‘It is not about the Chinese’: Malaysia’s Mahathir blames previous government for debt to Beijing and project woes

Malaysian Prime Minister Mahathir Mohamad on Sunday pinned blame for the large debt his country owes China squarely on his predecessor Najib Razak on the eve of crucial talks with top Chinese leaders, during which he will try to renegotiate the terms of over US$20 billion of Beijing-backed projects.

Diplomatic insiders say the 93-year-old leader’s comments in a forum with the elite China Entrepreneur Club put on show the savviness he is likely to employ when he meets President Xi Jinping and Premier Li Keqiang on Monday.

By blaming Najib and all but absolving Beijing of pushing Malaysia into a debt trap, observers say Mahathir is likely to have strengthened his hand in his push to drastically cut the costs of rail and gas pipeline projects tendered to Chinese companies by the former premier.

“It is not about the Chinese, it is about the Malaysian government,” Mahathir told the forum, referring to Najib’s administration, which he defeated in a May election.

“They borrowed huge sums of money and now we have problems trying to repay the money that they have owed. That is not foreign direct investment,” Mahathir said, responding to a question about the future of Chinese infrastructure projects in Malaysia.

“That is Malaysians playing around with money, not even doing proper feasibility studies and due diligence before going into business,” he said. “That is why we have to relook at these borrowings and these projects which in any case would not be beneficial for our economy. Maybe later they could, but … the borrowings by the Malaysian government, not only from China but also from other sources is so huge that we are having difficulty trying to repay the loans we have taken.”

He added: “We are not against Chinese companies but we are against borrowing money from outside and having projects which are not necessary and which are very costly.”

The Malaysian premier made debt reduction the top priority after coming to power.

According to his officials – from the now-ruling Pakatan Harapan coalition – total national debt stands at over 1 trillion ringgit (US$243 billion).

Najib disputes the figure, saying he left the economy far better off than Mahathir is letting on.

Currently awaiting trial for criminal charges linked to the 1MDB scandal, Najib is also accused by Mahathir of being too lax in allowing the Chinese projects: the US$20 billion East Coast Rail Link being built by the Chinese Communication Construction Company and gas pipelines worth US$2.3 billion to be built by the China Petroleum Pipeline Bureau. Mahathir suspended both projects in July, citing their high costs.

Kai Ostwald, a Malaysian politics observer, said while Mahathir was more strident in his criticism of China before the election – even accusing Najib of ceding sovereignty to Beijing – “economic realities” may have come into play now he is in power.

“Portraying Najib as China’s lackey made a lot of sense politically around election time, especially with the apparent 1MDB connections,” said Ostwald, director at the Centre for Southeast Asia at University of British Columbia in Canada. “But that posturing for Malaysia’s domestic audience has to be squared with economic realities – China is Malaysia’s largest trading partner, and many Malaysians have become at least indirectly reliant on Chinese investment.”

That was apparent at Sunday’s forum as Mahathir urged the Chinese business community to have faith in his new government.

Speaking after a visit to Chinese drone maker DJI’s Beijing headquarters, he said he was amazed that the company had garnered some 70 per cent of global market share despite being relatively new.

“That is the kind of story we will like to see in Malaysia. I believe that by associating with Chinese businessmen and learning about their ways and their systems as well as their ethics, we will be able to achieve the same,” Mahathir said.

The event was one of three forums Mahathir took part in on Sunday.

He landed in Beijing late on Saturday after a short detour to Shanghai from Hangzhou, travelling from the tech hub to Shanghai on the “Fuxing” train, which is billed as the world’s fastest.

Apart from renegotiating the infrastructure deals, trade issues, strategic ties and the South China Sea dispute – which both countries are party to – are expected to be discussed in Monday’s meetings.

With the economy on Mahathir’s mind, the sea dispute is only likely to be discussed cursorily, observers say.

“With about 45 minutes and about an hour with Li Keqiang and Xi Jinping respectively, Mahathir may not be able to go into specifics, beyond generally advocating for calm in the Malacca Strait and South China Sea,” said Shahriman Lockman, a senior analyst with Kuala Lumpur’s Institute of Strategic and International Studies.

Abdul Majid Ahmad Khan, a former Malaysian ambassador to China and current president of the Malaysia-China Friendship Association, said Mahathir is likely to approach the talks with long-standing foreign policy principles he crafted during his first stint in power from 1981-2003, emphasising his country’s independence, pragmatism and ideological neutrality.

One other matter that may be discussed is Malaysian businessman Jho Low, who has arrest warrants in Malaysia and Singapore over his alleged links to the 1MDB scandal.

Rais Hussin, a top political strategist in Mahathir’s coalition, said he hoped China would hand over Low if he was living in the country.

“Jho Low is not merely a fugitive on the run from Malaysian laws, but is on the Interpol watch list,” Rais told the South China Morning Post. “He should be the top priority of all law enforcement agencies in the world not just Malaysia and China. If he is in China, it is best China hand him over to Malaysia.”