A View from Malaysia

Philippine President Rodrigo Duterte and Malaysian Prime Minister Najib Razak made high-profile visits to China from October 18-21 and from October 31 to November 5, 2016, respectively. It was the first China visit for Duterte since he took office about four months earlier (his first trip outside of ASEAN), and the third for Najib as premier since 2009. Both visits sparked concerns that have grown after Donald Trump’s surprise triumph on November 8. Is the United States losing to China in the long-term geopolitical competition in Southeast Asia? Are more smaller states in Asia tilting toward China for economic benefits at the expense of US interests? Is the continuing uncertainty surrounding Trump’s external policies (particularly on China, US-Asian alliances, and the TPP) creating more room for China to expand its influence in Asia?

These questions are misleading because of their zero-sum, dichotomous assumptions; however, the issue of small-state “realignment” in Asia, as highlighted by mounting concerns in and out of the region, is real. Regional states’ strategic “reorientations” will have an impact on the power order in the Asia Pacific. If countries, especially those perceived by Beijing as within its “traditional” sphere of influence, are “shifting” their external priorities one after another in embracing China’s geo-economic and geostrategic designs under President Xi Jinping’s One Belt, One Road Initiative, the developments may signify the reemergence of the Sino-centered order.¹ Are the two leaders’ visits an early sign of such a trend?

We contend that it is still early to draw such a conclusion, as the visits underscore more recurring themes than new trends. They signify greater readiness on the part of smaller countries to move closer to Beijing; however, this is more a calculation of self-interest in the face of fast-changing, uncertain, external and internal conditions than a demonstration of strategic choice to side with the proximate giant. The direction of alignment decisions will depend especially on three factors: China’s actions, Trump’s Asia policy, and the actions and reactions between the two giants. The top-down effects of these interactions will then be filtered by domestic conditions, prompting states to respond in ways that serve their own ruling elites’ internal agenda. If Trump’s telephone conversation with Taiwanese President Tsai Ing-wen on December 2 was indeed “planned in advance to signal a new, robust approach to relations with China” as reported,² this may signal more turbulent US-China relations ahead with growing uncertainty that continues to make any clear-cut alignment choice on the part of smaller states unlikely.

Two Visits, One (Domestic) Imperative

Both Duterte and Najib’s China visits were driven primarily by their own domestic political needs and calculations. Domestic political imperative filters judgments about the relative utilities and drawbacks of adjusting relations with the major powers, e.g. from siding with one power to a more balanced relationship with all big powers, from close cooperation to even closer partnerships in all domains with the power(s) that matter. Whatever the pattern of relations—close, distanced, and/or selectively confrontational on certain or all domains—the desired benefits will always come together with some undesirable, but inevitable downsides, costs, and risks, as in all policy processes. The drawbacks will be seen as “acceptable” tradeoffs, so long as the adjusted relations promise ruling elites greater utilities needed at home.

Duterte’s China Visit

What benefits does Duterte target from his visit to China (and rebalanced relations with the big powers)? Economic benefits clearly top the list. He returned home with USD 24 billion in deals, which boost Philippines’ public infrastructure and a range of other sectors. There is a wider geopolitical rationale as well. Duterte obviously wants to find a way out from the stalemate in the South China Sea, in order to concentrate on domestic development. He also wants to reduce his country’s dependence on the United States and steer a more independent foreign policy.

These multiple targeted benefits must be seen as the parallel, integral instruments of the new leader’s domestic agenda. That is, to pursue policies along the very political pathways that brought him from the southern city of Davao (as a seven-term mayor) to the Malacanang Palace, with the ambition of transforming Philippine politics, and, as one analyst puts it, “uplifting the lives of the vast majority [of] Filipinos who have long been denied economic development opportunities.”³ These aspirations require him to carry out the type of populist, mass-oriented policies that earned him high support in Davao and policies that he pledged to the electorate, who yearned for change. Chief among these policies are tackling the country’s drug, crime, and corruption problems, improving its infrastructure, and reaching peace agreements with the communist insurgents and Moro separatists in the south, but also managing the maritime disputes peacefully. These are all essential to attain Duterte’s ambition of ending the elite-based, Manila-centered old politics, while creating more equally distributed developmental fruits to the majority of his people in a safe, peaceful environment.  

