Recent years have seen a remarkable reversal in the foreign policy orientation of two key Southeast Asian countries. On one hand, the 2016 election of President Rodrigo Duterte has effectively ended the Philippines’ regional role as leading critic of Chinese geopolitical assertiveness, particularly in the South China Sea. The Filipino president has refused to assert his predecessor’s landmark arbitration award against China, while downgrading the Philippines’ century-old alliance with the United States. Eager to attract Chinese investments, he has called on smaller states to be “meek” and “humble” in exchange for Beijing’s goodwill.

In stark contrast, the shocking return to power of Prime Minister Mahathir Mohamad earlier this year seems to have brought an end to Malaysia’s traditionally deferential, if not subservient, relations with China. For decades, Kuala Lumpur maintained “quiet diplomacy” in the South China Sea, shunning open criticism of China’s coercive actions in the area in exchange for large-scale Chinese investments. True to his campaign promise, the new Malaysian government under Mahathir is revisiting the foundations of its bilateral agreements with China. They are currently reviewing the cancellation of up to $40 billion in Chinese infrastructure investments, while Mahathir’s senior advisors say they are exploring greater “minilateral” coordination with other Southeast Asian claimant states such as Vietnam and the Philippines in the South China Sea amid China’s militarization of the disputes. In a strange twist of events, Malaysia has thereby emerged as a new regional vortex of resistance against Chinese hegemony in Southeast Asia.

A Perfect Storm

Malaysia’s strategic recalibration is driven by a combination of factors. In more immediate political terms, it’s directly related to the new government’s rejection of potentially corruption-infested bilateral deals struck by the preceding Najib Razak administration.

Mahathir has accused his predecessor of selling out the nation to China in exchange for lucrative infrastructure agreements as well as financial assistance, leading to a ballooning of Malaysia’s foreign debt. At the height of the 1Malaysia Development Bhd. corruption scandal, with countries around the world freezing accounts of and launching investigations into senior Malaysian leaders, China provided $2.3 billion to bail out the embattled Najib administration.

Intent on addressing a potential fiscal crisis, the Malaysian authorities have resolved to manage the $250 billion debt by, among other things, reassessing big-ticket Chinese infrastructure investments. As Finance Minister Lim Guan bluntly put it, the current government is desperate “to restore our finance and also restore our country’s reputation in international financial circles”, both of which have been tarnished by the 1MDB scandal and the country’s weakening fiscal position. Geostrategically, the finance chief made clear that Malaysia is seeking to avoid a situation like that facing Sri Lanka over its Hambantota port project, where an inability to pay back Chinese infrastructure loans led to the Chinese taking possession of the port.

Because of its dependence on China, the previous administration remained largely quiet over China’s creeping intrusion into Malaysian waters in the South China Sea, officials in the new government contend. As the new deputy defense minister Liew Chin Tong told the author in late August: “We don’t want to antagonize China, but we also don’t want to be seen as a client state.”

It was precisely against the larger backdrop of Malaysia’s suffocating dependence on China that Mahathir, during his recent trip to Beijing, warned against “new colonialism”, that could entrap smaller countries relying on large-scale trade with and investment from the Asian powerhouse.

Mahathir Doctrine

Mahathir’s strategic doctrine can be surmised as “dynamic balancing”, studiously maintaining Malaysia’s strategic autonomy by avoiding overdependence on and vulnerability to the whims and dicta of any major regional power.

During his earlier tenure, from 1981-2003, he was largely known for a critical stance against the West, viewing the United States and Australia as overbearing alien powers. An advocate of so-called “Asian values”, he rejected liberal democracy as inimical to the supposedly distinct societal values of Asian societies, and pushed for closer ties between Southeast Asia and China to the exclusion of the United States and other Western nations.

Back then, Mahathir viewed China as a potential counterbalance to American unilateralism. In recent years, however, he has begun to acknowledge the emergence of China as an increasingly assertive and, at times, coercive power in the region. He views contemporary Chinese leaders, particularly Xi Jinping, as “inclined towards totalitarianism” and unafraid to “flex [their] muscles” in order to “increase [their] influence over many countries in Southeast Asia,” a development that he characterizes as “very worrisome” for smaller neighbors such as Malaysia.

The new government will likely axe major Chinese investment projects, including China Communications Construction Company’s East Coast Rail Link project (estimated to cost the government close to $20 billion once in operation); the $10 billion Melaka Gateway project, a partnership between Malaysian KAJ Development group and several Chinese companies, including PowerChina International; and the natural gas pipeline project led by a subsidiary of China National Petroleum Corporation worth $2.5 billion.

The new government has also imposed restrictions on Chinese real estate investments, particularly the $100 billion Forest City, which almost exclusively catered to mainland Chinese buyers.

Deputy Defense Minister Liew told the author that “if investment into [a country] doesn’t bring jobs, you will eventually see a domestic political problem.” The Malaysian government, according to him, is open to Chinese investments, provided they are economically viable, negotiated transparently, and generate quality jobs for locals.

Amid a reassessment in bilateral economic relations, Malaysia is also likely to adopt a tougher stance in the South China Sea by fortifying its military presence in the Spratly Island land features under its control, more openly criticizing China’s militarization of the disputes and intrusion in Malaysian waters, and exploring tighter diplomatic and strategic cooperation with other Southeast Asian claimant states.

Mahathir has already proposed a new peace formula, calling for demilitarization of the disputes and preservation of freedom of navigation and overflight in regional waters. The centrality of Malaysia to regional politics, accentuated by Mahathir’s stature as an influential global leader, has given the country a platform as a new voice of skepticism and resistance toward China. The new government in Putrajaya may, in time, inspire other regional governments to adopt a more critical view of close cooperation with Beijing.

Header photo by How Hwee Young – Pool/Getty Images

About Richard Javad Heydarian

Richard Javad Heydarian is an assistant professor in political science at De La Salle University, and a policy adviser at the Philippine House of Representatives (2009-2015). He is the author of Asia’s New Battlefield: The US, China, and the Struggle for Western Pacific.