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Interview

Malaysia a haven for foreign money as trade war rages: minister

Finance chief Lim Guan Eng touts rising FDI and keeping Malaysia Airlines aloft

Malaysian Finance Minister Lim Guan Eng noted an increase in inbound investment as a result of the U.S.-China trade war. (Photo by Wong Ying Xian)

KUALA LUMPUR -- Malaysia has enjoyed a surge in investment from abroad as businesses run for cover from the Sino-American trade war, Finance Minister Lim Guan Eng said, while warning that everyone loses in a prolonged conflict.

Foreign direct investment increased 94.8% on the year to 21.7 billion ringgit ($5.18 billion) in the January-March quarter, according to government statistics. Investment from China has shown remarkable growth, Lim told Nikkei in an interview.

The rise in FDI is "in accordance with the predictions that Malaysia will be seen as a safe haven, neutral ground away from the trade conflict," he said.

"We are seen as one of the beneficiaries of the trade war," Lim said.

The finance chief credited better transparency and accountability under Prime Minister Mahathir Mohamad as well.

But "world history has proven that nobody wins in a trade war," said Lim, who argued that Malaysia will also suffer should the trade war drag on.

Regarding the growing pressure on Huawei Technologies, he called American moves to blacklist the Chinese company part of President Donald Trump's "negotiating strategy" to extract a better deal from Beijing. "We won't follow any nation into war," he said.

Lim also shared insights into Malaysia's plans to shrink its debt and liabilities of more than 1 trillion ringgit and expand the economy. He said that while Mahathir's government spent its first year dealing with the aftermath of the scandal involving state-run fund 1Malaysia Development Berhad, it will get the economy back on track in two more years.

It is "unlikely there'll be new tax measures," Lim said, since the government already introduced new taxes, including on digital services, in its 2019 budget. Instead, the government expects to balance things out with spending reductions and higher tax revenues from economic growth.

"If we can turn things around, I will personally think that we should have a corporate tax cut," Lim said.

The appointment of an ethnically Chinese finance minister was seen as a sign of change in a Malaysia long politically dominated by ethnic Malays. But Mahathir's government has since decided against joining a United Nations treaty on racial discrimination and the Rome Statute of the International Criminal Court after drawing Malay pushback on the instruments.

"We have to take care of local sensitivity," Lim said of what happened. He said there are no serious ethnic tensions in Malaysia and called out opposition politicians who "play fear."

Regarding Mahathir's talk this March of selling or shutting down Malaysia Airlines, Lim said the flag carrier "epitomizes the aspirations of leisure, so I personally don't think it would happen."

A sale "is just one of the many options," he said. "There's no serious proposal to do so."

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