Caixin
Aug 20, 2018 02:55 PM
WORLD

Mahathir Aims for ‘Win-Win’ in Reducing Chinese Projects

Malaysia is seeking to reach a mutually beneficial outcome with Beijing as Southeast Asia’s third-largest economy plans to postpone or scrap some mega projects funded with money borrowed from China, Prime Minister Mahathir Mohamad said Monday.

“Malaysia has been borrowing a lot of money from China. And now it’s faced with the problem of repayment of the loans, and that is why we have to maybe reduce or postpone some of the projects in Malaysia,” Mahathir told Caixin in an interview. “So it’s nothing to do with Chinese business. It is just our need to reduce the amount of money we borrow from other countries.”

Mahathir kicked off his first state visit to China on Friday after resuming power in May, in a much-watched move that analysts said could put bilateral ties to the test as the fate of Chinese deals in Malaysia hang in the balance.

The troubled projects under the spotlight include a major section of the $20 billion East Coast Rail Link being built by China Communications Construction Co. Ltd. and financed by the Export-Import Bank of China. Malaysian authorities told the builders in July to “immediately suspend” construction, which is 13% completed.

The 93-year-old leader said his government, saddled with over 1 trillion ringgit ($243.5 billion) of debt, can’t repay the Chinese loans. “We want to have a win-win situation for Malaysia (to) gain from the postponement or from the dropping (of) the project and China also doesn’t lose.”

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Malaysian Prime Minister Mahathir Mohamad gestures at an exclusive interview with Caixin reporters on Monday in Beijing. Photo: Ding Gang/Caixin

He said the negotiations will take time and that he believes China is able to help Malaysia to tackle the issues.

While reiterating his view that Malaysia doesn’t want an influx of new migrants by selling land to foreign property developers, Mahathir said he looked forward to overseas investors that bring in technology and buoy local employment.

He also said Malaysia wants to tap into Chinese companies’ technological know-how.

“China has got the new technologies from which we can learn,” Mahathir said. “And Chinese companies have shown that they can grow very big. They can be world players. So we want to learn that from them.”

Mahathir’s exclusive interview with Caixin follows. The interview has been edited for clarity and length.

Caixin: What do you expect to achieve during this visit to China? And what is the new Malaysia government’s vision about Malaysia-China relations?

Mahathir: I want to resuscitate the whole relations within China and Malaysia, which were formulated during my first term as prime minister — that is to say, we have to be friendly countries and that we do not look into the politics. Instead, we look at the good relations that can be established with China, because China is a big country, a big market, and Malaysia is a trading nation, we need markets.

Before you came here for the visit, had any consensus been made between the two sides, especially on the multibillion-dollar East Coast Rail Link or gas pipeline projects?

Malaysia has been borrowing a lot of money from China. And that is why we have to maybe reduce or postpone some of the projects in Malaysia, because we cannot pay — we don’t have the money. So it’s nothing to do with Chinese business. It is just our need to reduce the amount of money we borrow from other countries.

So until now, do you think the Chinese side has shown enough understanding, respect and willingness to work together with your government to tackle these concerns?

I can see China’s understanding of the problem of Malaysia, and I think that understanding is very good, because that means that we can resolve the problem. The problem mainly centers around the amount of money we borrow from China because we can’t repay the loan, so we need to reduce the loan, and we need perhaps to cancel or postpone the projects which involve borrowing from China.

What’s the potential timetable to see an outcome for the negotiation?

Well, firstly, we need to explain what the problem is all about, and to seek the understanding of China. Of course, the details will have to be worked out later, possibly at the official level, but at this moment, we need to have the understanding of the leaders of China so that they do not misunderstand that this is a stance against China, it is not against China. We want to establish good relations with China, friendly relations. But we have these financial problems with China which it can help us resolve.

How long do you expect the process will take?

Well, it may take some time. But of course these are very big loans, and of course, when you don’t proceed with the project, the contractor and all that will suffer. We want to have a win-win situation for Malaysia (to) gain from the postponement or from the dropping (of) the project and China also doesn’t lose.

It is your second time to be the prime minister. What are your new challenges and new missions?

The challenge this time is very big. The last time when I became prime minister, the country was in good shape, the finances were OK, and the machinery of government was working very well. But this time I find that the country is burdened with huge borrowing, more than 1 trillion ringgit. At the same time, we find that the machinery of government has been destroyed. It’s not able to function well because of the previous government’s political use of the machinery of government. So we need to resolve this administrative machinery before we can get things done properly.

Since the early phase of Chinese economic reform, Malaysia has introduced its experience of industrialization and helped China integrate into the world. But for the last decade, investment from China to Malaysia has surpassed that from Malaysia to China. How do you see that?

