Malaysia: ASEAN Belt and Road risks under scrutiny – 30 Jul 2017

  • Malaysia and other South-East Asian countries have come under China’s close scrutiny for political, financial and legal risks as Beijing intensifies its efforts to review its Belt and Road programmes and control capital outflows.
  • Two weeks ago, a six-member delegation of academics, researchers and foreign affairs officials – members of Beijing think tanks – came to Kuala Lumpur to conduct an independent assessment of the local political situation, legal and financial systems, as well as response towards Belt and Road projects.
  • The 13-16 Jul 17 study tour of the Chinese group came following the 14-15 May 17 Belt and Road Summit in China that had, among others, compiled complaints on Chinese projects and the way the projects were being implemented. According to Citi Research, Malaysia’s port and railway projects may see investments of MYR400bn from China.
  • By sending its officials to conduct independent studies, the Chinese are signalling that their money does not fall from the sky anymore. It is time to rectify the wrongs. Chinese funded investments should look at risks, costs and benefits, just like any other commercial undertakings.
  • Recently, the Chinese Commerce Ministry revealed that 65% of Chinese investments abroad – including Belt and Road projects – had incurred losses. The influx of Chinese investments in the recent two years has sparked a local debate on whether the Government is “selling Malaysia’s sovereignty”.
  • There is also a warning that Malaysia’s debts, just under 55% of the country’s GDP, could balloon due to huge soft loans to be taken from China to implement Belt and Road projects, mainly for railways and ports.
  • On the ground, there is fear that jobs and business opportunities for small businesses may be curtailed as the Chinese bring in their own contractors, managers, workers and even chefs.
  • Zhang said a major task of the delegation was to assess how stable the Government was, and whether there were implementation risks in Chinese projects here. Malaysia must hold its 14th general election before mid-2018.
  • The Chinese experts were also looking into how investments from China were being managed. The unexpected visit of this group shows that China is no longer indiscriminate in dispersing funds for state projects overseas. It also means that overseas investments by its nationals – not just the big corporations – would also have to be properly managed.
  • The scrutiny has come about partly due to China’s tightening of capital controls to prevent outflow of funds into projects that will not contribute to the real economy of the host countries, said Zhang.

External Link : http://www.thestar.com.my/news/nation/2017/07/30/asean-belt-and-road-risks-under-scrutiny-china-is-signalling-that-it-will-not-be-splashing-money-ind/

30-Jul-2017


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