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A nation must think before it acts.
Mahathir Mohamad is back. After serving as Malaysia’s prime minister from 1981 to 2003, the 92-year old Mahathir returned to his prior post in May 2018. He came back at the head of a new political coalition, Pakatan Harapan, that defeated his old political party, the United Malays National Organisation, and unseated its standard bearer, former Malaysian Prime Minister Najib Razak, who had become entangled in a far-reaching corruption scandal involving Malaysia’s sovereign-wealth fund, 1Malaysia Development Berhad (1MDB).
With Mahathir’s return has come a whirlwind of house cleaning. Even before the new Malaysian parliament convenes in July, the secretary general of the Malaysian Treasury, who also served as chairman of 1MDB, was sacked. So too was Malaysia’s attorney general. Then, in rapid succession, Malaysia’s anti-corruption commission chief and central bank governor resigned. Though no stranger himself to backroom deals among Malaysia’s business and government elites, Mahathir never let those dealings get out of hand as badly as Najib did. Malaysia’s new finance minister, Lim Guan Eng, revealed that Najib’s government had run up liabilities, including from the corruption-ridden 1IMDB fund, of $273 billion, a sum equivalent to over 80 percent of Malaysia’s gross domestic product.
Mahathir quickly set to work slashing expenses from infrastructure projects, government department budgets, and civil servant salaries, all of which Najib had inflated to boost his flagging political support. Unceremoniously, Mahathir abruptly announced the cancelation of Najib’s flagship infrastructure project—a $28-billion high-speed railway between Kuala Lumpur and Singapore—because he believed it would “not earn [Malaysia] a single cent.”
Such infrastructure project cancellations have worried China, not only because its companies may lose their lucrative contracts, but also because Mahathir’s anti-corruption drive could throw light on China’s dodgy deals in Malaysia. Just last month, Lim revealed that Najib’s government paid the China Petroleum Pipeline Bureau, a Chinese construction company, nearly 90 percent ($2 billion) of the total cost for two pipelines that are less than 15 percent complete. Lim promptly asked Malaysia’s new anti-corruption commission to investigate the payment. “We are strongly suspicious this is all part of the 1MDB scam,” Lim explained. Such probes could be a bad sign for other Chinese-backed projects, including the $14-billion East Coast Rail Link which Najib wanted to connect Peninsular Malaysia’s coasts.
But China has a bigger reason to worry about Malaysia: the trajectory of its foreign policy. Indebted to Beijing for its financial assistance time and again, Najib had drawn ever closer to China as his 1MDB woes deepened. Despite increasing Chinese provocations in the South China Sea, including in Malaysian-claimed waters, Najib rarely protested China’s actions. The more Najib came to rely upon China to recoup losses from the 1MDB fund, the quieter he became. His tilt toward China became apparent after a Chinese state-owned company bought $2.3 billion worth of overvalued power assets from 1MDB in late 2015. Soon after, Malaysia made the odd (and ironic) decision to purchase four Chinese littoral warships to patrol its disputed waters.
Given Mahathir’s first acts as prime minister, China is understandably concerned about whether Mahathir will take a firmer line against it. Already, Mahathir has called China’s deals with Najib “unequal treaties,” a term used to describe the onerous agreements foreign imperialist powers imposed on China during the nineteenth and twentieth centuries. Mahathir also announced that he would reconsider allowing Chinese vessels into Malaysian waters and “would not like to see too many [Chinese] warships” in them anymore. So, with some reason, Chinese state media reported on Mahathir’s return with a degree of trepidation.
However, in a recent interview, Mahathir described his view of contemporary Southeast Asian international relations as one reminiscent of the Cold War: a bipolar great-power competition, this time between China and the United States. He suggested that Malaysia could use this competition to its benefit. If he truly believes that, then Beijing has little to fear. Mahathir will not become resolutely anti-Chinese or pro-American. Rather, he will try to seek a path that leaves Malaysia bound to no single power, as he did during his first tenure as prime minister. He may yet tip toward the United States, but probably only to gain leverage to extract a better deal from China. That might include reducing or removing the obligations that Najib made with China.
It remains to be seen how China responds to Mahathir. If China’s interaction with heavily indebted Venezuela is any guide, China will be willing to bend, but only to a point. If pushed too far, for example on the South China Sea issue, China is apt to push back.
Whichever way Mahathir decides to lean, his long-term influence on Malaysian foreign policy may be limited. For during his election campaign, he pledged to step down as prime minister within two years to reassure voters who had doubts about his commitment to democracy. At that time, Mahathir will relinquish his post to Anwar Ibrahim, a political rival who Mahathir once imprisoned and was only recently pardoned after a second stint in prison. And so, if China and the United States want to influence Malaysia’s future foreign policy, they would be wise to get to know Anwar better, unless of course Mahathir’s autocratic tendencies persuade him to reconsider his pledge and stay on a bit longer.
 Ridzwan Rahmat, “New Malaysian premier reconsiders naval relations with China,” Jane’s Defence Weekly, May 11, 2018.