of fresh air to read Sangeet Karpal’s critical statement on Pakatan Harapan’s endorsement of BN 2.0 with Malaysia’s infamous autocrat as their “interim Prime Minister.

She also pointed out that the leaders in the opposition had remained silent in the face of Mahathir’s recent hollow “apology” over his use of the ISA during his first term as PM. Then there was Anwar Ibrahim’s other daughter, Nurul Nuha who on 14 September 2016 felt she had to uphold her family’s dignity by demanding that former PM, Dr Mahathir apologise for ‘trumped up’ charges against her father. The men currently critiquing Nurul so loudly doth protest too much…

Is it not Malaysian to criticise the PM?

Some of these male politicians have spouted the old feudal argument by saying that Nurul Izzah should show more courtesy toward the Prime Minister. Really? If Malaysians want to learn about the correct etiquette with regard to respecting Prime Ministers, they should learn from the recalcitrant Dr. M himself! Didn’t he teach us the art of the surat layang when he wrote his piece against the Tunku during the May 13 crisis? It certainly was not “sopan santun” the way he slammed the “Father of Independence” on his way to political power.

And if the office of Prime Minister has to be so respected, why did Dr Mahathir proceed to humiliate and denigrate Prime Minister Abdullah Badawi after he had ascended the post in 2003 and to do the same against Prime Minister Najib Razak after 2009? Wasn’t it the only way to get rid of the Great Kleptocrat as Dr. M has reminded us? Let’s not forget that Dr. Mahathir does not respect prime ministers and presidents in other countries either and that was why the former Australian PM Paul Keating bequeathed Dr. M with the epithet “recalcitrant”.

Calling a spade a spade

Was Nurul Izzah wrong to refer to Dr. M as a former dictator?

Some young male politicians in PH may have been born after Dr. M left office in 2003, but they only need to talk to their older colleagues like the former leader of the Opposition and the PM-in-waiting himself to know that Dr. M was called worse things after 1998. Nurul Izzah and her siblings know this only too well. Or if these male politicians in PH are keen to learn, they can start reading all that was written about Dr. M during his first term as Prime Minister by writers such as K. Das, Barry Wain, Kua K.S. and others.

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Whiffs of autocracy

Nurul Izzah has resigned from the PAC because Pakatan’s promised reform of having an Opposition MP chair the committee has been overruled by the PM. This is but the latest in a series of unilateral decisions by Dr. M since he took office in May 2018, including the plans to privatise Khazanah and to start another national car. The Cabinet will have to bear collective responsibility for the consequences in the event of its failure. We are witnessing the same “silence of the lambs” culture for which the DAP used to criticise the BN leaders under Mahathir 1.0 with the new ministers saying “We’ll leave it to the Prime Minister” and “I’ll discuss this with the prime minister to let him decide”, ad nauseum.

The PH manifesto prohibits the PM from also taking over the Finance portfolio but Dr Mahathir has in the 100 days taken over the choicest companies, namely Khazanah, PNB & Petronas under his PMO. It is the return to the old Mahathirist autocracy. The appointment of Prime Minister Dr Mahathir Mohamad and Economic Affairs Minister Azmin Ali to the board of Khazanah Nasional Berhad also goes against the PH manifesto promise of keeping politicians out of publicly-funded investments since it leads to poor accountability. Only by insisting on boards being comprised of professionals and on rigorous parliamentary checks and balances for bodies such as Khazanah can we ensure a high level of transparency and accountability.

Mahathir’s response to this criticism was the old feudal justification: “I started Khazanah so why can’t I be in it?” In other words, “Stuff your high ideals and democratic principles!”

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What spat with Singapore?

 

Some of these male politicians have further claimed that Nurul Izzah should not have made her views known to a Singaporean newspaper because of our supposed “spat” with Singapore over the water agreement. Do we have “spats” with either Singapore or China or are these issues just another diversion created by Dr. M to cover up his unfulfilled reforms and failed economic policies?

