The Israeli In KL

When Israeli diplomat David Roet attended a United Nations conference in Kuala Lumpur recently, the Opposition went into full swing trying to discredit the government saying that it wants to establish diplomatic relations with Israel.

In a statement, the Malaysian Ministry of Foreign Affairs (MoFA) explicitly states that the invitations to the Israeli delegates was issued by the UN as per Article III of the Host Country Agreement signed by the organisation and Malaysia so that the UN is able to conduct its conferences away from any of its established headquarters.

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The Article states, in part, that the Forum shall be opened to all UN member states and its Specialised Agencies. This was confirmed by Israel’s Hadashot TV which reported that Malaysia was compelled to host the Israelis, since it was required to grant visas to all delegations in order to hold the international conference.  Therefore, it is immaterial whether or not Malaysia has diplomatic relations with Israel.  It is for the same reason that Fidel Castro was able to attend the UN summit in New York in 1976, 1995 and 2000.

Malaysia-Israeli Relations

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If you walk along Jalan Zainal Abidin in Pulau Pinang which is just off Burmah Road near the Tune Hotel, you will come across an old cemetery.  That is a Jewish Cemetery.  Jalan Zainal Abidin was once called Jalan Yahudi or Jew Street, the only evidence that a Jewish enclave once existed on the island.

Israel first established contact with our pre-independence government in 1956 when Israeli Prime Minister Moshe Sharett visited Malaya to propose the appointment of an Israeli consul in Malaya.  Israel also voted in favour of the Malayan bid to become a UN member in 1957.  Trade between the two countries was in place.  This was banned in 1974, after the Yom Kippur war, but indirect trade (through third countries) was in place.

An Opposition supporter was quick to point out that according to the Israeli Central Bureau of Statistics, between 2008 and 2011 trade between the two countries fluctuated considerably.  Israel’s exports to Malaysia peaked at USD798 million in 2010 while imports from Malaysia peaked in 2011 at USD93.6 million.

Although the preriod shown above shows the statistics was for the period between the end of Abdullah Badawi’s administration and the commencement of the Najib Razak administration, the flourish in trade could be traced back to the Mahathir administration.  In December 1993, as a consequence of the Oslo I Accord, Mahathir wrote a letter to Israeli Prime Minister Yitzhak Rabin.

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Mahathir’s letter to Yitzhak Rabin in December 1993

The photo of the letter may be a bit difficult to read but I shall provide the transcript here:

PRIME MINISTER, MALAYSIA

21 December 1993

His Excellency Mr Yitzhak Rabin Prime Minister of Israel, JERUSALEM

I would like to thank you for your letter of 17 October informing me about the Agreement of Principles and Mutual Recognition between Israel and the PLO.

My government supports this positive development and views it as a first step towards the realization of a comprehensive solution to the Middle East problem. As a demonstration of Malaysia’s support to this development my country was represented at the Donor’s Conference to support The Middle East Peace held in Washington and subsequently pledged a modest financial contribution to the Palestinians to assist in their new tasks. My government has also offered the Palestinians technical assistance under the Malaysian Technical Cooperation Programme.

Malaysia as a matter of general principle is prepared to develop relations with Israel at the appropriate time. In the meantime, we would like to see tangible progress in the implementation of the peace agreement.

The Middle East problem particularly the Palestinian issue has been a cause of instability to the region and I hope the recent agreement between Israel and PLO would contribute to lasting peace to the area.

I look forward to normal relations with Israel.

DR. MAHATHIR BIN MOHAMAD

I intentionally made bold the last line because, while the rest of the content which, obviously was drafted by someone else, Mahathir wrote that bold part saying he looked forward to normal relations with Israel himself.  Yes, it was handwritten.

In the most recent diplomatic history, Obama wished to have normal relations with Cuba.  Diplomatic relations between the US and Cuba was subsequently restored.  The following year, PKR’s Chua Jui Meng, who was the then-Deputy Minister of International Trade and Industry, suggested that Israel could eventually become a destination for Malaysia’s investments (Shanti Nair, Routledge, 1997 p.252).

