Mahathir aims to secure deals more favourable to Malaysia’s economy
KUALA LUMPUR: Prime Minister Tun Dr Mahathir Mohamad is pushing back against China’s dominance in the economy, stalling billions of dollars of contracts as he tries to renegotiate them.
He’s heading to China next month to discuss those projects and try to win deals that he says should be more favourable to Malaysia.
China has US$34 billion (RM136 billion) worth of infrastructure projects underway in Malaysia, negotiated by the previous government, deals that Dr Mahathir said favoured Chinese investors over the Malaysian economy.
Among his concerns are the large sums that the government has borrowed from China and contractors that use Chinese labour and equipment.
Earlier this month, the government suspended the East Coast Rail Link, which was being built by China Communications Construction Co with an estimated price tag of RM81 billion. Two energy pipeline projects were stalled.
Dr Mahathir’s move comes against the backdrop of growing disquiet in Southeast Asia about China’s spreading influence in the region. China’s multi-billion dollar Belt and Road initiative to build roads, railways and ports is stoking fears of ballooning debt in countries like Myanmar and Laos.
Malaysia has been one of the region’s biggest beneficiaries of Chinese investment in the 15 years between Dr Mahathir’s first and latest stint as leader, while economic links in the two countries from trade to tourism have strengthened.
Here’s a look at how China’s economic links with Malaysia have evolved in recent years:
Trade
Malaysia is China’s biggest trading partner in Southeast Asia after Vietnam, with total trade of US$92.4 billion last year. In 2003, when Dr Mahathir ended his first period as prime minister, the figure was less than a quarter of that.
Malaysia is one of the few economies in Southeast Asia to run a trade surplus with China, exporting everything from electronics and palm oil to liquefied petroleum gas.
Last year, Malaysia exported US$54.4 billion to China, or about 18 per cent of its total shipments. In 2003, that figure was just US$14 billion. Malaysia imports electrical products, machinery and equipment from China.
Investment
Official data shows Chinese foreign direct investment into Malaysia surged more than 700 per cent in the past decade to RM9.9 billion last year, a far bigger increase than any other source country.
The inflow has raised concerns among Malaysians over sovereignty, indebtedness and the risk of creating white elephant projects. Tourism
Chinese tourists are now the third-largest group of visitors to Malaysia after Singaporeans and Indonesians, lured by sandy beaches, a shared culture in a country where a quarter of the population are ethnically Chinese, and a love of the pungent durians.
That growth has underpinned a tourism industry that now makes up 15 per cent of gross domestic product. Total tourism receipts in Malaysia climbed 54 per cent in the past decade to RM82.1 billion last year.
Immigration
Chinese nationals were the largest group of participants in the “My Second Home” programme, an international residency plan allowing wealthy foreigners to live in the Southeast Asian nation on a long-stay visa. Chinese citizens accounted for almost 30 per cent of successful applicants since the programme was launched in 2002.
Property
The increase in Chinese migration has helped underpin property demand in Malaysia, especially in Johor Baru, Penang and Melaka, according to Knight Frank LLP consultants.
For Chinese investors, Malaysia is a cheaper alternative to real-estate markets in Australia, Hong Kong and Singapore. What also counts in Malaysia’s favour is a lower entry cost for property and cultural ties that make food and language familiar to Chinese buyers.
China’s Xiamen University was the first to open an overseas campus, which was set up outside of Kuala Lumpur with the aim of boosting ties between Chinese and Malaysian students and academics.