THE recent Wall Street Journal report on senior Chinese officials offering to bail out 1MDB and derail investigations into the alleged corruption in the fund in exchange for stakes in the East Coast Rail Link project has raised serious concerns. Being linked to the wider web of China’s Belt and Road Initiative (BRI), the project’s execution in Malaysia and other countries now raises questions as to whether the BRI is a noble win-win global trade programme or something more sinister .

Viewed together with some questions on human rights and its adamant nine-dash-line claim of the South China Sea and military installations on artificial islands in total disregard for the law of the sea, it has also raised questions about China’s moral leadership in a widely anticipated “Asian century”.

The hallmarks of an impending Asian century are indicated by a number of factors. Asian countries as a whole have seen robust growth in the past decade, surpassing the United States and European Union. The International Monetary Fund’s report for real GDP growth in 2017 saw East Asia at 5.6%, Southeast Asia at 5.3%, and South Asia at 6.5%. The US was at 2.3%, the EU at 2.7%, and the UK at 1.8%. The interest rate in EU is 0%, 2.5% in the US, and 3% to 5% in most Asian countries.

The debt-to-GDP ratio for EU and the US is dangerously high, with many countries above being 100%. Most Asian countries (with the exception of Japan) have their debt-to-GDP ratios within a manageable 30% to 60%. The implication is that developed countries have little room to manipulate via monetary or fiscal policies. With the current world economic contraction, Asian countries have better chances to weather the storm.

China’s double-digit growth has provided impetus for growth in other Asian countries for more than a decade. Even with the current 6.6% growth, it is still the highest compared with developed or emerging economies. China’s leadership is recognised and much in need for the impending Asian century.

According to a report by PricewaterhouseCoopers in 2017, the world’s 10 most powerful economies in 2030, ranked by their projected global GDP by purchasing power parity are:

1. China – US$38 trillion
2. US – US$23.5 trillion
3. India – US$19.5 trillion
4. Japan – US$5.6 trillion
5. Indonesia – US$5.4 trillion
6. Russia – US$4.7 trillion
7. Germany – US$4.7 trillion
8. Brazil – US$4.4 trillion
9. Mexico – US$3.7 trillion
10. UK – US$3.6 trillion

Four out of the top five economies will be Asian countries and six of the top 10 economies will be non-Western countries, according to the report.

Patriot and G25 Malaysia are of the view that China’s economic and political leadership has to also bond with moral leadership. The latest WSJ report on the minutes of previously undisclosed meetings suggests shadowy deals between China’s government officials and Najib Razak’s Barisan Nasional government. Previous revelations by the finance minister involved only contractual parties – Exim Bank, China Communications Construction Company Ltd, and 1MDB. The price tag of the ECRL project was inflated by RM20 billion, with payment terms in accordance to time scale and not on work done. In addition, there was the issue of two pipeline projects wherein 88% of the contract sum was paid for only 13% of the work done.

Malaysia and other Asean countries welcome China’s BRI investments and projects, but there has to be transparency, accountability, and good governance. In this regard, it is in the best interest of all that BRI projects should be included in the Asean Agenda and the Asean  Dialogue process.

There is merit to criticism from Western observers that BRI projects in certain countries may not be economically and financially viable, and that they may be debt traps. The IMF had warned of excessive debt in a number of countries where the debt-to-GDP ratio had become burdensome. The countries at risk are Maldives, Kyrgyz Republic, Laos, Tajikistan, and Pakistan. In 2011, Tajikistan had to give up thousands of square kilometres of territory in exchange for a debt write-off. In 2017, Sri Lanka had to hand over the Hambantota port on a 99-year lease for failure to settle debt.

Patriot and G25 Malaysia are of the view that BRI projects by China should indeed be a win-win for all, taking into consideration the welfare of the local people and the economic well-being of the participating developing countries.

In the case of the oil and gas pipelines constructed in the Rakhine state of Myanmar, where China owns 51%, compensation for land acquirement had not been fair, and in numerous cases owners of land were not compensated.

The two largest corporations, Union of Myanmar Economic Holding Ltd and Myanmar Economic Corporation, owned by Myanmar military, have stakes in the pipeline projects. It was in the interest of the military to declare a state of emergency so that the National Security Council, dominated by the military generals, could rule.

Certain religious sects among the Buddhist monks were sponsored to create chaos to enable the military to take action, which resulted in the exodus of 700,000 Rohingya refugees. China’s unholy relationship with Myanmar’s military today is a major part of the constitutional problem in the country, causing the civilian government to be severely handicapped.

Within China, the plight of the ethnic Uighurs has raised international concern and a UN fact-finding mission was sent to inquire on the much-reported “re-education” internment camps. Chinese officials cannot merely deny such accusations, but must show proof beyond reasonable doubt that such accusations are not true.

Clearly, China is under a moral obligation to cooperate with the UN system and civil society groups to address this alarming situation.

China must respect the relevant provisions of the United Nation Convention on the Law of the Sea. Each of the much smaller Asean states has rights to its exclusive economic zone, and China must respect that. Anything less will see China as a big bully thrashing any remaining bit of moral leadership.

Demilitarisation of the South China Sea and respect for ZOPFAN, the Treaty of Amity and Cooperation in Southeast Asia, and an early agreement on a code of conduct on the South China Sea would go a long way for China to gain respect.

Patriot and G25 Malaysia welcome China’s role and moral leadership in an eventual Asian century. – January 29, 2019.

* This statement is issued by National Patriots Association and G25 Malaysia.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.