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What Can China Expect From Malaysia’s Newly Elected Leader? Ask Washington

(Source: www.forbes.com)

Last week’s election of of 92 year-old Malaysian strongman Mahathir Mohamad has prompted some interesting speculation. The country’s relatively turbulent politics since his departure in 2003–retiring at the grand old age of 78–give his return at the even grander age of 92 with the declared intention of reinstating his one-time protégé as his successor a feeling of unfinished business. But as with many political developments these days, the domestic implications are not quite so interesting as the international.

For some years now, Malaysia has been openly courting Chinese investment through the auspices of the Belt and Road Initiative. Kuala Lumpur appears on all the maps, and has openly supported closer ties with China, extending all the way to military cooperation. In some ways this can be seen as mere pragmatism. Malaysia is a relatively small economy, but is growing and has made itself open for investment. Equally the reality of China for most Southeast Asian countries is simply a strategic fact that they have to adjust to, rather than a variable over which they have some control.

The Malaysian Emergence

There is something else, however, that Malaysia possesses, which to a large extent it owes to Mahathir Mohamad. It is a quality that is hard to measure or even estimate, but Malaysia possesses a remarkable self-assurance, and a willingness to chart its own course internationally. Perhaps this comes in part from its post-colonial experience of asserting itself against the UK and within the non-aligned movement rather than the broader western block which Singapore backed very strongly. More importantly, however, when the Asian Currency Crisis blew up in 1997, Mahathir rapidly imposed some very cleverly devised capital controls in absolute defiance of the prevailing orthodoxies. Malaysia still suffered from the crisis, but the capital controls acted as a spur to reform and stabiliZation which allowed the economy to recover quickly without resort to strict IMF conditions. In consequence, where other Asian governments fell, Mahathir’s reputation was enhanced as “the man who broke the Washington Consensus.”

More on Forbes: Why Malaysia’s Surprise Election Result Should Be A Wake-Up Call For Global Leaders

In this election campaign Mahathir made much of his intention to review Chinese investments were he to win power. This may have been just clever politics and not amount to much in the end as it is well-known that despite the elite embrace of China, Chinese investments in Malaysia are not always popular with the public. Indeed, Malaysia’s relations with its own ethnic Chinese population are sometimes fraught, so perhaps this is not so surprising. But Mahathir’s language towards Chinese investment is particularly interesting. According to the WSJ, his opposition is not really strategic so much as pragmatic, the key line being:

“China comes with a lot of money and says you can borrow this money,” Dr. Mahathir said in an interview before Wednesday’s vote. “But you must think, ‘How do I repay?’ Some countries see only the project and not the payment part of it. That’s how they lose chunks of their country. We don’t want that.”

Post Washington Consensus?

In the years following the financial crisis of 2008, there has been little talk of the Washington Consensus. There has, however, been much talk of an emerging “Beijing Consensus” as China has offered its own model of state-backed capitalism as an alternative to the West’s “obviously” failed example. Such has been the power of this message that investment capital has flowed out of China in support of many regimes around the world that bucked against the conditionality of the IMF. The results of these early investments can be seen in countries like Venezuela and Argentina, to both of which China opened its chequebook, only for them to find that the one condition China did insist upon was the need to repay.

The Belt and Road Initiative carries the same risks, as identified by the IMF, the World Bank, many foreign Governments, and now Malaysia. More importantly, the Beijing Consensus prioritizes stable governments, falling into line with China’s often-made argument that democracy is a deeply flawed political system. Yet democracy has now delivered up a challenge to China in its own backyard. And it is either a deep irony or just a fascinating coincidence, that the man who saw off the “Washington Consensus,” might be among the first to openly challenge the “Beijing Consensus” as well. A man who, in spite of his advancing years, still sees clearly through the intellectual miasma of reassuring puff, and grasps the obvious reality that lies beneath.

Also on Forbes: Malaysia’s Richest 2018

 

More Info: www.forbes.com

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