Malaysia jumping onto Chinese bandwagon, but at what cost?

Xi Jinping has decided to revamp the idea behind the glory days of the Silk Road, which once established the Chinese Empire as the most influential power in Asia.

In 2013, China announced its master project, the One Belt, One Road (OBOR) initiative, for which it laid out a staggering estimate of US$1.7 trillion a year according to the Asian Development Bank. This money was, and is, to be used for development, mainly in constructing infrastructure.

Malaysia recently jumped on the Chinese bandwagon. Most of our current mega-projects like the Malacca Gateway and East Coast Rail Line (ECRL) involve the participation of firms from China.

The question now is, what is at stake here? Are we getting a large slice of cake without any repercussions? This article will mainly focus on the impact that Chinese involvement in Malaysian development projects is going to have on our sovereignty.

The first concern is the South China Sea crisis. It is an open secret that China is trying hard to lay its claims to the territories in the South China Sea.

Recently, efforts to put a lid on China’s man-made island building were put on hold as one of its loudest critics in Asean, Rodrigo Duterte, decided to put such concerns aside in exchange for China pledging US$24 billion for the Philippines. As reported by Reuters, some analysts and Asean diplomats have voiced concerns that China is boosting its military capability in the region.

There is a huge question mark over the Kuantan Port project and Malacca Gateway. The Kuantan Port is strategically located facing the heavily-disputed South China Sea, and the Malacca Gateway is currently facing the busy Strait of Malacca.

As far we know at the moment, a major port project by China that failed is the Hambantota port in Sri Lanka. The port simply could not generate the revenue it needed to survive. It ended up in a large amount of debt, and was eventually taken over by a Chinese firm.

The same concern applies to the Malacca Gateway. A World Bank study commissioned by the government last year showed that a new port on Malaysia's west coast is not necessary, as existing facilities have yet to reach capacity, according to sources. Both operators at Port Klang - Westports and MMC - have also made expansion proposals that would double the port's capacity. This means the port operation is heavily depended upon Chinese ships, as the Malaysian government verified.

What happens if we lose control over the port? Having ownership over the port means the firm can control which ships can land in the port, effectively creating an economic barrier. This is just one of the possible risks that we are facing.

The second concern is about fulfilling China’s Debt Trap. Initially, this was viewed as Western propaganda to scare off countries from getting loans from China. However, since Sri Lanka became the victim of such loans, people have begun taking such views seriously. But how can such loans hamper our sovereignty?

A good case study is Zimbabwe’s Hwange Power Station expansion project, which secured a US$1 billion loan from China that promptly had stringent conditions slapped upon it. The Export-Import Bank of China set out conditions for the release of the loan, which included the specification that the project’s equipment, materials and contractor had to be from China.

This is not meant to scare anyone, but most projects, if they underperform, have to rely upon China’s kind heart. But trends have shown that most of the help comes in form of takeovers or further financial assistance from banks in China, and most of them come with strict conditions.

The issue here is not that we should reject any foreign direct investment, that would be an economic suicide. The bigger picture here is: Do we need the project, and can the project survive without help from China?

What is most concerning is the fact that a lot of the so-called “investments” from China are not real investments, but debt taken up by the Malaysian government from China. Almost all the mega projects are financed by Chinese banks, which will act as debt collectors in the future.

Shady dealings like the one brought up by Najib’s own brother, Nazir Razak, on the overpriced ECRL need to be revised. How can a project with a cost estimation of RM30 billion balloon to RM55 billion? Is this a way for the Chinese government to bail out 1MDB?

These are legitimate concerns which Malaysians must be aware of, as they involve massive debt which can only be paid off in decades to come.

The third concern would be direct foreign policy influence. China has been accused of flexing its economic muscle to ensure foreign policies are crafted in their favour. A prime example would be China using its clout to push Cambodia, Laos, Myanmar, and Thailand to block a united Asean stand against China’s aggressive pursuit of its territorial claims in the South China Sea.

This is further aggravated by the nature of interminable loans that China seeks to create, in which contracts are expected to be given to China in order to wipe out one’s debt. In Venezuela for example, China has preferential access to infrastructure, factory deals, and market access for about US$6 billion per year in Chinese consumer goods. This means that China does not only try to control other countries’ foreign policy, but also other internal policies.

It cannot be disputed that we have benefited from the foreign direct investment brought in from China in several ways. But we should also evaluate the risk, and look at trends from other countries in order to come up with the most comprehensive deal with China. Just because someone says there is a pot of gold at the end of the rainbow, it does not mean you should simply jump without thinking.

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SYED SADDIQ SYED ABDUL RAHMAN is Parti Pribumi Bersatu Malaysia (Bersatu) Youth chief. - Mkini