foreign policy malaysia

Written by Anas Mehmood 12:30 pm Current Affairs, International Relations, Published Content, Research Papers

China’s BRI vs the US’s FOIP: Foreign Policy Opportunities and Challenges for Malaysia

Contemporary publications identify Indo-Pacific as a hub of great power politics. The great powers, China and the US, are striving their best to enhance their sphere of influence across the region through BRI and FOIP respectively. These two strategies bring some opportunities along with certain challenges for ASEAN member states. In this research paper, the structural realism lens is used to analyze the foreign policy situation of Malaysia under these circumstances.
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Anas Mehmood is a student of international relations at the National University of Modern Languages.

Introduction

China’s Belt and Road Initiative (BRI) is China’s grand project to revive ancient trade routes across the Indo-Pacific (and other regions as well). Beijing pledged to invest billions of dollars in infrastructure development and various other projects under the umbrella of this extravagant project. Together with the growing power of China, this huge investment indubitably spurred severe geopolitical repercussions across the Indo-Pacific region where the US is trying to balance China through its grand Free and Open Indo-Pacific (FOIP) strategy.

The US, an established hegemonic power, is not willing to leave China’s growing power unchecked; ergo, it is opposing China’s development and restricting its sphere of influence across the globe. Southeast Asia, located at the strategic center of Indo Pacific region, has the potential of serving China’s interests, including the enhancement of China’s national security.

Likewise, ASEAN centrality in regional multilateralism also motivates China to extend and proliferate its sphere of influence through this region (Xue Gong, 2020). China has been engaging the regional states through infrastructural and economic statecraft under the umbrella of BRI (Kurlantzick, 2008). The US believes China’s BRI to be a debt trap for regional states.

The US’s FOIP is primarily designed to counter China’s BRI and to limit its growing influence in Indo Pacific region in general and with ASEAN member states in particular. However, regional states are reluctant to join one bloc at the cost of another state’s rivalry. Hence, the majority of ASEAN member states, including Malaysia, lay hanging in between two great powers.

These two contradictory strategies, China’s BRI and US FOIP, bring some opportunities vis-a-vis challenges for regional states of the Indo-Pacific region. In this regard, Malaysia is taken as a case study. The condition of the foreign policy of Malaysia to deal with this kind of hanging situation between the two great powers is analyzed according to the lens of structural realism.

Theoretical Understanding

Neo-Realism (which is also known as structural realism), espoused by Kenneth Waltz, elucidates the effects of the Indo-Pacific contest on regional states in an appropriate manner. Structural realists assume that the structure of the system is more important than the state and the state will always behave in accordance with structural dictation. They claim this by giving the concept of “structure agency debate.”

Likewise, structural realists are of the opinion that there is no room for independent foreign policy in the international system and that every state is a prisoner of the international system. By using the prism of neo-realism, one becomes familiar with the foreign policy of Malaysia. Uncontestably, Malaysia is suffering from a prisoner’s dilemma, stuck between the adventurous ambitions of two great powers.

Additionally, structural realists assume that states should align their foreign policy in accordance with the global power transition. This is also pertinent in Malaysia’s case. Before the dawn of the 21st century, when China did not emerge as an economic giant, Malaysia’s foreign policy was more bent towards the United States, but after the dawn of the 21st century, the foreign policy of Malaysia witnessed a sharp turn and started bending more towards China.

Literature Review

Xue Gong highlights the regional repercussions of China’s BRI and US FOIP in a well-précised manner. How do these policies by the major powers pose a threat to the small states in the ASEAN region? He highlights the potential implications of great power strategies on ASEAN member states but, for sake of parsimony, he left detailed information about Malaysia (or any other ASEAN member state).

Kuik Cheng Chwee primarily focuses on the challenges brought by China’s rise in Malaysia and Singapore. This article completely lacks the opportunities associated with China’s rise for these states. Likewise, this article also lacks the preeminent effects of BRI on Malaysia. Koh King Kee evaluates the key investments of China’s MNCs all across the globe in general and in Malaysia in particular.

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Additionally, this article identifies key areas of development: policy coordination, infrastructure, connectivity, trade and investment enhancement, financial integration, and people-to-people bond which are central to China’s flagship project BRI. =The author pays more attention to the overall projects of BRI rather than the opportunities available for Malaysia under BRI.  

Tham Siew Yean, Andrew Kam Jia Yi, and Tee Beng Ann assess the potential effects of the US-China trade war on the Malaysian economy because both are leading trade partners of Malaysia. The authors suppose two parallel scenarios; retrogressive effects of imposed US tariffs on China and the diversion of Malaysia’s products. The former case can damage the Malaysian economy, while the latter can nourish Malaysian exports.

