The real danger in China’s influx of investments into Malaysia


KUALA LUMPUR: The influx of investments into Malaysia from China is not a problem, provided these are well managed, says Wan Saiful Wan Jan, a Visiting Senior Fellow at ISEAS-Yusof Ishak Institute of Singapore.

The real concern, he says in an opinion piece in Today Online, is its effect on democracy, human rights and standards of governance.

China has shown that economic growth can be achieved without the need to strengthen liberal democracy or respect human rights, while strengthening one-party rule.

“This can have a real impact on the fate of liberal democracy and human rights in Malaysia.

“As argued by Columbia University’s Professor of Political Science Andrew Nathan: ‘Beijing’s pragmatic efforts to protect its regime and pursue its interests abroad have a negative impact on the fate of democracy … China encourages authoritarian regimes elsewhere by the power of example’.

“The rise of China’s economic power shows to Malaysia, and any other country for that matter, that it is possible to create economic growth without extending political and social freedoms to citizens, while at the same time strengthening one party rule.”

Saying that China playing a dominant role in the world is the new normal, Wan Saiful adds that if this, especially investment inflows, is managed properly, it will be a positive catalyst for Malaysia’s growth.

The key is to acknowledge the issues and concerns, and then to devise steps to tackle them while staying committed to enhancing good governance, he asserts.

“Thus, while Malaysia should be open to China’s funds, it is Malaysia that needs to remain committed to the pursuit of a rules-based, competitive and transparent economic system.”

Wan Saiful, who is the chief executive of think tank IDEAS, says the responsibility of ensuring good governance in Malaysia lies with the Malaysian government and the Malaysian people, not China.

“The question is whether the current Malaysian administration sees the rise of China as a motivator to pursue good governance, transparency and liberal democracy, or as an opportunity to adopt authoritarian capitalism with a view to strengthen one-party rule, especially at a time when their grip on power is loosening.”

Wan Saiful warns: “With all the problems besetting the current Malaysian administration, it is not difficult to imagine Malaysia evolving in the wrong illiberal direction.”

He notes, too, that as China pursues its One Belt, One Road agenda, the flow of money is growing, with Malaysia recording an increase in Chinese investments of 1,064%, from 2012 to 2015.

He says studies show that opening a country’s economy to investors more often than not creates economic growth that benefits the population as a whole.

“Nevertheless, the volume, speed and style with which this has happened have raised questions.”

Wan Saiful then writes about some of the problems created as a result of this, including whether the influx of funds from China is a real investment or just a long-term soft loan.

He notes that long-term soft loans from China have got other countries, such as Venezuela, into trouble.

Wan Saiful says in some of the recently announced projects in Malaysia, the Chinese government, through its state arm, provides financing to special purpose vehicles created by the Malaysian government on the understanding that the top-tier contractor would be a Chinese company.

“Upon completion of the project, the Malaysian entity is still liable to pay back the loan with interest. Some of the loans are also guaranteed by the Malaysian government, which means there is very minimal risk on China’s part.”

The biggest example is the East Coast Railway Line (ECRL). China gains the most from this project.