Mahathir’s China visit boasts immense potential

By Ei Sun Oh Source:Global Times Published: 2018/8/16 20:18:40

Illustration: Liu Rui/GT

When Malaysia's new Prime Minister Dr. Mahathir Mohamad first visited China, it was during his stint as the trade and industry minister. What he saw was a China full of potential as the Cultural Revolution had just ended, bracing for the imminent reform and opening-up. Having spent his formative years during the eve of Malaya's independence from British rule, Mahathir was much influenced by the progressive spirit of the time, with the principles of peaceful coexistence enshrined in the Bandung declaration (to which China was a drafting party) and solidarity among newly independent, developing countries forming the core of his foreign policy beliefs.

During his first term as prime minister in the 1980s and 1990s, both China and Malaysia underwent rapid industrialization, not the least with the help of massive foreign direct investment (FDI). Although Malaysia was the first member state of ASEAN to have established diplomatic relations with China, even earlier than the US, substantive Sino-Malaysian ties could be said to have truly blossomed during the Mahathir years.

Despite ideological differences during the Cold War, Mahathir considered China to be a fellow developing country with which close trading and investment ties should be woven, and common voice of aspiration should resonate together on the world stage.

He visited China almost every other year then, and encouraged Malaysian businessmen to invest heavily in China during the early years of China's reform and opening-up process. The gleaming Shangri-La Hotels found in most major cities in China were shining testimonies to the camaraderie between the two developing countries, as role models for the concept of "prosper thy neighbor."

As years passed by, and even after Mahathir stepped down for the first time, the trade links between China and Malaysia boomed to such an extent that Sino-Malaysian trade volume is now almost twice that between Russia and China, with the latter two being contiguous superpowers.

China is Malaysia's largest trading partner, and Malaysia is similarly often China's largest ASEAN trading partner. The two countries even signed on to become comprehensive strategic partners in recent years.

As China grew its economy to be the world's second largest, and under the aegis of the Belt and Road initiative, Chinese businesses, be they State-owned enterprises or private conglomerates, decided to go offshore to countries in the region.  Many of these businesses went to a friendly Malaysia, and typically engaged in undertaking massive infrastructural projects such as building ports, railways and pipelines, and also property development.

This is a development model that Chinese businesses are familiar with, as the modern Chinese saying goes, "building roads leads to prosperity." Many of these Chinese businesses are enthusiastic about replicating this model elsewhere so that the benefits might spread to other regions of the world.

But that appears not to be the development model familiar to Mahathir. During his former years in power, he was more attuned to the more traditional FDI model in which foreign businesses would invest in developing countries, typically setting up factories or regional headquarters, employing many local employees, and enabling a degree of technological transfer. It was also the model that has worked for Malaysia.

That is why Mahathir warmly welcomed Jack Ma to Malaysia again, for Alibaba would set up its regional logistics hub in Malaysia, not only creating many jobs, but empowering Malaysian small and medium enterprises to take advantage of its massive online trading platforms to sell local goods and services to China and beyond.

As Mahathir came to power in Malaysia again after a May watershed election, his government delayed or put on hold some massive infrastructural projects undertaken by Chinese businesses. It did not do it out of any spite against China, but because the government could no longer afford to continue with these projects. Mahathir would never hold any grudge against China. During his upcoming official visit to China, both countries should iron out their different models of investment.

As protectionism is on the rise and free trade is increasingly being relegated to the back seat, it is equally important for Malaysia and China to reaffirm their close trade ties.

The author is senior adviser on international affairs, Asian Strategy and Leadership Institute, Malaysia.

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