Chinese loan to boost Malaysia’s “northern” development and bring “equity” to less developed region

Updated On: Jul 17, 2007

Malaysia will pump US$826 million into building a second PenangBridge, with much of the money coming from China.

China has extended its most generous loan for a single project in a foreign country to Malaysia, signifying the strong relationship between the two countries, The Star reported. The loan, totalling US$800 million, will finance the Penang Second Crossing Bridge project which will be a “major catalyst for economic growth and investment in the Northern Corridor”, according to the New Straits Times. It will be repaid over 20 years at an interest rate of 3%, well below the market average of 4-5%, reported The Star.

The loan not only deepens Malaysia’s friendship with China. The signature project in the Northern Corridor Economic Region is part of plans to bring equity to one of its poorest regions. The bridge’s very construction will create 2,000 jobs. It also supplements the NCER plan to boost agricultural productivity and rural development, reported Bernama.

In the NCER blueprint, a major focus will be on involving and spreading wealth to local investors and companies. Datuk Ahmad Zubir Murshid, Group Chief Executive of Sime Darby Bhd, which led in preparing the groundwork for the comprehensive development blueprint, said “This is the beauty of the NCER as opposed to the southern corridor where you are talking about foreign and big companies. Here (NCER) you are bringing in local investors, local companies and local contractors.” Quoted Bernama, “We don't need super contractors to come in and grab billion-ringgit projects ... here, they are big and small parcels that they can do, that cost millions of ringgit.” One local company that has benefited is Malaysian Resources Corp which secured the contract to build a transport hub in Penang, reported AFX News.

The NCER development plan will also take advantage of downstream industries by setting up an agro park where products can be processed. The bridge, along with Penang’s Outer Ring Road, ports and rail links will allow ripple effects of development to flow throughout the Northern Corridor. 

These ripple effects will be more than welcome, as the Northern Corridor (consisting Penang, Perak, Kedah and Perlis) currently accounts for 29% of hardcore poor. Over three quarters of households there earn an average of RM2000, making it the second-least developed region in Malaysiaafter Eastern Malaysia. Malaysia intends to ‘unleash’ the region’s potential by facilitating the four states in pooling resources while each developing its own comparative advantages, announced Chief Minister of Penang Tan Sri Dr Koh Tsu Koon. Of the four states, the pulse of logistics and transportation is set to be inPenang, whose role as the logistics hub of the Northern Corridor will be augmented by the sparkling new bridge which will link Batu Maung on the island to Batu Kawan on the mainland, reported Bernama.

Amongst other recently unveiled plans is Asean’s first nuclear monitoring laboratory to be opened in three years, which will be run by locals and “is one of the Government’s efforts to see a balanced development among the regions in the country,” said Deputy Prime Minister Datuk Seri Najib Tun Razak, quoted by The Star.  Another project involves a US$29 million fund to redevelop Malay enclave Kampung Baru. Najib said this would benefit Malays falling behind in urban development, reported Bernama.

These new plans seem to be in the spirit of achieving equity, but ‘equity’ in Malaysiais remarkably thorny. Instead of a straightforward attempt to narrow the rich-poor divide, it harbours racial dimensions. Agriculture and Agro-based Industry Minister Muhyiddin Yassin berated Barisan Nasional’s non-Malay leaders for “failing to explain to their community members the necessity of having and supporting the New Economic Policy,” especially since “Malay economic power is still weak compared to that of other communities. The NEP is supposed to create a level playing field and promote equality.” reported the New Straits Times.  On the NEP, Deputy PM Najib sent a slightly different message. Speaking after the Wangsa Maju Umno division’s annual meeting, Deputy PM Najib told bumiputera entrepreneurs to stop depending on handouts and stand on their own feet.  The Bernama quoted him saying that “it would be more honourable if bumiputera entrepreneurs can have 100 percent control of their companies, instead of seeking 30 per cent equity in others’ companies”. 


Stop looking for handouts, Najib tells bumis (Straits Times, 16 July 2007)

Rely less on 30pc Bumi quota, Najib tells Malays (New Straits Times, 16 July 2007)

NEP’s role `must be explained’ to non-Malays (New Straits Times, 15 July 2007)

Strong ties behind bridge loan (The Star, 15 July 2007)

Penangpoised for makeover (The Star, 15 July 2007)

Plans for Pahang nuke lab (The Star, 15 July 2007)

Penangto become logistics hub (New Straits Times, 15 July 2007)

Chinaloans RM2.7b for second Penangbridge (New Straits Times, 15 July 2007)

Asean's 1st nuclear lab to be located in Rompi (The Star, 14 July 2007)

ChinaConsiders Malaysiathe "Only Close Friend" In Asean (Bernama, 14 July 2007)

Matrade Aims At More Exports Into AseanChinaMiddle East(Bernama, 14 July 2007)

PenangCan Be Logistics And Trade Hub For NCER, Says Koh (Bernama, 14 July 2007)

Northern Corridor Blueprint Set For Launch Month-end (Bernama, 14 July 2007)

China's Exim Bank gives Malaysia US$800m loan for bridge project (AFP, 13 July 2007)