Malaysia Treads Carefully Amid Spratly Tensions

An accommodative economic policy may have earned no favors

By: BA Hamzah

The recent confrontation off the Laconia Shoal –just 100 km from Sarawak and 2,000 km from China – involving the Chinese Coast Guard and other vessels harassing a drillship contracted to the national oil company Petronas has spotlighted Malaysia’s increasingly fraught relations with China. The social media is abuzz with netizen complaints on Malaysia’s “soft policy” with some calling for a tougher response for infringing Malaysia’s sovereignty.

The former foreign minister Musa Amann, for example, is asking the Ministry of Foreign Affairs to be more aggressive in response to China’s provocation. In a letter to the Prime Minister, Musa cited a similar incident in 2012 in which the Chinese Coast Guard vessels harassed foreign vessels on contract to Petronas conducting an aseismic survey in the same area.

This coincides with rising tensions across the entire region, raising the risks of armed confrontation. A naval skirmish between the US and Chinese navies looks increasingly likely, with the US sending destroyers into territory in the Spratly Islands last week on what the US described as freedom of navigation missions.  These are entangling risks that Malaysia should steer clear from.

The recent spats do raise questions whether an increasingly assertive China has changed its policy despite Putrajaya’s support of grandiose geopolitical projects like the Belt and Road Initiative and whether China is moving more aggressively southward from the Spratlys, where it has transformed several artificial islands into garrisons, in a kind of creeping annexation into Malaysia’s maritime waters.

Is Beijing building a new sand wall in the Laconia Shoals and possibly putting a permanent naval presence on James Shoal, an underwater feature that is embedded on the continental shelf of Malaysia? These questions call for face-to-face diplomacy and adroit statesmanship. It is not easy to keep calm after such a stormy incident. Putrajaya shouldn’t be too hasty in demonizing China when it has few cards to play. Although recent spats at sea shouldn’t be treated as little bumps in our diplomatic relations, roughening up with a powerful neighbor can be very messy.

Strategically located between the Strait of Malacca and the Sulu Sea, Malaysia considers itself an important geopolitical and economic force in Southeast Asia. It is a pioneer in regional cooperation and has played a leading role in creating a durable security architecture for such cooperation. But a more important contribution Malaysia has made to regional peace and security has been its leading role in effecting some political and strategic reconciliation between Southeast Asia and China.

Historically, long before the sovereign Malay states won independence as the Federation of Malaya in 1957, their seafaring people used to roam the nearby maritime areas, including the Spratlys for economic and military activities. The presence of Malay seafarers in the Spratlys preceded the colonial era and was long before the establishment of the 1947 nine-dash line through which China stakes formal claim to the entire South China Sea.

Like many seafarers from the coastal states in the region that today make up the current states of Indonesia, Cambodia, and Vietnam, the seafarers from China also sailed through the South China Sea since ancient times. The seafarers from the Ming China (1368 - 1644), for example, were noted for their expeditions.

Malaysia became the first ASEAN state to establish diplomatic relations with China, in May 1974. What began as a calculated diplomatic strategy, it has since 1990 spilled over into economic, cultural, educational, and military ties. Despite disagreement over China’s extensive territorial claims in the Spratlys, Malaysia doesn’t consider China a hostile power. On the contrary, following the decision to establish diplomatic ties and despite the memory of a brutal insurgency inspired by Communist China, Malaysia has adopted a friendly approach towards China.

Since the launch of the Belt and Road Initiative (BRI) in 2013, economic ties between China and Malaysia improved tremendously, with China becoming Malaysia’s largest trading partner for the last decade, with bilateral trade increasing from US$63.6 billion in 2017 to US$77.7 billion in 2018. China has invested more than US$43.8 billion over the past 10 years in Malaysia, including bailing out the once-ailing Proton, the national car project that then-Prime Minister Mahathir Mohamad pioneered in the early 1980s, taking 49 percent of the equity.

Malaysia is among the 65 countries that have participated in BRI projects and a major recipient of Chinese FDI. It doesn’t look upon BRI projects as a form of debt diplomacy to increase its political clout in the developing world, as many countries do. But the country does have its own woes with China over multi-billion-dollar mega projects initiated when Najib Razak was prime minister. Najib has been accused of getting the Chinese to initiate the projects to provide funds to bail out 1Malaysia Development Bhd., the state-backed investment fund that capsized with US$4.8 billion losses from corruption and mismanagement.

After the Barisan Nasional was drubbed in the May 2018 general election, many predicted the relationship with China would suffer because Mahathir accused Beijing of bribing Malaysian leaders to get overpriced mega projects, promising that if returned to office, he would cancel them.

However, once elected, he surprised even the Chinese when he made a 180-degree turn to embrace the projects, renegotiating them for better prices and insisting that Chinese companies employ more locals and source their construction materials from local companies. Interestingly, the Chinese companies agreed to cut cost and to abide by the conditions, an indication that the BRI projects are not cast in stone but can be renegotiated.

Some of the mega projects that have been renegotiated include the Bandar Malaysia and the East Coast Rail Link (ECRL). The warming relationship with China has seen a spike in Chinese imports of, for example, of palm oil, offsetting a decision of the European Union to ban palm oil imports over charges of environmental damage.

This policy shift with China has earned Mahathir many critics in the country, but it has earned him the respect of Chinese leaders, eager to portray to the world their readiness to debunk any allegation of unfair agreements with the developing countries. At the Second Beijing Forum on BRI which took place on April 26 and 27, 2019, Mahathir rubbished the claim that Beijing was using the BRI “to gain control of participating countries.”

The focus of Malaysia’s policy in the South China Sea revolves largely around maintaining friendly relations with China, claimant states and other stakeholders. However, this does not mean Malaysia has chosen appeasement in its relations with China. Putrajaya continues to support the ASEAN-initiated Code of Conduct mechanism against China in the South China Sea. 

Similarly, Malaysia’s support for freedom of navigation in the South China Sea reflects its responsibility to the international community and respect for rules-based international order; these two are currently at odds with China’s position.

Malaysia relies on international law and diplomacy to resolve territorial disputes in its waters. Though Malaysia’s 1979 map of the continental shelf has been the bone of contention with many in the region, its appeal for international law and diplomacy has produced positive impact on its neighbors. Boundary disputes with Thailand and Vietnam, for example, have been temporarily shelved through joint development schemes. Disputes with Singapore and Indonesia were resolved through the International Court of Justice.

Malaysia’s reliance on international law and diplomacy to manage boundary disputes is a testimony to its active engagement policy with all the contending stakeholders in the South China Sea. In the same vein, Malaysia’s reliance on the ASEAN member states to seek peaceful solutions in the South China Sea helps to reinforce its active engagement in the region.

BA Hamzah teaches a course on strategic studies and sea power at the National Defence University of Malaysia, Kuala Lumpur.