What Is Going on in Malaysia—and Why Does It Matter to the United States?

IN THE 1960s, Southeast Asia was the very epicenter of a U.S. security strategy that culminated in the Indochina wars. Over the subsequent decades, the region became an economic success story while it virtually disappeared from the security map. America had other, seemingly more pressing, concerns in Europe as the Cold War waxed and waned and in the Middle East with its endemic instability and the rise of a global jihadist threat. Yet during this same period, China was emerging as an authentic peer competitor of the United States, economically and militarily, with increasingly evident ambitions to dominate East Asia—putting Beijing on a potential collision course with Washington. Ever since World War II, America has maintained a robust military presence in the maritime reaches of the Western Pacific including the South China Sea. However, China has become unambiguous in its assertion that the South China Sea is, in fact, sovereign Chinese territory and the U.S. Navy has no right to be there. As China fortifies its outposts and the U.S. Navy extends its “Freedom of Navigation Operations” (FONOPS) it does not take much imagination to see serious danger ahead.

It is in this context that we should view U.S. relations with the countries of Southeast Asia—especially those that border on the South China Sea. As the military balance of power on the Asian maritime littoral shifts in China’s favor, the American strategic position will increasingly depend on support (or lack thereof) from Southeast Asian governments. That support has become less certain as relations with the two U.S. treaty allies in the region, Thailand and the Philippines, have come under strain. Another key actor, Indonesia, remains deeply ambivalent about how to cope with Chinese ambitions and possible U.S. reactions. Vietnam has a much clearer strategic vision but remains forever constrained by the dangers of antagonizing neighboring China beyond some threshold.

This leaves Malaysia as somewhat of a puzzle. The Federation, as it is also known, has obvious intrinsic importance. It is at the geographic center of Southeast Asia and the one country in the region that bridges its peninsular and archipelagic divide. It is also a “third world” success story on multiple dimensions: economic development, political democracy and multiethnic cooperation. The Federation constitutes perhaps the best example of a predominantly Muslim country achieving successful, multi-faceted modernization. Yet Malaysia has been a perennial stepchild in terms of U.S.-Asia policy.

The reasons are rooted in history. In Southeast Asia, the Philippines was an American colonial possession, but Malaya, Singapore and the territories of northern Borneo were British. They returned to British control after World War II. British armed forces with extensive local support fought and defeated a communist postwar insurgency on the peninsula. When London granted independence to a new Malayan (1957) and subsequent Malaysian Federation (1963–5), it did so to a British-educated, Anglophile elite. Britain made good on defense commitments to its former colonies by helping Malaysia defeat an Indonesian military effort to dismember the new Federation.

AS THE Cold War became more lethal in Southeast Asia, America focused on Indochina—culminating in the Vietnam War. With that bloody conflict over, Washington in the 1980s and 1990s turned its attention to the epochal events surrounding the conclusion of the Cold War in Europe, the demise of the Soviet Union and war in the Persian Gulf. There was no reason to expect that Malaysia would receive any attention aside from its attractiveness to foreign investors as an economic success story. In fact, it received unexpected, and entirely negative, attention due to repeated public statements from its long-serving and politically dominant prime minister, Mahathir bin Mohamad. As a political personality, Mahathir was reminiscent of the anti-Western/anti-U.S. firebrands of the early 1950s and 1960s—men like Kwame Nkrumah, Sukarno, V. K. Krishna Menon and Fidel Castro. His harsh criticism of Israeli policy toward the Palestinians plus gratuitous comments about Jews dominating international finance earned him a reputation in the Western media as anti-Semitic. But much of this involved rhetorical pyrotechnics and personal proclivities rather than policy substance. When it came to issues involving national security (defense, counterterrorism, intelligence) and the economy (trade, investment, education) Mahathir fostered close ties with U.S. counterparts. While American diplomats were having a terrible time in Malaysia, the U.S. Pacific Command and Lockheed Martin were getting along just fine.

Above all else, Mahathir is a modernizer and a Malaysian nationalist. He’s also extremely intelligent. In 2003, Mahathir did something that autocrats (even elected autocrats) rarely do: at the height of his political power, he resigned and turned over authority to his elected deputy. However, Mahathir did not slip into quiet retirement; he became a vocal critic of his successor and effectively forced his resignation in favor of a new prime minister, Najib Razak, scion of one of Malaysia’s most prominent political families. Like Mahathir, Razak was a modernizer with a strategic view of Malaysia’s future. Like Mahathir, he understood that Malaysia’s system of government sanctioned communal preferences (i.e., systematic affirmative action favoring Malays) was unhealthy economically, socially and politically for Malaysia. And like Mahathir, he chose not to take on all the powerful vested interests that supported those preferences. But Najib differed from Mahathir in one crucial respect: he proved to be personally corrupt on a spectacular scale.

