OBOR: The dilemma that benefits Malaysia says MIDF

OBOR: The dilemma that benefits Malaysia says MIDF

January 24, 2018 0 By WFTV

MIDF Research said China’s One Belt One Road (OBOR) is economically linked to Malaysia’s own OBOR projects, and Beijing is in its own dilemma to support the related projects in Malaysia. In view of this, China will probably pump its foreign reserve into such projects, thus benefiting Malaysia largely.

It said Beijing’s own dilemma is to ready these rail and sea links between China and the countries that supports the OBOR. In Malaysia they are the East Coast Railway Line (ECRL) and Kuala Linggi International Port and Melaka Gateway Deep Sea Port.

The research house said the projects in Malacca, and the East Coast are Malaysian dilemma’s that would be beneficial to Putrajaya with the Chinese push for the OBOR.

It said China’s economic security is closely tied to the South China Sea (SCS) as over 60 percent of its trade in value travels by sea. The straits’ narrowest point is 2.8km which makes it vulnerable to choke point.

“Consequently, it is important for China to increase the efficiency of logistics for its product and supplies and balancing the stable supply of materials from Africa, Middle East and South Asia.

The ‘Malacca Dilemma’ which is the over- reliance of the Straits of Malacca as main artery for shipping traffic is of benefit to Malaysia since China has its economic and geo-political interests tied to the Malaysian port.

“The genesis of Malaysia’s railway and port infrastructure largesse has its roots in China’s export and import pattern to feed on its population as well as avoiding choke-points,” it said.

The Straits of Malacca is 890km long and the United Nations Conference on Trade and Development (UNCTAD) cited that it accounts for nearly one-third global trade traffic.

In 2016, USD3.37trn of global trade passes through the South China Sea (SCS) and China’s export through SCS amounted to USD874bn – counting the Straits of Malacca as its main traffic artery. ‘Additionally, close to 80.0% of China’s oil import passed through SCS via the Straits.

The cost of rerouting shipping traffic in the Straits if it is closed for a week would be USD64.5m and the cost of rerouting through other sea line of communication (SLOC) such as Lombok or Sunda Straits for one week is USD119.0m and USD64.5m respectively.’

Worst cases is going through Australia and face a hefty USD650.9m3 weekly cost. For example, in 1967 to 1974 Suez Canal was closed from rerouting shipments through Africa which costs USD2.8bn monthly for traders, said MIDF.