Malaysia's Prime Minister Mahathir Mohamad salutes the royal guard of honor during the opening ceremony of the parliament in Kuala Lumpur on July 17, 2018. Photo: AFP/Mohd Rasfan
Malaysia's Prime Minister Mahathir Mohamad salutes the royal guard of honor during the opening ceremony of the parliament in Kuala Lumpur on July 17, 2018. Photo: AFP/Mohd Rasfan

Malaysia’s robust economic ties with China traditionally went hand-in-hand with a conciliatory approach to their low-boil territorial conflicts in the South China Sea.

That “quiet diplomacy”, however, has started to come undone as Prime Minister Mahathir Mohamad’s new government re-examines and looks to redefine the terms of its bilateral relations with Beijing

Since Mahathir’s election in May, the Southeast Asian country has emerged as a new vortex of resistance against China’s growing economic influence and rising strategic sway over the region – one that other claimants to the contested maritime area are no doubt closely monitoring.

The region is already watching as Malaysia takes the lead in redefining its economic relations with China amid rising concerns that its outward investments, particularly big ticket infrastructure projects, could become sovereignty-eroding debt traps.

A senior Malaysian official told this writer the government is expected to cancel up to US$40 billion in Chinese infrastructure projects previous agreed under the US$1 trillion Belt and Road Initiative (BRI), due to concerns over corruption, viability and debt.

That’s more than the US$22 billion previously reported, including US$20 billion for the cancelled high-speed East Coast Railway Link (ECRL) and US$2 billion worth of pipeline projects.

Malaysian Prime Minister Mahathir Mohamed (left) and Chinese Premier Li Keqiang at the Great Hall of the People in Beijing on August 20, 2018. Photo: AFP/Pool/ How Hwee Young

Mahathir caused more investor ripples in late August when he announced a government ban on foreign buyers for the China-backed, US$100 billion Forest City real estate project in the southern city of Johor that had catered largely to overseas Chinese.

But Malaysia is equally concerned about China’s potential domination of the nearby South China Sea, a strategically crucial waterway through which as much as US$5 trillion worth of annual trade transits.

China has claimed as much as 90% of the maritime area through its so-called nine-dash line map. An arbitral tribunal at The Hague ruled the map’s claims were groundless in a July 2016 ruling Beijing has refuted and ignored.

Malaysia controls a number of land features in the sea’s Spratly chain of islands, including the artificially augmented and well-developed Swallow Reef. The reef hosts state-of-the-art tourist resorts, a modern airport as well as permanently stationed military personnel from the Royal Malaysian Navy (RMN).

One of Mahathir’s senior advisors who requested anonymity told Asia Times that the nonagenarian leader realizes that today’s China is far more assertive, if not hegemonic, than the poorer, low-key version he engaged during his previous 22-year tenure as national leader from 1981-2003.

Known for his staunch independence, Mahathir has so far stuck to his previous “non-aligned” foreign policy doctrine, which has seen him not only critical of the West by calling US President Donald Trump an “international bully”, but equally skeptical of China under outward-looking President Xi Jinping.

In a sharp turn from the broadly China-leaning rhetoric of his Southeast Asian peers, Mahathir has described the current leadership in China as being “inclined towards totalitarianism” and over-prone “to flex[ing] muscles” to “increase [its] influence over many countries in Southeast Asia.” He has described China’s thrust into the region as “very worrisome.”

Previously, Mahathir viewed China as a much-needed counterbalance to what he saw as America’s neo-imperial behavior in the region, according to the same advisor. Today, however, the roles have been reversed, the advisor says, with the US increasingly needed to balance against China’s growing assertiveness in the region, including in the South China Sea.

Despite his personal reservations vis-à-vis Trump, the Malaysian leader is expected to meet his American counterpart on the sidelines of the United Nations General Assembly in September. He will aim to explore stronger strategic cooperation with the US to reduce his country’s dependence on China, the advisor says.

The Najib administration’s intimate diplomatic ties with China came with stronger defense cooperation, including through the 2016 purchase of Littoral Mission Ships (LMS) and other advanced naval assets.

At the same time, Beijing lent Najib a financial lifeline when his government struggled to cover debts related to the 1Malaysia Development Berhad (1MDB) state fund he created and is now struggling to defend against massive corruption and money-laundering charges.

