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As US-China competition intensifies, it is becoming harder and harder for small countries like Malaysia to steer clear of big-power rivalry. Malaysia’s 5G rollout is a case in point. 

Many Malaysians were outraged to learn that EU and US envoys had lobbied Putrajaya against Huawei’s participation in Malaysia’s 5G rollout. The US ambassador, for example, warned that upending the existing model (Ericsson as the sole provider) would “undermine the competitiveness of new industries, stall 5G growth in Malaysia, and harm Malaysia’s business-friendly image internationally”. 

What is less known, however, is that China has been equally, if not more aggressive, in pushing for Huawei’s inclusion. Outraged that Huawei lost out to Ericsson, China launched a well-funded high-level campaign to reverse the decision. An intense behind-the-scenes competition between Chinese and EU diplomats ensued. In the end, the arrangement with Ericsson was maintained. 

But that was not the end of it. China continued to look for ways to pressure the Malaysian   government on behalf of Huawei. According to sources, during Prime Minister Anwar Ibrahim’s recent visit to China, he was warned in no uncertain terms that Malaysia-China relations including future Chinese investments would suffer if Huawei was excluded. Presumably, this included that RM170 billion worth of investments – described as “historic” – that the prime minister jubilantly announced following his visit.  

The decision by the government last week to opt for a second 5G network – no need for a crystal ball to know that it will be given to Huawei – is an attempt to placate China. Whether it will be good for Malaysian consumers and telcos is an issue that is still being hotly debated.

In the meantime, western governments remain empathic that Malaysia should honour the original arrangement with Ericsson as the sole provider. They argue that changing the terms of the original contract would dent Malaysia’s international credibility.

They also insist that allowing “untrusted suppliers” (i.e. Huawei) in any part of the network not only poses security risks to Malaysia but also to Western corporations operating in Malaysia who will be using the 5G network. 

Huawei is currently facing a raft of allegations that the company’s products are designed with security holes that would allow China to access data for spying purposes. Under US pressure – some say hysteria – more and more US allies are backing away from relying on Huawei’s 5G technology. 

With the Biden Administration now considering tightening export control measures against Huawei and completely banning all business dealings with the company, including banning exports to Huawei’s suppliers and middlemen, there’s concern that American and European companies in Malaysia might be put in a difficult situation if Huawei is allowed to participate in Malaysia’s 5G network. 

The US involvement in what was originally a Malaysia-EU trade and investment issue is a sure giveaway that the ruckus in Malaysia has also to do with the US strategy of containing China. Alarmed by a rapidly rising China, the US wants to build a series of firewalls – military, economic and now digital – to limit China as much as possible. This is something that Malaysia is not comfortable with given its extensive ties with China.

China, for its part, is certainly not taking the US challenge lightly. It will use all the leverage it has – and it has plenty especially with Malaysia – to persuade or cajole its neighbours into circumventing US attempts at containment.

Caught in the crosshairs of US-China rivalry, Malaysia is going to have to tread carefully. Putrajaya’s traditional non-aligned approach – to side neither with the US nor China – has served its national interests well but making it work in the current geopolitical environment is going to require deft diplomacy.  

While the legions of pro-China fans are, of course, delighted that Malaysia stood up to the US and are quick to point out that the US itself has a long history of penetrating domestic and foreign networks for spying, the reality is that Malaysia can ill-afford to antagonise either the US-EU or China. Both are important to Malaysia’s economic well-being. 

Going forward, China, in particular, will pose a unique set of challenges for Putrajaya because Malaysia is already heavily dependent on China and has little room to manoeuvre. Standing up to the US is one thing; standing up to China with the same bravado will be the real test of Malaysia’s ability to maintain its non-aligned posture.

[Dennis Ignatius | Kuala Lumpur | 11th May 2023]