Malaysia, BRI and a multitude of challenges

THE rise of China and the growing acceptance of its Belt and Road Initiative (BRI) have been remarkable over the last 10 years.

In this time, Malaysia and China have increased their respective gross domestic product (GDP), level of Sustainable Development Goals (SDG) attainment, ease of doing business and institutional quality as measured by Worldwide Governance Indicators (WGI).

The Covid-19 pandemic, geopolitical tensions, the Industry 4.0 and issues of sustainable development have created a multitude of stormy challenges to the BRI and participating countries, including Malaysia.

Every challenge provides both threat and opportunity, and Malaysia needs to be prepared to overcome them and benefit in the process.

Four major areas of challenge are international relations, a new economy, sustainable development, and rising debts.

On the international relations front, unrest in the Middle East, Africa and several European countries as well as the Russia-Ukraine conflict have seen escalation.

Furthermore, growing Sino-American tensions continue to churn negative propaganda on China and BRI.

To navigate these international relations storms, a constant dialogue between China and BRI participating countries are vital to maintain trust in and commitment to the good objectives of the initiative.

China’s paramount leader Xi Jinping has repeatedly emphasised a Community of Shared Future where China has an entrusted significance in promoting international trade and sharing prosperity through BRI.

Malaysia should continue to adhere to its commitment as a neutral country in the Non-Aligned Movement (NAM) to avoid being entangled in international conflict.

Internally, the good relationship with China and investments from BRI should not be a tool for political mileage. In contrast, Malaysia should strengthen its political will to tap into the mutual benefits of China and BRI.

In the so-called new economic era of Industry 4.0, coupled with stormy international relations and high debt concerns, policymakers worldwide are facing unprecedented challenges.

In the modest reality, Malaysia is not a pioneer in digitalisation and artificial intelligence (AI), which are cornerstones of Industry 4.0. Therefore, unprecedented times do not necessarily require unprecedented measures for the country.

Conventional approaches of strengthening basic economic fundamentals and tapping technology transfer through investment from BRI would serve the country better.

Since the start of BRI, Malaysia’s Ease of Doing Business score increased marginally by 4.00 points yet currently stays at a high level of 81.5 out of 100.

Malaysia’s GDP level and institutional quality, as measured by the WGI score, increased by almost 50%, implying good improvement and strong economic fundamentals.

Thus, maximising the benefits from infrastructural connectivity and the digital silk road of BRI are practical measures to help Malaysia embrace Industry 4.0 and economic transformation.

In sustainable development, Malaysia has pledged to achieve the United Nations' SDG by 2030. With barely seven years to go, Malaysia has only achieved 69.80% of overall targets, which is merely 8% more than before the BRI started.

In contrast, China has added 13% attainment of targets in the same period to achieve an overall level of 72%. China’s sustainable development achievement has earned praise in the World Economic Forum, where four key strategies for its success have been identified.

They are: unprecedented rapid structural transformation from smokestack manufacturing industries to low-carbon services; embracing non-carbon renewables such as wind, solar and geothermal biomass; developing new transportation systems of energy-efficient high-speed rail network and electric vehicles; and embracing eco-friendly urbanisation.

Malaysia and other BRI participating countries should learn these successful strategies from China.

Last but certainly not least is the challenge of rising debt. Worldwide, countries are facing rising debts from efforts to sustain their economy through the pandemic.

In general, a low debt level is conducive for fiscal policy to boost future growth, support welfare programmes, improve credit rating and ease pressure on exchange rates.

With the possibility of a global economic slowdown or crisis in the near future, thereby placing further stress on governments’ finances, this rising debt issue may be the toughest challenge to sail through.

Hopefully, China and the BRI countries may have enough collective financial strength to help each other when needed.

Perhaps now may be the right time for BRI countries to create their own “BRI drawing rights (BDR)”, mirroring the current special drawing rights (SDR) of the International Monetary Fund (IMF).

SDR is not a currency per se, but a unit of account for the IMF. Therefore, the proposed BDR can enhance the collective financial strength of BRI countries as well as facilitate debt management, trade payments and investment flows between participating countries.

As the saying goes, the sun always shines after the storm. Economies will go through the ups and downs of the business cycle. BRI and its participating countries do have their challenges, but overcoming them is a learning process to become stronger and better.

Har Wai Mun is a Senior Lecturer at Universiti Tunku Abdul Rahman. The views expressed here are entirely the writer’s own.

The SEARCH Scholar Series is a social responsibility programme jointly organised by the South-East Asia Research Centre for Humanities (SEARCH) and Tunku Abdul Rahman University of Management and Technology (TAR UMT), in conjunction with the 10-year anniversary of the Belt and Road Initiative.