This article first appeared in The Edge Financial Daily on August 23, 2017
KUALA LUMPUR: While China holds the power to spur the recovery of the global economy given the subdued Western world, prominent economist Professor Dr Jomo Kwame Sundaram said Malaysia needs to be more cautious about accepting investments from the Eastern giant.
Just because China is a significant global power, Malaysia should exercise caution and not blindly accept proposals from the country, said Jomo at the Asia Business First Forum yesterday.
“My view is that given the situation in the West today, it is probably Chinese finance which will be able stimulate the world economy to have a strong recovery. However, this does not mean we have a blank cheque and should accept anything that comes from China.
“We have to take a positive view of its potential but we must make sure that we protect the interests of the nation, the public, the consumers and the taxpayers,” he said.
Asked if his criticism of the East Coast Railway Link (ECRL) project was due to the presence of Chinese financing, he made clear that he would oppose the project even if it was financed by parties from other foreign countries.
“I have very strong objections to [the] ECRL, partly because the projections which are made to justify the project I believe to be false and there is no way that the whole project can be justified on its own terms.
“I would criticise the project because of what we have been told, and I’m not the only one,” he said.
For example, Jomo pointed to Institute for Democracy and Economic Affiars chief executive Wan Saiful Wan Jan who has also criticised the project despite his previous support for China’s US$100 billion Forest City development in Johor.
He said it is important for the country to be very careful about the various propositions from China, but made it clear that he was not against all investments from Beijing.
He pointed to the collaboration with Chinese investors for the export of Malaysian solar panels, which he said was a great success.
“I think we have to be much more nuanced. It’s not a black and white world we live in, and it’s important for us to see the tremendous potential of Chinese financing for world economic recovery.
“But we must also take caution to not end up like Sri Lanka, where they built a port using public money but at the end of the day end up in a situation where they basically turned over the port to a Chinese company to run for the next 99 years,” he said.
Meanwhile, on foreign direct investments, Jomo said it is no secret that there is “a severe trust deficit in the country” due to the negative headlines Malaysia has been seeing in relation to the various scandals, but added that it does not affect the flow of foreign investments as investors take many things into consideration.
“Very often, unless the situation is completely unstable and uncertain, they really don’t care very much. They don’t care very much about democracy,” he said during the panel discussion at the forum.
Present during the discussion was InvestKL chief executive officer Datuk Zainal Amanshah who also weighed in on the matter, saying that most of the negative headlines account for just one component of investors’ evaluation criteria.
Among others, he said foreign investors consider the track record of the country, stability, strength of the banking system and the regulators, policy consistency, talent availability and the cost of doing business.
“Yes, it has been a challenge [with the negative headlines] but when investors look at our fundamentals, the strong track record we have and the commitment of the government to enhance our ecosystem, it adds up to a good and competitive cost structure for multinationals,” said Zainal.