Opinion

Mahathir’s warning on ‘new colonialism’

BREAKTHROUGH - Elfren S. Cruz - The Philippine Star

November 25, 2018 | 12:00am

It was the first visit to the Philippines by a Chinese head of state in 13 years. It seems that Xi Jinping is making every effort to cement relations with a government that is or has become one of its closest allies. The intriguing question is the purpose of China’s alliance-building initiatives.

Normally, there is a need for allies when there is a common adversary. The obvious adversary of China is the United States and other countries worried about Chinese expansion in the Indo-Pacific region. Some of these increasingly worried countries include Australia, Japan, New Zealand, India and some ASEAN countries like Vietnam, Malaysia and even Singapore.

The advent of another Cold War seems to become more and more imminent. In such a geopolitical situation, joining one side immediately puts a nation on the opposing side. In the last Cold War, China tried to present an image as the leader of non-aligned nations. However, clearly Maoist China was an active participant in that cold war with its own version of the Bamboo Curtain.

In 2016, China and the Philippines signed a total of $24 billion. However, since then China has only delivered a small fraction of the total it promised. Hopefully, these new deals will yield more tangible investments for the Philippines.

As far as I can tell, the new agreement can be divided into two parts – the infrastructure investments and the MOU on gas and oil. The agreement included $365 million for the Kaliwa Dam, the $3.26 billion Luzon railway project. Chinese funding for this railway project has been on the drawing board since the term of Gloria Macapagal Arroyo. China also opened its markets to Philippine coconuts, frozen fruits and even English teachers.

The second part is an agreement to cooperate on oil and natural gas. However, at this point, details on the agreement are still rather vague. A think tank – Stratfor – analysis said: “An interest in avoiding domestic pushback is probably why the newly signed energy deal appears to have been left vague. Reports in early November suggested that two joint energy explorations were in the works would not include the disputed Reed Bank in the South China Sea. When it comes to contentious areas, the two countries will proceed with caution, while the Philippine government will likely still need to survive a Supreme Court challenge – particularly on energy cooperation – to proceed. Even as their cooperation increases, domestic opposition to that cooperation will still have a role to play.”

In the meantime, the leading investors in the Philippines are its traditional allies – Japan and the United States. Prime Minister Abe has committed to an $8.8 billion investment and aid program during his 2017 visit. The much talked about Japanese funded Metro Manila subway project is set for ground breaking ceremonies this December. This multibillion dollar project is expected to finally end the traffic nightmare in this metropolitan region. The Japanese government is reportedly considering additional infrastructure investment projects in the Philippines.

China and Japan are apparently competing to provide infrastructure investments to ASEAN countries. Chinese investments have become controversial. Newly elected Malaysian Prime Minister Mahathir has cancelled billions of dollars of China-financed projects. He said: “It’s about pouring in too much money, which we cannot afford, cannot repay, and also because we don’t need those projects for Malaysia at the moment.” He issued a warning about bankruptcy and Malaysia’s ballooning national debt.

The termination of the Chinese projects in Malaysia is considered a big defeat for the Belt and Road initiative of China. However, Mahathir was recently quoted as stating that Malaysia would have to pay “substantial penalties” for cancellation of the Chinese projects.

Michael Kang Hua Keong, Malaysia SME Association president, said: “The special thing about Chinese investments is that they control and own the entire value chain. In other words, Chinese investors bring in their own employees and create no new jobs in Malaysia.”

Japan aid and infrastructure investments have been able to avoid any controversies. In fact, Japanese projects are known to hire and train a lot of local workers unlike Chinese investors.

The results of the US midterm elections is expected to add further pressure on Xi Jinping to seek other alliances and newer markets for Chinese exports. This is the Stratfor analysis of the effect of the midterm elections on American policy towards China:

“ Trump’s broad assault on China has largely garnered bipartisan support, as evidenced by Congress’ approach to subjecting Chinese trade and investment in the United States, particularly in sensitive sectors like technology, under more oversight and restrictions. Now that some political pressure on Trump has eased with the conclusion of the midterms, and trade negotiations face more obstacles ahead, China will be bracing itself for more tariffs.”

As the Philippines reviews its Constitution and its policy toward international trade and investments, we must re-examine the mantra that free trade is automatically beneficial for every nation. Mahathir once criticized his political opponent saying: “The government of Najib Razak gives away land to the foreigners, who build luxury homes, which locals cannot afford.” He also warned against a “new version of colonialism” happening because poor countries are unable to compete with rich countries just in terms of free trade. It must always be “fair trade.”

Mahathir’s warning is important when countries like Malaysia and the Philippines deal with superpowers like China and the United States.