These domestic needs push Duterte to view China as the indispensable source of external assistance. Beijing’s responses before, during, and after his visits justify his conciliatory approach, thereby resetting bilateral relations and ending the years-long antagonism under Benigno Aquino III (2010-2016). China has enthusiastically backed Duterte’s drug war, pledged the much-needed investments and know-how to revamp the country’s infrastructure, and reciprocated the leader’s good will over the South China Sea by quietly allowing Filipino fishermen to return to Scarborough Shoal for the first time in four years.

In comparison, other powers are seen as mixed on policy areas crucial for Duterte. In fact, some are perceived as a challenge to his anti-drug campaign. The United States and many Western countries have criticized his campaign, which has led to extrajudicial killing of thousands of alleged dealers and users. Duterte has reacted strongly by lashing out at Western “hypocrisy”, saying that they “should not pretend to be the moral conscience of the world,” as they “also violated the human rights of other countries.”⁴ On the eve of his China visit, Duterte thanked Beijing “for not criticizing the crime-crackdown” as he accepted soft loans and financial assistance. “China never criticizes. They help us quietly.”⁵

Duterte’s perception of Japan, a US ally, is positive. He sees Japan as an important partner, vital to his goals of securing more economic assistance and pursuing a more balanced big power policy. He visited Japan from October 25-27, 2016 after, reportedly, turning down Japan’s request to visit Tokyo before Beijing.⁶       

There are costs and risks in Duterte’s realignment move, but, for now, he seems to perceive the tradeoffs as manageable and to have taken steps to address some of them, e.g., undermining the long-standing US alliance, casting uncertainty on the Enhanced Defense Cooperation Agreement. Thus far, this damage remains chiefly at the high-level political level. Despite the leader’s remarks on “separation from the US,” bilateral defense and economic cooperation have continued. The incoming Trump administration provides Duterte a fresh opportunity to improve relations. He made a positive gesture by congratulating the president-elect, and on December 1, after a phone call, he said that the president-elect praised his war on drugs.⁷ However, if Manila continues to shift further away from Washington, bilateral defense ties will be at risk. Another challenge is the uncertainty surrounding China’s actions, especially in the South China Sea. It could retract its decision to allow Filipino fishermen to access the Scarborough. Duterte appears to be giving Beijing the benefit of the doubt, and working with China on exploring mechanisms to manage the dispute. Domestically, the main cost is the resentment of the pro-US security establishment, which is suspicious of China, which Duterte has attempted to mitigate by making a series of visits to military camps throughout the country.⁸

Najib’s China Visit

Najib’s week-long trip to China and his evolving big power policy is similarly driven by domestic political necessity, especially economic gains, by securing investments that can boost Malaysia’s flagging economy (deals worth USD 33 billion were signed during the visit). Like Duterte, Najib also went to Beijing with Washington in mind (while there, he wrote an editorial in a state-run Chinese newspaper warning “former colonial powers” to stop interfering in the internal affairs of smaller countries). Small-state pragmatism aside, Najib’s visit was also colored by his battle for survival at home.

The ruling Barisan Nasional (BN) coalition—of which Najib’s United Malays National Organisation (UMNO) is the dominant party—has faced unprecedented challenges in recent years. After BN’s setback in the 2013 general elections, where it again lost its two-thirds majority in the Parliament and lost several states to the opposition (after the first such setback in 2008) due to a major swing in the urban electorate, UMNO has increasingly turned to race and religion to consolidate its rural Malay-Muslim base. Identity conservatism alone, however, may not be a sufficient platform to win the election, which is due in mid 2018, but can be held as early as 2017. Economic performance is another pathway to hold on to power. Ensuring growth has long remained a key source of legitimacy for BN to appeal to the non-Malays and the urban-based, moderate-inclined Malay voters. It is also a basic element of UMNO’s increasingly patronage-based politics. Economic pragmatism, by extension, is a pillar of Malaysia’s external policy, especially towards China, its largest trading partner since 2009 (and Malaysia is China’s largest trading partner in ASEAN, and the third in Asia, after Japan and South Korea).

