Malaysia right to reject China’s debt-book diplomacy

opinion August 30, 2018 01:00

By The Nation

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Thai leaders should follow suit and stand up to Bejing over onerous conditions attached to infrastructure projects 



Malaysian Prime Minister Mahathir Mohamad made a bold decision when he announced the cancellation of China-backed infrastructure projects worth US$22 billion during his official visit to the country.

It is not clear whether the move is temporary or permanent but the decision should be a wakeup call for China, as well as Thailand and other recipients of Chinese development loans.

The announcement came at the end of Mahathir’s August 17-21 visit to China. Beijing responded coolly, declaring, “cooperation between any two countries may encounter some problems, and different views may emerge at different times”.

But this was diplomatic language. The world will be watching for a more concrete response from Beijing in the coming weeks and months. 

Needless to say, this is a set back for Chinese President Xi Jinping’s Belt and Road Initiative, a grandiose plan to connect China with Southeast Asia and Central Asia, the Middle East, Russia, Europe and Africa through roads, rail, and sea/airports.

It has not been a smooth sailing, to say the least, for this modern-day Silk Road plan. Countries including Laos, Sri Lanka, Cambodia, and Pakistan are drowning in Chinese debt and fear of Beijing’s political domination is in the air. 

Mahathir is now in essence telling China that Malaysia does not want to be in this predicament.

The projects halted include the East Coast Rail Link and two energy pipelines. Mahathir said all three would be “deferred until such time we can afford, and maybe we can reduce the cost also if we do it differently”.

“It’s all about borrowing too much money which we can’t afford, can’t repay, and also we don’t need those projects for Malaysia at this moment,” he added.

The concern and criticisms are the same as those being voiced in Thailand. Here also, locals are being denied jobs because Bangkok has agreed to the condition that Chinese contractors will bring their own engineers and builders. This means, essentially, that project money will be returning to China.

Mahathir should be praised for not blaming his predecessor Najib Razak for approving the project. Najib was ousted by a shock result in May’s election. He offers an easy target as he is currently facing corruption charges over billions of dollars apparently missing from the state development fund, 1MDB.

When asked if he supports free trade at the press conference, Mahathir replied, “I agree free trade is the way to go, but, of course, free trade should also be fair trade. We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries, therefore we need fair trade.”

China should have sympathy for this fear of foreign domination.

After all, it wasn’t so long ago that 90 per cent of China’s railway was owned by foreign powers. The debts owed to these foreign developers were so enormous that they sparked a rebellion that led eventually to the downfall of the Qing dynasty.

Thailand, on the other hand, is negotiating a very lopsided deal. China is demanding serious collateral, namely property rights stretching 50 metres either side of the rail line from Bangkok to the Lao border. 

Agreeing to such a deal could be suicidal for political leaders in Thailand. Prime Minister Prayut Chan-o-cha has employed his absolute powers to bypass critical items such as environmental assessment in getting the project off the ground. But we have yet to see China softening its demands for collateral, despite the fact that Thailand has a history of paying back its debts.

Thai leaders need to show backbone and stand up to Bejing on this matter. We don’t have to look far for an example to follow. Also, it is in China’s interests that Thailand and Malaysia remain strong and solvent partners.

As Mahathir stated at the press conference, “I believe China itself does not want to see Malaysia become a bankrupt country.”