THE U.S. Department of Justice has been formally investigating allegations that billions of dollars have gone missing from the national sovereign wealth fund and hundreds of millions have gone into the personal accounts of Najib and his wife. The Malaysian government went to extreme lengths to stifle any domestic negative backlash from these events. The attorney general and head of the government’s anti-corruption agency were replaced. The new attorney general announced that there was nothing to investigate because nothing was missing. Traditional media outlets, under tight government control, censored stories about 1Malaysia Development Berhad (1MDB), Malaysia’s state development fund. The leader of the political opposition had been jailed on charges of moral turpitude (sodomy) and electoral districts were heavily gerrymandered to favor the ruling party—the United Malays National Organisation (UMNO). UMNO has been in power since Malaysia’s founding (over sixty years). These measures plus the liberal use of government money to buy electoral support led Najib to call national elections in May; he was fully confident that UMNO would win again.

But these expectations were upended by two developments. First, for many Malaysians, social media had become their preferred news source and vehicle for political mobilization—and social media had largely escaped the more draconian government efforts at media control. Civil society organizations mounted determined and relentless campaigns in support of clean government using these platforms. Second, Mahathir, now in his nineties but newly reinvigorated by successful cardiac surgery, offered to lead a fractured and dispirited opposition in the scheduled elections. His battle cry was saving the country from corrupt leaders. He also pledged that if elected he would seek an immediate pardon for Anwar Ibrahim (a man he had jailed in an earlier time) and would pledge to turn power over to him as the rightful leader of the opposition. In the meantime, Anwar’s wife would stand in for him during the campaign and in the formation of a new government.

It was riveting theater, but almost no one thought it would actually work. However, Mahathir’s reemergence had a galvanizing effect. Suddenly, a dispirited, fractured and leaderless opposition was coherent, purposeful and credible. When the votes were tallied, the opposition had won so convincingly that the results overwhelmed the many extralegal firebreaks and stratagems the government had put in place to insure an UMNO victory. Mahathir immediately demanded that the king play his constitutional role and mandate him to form a new government. After hours of silence and delay, the king complied.

It is reasonable to suspect that had the vote been closer or the opposition led by a less formidable figure, Najib and the UMNO leadership would have tried to enlist the king to annul the election results. But that did not happen, and Mahathir immediately made good on his pledge to seek a full pardon for Anwar that would both affect his release and allow him to reenter politics. Anwar is now a free man and has been re-elected to a seat in parliament. He is now eligible to resume his old position as deputy prime minister. However, he has repeatedly stated that he does not intend to pressure Mahathir. How soon Mahathir will actually relinquish power remains to be seen. Meanwhile, Najib has been arrested and charged with grand larceny and his passport (and that of his wife) has been seized. If that were not enough, the new government has formally reopened a decades-old murder inquiry that may implicate Najib personally. A veteran parliamentarian has also called for Najib to be investigated in relation to at least two more recent politically-related murders. Malaysians were transfixed as police carried out one raid after another in full public view, seizing vast quantities of personal luxury goods from the couple’s various properties. It is a drama replete with characters that Shakespeare would love.

But drama aside, what does it all mean? The consequence and implications fall along three dimensions: for Malaysia, itself, and for Malaysia’s relations with both China and the United States. Together, there is the potential for a significant impact on the geopolitics of Southeast Asia and East Asia as a whole.

BEFORE THE poll, there was ample reason for deepening pessimism concerning the future of the Federation. Money politics, habitual and corrupting, had become entrenched. Communal comity between Malays, Chinese and Indians, the foundation of social and political stability, was increasingly frayed. Nearly fifty years of official government bias in favor of one community (Malays/Bumiputera) over others had taken its toll. A great many citizens, including a number of young Malays, saw the system as not just biased, but fundamentally rigged. Substantial numbers of young, talented Chinese chose to emigrate. By suppressing any investigation into the 1MDB scandal, the government sent a clear signal: social justice and the rule of law had become a bad joke.