Under Najib, economic pragmatism vis-à-vis China has gained more salience. In addition to promoting bilateral trade, his administration has taken concerted efforts to attract more investment while exploring new commercial ventures: developing the Twin Industrial Parks in Guangxi’s Qinzhou and Pahang’s Kuantan, enhancing currency and financial cooperation, as well as attracting China’s leading MNCs in telecommunication, railways, and other key sectors to make Malaysia their base in the ASEAN region. China’s telecommunications giant Huawei’s Global Training Center in Putrajaya is the first of its kind outside of China. CSR‘s center in Batu Gajah to produce locomotives is China’s first overseas base to manufacture railway equipment (ventures initiated well before the launching of Xi’s One Belt, One Road initiative).

Over the past two years, the Najib government has stepped up its efforts to attract capital and technology from China as Malaysia faces sharply declining foreign investment, increasing capital outflows, sliding commodity prices, and a depreciating currency. The sharp drop in oil prices has posed a serious problem, as energy accounts for about 20 percent of the country’s GDP. While Malaysia tries to diversify its economic links (joining the TPP, exploring a FTA with the EU, and taking part in RCEP), developing an even closer economic partnership with China had emerged as a key component of Najib’s external economic strategy by the mid-2010s.

Then came the 1MDB scandal. In July 2015, The Wall Street Journal reported that nearly USD 700 million related to 1MDB, the troubled state investment fund, was deposited into Najib’s personal bank accounts. In November and December 2015, China’s state-run firms made two multi-billion asset purchases from 1MDB, including a stake in Bandar Malaysia, the terminus for the proposed high-speed rail between Kuala Lumpur and Singapore. Rafizi Ramli, an opposition lawmaker said, “We [now] have a prime minister who is indebted to the Chinese government.”⁹ In July 2016, the US Department of Justice filed lawsuits in a federal court seeking to seize USD 1 billion in assets, revealing that a total of USD 3.5 billion was misappropriated from 1MDB. The lawsuits did not name Najib, instead referring to “Malaysian Official 1.”

Najib’s China visit took place against this backdrop. The trip and its various outcomes signify Najib’s inclination to move closer to China. On the economic front, 15 business-to-business MoUs and 16 government-to-government MoUs were signed, covering port and rail construction, e-commerce, finance, energy, manufacturing, and other sectors.¹⁰ Accordingly to one observer, most of the commercial deals were sealed much earlier, but were arranged during this trip to ensure “money flowing in” without delay, to accelerate China’s pledged investment into realized investment.¹¹ The major deals that surprised many in and out of the country were two: the purchase of an initial four Littoral Mission Ships (LMSs) from China, and the award of the East Coast Rail Line (ECRL) project to China Communication Construction Company (CCCC). “A warm-up to the general election,” the commercial MoUs and investments will help lay the foundation to develop Malaysia’s future growth engines and “lend the much-needed feel-good factor” to Najib’s BN coalition.¹²

In the geopolitical realm, there were signs the Malaysian leader sought to use the trip not only to strengthen the Malaysia-China partnership but also to play Beijing against Washington. While it remains a matter of conjecture whether this had anything to do with the 1MDB fallout, his message was clear. In China Daily on the third day of his visit, Najib wrote, “we believe it is incumbent upon larger countries to treat smaller ones fairly. And this includes former colonial powers. It is not for them to lecture countries they once exploited on how to conduct their own internal affairs today.”¹³ He emphasized, “Malaysia and China are united in agreeing on the need to defend the sovereignty of the nation state and in the belief that the individual histories, values and governance systems of different countries must be respected” and added that this is particularly relevant “as the world’s fulcrum shifts east.”¹⁴ Earlier, in an exclusive interview just before his visit, Najib hailed China as “a true friend and strategic partner”, saying he would ensure that “it continuously improves and reaches new heights,”¹⁵ stating in written responses, “It is a relationship I am personally committed to; not just as the Prime Minister of Malaysia, but also as the son of Tun Razak—our former prime minister who first established diplomatic relations with China 42 years ago.”¹⁶ He also agreed with Xi Jinping’s analogy in describing China relations with Malaysia “as being as close as lips are to teeth.”¹⁷  

