Agenda Daily

Why King Salman’s Asia tour is so significant

In Kuala Lumpur on Tuesday, Malaysia’s Petronas signed a deal for Saudi Aramco to invest $7 billion (Dh25 bn) into an oil and petrochemical refinery in the southern state of Johor.

Other agreements and opportunities for businesses in both countries will also be announced, and Malaysia’s prime minister Najib Razak has already used this to hit back at critics who accused him of "selling" the country by securing massive investment from China on his visit to Beijing in November.

The Saudi deals show the level of confidence other countries such as the kingdom have in Malaysia, he has said.

The king’s visit and the huge amount of new trade being generated around it are also very public votes of confidence in the economic reform programmes.

Both have undertaken measures to improve long-term resilience and competitiveness, such as the rationalisation or removal of subsidies.

Malaysia has also introduced a goods and services tax to widen the tax base. But neither of these moves have been popular – who likes paying more for anything? – and opponents have been quick to try to exploit discontent at their impact.

The arrival of King Salman draws attention to the fact that his government has been undertaking almost the exact same reforms, removing or cutting key subsidies last year, and agreeing in January to impose a new 5 per cent value added tax – in essence, the same as GST.

If Saudi Arabia now deems it wise to emulate the reforms of the Malaysian and Indonesian governments, that is an even greater vindication than the plaudits of the IMF and World Bank officials who have already commended the moves.

At a time when the United States has been sending mixed – and sometimes distinctly unfriendly – signals to many countries, including allies, the Saudi King’s tour also suggests that links in Asia need to be strengthened and may prove more reliable than with the "America First" of Donald Trump.

All states on the tour have vested interests in sharing domestic and international counter-radicalisation and deradicalisation programmes, in which Saudi Arabia and Malaysia have particular expertise.

The visit – during which the king has described relations with Malaysia as being at "an all-time high" – revalidates Mr Najib’s status as a Muslim leader, reinforces his doctrine of "wasattiyah" or moderation, and also backs up his claim that the $700 million received into his bank account before the last election was a donation from the Saudi royal family, as the Saudi foreign minister has confirmed.-1/3/2017

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