1. Mahathir to open new chapter in Malaysia-China ties
  2. RAM Ratings expects Malaysia´s growth to hold up at 4.9 pct
  3. Economists stay confident with PH government post-100 days
  4. BNM revises 2018 GDP downwards to five pct

Mahathir to open new chapter in Malaysia-China ties
Prime Minister, Tun Dr Mahathir Mohamad’s five-day visit to China, beginning today, is expected to open a new chapter to further enhance Kuala Lumpur-Beijing ties. Malaysian Ambassador to China Datuk Zainuddin Yahya said Chinese leaders were excited to welcome the Malaysian prime minister. This is said to be despite the strong statements coming out of Kuala Lumpur lately, particularly on the suspension of two China-backed projects – the East Coast Rail Link (ECRL) and Trans-Sabah Gas Pipeline (TSGP). The two projects, especially the RM81-billion ECRL, had gained attention as the Malaysian government felt that the mega projects of the previous government, among others, burdened the country and its people with mega debts and there have been hints that Kuala Lumpur may scrap the project. Datuk Zainuddin said both countries should be looking at potentials and not only issues. He said vast potentials waited to be explored in Kuala Lumpur-Beijing relations as China was the world’s second-largest economy after the United States, with advancement in science and technology and innovations. Datuk Zainuddin said Malaysia also hoped to export whole durians to China, which would benefit Malaysian farmers. China has been Malaysia’s largest trading partner for nine consecutive years, with total trade of US$96.5 billion (about RM386 billion) last year, an increase of nine per cent compared to 2016. The total trade between the two countries between January and July this year was US$61 billion (RM244 billion), up 17 per cent compared to the same corresponding period last year. Tun Dr Mahathir is scheduled to meet President Xi Jinping, Prime Minister Li Keqiang, Chinese investors and the business community and the Malaysian diaspora. Tun Dr Mahathir is also scheduled to witness the signing of memorandums of understanding related to bilateral currency swap arrangement, the protocol for export of frozen durians, development and promotion of Malaysian palm oil biofuel, collaboration in rubberised bitumen road technology as well as accounting and audit regulatory cooperation. Tun Dr Mahathir is accompanied by six Cabinet ministers.

In Beijing, Shi Yinhong, an international affairs specialist at Renmin University said “China has been more patient with Malaysia, compared with [its approach] maybe five or six years ago, and has been more willing to compromise”. “There are clear signs of adjustment.” Shi said one example of that change was China’s restrained reaction to Mahathir’s decision to review at least three major Beijing-led projects – the US$20 billion East Coast Rail Link and two pipeline projects worth a combined US$2 billion. “It is understandable that Malaysia is worried about the sudden influx of Chinese investment and in such a large amount,” said Shi, who also is an adviser to China’s State Council. “China has reflected upon it and has adopted a humble attitude towards the backlash [from Kuala Lumpur].” But he also warned that “Malaysia shouldn’t set too high the negotiation price” when resetting the terms of projects with China.

Xu Liping, a professor with the Institute of Asian-Pacific Studies at the Chinese Academy of Social Sciences, said China hoped to build “political trust” with the new Mahathir administration. “This Mahathir government is different from the last – there are many new ministers who do not have governing experience – so this will be a good time to get to know each other,” Xu said.

But Wu Shicun, president of the National Institute for South China Sea Studies, said Mahathir’s position on the disputed marine area could potentially disrupt the two countries’ delicate effort to build trust.

RAM Ratings expects Malaysia´s growth to hold up at 4.9 pct
RAM Ratings expects Malaysia’s overall growth in 2018 to remain resilient at 4.9 per cent, moderately lower than the initially forecasted 5.2 per cent, on the back of robust private consumption and slowing import activity. It said the revelation of the government’s key fiscal policy initiatives and direction going forward, and the renewed longer-term development policies of the revamped 11th Malaysia Plan after its mid-term review, would help provide more guidance on the medium-term economic growth trajectory. Head of Research Kristina Fong said the new government’s first 100 days in office was just the start of what seems to be a period of re-adjustment for the economy and managing this required a careful balancing act by both policy makers and businesses alike. The rating agency said private consumption would continue to be the driving force for domestic demand this year with growth forecasted at 7.4 per cent as private investment is set to slow. “Infrastructure project rationalisation has come at a time of moderating capacity building activities, as shown by insights from our quarterly RAM Business Confidence Index, which indicates reduced impetus for marginal investment activity as capacity constraints become less binding.

Economists stay confident with PH government post-100 days
Despite delays in fulfilling its promises, economists remain confident with the Pakatan Harapan (PH) administration led by Prime Minister Tun Dr Mahathir Mohamad who aims for a country that is corruption-free and economically vibrant. Today marks the first 100 days of PH ruling after winning the 14th General Election (GE14). Economists said that the time frame was too short to fulfil its election pledges, see changes and bring about significant reforms. Hence, they felt that the PH government should take the opportunity to plan for the country’s future direction and not only focusing on their promises made during the election. Chief Economist of Bank Islam Malaysia, Dr Mohd Afzanizam Abdul Rashid said, given the sheer size of economic uncertainties brought by external factors, it would be almost unrealistic to expect changes to happen immediately. “Malaysian economy is very open to global conditions and at the moment, risk aversion has increasingly become more apparent. So this may impact markets and business sentiment as well as demand.”

BNM revises 2018 GDP downwards to five pct
Bank Negara Malaysia (BNM) has revised downwards the country’s full-year gross domestic product (GDP) growth for 2018 to five per cent from the 5.5-6.0 per cent projected earlier due to prolonged disruptions in oil and gas production, and low production in the agriculture sector. BNM Governor Datuk Nor Shamsiah Mohd Yunus, however, said growth would be supported by strong business and consumer sentiments, strong consumer spending due to the tax holiday from June to August, and expansion in manufacturing production capacity. She said this at a media conference on Malaysia’s second quarter GDP growth in Kuala Lumpur. With a five per cent growth projection, Datuk Nor Shamsiah believed Malaysia would continue to be one of the fastest growing economies in the region. Going forward in 2019, she said growth momentum would remain steady, supported by sustained global growth and trade, recovery of commodity output and favourable labour market conditions.