In recent days, the Malaysian state of Melaka has terminated an agreement with the state’s main infrastructure developer over its Belt and Road Initiative project. As a result, the future of Malaysian involvement was thrown into question.
This comes as the Melaka Chief Minister’s Office said in a statement that the agreement with KAJ Development on the Melaka Gateway mixed development had ended after the developer failed to complete the 246.45-hectare maritime initiative, which it signed on to in October 2017. It was meant to include port facilities, economic parks and tourist attractions on three artificially constructed islands”. As a result, the company is now required to return the building site and face the termination notice issued upon them.
In addition to this, the notice included cancelling the 43 billion ringgit (US$10.5 billion) project. These included KAJ Development working with Chinese state-owned energy firm PowerChina.
The development was originally thought up in 2014. Since its inception, it has been a magnet for problems. This was due to a lack of real need or desire for the creation of another Malaysian port and signs of Chinese investors having removed themselves from the project.
Francis Hutchinson, coordinator of the Regional Economic Studies Programme at the ISEAS-Yusof Ishak Institute in Singapore, has stated that “The project was very ambitious and not very well grounded in an economic or political sense,” and that “Economically, due to its location and the current overcapacity in the port sector, it was not very feasible. Politically, it did not check the boxes as it would have competed with existing facilities owned and run by corporations, and it did not have buy-in from large conglomerates or government-linked companies.”
In addition to this, according to Hutchinson “the main local player pushing the project was KAJ Development, which is not an established name at the national level. It had some buy-in from the Melaka state government through one of its subsidiaries, but this is not enough in the Malaysian context to get things going.”
However, it has become increasingly clear that Melaka Gateway has been marketed as an appealing prospect for Chinese state-owned businesses, which seek to profit off such endeavours. After much time, it has become increasing clear that such projects made no real economic or political benefit for the nation.
Malaysia has placed itself as being a key section of Chinese BRI investment and the first nation to confirm its attendance at the second BRI summit in 2019. Malaysia will continue to host further projects, which include the “widely anticipated East Coast Rail Link (ECRL), a multibillion ringgit China-backed railway project that will connect rural states along the east coast of the nation’s peninsula”.
The previous administrations have defined different parts of the investments, while never officially including it in the government’s plans. This was specifically around the Najib Razak administration which ran from 2009-2018. As such, more recent political developments in the nation meant that the future of investment is becoming even more messy and complex.
As the current Malaysian government is now solely focused on its own political stability and dealing with the coronavirus pandemic, all projects will return to being in a state of limbo.
This latest news show that Malaysia could be in the process of radically reassessing itself, in regard to foreign direct investment from China and how/ if they can move ahead with further infrastructure projects.
As such, the Melaka Gateway is not the first BRI project to be cancelled. Even in 2018, under the Pakatan Harapan government coalition, it immediately cancelled several gas pipelines under construction worth US$2.3 billion and further delayed other BRI projects within the country.
Overall, what this might show is that Malaysian foreign policy could be understood regarding these topics. BRI has been a source of major controversy and nations which have engaged with the project, issues around neo-colonialism and debt trap diplomacy has often plagued the Belt and Road Initiative. However, an additional problem comes in the form of financial corruption and abuses of power. Two such allegations have also been raised against the Malaysian government itself.
In March 2020, the Pakatan Harapan administration fell due to a political coup, which has been itself found guility of corruption and abuse of power. Which previously, “had renegotiated several China-backed projects to adjust costs, citing empty government coffers drained by the administration of Najib”. All of which has resulted in further trouble for both Malaysian politics and China’s BRI strategy.
Featured image credit: Ishan @seefromthesky on Unsplash