Malaysia’s Democratization Poses New Challenges to China’s BRI Projects

Recent Features

ASEAN Beat | Politics | Southeast Asia

Malaysia’s Democratization Poses New Challenges to China’s BRI Projects

Elites’ growing need for democratic legitimization is impacting the fate of a slew of large-scale Chinese projects.

Malaysia’s Democratization Poses New Challenges to China’s BRI Projects

A photo shows a portion of the Melaka Gateway project in Melaka, Malaysia, in March 2019.

Credit: Flickr/Richard Le Sueur

The Melaka Gateway, a planned seashore development project on the coast of Melaka, has had a somewhat turbulent recent history. Inaugurated in 2014 by then prime minister Najib Razak and later branded as part of China’s Belt and Road Initiative (BRI), the project soon attracted controversy for its negative environmental spillovers, while allegations were also raised about the supposed close connections between the project developer and figures in the Melaka state government. Following the change of government in May 2018, the project came under the scrutiny of the reformist Pakatan Harapan government and was eventually terminated. In March of this year, under another administration, it was announced that the Melaka Gateway had been reinstated. The saga of the Melaka Gateway speaks to the larger role of elite agency in determining how Malaysia chooses to engage with China’s BRI, as well as how societal contestation can impact the fate of projects.

The Melaka Gateway was one of many BRI projects whose status has been in flux over the last few years. Since the BRI was launched in 2013, Malaysia has been one of the most enthusiastic recipients of BRI-related infrastructure and connectivity projects. Like the Melaka Gateway, many of these projects soon attracted controversy for their lack of transparency and dubious economic rationale.

Some of these projects were likewise shelved following the change of government in 2018, including the Trans-Sabah Gas Pipeline (TGSP) and the Multi-Project Pipeline (MPP), while other projects, such as the East Coast Rail Link (ECRL), were ultimately renegotiated to reduce costs and alter certain project specifications. Following another change of government in 2020, some projects, including the TGSP and MPP, were quietly reinstated.

At the time of writing, Malaysia faces another change in government following a closely contested election which has resulted in a hung parliament. It is unknown whether this will alter the status of the nation’s BRI projects yet again. With the opposition Pakatan Harapan coalition led by reformist leader Anwar Ibrahim on the verge of forming a government, another review of these projects remains a possibility, given that the coalition has historically been hostile to many BRI projects.

In most literature concerning the BRI, there is a tendency to cast the Chinese state as the most important, if not the only variable in analyzing the outward investment of Chinese firms. Little attention is paid to the role and motivations of elite players within recipient countries in deciding how said country chooses to engage (or disengage) with Chinese capital. Likewise, there is little focus on the role of societal contestation, which adds another layer to the complex, multifaceted politics with which Chinese firms must contend when doing business abroad.

In the case of Malaysia, how Putrajaya chooses to interact with the outside world, especially when it comes to foreign-funded infrastructure and connectivity partnerships, depends first and foremost on how local elites define and defend their domestic legitimacy. This domestic legitimacy is pursued through different avenues, one being development-based legitimacy, centering on providing economic growth and jobs. With a small domestic market of its own, Malaysia’s economy is heavily tied to attracting international trade and foreign direct investments (FDI). As such, the BRI provides a ready source of capital to spur economic development.

Chinese capital also provides Malaysian elites an avenue by which to bolster their identity-based legitimation, namely Malaysia’s long-term policy of redistributing wealth to the country’s ethnic Malay majority. Indeed, most Chinese cross-border investments into Malaysia have collaborated with the ethnic Malay-led government-linked companies (GLCs) rather than Malaysian Chinese firms, ensuring that politically connected Malay elites are the primary beneficiaries of BRI projects.

Thus, elite agency plays a prominent role in Malaysia’s engagement with the BRI, driven by the traditional importance of development and identity-based legitimation in maintaining the authority of elites. However, this engagement is also impacted by instances of societal contestation, mostly in the form of public backlash to several projects. Indeed, a slew of BRI projects in Malaysia has attracted major controversies, with critics pointing to a lack of transparency, environmental degradation, and the exorbitant costs involved. Most damning of all were allegations tying certain BRI projects, such as the TGSP, MPP, and the ECRL, to the multibillion-dollar 1MDB corruption scandal.

These controversies ultimately contributed to the downfall of Najib in May 2018, as the opposition Pakatan Harapan coalition under Mahathir Mohamad capitalized on public fears about the implications of the BRI on Malaysia’s public debt and national sovereignty.

Following the change of government, China’s credibility in Malaysia would continue to suffer as more evidence began surfacing implicating China in the Najib administration’s gross economic mismanagement. As argued at the time by Dr. Peter Chang, senior lecturer at the Institute of China Studies at the University of Malaya, Beijing’s “no strings attached” development model had proven to no longer work in many countries, particularly those that had achieved greater democratization.

Indeed, as we begin to see the slow maturation of Malaysian democracy, symbolized by the eventual jailing of Najib in August and the current shift towards a more competitive multi-party system, future economic ties between China and Malaysia’s elites will have to contend with the changing expectations of the Malaysian electorate, who now demand greater accountability and good governance from their leadership. While patronage politics remains very much alive in Malaysia, a recognition on the part of Malaysia’s elites that the people also demand reforms will add further pressure on policymakers to address the more glaring governance gaps found in the country’s development strategy.

Indeed, we have already started to see indications of China recalibrating its developmental model in response to increasing public scrutiny around the world. While previous BRI projects centered on constructing expensive mega-projects, experts have noted a recent shift in focus in China’s development aid strategy, with an emphasis now on providing public goods such as hospitals. This has been attributed to the public backlash that many BRI mega-projects engendered around the world, a common complaint being that they only contributed to widening the gap between rich and poor in host countries.

Internal dynamics in China must also be considered when attempting to analyze the China-Malaysia economic relationship going forward. The ongoing tech crackdown in China will push China’s beleaguered tech companies to seek new markets abroad, thereby opening new avenues for cooperation between China and Malaysia in the digital economy, a key area of focus for the Malaysian government.

Ultimately, while geopolitical realities will no doubt see Malaysia continue to pragmatically embrace China while downplaying areas of concern, we can expect to see recalibrations in the BRI in Malaysia. This is due to the traditional political needs of development-based and identity-based legitimation in maintaining authority for Malaysia’s elites now having to contend with a greater emphasis on democracy-based legitimation, attributed to the ongoing maturation of Malaysia’s democratic system and greater demands for good governance from the Malaysian electorate. Coupled with shifts in China’s international development aid strategy and domestic economic challenges, this opens the possibility for a more sustainable relationship moving forward: namely, one more in tune with Malaysia’s long-term development needs (such as in the digital space).

As Malaysia’s political dynamics continue to destabilize and reset, we can expect to see cyclical renegotiations and readjustments in BRI projects moving forward.