Malaysia and China: Strange bedfellows on the South China Sea?

Photo: U.S. Pacific Fleet/CC BY-NC 2.0
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By Holly Reeves

In public, Malaysia and China are friends, seeking amicable solutions to the region’s sensitive territorial politics. In business, they are partners – China is Malaysia’s top foreign funder. In private, the “special relationship” between these two is tense and increasingly under pressure.

While the Philippines and Vietnam are active and vocal in the defence of their claims to the islets of the South China Sea, Malaysia is strangely quiet. That seems an unusual position when the country is Southeast Asia’s second-largest oil and natural gas producer and much of its resources stem from these disputed waters.

Economics is the easy answer. China, a global economic heavyweight, is Malaysia’s top trading partner, and its number one source of direct foreign investment (FDI).

Just recently, China’s state-run organisations have not only rescued the state-owned 1MDB from an embarrassing hole by purchasing its energy assets for RM 9.83 billion ($2.41 billion), but also took a substantial equity stake in the huge Bandar Malaysia development project. Meanwhile, the Chinese government is buying up Malaysian Government Securities at a quick pace. By April it held a share of almost 10%.

Follow the money trails and you will see billions of dollars crossing into Malaysia from its powerful friend to the north. So Malaysia does not want to rock the boat. And if it is to hit its FDI target of RM 40 billion ($ 9.8 billion) this year, then that seems economically sensible.

But there is more. “Malaysia has been more hesitant to push back forcefully against China, partially because the Philippines and Vietnam have been a useful buffer, soaking up so much of China’s bullying over the last few years,” said Gregory Poling, Asia Maritime Transparency Initiative director with the Center for Strategic and International Studies, a US-based think tank, .

He also adds that the ruling elite is convinced that they have a “special relationship” with Beijing, however, “increasingly parts of the government in Malaysia have been disabused of that notion as China has increased its incursions into Malaysian waters.”

A flood of fishermen

The Malaysian Defence Minister, Hishammuddin Hussein, played down the largest of these incursions into the disputed South China Sea, where 140 Chinese fishing boats, and China’s coastguard, were sighted just 80 miles from the shore of the state of Sarawak.

And the power of the two nations’ relationship can be seen in his reply. It occurred in Malaysia’s exclusive economic zone, and not its territorial waters, he said. Apparently the paper-thin difference is crucial. Unnecessarily aggressive or otherwise, it matters less.

But more telling is the next part of his response. Asked if his country would boost its maritime capabilities as a result he said, “We will increase our maritime capability anyway… But we have to be realistic. No matter how big we boost our capacity – the navy – will it ever be as big as China’s or the US’s? No.”

Perhaps this is more of the truth. When you know you cannot fight your neighbours, it is better to make them your friends. Following a recent visit by Xi Jingping’s special representative, Najib Razak’s office stated, “Malaysia is ready to discuss further possibilities and believes positive discussions and collaborations with China, as well as ASEAN countries, in these areas will further safeguard mutual interests.”

It said Malaysia was confident that constructive dialogue between ASEAN countries and China would enable all parties to achieve a mutually beneficial long-term solution, with respect to the South China Sea issue, that would bring stability and prosperity to the region.

So, publicly they are working together. Geopolitically, Malaysia is keeping a low profile. But privately it just announced plans to set up a naval forward operating base near Bintulu, south of Miri.

The defence minister insists the base, which will house helicopters, drones and a special task force, is to protect the country’s rich oil and gas assets from potential attacks by Islamic State (IS) sympathisers based in the southern Philippines, hundreds of kilometers to the northeast.

Others are not so sure. “If you beef up security for oil and gas assets, you are protecting yourself from non-state and state actors so there is some plausibility to what he’s saying,” said Ian Storey, a South China Sea expert at Singapore’s ISEAS-Yusof Ishak Institute, “But is it really being driven by [IS]? I don’t think so.”

A quiet truce?

It is safe to say that Malaysia’s voice is unlikely to be heard in the noisy scuffle over ownership of the rocks and resources in the South China Sea. The country’s representatives have already agreed to deal with issues with China bilaterally, via a Declaration on the Conduct of Parties. They will also speed up completion of a Code of Conduct for the area.

According to China’s foreign ministry, both countries had a “high degree of consensus” on this and they “are willing to remain in close touch with Malaysia.”

The question remains – with friends like this, who needs enemies?

China offers money, and expects acquiescence in return. It publicly sustains the “special relationship” but, as its aggression around Malaysian coasts shows, the terms are unequal.

Malaysia supports China publicly. China supports Malaysia economically. Malaysia may be building defences against Islamic State; but the threat to its own self-respect is from the power of Beijing.