As a result, in 1999 Israeli exports to Malaysia totalled USD107 million.  In 2000, it was USD732 million, and USD615.5 million the following year.  In 2002, the Israel Ministry of Industry report on trade relations with Indonesia and Malaysia advised Israelis interested in conducting business with Malaysian companies that “there is no opposition to trade and commerce relations as long as a low profile is kept“.

Discretion is essential for these companies, not just in Malaysia but also in Indonesia.  Reputation and financial damage are the risks for companies in these two countries if they are known to be doing trade with Israel.  According to Emanuel Shahaf, the vice chairman of the Israel-Indonesia Chamber of Commerce, “There are two contradictory trends. The pro trend is that Indonesia demands more high-tech things… The negative trend is the political situation is not getting better (when it comes to Israel), in fact it’s getting worse.”

Mahathir’s son Mukhriz, who was the Deputy Minister of International Trade and Industry in 2011 confirmed that Malaysia has had bilateral trade relations with Israel since 1996.

Mukhriz tweeted “Upon request from large foreign investors here, in 1996 the Cabinet instructed MITI to approve import from and export to Israel.” The relevation came as a surprise, especially as the trade ties were established during the Mahathir administration.  Mahathir has been a vocal opponent of Israel and continues to project this false stand via his Perdana Leadership Foundation which openly opposes Israeli occupation of Palestinian land.  Najib took over from Abdullah only in 2009.

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So, thank you Mahathir for his eagerness to start a diplomatic relationship with Israel in 1993.

Congratulations also to the Opposition states as they received a lot of FDI from Israeli companies.  Don’t forget to thank Mukhriz for that information and confirmation.

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Shalom Alekhem!

Drama Kera La

ST photo -SAF-PLA joint military exercise
Singapore Army invading China?

Recently, a video clip of how China is fulfilling its hegemonic ambitions using economic means was spread around especially in Facebook and WhatsApp groups.  The video compares the Sino-Sri Lankan joint-venture at the Hambantota Deep Water Port with the ones in Malaysia, proving that Malaysia, like Sri Lanka, could end up not only with a huge debt owing to China, but also lose its ownership of those assets.

On the surface, it sounds scary to have so much money owed to China for these projects especially so for the ill-informed.  But comparing Malaysia to Sri Lanka hardly does any justice.

The Hambantota Deep Water Port lies within the constituency of the former President Mahinda Rajapaksa and costs more than $1 billion to construct.  Another project that was constructed in this constituency is the Mattala Rajapaksa Airport, located 30 kilometres away from the port, which until now flies only a few hundred passengers in and out weekly and has been dubbed “the world’s loneliest airport.”

Hambantota is a remote region in the South, 240 kilometres from Colombo and the nearest city, Galle, is 130 kilometres away.  The population of Hambantota is around 12,000 people and is very underdeveloped.  The problem with Hambantota’s deep-water port is that its waters are not deep enough for large vessels with deep draught, so large shipping companies shy away from it.  It is far from any development that hardly anyone wants to move there.  Both the port and the airport cannot generate enough income to sustain operations let alone pay back loans to the Chinese.

Sri Lanka owes its financiers close to $65 billion and of this, $8 billion alone is owed to the Chinese.  Its GDP stands at $81.32 billion, debt-to-GDP ratio stands at roughly 75 percent while its foreign currency reserves is at $7.2 billion.  The Sri Lankan government uses 95.4 percent of its revenue to repay debts.  These are the reasons for Sri Lanka to opt for a debt-for-equity solution for both projects.

Compare this with Malaysia’s $13.1 billion East Coast Rail Link, or RM55 billion in Malaysian terms.  Malaysia took a $11.14 billion loan (85 percent or RM46.75 billion) from China to finance the project while the balance is in the form of a sukuk programme managed by local financial institutions.

The Forest City project in Johor is a development programme that runs over 20 years.  How much is being allocated per project is a company confidential information but if we go by average, it would be at $5 billion per annum, with a total of $100 billion over 20 years.  The project commenced in 2015 and to date has completed about 11 percent.  At the end of December 2016, Forest City saw concluded contracted sales of $2.9 billion for 17,000 apartment units.  It still has another 17 years of development to go.

