Jomo on China-Malaysia Ties

July 26, 2018

Jomo on China-Malaysia Ties

by Dr. Jomo Kwame Sundaram

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Malaysia’s Award Winning Economist and Author–Dr. Jomo Kwame Sundaram

Various media reports and even remarks by some close to the new government of Malaysia imply that it will be antagonistic to improving economic relations with China. This grossly misrepresents the popular Malaysian rejection of the corrupt kleptocracy that ruled the country in the last decade.

Rather than rely on an opportunistically compliant leader ever ready to serve those who pay him most, China is surely better off dealing with a Malaysian leader who desires peace, freedom and neutrality based on mutual respect and benefit, and truly commands the respect of the governments and peoples of the region.–Dr. Jomo Kwame Sundaram

To be sure, all Malaysian governments since independence in 1957 have invited foreign direct investment. For decades, some of us have been concerned with the Malaysian government’s seemingly uncritical view of foreign investments.


However, to be fair, both Prime Ministers Tun  Abdul Razak Hussein and Dr Mahathir Mohamad were, in fact, quite circumspect.

How else can we explain the takeovers of mainly British-owned investments in Malaysian trading agencies, plantations and mines of the 1970s? Or for that matter, the technology transfer, employment generation and domestic procurement requirements imposed in the following decade?

Caricaturing the recent Malaysian political debate over some investments associated with China risks misleading all concerned. This may have unpredictable, and even adverse consequences for future bilateral economic relations.

Since early 2017, some of us have been portrayed in some quarters as critics of all foreign investments from China.


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In particular, I had (have) questioned the economic viability of the East Coast Rail Link (ECRL) project as Malaysia would eventually have to pay well over three times the original cost estimates. Even at the much lower costs, the project would never ever pay for itself.

After discounting the original cargo and passenger projections to more realistic levels, the project would have implied permanent haemorrhage of operating costs, even after writing off the gargantuan development costs of RM81 billion plus interest.

As had become the norm with such projects in recent years, the contract was awarded following “direct nego” by the previous Malaysian government to a Chinese company without any competition and little transparency, but generous special privileges, including massive tax exemptions.

To be sure, ECRL would not have involved foreign investment from China, but rather, huge loans from China’s Export-Import Bank, ostensibly for 85% of projected costs. It was expedited to start early this year before the general election.

A few months later, with little work done, almost RM20 billion, or half the total loan, had already been disbursed in dubious circumstances.

The sagas of the two SSER gas pipelines are similar, with the loans almost all disbursed despite little actual progress on the ground. The huge safety risks for the multi-product pipeline and the likely ecological damage in Sabah only exacerbate the familiar tale of economic infeasibility.

Unsurprisingly, there has been considerable public opposition to such projects and associated debt liabilities, involving likely fraudulent hands already greatly resented by most Malaysians. Needless to say, the mammoth resulting debt burdens will be borne by future generations of Malaysians.

China’s Xi Jinping opposes fraud

On May 9, Malaysians resoundingly rejected such irresponsible foreign investments and dubious loans that will burden and ruin our economy, and their greedy enablers. However, public opposition to such abuses does not constitute blanket opposition to all investments from China.

Unfortunately, the undiscriminating tend to lump all investments from China together.

Recent full employment, assured by ballooning public sector employment, has obscured the lacklustre growth since the 1997-1998 Asian crisis, especially in the last decade following premature deindustrialization. The promise of services employment has mainly involved traditional, rather than modern services, despite misleading official hype to the contrary.

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Like the government of China, the new Malaysian government is much more discerning, and recognises that foreign direct investment and technology transfers from abroad will be crucial to future progress.

Undoubtedly, there are some dodgy foreign investments in Malaysia involving investors from China, as it is from elsewhere. But it is important to recognise that China’s authorities are embarrassed by such opportunistic, irresponsible, and even corrupt behaviour. Hence, they have already taken action to regulate outward capital flows.

Before that, a serving Chinese Ambassador famously criticised such investors from China, and publicly apologised for their bad conduct.

For over half a decade, Chinese President Xi Jinping has led an ongoing campaign against graft, promising to quash deep-seated corruption at all levels. China’s Central Commission for Discipline Inspection has taken the fight abroad since 2015, and can be expected to cooperate, not least because of the reputational risks for China, especially after recent attempts to diplomatically isolate it by its strategic rivals.

