Are Malaysians not Chinese

Malaysia cancels Chinese Belt and Road projects

Malaysia is redefining its relationship with Beijing. This includes stopping billion-dollar projects that would have given China access to the Indian Ocean.

The new Malaysian government has drawn another line under the previous administration of Najib Razak and stopped costly Chinese projects. Affected is a controversial east-west railway project that would have connected the South China Sea with the Andaman Sea and the Indian Ocean. Two gas pipeline projects have also been canceled.

Prime Minister Mahathir Mohamad personally brought the bad news to the Chinese government. He announced the decision to cancel the three billion-euro projects on the occasion of his visit to Beijing. This is not surprising, because Mahathir had already announced during the election campaign that mega-projects from the time of Najib would be put through their paces. Mahathir had already shown in May that he was not afraid to stop major projects when he put the plan for a high-speed train between the capital Kuala Lumpur and Singapore on hold.

Cold shoulder for the hegemon

The plans that have now been canceled are about a lot. China has been Malaysia's most important trading partner for some time and is increasingly establishing itself as a political hegemon in the region. The East Coast Rail Link (ECRL) is a strategically important land bridge to the west for China. It is part of the Belt and Road Initiative, with which Beijing wants to open up new land and sea routes. The mammoth project is also controversial from an economic perspective.

China's vision of a new silk road

The fact that Malaysia is now enforcing a halt should also be attentively registered in other countries that feel rather uncomfortable about the embrace of Beijing. Burma, also a transit country between the two seas, has already canceled Chinese dam projects inland and redimensioned port projects in the Bay of Bengal. Thailand, on the other hand, is suspicious of the China-driven idea of ​​a canal through the Kra Isthmus, which the USA is also following with concern. The position of the Philippines, where the Duterte government is currently following China, which is controversial, is less clear.

Mahathir's justification for the decision is initially of an economic nature. The country simply cannot afford such expensive projects. Kuala Lumpur is already facing a mountain of debt of around $ 250 billion. The construction costs of the ECRL would have amounted to 55 billion ringgit (around 14 billion dollars). For one thing, Mahathir explained, these amounts will never be repaid; on the other hand - this is where the unvarnished nature of the 93-year-old is expressed - you don't need this infrastructure at all. In addition, neither Malaysian companies nor local workers were given sufficient consideration. It is an old concern of Mahathir, which also shaped his first term in office from 1981 to 2003: Foreign direct investment should primarily benefit Malaysia, for example through technology transfer and job creation.

Ruins and compensation

The criticism of Beijing's planners and the Najib administration is obvious and quite blatant. China's leadership, which in Southeast Asia has been trying for some time to present itself as a benefactor of the region, is unlikely to be pleased. Mahathir said that during the talks during his five-day visit, President Xi Jinping and Prime Minister Li Keqiang showed understanding. Officially, China has hardly commented on the Malaysian removal. The last word is unlikely to have been spoken yet. According to Mahathir, it is now a matter of regulating the modalities of the exit, including compensation payments. For the ECRL project, for which work has already started, Malaysia has already made down payments totaling 19.68 billion ringgit.

The largest Belt and Road projects in Malaysia

Malaysian Ringgit (in billions)

In the case of the double project described as the “Multi-Product Pipeline”, advance payments are actually significantly higher in percentage terms. According to information from the Ministry of Finance, 88 percent of the estimated construction costs of 9.4 billion ringgit have already flowed to the companies involved. That’s enormous. As early as the end of May, the new government classified these payments as "strange", which should be interpreted as a suspicion of corruption. Mahathir even let it be known in Beijing that public contracts from the previous government were all under the general suspicion of bribery payments, since around 30 percent of the contract sums had flowed into the coffers of the governing parties.

Frosty mood between Beijing and Kuala Lumpur

Such remarks, the lack of a joint statement and the absence of a public appearance with President Xi suggest that relations between Malaysia and China have cooled significantly. The fact that Jho Low, the internationally sought-after mastermind behind the corruption scandal surrounding the sovereign wealth fund 1MDB, should be in China could put additional strain on bilateral relations. Mahathir could not resist another critical remark during his visit to China: There is a danger today of a new kind of colonialism in which rich countries dominate poorer countries, he said. If he had said something like that in Kuala Lumpur, it would have been read as old anti-colonial rhetoric. In Beijing the remark has a completely different meaning. Video recordings of the final press conference with Li Keqiang show that the Chinese host remained silent and concluded the encounter with a stiff handshake.