Let us be clear. The 1962 water agreement between Singapore and Malaysia is sacrosanct just like all the other international agreements made with China and other countries. Dr M himself should be held responsible for failing to amend the agreement when we had the right to do so in 1987. In fact, this is another issue that he should apologise to Malaysians for. Malaysia’s current financial difficulties are strictly of our own doing and we cannot rely on other countries for alternative sources of revenue growth. Creating a “spat” over the water agreement is another vain attempt at creating a storm in a teacup out of a tired issue when the new administration should be doing its best to nurture good bilateral relations with all our neighbours in the region.

 

The importance of speaking truth to power

Malaysians in the “New Malaysia” need to value and practice “speaking truth to power”. Instead of criticising Nurul Izzah based on feudal obeisance to authority, let her be an example especially to the opportunistic men who have lost their principles and integrity. It means that we have to take a stand if we truly want reformasi and to challenge injustice and authoritarianism.

All it takes is courage, courage to stand for one’s convictions and not the courage to throw conviction out the window for personal gain or political opportunism. “Speaking truth to power” means believing deeply in what you say – it may not be popular. It means taking a risk, it means standing for something without fearing condemnation.

After witnessing these interventions by Karpal Singh’s daughter, Sangeet Karpal and Anwar Ibrahim’s daughters, Nurul Nuha and now Nurul Izzah at the critical junctures, I say again: Thank goodness for daughters. They have shown the male politicians that they have the gall to speak truth to power…

 

No photo description available.

 

 

Malaya-Singapore Relations: Old Bilateral Issues have resurfaced under PH Rule, says Diplomat Bilahari Kausikan


February 22,2019

Malaya-Singapore Relations: Old Bilateral Issues have resurfaced under PH Rule, says Diplomat Bilahari Kausikan

Former diplomat Bilahari Kausikan said after Barisan Nasional was replaced by PH in the 14th general election last year, “old bilateral issues almost immediately resurfaced”.

Mr Kausikan said the fundamental reason for Malaysia’s continued provocative acts towards Singapore is because of the republic’s system of a multiracial meritocracy, which greatly contrasted from the former’s race-based policies.

Political instability in the ruling Pakatan Harapan (PH) coalition and its failure to capture Malay support are aggravating relations between Malaysia and Singapore, said former Singaporean diplomat Bilahari Kausikan.

Mr Kausikan said after Barisan Nasional (BN) was replaced by PH in the 14th general election last year, “old bilateral issues almost immediately resurfaced”.

He was referring to recent disputes on maritime boundaries and joint airspace control, as well as ongoing negotiations into the price of water Malaysia sells to Singapore.

“These issues are not new and they cannot be resolved,” Mr Kausikan said in a public lecture at the National University of Singapore.

“To resolve an issue, both sides must want to resolve it. Whereas in this case, the other side’s interest is to keep them alive to use them to rally support. “It would be wrong to place too much emphasis on the personality of (Prime Minister) Dr Mahathir (Mohamad) although that was undoubtedly a factor,” he told more than 200 attendees.

“More importantly, the new Pakatan Harapan government is fundamentally incoherent.

“It’s falling apart,” said Mr Kausikan.

He cited a Merdeka Centre research last year which found a three-way split of Malay votes for PH, UMNO and Islamist party PAS, meaning that the support of Malaysia’s largest ethnic group looks to be fiercely contested by the three groups.

The results, said Mr Kausikan, reveals the instability of the ruling pact, which will grow further as it desperately tries to rally greater Malay support if it hopes to retain power in the next general election.

Using Singapore as a bogeyman or whipping boy to rally the Malay ground is a time-tested tactic,” he said.

“Dr Mahathir used it when he led UMNO, he uses it now that he is head of Bersatu.

“This is not just a matter of personality or historical baggage.”

In his lecture, Mr Kausikan also said he expects Malaysia’s political scenario to remain in a flux for some time because of infighting within PH and the growing threat of Islamic fundamentalism.

Show of Might

The Former Policy Adviser to Singapore’s Ministry of Foreign Affairs urged the republic’s incoming new leadership to maintain the country’s military capabilities, saying that a show of might is crucial in its dealings with Malaysia.

This is because Malaysian leaders will always seek to undermine and subjugate the city-state.

