Summary  

On Tuesday, August 21, Malaysian president Mahathir Mohamad concluded his first visit in Beijing. During his 5-day visit, Mohamad re-negotiated with China for some $22 billion U.S. dollar infrastructure projects under the Belt and Road Initiative (also known as the One Belt One Road (OBOR) Initiative), in an effort to free Malaysia from their national debt crisis. Unlike his Beijing-friendly precursor, Mahathir is attempting to cancel two major China-backed infrastructure projects already in agreement with Beijing. He warned the emergence of new colonialism, unfair competition, and claimed that Malaysia is unable to afford expensive projects under their current national debt. The two projects are likely to be suspended. The first project is a $13.4 billion USD East Coast Rail Link, which is being planned and developed by the China Communications Construction Company. This project is a high-speed rail connecting the large cities in Southeast Asia, such as Gomak and Kuala Lumpur. The second project is a $2.5 billion USD gas pipeline in Sabah, Malaysia, which was constructed by Chinese energy giant China Petroleum Pipeline Bureau. However, Malaysia has an estimated $250 billion dollars in national debt. Some of the debt is owed to Chinese companies. Malaysia used to favor Chinese investment and loans due to their high value for both parties. However, after the prime minister’s election in May, there are growing concerns in Malaysia about China’s dominance and risks related to its capital. 

FAO Global Assessment 

Malaysia is a major Southeast Asian country that has great geopolitical importance to China. It is located in the heart of maritime trade in Asia, which links the Indian Ocean and South China Sea. Trillions of USD pass in international ships and vessels through the Malacca Strait to transit between the Middle East, Africa, India, to East Asia. China continues to expand its military power and financing in Malaysia, especially in Kuandan, a Malaysian port city on the South China Sea coast. China’s expansion will likely contribute to its increased influence in the South China Sea which has far reaching impacts for policy and security, in addition to the economic benefits. Malaysia’s move may have an alternate effect of possibly discouraging foreign investment, and possibly hurt construction and consulting businesses who are involved in those projects. However, this offers opportunities for companies to work together on smaller projects or offer different financing options without the worry of political indebtedness.

Related Links: 

1. Financial Times: Mahathir Mohamad warns against ‘new colonialism’ during China visit 
2. New York Times: ‘We Cannot Afford This’: Malaysia Pushes Back on China’s Big Projects 
3. South China Moring Post: MAHATHIR MOHAMAD. MALAYSIA’S ANTI-CHINA REBEL? NOT SO FAST  
4. Reuters: Malaysia’s Mahathir cancels China-backed rail, pipeline projects 
5. Wall Street Journal- Malaysia Can’t Afford $22 Billion Beijing-Backed Projects, Mahathir Tells China
   

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Analyst Bio

Weiting Li -International Policy Associate

Weiting Li is an international policy intern at FAO Global, where she focuses on international trade, technology, and environmental policies. Weiting is currently a second year graduate student pursuing dual master’s degrees in public policy at Georgetown University and Business Administration at University of Geneva. Prior to Georgetown, she was the assistant for government relations and working groups at European Chamber of Commerce in China. She graduated from Gettysburg College with a major in Sociology and a minor in Business. 

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