Now it appears that the fever has broken. Entrenched moneyed interests supporting UMNO have been politically sidelined. Mahathir has set in motion a full investigation of the 1MDB affair—and has insisted it will be conducted in full conformance with legal procedures and requirements. A new attorney general has been appointed—a respected lawyer who will be the first non-Malay in that post. The opposition slate that Mahathir led is genuinely multi-communal. It received wide support from young voters who wanted to move past traditional politics where every policy and every person is identified in terms of race, religion or ethnicity. They are tired of being compartmentalized as Malays, Chinese and Indians; they simply want to be Malaysians. Anwar, the presumed future prime minister, has the sort of protean personality that gives him authentic appeal across the communal divide. Anwar’s personal trajectory has taken him from a young Malay-rights champion to the halls of international finance. He is the real architect of the opposition coalition at home and widely respected overseas. Most important, he is extremely capable—the one prominent figure in Malaysia who is a match for Mahathir intellectually and personally.

Mahathir, himself, is obviously key to Malaysia’s future. He became prime minister in 1981 unexpectedly when his predecessor, Hussein Onn, resigned from office due to ill health. UMNO originally selected Mahathir as deputy prime minister in order to broaden the electoral appeal of the political establishment to include younger Malay voters. He had a reputation as a “radical” champion of Malay rights based on a book he had written as a young man entitled The Malay Dilemma. The government initially banned it as a racist tract that could incite Malay discontent. That judgment was unfair in that Mahathir had written an analysis of why Malays were “backward” and what should be done. He assigned much of the “blame” for the Malay’s condition on the Malays themselves and much of his solution required that community to pull up its socks and acquire greater self-discipline and ambition. At the end of the day, Mahathir’s vision for Malaysia is that of a fully modern country where communal identity has become largely meaningless because all are competing and participating on an equal basis.

CHINA HAS always and inevitably loomed large in Malaysian foreign policy. At independence in 1957, ethnic Chinese comprised nearly 40 percent of the population of the Federation of Malaya and nearly 90 percent of next-door Singapore. The influx was a product of British colonial rule. The Crown needed a labor force—stevedores at the docks, tin miners in the interior, bookkeepers for government and business accounts—and migrants out of southern coastal China were more than happy to meet that need. The native Malays preferred to stay in their villages as agriculturalists and it did not take long for the British to conclude that there was a natural division of labor between the two communities. Meanwhile, ethnic Indians also migrated to Malaya in substantial numbers to fill another need—plantation workers on the new rubber and palm oil estates.

During World War II, ethnic Chinese in Malaya and Singapore were jolted into political consciousness by Japan’s invasion and occupation of their homeland. The most effective resistance organizations were led by local, ethnic Chinese Communist Party cells and included clandestine paramilitary groups. Soon, communist–led insurgents were harassing the occupying Japanese in peninsular Malaya. Following the defeat of Japan, communist guerrillas turned their guns on the returning British. It was part of a Comintern-directed campaign to try to seize control of formerly colonial territories in Southeast Asia. The result was a bloody counterinsurgency campaign (“The Emergency”) led by the British but with the manpower coming largely from local Malays. The whole experience engrained in the new Malayan political elite a view of “Communist China” as an existential security threat. And for the first decade of independence under Prime Minister Tunku Abdul Rahman that view remained unchallenged.

Mao’s recurring ideological campaigns culminating in the Great Proletarian Cultural Revolution only served to validate Kuala Lumpur’s view of China as fanatical, hostile and deeply unattractive—the very antithesis of the values represented by a democratic, Anglophile, politically conservative government in Kuala Lumpur. That government provided low-key but explicit public endorsement for the U.S. role in the Vietnam War as part of an effort to thwart Communist expansion in Southeast Asia. Malaysia became a founding member of the Association of Southeast Asian Nations (ASEAN) in 1967 for the same reason.

Rahman retired after serious race riots in 1969. His deputy, Tun Abdul Razak, became prime minister with a mandate to prioritize domestic programs (the “New Economic Policy”) designed to give the Malays a greater stake in the modern, urban economy. It was an ambitious, even draconian, effort at social engineering and income redistribution. Foreign policy, while not a priority, acquired a new tone. Razak wanted Malaysia at least to sound more like other “third world” countries. Malaysian policymakers began talking about nonalignment and championed proposals for the “neutralization of Southeast Asia” and a “South Pacific Nuclear-Free Zone.” Malaysian policy retained its anti-communist, Western-oriented core and the result was a bit schizoid and ill-defined.