BRI and FOIP for ASEAN

Under the BRI, China has invested a lot in megaprojects that are establishing a web of transnational economic connectivity, multimodal marine and land routes, electricity grids, and gas/oil pipelines. The concept of FOIP was given by Japan in 2016, but it gained importance when the US state department published a document to formalize it in 2019. There are three main objectives of the FOIP:

  • Establishing and promoting the rule of law
  • Freedom of free trade and navigation
  • Pursuit of economic prosperity

Great Power Competition and Opportunities for Malaysia

Malaysia, an important ASEAN member state, cautiously pursues a hedging strategy between the great powers’ competition in the Indo-Pacific region. Ostensibly, Malaysia’s tactics are acceding towards China because China is its largest trading partner. However, at the same time, Malaysia’s tactical cooperation with the US regarding defense and security shows Malaysia’s hedging strategy in practice.

Malaysia cannot bear US rivalry at the cost of Beijing’s friendship because US companies account for about 25% of Malaysian foreign investment (Abuza, 2020). Malaysia’s stance seems quite realistic and can be termed an “equidistance equilibrium.” This approach brings Malaysia a few opportunities along with certain serious challenges.

Opportunities for Malaysia under BRI

Trade

Due to the growing competition with the US and its allies, Beijing is keen to usher in plenty of trade-related projects in order to counter US influence in this region. In this regard, last year (from 2019 to 2020), trade between Malaysia and China grew by a handsome value of 5.7% against all odds posed by Covid-19 (Ouyang, 2020).

Here it is noteworthy to mention that China remains the greatest trading partner of Malaysia for the past 12 years. This steady growth in trade between Beijing and Malaysia can be credited to the rising competition between Beijing and US.

E-Commerce

In the era of extensively growing competition, China is trying to transform its cheap goods-based economy into an economy based on high technology and innovative material. China’s ambitions are pertinent to the Made in China 2025 strategy which reads: “We will strive to transform China into the global manufacturing leader before the centennial of the founding of the new China, which will lay the foundation for the realization of the Chinese dream to rejuvenate the Chinese nation.” (Grassi, 2020).

This brings another leading opportunity for Malaysia in the form of growing e-commerce. Malaysian SMEs (Small and Medium Size Enterprises), which account for about 98.5% of all registered businesses in Malaysia, have the opportunity of exploiting the e-commerce domain under an extravagant project of BRI (Site, 2020). Likewise, BRI projects will grant Malaysia access to Central Asia markets.

Growing economies and economic markets need immense connective links to facilitate trade between these markets. In this regard, BRI is an ideal project which primarily focuses on interconnectivity via infrastructural building in this region. Consequently, this integration of markets can help Malaysia in sustaining growth momentum in terms of alleviating the life standard of Malaysia’s citizens.

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Opportunities for Malaysia under FOIP

By establishing trans-border connectivity corridors, FOIP is designed to connect the Asian and African continents as well as the Indian and Pacific Oceans. So Malaysia has a chance of boosting its economy as the FOIP strategy focuses on free trade. This would help Malaysia in accessing the global market.

Security

Malaysia’s equidistance approach to great powers grants it the opportunity of benefitting from the US’s FOIP strategy as well. Malaysia is a littoral state of the South China Sea where it, too, faces the aggression of the Chinese Navy like the rest of the littoral states. Malaysia cannot afford to take the side of either US or China which is why it has adopted a hedging strategy.

In pursuance of this hedging strategy, Malaysia has taken advantage of the FOIP strategy and improved the security sector with the help of the US. Malaysia is a middle power that cannot bear China’s aggression alone. Due to this reason, Malaysia signed several defense pacts with the US. Malaysia, for the very first time, took part as a participant in US-led cobra exercises.

Earlier, Malaysia was reluctant to become a part of these exercises, but China’s assertiveness compels Malaysia to become a part of these exercises. Moreover, the alliance with the US has enhanced Malaysia’s surveillance capability across the Indo-Pacific region for which the US provides a coastal radar system. This radar system was installed along the coast of Sabah.

In addition, Malaysia and US alliance also led to the renewal of the “Acquisition and Cross Servicing Agreement (ACSA)”, which was first signed in 1994, according to which both states agreed upon mutual exchange of pieces of equipment, logistics, weapons, and transportation during exercises and pieces of training. In the recent past, Malaysia and US held joint exercises in the South China Sea under the banner of “Cooperation Afloat Readiness and Training (CARAT).” 

Trade

Despite enjoying better trade relations with China as China is the second-largest importer of liquefied gas from Malaysia after Japan, Malaysia is also engaged in billions of dollars’ trade with the US. In 2020, goods and trade services between the US and Malaysia hit the record-breaking figure of US$60.1 billion (Representative, 2020). This is something extremely satisfactory on Malaysian’s behalf.

Malaysia has 41.8 trillion cubic feet of proven natural gas reserves as of 2020 and is the third-largest gas reserve holder in the Asia Pacific region after China and Indonesia. Other resources include cocoa, pepper, pineapple, and tobacco. The US companies account for approximately 25% of Malaysia’s foreign investment which is a high amount (Koh King Yee, 2021)

Strategic Hedging: A Difficult Task for Malaysia

Malaysia adopted a foreign policy of equilibrium equidistance amidst US-China competition which can be termed as a form of strategic hedging. Malaysia is trying its level best to sustain this approach but its sustainability is an arduous task. Undisputedly, struggling against two rival giants is an extremely difficult endeavour.