Well, China began to industrialize much later than Malaysia. Malaysia was ahead. So at that time, of course, Malaysia was able to look into helping China to industrialize. But now, China has overtaken us and passed us already because China has acquired new technologies and it has become very wealthy. So it can not only spend money in China to industrialize, but also invest in other countries. So now you see the investment flow is from China to Malaysia, but that is all right. We accept that, except we must define what is in that foreign direct investment. For us foreign direct investment means bringing in capital, technology, setting up plants in Malaysia, and employing Malaysians. That is foreign direct investment that will benefit us. But we don’t think that developing a land in Malaysia is foreign direct investment because Malaysians can do it by themselves.

During your election campaign, you criticized the real estate project in Johor Bahru because the prices were too high and that might bring too many foreigners to the country. How do you plan to resolve the problem? (Editor’s note: The project refers to Country Garden Holdings Co. Ltd.’s construction of a $100 billion sprawling complex of high-end residences and hotels in the peninsular Malaysian state bordering Singapore.)

That particular project is a very high-value project, and it’s not meant for Malaysians, Malaysians cannot afford, especially the indigenous people. So these developments are to bring foreigners to stay there, but no country wants foreigners to come and stay in the country permanently. You see, even (U.S. President Donald) Trump doesn’t want the Mexicans to come into America, or the Europeans now don’t like the Syrians to come into Europe. So we are the same. We are a small country. If a lot of foreigners come in, then we lose control of our country. That is why we don’t approve of that project. We will not allow foreigners to come and live in Malaysia. They can come on holiday. That’s fine. But to live in Malaysia, it is not something that we would welcome.

It is almost 40 years now since you proposed the “Look East Policy.” Looking at today’s development, do you see any major differences compared to your original vision in the ’80s?

At the time when we introduced the “Look East Policy,” the growth was mainly in Japan, subsequently South Korea, and now it is China. So our “Look East Policy” can apply to all the three major economies of Northeast Asia. So we find now that China not only has a lot of wealth capital to invest, but also has got the new technologies from which we can learn. And Chinese companies have shown that they can grow very big, they can be world players. So we want to learn that from them.

For over four decades, you have been a major player and witness of the geopolitics in Southeast Asia. How would you evaluate the transition of roles of China, Japan and the United States in this region?

From the very beginning, I saw that the Eastern countries will be able to compete with Europe and America because their cost is much lower. At the same time, of course, their people are quick to learn new technologies. That was at the beginning. Now it is obvious that they don’t only learn from the West, they themselves develop new technologies. So there are a lot of reasons why we think the East will dominate the West in the future.

Do you find the similarities between yours and U.S. President Donald Trump’s economic approach in terms of the relationship between the government and private sector?

No, we are not like Trump at all. We are very open. We like foreign investment in our country. And we also have Malaysians who invest in foreign countries. Trump does not want that, he wants everything to be done in the United States, to bring back all the industries to the United States. That is not our strategy. So we are different from America at this moment. … We are more like China, where the government does give a lot of support for the private sector. One time we formulated the idea of “Malaysia Incorporated,” in which the government and the private sector work together for Malaysia as a corporation. So our strategy and our way of doing things is not at all like America.

China’s multilateral program such as the Belt and Road Initiative has now entered its fifth year. What’s your take on this?

Well, there may be some suspicions about the intention of China to have this “One Belt and One Road,” but for us we see different things about that. Because China depends on the sea route to bring in goods from the West to China and to export Chinese goods. So keeping the sea lanes open is very important for China. So we must be open to all shipping because Malaysia also depends upon the sea lanes being open. We want these passages to remain open for all shipping, so that we also can benefit. But if we restrict shipping from using the sea route then it will be bad for Malaysia, it will be bad also for China.

Under the threat of trade conflicts among the major economies, how do you see the future of multilateral programs?

Whether we like it or not, the world has now developed into a village because of ease of communication. You can travel anywhere now within hours and you can communicate right now with anybody around the world immediately. So we are now very close neighbors. So multilateralism will happen, whether you like it or not. It has to happen because relationship is very easy now and we realize that the world has become the market for everyone. So we need to trade to enrich (ourselves). So we can only do that if we accept multilateralism. There should be no dominance of the West or the East or whichever region. We are now the members of a single community, which is the world.

If there’s only one theme that you can interpret or explain to the people outside Malaysia, what will be the biggest difference between your first term as a prime minister and the second term now?

We want Malaysia to be integrated with the rest of the world. We want Malaysia to be accepted as a democratic nation and we want also to be able to reach other countries in the world freely. So we accept to a certain extent free trade. But free trade between powerful countries and weak countries can’t be the same. Weak countries will have to protect themselves because they are just growing. Just like China when it was growing, it doesn’t allow foreign companies to take over their business in this country. So we too would like to. Because Malaysia is weaker than China, weaker than Europe, weaker than America — we would like to be allowed some protection for our infant industries. So that is the way that multilateralism will survive. But if you see everything is equal, you can come into our country and we can go into the partner countries, but they are big and we have nothing to sell them. They have a lot of things to sell to us, so there will be imbalance in the trade.

Contact reporter Jason Tan (jasontan@caixin.com)

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