Business Commentary

The increasing role of economic diplomacy

najib salman

Written by TheMole

March 2, 2017

By Salahuddin bin Hisham

THE most visible economic deliverable from the official visit of King Salman of Saudi Arabia to Malaysia this week must be the RM31 billion 50:50 venture between Aramco and Petronas into oil refinery, storage, and petrochemical at RAPID, Pengerang.

Not only is it substantial, mutually beneficial, and strategic, it also put an end to rumours from across the causeway of stumbling negotiations that climaxed with a Saudi pullout in late January.

Petronas president Dato Wan Zulkiflee Wan Ariffin denied and explained that  Saudi could not possibly pull out of an agreement that has not been signed yet.

Whether there is truth or that it is a similar attempt to paint a negative perception of Malaysia, the successful agreement highlighted the increasing importance of economic diplomacy.

Negotiations took three years. The process  was  certainly  not done by some 15-minute audience  with princes and king. While the commercial and operational issues are being ironed out, the good relations between the two countries or close friendship between foreign ministers could have been the deciding factor.

Salahuddin Hisham was involved in various financial markets but has since, turned political and online.

It is not the first time that Petronas, or Malaysian companies and businessmen had called on diplomatic support in their venture abroad. Good relations offer access to new markets, smoothen the in-roads, and solve problems.  The foreign offices need to be provided with a bigger budget to undertake more in-depth business intelligence and collect economic data.

In January 2013, the late Professor Dato Mahani Zainal Abidin, former Chief Executive Officer of the Institute of Strategic and International Studies (ISIS) Malaysia, wrote an article in a financial weekly highlighting the need to sharpen economic diplomacy.

She viewed then that Malaysia had reached the stage where making improvement domestically might not result in significant increase in growth. Though there had been a pause in globalisation trend, the Malaysian economy was undeniably more open than before, and happenings in the international economic, political and social scenes had impact on Malaysia.

It is not just  recipient of FDIs from abroad but in the export of capital abroad. Till of late, Malaysia was net exporter of FDI to China. Malaysia is dependent on foreign labour to drive local manufacturing and plantation. On the other hand, skilled Malaysians are hired all over the world.

The present economic situation demonstrates the fact that Malaysia can be adversely affected by strategic and geo-political developments abroad. So our diplomats abroad need to do more engagement to explain latest developments in Malaysia to preserve market confidence.

Malaysia is a small country with limited military capability. It is in no position to emulate the gunboat diplomacy or coercive policies of superpowers to achieve economic means. However, it can do so in a more constructive manner.

Beyond the FTA, multilateral agreements and economic partnerships, Malaysia’s active involvement in various international groupings and participation in international humanitarian, peacekeeping, and anti-terrorism efforts have built good relations with other countries, raised its reputation, and opened doors.

It answers to Malaysians accusing the government of being a busy body abroad but neglecting domestic problems.

For instance, Malaysia’s long-term relations built with Sudan, Iran and China are bearing fruits today. The early initiatives to build relations with Sudan landed Petronas with oil exploration opportunity. Good relations helped sort out operational hiccups that could have led to a Petronas pull-out.

Under the leadership of Datuk Seri Najib Razak, Malaysia is playing an increasing role in the international arena. The latest being the megaphone diplomacy on Myanmar to end the Rohingya genocide.

It brings international recognition from superpowers as Malaysia’s initiatives reduce the need for their intervention in Myanmar and presence in South East Asia. Malaysia has also earned the respect and support from dedicated practitioners of human rights like Scandinavian countries.

Over time, a resolution to the Rohingya problem will yield peace dividends.  Malaysia cannot overlook the future economic potential of the state of Bengals.

Malaysia’s membership in the United Nations Security Council has built good relations with Azerbaijan. Strengthened Islamic brotherhood has helped sort out snag sin Petronas investments there.

Petronas is conducting exploration in the Caspian Sea and was also invited into their gas development projects.

It is not a surprise that Malaysia can be playing a role to cool down tension between Saudi Arabia and Iran. That may contribute to confidence in the Saudi part for Aramco to invest in RAPID. Saudi provides for 70 per cent of the feedstock.

Perhaps Iran can make up part of the balance.

Aramco plan to sell 5 per cent of the company through the world’s largest IPO ever to raise money for a long-term sovereign wealth fund. It is meant to reduce Saudi’s dependence on oil and diversify into non-oil business. They could leverage on Malaysia as a launching pad into the vibrant South East Asian region.    

Malaysia has been taking many leadership roles in ASEAN and Foreign Minister Datuk Anifah Aman  had initiated efforts to consummate the long-standing relationship into various specific multilateral cooperation agreements.

In the years to come, Indonesia and India are predicted to be economic giants and Malaysia can seize on these opportunities. Futurist John Naisbitt predicted decades ago that the melting pot of the three races of Malay, Chinese and Indian will harness the benefit of Indonesia, China and India and turn Malaysia into an economic power on its own.  

To realise such potential, Malaysians must appreciate, acknowledge and support the increasing role of Wisma Putra in international diplomacy. It is also part of the responsibility to become a developed nation.

Malaysian practice in diplomacy is to work together for mutual benefit or in dealing with difficult issues. In other words, Malaysia always plays the role of peacemaker.

There is a cynical quote that makes claim of peacemakers get whacked from both sides in a dispute. So far, the reality is far from it for Malaysia.

The win-win attitude by Malaysia does not relinquish another country’s rights or interest but an engagement on the basis of equal footing and mutual respect helps to address shared concerns and achieve shared objectives.



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