Malaysia steers between the superpowers – Nikkei Asian Review

http://asia.nikkei.com/Politics-Economy/International-Relations/Malaysia-steers-between-superpowers

KUALA LUMPUR — It must have been through gritted teeth, but Malaysia’s troubled Prime Minister Najib Razak affected a sanguine air when asked about his reaction to U.S. President Barack Obama’s comments on the recent crackdown on dissent during their meeting on Nov. 20.

“Malaysia is committed to reforms,” Najib said. The Malaysian prime minster added that he is “taking into account some of the president’s views” on freedom of speech and the role of civil society in a democracy  — a contribution Obama seemingly regards as significant given that while in Kuala Lumpur he also met with the organizer of a demonstration held in August during which protestors demanded Najib’s resignation.

Since a narrow 2013 election win, Najib has overseen the charging of hundreds of journalists, activists, cartoonists and lawmakers with sedition, while opposition leader Anwar Ibrahim has been sent back to jail for allegedly sodomizing a male colleague — a criminal offence in Malaysia.

“Najib has been in a touchy mode since the May 5, 2013 general elections. He does not seem to take criticism very well, and so I imagine that Obama meeting opposition people upset Najib,” said James Chin, director of the Asia Institute at the University of Tasmania.

Najib remains under pressure over accumulated debts at a controversial state development fund, 1Malaysia Development Berhad, and over the nearly $700 million deposited into his bank accounts in 2013 — money the prime minister said was “not for personal gain” and which, he claimed, came from an unnamed Middle Eastern donor.

Asked on Nov. 20 if he would raise restrictions on freedom of speech and allegations of financial impropriety with Najib, Obama told an audience member at a question-and-answer session in Kuala Lumpur: “I was going to do it anyway, but now that I hear it from you, I’m definitely going to do it.”

But given the list of complaints about Najib’s government, Obama had little option but to tone down his meeting with Najib — with whom he played a few holes of golf in Hawaii last year — and the usually affable president sat stern-faced as he posed for photos with Najib and several of the Malaysian cabinet after  a bilateral meeting on Nov. 20.

The awkward moment did not last, however, as both sides moved on to other matters that dominated the various summits Najib hosted in Kuala Lumpur last weekend.

Najib turned the focus to some of the other issues on the U.S. president’s mind, telling the public that he and Obama discussed Islamic State terrorism and the disputed South China Sea, as well as regional economic deals such as the recently agreed Trans-Pacific Partnership, a trade coalition involving 12 countries including the U.S. and Malaysia.

Obama in turn praised Malaysia as a bastion of moderate Islam and a rhetorical ally in the fight against the so-called Islamic State group — which Najib denounced as “evil” on Nov. 21.

“On Obama’s side, he has to balance between playing moral leader and being leader of the world’s superpower,” Chin said.

With China Prime Minister Li Keqiang also in town, the U.S. president could not afford to push his Malaysian counterpart too far on mysterious donations or the jailing of Anwar.

“He [Obama] has to have the support of the governments that are in place at this time in all the Trans-Pacific Partnership countries. This means a lot of shaking of hands with people he personally can’t stand,” said Ooi Kee Beng, a Malaysia expert and director of the Institute of Southeast Asian Studies in Singapore.

The two giants are proposing rival trade and economic visions for the region, but Obama has to tread carefully in Malaysia, where around a quarter of the population is of Chinese ethnicity and whose biggest trading partner is China.

China’s economic growth is slowing to below 7% however, prompting the OECD to note in its new Economic Outlook for Southeast Asia China and India 2016 that Malaysia, which sends 12% of its exports to China, is vulnerable to slowdown in China.

But despite concerns about China’s economy, there has been “substantial” progress with the Chinese-backed Regional Comprehensive Economic Partnership, Najib said on Nov. 22.

The RCEP includes the 10 member states of the Association of Southeast Asian Nations, as well as Japan, India, South Korea, Australia and New Zealand. The negotiating counties hope to “achieve a mutually beneficial and high quality agreement in 2016,” according to Najib.

The RCEP is pitted against the U.S.-led TPP, on which the 12 countries — including Malaysia — forged a deal in October after five years of excruciating haggling, though implementation is still awaiting ratification by parliamentarians in the member states.

Obama talked up the TPP in Kuala Lumpur, describing the deal on Nov. 22 as “a win for all of our countries.”

“Malaysia will be able to sell more cell phones to Mexico. Singapore can sell more medicine to Peru. Vietnam will be able to sell more leather goods to Japan,” Obama said.

But China offered Najib a bigger, more concrete short-term win, announcing on Nov.23 that China General Nuclear Power Co. would buy up the energy assets held by troubled state fund 1MDB — in effect, bailing it out.

The deal amounts to a $2.3 billion political lifeline for Najib, who doubles up as Malaysua’s finance minister and chairs 1MDB’s advisory board. However he has been sharply criticized for the fund’s failures by political opponents including former Prime Minister Mahathir Mohamad.

Li also said China would offer $10 billion worth of infrastructure loans across Southeast Asia. As lucrative infrastructure contracts come up across the region, China will be bidding against U.S. ally Japan. China’s baby, the $100 billion Asian Infrastructure Investment Bank, will be pitted against other major lenders, such as the U.S.-led World Bank and the Japanese-led Asian Development Bank.

In such a competitive landscape, Beijing’s bailout of 1MDB could put it in good stead to win deals, such as the building of a high-speed rail link between Malaysia and Singapore. The U.S. has yet to offer similar inducements.

Behind the tussle for political and economic sway over Malaysia is intensifying American-Chinese rivalry across the wider Pacific region and growing tensions over the South China Sea. China claims around 80% of the sea as its territorial waters. Vietnam and the Philippines have rival claims. The U.S. has waded in by sending its navy and airforce into the sea in recent weeks in the name of freedom of navigation.

Earlier in November, the Obama visited a Philippine navy ship and called for China to stop its creation of artificial islands. Li in turn said that China would continue construction and his deputy foreign minister accused the U.S. of “provocation.”

Malaysia also has claims to part of the South China Sea, but, unlike the Philippines or Vietnam, has been for the most part reluctant to publicly challenge China. Malaysia has pushed strongly for the establishment of a maritime “code of conduct” in the area, which could restrict China’s activity on the sea — all suggesting that even if Malaysia’s relations with the U.S. are sometimes strained, Putrajaya is equally unlikely to veer too close to China.

“Both sides are trying to lure Malaysia but Malaysia refuses to take sides, hoping to benefit from both and have both balancing each other out over South China sea issues,” said Chin.

“Malaysia is carefully crafting the image of a ‘neutral broker’ even as it follows the strategic trend of many maritime states in Southeast Asia by hedging against China through reaffirming and strengthening military relations with the U.S. and other regional states,” wrote China scholar John Lee in 2014.

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