Malaysia Cancels Chinese Infrastructure Projects

Malaysian Prime Minister Mahathir Mohamad told Chinese leaders last week that his country cannot afford to spend money on Beijing-backed infrastructure projects that had been planned under former Prime Minister Najib Razak. He announced the cancellation Tuesday after returning from a 5-day trip to China.

The canceled projects – a $20 billion railway line and two energy pipelines – were a part of Chinese President Xi Jinping’s Belt and Road initiative. 

Malaysia is not opposed to Chinese companies, said Mahathir, but it needs to cut its debt burden before it can afford projects of this scale. 

“It is all about borrowing too much money which we cannot afford, we cannot repay…So we must find a way to exit these projects and at the lowest cost possible.”

Roughly 20% of the project had already been completed, and politician Dakut Seri Dr Wee Ka Siong insists it will cost Malaysia more to cancel the project than it will to finish it. 

“It means that there will be no economic growth, job opportunities created, and no economic spillover that could be enjoyed from the project,” argues Wee. “Those living in the East Coast will be deprived of development and will continue to be sidelined compared with their counterparts in the West Coast.” 

Wee, who represents Ayer Hitam in the Malaysian Parliament, worries the compensation payout after the cancellation will cost the federal government billions.

Meanwhile, Mahathir’s government is investigating claims that funds for the Chinese projects were used to pay debt owned by state investment fund 1MDB.

Mahathir, who was elected in May, has long criticized China’s high-profile projects in Malaysia as well as its aggressive territorial claims in the South China Sea. “We do not want a situation where there is a new version of colonialism happening because poor countries are unable to compete with rich countries in terms of just open, free trade.”

When asked about the Prime Minister’s comments, Chinese Foreign Ministry spokesman Lu Kang said it is “unavoidable for some problems and differences of opinion to emerge as two countries cooperate together.”

Chinese accounts of Mahathir’s visit did not mention the infrastructure deals.