Then Malaysian Prime Minister Najib Razak (R) and Chinese Premier Li Keqiang (L) inspect Chinese honor guards during a welcome ceremony at the Great Hall of the People in Beijing. Photo: AFP / Wang Zhao

In exchange, Najib’s government remained silent on China’s growing incursion into Malaysia’s waters and traditional fishing grounds, much to the consternation of residents in the nation’s coastal regions.

With all this in clear sight, Mahathir accused Najib of selling out the country to China on the campaign trail. Now, it’s precisely this excessive tilt towards Beijing that his new government seeks to rebalance by enhancing strategic ties with the West and other external powers.

His earlier meeting with US Secretary of State Mike Pompeo on August 3 was held in the context of expanding bilateral strategic cooperation amid shared concerns over China. In recent years, the US Navy has conducted regular visits to Malaysian ports and the two countries are known to be exploring deeper maritime security cooperation.

Mahathir will likely continue, if not augment, such efforts, though in a low-key manner given domestic sensitivity about military cooperation with the West and his staunch “independent” foreign policy mantra, the advisor says.

As a Muslim majority country, Malaysia has historically been critical of the West’s policies in the Middle East, particularly America’s military interventions in Iraq and Afghanistan, its large-scale military assistance to Israel amid its siege on Palestinians in Gaza, and broadly against the global war on terror, which in the past two decades has extended to the jungles of Southeast Asia.

An overt strategic tilt towards the West would not only negate Mahathir’s staunch non-aligned doctrine, but could also stoke resentment among conservative sectors of Malaysian society that voted him into office as a proven defender of ethnic Malay identity and Muslim values.

Malaysia’s Prime Minister Mahathir Mohamad (R) with US Secretary of State Mike Pompeo, Putrajaya, August 3, 2018. Photo: AFP/Manan Vatsyayana

Malaysia’s geo-strategic significance lies in its position on the Malacca Strait as well as the South China Sea, two critical waterways which are crucial to China’s energy imports and trade with the wider world.

For decades, Beijing has feared the possibility of the US and its allies using choke points such as the Malacca Strait to wreak havoc on the Chinese economy in a conflict scenario. China had hoped to at least partly overcome its so-called “Malacca dilemma” by investing in major infrastructure projects along Malaysia’s strategic ports and coastal areas.

Now, all of those multi-billion dollar development plans are up in the air under Mahathir’s government.

Mahathir, however, has made clear that he isn’t seeking to forge a counter-alliance or containment front against China per se, and remains averse to taking a more militaristic stance in the South China Sea, his advisor says. “They are more powerful and we cannot fight against them,” the Malaysian leader told CNN earlier this year.

Yet Mahathir has rhetorically opposed China’s recent militarization of the disputes, which he has said risks jeopardizing regional security.

He has emphasized the importance of freedom of navigation and overflight in the area, saying he is fine with “all… ships, even warships, passing through.” But he remains opposed to any naval assets being “stationed” in the contested sea. “It is a warning to everyone. Don’t create tension unnecessarily,” he said in a recent media interview.

Mahathir’s Malaysia wants a fast freeze of the escalating disputes and is especially worried about great power conflict in light of the US Navy’s recent pushback in cooperation with regional and European allies through Freedom of Navigation Operations (FONOPs) in the area.

The US aircraft carrier USS Carl Vinson transits the South China Sea on April 9, 2017. Photo: US Navy/Reuters

Malaysian Senator and Deputy Defense Minister Liew Chin Tong told this writer on August 27 that the new government is “not worried with China’s expansive claims per se, but instead is concerned over their willingness to [fully] enforce them” in the future at the expense of other claimant states.

“We don’t want to antagonize China, but we also don’t want to be seen as a client state,” the Malaysian defense official said, while accusing the predecessor Najib Razak administration of being overly dependent on and deferential to Beijing.

Crucially, Malaysia is also looking at ways to strengthen cooperation with fellow Southeast Asian claimant states, including the Philippines, a US treaty ally, and Vietnam, which is particularly perturbed by China’s relentless reclamation and militarization activities in the South China Sea.

At Mahathir’s behest, the three Southeast Asian claimant states may consider a more coordinated diplomatic position on the disputes and explore various confidence-building measures to de-escalate tensions in the area, Malaysian officials say.

It’s not immediately clear what specific measures the Malaysian government may advocate to protect its interests and prevent conflict in the South China Sea. What is clear, however, is that Mahathir’s new government has abandoned the country’s previous quiet diplomacy for a more proactive and vocal stance on balancing China’s rise.

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