Malaysian Prime Minister Mahathir Mohamad made history after being elected Prime Minister in May this year. It marked the first time since Malaysian independence that incumbent party Barisan Nasional lost its hold on the Malaysian parliament. The election also made Mohamad the oldest currently serving state leader in the world at 92 years old. With a pledge to take on alleged rampant corruption in Malaysian politics, Mohamad’s rise to power also looks like a potential threat to Chinese projects in the country—many of which may be connected to the previous administration’s questionable practices. At the same time, Malaysia wants to attract more Chinese tourists. Things may turn out complicated.
At the center of the corruption scandal in Malaysia is 1Malaysia Development Berhad (1MDB), a strategic development company owned by the Minister of Finance (Incorporated) intended to promote strategic development by “forging global partnerships and promoting foreign direct investment.” The company is believed to have been used to steal state funds for the benefit of former Prime Minister Najib Razak and his cronies. In a lawsuit filed by the U.S. Justice Department, it’s stated that funds in excess of $3.5 billion have been stolen from 1MDB’s state-owned fund.
Malaysia changed its China-friendly former Prime Minister for a Prime Minister skeptical of prior dealings with Chinese projects
During Najib Razak’s reign, many things China blossomed in the country. Razak was an outspoken supporter of China’s so-called One Belt, One Road (OBOR) initiative, and facilitated billions of dollars’ worth of Chinese investments in Malaysia. Projects include everything from ambitious infrastructure projects like the East Coast Rail Link (ECRL), to major real estate developments like the “Forest City”—sold to Chinese private investors as “the next Shenzhen.”
It goes without saying that Malaysia, more so than many other countries in Southeast Asia, quickly became a tourism hotspot for Chinese travelers as well. This is to the extent that Chinese tourists have even been blamed for causing Malaysian nationals to be priced out of the durian market—due to Chinese tourists supposed love for the tropical fruit. In 2017, Malaysia received some 2.28 million Chinese visitors, less than the 3 million it had hoped to attract—and light years away from former Tourism Minister Nazri Aziz’s goal of attracting 8 million Chinese tourists by 2020.
The prior administration wished to boost Chinese tourism, and the current administration is committed to the same goal
While it’s unclear if Chinese tourism is really in jeopardy with Malaysia’s new anti-corruption drive, it has already proven a threat to Chinese projects in the country. South China Morning Post reports that Mahathir has been highly critical of the benefits of certain Chinese projects signed by the previous administration, and that he this week went as far as stopping work—effective immediately—on $22.3 billion worth of Chinese projects in the country. Needless to say, the move puts the future of other Chinese projects in the country in question.
Meanwhile, Malaysia’s new Tourism Minister, Mohamaddin Ketapi, has ensured that his ministry will continue efforts to strengthen Chinese tourism growth in the country.
It’s a complicated balance. The previous administration may have struck questionable deals with China (the projected cost of the ECRL has increased by 50 percent, for example), and having promised Malaysia’s population to go after corruption; some Chinese projects may very well suffer as a result. At the same time, good relations with China are important—not least for Malaysia to keep momentum in tourism.
The finance ministry emphasizes that no particular country is targeted as some Chinese projects are being halted and further scrutinized
“The decisions are solely directed towards the related contractors, relating to the provisions mentioned in the agreements, and not at any particular country,” the Malaysian finance ministry said in a statement reported by the South China Morning Post.
However, it would appear that it’s not only Malaysia that worries about current stress to China-Malaysia relations. Alibaba, a Chinese company with significant interests in Malaysia, is today kicking off “Malaysia Week”—basically a weeklong marketing campaign for Malaysian products and tourism on Alibaba’s e-commerce platforms. “The initiative is part of Alibaba’s continued commitment to Malaysia, its first electronic world trade platform (eWTP) hub outside of China,” the company said according to Malaysia’s The Star Online.
So while interests on both sides are committed to keeping Sino-Malaysian trade and tourism ties strong, other Chinese interests in Malaysia may be under increased pressure. Hopefully, the one doesn’t need to influence the other.