No reason to fear Belt Road initiative, says Yong Teck Lee

Yong Teck Lee, adviser of the Malaysia Maritime Silk Road Research Society, says there is no issue of a debt trap in Malaysia’s economic ties to China.

KOTA KINABALU: Malaysia and other Asean countries have taken the correct strategic position to be engaged in the Belt Road initiative.

Yong Teck Lee, adviser of the Malaysia Maritime Silk Road Research Society, said the ongoing trade war between America and China is having a negative impact on the global economy.

The crude way that the US tore apart international agreements has shown to the rest of the world that American leadership is no longer reliable, he said in a statement.

Yong, a former Sabah chief minister, recalled that several Asian and Pacific countries, including Malaysia, were pressured by America to overcome domestic reservations to accept the US-led Trans-Pacific Partnership Agreement (TPPA) in 2016.

TPPA was a trade pact signed in 2016 by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States. It was later abandoned by the Americans despite them initiating it.

This unpredictability of the US in world leadership was mentioned by Malaysian leaders in the past as a reason for not relying too much on American leadership.

“It is therefore timely that the One Belt, One Road policy initiative by China in 2013 at Kazakhstan and Jakarta has begun to bear fruit for the economies along the Belt Road regions.

“There is no other multi-national economic plan in sight that can stimulate the economies of so many countries,” he said.

According to Yong, the formation of the Asian Infrastructure Investment Bank (AIIB), a multilateral development bank under the Belt Road initiative, is a practical mechanism to allow Asian countries to invest in their own infrastructure and productive economy.

The AIIB consists of 97 countries, including most Asian countries, Canada, UK, Germany, Saudi Arabia, Australia and Russia, with a portfolio of close to US$100 trillion.

In spite of the relentless onslaught of western media campaign against the Belt Road concept, Yong said a closer look at the Belt Road initiative by the countries concerned had convinced these countries to stay with the Belt Road policy led by China.

The Philippines, for example, even though it is a close ally of America, secured trade and investment deals worth US$12.6 billion when Philippine President Rodrigo Duterte was in Beijing for the Second Belt Road Forum last month, initiated by the Chinese President Xi Jinping.

“Malaysia managed to overcome its earlier concerns that the good China-Malaysia relations might be affected by the issue of the East Coast Railway Link (ECRL) and other China investments in Malaysia.

“By the time of the Second Belt Road Forum, attended also by Prime Minister Dr Mahathir Mohamad, the ECRL issue had been settled successfully in a win-win manner.

“It was reassuring to both Malaysians and China that the prime minister had declared Malaysia’s full support for the Belt Road Initiative,” said Yong.

He added the success of the Belt Road Summit in Beijing last month was the only global event that has injected energy into the economic growth of Asia, including Southeast Asia.

Right approach by Malaysia

Yong believed Malaysia, which has seen its biggest fall in the stock market below the benchmark of 1,600 points and experienced the ringgit depreciating, has taken the right path in forging closer economic ties with China.

“There is no issue of a debt trap in Malaysia’s economic ties to China.

“For instance, even at its earlier cost of RM65.5 billion, the cost of the ECRL is only 7% of the total national external debt. This means that 93% of the current national debt has nothing to do with China or the Belt Road initiative.

“Indeed, Bank Negara figures show that 55.5% of Malaysia’s national debt is denominated in US dollars, 31.2% in ringgit, 2.2% in Japanese yen (excluding the RM7.3 billion in Samurai bonds) taken by Malaysia in March this year, and 11.3% others.”

Yong added this post-election support of the Belt Road initiative by the Malaysian government echoes the example of Sri Lanka which had a similar change of government in 2015, with the winning party pledging to review China’s investment, particularly in the Hambantota international Port.

In some ways, Yong said Sri Lanka’s Hambantota port was like Malaysia’s ECRL as both were election issues and both were retained on a win-win basis by the newly-elected government.

Previously, he noted the western media reported that Sri Lanka was unable to pay the China loan taken for the construction of the port, leading to its seizure by China which wanted to turn it into a naval base.

In fact, the newly-elected Sri Lanka government found no improper elements in the construction and the financing package. The port has since been able to repay its loans from its container terminal business.

“The oft repeated criticism of the Belt Road policy is that it is a debt trap disguised as a loan to ensnare poor countries. The allegation is that China gives loans to poor countries to build infrastructure assets such as ports and railways.

“When these countries cannot pay back the loan, China will seize the assets. This false narrative has been repeated so many times that some people have begun to fall for it,” he said.

He explained that infrastructure expenditure is capital expenditure, an investment on infrastructure that will create new wealth for more people by increasing the productive capacity and GDP of the nation.

He said it was apparent to all that wherever a highway was built, the areas on both sides of the highway would become regions for economic activities.

“Shops, houses and recreation centres will be built. Jobs will be created and poverty reduced. With accessibility, education, health care and social services become more readily available to the rural population.

“Basically, quality of life improves. This is what the Belt Road initiative is all about,” he said.