After Malaysia-China’s RM144b deals, pundits say more investments possible

Prime Minister Datuk Seri Najib Razak shakes hand with China President Xi Jingping at Diaoyutai State Guest House in Beijing, November 3, 2016. — Bernama pic
Prime Minister Datuk Seri Najib Razak shakes hand with China President Xi Jingping at Diaoyutai State Guest House in Beijing, November 3, 2016. — Bernama pic

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KUALA LUMPUR, Nov 3 — Malaysia could see more money being pumped in for investment here if its recent multi-billion-ringgit deals with China work out and if conditions remain favourable, pundits said.

Economist Diana del Rosario said the 14 agreements for planned investments signed earlier this week between Malaysia and China will deepen Malaysia’s “economic and political relations with China”, adding that Malaysia’s economy is likely to benefit in the medium-term from these projects.

“China’s proposed investments in Malaysia would be positive for Malaysia’s growth prospects, but more likely in the medium term as these pledges tend to have long gestation periods.

“Perhaps, over time as well, successful implementation of these pledges would attract more FDI into Malaysia,” the Singapore-based economist at Deutsche Bank told Malay Mail Online today, using the acronym for foreign direct investment.

On Tuesday, Malaysia and China made history by signing 14 agreements for proposed investments worth almost RM144 billion, including projects involving property development, steel production, solar cells production, bird’s nest, a port and a technology park.

Prof William Case said there does not appear to be much investment from China in the manufacturing sector, which is the real driver of employment, and noted that there is already a global oversupply of solar panels and steel, but also predicted more investments from China in other sectors given suitable conditions.

“So long as China’s economy remains able to export capital, and so long as economic opportunities and political benefits are to be found in Malaysia, I can foresee more investment, particularly in sectors like property, infrastructure, and some services like banking and e-commerce,” the academic at City University of Hong Kong’s Asian and International Studies department told Malay Mail Online.

Case said Malaysia’s indebtedness and dependency on China will deepen as the latter’s state-owned companies gain sway over “large parts of Malaysia’s infrastructure, a foothold in its banking sector, and stakes in vital property markets”.

Raising the question of what the economic superpower’s investments will mean for local quotas for ethnic Malay ownership and employment in businesses, Case said Malaysia would have to watch out for possible risks to ties between different local ethnic communities.

Universiti Malaya’s (UM) Dr Ngeow Chow Bing said that any increasing economic relationship that Malaysia has with another country — including China — is “good”, noting that it just happened that China is currently Malaysia’s fastest growing economic partner.

“There are risks of course. Chinese investors may create pressure for local competitors. China-invested projects may not trickle down to benefit local businesses. But in general, we welcome China’s FDI and therefore we have to manage them,” the senior lecturer at UM’s Institute of China Studies told Malay Mail Online when contacted yesterday.

Ngeow noted China’s foreign direct investment into Malaysia can provide much benefits, citing as example telecommunications equipment firm Huawei, which set up a research and development centre here and worked together with local scientists and engineers.

“Many of the incoming investment is targeted at the infrastructure sector. If China’s investment in this sector indeed can build up Malaysia’s infrastructure (and not just some “white elephant” projects), certainly that will be good too, for infrastructure is the foundation of sustainable economic growth,” he said.

South China Sea

With Malaysia already far less assertive than some of its Southeast Asian neighbours in defending its stake in the South China Sea, Case said Malaysia’s growing indebtedness to China will make it even “less assertive”.

Ngeow said Malaysia has already taken on a relatively less confrontational policy when dealing with the territorial disputes in the South China Sea well before the recent pumping in of China’s investment, adding that Malaysia would have even less incentive to change this stance as economic ties with China deepen.

Researcher Shahriman Lockman indicated it would likely be status quo with no fundamental changes in the South China Sea.

“All those naval and coast guard vessels of various countries are still out there, shadowing each other; construction is still taking place on China’s artificial islands; and the competing claims aren’t likely to be resolved in the near future.

“So the issues involved are incredibly complex and involve parties other than China and Malaysia. Let’s not allow a seven-day visit to distract us from what takes place on other days of the year,” the senior analyst in the Institute of Strategic and International Studies’ (ISIS) Foreign Policy and Security Studies Programme said.

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