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The Future of Asia 2019

Malaysia will use Huawei tech 'as much as possible,' says Mahathir

Prime minister warns US of the rise of technology prowess in the East

Malaysian Prime Minister Mahathir Mohamad speaks to the Nikkei Asian Review on May 30, in Tokyo. (Photo by Manami Yamada)

TOKYO -- Malaysian Prime Minister Mahathir Mohamad said Thursday that Malaysia would continue to welcome Huawei Technologies, even as others shy away from working with the Chinese tech juggernaut.

Huawei has achieved a "tremendous advance over American technology," Mahathir told the annual Future of Asia conference in Tokyo, hosted by Nikkei.

While the U.S. has long had a strong research and development capability, he said, "they must accept that this capability can [now] also be found in the East."

The U.S. recently put Huawei on its Entity List, essentially a blacklist for foreign companies deemed national security threats. This requires U.S. companies to obtain government approval to export products to Huawei. The implications have spread far beyond American borders, affecting foreign Huawei suppliers that use U.S. products or software.

While countries including Japan and Australia have already taken measures to avoid using Huawei equipment as they introduce new 5G mobile networks, Mahathir signaled that Malaysia has no intention of shunning the company.

"Huawei's research is far bigger than Malaysia's capability. We try to make use of their technology as much as possible," he said, adding that he is not concerned over allegations of espionage activity because "we are an open book."

The 93-year-old leader, in an interview with the Nikkei Asian Review after the speech, said Malaysia hopes to use Chinese technology to enhance its security and business, even as others distance themselves due to the trade war with the U.S.

Mahathir said China's expertise in artificial intelligence and e-commerce are areas that Malaysia can benefit from in terms of beefing up security, as well as opening up markets to the country's goods.

"AI is a very powerful tool if you understand its power," said Mahathir on the sidelines of the Future of Asia 2019 conference. Technologies owned by Huawei and Alibaba Group Holding, including facial recognition, could be used to track people to reduce crime, and on e-commerce platforms, he added.

After becoming prime minister for the second time a year ago, Mahathir met the founders of both Chinese tech giants, hoping to drum up investment.

"Currently Huawei has got [a training center] in Malaysia and we are looking into how we can benefit from it," said Mahathir. Although he hopes that Chinese tech investment will create high-paying jobs in Malaysia, Mahathir stressed that he welcomes technology from other countries as well.

Ties with China have improved, Mahathir said, after the two sides resolved a dispute over a China-backed rail line in Malaysia. The prime minister said Malaysia is also looking to work with Chinese companies abroad, based on the success of a partnership in automobiles.

"I am quite satisfied because the sales of Proton have gone up, and it has improved on its technologies," said Mahathir, referring to the national automaker, which is 49.9% owned by China's Zhejiang Geely Holding Group. Proton's market share rose to 13% in the first four months of 2019, up from 9% during the same period a year earlier.

In April, Proton announced plans to make cars in Karachi with Geely's backing. The company is also working to assemble cars for export in China. "That will be a big jump, because Proton has always to work with China, and with Geely they can go to China for exports," said Mahathir, arguing that it is more profitable than exporting from Malaysia.

Regarding Malaysia's debt, Mahathir said borrowing would be reduced to a "sufficient level," as part of an effort to pare down the country's debt-to-GDP ratio to 54%, versus 80% at present. The move is being financed in part by a March bond issue worth 200 billion yen ($1.8 billion), backed by Japanese financial institutions.

Mahathir did not rule out the possibility of another round of Samurai bonds, but said any new issue would be used for infrastructure. That idea was backed by at least two investment banks during a meeting between Mahathir and Japanese business leaders on Thursday.

Representatives from Mizuho Financial Group and Daiwa Securities Group told Mahathir that they are prepared to arrange another bond issue, given the success the success of the first round, which was oversubscribed by more than 1.6 times. Both banks were part of a consortium that arranged the sale of the 10-year bonds.

The Malaysian government, Mahathir said, will continue to pursue those who had siphoned money from 1MDB, a state-backed investment fund set up by the previous government that was found to be operating a slush fund. So far, Malaysia has retrieved some of the stolen money, with help from authorities in Singapore and the U.S., but much remains unaccounted for.

"We believe they are stashed somewhere by [former Prime Minister] Najib [Razak], Rosmah [Mansor] and Jho Low," said Mahathir, referring to his predecessor and Najib's wife. Low Taek Jho is the alleged mastermind of a scheme to divert funds from 1MDB. Low's whereabouts are unknown and he has been charged in absentia.

Nikkei staff writer Wataru Suzuki in Tokyo and researcher Ying Xian Wong in Kuala Lumpur contributed to this report.

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