THE EAST COAST RAIL LINE (ECRL) IS FUNDED BY A LOAN FROM CHINA’S STATE-OWNED EXIM BANK. THE MALAYSIAN GOVERNMENT ACTS AS THE GUARANTOR. WE DO NOT HAVE TO PAY BACK THE LOAN IN THE FIRST SEVEN YEARS, BUT AFTER THAT WE WILL HAVE TO SETTLE IT WITHIN 20 YEARS. IT DOES NOT MATTER WHETHER THE ECRL IS PROFITABLE OR NOT. WE STILL HAVE TO PAY BACK THE LOAN.
Is China a good investor?
Two years ago Columbia University’s Professor of Political Science Andrew Nathan published a paper in which he noted that analysts are wondering “the extent to which China, as its power grows, will seek to remake the world in its authoritarian image.” Many have tried to answer this question. The new wave of China’s global expansion is attracting a lot of interests from analysts and observers.
The deal is very good for China. It came with the understanding that the Malaysian government will contract out the job to another Chinese state-owned enterprise, the China Communication Construction Company (CCCC). There are conditions that they must subcontract to local firms but they remain as the tier one contractor.
That means we borrowed money from China in order to pay a Chinese company to do the job, and, after seven years we still need to pay back the loan plus interest, again, to China. Not only does China get back their money immediately in the form of payment for work done by CCCC, they will get more money from us when we repay the loan. We shoulder all the risk while China gets guaranteed profit.
My focus is on the neglect of good governance and transparency that has arrived with China’s money. This is what worries me because the authoritarian Chinese regime is unlikely to tie their money with a rules-based, competitive and transparent economic system. The above is just one example that we already see today. They clearly did not say “take this loan, call for an international tender, and make all studies available to the public so that Malaysian taxpayers are guaranteed best value for money.”
Back in 2011, Evelyn Goh wrote a working paper for Singapore’s Rajaratnam School of International Studies. Contrary to the usual coupling of economic growth with political freedom, she explained that there is an “alternative path of maintaining a capitalist economy without concomitant political liberalisation”. She added that now countries “look to China as an important model for authoritarian capitalism.”
Additionally, the rise of China is interesting to me because even I have experienced the impact. This article was initially submitted to another English newspaper but they rejected it. I don’t think their refusal is because of my usage of the ECRL as an example because just a few weeks ago the same newspaper also declined to publish my article commenting on China’s interference in Malaysian domestic politics. The common feature of both rejected articles is I was commenting on China.
I hasten to add that I fully accept the editorial decisions of that newspaper. As CEO of IDEAS, I too retain the right to decide what to publish under our banner. So this is normal practice and I respect their call. Let us not question that. I am just saying that this is a very interesting case study of how China’s soft power already influences the behaviour of a Malaysian national newspaper.
And if a national newspaper feels “persuaded” to behave in a certain way, you do wonder what else is being affected in this country.
As we welcome foreign investments into the country, including from China, we should also carefully study and manage the possible implications to our budding liberal democracy.
WRITER: Wan Saiful Wan Jan is chief executive of the Institute for Democracy and Economic Affairs (IDEAS).