Losing China-backed projects positive for Malaysia: report

By Edward White in Taipei

Prime minister Mahathir Mohamad

Malaysia’s threat to cancel a suite of Chinese-backed infrastructure projects could ultimately be positive for the south-east Asian country’s economy despite probably slowing the pace of headline growth, according to one economist.
 Malaysia’s new prime minister Mahathir Mohamad has promised to review all Chinese projects and renegotiate any “unequal treaties”.
This move has threatened to destroy the image of Malaysia as a key pillar of Xi Jinping’s Belt and Road initiative. 
 “If the projects are cancelled, investment growth would drop sharply, and GDP growth would likely slow. But cancelling the projects may actually be in Malaysia’s best interests,” said Alex Holmes, Asia economist for Capital Economics, in a research note on Monday. 
 Mr Holmes said that because the Malaysian economy was already growing at respectable year-on-year pace of 5.4 per cent in the first quarter, the additional investments from China “could have caused the economy to overheat, leading to a rise in inflation”. 
 The proposed Chinese investments, which included ports and rail projects, could also lead to the country being “saddled with bad debts”, weighing on an already-poor fiscal situation, he said. 
 And he added: “some of these projects are of dubious economic value. Malaysia already has good infrastructure, equivalent to what you’d expect in a developed economy, and much better than countries at a similar income level.”