Whenever Malaysia turns towards Beijing for economic leverage, the US starts blaming Malaysia for siding with its potential enemy. Likewise, Malaysia’s security pact with the US is highly criticized by China. In this intense situation, neutralizing the effects of relations with one power over another power is like a permanent source of headache for Malaysian officials.

Economic Pragmatism

Economic pragmatism refers to the maximization of economic gains from direct relations with great powers irrespective of all political differences existing between them. Growing US-China rivalry is turning all friendly stones through a wave of animosity and this ferocious wave has shaken the roots of Malaysia’s economic pragmatism.

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Economic pragmatism, adopted by Malaysian officials since the dawn of the cold war, represents Malaysian neutrality. Despite its neutral approach, the Malaysian economy is declining; the leading reason, identified by political analysts, for this rapid negative shift in Malaysia’s economy is the great power competition. This policy, strategic hedging, seems under constant pressure and its future is fading (Cheng-Chwee, 2021).

Impacts of US-China Trade War on Malaysia

In the recent past, the US imposed US$250 billion worth of additional tariffs on multiple numbers of Chinese products. In response, China retaliated by imposing US$110 billion on various US products (Cheng, 2019). Malaysia’s economy is small and open in nature with a relatively high dependence on trade. Any fluctuation in global trade will drastically affect Malaysia’s economy.

At the same time, there is a ray of hope for Malaysia amidst the great powers trade war. An opportunity can be observed in the form of trade diversion. Once Chinese products come under additional tariffs, Malaysian products can offer the best alternative. So, what is the overall effect of the US-China trade war on Malaysia? Does Malaysia really benefit from trade diversion? So far, the answer is negative. Malaysia has not benefitted from the US-China trade war yet, but it does have the potential to like the other East Asian states of Japan and South Korea (Yean Tham, 2019).

Conclusion

Both great powers are trying to offer more fascinating deals to Malaysian officials. From trade to security, from infrastructural building to regional connectivity, from increasing exports to trade diversion, Malaysia is benefitting immensely from the ongoing rivalry of great powers. This has all become possible due to the equidistance foreign policy adopted by Malaysia.

How far can Malaysia benefit from great power politics? This is an interesting question. Malaysia’s success lies in adopting a Machiavellian approach in this case. If Malaysia’s leaders show foresightedness, Malaysia will be able to cash all the opportunities and benefits simultaneously, otherwise, Malaysia can become a pawn in great power politics.

References

  • Allen, J. S. (2021). Do Targeted Trade Sanctions Against Chinese Technology Companies Affect US Firms? Evidence from an Event Study. Business and Politics, 1–14.
  • Garlick, J. (2020). The Regional Impacts of China’s Belt and Road Initiative. Journal of Current Chinese Affairs, 49(1), 3–13. https://doi.org/10.1177/1868102620968848
  • Gong, X. (2018). The Belt & Road Initiative and China’s influence in Southeast Asia. The Pacific Review, 32(4), 1–31. https://doi.org/10.1080/09512748.2018.1513950
  • Gong, X. (2020). China’s Economic Statecraft: The Belt and Road in Southeast Asia and the Impact on the Indo-Pacific. Security Challenges, 16(3), 39–46. https://www.jstor.org/stable/26924338
  • Haider, A. (2022, September 30). Malaysia’s relations with China: A multifaceted approach. Paradigm Shift. Retrieved from https://www.paradigmshift.com.pk/malaysia-china/
  • Indonesia Defense Strategy Towards Indo-Pacific (Case Study: The ASEAN Outlook on the Indo-Pacific). (2020). International Affairs and Global Strategy. https://doi.org/10.7176/iags/80-04
  • Le Thu, H. (2020). Southeast Asia and Indo-Pacific Concepts: From Resistance to Reticence to Reaction. Security Challenges, 16(3), 53–57. https://www.jstor.org/stable/26924340
  • Mouritz, F. (2020). Implications of the COVID-19 Pandemic on China’s Belt and Road Initiative. Connections: The Quarterly Journal, 19(2), 115–124. https://doi.org/10.11610/connections.19.2.09
  • Responding to the Geopolitics of Connectivity. (2020, November 22). Regional Programme Political Dialogue Asia. https://www.kas.de/en/web/politikdialog-asien/panorama/detail/-/content/responding-to-the-geopolitics-of-connectivity
  • Koh King Yee, Understanding China’s Belt and Road Initiative and its Implications for Malaysia. (n.d.). https://www.bakertilly.my/public/files/c050c3039b827370a8106fb29a17967888c4d8e1a3aec72ae91a268835f63b52.pdf
  • Yean Tham, S., Yi, A. K. J., & Ann, T. B. (2019). U.S.–China Trade War: Potential Trade and Investment Spillovers into Malaysia. Asian Economic Papers, 18(3), 117–135. https://doi.org/10.1162/asep_a_00729

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