29 March 2017
Malaysia’s Malacca Advantage
When China's Belt and Road Initiative was unveiled four years ago, Malaysia was among those expected to benefit substantially from the investments on offer and the potential cooperation opportunities. China is Malaysia's biggest export market and its most significant trading partner.
With Malaysia situated along one of the world’s most important shipping routes, the Strait of Malacca, the country is seen as a valuable link in China's broader infrastructure plans. In particular, the country is a key component of the high-speed railway Beijing hopes will eventually run from Kunming down to Laos and Thailand, and on to Malaysia and Singapore.
To date, financing for port expansion and the development of several industrial parks in the country has already been put in place. The Kuantan Industrial Park in Pahang, the country's third-largest state, for instance, has now been backed to the tune of Rmb5.6 billion (US$1.2 billion). Investment in this project, some 40 per cent of which come from China, will go towards building a steel mill and upgrading its port infrastructure.
Transport Hub Project
Plans for another major infrastructure project – Bandar Malaysia, a 197-hectare transport transit district – is underway. Considered one of the most ambitious developments in the greater Kuala Lumpur area, construction is scheduled to begin this year, with completion slated in 30 years. Once operational, it will be the main intercity link for the country's primary rail lines, while also offering access to 12 major highways.
Ultimately, the plan includes the construction of an underwater canal city, which would house a financial centre, cultural villages, lifestyle retail outlets, theme parks and gardens. The consortium handling the Rmb160 billion-project is led by Iskandar Waterfront Holdings, one of Malaysia's leading developers, and CREC Malaysia, a subsidiary of the China Railway Group.
"We have already established the China-Malaysia Port Cooperation Alliance, comprising 11 Chinese and six Malaysian ports,” said Liang Haiming, Chief Economist at the China Silk Road iValley Research Institute in Beijing. “Work has also begun on the Strait of Malacca Maritime Industrial Park and a number of other projects. Given that the Initiative wasn't proposed until 2013, the Belt and Road Initiative has developed very quickly."
Despite its clear benefits for Malaysia, there have been some concerns about the Initiative’s wider implications, especially relating to the environment. One particular flashpoint has been the Kuantan Industrial Park project, where open-pit mines are being used to extract bauxite destined for export to China.
Local farmers have also reportedly staged protests against the mine works after some of the durian farms are said to have been affected by contaminated air. Another major concern has been the amount of Chinese investment on offer and the terms on which it is being supplied. One body keen to regulate the country's financial dealings with the mainland has been the Malaysian Chinese Association (MCA), a political party that forms part of the ruling Barisan Nasional coalition.
"China is investing in our ports, railways and in the Kuantan Industrial Park,” said Datuk Seri Liow Tiong Lai, President of the MCA. “The cabinet has decided, however, that Chinese investors must use local materials and engage local industry players as a way of ensuring that we are driving our own economy forward."
There are also concerns that Chinese inbound investment still falls short of outbound investment to the mainland. "In 2015, Chinese companies invested Rmb10 billion into Malaysia,” said Datuk Chua Tee Yong, Vice-President of the MCA and the country's Deputy International Trade and Industry Minister. "At the same time, though, Malaysian companies were investing Rmb30 billion into China."
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