Defense has long been an underdeveloped area of Malaysia-China relations. In addition to the “landmark decision” (Najib’s own words) to purchase the LMSs, the country’s first significant defense deal with China, Malaysia has agreed to forge naval cooperation with China in the politically sensitive South China Sea, as stated in an MoU signed on November 1, 2016.¹⁸ Malaysia’s decisions on the LMSs and naval cooperation should not be seen as isolated developments, but part of ongoing strategic recalibration that has gained momentum, with implications for the country’s long-term security posture.¹⁹ In 2013, Malaysia and China upgraded their bilateral ties to a “comprehensive strategic partnership.” In 2014, the two militaries conducted a joint table-top exercise (TTX). In 2015, the two held their first ever joint live-troop exercise in the Strait of Malacca (the largest ever drill between China and an ASEAN country). This year, the two armed forces conducted their second joint live-troop military exercises code-named Aman Youyi (“Aman” means “Peace” in Malay, whereas “Youyi” means “Friendship” in Chinese) in Paya Indah, Selangor from November 21-25, about two weeks after Najib’s China visit, with ten observers from the Thai military, led by a two-star general. Malaysia proposed to expand from bilateral to trilateral exercises in 2017.²⁰ These developments notwithstanding, there is still a big gap between Malaysia-China defense ties and the Malaysia-US defense partnership.

The most controversial deal signed during Najib’s trip was the RMB 55bn ECRL project. Since the  announcement that China was given the five-year contract to build and finance construction of the 620km-long railway line, concerns have been voiced by various quarters in the country. Despite the projected economic benefits of linking Port Klang and the Gombak integrated transport terminal near Kuala Lumpur with the eastern townships of Kuantan, Kuala Terenggganu, Kota Baru, and Tumpat, many are questioning the Najib administration’s decision to award the contract to China’s CCCC. Criticisms focus on: 1) the procedure (the contract was not awarded by open and competitive tender);²¹ 2) the high price tag (RMB 55 billion is much higher than the industry-estimated cost of RMB 30bn-RMB 36bn, sparking speculation that the project was inflated to pay the 1MDB debt);²² and 3) ramifications (concerns about over-dependency on China, limited technology transfer, little impact on generating jobs, an inflow of Chinese migrant workers and possible unbalancing of racial relations in the multi-ethnic country, etc.).²³ The leader and his ministers had to openly refute the accusations. Najib said in a statement, “Some have scare-mongered that Malaysia is being sold off. This is absurd and absolutely false.” The premier insisted that all projects “will be owned and run by Malaysians.”²⁴

Three Misinterpretations

The two leaders’ high-profile visits have attracted much attention, leading to half-truths and misinterpretations in many commentaries. Three are widespread.

Misinterpretation 1: The visits signify that smaller states have “abandoned” their earlier position, “shifted” their alignment choice, and become “pro-China.”

It is correct to describe the visits as indicative of the weaker states’ greater readiness to move closer to China and accord greater deference to it; however, these postures do not necessarily mean completely siding with and accepting a hierarchical relationship in an across-the-board manner. At issue is the degree and manner of deference. It is inaccurate to use the term “pro-China” if a state’s deference to Beijing is only selective, and if this is accompanied by defiance behavior (in another realm).²⁵

Manila and Putrajaya’s deference to Beijing has remained selective, displayed side-by-side with quiet, subtle defiance. After pleasing Beijing with their praise and pragmatic actions, the two smaller states have stopped short of completely aligning themselves with the giant; as both have insisted on keeping their options open by exploring close partnerships with other powers, such as Japan. Both Duterte and Najib have chosen to visit Tokyo after Beijing (Myanmar de facto leader Aung San Suu Kyi did the same in August and November 2016); both have accepted patrol ships and agreed to strengthen maritime cooperation with Tokyo.²⁶ During his Tokyo visit, Duterte reassured Abe that “he has no intention to sever diplomatic ties with the US.”²⁷ Malaysia is maintaining its robust military partnership with the United States. In addition to taking part in the annual bilateral CARAT exercises, Malaysia has also been participating in the “Pacific Partnership,” the largest annual multilateral, multi-service humanitarian assistance and disaster relief preparedness mission in the Indo-Pacific region. Planning for the Pacific Partnership 2017 mission in Kuching (the state capital of Sarawak on the island of Borneo) is currently underway.²⁸

