In dealing with China, Malaysia has dared to do something Sri Lanka, Pakistan, and the Philippines didn’t: bring Beijing back to the negotiating table to cut the cost of the investment projects assigned to Chinese contractors.
This week, China agreed to cut the cost of East Coast Rail Link project by one-third.
The new deal is a big win for Malaysian Prime Minister Mahathir Mohamad. He made good on his election campaign promise to re-negotiate China’s investments in the country, which served the interests of Beijing more than they served the interests of Kuala Lumpur.
The East Coast Rail is one of the dozens of China’s infrastructure projects around the world – a bid to write the next chapter of globalization and advance Beijing’s geopolitical agenda.
“China has political and military ambitions to fill this void,” says Xiaomeng Lu, China practice lead at Access Partnership, a global public policy consultancy for the tech sector. “Chinese President Xi aims to realize the ‘great rejuvenation of the Chinese nation’ by projecting power overseas through the “Belt and Road” initiative, which covers both Southeast Asia and Africa. This political economy effort is paired with China’s growing military might in the South China Sea and the African continent, posing a growing challenge to the U.S. security umbrella worldwide.”
The trouble is that many of China’s infrastructure projects aren’t economically viable, as they are built at inflated costs and leave countries involved heavily indebted to Beijing.
That’s what happened to Sri Lanka.
“While some of China’s infrastructure projects benefited the island, others proved to be costly white elephants that forced Sri Lanka into a debt trap,” say Neil DeVotta and Sumit Ganguly in “Sri Lanka’s Post—Civil War Problems,” published in the April issue of CURRENT HISTORY. Like the deep-sea Hambantota port project, the Colombo Port City complex, and the Mattala Rajapaksa International Airport. “The overpriced projects left Sri Lanka owing $8 billion, or around 10 percent of the island’s debt. That is close to what Sri Lanka owes Japan and India, but what rankles many is how Chinese loans have been used to fund questionable projects that generate little income.”
:The situation has fueled accusations that China seeks to entice strategically located countries (others include Djibouti and the Maldives) into debt traps that it then leverages to seize control of key infrastructure.”
It’s this debt trap that Prime Minister Mahathir Mohamad has been trying to avoid. Back in August he canceled the East Coast Rail Link project, forcing China back to the negotiating table. And he is winning, as evidenced by the new deal, which has cut the cost of the project substantially.
Will Duterte and Imran Ahmed Khan dare to do the same, and save their countries from the fate of Sri Lanaka? It remains to be seen.
Source : Forbes