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Malaysia in transition

Mahathir says Beijing understands his need to halt projects

Malaysia welcomes Chinese tech but does not want to open the door to contractors

Malaysia's Prime Minister Mahathir Mohamad speaks during a news conference with China's Premier Li Keqiang at the Great Hall of the People in Beijing on Aug. 20.    © Reuters

KUALA LUMPUR -- Malaysian Prime Minister Mahathir Mohamad on Tuesday said Chinese leaders have accepted his government's request to stop three China-backed infrastructure projects.

Since the 93-year-old returned as Malaysia's prime minister in May, his government has been recalibrating state expenditures and trying to dig its way out of a debt trap.

Speaking to the press on the last day of a five-day official visit to China, Mahathir said he explained to Chinese leaders that debt caused by the East Coast Rail Link and two gas pipelines would have to be deferred as part of his government's debt-reduction initiatives.

"I explained to all three leaders why we have to do this," Mahathir said, referring to President Xi Jinping, Premier Li Keqiang and National People's Congress Chairman Li Zhanshu. "And not one of them said no. They understand our problems and why we have to reduce our debts."

Mahathir added that officials from both countries will continue to work at finding a way to "exit these projects at the lowest cost possible."

The three infrastructure projects, symbols of Xi's Belt and Road Initiative, came under scrutiny as soon as Mahathir rtook office. They were awarded to Chinese state companies by Malaysia's previous government after direct negotiations, and the manner in which they were being carried out put Malaysia at a disadvantage, Mahathir said.

The government is determined to rein in expenditure to maintain fiscal discipline, having redefined national debt. Under the new calculation method, federal debt including liabilities stood at 1.08 trillion ringgit ($264 million), or 80.3% of gross domestic product, at the end of last year. The three projects, costing 76.18 billion ringgit formed part of the debt. Debt minus contingency liability and government guarantee was 50.8% of GDP.

"We do not find the needs for those [projects]," Mahathir reiterated. "They cost too much money and we cannot afford them." 

Mahathir also reminded Beijing to respect Malaysia's stance on foreign direct investment. "[When investors] come to Malaysia, they must follow Malaysian rules and laws."

Malaysia, the prime minister said, welcomes foreign direct investment that brings in capital and technology but does not want to open the door to foreign contractors and land-buying, which could inflate local property prices.

Separately, Mahathir said China's remarkable growth in technology and its ability to feed its vast population served as a "model" for Malaysia's "Look East" policy. The policy, originally launched in the 1980s and renewed recently, is based on taking lessons from Japan in terms of work ethics and industrialism. 

In response, China said the two sides must strengthen strategic communication, implying high-level exchange, to deepen cooperation. Xi, in a meeting with Mahathir on Monday, called on both countries to promote "pragmatic cooperation" in a new era especially in BRI, which promotes the construction of mutually beneficial infrastructure projects. 

China has always regarded Malaysia as a strategically located friendly country, said Abdul Majid Khan, former Malaysian envoy in Beijing. Majid, who is part of the Mahathir delegation, said Beijing gave in to Malaysia to ensure the success of the visit. "Chinese businesses in Malaysia would benefit from an improved bilateral relationship," he said. 

Premier Li pledged on Monday to buy more agricultural products from Malaysia. Both sides also signed deals to develop Malaysia's palm-based biofuels and promote the use of rubber in road-building. 

Mahathir said he had extended an invitation to Xi to visit Kuala Lumpur, while Beijing asked him to return for a BRI conference next year. 

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