“Even though Singapore is now accepted as a sovereign state, it is not a situation which Malaysia is entirely comfortable with,” Mr Kausikan said at the lecture titled ‘Singapore’s relations with Indonesia and Malaysia’.

Today, the governments of our neighbours deal with Singapore as a sovereign nation only because we have developed capabilities that have given them no other choice.

“It is not their preferred way of dealing with a small, ethnic Chinese-majority city-state.

“They would prefer us to accept a subordinate role as do their own Chinese populations,” he said.

Singapore’s new leaders must, therefore, continue to “establish red lines,” which send a clear message to Putrajaya that the country is equipped and ready to use its military might in the event it is forced to a corner. The threat of use of force is as much part of diplomacy as negotiations.

Diplomacy is not just about being nice.“It is essential to establish red lines because it is only when red lines are clearly understood that mutual relations can be conducted on the basis of mutual respect.”

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Mr Kausikan said the fundamental reason for Malaysia’s continued provocative acts towards Singapore is because of the republic’s system of a multiracial meritocracy, which greatly contrasted from the former’s race-based policies.

“The basic and enduring issue is not what we do, but what we are – a multiracial, meritocratic small city state that performs better than they do and we must always perform better.

“The very existence of our dramatically very different system, too close to be ignored or disregarded, that does better than their system, poses an implicit criticism of their system to their own people.”

https://www.todayonline.com

 

Malaysia-Singapore – 50 Years of Contentions ’65-’15


November 18, 2018

Podcast > The Bigger Picture > Live & Learn > Malaysia-Singapore – 50 Years of Contentions 1965-2015

 

Tan Sri Ab. Kadir Mohamad, Former Secretary-General, Ministry of Foreign Affairs

23-Feb-15 16:40

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23:27

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Tan Sri Ab. Kadir Mohamad joined the Malaysian Foreign Service in 1968. He served in various capacities on diplomatic missions overseas for close to three decades before reaching the pinnacle of the Ministry of Foreign Affairs in 1996, becoming its 10th Secretary General (1996-2001). Tan Sri Kadir was also the foreign affairs advisor to Tun Abdullah Ahmad Badawi (2003-2009), and advised current prime minister Datuk Seri Najib Razak’s National Security Council Secretariat (2010-2013), before finally retiring in December 2013. He recently released a book titled “Malaysia-Singapore: Fifty Years of Contentions, 1965-2015,” which is his take on major events of these two countries’ bilateral relations since the island republic and our nation parted ways.

ttps://www.bfm.my/malaysia-singapore-fifty-years-of-contentions-1965-2015-tan-sri-abdul-kadir-mohamad.html#

 

 

 

The Perils of China’s “Debt-Trap Diplomacy”


September 10, 2018

Banyan

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Malaysia-China Relations:The Perils of China’s “Debt-Trap Diplomacy”

Malaysia’s rethink of Chinese belt-and-road projects has lessons for other countries

 Print edition | Asia

IN AUGUST, three months after his opposition coalition trounced the Malaysian party that had ruled since independence, Mahathir Mohamad, the country’s 93-year-old new Prime Minister, travelled to Beijing. His aim was to tell President Xi Jinping that his country was now the Malaysia that can say no.

Dr Mahathir’s predecessor, Najib Razak, had hewed close to China. His loss at the polls resulted more than anything from the stench of corruption within his ruling United Malays National Organisation (UMNO). But his chumminess with China was also a factor. The two issues were entwined.

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Najib Razak–Malaysia’s Voleur

During Mr Najib’s rule, huge holes appeared in the finances of a state investment vehicle, 1MDB, which Mr Najib chaired. America’s Justice Department estimates that $4.5bn was stolen from the fund by insiders. (Around the same time, nearly $700m turned up in Mr Najib’s own bank accounts.) As 1MDB teetered, Chinese state entities stepped in, taking stakes in 1MDB ventures.

The relationship with China grew ever cosier. Chinese-funded projects in Malaysia were packaged as part of China’s Belt and Road Initiative, a global infrastructure-building scheme close to Mr Xi’s heart. Jack Ma of Alibaba, a Chinese tech giant, won the right to turn a site near Kuala Lumpur’s main airport into a Digital Free Trade Zone. Malaysia’s government tried to silence criticism of its state-to-state dealings. And China showed its gratitude. In the run-up to Malaysia’s general election in May, the Chinese ambassador appeared to lend open support to the ruling coalition. Many people were surprised that Dr Mahathir managed to win, despite UMNO’s gerrymandering. Mr Xi had reason to be aghast.