Misinterpretation 2: The statements made by the two leaders during the visits indicate that these states have chosen to downgrade their US ties.

While statements (and deals) made during the visits may have left this impression,  this does not necessarily mean that Manila and Putrajaya have decided to move into that direction. Their statements’ presumably were mainly the leaders’ reactions to US criticism, even if they also may be a deliberate act aimed at playing one power against the other for bargaining. Indeed, both leaders have pledged to strengthen their respective relations with Washington after Trump’s victory. Duterte congratulated Trump for a “well-deserved victory” and said he would stop quarrelling with the United States.²⁹ Najib lauded Trump for an “outstanding” win and recounted fondly his golf game with the president-elect at the Trump National Golf Club in Bedminister.³⁰

Misinterpretation 3: Because of growing reliance on China, the Philippines, and Malaysia, both claimant countries of the South China Sea, are compromising their interests in the disputed areas and, possibly, on other issues as well.

It is premature to judge whether China’s economic inducements have already eroded the smaller states’ autonomy, compelling them to surrender their interests in the South China Sea. Both leaders have insisted to the contrary. Duterte declared: “We will stick to our claim. We do not bargain anything there. We continue to insist what is ours.”³¹ Having emphasized his stance, the leader talked about his preferred approach to manage the disputes, “There is no sense in going to war. There is no sense fighting over a body of water.” He added, “It is better to talk than war. We want to talk about friendship, we want to talk about cooperation and most of all, we want to talk about business.”³² Najib similarly stressed, “Malaysia would not compromise on its South China Sea claims, but wants them to be worked out through dialogue and peaceful negotiations.”³³ Malaysia’s South China Sea policy has long been sustained by the following thrusts: exercise of sovereign rights, insistence on dialogue and peaceful means, avoidance of confrontation, emphasis on international law, and limited alignment.³⁴ Each of these thrusts has been in place before Najib came to power; none of them has been given up after Najib’s visit to China.  

Four (Recurring) Themes: The Future of Small-State Alignment 

The leaders’ China visits reflect themes typical of weaker states’ alignment behavior under uncertainty. Four are the most vital, likely to endure well into the Trump era.  

First, power asymmetry compels pragmatism; growing asymmetry compels growing pragmatism, albeit almost always in an ambivalent manner.³⁵ Smaller states’ leaders realize that major powers like China (and also the United States) could help and harm them much more than all other actors, and in more than one realm. They realize that the big powers present them indispensable assistance and opportunities in certain domains, but pose challenges in others. Pragmatic recognition of such ambivalent realities drive—and limit—their policies towards the major powers, as in bringing the leaders to China for maximizing benefits, while seeking to mitigate certain risks.

Second, when power asymmetries meet power competition under uncertainty, pragmatism necessitates that smaller states avoid putting all of their eggs in any single power’s basket, at times even attempting to play one big power off against the other. When there is only one dominating power in the region, smaller states are likely to pragmatically accept hierarchy as a given reality, embracing the regional hegemon for survival and profits. However, when there are two or more powers competing for influence and domination, but with uncertainty in their relative resolve, strength, and future relations, small-state ambivalent pragmatism is likely to take different forms: avoiding taking sides, while adopting deliberately contradictory actions vis-à-vis the competing powers to preserve fallback position for themselves. The higher the uncertainty, the higher the need to avoid taking-sides, and to adopt mutually counteracting actions to ensure maneuverability, to bargain for benefits from all powers, and most importantly, to reduce the risk of entrapment, abandonment, and over-dependency.³⁶ New Philippine ambassador to China Jose Santiago “Chito” Sta. Romana said in an interview in October 2016, “the Philippines is shifting from a very close and tight alignment with the United States that made it seem we were part of the anti-China coalition.”³⁷ He continued, “the pendulum may swing toward China.” But he emphasized that “the alliance with the US will stay.” In an earlier interview in September before his ambassadorial appointment, Romana said that while “Duterte was shifting, sort of distancing himself a little more from the US,” “it doesn’t mean that he is going all the way to an alliance with China. I think this, in international politics, is known as a hedging strategy.”³⁸

