Malaysia: Background and U.S. Relations
Ian E. Rinehart
Analyst in Asian Affairs
April 21, 2014
Congressional Research Service
7-5700
www.crs.gov
R43505
Malaysia: Background and U.S. Relations
Summary
Malaysia, a majority Muslim nation in Southeast Asia, has long been a partner in U.S. security
and economic initiatives in the region, although political sensitivities in Malaysia have
constrained both sides from forging deeper ties or even acknowledging how close the relationship
is. Bilateral relations have improved over the past decade, especially under Prime Minister Najib
Razak, who has made relations with the United States a priority. The Obama Administration has
emphasized deeper engagement with Malaysia and other “emerging partners” in Southeast Asia
as part of the strategic “rebalancing” of U.S. resources and attention to the Asia-Pacific region.
Congress has expressed interest in a variety of issues in U.S.-Malaysia relations over the years,
especially regarding trade, security cooperation, human rights, and Malaysia’s diplomacy.
The two nations are major trade and investment partners. In 2013, Malaysia was the 25th largest
market for U.S. exports and the 18th largest supplier of U.S. imports. The United States was
Malaysia’s 4th largest export market (after Singapore, China, and Japan) and the 4th largest
supplier of imports (after China, Singapore, and Japan). Both countries are parties to the Trans-
Pacific Partnership (TPP) negotiations, which aim to create a high-standards free trade agreement
among 12 countries comprising nearly 40% of the global economy. The United States’ main
trade-related concerns are Malaysia’s government procurement policies, protection of intellectual
property rights, and market access for key goods and services.
Despite a diverse ethnic and religious mix, Malaysia has enjoyed considerable political stability
since it gained independence in 1957. Political coalitions led by the United Malays National
Organization (UMNO), the country’s dominant political party, have ruled Malaysia without
interruption since independence. UMNO is a staunch proponent of the preeminent position of
ethnic Malays and other indigenous groups, collectively known as bumiputra. The United States
occasionally has criticized the Malaysian government for its weak human rights protections,
constraints on press freedom, and prosecution of opposition political leaders like Anwar Ibrahim.
Malaysia achieved high rates of GDP growth through the 1970s and into the 1990s, as did other
East Asian economies. It is now considered a middle-income country, relatively prosperous
compared to most other Southeast Asian countries, and has retained its Muslim identity through
periods of rapid modernization. As in politics, Malaysia’s economy is divided along regional and
ethnic lines; a wide ranging economic program known as the New Economic Policy attempts to
address socio-economic disparities by privileging ethnic Malays and other indigenous groups in
government contracts, education, and government hiring.
Malaysia has been a constructive diplomatic actor on numerous regional and global issues.
Efforts to promote moderate Islam and marginalize religious extremism have been a major part of
Malaysian diplomacy, including acting as a mediator in conflicts between Muslim separatist
groups and the central government in both Thailand and the Philippines. Kuala Lumpur maintains
good relations with its neighbors and has promoted cooperation among the 10 countries in the
Association of Southeast Asian Nations (ASEAN). Malaysia is one of several Southeast Asian
countries with maritime and territorial claims in the South China Sea, although it has assumed a
low profile in those disputes. U.S.-Malaysia security cooperation includes counter-terrorism
activities, numerous military exercises, ship visits, and military education exchanges.
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Malaysia: Background and U.S. Relations
Contents
Introduction ...................................................................................................................................... 1
Overview .......................................................................................................................................... 1
Modern Malaysian History ........................................................................................................ 2
Challenges for Malaysia ............................................................................................................ 3
U.S.-Malaysia Political Relations .................................................................................................... 4
Malaysia’s Economy ........................................................................................................................ 5
Trade Relations with the United States ............................................................................................ 6
Trans-Pacific Partnership Negotiations ..................................................................................... 7
Other Trade Issues ..................................................................................................................... 8
Domestic Politics ............................................................................................................................. 9
Malaysia’s Diplomacy and Regional Relations ............................................................................. 11
South China Sea Maritime Disputes ........................................................................................ 11
Security Cooperation ............................................................................................................... 12
Conflict Mediation and Promotion of Moderate Islam............................................................ 12
U.S.-Malaysia Security Relations .................................................................................................. 13
Outlook .......................................................................................................................................... 15
Figures
Figure 1. Malaysia and Surrounding Areas ..................................................................................... 2
Tables
Table 1. Selected Indicators for Malaysia’s Economy ..................................................................... 5
Table 2. Official Merchandise Trade Figures: Malaysia and United States ..................................... 6
Contacts
Author Contact Information........................................................................................................... 16
Acknowledgments ......................................................................................................................... 16
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Malaysia: Background and U.S. Relations
Introduction
This report analyzes U.S.-Malaysia relations and the economy, domestic politics, and diplomacy
of Malaysia. Congress has expressed interest in a variety of issues in U.S.-Malaysia relations,
especially regarding trade, security cooperation, and human rights. The report provides
background information on current events and policy debates related to Malaysia.1
Overview
The relationship between the United States and Malaysia is a complex one. Bilateral ties are
considerably closer than often is acknowledged, but lingering mistrust and political sensitivities
in Malaysia constrain the establishment of a deeper strategic relationship. Malaysia, a majority
Muslim nation of 30 million people, is a partner in numerous U.S. security and economic
initiatives in Southeast Asia. It is a major U.S. trading partner and a site of substantial U.S.