The one clear departure involved China. Razak put his personal stamp on foreign policy by having Malaysia in 1974 become the first ASEAN country to normalize diplomatic relations with China. Soon Malaysian and Chinese diplomats were referring to a “special relationship” between the two countries. Special or not, the content of relations had changed dramatically—as had the regional context. China under Deng Xiaoping prioritized economic development, as did the ASEAN governments. Deng championed trade and investment and with it, full diplomatic normalization with the region. The days of Chinese-sponsored communist insurgencies were long gone. Malaysia’s normalization of relations with China signaled the commencement of nearly four decades of relative strategic tranquility across the region. The end of the Vietnam War and the U.S. Navy’s withdrawal from the Philippines was of a piece. China was a factor in Malaysian foreign policy largely in economic terms as commerce between the two countries grew steadily.

In this benign environment, the prevailing view of China in Malaysia improved markedly. A recent opinion poll found 70 percent of the public had a favorable view of China. Government officials, business leaders and scholars spoke glowingly of relations with China through the 1980s, 1990s and much of the first decade of this century. However, by the end of that decade, China’s rapid buildup of maritime military power in the South China Sea was beginning to generate disquiet in key sectors of the Malaysian government. In 2009, the United States and Malaysia held their first Senior Strategic Dialogue in Kuala Lumpur—with a small Pentagon delegation meeting with Malaysian security officials. That dialogue featured a surprisingly candid exchange of concerns regarding Chinese ambitions in the region. At the 2010 ASEAN Regional Forum meeting in Hanoi, the Malaysian foreign minister supported Secretary of State Hillary Clinton’s assertion that the sea-lanes through the South China Sea were a “global commons” beyond the sovereignty of any country.

In 2013 China’s new president, Xi Jinping, announced his ultra-ambitious Belt and Road Initiative (bri) that envisioned well over a trillion dollars of Chinese-led infrastructure investment across Central and Southeast Asia, ultimately connecting to Europe. Not surprisingly, neighboring Malaysia became a serious focus of this new strategic vision. Before this, Chinese investment in Malaysia had been relatively modest. Today, the situation is very different; China is Malaysia’s largest trading partner and its largest source of foreign investment. Najib Razak, son of the second prime minister, became prime minister in his own right in 2009. He embraced his father’s legacy regarding China and soon became a regular visitor to Beijing extolling the “special relationship.” In 2016, Najib led a delegation to China that returned with $34 billion in signed deals—including $14 billion for a railroad bisecting the Malayan peninsula with Chinese financed and managed ports on both coasts and two pipelines (one gas and one oil). In the case of the pipelines, the prime minister’s office signed the deal directly with financing coming primarily as loans from the Bank of China. More Chinese money was slated for expensive residential real estate projects that would presumably attract wealthy Chinese seeking a pied-a-terre in Southeast Asia.

When the 1MDB scandal surfaced, it was not long before keen-eyed observers suspected a connection with these Chinese projects. For example, most of the money was drawn from the funding accounts for the pipelines when construction had hardly commenced. The suspicion (some claim proof) is that these funds were used to replenish the depleted coffers of 1MDB. Before the election, Mahathir made it clear he was prepared to fully investigate the allegations surrounding 1MDB and that he was highly skeptical concerning the benefits of China’s more grandiose BRI projects in Malaysia, including the railroad deal.

WHEN MAHATHIR first became prime minister thirty-seven years ago, his impact on foreign policy was immediate and dramatic. His “take no prisoners” rhetorical style focused on Britain and the United States with speeches peppered with references to “imperialists” and “racists.” He seemed to take particular delight in insulting the American ambassador in Kuala Lumpur—whomever it was. Shortly after becoming prime minister, Mahathir summoned his foreign minister (inherited from Prime Minister Onn), the redoubtable Ghazali Shafie, and told him to call all of Malaysia’s ambassadors back to the capital so he could meet with them. When they were assembled, Mahathir berated them: “You are all too nice; you are too polite.” He wanted them to be outspoken and provocative. When the Malaysian ambassador entered a room, he wanted everyone there to be on edge, afraid of what he might say. When asked if this was a problem for these diplomats, Ghazali responded, “It was a problem for me! I had friends in London and I was expected to go and spit in their eye. I refused, and I quit!” Mahathir became his own foreign minister and relations with Washington and London, in particular, became distinctly chilly.

Soon after taking office, Mahathir championed a “Look East” foreign policy that looked to Asia, not the West, for a model of modernization. By “East” Mahathir meant Japan, not China. Relations with Beijing were relatively uneventful through Mahathir’s long tenure (coinciding with the Deng Xiaoping-era) because China played a relatively small role in Malaysia’s economic and security calculations at the time.

