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Mahathir's attack on China raises tough questions for his neighbors

Beijing-friendly Duterte and other Southeast Asian leaders put in a difficult spot

| Philippines

Mahathir Mohamad is not easily ignored. With his quick mind, acerbic wit and long political experience, the veteran Malaysian prime minister has often given other Southeast Asian leaders food for thought.

Not surprisingly, his recent outspoken criticism of Chinese economic influence is resonating around the region. Speaking in Beijing, with his Chinese hosts looking on, he accused China of securing influence via debt-funded infrastructure schemes that the recipient countries could not afford. He bluntly warned China against "a new version of colonialism."

As he well knows, there is barely a country in Southeast Asia, which has not been drawn to Beijing's promises of cheap credit. His critique is a welcome opportunity for other states to reassess their own ties with China, become more cautious about large-scale economic aid, and diversify their economic partners by augmenting ties with old-established partners, notably the U.S. and Japan.

This is particularly true in the case of neighboring Philippines, where President Rodrigo Duterte is increasingly struggling to justify his China-leaning foreign policy, with opposition growing against the entry of big-ticket investments from Beijing and pressures rising for a tougher stance on the South China Sea disputes that divide the two countries.

For decades, Malaysia served as a supposed showcase of the perks of friendly relations with China, which invested heavily in the strategically located nation, which borders the sea lanes of the Malacca Strait and the South China Sea.

Today, however, Malaysia is emerging as a focus of skepticism about Chinese economic hegemony in Southeast Asia. Where Malaysia goes, the rest of the region may follow, especially as the perils of Chinese investment become more apparent to recipients.

The new government in Malaysia has openly warned about the potential "debt trap" underlying in China's credit-financed infrastructure schemes, the possible economic unviability of many projects, and their lack of transparency.

Far from describing Malaysia's case as unique, senior officials in Putrajaya have openly pointed to Sri Lanka, where China has forced onerous debt-for-equity arrangements on to Colombo, for example in taking over operational control of Hambantota port. The scale of Chinese investment in Laos and Cambodia has also provoked domestic backlash.

Malaysia's significance lies in the fact that, unlike Cambodia, Laos and Sri Lanka, it is not a small country, but a mid-sized emerging market of 31 million with a historic reputation for economic dynamism.

All this makes its troubles with Chinese investment relevant to larger regional peers such as Indonesia, Thailand, Vietnam, and, especially, the Philippines.

Like Malaysia, the Philippines has a long record of ties with other economic partners, notably Japan and the U.S. Like Malaysia, its links with China are complicated by territorial and maritime disputes in the South China Sea. As a result, many Filipinos believe their country has choices and should not be blindly deferential to China. Malaysia is a cautionary tale they have no wish to repeat.

The parallels between Duterte and the former Malaysian Prime Minister Najib Razak are striking. Both downgraded their countries' historically warm relations with the West in favor of tighter ties with China. Where Najib led, Duterte followed.

To lure Chinese investments, Najib maintained a "quiet diplomacy" approach vis-a-vis the South China Sea rows despite China's relentless militarization of disputed island-like land features. As for Duterte, he even refused to pursue the landmark arbitration award won by the Philippines against China in a maritime legal case, much to the chagrin of the defense establishment and the public.

But Najib came under fire for allegedly "selling out" the country to China after striking multiple projects, which are now subject to investigations. He is not only out of power, but is also facing corruption charges.

Under Mahathir, Malaysia has taken tougher stance on China, calling for the cancellation of close to $40 billion in infrastructure projects and is more openly criticizing China's militarization of the South China Sea. Deputy Defense Minister Liew Chin Tong told the author: "We don't want to antagonize China, but we also don't want to be seen as a client state."

Duterte, a self-proclaimed nationalist who cruised to power on an anti-corruption and anti-crime agenda, will have to recalibrate his strategic orientation lest he risks suffering a political backlash like Najib. Beijing has promised Duterte up to $24 billion in investments, though the Philippines is yet to see the materialization of any big-ticket Chinese infrastructure.

But Malaysia's turnabout has reinforced domestic criticism of warmer ties with China. The media, business leaders and the public remain highly skeptical of Chinese investments, especially in the light of the country's experiences with corruption-infested Chinese projects in the past.

As Vice President Leni Robredo says, "Our fear is we might get stuck in a debt trap like the one experienced by Sri Lanka," warning against "no longer looking at any alternative" source of investment for big infrastructure projects.

With Mahathir taking a tougher stance against China in the South China Sea, Duterte is coming under growing pressure to follow suit. Latest surveys show widespread public opposition to Duterte's China-friendly diplomacy. A survey by Social Weather Stations in July  showed that close to nine out of 10 Filipinos wanted Duterte to take back Chinese-occupied land features claimed by the Philippines.

The emerging pushback across the region against Chinese influence has opened up the space for other external powers, particularly the U.S. and Japan, to serve as alternative sources of investment.

The U.S. is hoping to increase from $29 billion to $60 billion the capital of the Better Utilization of Investments Leading to Development, or BUILD, fund, which aims to facilitate private American investment in strategic markets -- and offer an alternative source of credit to China's Belt and Road Initiative.

Japan, the leading investor in both the Philippines and Malaysia, is also stepping up its investment through the multibillion-dollar Connectivity Initiative and Partnership for Quality Infrastructure initiative, which offers financial support for "soft infrastructure" such as bureaucratic capacity-building to constructing hard infrastructure such as bridges.

Amid Malaysia's resonant critique of Chinese investments, which has forced strategic soul-searching among many regional peers, it's high time for the U.S., Japan and other established partners of Southeast Asia to act. They must not only criticize Beijing's influence, but provide quality alternatives for infrastructure finance across the region.

Richard Heydarian is a Manila-based academic, columnist and author; his latest book is "The Rise of Duterte: A Populist Revolt Against Elite Democracy."

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