The DFTZ is just one example of Malaysia’s participation in Belt and Road. Prime Minister Najib Razak has agreed to several rail projects and a deep-sea port that could see his country rival Singapore as a transshipment hub.
The Muslim-majority nation was the fourth most attractive destination for Chinese overseas direct investment in 2017, according to the Economist Intelligence Unit. Najib, whose international image has been tainted by investigations into an alleged multi-billion dollar corruption scandal, has warmed up to Xi’s government in recent years.
Analysts agree that it’s important for Najib to boost the economy ahead of general elections this year, but they warned of consequences that accompany closer Chinese ties.
“There are anecdotal complaints from Malaysian (companies) that (Chinese) companies procure almost everything from China, sidelining local firms,” Wan Saiful Wan Jan, visiting senior fellow at Singaporean think tank ISEAS-Yusof Ishak Institute, said in a 2017 report.
He drew parallels to Zambia, Ghana and Nigeria, where Chinese state-owned companies rely on Chinese manpower and materials, shutting out locals from jobs. “Are there sufficient steps to ensure that not all funds flow out from Malaysia to (Beijing), bypassing local players?”
The issue is particularly sensitive given the long history of tensions between ethnic Chinese and Malay populations within Malaysia. Minister Salleh Said Keruak told CNBC that anti-China sentiment “has become a hallmark of the opposition’s latest political smears against the government.”
Malaysia is due to hold a general election before August, and tensions are fraught between the incumbent Najib and former prime minister Mahathir bin Mohamad, the opposing candidate.