DECEMBER 2017 FORBES ASIA | 21OBOR projects were actually conceived years ago but that only
Chinese state-owned enterprises had the means and willingness to
make them happen. “A lot of this is our own initiative. They come
at the right time with the right conditions and the right kind of
attitude,” he says. Indeed, the recent influx of Chinese FDI has un-
derpinned a spell of healthy economic growth: Malaysia’s annual
GDP growth rate has averaged 5.7% since 2010, with the World
Bank predicting a similar rise in 2017.
Still, overdependence on Chinese economic patronage could
make Malaysia vulnerable to a sudden economic downturn or
policy shift in China. This became clear in March, when Beijing
unleashed aggressive measures to clamp down on capital outflows.
In Malaysia this arguably contributed to the collapse of the Bandar
Malaysia buyout. It also threatened to deprive Forest City of ac-
cess to its primary target market, leading some to predict that the
project will become a giant white elephant.
Yu Runze of Country Garden Pacificview claims that the im-
pact on Forest City so far has been minimal, with just 60 buyers in
China—less than 0.5% of the total—asking to cancel their book-
ings as a result of new capital regulations. “There was some initial
impact, but we have been able to balance this, and the project is
going smoothly because of this focus on the global market,” he
says. “We are in year one of a 20-year project and remain commit-
ted to the success of this venture.”
Judging by the crowds at the sales office on a recent Satur-
day, interest remains healthy. Large groups of foreign visitors
trouped through the showroom, buying up souvenirs like dried
durian and posing for photos on the manmade beach facing
Singapore. At the far end of the beach, where the landscaping
petered out amid a few scraggly palm trees and a corrugated
iron fence, dredgers were at work creating what will eventually
become the project’s second island.While Forest City may have ridden out the storm this time,
concerns about the wisdom of Chinese mega-investments are un-
likely to go away. Abdul Majid, the former ambassador, says small
countries like Malaysia will each need to learn how to ensure that
the flood of OBOR capital serves them as well as it does Beijing.
“It’s up to us now,” he says. “The Chinese can deliver a beautiful
port, they can deliver a beautiful train—but if the recipient coun-
tries don’t take care about the contents, if they’re not prepared for
it, they might have an empty port or an empty train.”troubled state development fund 1Malaysia Development Berhad
(1MDB). Again Dr. Mahathir has been in the forefront. In 2016
the now 92-year-old quit the ruling United Malays National Or-
ganization (UMNO)—the keystone of Malaysia’s ruling coalition
since independence in 1957 —and formed a new Malay nationalist
party, which will lead the PH coalition into battle against Najib at
the election, due to be held before August 2018.
With Najib under fire for the alleged mishandling of 1MDB,
which has chalked up multibillion-dollar losses and is subject
to investigations around the world, Mahathir has accused his
former protégé of turning to the quick fix of cheap Chinese
credit to the detriment of Malaysia’s long-term interests. “The
present government is fond of borrowing money without
thinking about repayment,” says Mahathir, who denies claims
that his own long tenure was marked by cronyism and corrup-
tion. “The East Coast Railway is not necessary.... The returns
will not be enough to repay the loan.” (Najib has consistently
denied taking money from 1MDB or any other public funds).
Adding weight to the claims of opportunism is the fact that Chi-
nese firms have stepped in to buy up pieces of the troubled 1MDB
fund. In 2015 China General Nuclear Power acquired Edra Global
Energy, a power company belonging to 1MDB. Later that year,
Iskandar Waterfront Holdings and the China Railway Engineering
Corp. agreed to purchase a 60% stake in the Bandar Malaysia proj-
ect, another component of 1MDB. (The $1.7 billion deal fell through
in May, but seven Chinese state-owned entities are reported to be
among the nine firms now bidding for the project.) Last year the
Financial Times also reported that China was helping Malaysia repay
a $6.5 billion debt to a state-owned petroleum firm in Abu Dhabi.
The controversies over Chinese investment in Malaysia mirror
the dilemma facing most of its Southeast Asian neighbors: how to
reap benefits from China’s meteoric rise without being sucked into
Beijing’s economic orbit. For his own part,
Najib has defended his government’s dealing
with China. In March he said that the ECRL
would be a “game changer” that will contrib-
ute 1.5% growth annually to the three states
on Malaysia’s east coast. On another occa-
sion he asked, “What’s wrong with us foster-
ing closer ties with China, which is expected
to be the biggest economy in 2030?”
Some observers agree. Abdul Majid
bin Ahmad Khan, a former ambassador to
Beijing who now chairs the Malaysia-China
Friendship Association, says that since rela-
tions were established with China in 1974
under Najib’s father, Abdul Razak Hussein, Malaysia has tried to
maintain good relations with all countries. In the 1970s, he says,
Japanese firms came and invested in Malaysia. Then came the
so-called Four Tigers: Hong Kong, Singapore, South Korea and
Taiwan. “Now it’s China’s time,” he says.
Others argue that even if OBOR projects exceed Malaysia’s
needs in the short-term, they could lay the basis for sustained
future growth. Dr. Ngeow of the University of Malaya says that
the ECRL, the Kuantan port project and many other Malaysian
HUANG HUIKANG, CHINA’S OUTGOING
AMBASSADOR, SAID THAT THE
SINO-MALAYSIAN RELATIONSHIP
“SHOULD MOVE UP OVER THE NEXT
40 YEARS TO REACH MUTUAL
DEPENDENCY, LIKE LIPS AND TEETH.”F