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China is not used to recipients of its largesse challenging the terms on which it is offered. Yet growing numbers of them are struggling with debts to Chinese entities taken on to fund Chinese-staffed projects. The Centre for Global Development in Washington reckons that eight belt-and-road countries are at “particular risk of debt distress”, among them ones that border on China: Laos, Mongolia and Pakistan. That is why Dr Mahathir’s progress in disentangling his country from Chinese-funded ventures is being closely watched.

 

In Beijing Dr Mahathir was plain-speaking and deft. He said that Malaysia was cancelling the $20bn East Coast Rail Link, a massive belt-and-road project, as well as two oil pipelines in Sabah province. His message, in essence, was: very sorry—lovely projects, but since coming to office we’ve discovered we can’t afford them. Implicit was another point: we can’t afford them because we now know how inflated the costs are, and how skewed the deals are in China’s favour—or plain fishy. It appears the Najib government paid nearly 90% of the $2bn price of the Sabah pipelines, although they were only 15% complete. Part of a Chinese loan for them appears to have plugged financing gaps at 1MDB.

Since Dr Mahathir’s return, he has gone further, taking aim at a large, Chinese-led housing scheme in Johor state intended for wealthy investors in China. This week the Prime Minister declared that foreigners would not be given visas to live there. Most Malaysians, he complained, could not afford to live in the new development. (The government in Johor makes more reassuring noises to foreigners who might be interested.)

China has a tendency to launch into tirades against countries that confront it. In this case the response from Beijing has been muted. That may be partly because of Dr Mahathir’s careful choice of words. But Malaysia is an influential country in South-East Asia, a region that China wants to draw closer into its orbit. And China does not want to make enemies among belt-and-road countries. One of the main points of the project is to boost China’s influence over them. For other countries badly needing to renegotiate their deals with China, that is a lesson worth learning.

Of these, Pakistan, which also has a new Prime Minister, Imran Khan, is by far the biggest debtor to China. The China-Pakistan Economic Corridor, a collection of energy and infrastructure projects supposedly worth $60bn, is the biggest plank of China’s belt-and-road strategy. Not for the first time, Pakistan faces a balance-of-payments crisis. It wants out of its debt.

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Mr Khan ought to do a Mahathir. And he is in an even better position. Far more than with Malaysia, there is a strategic dimension to China’s relations with Pakistan, says Husain Haqqani, a former Pakistani diplomat who is now at the Hudson Institute, an American think-tank. Officials in Beijing see Pakistan as a counterweight to India, China’s geostrategic rival. China needs Pakistan’s help in keeping Islamist extremism at bay. And it regards its neighbour as a vital route to the Arabian Sea. Unlike Dr Mahathir, Mr Khan himself seems not to grasp the problems of China’s debt embrace. But at least critics in Pakistan of the economic corridor are beginning to find their voice.

Debt divisions

China has more than its political ties with belt-and-road countries to consider. Chinese banks are getting worried about the safety of their lending. Commercial banks have sharply cut new belt-and-road financing since 2015. (So-called policy banks continue to lend.) And now the Belt and Road Initiative faces strong popular criticism at home. In part, the initiative is a victim of the Communist Party’s own propaganda: what debtors see as hard-to-service loans, state media paint as beneficent “aid”. That is a touchy word. At a summit in Beijing this week with African leaders, Mr Xi promised $60bn for the continent. Why, Chinese people asked on social media, is an indebted China spending so much abroad when it has pressing requirements at home? Censors rapidly shut down their criticisms of Mr Xi’s gesture.

China is right that many countries need more roads, railways and other infrastructure. But it is evident that the scheme it touts as a defining one of Mr Xi’s rule is losing its shine. Dr Mahathir’s trip may have taught some valuable lessons.

This article appeared in the Asia section of the print edition under the headline “Can’t pay”