Great-power relations have become even more uncertain under Trump. The structural reality of enduring uncertainty has profound implications for regional states’ alignment decisions. Because of the high stakes and uncertainties in great power politics, the Philippines and Malaysia—like other weaker states in Asia—are keeping their options open. While Duterte and Najib have moved closer to China, they did not severe their long-standing strategic links and multi-front cooperation with their traditional partners. Duterte and Najib may not be pro-China or pro-anyone but mainly prioritize their own domestic political interests. 

Third, domestic politics dictate the substance of small-state alignment behavior. The ruling elites’ respective judgments on how best to conceive, cultivate, and capitalize on external conditions for justifying and consolidating their own domestic authority determine a state’s alignment choices.³⁹ These choices include: how close (or distant) should a state position itself toward a big power (or any external actor), to what extent should one cooperate with (or confront against) the power, for what prioritized benefits, and over what (politically acceptable) price. Duterte and Najib’s China visits and their overall big power policies should be seen in this context.

Fourth, when domestic conditions are complex and the external power structure uncertain, ambiguity in small-state strategy is a necessity. It is often manifest in multiple mutually complementary, competing, and even contradictory approaches, distinct from single-directional, straightforward strategies like hard-balancing (e.g. a full-fledged alliance with the US to check a military threat, the approach adopted by Aquino III) or complete bandwagoning (e.g. fully joining the China camp for benefits—a near example being Hun Sen’s Cambodia).⁴⁰ Although those clear-cut strategies may bring benefits (e.g. maximizing security and/or prosperity), they incur external and internal costs (alienating the opposing power, eroding domestic authority, undermining autonomy), which may not be acceptable to certain ruling elites, depending on the sources of their power at home. Such tradeoffs are a non-starter for both Duterte and Najib; hence their rejections of the straightforward strategies.

Duterte and Najib’s alignment decisions are not only ambiguous, but also counter-intuitive. The peculiarity of their China policies is that the weaker states have both chosen to move closer to and work with, rather than to confront, the main source of their security concerns. Duterte has expressed his intention to expand defense cooperation with China in sharp contrast to the openly antagonistic approach adopted by Abe’s Japan and Aquino’s Philippines. At a time when many observers were expecting Manila to leverage the Permanent Court of Arbitration’s ruling to directly confront and constrain China, Duterte has chosen to accommodate the power. China expert “Chito” Romana said in September 2016, before he was appointed as Duterte’s envoy to Beijing, “the impact of what’s happening right now, I think, is that the Chinese can see that Duterte is seriously moving away, perhaps to a degree, from the US to show his own independent posture.”⁴¹ This increases Duterte’s credibility at the negotiating table, and “increases the Philippines’ chances of getting more out of China, which has de facta control of much of the disputed waters.”           

In the case of Malaysia, Najib’s policy is similarly working with, rather than confronting, the source of security risks. As opined by one former senior diplomat, “Malaysia has a unique approach in dealing with perceived problems and risks. Instead of distancing or confronting the source of dangers, we opt to engage, cooperate, and integrate them within a wider interactive process. [In so doing] we transform the potentially problematic relations by working together, by becoming partners, and by jointly managing common concerns, thereby continuously creating a sense of closeness, avoiding conflicts, and making cooperation as the main thrust of the relationship. This process may help us to neutralize potential dangers over the long run.”⁴² More comparative research should be undertaken to examine more systematically the manifestations, conditions, and factors driving small states’ deliberately ambiguous and counter-intuitive approaches vis-à-vis the competing powers.