investment. Malaysia, for many years one of the leading voices behind building “Asia-only”
regional institutions, is now seen as an advocate of a strong U.S. presence in the Asia-Pacific
region. Some experts believe that Malaysian concerns about China’s assertiveness in the South
China Sea have been the main driver behind closer U.S.-Malaysia strategic ties.2 Yet, some issues
have proven contentious over recent years—particularly U.S. counter-terrorism strategy and
policy in the Middle East—and many observers still perceive a ceiling on the degree to which the
two countries can deepen their relationship.
The Obama Administration’s strategic “rebalancing” of foreign policy priorities to Asia has
placed substantially increased attention on the nations of Southeast Asia, including Malaysia.
Although the rebalancing has not featured high-profile bilateral initiatives with Malaysia, most
observers say U.S.-Malaysia relations have warmed considerably in recent years. Malaysia is one
of 12 nations negotiating the Trans Pacific Partnership (TPP), a potential trade agreement that is
the United States’ highest-priority economic initiative in Asia. The United States and Malaysia
also conduct numerous military exchanges, training exercises, and port visits and cooperate in
counter-terrorism and maritime domain awareness.
Malaysia harbors a strong self-image as a moderate leader within the Islamic world, and this role
sometimes complicates its relationship with the United States. Malaysia has criticized the U.S.
counter-terrorism strategy and its support for Israel, maintaining that these policies created a
perception that the United States was “anti-Islam,” and that U.S. rhetoric generated broader
support for Islamic militancy. However, Malaysian statements along these lines have moderated
in recent years, especially under the current Prime Minister, Najib Razak.
1 Other CRS products cover issues related to Malaysia. These include CRS Report R42694, The Trans-Pacific
Partnership (TPP) Negotiations and Issues for Congress, coordinated by Ian F. Fergusson, CRS Report R42344,
Trans-Pacific Partnership (TPP) Countries: Comparative Trade and Economic Analysis, by Brock R. Williams, and
CRS Report R42930, Maritime Territorial Disputes in East Asia: Issues for Congress , by Ben Dolven, Shirley A. Kan,
and Mark E. Manyin. Archived reports include CRS Report RL33445, The Proposed U.S.-Malaysia Free Trade
Agreement, by Michael F. Martin, CRS Report RL33878, U.S.-Malaysia Relations: Implications of the 2008 Elections,
by Michael F. Martin, and CRS Report RL34194, Terrorism in Southeast Asia, coordinated by Bruce Vaughn.
2 Joshua Kurlantzick, “Obama in Malaysia: A Strategic Partnership?” Council on Foreign Relations, Asia Unbound
blog, April 8, 2014.
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Figure 1. Malaysia and Surrounding Areas
Source: Graphic created by CRS.
Modern Malaysian History
For most of its early history, the territory that comprises the modern state of Malaysia was a
collection of small, separate kingdoms or sultanates. After Islam was introduced to Southeast Asia
by Muslim traders, most of the indigenous population adopted the religion. In the late 18th
through mid-19th centuries, during the height of European imperialism, various principalities on
the Malaysian Peninsula and northern Borneo fell under the British sphere of influence. Britain
administered these resource-rich states through local leaders and eventually knit together these
territories into the Federated Malay States in 1895. Japan briefly ousted the European powers
from Southeast Asia during World War II, but Britain restored its governance of the Malaysian
territories after 1945, inaugurating the Federation of Malaya in 1948.
While indigenous political groups, including the United Malays National Organization (UMNO),
agitated for independence during the postwar period, the Malayan Communist Party waged a
prolonged guerrilla campaign against British rule. The British and their anti-Communist allies in
Malaysia defeated the Communist campaign, sometimes employing brutal tactics; this period is
known as “the Emergency.” Peninsular Malaya gained its independence as a constitutional
monarchy in 1957, and the colonies of Singapore, Sabah, and Sarawak were relinquished by
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Britain in 1963 into the new Federation of Malaysia. Indonesian ruler Sukarno opposed this union
and instigated low-level military conflict (known as konfrontasi) with newly enlarged Malaysia
until 1965. Singapore was forced out of the federation and became independent in 1965 amid a
series of political disagreements between Malaysian and Singaporean leaders.
Race riots between Malays and Chinese that erupted in May 1969 in Kuala Lumpur shook the
social foundations of Malaysia and catalyzed reform of the political system. A major consequence
of the race riots was the New Economic Policy (NEP), which sought to remedy socioeconomic
disparities by favoring bumiputra—ethnic Malays and other indigenous groups—over the
economically dominant Chinese minority. The Malaysian government promoted agricultural
improvements, natural resource exploitation, and export-oriented industrialization (reserving
opportunities for bumiputra) that led to consistent economic growth through the 1970s and 1980s.
