Tun M Meets Xi Jinping

Dr M-Xi Talks to Hit Beyond Troubled Projects

WHEN Prime Minister Tun Dr Mahathir Mohamad visits Beijing next month to meet with China’s President Xi Jinping, the two leaders are likely to resolve most of the contentious issues that threaten to undermine bilateral cooperation.

The pair, who share the same goal to rid their countries of corruption, are expected to exude political wisdom and pragmatism when holding talks on bilateral and regional issues, according to China-Asean watchers.

Xi is expected to extend a warm welcome to Dr Mahathir, whom he had in 2013 described as “the old friend of the Chinese people” for his contributions to strengthen China-Malaysia ties when he was Malaysian premier for the first time in 1981-2003.

The Chinese President paid a courtesy call to Dr Mahathir on Oct 5, 2013, during the former’s official visit to Malaysia to hold talks with former premier Datuk Seri Najib Razak.

Although Dr Mahathir was then a former PM, this visit by Xi was reported by China’s CCTV. During his previous rule, the Malaysian leader had lent support to Beijing on many international issues.

“Mahathir’s plans to visit China show that he thinks highly of China and would like to deepen cooperation with Beijing,” Gu Xiaosong, an expert on Asean studies at the Guangxi Academy of Social Sciences, told China’s Global Times last weekend.

“Tun Mahathir has good personal relations with President Xi and he understands the importance of guanxi. But while some issues can be settled by the two leaders, others will have to go through diplomatic channels,” says a source close to Dr Mahathir.

Economist Lee Heng Guie, executive director of Socio-Economic Research Centre (SERC), sees the urgency to resolve outstanding issues concerning China-linked mega projects.

“The focus of the two leaders will be on local projects involving China, and if necessary, renegotiate the terms. Ultimately, Malaysia hopes to strike a fair and mutually beneficial deal with Beijing without straining relations,” Lee tells Sunday Star.

Datuk Keith Li, president of the China Entrepreneurs Association in Malaysia, believes the bilateral meeting will be cordial despite problems facing Chinese projects.

He states: “During this visit, Mahathir might show political wisdom to clear his ‘anti-China’ image by welcoming Chinese investments while seeking Xi’s help on the review of China projects in Malay­sia. Both leaders will give face to each other as they do need each other’s support internationally.”

Dr Mahathir, once the idol of the Chinese nationals for his rhetoric against the West, gave the impression he had become ‘anti-China’ before the May 9 general election.

He had spoken of his concerns over high borrowing from China to build rails and other infrastructure, and had threatened to cancel or review Chinese projects in Malaysia if he came into power.

But he had also said he supported the Belt and Road Initiative of China and disclosed that he had written to Xi previously “on the need for the land connection with Europe.”

And after he became the premier for the second time on May 10, he has toned down his harsh rhetoric on China.

Without a doubt, the two leaders will have to address critical issues on Chinese projects in Malaysia – in particular the RM55bil East Coast Rail Link (ECRL), which was issued a stop-work order earlier last week.

The other two projects that have suffered the similar fate are the Multi-Product Pipeline (MPP) and the Trans-Sabah Gas Pipeline (TSGP) projects, which cost about RM9.4bil for their construction.

Contracts involving China-linked projects, approved by the previous government, are now under intense scrutiny. Many clauses are found to contain China-tilted terms, with some smacked of corruption.

In the case of ECRL, Finance Minister Lim Guan Eng disclosed last Monday that the final cost of constructing the ECRL would total RM81bil rather than RM55bil stated by the past administration.

In addition, the payment mode for the ECRL construction, undertaken by state-owned China Communications Construction Company (CCCC), defies customary practice as payment is made based on timeline, not work progress.

There is also suspicion that some payments for the ECRL construction would be used to retire debts of 1MDB, which is the most explosive corruption scandal responsible for bringing down the Najib government in the May 9 polls.

As ECRL is a key strategic project under China’s ambitious Belt and Road Initiative in Malaysia, analysts believe Beijing will be prepared to renegotiate the terms of this government-to-government project.

The ECRL, once completed, would enable China to bypass Singapore when transporting its exports and imports from Port Klang to Kuantan Port, and vice-versa.

Adjacent to the port is the Malaysia-China Kuantan Industrial Park, another G-to-G project that houses major Chinese industries including export-led Alliance Steel.

“Since President Xi has adopted a strong anti-graft stance, he should be happy to meet Dr M who had won the election on pledges to rid Malaysia of kleptocracy.

“President Xi might take the opportunity to show the world and his nationals that Beijing does not support tainted deals, particularly those under Belt and Road Initiative,” says a China-watcher in Kuala Lumpur.”

