The European Union (EU) and the US have warned Malaysia over risks to national security and foreign investment as the government finalizes a review of its 5G rollout that could allow China’s Huawei a role in the country’s telecoms infrastructure, Financial Times reported on Tuesday.

Envoys to Malaysia from the US and EU wrote to the government in April after it decided to review a decision to award Ericsson a MYR11 billion ($2.5 billion) tender to build a state-owned 5G network. The envoys’ letters have been seen by the FT.

The 5G review, which was due to be completed by the end of March, has become a test of whether Prime Minister Anwar Ibrahim’s new government can deliver stability after years of political chaos, as well as its ability to juggle relations with the west and China.

Huawei, the Chinese equipment maker blacklisted by Washington, has lobbied heavily for another chance at a role in building Malaysia’s network, the report added.

Brian McFeeters, the US ambassador to Malaysia, warned of “national security risks” unless Malaysia stuck with its original plan for 5G deployment, according to the report.

“Senior officials in Washington agree with my view that upending the existing model would undermine the competitiveness of new industries, stall 5G growth in Malaysia, and harm Malaysia’s business-friendly image internationally,” he was quoted as saying in the letter viewed by the FT.

“The US and other countries prioritize a fair and transparent review process and contract sanctity, as does the international business community. Allowing untrusted suppliers in any part of the network also subjects Malaysia’s infrastructure to national security risks.”

Michalis Rokas, ambassador and head of the EU delegation to Malaysia, said any change would “likely impact negatively and significantly the contractual terms agreed upon at the time of the launch of the open tender”. He noted the EU had more than €25 billion invested in Malaysia and European companies “place high value on clear policy direction”.

Any change “will not only impact the selected contractor, but is likely to affect more widely Malaysia attractiveness as a business destination for EU investors, in particular on high technology sectors that rely on trusted 5G vendors”, he reportedly wrote.

Quoting sources, Reuters reported last month that Malaysia plans to introduce a second 5G network from next year, in the latest policy shake-up aimed at dismantling monopolies and promoting competition by Prime Minister Anwar Ibrahim’s six-month-old administration.

Malaysia’s 5G roll-out by state agency Digital Nasional Berhad (DNB) has seen repeated setbacks because of industry concerns over pricing and transparency, as well as worries that a single government-run network would result in a nationalised monopoly.

According to the report then, Anwar’s government plans to introduce a second 5G network from January 2024 to challenge DNB’s lock on the market. The communications and digital ministry told Reuters no decision has yet been made on 5G.

Malaysia, which had been one of the slowest countries in the region to roll out 5G, has promised 80 per cent population coverage by the end of 2023. It has already exceeded 50 per cent, the government said.

One possible outcome of the review is that Malaysia will introduce a second 5G network from next year, said two people familiar with the discussions. Huawei, which alongside Finland’s Nokia was beaten by Ericsson in the open tender process, has been lobbying heavily for such a role, the people said.

Ericsson and the US embassy declined to comment. Huawei, representatives for the EU and Malaysia’s communications ministry did not respond to a request for comment, the report added.

Malaysia plans to set up second 5G network from next year — report