Our GDP now stands at around $320.25 billion (RM1.3 trillion) for 2017 which puts the cost of the ECRL project at 4.1 percent of the GDP while Forest City accounts to approximately 1.6 percent of the GDP per annum.  The total Government debt as at end of June 2017 was reported to be at RM685.1 billion or 50.9 percent of the GDP.  Of this total, RM662.4 billion was domestic debt while RM22.7 billion was offshore loans.

Interestingly, as of October 2017, the US debt to China is at $1.2 trillion, which is 19 percent of the $6.3 trillion in US Treasury bills, notes and bonds held by foreign countries.  The US GDP in 2016 was $18.57 trillion which makes its China-debt-to-GDP alone at 6.5 percent.

Of course, we could undertake to pay for all the above projects.  Our foreign currency exchange reserves are at RM414.71 billion ($102.17 billion) which is more than enough to pay for both projects.  If we use the Mahathir-era method, then Petronas has RM129 billion in cash ($31.8 billion) while the EPF has RM771 billion ($189.9 billion) worth of assets.  This does not include sources from other funds such as Khazanah, Tabung Haji, KWAP, SOCSO, PNB and others.

If our debt-to-GDP ratio of 50.9 percent is still a scary number to you, it was at 103.4 percent when Mahathir was the Prime Minister in 1985!  And an equivalent to 24 percent of the GDP went missing as a resut of the BNM Forex scandal also during his tenure as the PM in 1991!  That is RM315 billion if our GDP is RM1.3 trillion!  In contrast, Singapore’s debt-to-GDP ratio is 112 percent at tenth place out of 17 nations with the highest debt-to-GDP rate listed by Business Insider, UK.  Japan is first at 239.2 percent.

Still, we did not go bankrupt back then. So why should we fear a 50.9 percent debt-to-GDP ratio with much stronger economic fundamentals when we have reached 103.4 percent with a much weaker economy? And neither Singapore nor Japan has gone bankrupt.

And what is with the ownership of the land where Forest City is situated?  It is a reclaimed land; therefore, no part of mainland Johor was carved out to be “given to the Chinese.”  Johor has rights over the reclaimed land as accorded by the National Land Code, 1965 up to three nautical miles as given by Section 3(3) of the Territorial Sea Act, 2012.  Whether it is a freehold land or a leasehold land, Johor can always take it back, with provisions, under the Land Acquisition Act, 1960. Up to 12 nautical miles from the foreshore, the Malaysian flag flies no matter who holds the grant.

Mahathir recently said “I hope Forest City will truly become a forest… Its residents will consist of baboons (kera), monkeys (monyet) and so on”, fuelling unjustified fears among the people of Malaysia.

The Malaysia-China Kuantan Industrial Park (MCKIP) has MCKIP Sdn Bhd (MCKIPSB) as its Master Developer.  MCKIPSB is a 51:49 joint-venture between a Malaysian consortium and a China consortium.  In the Malaysian portion of the shareholding, IJM land holds 40 percent, Sime Darby Property 30 percent and the Pahang State Government holds the remaining 30 percent. Its twin sister, the China-Malaysia Qinzhou Industrial Park (CMQIP) in China is 49 percent owned by a Malaysian consortium (SP Setia Berhad and Rimbunan Hijau Group).

Going by Tun Dr Mahathir’s logic, has China just allowed Malaysia to colonise its land too?  Prior to this it allowed Singapore to colonise in two other areas, namely the China-Singapore Suzhou Industrial Park and the China-Singapore Tianjin Eco City.

As bleak as Sri Lanka may sound, Japan, Singapore and India have expressed interest in building infrastructure and setting up shop in Sri Lanka.  Even with much weaker economic fundamentals compared to Malaysia, Lolitha Abeysinghe of Opportunity Sri Lanka remains optimistic.

Over-dependence on any country for investments, technology, and markets could result in some adverse impacts on national interest in the long-run, but if managed properly with a futuristic vision, Sri Lanka can mitigate such adversity and reap the best benefits for the rural domestic economy in one of the least developed districts in Sri Lanka,” he said.

Malaysia has that vision but sadly some of its people would rather see everything fail in the name of politics.  The politics of baboons and monkeys.