China and the World

Shipshape

KL gets chummier with Beijing

Razak-w

Malaysia’s leader Najib Razak meets China's President Xi Jinping

Like many before him, Najib Razak arrived in Beijing last week looking for investment for his country’s economy. But much of the media focus was geopolitical, after the Malaysian prime minister confirmed the purchase of at least four ‘littoral mission ships’ from the Chinese – vessels used primarily for coastal security.

It was the Malaysian government’s first major defence contract with China and it was signed at a time in which Washington’s influence seems to be eroding. Indeed, the media has been remarking on the parallels with the Philippines, where Rodrigo Duterte has promised “separation” from the US after its criticism of his deadly war on drugs (see WiC343). Relations with Washington have also been under pressure in Malaysia since the Department of Justice filed lawsuits linked to a money-laundering investigation at state fund 1MDB. The legal action claims that billions of dollars have been misappropriated, some of which have ended up with a “Malaysian Official 1” – identified later by American authorities as Najib himself.

Last December the Chinese gave Najib a political boost with a $2.3 billion deal to buy assets at the scandal-hit fund, which is fuelling speculation that the vessel purchases were recognition of Beijing’s support last year. “The truth is we could have bought these from a number of countries. But China is the only country that has provided political support for Malaysia during the 1MDB scandal. This is payback for that political support,” Lam Choong Wah, a senior fellow at REFSA, a Malaysian research institute, told Reuters.

Malaysia’s Transport Minister Liow Tiong Lai has preferred to focus on the economics of the deal, saying that the Chinese offered the best terms. But it’s also interesting that Beijing would sell the kind of vessel that could be deployed by the Malaysian navy to counteract Chinese activity in the region.

China claims most of the South China Sea as its own territory, although Brunei, the Philippines and Vietnam are among those that hold rival claims to the disputed waters in the region. Malaysia is another of the claimants: earlier this year an official in the prime minister’s office complained that more than 100 Chinese boats had been trespassing in waters off the coast of Sarawak, and the country’s defence minister has warned of “pushback” if incursions continue.

Clearly, the Chinese see the naval contract as a chance to strengthen ties with Kuala Lumpur, and another way to drive a wedge between the various countries that oppose its policy in the region’s seas. The Philippines already seems to be moving towards bilateral negotiations with Beijing and Najib has also said that the disputes in the South China Sea should be resolved through dialogue with China.

Mahathir Mohamad, the former prime minister of Malaysia, has been critical of Najib’s approach, saying that it plays to China’s aims of preventing ASEAN nations acting as a group. “It seems that we are going off on our own. We are not taking into consideration the policies of other countries in the region,” he complained.

At least $34 billion in trade and investment agreements were announced during Najib’s visit, including Chinese capital for oil and gas pipeline construction in Sabah, and a cornerstone deal for a 620km rail line along the east coast of peninsular Malaysia linking Kuala Lumpur to the northeastern town of Tumpat. The railway will be built by China Communications Construction and financed by soft loans from the Export-Import Bank of China. But Liu Zhenmin, Chinese vice foreign minister, responded frostily to a question on whether Beijing was deploying chequebook diplomacy, insisting “there is no such thing as using our financial muscle to improve ties”.

Najib has been forced to respond to concerns at home that the Chinese are being given too much sway in the Malaysian economy. Stung by the questioning of some of the announcements in Beijing last week, he issued a statement from China insisting that the infrastructure projects would be owned and operated by Malaysians. “There seems to be some who don’t appear to welcome this investment in the Malaysian economy, and don’t seem to want the resulting jobs, skills and improvement in people’s lives,” he said.

“Some have scaremongered that Malaysia is being sold off. This is absurd and absolutely false.”


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