Those circumstances have, of course, changed dramatically in the years since he left office. As a consequence, Mahathir will have to seriously recalibrate his approach to China and the United States. The choices and decisions facing the new government are reasonably clear. Fundamentally, Malaysia will have to decide whether, and to what extent, it is prepared to resist Chinese pressure and blandishments aimed at creating a sphere of Chinese dominance in the Western Pacific and Southeast Asia.

Kuala Lumpur confronted the question of what to do about the infrastructure deals signed by Najib with China. Mahathir announced that the largest of these—a railroad and two pipelines—have been cancelled. A residential resort project, largely completed, is being reviewed.

Second, Malaysia must decide whether to publicly pronounce on the legality of Chinese claims to sovereign ownership of the South China Sea. The vehicle for such a pronouncement is readily available in the form of the 2016 UN Convention on the Law of the Sea Tribunal judgment that the Chinese claim is without legal merit. So far, Malaysia has shied away from any explicit embrace or rejection of that judgment.

Third, Malaysia will face hard decisions on how to respond to Chinese naval and maritime enforcement deployments within Malaysian-claimed waters of the South China Sea. These include deployments to shoals very near the coast of eastern Malaysia and very far from China.

Mahathir has already signaled a challenge to China insisting that we must “ensure our voice is heard because Malaysia does have islands in the area and this we must uphold.” He went on to note that China’s willingness to “flex its muscles . . . is very worrisome” as is its ability to rapidly “increase its influence over many countries in Southeast Asia without actually conquering them.” Mahathir has already set a very different tone for Malaysian-Chinese relations than his predecessor.

IF MALAYSIA is to become serious about resisting Chinese dominance there is only one place it can turn—the United States. The two countries have a long record of defense cooperation including port calls by U.S. naval vessels, joint military exercises (everything from jungle warfare training to surface naval maneuvers), counterterrorism and counterproliferation cooperation, and ministerial level consultations. U.S. naval surveillance aircraft fly over the South China Sea from a Malaysian naval base on Labuan Island, Malaysian units participate in the multination Cobra Gold exercise, Lockheed Martin maintains a repair depot outside Kuala Lumpur and Malaysian military officers attend U.S. military colleges under international military education and training grants.

Meanwhile, Secretary of Defense James Mattis has authorized a stepped-up U.S. military presence in the South China Sea. Since May 2017, the navy has more than doubled the number of designated FONOPS compared to past years. The number of “ship days” under routine operations increased from seven hundred in 2016 to nine hundred in 2017. Three naval carrier battle groups have conducted operations in the area while the air force has conducted bomber patrols over the South China Sea from Guam and Diego Garcia. In response to what Mattis described as China’s policies of “intimidation and coercion,” the Pentagon withdrew an invitation to China to participate in this year’s Rim of the Pacific Exercise (RIMPAC)—the world’s largest annual multinational naval exercise.

With regard to U.S.-Malaysia military cooperation, it is possible to imagine a good deal more including U.S. Navy cooperation with the Royal Malaysian Navy in the South China Sea (including an increased tempo of ship visits to Malaysian facilities), military sales, more regularized patrols from Labuan and additional visits by senior Pentagon officials to Malaysia. Any or all of these steps would have serious implications for Malaysia’s strategic position regarding both the United States and China. How Donald Trump’s presidency plays into this dynamic is anyone’s guess. Trump and Najib had a golfing friendship and Mahathir is on record excoriating Trump’s decision to move the U.S. embassy in Israel to Jerusalem. It is also worth noting that Anwar, Mahathir’s designated successor, has none of Mahathir’s contentious history with America. He has close ties with a number of U.S. officials and universities, and his first overseas trip since acquiring freedom of movement was not to China; it was to London.

In sum, Malaysia’s political transition has coincided with a rapidly changing and very challenging regional security environment. Malaysia is key to China’s Belt and Road strategy and, under Najib, seemed to have made major inroads there in the form of influence and economic presence—including personal payments to the prime minister. A veteran, strong-willed Malaysian leader with public opinion at his back is now carefully, but unmistakably, challenging those inroads. The implications for U.S. strategic interests are obvious. The senior director for Asia on the National Security Council staff has just visited Kuala Lumpur and other visits will follow shortly. The great game is afoot.

Marvin C. Ott is senior scholar at the Wilson Center and visiting professor at Johns Hopkins University. He is former professor of national security strategy at the National War College, deputy staff director of the Senate Intelligence Committee and senior analyst at the CIA.

Image: Reuters