Making cars

While many Malaysians are understandably wary of a “Perotiga”, we should not throw the baby out with the bathwater. We should consider Mahathir’s plea for a renewed commitment to more technologically advanced industrialisation despite earlier failed “heavy industrial” investments.

For example, Geely should be persuaded to work with Proton to make the country their major export hub for right-hand drive mid-size car production for the world. The collaboration may also build on prescient Mahathir-inspired efforts to develop an electric car in the 1990s, well before the now near universal appreciation of the urgent need to address global warming and air pollution due to fossil fuels.

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Electric Cars for Malaysia and ASEAN?

After all, electric cars will also dispense with the need for traditional engines, which was the last challenge in developing a Malaysian made car decades ago. Of course, the world has changed, and it would be crucial to reconsider what would be viable and internationally competitive going forward.

Malaysians appreciate investments which will contribute to the country’s progress, for example, in 5G telecommunications technologies, useful artificial intelligence applications, new financial technologies, renewable energy, new medicines and electric vehicles.

The new government clearly favours productive industrial investments, especially with Mahathir’s well-known commitment to accelerating Malaysian technological progress.


Of all ASEAN leaders, Tun Dr,Mahathir has been the most committed to the 1955 Bandung principles and the Asean commitment to make Southeast Asia a Zone of Peace, Freedom and Neutrality (Zopfan), recently reiterated as keeping foreign warships out of the region. This must surely give comfort to China, which has long strived to break out of decades-long efforts to encircle it.

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Rather than rely on an opportunistically compliant leader ever ready to serve those who pay him most, China is surely better off dealing with a Malaysian leader who desires peace, freedom and neutrality based on mutual respect and benefit, and truly commands the respect of the governments and peoples of the region.

Dr. Jomo KS is a member of the Council of Eminent Persons (CEP).

The views expressed are those of the author and do not necessarily reflect those of FMT.

Will Mahathir Reset China-Malaysia Trade Relations? – Analysis

July 26, 2018

Will Mahathir Reset China-Malaysia Trade Relations? – Analysis

By Mathew Maavak

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China President Xi Jinping met with Tun Dr Mahathir Mohamad during a state visit to Malaysia in 2013.

A shock electoral upset has just returned 92-year-old Dr Mahathir Mohamad to the prime ministerial chair in Malaysia. The run-up to this climax was muddled by a miasma of fake news, lurid allegations and outright conspiracy theories from either side of the political divide. China-baiting was inevitably drawn into this tawdry mix despite mainland investments being a stabilizing main stay of the local economy.

According to an Economic Intelligence Unit report last year, Malaysia was the fourth-largest recipient of mainland Chinese direct investments – right behind Singapore, United States and the autonomous Chinese province of Hong Kong. Although the sum total of Chinese investments in Malaysia has not been adequately tallied,the US$100 billion Forest City project provides a snapshot of the staggering amounts being invested into the local economy.

While former Prime Minister Najib Razak hailed these investments as an imprimatur of his government’s investor-friendly policies, the opposition camp (and new government) accused him of “selling out to China”. In reality, one doubts whether foreign consortia can match the scale, cost-effectiveness and speed of execution of many Chinese-led projects in Malaysia.

Business Compradors

Dr. Mahathir has particularly taken issue with the inadequate number of local jobs created by Chinese investments in Malaysia. It is an argument not without merit.Overseas Chinese infrastructure projects are known for their heavy reliance on mainland labour, machines and supplies – of the lock, stock and barrel variety – tokeep costs, graft and middlemen interference to the lowest possible scale.

Curiously, the backbone of Dr Mahathir’s electoral tsunami came from the ethnic Malaysian Chinese community who openly hailed the global ascent of China. That was until they discovered that mainland business models accommodated as few middlemen as possible.It was Alibaba on a massive scale, missing 40 thieves and in perennial need of 40 innovators.

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Robert Kuok’s appointment as a member of the Council of Eminent Person is a strategic move, given the billionaire’s ties to China


Many Malaysian consumers save thousands of ringgit each year by purchasing a variety of consumer products directly from China instead of forking out a hefty mark-up at local stores.Unsurprisingly, there are now growing calls to tax online purchases from China. This is not going to help budget-strapped Malaysians who voted in the new administration on the back of complaints over rising living costs. Malaysia’s shadow economy has been estimated by various studies to range between 30 percent and 47 percent of its GDP up till 2010.

The anti-China narrative therefore may be couched in terms of multifaceted grievances like jobs and the South China Sea but it primarily boils down to incentives for middlemen who contribute little or nothing in terms of value-additions to projects, products or services offered by mainland companies. These modern-day compradors have an ally in another area bereft of value – added or otherwise.

