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Aug 24, 2018 | 16:35 GMT

6 mins read

Back in Power, Malaysia's Prime Minister Moves Away From China

Mahathir Mohamad, who served as Malaysia's prime minister from 1981-2003, celebrates his victory and return to power in the country's election in May 2018.
  • Malaysian Prime Minister Mahathir Mohamad will work to end his country's economic overreliance on China without leaning on the West as part of his Malay nationalist agenda.
  • The government in Kuala Lumpur will look for alternative foreign partners to insulate itself from the intensifying competition between China and the United States.
  • Japan will probably take on a more prominent role in Malaysia's economy and security as a result. 

Malaysian Prime Minister Mahathir Mohamad's first state visit to China since returning to office in May went a lot like the seven state visits he made there during his first stint in power. On the trip, which ended Aug. 21, Mahathir reaffirmed his policy toward China and agreed with Beijing on several important issues, such as accelerating regional free trade and advancing multilateral negotiations over the South China Sea. He also toured the eastern city of Hangzhou and clinched a deal with Chinese automaker Geely to allow Malaysia's national car brand, Proton, a legacy of his time as prime minister in the 1980s, to assemble and market its cars in China.

But compared with his earlier visits to China, and with the trip predecessor Najib Razak made two years ago, Mahathir's latest jaunt produced few deals for investment or collaboration. The fate of three Chinese-funded projects planned for Malaysia under the Belt and Road Initiative, in fact, remained unclear after Mahathir's departure. It's all a part of the prime minister's highly publicized campaign to chart a new course for his country — one that gives China a wider berth.

The Big Picture

Mahathir Mohamad's recent return to power in Malaysia is bringing the country into a new phase. Mahathir made a name for himself in Southeast Asian politics during his first run as prime minister, from 1981 to 2003, through his authoritarian tendencies, nationalist inclinations and hostility to the West. Today, he is back to these tactics once more, adjusting Malaysia's course to account for the region's new geopolitical landscape.


Same Prime Minister, Different Concerns

For the more than 20 years of his first tenure as prime minister, Mahathir advocated stronger ties with China. His very first state visit to Beijing kicked off an era of deepening cooperation despite the pervasive mistrust toward China among Malaysia's elite. He also pushed fellow leaders in Southeast Asia, similarly suspicious of Beijing's intentions, to give China a bigger role in regional issues and institutions. To Mahathir, China's vast and growing economy offered Malaysia and its neighbors enormous opportunities to industrialize and reduce their economic dependence on the West, while at the same time building an alternative to the region's U.S.-dominated security arrangement.

Since his last term ended in 2003, however, things have changed considerably for Southeast Asia and for Malaysia itself. The country has made the most of its business-friendly policies, strong relationships with surrounding countries and robust electronics supply chain to develop its economy, but it has hit its share of bumps along the way. The plan that Mahathir introduced in 1991 to put Malaysia on the path to economic self-sufficiency, Wawasan 2020, foundered under subsequent administrations because of declining productivity, fiscal imbalance and scandal. And unlike the last time the prime minister was in power, today China has largely overtaken the United States as regional hegemon, not only in trade but also increasingly in security.

Reassessing Relations With China

Trade with and investment from China certainly fueled Malaysia's economy, but the costs of Kuala Lumpur's ties to Beijing are starting to add up. A surge in Chinese investment there since 2013 — particularly in property and transportation projects — brought with it an influx of Chinese workers and businesses that's crowding out the local competition. Instead of foreign direct investment, moreover, Chinese loans guaranteed by the Malaysian government are financing many of these projects.

In Mahathir's view, the tight relations with China that once helped Malaysia progress toward the goals of Wawasan 2020 are becoming a hindrance.

Malaysia's growing debt to China is not only a financial liability for Kuala Lumpur, whose foreign debt stands at 65 percent of gross domestic product, but it is also a political one. Many voters in Malaysia, like those in Myanmar and Sri Lanka, worry that their country's financial obligations to China will give Beijing control over its economy and even its strategic interests, including its claim to the South China Sea. (Further complicating matters, the Malaysian government has come to rely on Chinese support to cover the gaps left in its finances by the Najib administration's theft of nearly $1 billion from the state investment fund.) In Mahathir's view, the tight relations with China that once helped Malaysia progress toward the goals of Wawasan 2020 are becoming a hindrance.

Now that he's back in power, Mahathir intends to get his country back on track by paying down the $250 billion in national debt racked up by the Najib administration and by looking for new partners abroad. He's already visited Japan twice in his first 100 days in office and made a pitch for more Japanese investment in Malaysia's tech and automotive sectors in addition to appeals for soft loans. Nevertheless, Mahathir has no intentions of cutting ties with China and emphasized the importance of Malaysia's security and economic relationship with the country on his trip to Beijing. He also continued to rail against the U.S. military presence in the region and criticized the Comprehensive and Progressive Agreement, the successor to the failed Trans-Pacific Partnership that Japan has spearheaded. And all the while, he has continued to underscore the role of regional integration and cooperation in managing tensions in the South China Sea and mitigating the effects of the deepening rivalry between the United States and China.

The Mahathir Doctrine, Resurrected 

These policies are a return to form for the once and current prime minister. Just as he did during his first time in power, Mahathir is striving for a neutral foreign policy. Malaysia, as a weaker country still fighting to achieve its economic objectives, cannot afford to dissociate from China or to fully embrace the U.S.-led economic and security initiative in the Indo-Pacific region. With that in mind, Mahathir will instead work to find a balance between the two superpowers, using his country's relationships with other states in the region to meet Malaysia's needs and fend off external threats.

But while this strategy, known as the Mahathir Doctrine, earned its author a formidable reputation in Southeast Asia during his last stretch in power, not all of its initiatives succeeded. This time around, likewise, the changing circumstances in the country and in the region will put the revived Mahathir Doctrine to the test with new opportunities and challenges.

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