December 2014 31 August 2017 China-Malaysia Relations: Navigating a Complex Geopolitical Sea Part One: Deep Economic Ties Professor Vivian Louis Forbes FDI Associate Summary If Malaysia were a ship, captained by the Prime Minister and crewed by his Cabinet, it could be stated that the ship was on a steady course through a stormy geopolitical sea strewn with islets, reefs and rocks. History will record, perhaps, that by mid-2017, the ship of state was on course, heading towards its stated objectives of Vision 2020 with financial assistance and investments in infrastructure, either direct or indirectly, from the Government of China. In 2007, Ian Storey opined that the relationship between China and Malaysia, by mutual consent, was the best it has ever been. Indeed, the present author argued in 2013 that the Key Points Diplomacy and co-operation have taken the Sino-Malaysian relationship to a new high. China and Malaysia are experiencing considerable annual growth in their two-way trade and China has major investments in Malaysia. China is now Malaysia’s largest trading partner. Malaysia has embraced the Asian Infrastructure Investment Bank and the “Belt and Road Initiative”, both of which will deepen the economic links between the two countries.
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December 2014 31 August 2017
China-Malaysia Relations: Navigating a Complex Geopolitical Sea
Part One: Deep Economic Ties
Professor Vivian Louis Forbes FDI Associate
Summary
If Malaysia were a ship, captained by the Prime Minister and crewed by his Cabinet, it could
be stated that the ship was on a steady course through a stormy geopolitical sea strewn with
islets, reefs and rocks. History will record, perhaps, that by mid-2017, the ship of state was
on course, heading towards its stated objectives of Vision 2020 with financial assistance and
investments in infrastructure, either direct or indirectly, from the Government of China. In
2007, Ian Storey opined that the relationship between China and Malaysia, by mutual
consent, was the best it has ever been. Indeed, the present author argued in 2013 that the
Key Points
Diplomacy and co-operation have taken the Sino-Malaysian relationship
to a new high.
China and Malaysia are experiencing considerable annual growth in their
two-way trade and China has major investments in Malaysia.
China is now Malaysia’s largest trading partner.
Malaysia has embraced the Asian Infrastructure Investment Bank and the
“Belt and Road Initiative”, both of which will deepen the economic links
Beijing’s Powers and China’s Borders, B. Elleman, S. Kotkin and C. Schofield (Eds), Armonk, NY: M.E. Sharpe, 2013. 2 Statistics were verified from the official sources of the two countries and those of international
organisations. There are variations to the values stated here.
per cent of the world’s population and one-third of its gross domestic product (GDP). More
than 110 countries and international organisations attended the BRF. Most wanted, and
agreed, to become active participants. There are detractors and/or opponents – most
notably, India, Japan and the US – but they are, however, presently in the minority.
The Asian Infrastructure Investment Bank
The China-initiated and backed Asian Infrastructure Investment Bank (AIIB) announced on 23
March 2017 that it had approved 13 new members, bringing the total membership to 70.
The establishment of the AIIB could not be more timely and vital. Asia’s rapid growth, which
has averaged 5.4 per cent annually since 2008, particularly in South-East Asia, has put huge
pressure on the infrastructure of many countries, which is in critical need of expansion,
upgrading or both. The region’s rapid population growth, increasing rural to urban migration
and the urgent challenges of climate change, food security and, indeed, national security in
all forms, have combined to make infrastructure constrictions even more acute.4 The AIIB is
led by the Government of China but is not owned by it. The Annual Report indicates the
Board of Directors and their affiliations in the international community. It is an ethical
organisation with zero tolerance for corruption.
That interest in joining the AIIB comes from around the world, not just Asia, affirms the rapid
progress of the institution, a multilateral lender, which will compete, but also partner, with
the World Bank and the regional Asian Development Bank (ADB), founded in 1966, which is
based in the Philippines. The US$100 billion AIIB has notably declined to join the banks.
Loans to Bangladesh, Indonesia, Pakistan and Tajikistan by the AIIB were jointly financed by
the ADB and the World Bank. At the end of June 2017, the Government of Japan began to
show a modicum of interest despite its initial negative reaction, due in part to political
tensions over sovereignty issues in the East China Sea. The President of the ADB, Takehiko
Nakao, attended the 4 May 2017 BRI conference.
Malaysia and the AIIB
In October 2016, the Parliament of Malaysia debated a Bill that would enable the
government to commit to subscribe for a total of 1,095 units that would be worth US$109.5
million. The first of the five instalments would equate to US$21.9 million. The AIIB will
provide advice and network links for Malaysian industries. Membership of the AIIB will
promote and foster bilateral trade, services and investment between Malaysia and China
and maintain and further enhance commercial and other links between Malaysia and China.
There are significant Malaysian key industry sectors and professional services that will
benefit from Malaysia’s endorsement of the AIIB and BRI. This is especially essential to
establish a secure and efficient cross-border “e-commerce investment” and operational
platform to drive and stimulate the OBOR [sic] trade and mutual prosperity.
4 AIIB, ‘Connecting Asia for the Future’ Annual Report and Accounts 2016, and Zhao Hongquan, ‘Could
the AIIB Close Asian Infrastructure Finance Gap?’, paper presented at Belt and Road Initiative: Expanding Co-operation and Addressing Gaps Conference, Maritime Institute of Malaysia: Kuala Lumpur, 25 May 2017.