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Malaysia in transition

Malaysia asks Japan for yen loan to solve financial woes

Prime Minister Mahathir seeks Tokyo's help in developing railways and education

Malaysian Prime Minister Mahathir Mohamad visits Japanese Prime Minister Shinzo Abe on Tuesday. (Photo by Uichiro Kasai)

TOKYO -- Malaysian Prime Minister Mahathir Mohamad said Tuesday he had asked Japan for yen-denominated loans as Kuala Lumpur seeks to pare down its hefty debt load.

In a joint news conference with Japanese Prime Minister Shinzo Abe after talks between the two, Mahathir said Japan would also benefit when Malaysia recovers from debt obligations chalked up by the previous government, which has been blamed for corruption and lavish spending on infrastructure projects.  

"The resolution of the debt problem would enable Malaysia to once again be a good market for Japan and Japanese investments in Malaysia," Mahathir said. He did not say how much he wanted to borrow from Japan.

Mahathir said Abe promised to consider the request.

Abe said Japan would continue to support Malaysia's growth and nurture ties between the two countries to a "new level," through collaboration on education, human resources, science and technology.

Malaysia has in the past benefited from Japan's Official Development Assistance program in the form of low-interest loans and technical cooperation. Malaysia received $7.8 billion in total disbursements from 1969 to 2014, according to the Japan International Cooperation Agency. Of this amount, $5.3 billion has been repaid.

Most Japanese funds have been used for economic development, with a focus on infrastructure in the 1970s, and on manufacturing technology and human resources in the 1980s and '90s.

During his first stint as prime minister between 1981 and 2003, Mahathir often turned to Japan in times of distress, notably after the Asian Financial Crisis of 1998, reportedly borrowing $5 billion. The amount was part of a $30 billion package announced by then Japanese Finance Minister Kiichi Miyazawa to Asian economies hit by the crisis.

The Malaysian government has said the country's debt has ballooned to 1.087 trillion ringgit ($272 billion), or 80% of gross domestic product, substantially higher than the 50.8% claimed by the previous government. Former Prime Minister Najib Razak is under investigation in connection with a multi-billion dollar scandal involving the 1Malaysia Development Berhad state fund.

Mahathir told reporters Tuesday that Malaysia has also requested Japanese assistance to improve existing railroads to increase the frequency of freight and passenger trains running on underused tracks and stations. Such improvements could reduce road traffic and enhance rail transport in Malaysia.

The prime minister has said Malaysia would only consider a high-speed rail system in the future, due to the high costs, suggesting upgrading existing rail lines will suffice for the near term.

In his meeting with Abe, Mahathir also expressed hopes that Japanese universities would set up branches in Malaysia. Currently, higher education institutions from Australia, China and the U.K. have campuses in Malaysia, but Japanese universities do not. Mahathir said Malaysia would revive its Look East policy, pledging to study the cultural values and work ethic of Japan as a guide to industrialization.

In a meeting with Mahathir, Japanese business people expressed high hopes for the new government.

"Malaysia has now become a very important base for manufacturing activities, of which we can expect even greater development," said Hiroaki Nakashi, chairman of the powerful Japan Business Federation, or Keidanren.

Mahathir completes his three-day visit to Tokyo on Tuesday after attending the Future of Asia 2018 conference.

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