Malaysia 1MDB scandal

Five things to watch out for during Malaysian Prime Minister Najib Razak’s trip to China

PUBLISHED : Monday, 31 October, 2016, 4:05pm
UPDATED : Monday, 31 October, 2016, 4:05pm

After visits from the Philippines and Vietnam’s leaders in recent weeks, China is rolling out the red carpet for another Southeast Asian dignitary, Malaysia’s Prime Minister Najib Razak. Beijing will be hoping to further strengthen its influence in the region during the visit at the expense of the United States after the Philippines President Rodrigo Duterte announced his “separation” from long-time ally the US after his trip to the Chinese capital earlier in October. Here are five issues that are likely to crop up during Najib’s visit this week.

1. Defence deals:

The text of a speech to be delivered by Malaysian Defence Minister Hishammuddin Hussein was posted on Facebook last week saying his government would will sign a contract to purchase naval patrol vessels from China during the trip. The post was later removed.

Malaysia to buy navy vessels from China in blow to US

It would be the first significant defence deal between the two countries and would further upset the United States, a major arms supplier in the region.

2. The 1MDB scandal:

China came to Najib’s rescue last year with a US$2.3 billion deal to buy assets of the scandal-hit state development fund 1Malaysia Development Berhad, or 1MDB, which is at the centre of corruption and money laundering allegations. The infusion of cash helped ease Najib’s concerns over the firm’s mounting debts.

What has Malaysian leader Najib Razak’s China trip got to do with 1MDB?

As Malaysia’s biggest trade partner for the past seven years, investment from cash-rich China is vital to boost the country’s economy and help save Najib from the fallout from the 1MDB scandal.

3. Infrastructure projects:

Over the first three months of this year, Chinese investment in manufacturing in Malaysia reached 1.5 billion ringgit (HK$2.7 billion), making it the largest foreign investor in the sector.

Chinese firms have also secured major deals in Malaysia, including a US$7.3 billion port deal in the city of Malacca. China is widely expected to sign a contract to build Singapore to Malaysia high-speed rail line.

4. South China Sea:

Several nations in Asian lay claim to waters in the South China Sea, including Malaysia, but Najib’s administration has stayed largely silent on China’s increasingly assertive policy in the region. Analysts are watching to see if Chinese investment can secure Malaysian backing on the issue.

5. Pivot away from United States?

Ties between the United States and Malaysia have been strained since the US Department of Justice launched lawsuits linked to money laundering investigations into Najib’s pet project, 1MDB. Further deals and investment with China could put a further strain on ties with Washington.

Additional reporting by Reuters