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Malaysia axes $22 billion of Belt and Road projects, blow to China

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mahathir mohamadHow
Hwee Young/Getty

  • Mahathir Mohamad has cancelled two major Chinese-funded
    projects to avoid his country going into further debt.
  • The projects were a $20 billion rail link and two gas
    pipelines worth $2.3 billion.
  • All three were part of China’s Belt and Road Initiative
    (BRI), a massive project which aims to link more than 70
    countries through trade.
  • Several of China’s partners are having trouble repaying
    their loans.

Malaysia’s prime minister has cancelled two multibillion-dollar
Chinese-funded projects to avoid his country going into debt
— delivering a blow to China’s plan to reshape global trade.

Mahathir Mohamad told reporters on Tuesday that he would axe two
major infrastructure projects because “we don’t need” them, and
that the debt accumulated from them could bankrupt Malaysia.

The projects were a $20 billion rail link connecting Malaysia’s
east coast and two gas pipelines worth $2.3 billion.

Mahathir said, according to the Associated Press: “It’s all about
pouring in too much money which we cannot afford, we cannot repay
and also because we don’t need these projects for Malaysia at
this moment.”

“With that debt, if we are not careful we can become bankrupt,”
he added.

The projects had been suspended and were pending renegotiation
until Mahathir cancelled them. Some of the money on the projects
has already been paid, and could be difficult to recoup,
the Associated Press reported last week
.

Mahathir added that Malaysia’s current focus was on reducing
national debt, and that the projects could be restarted in the
future.


mahathir mohamad xi jinping
Mahathir
Mohamad, second left, and Xi Jinping meeting in Beijing on
Monday.

Roman Pilipey –
Pool/Getty


The ventures had been part of
China’s Belt and Road Initiative (BRI)
, a massive project
launched in 2013 to link China to more than 70 countries across
Asia, Africa, Europe, and Oceania via railroads, shipping lanes,
and other infrastructure projects.

China has already invested between $1 trillion and $8 trillion —
the exact amount is not clear — in those projects, the
Center for Strategic and International Studies said
.

Many BRI projects involve China giving massive loans to economies
with bad credit, and several countries are already
finding it difficult to pay the money back
. Many projects
have also been crippled by
performance delays
.

Mahathir blamed Malaysia’s national debt on his predecessor Najib
Razak, who developed close ties to China while in office. Najib
is currently being
investigated over charges
that he looted billions of dollars
from the state investment fund.


one belt one road land sea routes
Map
showing the projects subsumed under the Belt and Road Initiative
as of December 2015.

Reuters

But Malaysia’s cancellations came with the blessing of Chinese
President Xi Jinping and Premier Li Keqiang, Mahathir said. He
met the two men in Beijing earlier this week.

Mahathir said,
according to Malaysia’s New Straits Times newspaper
: “I have
explained to them and they understood the situation and accepted
them. Initially, there were some misunderstandings but now they
understood why we do it. I don’t think China wants us to be
bankrupt.”

Mahathir has taken a strong stance against China after taking
office in May.

At a joint press conference with Premier Li on Monday, Mahathir
said in pointed remarks,
according to the Financial Times
: “We should always remember
that the level of development of countries are not all the same.

“We do not want a situation where there is a new version of
colonialism happening because poor countries are unable to
compete with rich countries, therefore we need fair trade.”

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