By TK Chua
The second finance minister, when responding to CIMB Group Holdings Bhd chairman Nazir Razak’s comment to be cautious of investments from China, said China is the only major economy in “investment mode” now.
He sees no other country doing the same thing as China, implying that Malaysia has no choice but to rely on China.
I think the response by the second finance minister was too simplistic and sweeping.
For any investment, including infrastructure investment, viability is the key. We do not invest simply because loans are readily available. We do not invest simply because our revenue projection is good and we are able to pay back the loans when due, what more as Malaysia is not in the best financial position right now.
We invest when a project is viable and feasible. Feasibility studies will ensure that both costs and benefits are properly and meticulously worked out.
How did we work out that the East Coast Rail Link (ECRL) is going to cost RM55 billion? How did we work out that the potential benefits, including nebulous social benefits, are worth more than that? Did we have international tender and bidding on this project?
China may be in “investment mode” (although I am not quite sure what exactly this term means), but did China “invest” or “lend” us the money for the project? As a qualified accountant, I am sure the second finance minister knows the difference between project ownership and risk burden.
It is probably true that China lends to us generously but the loan is tied to China being in charge of implementation. Hence, what employment and multiplier effects are we talking about here when we have Chinese engineers, technicians and managers on the higher end and Bangladeshi workers at the lower end? Yes, Malaysians will probably get some “benefits” by selling sand, granite, food and drink to them.
Loans are not investments. Ultimately, loans must be repaid, regardless of the feasibility. If loans are wasted, misused or squandered in nonviable projects, creditors still expect repayment. China will expect repayment, whether or not the ECRL is a white elephant.
TK Chua is an FMT reader
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