Malaysia to gain from cancellation of controversial China projects

  • Business
  • Monday, 17 Sep 2018

PETALING JAYA: It could be a case of short-term pain for long-term gain if Malaysia decides not to be fully part of China’s Belt and Road Initiative (BRI) by cancelling some of the more controversial China-backed infrastructure projects.

Experts believe that the cancellation of the RM55bil East Coast Rail Link (ECRL) and two gas pipeline projects – the Trans-Sabah Gas pipeline and the Multi-Product Pipeline –could result in lower gross domestic product (GDP) growth and trade and investments.

The projects are considered a big push for China’s BRI and their cancellation would result in a decline in overall domestic investments over the short term, experts said.

However, over the longer term, they said the hefty cost of these projects would not benefit Malaysia.

However, because Malaysia is unable to scrap the ECRL deal, Omni Capital Partners Sdn Bhd managing director Scott Lim said the rail project could become a white elephant.

The cost of transporting goods is likely to be high due to the staggering cost of the rail project.

“The cost of running the ECRL is very high. You can’t transport goods cheap, so you can’t cover the operation cost.

“The ECRL will not enhance economic activities in the long run. Overall, these projects are not viable at the current price tag of RM55bil. So, there is no point in having them even if it means lower growth in the short term for Malaysia,” he added.

To mitigate the short-term pain, experts believe it is important for Malaysia to have its own master plan to identify the long-term drivers for growth of the country.

Furthermore, Asli Center of Public Policy Studies chairman Tan Sri Ramon Navaratnam said Malaysia should explore other markets for trade and investment and not be heavily dependent on China. He added that agreements in trade and investment should benefit both countries.

“There was no strong leadership at the top in the previous administration. There was a lack of coordination. Corruption was thriving. The one-sided deals are only possible with corruption,” he noted.

Prime Minister Tun Dr Mahathir Mohamad reiterated that the country cannot afford these projects. Furthermore, the terms of the contracts coupled with elements of high corruption and inflated costs rendered them non-beneficial.

Limited funds: Dr Mahathir has reiterated that the country cannot afford some of the Chinese projects. — Bernama

In the meantime, Dr Mahathir taking the lead in Asean to renegotiate China-backed investments may prompt neighbouring countries to follow suit.

Among the Asean countries involved in BRI are Singapore, Thailand, Myanmar, Indonesia, Laos and Cambodia.

Should the terms of the agreement for BRI projects be lopsided for other countries, Navaratnam said they would likely follow Malaysia’s footsteps to renegotiate the contracts. This would pressure China to be more reasonable in its foreign trade and investment policies.

“China’s government must ensure a level playing field. If China refuses to do so, other countries would not entertain their investments.”

Moreover, China’s private developer, Country Garden, which is building the man-made island known as the Forest City development in Johor Baru, has also come under heavy scrutiny after Economic Affairs Minister Datuk Seri Mohamed Azmin Ali revealed that residential units in the development are being offered for free in exchange for investments in China.

“China is planning to bring in 700,000 Chinese from mainland China to own these properties in Forest City. Certainly, we cannot allow that,” he pointed out recently.

Hence, Dr Mahathir has instructed the Housing and Local Ministry to form a committee to reassess agreements and deals related to the sale of residential units there.

If Country Garden is seen to have violated investment principles, this would affect local sentiment with regards to China’s BRI.

Navaratnam cautioned that investors who violate Malaysia’s rules and regulations would impact the bilateral relationship of both countries. Therefore, it is important for both governments to safeguard the long-term relationship.

“Forest City is an important link in the BRI plan. It affects local sentiment extensively and should be solved soon,” he says.

Moving forward, Malaysia intends to relaunch itself on a stronger platform to welcome foreign direct investors, who will eventually recognise the new government’s efforts to create a level playing field.

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