Governments across Southeast Asia are prioritising foreign direct investment (FDI) for economic growth at the expense of environmental integrity, exacerbating the region’s climate crisis, a Malaysian anti-graft expert said.
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Speaking at a climate finance forum in Kuala Lumpur in early August, University of Malaya political economy professor Edmund Terence Gomez said that states play a central role in facilitating ongoing land and resource exploitation via joint ventures with major economic powers, particularly China and the United States.
“The governments want these foreign direct investments. But when they do come in, it is at the cost of the environment,” he said at a fireside chat on climate finance and ensuring equity for the Global South.
Gomez said that large economic institutions from China and the United States have been investing overseas in emerging sectors such as green mobility, data centres and artificial intelligence (AI), in ways that often impact environmental health in developing countries.
China, for example, launched the Belt and Road Initiative (BRI) in 2013, a massive infrastructure and investment programme spanning dozens of countries in Asia and largely executed through state-owned enterprises (SOEs). These SOEs leverage the state’s backing to negotiate lucrative investment deals in resource-rich, developing economies such as Malaysia.
“The state is very powerful, and it can use its control over these SOEs to enter into negotiations with developing countries which also have state-owned enterprises or subservient governments,” Gomez said.
One notable example is the China Communications Construction Company (CCCC), a major BRI-linked SOE that has been involved in large infrastructure deals in Malaysia.
CCCC is the main contractor for the East Coast Rail Link (ECRL), the largest single BRI infrastructure project in Malaysia that spans 665 kilometres. The railway, which is currently under construction, will connect the states on Peninsular Malaysia’s east coast to the more populated Klang Valley on the west coast. However, this project traverses major river systems and cuts through some 357 hectares of protected forests that are home to endangered wildlife such as elephants, Malayan tapirs and tigers.
Meanwhile, American asset managers such as BlackRock are also investing in Southeast Asian sectors like AI, data centres, infrastructure, transport, and aviation. In Malaysia, BlackRock has struck a deal with Malaysia Airports Holdings Berhad (MAHB) in May 2024, which manages Kuala Lumpur’s main airport and others across the country. It has also formed a joint venture with Khazanah Nasional Berhad, Malaysia’s sovereign wealth fund, to jointly explore infrastructure and digital-economy investments.
“BlackRock knows who to work with. They go for the powerful sovereign wealth funds, get into joint ventures, cut deals and move in,” he said, adding that it is not only foreign intrusion that has led to land and resource abuse in developing countries, but local state governments themselves which have facilitate the access.
Gomez called on Malaysians to hold their federal and state governments accountable for problematic development projects driven by FDI, particularly those that threaten the well-being of the environment and the communities that depend on it for a living.
Much of these investments are either centred on energy-heavy industries or renewables that require the extraction of critical minerals through mining in protected forests, he said.
A case in point is the tropical island of Borneo, which currently faces increasing threats of deforestation as trees in Kalimantan are felled to make way for Indonesia’s new capital city, Nusantara.
Gomez noted that the proposed developments in Kalimantan, including highways, dams and housing complexes, could seriously exacerbate climate risks for the region since Borneo’s rainforests are one of the largest in the world, rich in carbon storage capacity and biodiversity.
While infrastructure, economic development and job creation are all important, he stressed that they have to be done without violating the environment, which will require deep thinking on what policies are being created and implemented.
“This involves deciding how we want to structure these developmental processes in a safe way. I don’t think we have gone into that discussion sufficiently,” he said.
Although conversations about climate justice commonly pit developed countries against developing ones, Timo Goosmann, deputy head of the Delegation of European Union (EU) to Malaysia said he does not believe in separation of powers of a monolithic block of developed countries and another monolithic bloc of developing countries.
“I think this is not a valid description of the world that we’re living in,” he said on the same panel.
While he acknowledged that a lack of climate financing is an issue for Global South nations, he said giving power to institutions is how the EU has organised political processes in its region to finding meaningful solutions.
Goosmann added that institutions are key to providing the energy and leadership needed to drive change in the climate space, and that they should be allowed to act accordingly.
“The principle of common but differentiated responsibilities is decades old, so there’s a lot on the table to turn into to reality. [We need to] give power to the institutions and the room to do what what they’re supposed to do,” he said.
However, Gomez questioned the capacity of these institutions to act freely and fairly without the influence of foreign governments in its decision-making processes.
“Is there an arms length relationship between the executive arm of government and these institutions? The executive arm of government may want to do things a certain way, but these institutions, especially if they are government-based institutions, may not have the ability to act independently,” he warned.
He maintained that Asean leaders must use their control over their land and resources when striking deals with powerful economies and be selective of how they open up crucial entry points to foreign enterprises – by drawing a fine line between protecting the environment and attracting foreign investments is crucial for Asean.
“Southeast Asia is one of the most dynamic regions for growth. We control important resources. We control the land which they [China and the US] need to access to build their industries, whether it’s electric vehicles, AI or semiconductors.”
In the case of Borneo, Gomez said, Brunei, Malaysia and Indonesia must unite in planning for the island collectively, taking the greater good into account rather than signing bilateral agreements with developed economies which could weaken their position and the region as a whole.
Goosmann said that in the current age of geopolitical upheaval, public money alone is not enough to finance the climate transition across emerging economies. Instead, there is a greater need for a smart link between political, economic partnerships, and the implementation through smart climate action.
“It’s a very complicated field, but it’s very necessary, and we need to accelerate these processes,” he said.