Media Compradors

The biggest impediment to the Malaysian economy is not China, its business modus operandi or the lack of local talent. It is the Malaysian media which has abjectly failed to relay grassroots ideas and innovations to national policy-makers for decades.

The author himself vividly remembers the lament of Dr Mahathir’s former national science advisor on the dearth of science journalists in Malaysia. This translates to recurring losses in taxpayer money.There is an oft-told account of how a fact-finding delegation to the United States, seeking particular expertise in renewable energy technology,were told that the expert they were looking for was a Malaysian academic back in Kuala Lumpur!

Researchers needing critical economic or scientific data on Malaysia are likely to get them from foreign sources as even google cannot cope with the bottomless insipidity and juvenile meanderings of the local media. Publicity-seeking experts with dodgy backgrounds are routinely sought for their banal insights and quotes in return for guaranteed filler spaces in a lack lustre media. Malaysia is gradually losing its economic and intellectual competitiveness due to the entrenched practice of mediocrity promoting mediocrity – egged on by Western interests.This forms the main backdrop to the current anti-China narrative.

Local media stalwarts privately blame politicians, in particular Dr Mahathir himself (during his previous 22-year reign) for the lack of media vigour and freedom in Malaysia. While media restrictions undeniably exist, one wonders how proposed articles on topics such as Open Governance could be seen as subversive.

It is high time to drain the swamp in Malaysia. Dr Mahathir has already indicated that the bloated 1.6 million-strong civil service in Malaysia would be pruned to promote economic and government transparency. For decades, successive governments had rewarded personal loyalty with plush posts and contracts. Malaysians now have another chance to demand efficient, meritocratic and transparent governance. Not mass-mediated bogeymen, viral passions and pies-in-the-skies.

The billion-dollar question now is whether the new administration will be able tougher in a transparent and vibrant media – one that can explore greater synergies within and abroad.Otherwise, Malaysia’s relations with its neighbors and trading partners are bound to deteriorate, along with its economy.

An abridged version of this article was published by CCTV’s Panview on May 14, 2018

ASEAN is Priority, says Malaysia’s Foreign Minister Saifuddin Abdullah

July 25, 2018

Foreign Policy: ASEAN is Priority, says Malaysia’s Foreign Minister  Saifuddin Abdullah

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by  Yiswaree Palansamy

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Foreign Minister Saifuddin Abdullah and his Indonesian counterpart, Retno Marsudi, in Jakarta

“ASEAN is always premium. ASEAN member states really have to come together, be on the same page, not only with China, but any superpower.– Saifuddin

Malaysia’s foreign policy will continue to be focused on strengthening ties with its South-east Asian neighbours, Foreign Minister Datuk Saifuddin Abdullah said as China flexes its muscle over the resource-rich region.

But he added that the full extent of the country’s foreign policy will be spelt out by Prime Minister Tun Dr Mahathir Mohamad when he addresses the United Nations General Assembly in New York in September, Straits Times reported today.

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 “ASEAN is always premium. ASEAN member states really have to come together, be on the same page, not only with China, but any superpower,” Saifuddin told the Singapore daily in an interview yesterday.

The Malaysian Foreign Minister admitted that it will not be easy to manage ties with China, which is also Malaysia’s largest trade partner, noting that other ASEAN members too have significant trade and other bilateral interests with the Asian superpower.

“Security is another story altogether, and ASEAN centrality is missing. We can speak in one voice and negotiate and explain our position better. Hopefully, then China and others will appreciate our position and concerns,” he was quoted saying.

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While Malaysia still holds to the “fundamental principles of non-alignment, non-interference” and does not support violent actions by sovereign powers, Saifuddin expressed confidence that the business community in the 10-member ASEAN will look to Dr Mahathir to play a key role as he has done in the past to safeguard their economic interests.

“The grassroots, the small businessmen, the small-medium enterprises don’t really feel (ASEAN Economic Community (AEC) represents them. Social entrepreneurship is where you can strike a common denominator where people in all 10 member states can benefit.

“We need to bring them as government contractors, if you like, or as empowered non-state actors to play a more active role,” he told the Singapore paper.

Saifuddin also said he hopes to engage Singapore — one of the five founding members of ASEAN — on ways to bring other parties into discussions to enlarge the ASEAN Economic Community and to move away from the concept that the grouping is only for “big people and big companies”.