Whither Chinese FDI’s in Kedah post-GE 14.

The thought of a ‘Malay Tsunami’ in the state of Kedah stemming from the Tun Mahathir Mohamad factor impacting Chinese investment in the state is discussed here by Karl C. L. Lee. 

April 8, 2018:  Prior before the dissolution of the Malaysian Parliament, the news about the 15,000-man in the opposition’s Pakatan Harapan (PH) Kedah ceramah (speech) programme has created a hype among the online media news in Malaysia.

The opposition front’s leader Liew Chin Tong, has flaunted such reception as the demonstration of the coming ‘Malay tsunami’ (stemmed from the Mahathir factor) while the ruling Barisan Nasional (BN’s) leaders steadfastly downplayed such effect, stipulating those who attended the event may not even vote the opposition on the voting day itself.

Regardless of these discourses from both political divides, the event is part of the phenomenon I hypothesised earlier in The Diplomat’s magazine — the localisation of Malaysian electoral politics.

Unprecedented since Malaysia’s independence in 1957, such phenomenon is a result of the realignment of political forces that is shaping in the country’s political landscape.

The withdrawal of dissented Malay-Muslim political forces from UMNO and PAS into Pakatan Harapan, has created the opportunity for the opposition coalition to tap on the support bases of these influential ‘local warlords’ (such as Mahathir, Muhyddin, Mat Sabu, and Husam Musa) in the states of Kedah, Johor and Kelantan.

And as one of the three battlegrounds for the upcoming GE (the other two being Johor and Sabah), the election outcomes in Kedah are certainly one that will be determined by effective local electoral campaigning and state-based dynamics for the three contesting political coalitions (including the PAS-led Gagasan Sejahtera).

Having said that, I am not into forecasting which political coalition will win the Kedah state in the coming GE.

What I am interested, however, is to explore the future of the Chinese investments in the state regardless of which political coalition ruling the state after the election.

Setting aside the slim possibility of the PAS-led Gagasan Sejahtera ruling the state as a majority government alone, there are two most scenarios which may occur with this third political coalition becoming a minor ruling partner in the new Kedah state government.

The first scenario, of course, is a huge or comfortable victory for BN in Kedah. In this case, there is no doubt that the existing Ahmad Bashah administration’s open stance toward the Chinese investments will continue as it is.

In fact, more Chinese FDIs are expected to land in the state, given the rising interests of both Beijing and the private players in China to invest in the largely unexplored Kedah.

The second scenario, on the other hand, is relatively new — PH’s victory in Kedah. Unlike BN’s victory, the opposition pact’s win resonated a lot of controversies prior to the GE14.

These stemmed from the recent criticisms levied by the PH’s chairman (and former prime minister), Mahathir, on the adverse effects of the Chinese FDIs in Malaysia and Kedah; as well as the ruling BN’s warning of the possible deterioration of Sino-Malaysian ties when the opposition takes over the federal power.

Notwithstanding the validities of these two discourses, there are evolving structural dynamics which one must be recognised before ascertaining whether the new Kedah government will discriminate or overturned the prevailing Chinese FDIs.

First, just like national actors, sub-national actors such as the Kedah state government, are also actively seeking global spaces in the challenging era today. Notable private think tank in China, Anbound Consulting, gave an excellent illustration of the global economy today.

In the words of its Chief Researcher, Chen Gong, “The twin pressures of ‘market wars’ and counter-globalisation movements in many parts of the globe today, have decisively contributed to the diminished economic space in the world.”

Faced with the shrinking spatial ground in the world’s economy, countries and other actors are faced with the stark competition in seizing market spaces for their own survival and development needs.

Such endeavour is even more challenging for smaller countries or those actors that possess relatively lesser resources and technological advantages (than the larger counterparts) in their course of controlling available market spaces.

For, the Malaysian state of Kedah is a no exception. As a sub-national actor with relatively lower value-added industrial base than the more advanced Selangor and Penang states, coupled with the shrinking economic space globally, it is more urgent than the northern state to link up with the industrial networks in the wider world.

Connecting to these industrial networks, in turn, helps Kedah to carve its own market spaces in both the region and the wider world.

Failing to do so will not only lead this northern state of Malaysia to lose the competitive edge internationally but also, put its own survival at risk.

It is, therefore, not an option for the new state government of Kedah, be it from BN or PH, to circumvent Beijing’s Belt and Road Initiative (BRI) that offers rare and tremendous opportunities to the state to connect to the available industrial networks out there and occupy certain market spaces in both China and the wider Eurasian continent.

Second, the Mukhriz factor in Kedah-China (Qingdao) relations is a feature unexplored for any analyst and observer. Contrary to his image as a ‘Japan hand’ and the proponent of Malaysia’s Look East Policy 2.0 back in his days within the ruling coalition, this BN-turned-opposition leader is responsible for laying the foundations of current cooperation between Kedah and China.

For one, his tenure as the Menteri Besar (First Minister) of Kedah (May 2013 – February 2016) saw the state fostering specialities with the city government of Qingdao in Shangdong province.

The high-profile example was the US$776 million investment from Qingdao’s Lu Haifeng Limited into the Kedah Integrated Fishery Terminal (KIFT) plan — in which the negotiations for such investment were conducted by the then Mukhriz administration as early as in 2015.

Apart from such FDI that seeks to turn Kedah into an international fishing hub through technology transfer and injection into the Chinese market, both sub-national actors also organised the first-ever Kedah-Qingdao Seminar in Alor Setar, back in November 2015.

In particular, the attendance of the Chairman of the Standing Committee of Qingdao Municipal People’s Congress highlighted serious commitment from the Chinese side, to build long-standing ties with this highly agricultural state of Malaysia.

Apart from Kedah’s special-ties with Qingdao, the then Mukhriz administration also facilitated the first-ever power plant in Kedah that saw the cooperation between China MC Engineering Co Ltd (CAMCE) and the Malaysian KOSMO Group.

Backed up strongly by the Chinese technology transfer and funding from the Bank of China, the US$6 billion-project has itself signed during Mukhriz’s fruitful visit to Qingdao three years ago.

Hence, the risk of the Chinese FDIs being discriminated and overturned if the PH wins any power may not be straightforward as it is. As far as Kedah concerned, the then Mukhriz administration clearly showed its positive reception to the Chinese FDIs for the state’s long-term development.

With Mukhriz tipped to helm the state once again if PH wins the state in the coming GE, it is highly likely that he will continue his previous constructive approach in attracting the Chinese investments into the state.

By all means, regardless of BN or PH becoming the next Kedah government, it is unlikely that the Chinese investments will be discriminated or even overturned in this northern state of Malaysia.

No radical change is expected on how the new Kedah government will deal with
the present and future Chinese investments in the state. The same goes to other foreign investments as well.
Karl C.L. Lee is PhD Candidate at the School of Arts and Social Sciences, Monash
University (Malaysia Campus). Interested in the role of sub-national actors in international affairs, he is now a researcher of China’s sub-national ‘diplomacy’ in the region. Presently, he is also the Visiting Scholar at the School of Politics and Public Administration, Guangxi University for Nationalities (GXUN).

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