The Belt and Road Initiative was propounded by Xi in late 2013, after he became president.

Dr Ngeow Chow Bing, deputy director of the Department of China Studies in Universiti Malaya, believes problems of the mega projects will not stand in the way of promoting Malaysia-China relations.

China views Malaysia as a trusted friend and has upgraded this small but important neighbour to be its “comprehensive strategic partner”. Malaysia has been accorded preferential treatments.

China’s investments began to flow into Malaysia after this upgrade. Total annual bilateral trade hit US$100bil (RM4.04bil). FDI from the mainland now ranks high among foreign investments.

On the back of close ties, more Chinese tourists have flooded into Malaysia for durian, beaches, culture and food.

Dr Ngeow says: “I think both sides understand well the importance of close bilateral relations… Renegotiating the terms of agreements of certain mega-projects will be a difficult issue, but I don’t think both sides want to be bogged down by these and would want to move on.”

Dr Oh Ei Sun, another China watcher, says Malaysia could take this opportunity to tell China that its concept of building railways to spur economic activity might not be fully applicable to Malaysia now.

Although Dr Mahathir supports ports and rail connectivity and needs Chinese FDI, his current priority is to bring down Malaysia’s national debt estimated at RM1 trillion.

What Malaysia needs are direct investments, in particular from China’s high technology sector, to help generate jobs and stimulate the real economy. Hence, Dr Mahathir is happy to see Alibaba’s entry into Malaysia.

The academic says, “I expect both leaders to be open and frank about their expectations and preferences as they embark on the next stage of development in bilateral ties. I am optimistic ties will hit another new high.”

While in Beijing, Dr Mahathir is likely to reiterate Malaysia’s stand to support the Belt and Road Initiative to boost international trade and economy via rail and port connectivity.

As a new premier, Dr Mahathir is expected to seek reaffirmation on China’s past pledges made to Najib to buy Malaysian palm oil “without upper limit”, encourage its tourists to visit Kuala Lumpur, support the Malaysian economy and buy government bonds (MGS).

As China is Malaysia’s largest trading partner and key investor, Malaysia’s economy needs Beijing’s support.

The new Primary Commodities Minister Teresa Kwok has urged Beijing to turn to Malaysian palm oil, now that it is much more expensive for China to buy US soybean oil amid the US-China trade war tension.

Palm oil exports and prices have fallen in recent weeks due to weakness in demand and jitters over the trade war. This has affected the livelihood for over one million Malaysians.

China is Malaysia’s third-biggest buyer of palm oil and palm oil-related products in 2017, importing 1.92 million tonnes of palm oil. It used to be the biggest buyer.

As tourism can have an immediate impact on Malaysia’s revenue, analysts believe a prompt removal of visa requirement for Chinese nationals will excite the local tourism sector.

If Xi demonstrates goodwill by advising his people to holiday in Malaysia, Chinese tourists could easily rise to six million a year, up from under three million last year. This is because Chinese have great respect for their leader.

The potential for Malaysia to grab more outbound Chinese tourist is high because only 10% of China’s 13 billion people possess passports. The first outbound traveller normally heads to Southeast Asian nations.

Although Malaysia is only a small nation, it is strategically located in Southeast Asia and China may expect this Asean neighbour to reiterate its support for Beijing on the international front.

This expectation on Dr Mahathir is realistic, given that he is still seen as maintaining his pro-Asia stance.

But on South China Sea, Beijing may have to adjust its expectations on Kuala Lumpur.
The new Malaysia has stated its opposing stand to the presence of foreign warships in South China Sea.

Defence Minister Mohamad Sabu has said that the presence of various warships may lead to military conflict in the resource-rich waters, in which Malaysia and several other neigbours have laid overlapping claims with China.

It is clear that US warships are “foreign”, but it is unclear whether China’s warships are considered as “foreign”.

As recent as June 15, China’s navy carried out drills in the South China Sea to simulate fending off an aerial attack. This followed the United States Navy freedom of navigation operation in January close to Scarborough Shoal that China claims is her territorial seas.

Although under the previous administration Malaysia was largely silent on China’s military build-up in the South China Sea, this stance may not be shared by the new regime.

In dealing with China on South China Sea, Asean as a whole has been split. In past meetings, the grouping had failed to express a joint stand in its communique.

“The meeting of Tun M and President Xi may present a historic opportunity for China to foster a sustainable order, which is not necessary against the interests of China. Overall, I am cautiously optimistic on this issue,” says Dr Ngeow.

But he believes Asean affairs will not be an obstacle for the two countries to deepen their relations.

According to Global Times, it is a view shared by analysts in China: China-Malaysia relations will not be affected by differences on South China Sea issues.