1MBD firesale to China’s interests: is Malaysia’s strategic position compromised?

Are the recent 1MBD “firesale” of energy deals with China-linked companies in the national interest? Will those sales compromise the long-held neutrality of Malaysia’s strategic posturing?

2015 saw the intensification of United States – China competition in the Southeast Asia region. Malaysia is being courted by the US and China, as it has hitherto not taken sides in an obvious manner. Since the 1970s, Malaysia has been the key leader championing Southeast Asian neutrality.

By now, it is clear that the Najib Government is cashing in on Malaysia’s unique bargaining position with both countries. On the one hand, Najib is commiting Malaysia to the controversial US-initiated Trans Pacific Pact (TPP). On the other hand, a number of recent deals with China’s interests risk compromising Malaysia’s strategic position.

These deals with China’s government-linked busineses – often backed by Chinese Government loans – are common in Africa, or in Laos and Cambodia. Myanmar turned its back on such inducements in 2010. Sri Lanka moved away from such practices after Rajapaksa lost the presidential election in early 2015.

China General Nuclear Power Corp has acquired all of the energy assets of 1Malaysia Development Bhd., or 1MDB, for RM 9.83 billion in cash. Those assets, known as Edra, consist of 13 power plants across five countries from Malaysia to Egypt and Bangladesh. China General Nuclear will also assume an unspecified amount of debt as part of the deal. China General Nuclear Power Corp outbid Tenaga Nasional Berhad to clinch this deal.

The energy deal requires the Government to bend the foreign ownership rules and for the first time allowing foreign ownership of power generation, a strategic business. While privatisation of power generation by foreign firms is not usual around the world in the past two decades, there are backlashes and rethinking on the part of the firstmovers.

On 31st December 2015, China Railway Engineering Corporation Sdn Bhd and Johor-based Iskandar Waterfront Holdings purchased a 60 per cent stake in 1MDB’s Bandar Malaysia project at RM7.42 billion.

It is now a foregone conclusion that a China-led consortium would be awarded the Kuala Lumpur-Singapore High Speed Rail project.

I have repeatedly called on the Government to release the feasibility study report of the HSR. HSR is not neccesarily the answer to better connectivity for Kuala Lumpur and Singapore. An expanded railway system that can handle both passengers and freight could be a better alternative.

But with the 1MDB firesale, the Government has jumped the gun in deciding on a) going ahead with HSR without extensive consultation with the public; b) giving it to a China-led consortium. Such is not good policy making at all.

The ultimate question is, should Malaysia sell strategic businesses to China in exchange of a bailout for 1MBD? Will Malaysia’s long-held posturing be compromised?

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