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Malaysia’s perilous dance with China

Last week, Malaysian Prime Minister Najib Razak wound up a successful and financially fruitful state visit to China. His third official visit raked in US$34 billion (S$47 billion) worth of investments and loans to jump-start the Malaysian economy, which has been badly affected by falling oil prices and the introduction of the goods and services tax (GST) in April last year. The bounty was a welcome respite from the daily staple of bleak reporting on Malaysia.

Malaysia’s Prime Minister Najib Razak and China’s Premier Li Keqiang in Beijing last week. Malaysia is putting its relations with China on parity with that of the United States and Japan. Photo: Reuters

Malaysia’s Prime Minister Najib Razak and China’s Premier Li Keqiang in Beijing last week. Malaysia is putting its relations with China on parity with that of the United States and Japan. Photo: Reuters

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Last week, Malaysian Prime Minister Najib Razak wound up a successful and financially fruitful state visit to China. His third official visit raked in US$34 billion (S$47 billion) worth of investments and loans to jump-start the Malaysian economy, which has been badly affected by falling oil prices and the introduction of the goods and services tax (GST) in April last year. The bounty was a welcome respite from the daily staple of bleak reporting on Malaysia.

However, the euphoria from the visit was short-lived, as the multi-billion-dollar deals and financial arrangements were criticised by some quarters in Malaysia as a “sell-off” to Chinese interests and were even taken as evidence of Malaysia’s tilt or pivot towards China.

Mr Najib has dismissed allegations of Malaysia being “sold off” as scare-mongering, saying that the deals between the two sides represented a “huge vote of confidence” in each other’s economies.

To be sure, it would be a mistake to cast Malaysia’s deepening relations with China in zero-sum terms vis-a-vis the major powers, as doing so ignores the strong fundamentals in Kuala Lumpur’s relations with Washington and Tokyo.

Echoing this point, the top US diplomat for Asia, Mr Daniel Russel, said: “Strong, constructive, productive bilateral relations with China are an important part of (the US’) strategy. Why wouldn’t it be an important part of the strategy of China’s own neighbours?”

In any case, it is premature to make any definitive conclusions on these assertions, as the events associated with Mr Najib’s visit have yet to run their course.

The implications of the visit can be measured only when China delivers on its billion-dollar pledges, effectively translating its political commitment on paper into tangible economic benefits for Malaysia.

Even then, Mr Najib’s visit would not carry the same strategic weight as his father — and a predecessor — Mr Abdul Razak’s visit to China in 1974, which normalised Sino-Malaysian relations. Mr Najib’s China visit could more accurately be described as continuing Mr Razak’s legacy and reaping the rewards of a 42-year investment, one that former prime minister Dr Mahathir Mohamad has done much to cultivate.

RISKS AND REWARDS FOR BOTH SIDES

The elevation of Sino-Malaysian relations to “new highs” — in the words of leaders from both sides — is not without its risks and challenges for the two parties.

For China, the 14 new business deals inked during the visit are a crucial test of its economic diplomacy. Lessons learned from its African foray, where Beijing encountered backlash against Chinese predatory business practices, could be especially instructive in Malaysia, where voices against China’s growing influence in politics and economics have grown louder of late.

China’s increased profile in Malaysia would also mean that the bilateral relations will come under greater scrutiny.

For example, the overall bilateral trade for the past five years has stagnated in the US$90-100 billion range, and incremental growth was largely driven by the expansion of Malaysian import of Chinese goods, which ballooned from US$27 billion in 2011 to US$44 billion in 2015, according to UNComtrade. On the reverse side of the trade, Malaysia’s exports to China declined from US$62 billion in 2011 to US$53 billion in 2015.

The narrowing of Malaysia’s trade surplus with China, which has registered five consecutive years of decline since 2011, dropping from US$34 billion in 2011 to US$9 billion in 2015, may expose the bilateral relations to nationalistic headwinds. The larger risk that China carries is the framing of the bilateral relations in the context of the incumbent Prime Minister. Regardless of the veracity of the claim, China’s “new” charm offensive in swooping up distress assets of troubled state investment fund 1Malaysia Development Berhad and the latest round of business deals, investments and soft loans is perceived in Malaysia as a bailout to bolster Mr Najib’s political survival.

In this context, the stability and future of the Sino-Malaysia relationship are tied to the Prime Minister’s tenure. Beijing’s close links with Mr Najib may backfire and become a liability if his stranglehold on the Malaysian polity unravels.

It is also an ironic twist that Mr Najib has turned to China to steady Malaysia’s economic ship while large swathes within the political party that he leads, the United Malays National Organisation (Umno), have turned their backs on the Malaysian electorate of Chinese ethnicity, putting in jeopardy Malaysia’s heretofore successful multi-ethnic power-sharing framework.

At the same time, Chinese Ambassador Huang Huikang’s visit to Kuala Lumpur’s Chinatown last September during a rally by Malay protestors suggests that Beijing takes more than an economic interest in Malaysia.

He remarked that China “will not sit by idly” if the infringement on China’s “national interests, violations of legal rights and interests of Chinese citizens and businesses” lead to the deterioration of relations between China and the host country. This could be a potential looming crisis as any political interference by China will not go down well with Mr Najib’s political base.

NAJIB’S CONUNDRUM

While China’s generosity took centrestage and hogged the limelight in the week-long visit, the agreement to purchase four Littoral Mission Ships (LMS) did not go unnoticed. This is Malaysia’s first major arms deal with China, sparking speculation of Malaysia’s strategic shift to China.

The arms deal will be a game-changer and provides immeasurable payoffs for China. From the construction phase of the ships to the outfitting, maintenance and training phases, the People’s Liberation Army Navy will work closely alongside the Royal Malaysian Navy, giving the former access and the opportunity to cultivate ties with the Malaysian security establishment.

The development of closer military relations may also have a knock-on effect on Malaysia’s strategic thinking. The immediate question that comes to mind is whether China would withhold the supply of parts and munition for the Chinese-designed-and-built ships if these assets were used to defend Malaysia’s sovereignty in the South China Sea against China’s claimed interests.

The arms deal effectively exposes Malaysia to potential Chinese arm twisting.

For sure, Mr Najib has brought Malaysia closer to China than any point in history. His predecessors have built a strong platform for economic and socio-cultural collaboration, but his legacy has been to leverage on these foundations to expand cooperation into the political-security sphere.

This development in itself is not a bad thing and is consistent with Malaysia’s long-held multidimensional foreign policy outlook. In fact, one can argue that Malaysia is belatedly putting its relations with China on par with that of the United States and Japan.

However, the context in which these improvements have taken place is less than ideal. Mr Najib’s less than solid political position puts him at a distinct disadvantage when negotiating with the Chinese. There will surely be some expectations on the part of Beijing for Kuala Lumpur to toe the line and consider the former’s interests in sensitive matters such as the South China Sea. Likewise, Kuala Lumpur will be mindful that Beijing could withhold the disbursement of loans and delay the implementation of joint projects if the former steps out of line.

Securing China’s economic lifeline solves one problem for Mr Najib but raises yet another equally delicate conundrum for him: How will Malaysia maintain its political and strategic autonomy as it grows ever more economically dependent on China?

ABOUT THE AUTHOR:

Dr Tang Siew Mun is Senior Fellow at ISEAS-Yusof Ishak Institute. The views are his own.

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