In the political sphere, the UMNO-led coalition of ethnically based parties has maintained its
preeminence since independence and delivered a measure of stability to Malaysia despite internal
diversity and a volatile external security environment. A central figure in recent Malaysian history
is Mahathir Mohamad, who was Prime Minister from 1981 until 2003 and remains politically
active. Mahathir helped to shape a more secular Malaysia by limiting the political strength of
religious leaders and curtailing the privileges of Malaysia’s royalty. He also aggressively sought
to rein in critical voices in the political arena, the media, and civil society. Many aspects of
Malaysia’s current political landscape have evolved from the Mahathir era, as both prime
ministers who followed him, as well as opposition leader Anwar Ibrahim, were at one time his
protégés within UMNO.
Challenges for Malaysia
Malaysia faces numerous internal and external challenges as it seeks to attain its goal of
becoming a prosperous, developed country that is influential in Southeast Asia and around the
world. Chief among Malaysia’s domestic challenges are ethnic and religious sensitivities and
tensions, a volatile political climate with an
increasingly active political opposition, and
Basic Data
fragile protections for human rights.
Population: 30,040,000 (April 2014 est.)
Compared to most of its Southeast Asian
Area: 126,895 sq. mi. (slightly larger than New Mexico)
neighbors, Malaysia has a relatively high
average income, but its economy is still
Gross domestic product (GDP): $326.3 billion (2013)
undergoing the transition to high
Per capita GDP: $10,895
technology, high value-added industries.
Ethnicities: Malay/bumiputra 67%, Chinese 25%, Indian 7%,
Many economic reform proposals confront
others 1%
opposition from rural, Malay-centric interest
Religions: Islam 61%, Buddhism 20%, Christianity 9%,
groups. As one of the leading countries in
Hinduism 6%, others 2%
ASEAN (the Association of Southeast Asian
Life expectancy at birth: male 72 years, female 77 years
Nations), Malaysia faces the diplomatic
challenges of promoting regional trade
Government type: Federal Constitutional Monarchy
integration, maintaining security and
(Parliamentary Democracy)
stability, and creating an attractive climate
Prime Minister: Mohamed NAJIB bin Abdul Najib Razak
for outside investment. The rise of China
(inaugurated April 3, 2009)
brings many opportunities to East Asian
Sources: Population, ethnicity, religion, and life expectancy
countries, as well as concern about Beijing’s
data from Malaysian Department of Statistics. GDP data
increasing assertiveness in regional affairs.
from Malaysia’s Economic Planning Unit.
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U.S.-Malaysia Political Relations
Bilateral ties between the United States and Malaysia long have been both highly cooperative and
publicly contentious. Malaysia is a strong partner in many U.S. security and economic initiatives,
but domestic Malaysian sensitivities, particularly regarding the nation’s identity in the Muslim
world, have consistently constrained Malaysian leaders from undertaking high-profile
partnerships with the United States.
The Obama Administration’s strategic “rebalancing” to the Asia-Pacific region has placed a high
priority on deepening relations with Southeast Asian countries, and Malaysian Prime Minister
Najib Razak has spoken frequently about building stronger relations with the United States. With
its participation in the TPP negotiations, Malaysia is part of the Administration’s signature
economic initiative in the region. President Obama’s April 2014 visit to Malaysia makes him the
first U.S. President to visit the country since 1966. (Obama’s scheduled visit in October 2013 was
cancelled due to the partial U.S. government shutdown.)
The Najib government has taken visible steps to support U.S. initiatives. In April 2010, Malaysia
enacted legislation to strengthen its restrictions on the shipment of nuclear materials, on the eve
of the Nuclear Security Summit hosted by President Obama. In 2010, it sent 40 military medical
personnel to Bamiyan province in Afghanistan, and it subsequently has rotated four deployments
to support Afghan reconstruction—a notably public move in a Muslim-majority nation where
U.S. actions in Iraq had led to large protests at the U.S. Embassy in Kuala Lumpur.
The high visibility of these initiatives marks a change for the bilateral relationship. U.S. relations
with Malaysia were particularly fraught under long-time Prime Minister Mahathir, who was a
vocal advocate of “Asia-only” regional organizations. Malaysians were particularly upset both by
U.S. criticism of Malaysia’s economic policy during the Asian Financial Crisis in 1998, when
Malaysia instituted strong controls on capital flows in order to protect its currency; and by high-
level U.S. criticism of Malaysia’s judiciary after Anwar Ibrahim, then Malaysia’s Deputy Prime
Minister, was arrested and subsequently convicted of sodomy, which is a crime under Malaysian
law. (See “Domestic Politics”, below.) Following Mahathir’s retirement as Prime Minister in
2003 (he remains a politically active Member of Parliament), some of the barriers to warmer
bilateral ties eased, although Malaysia continues to strongly oppose U.S. support for Israel.
Washington and Kuala Lumpur agreed to discuss a Free Trade Agreement in 2005, and although
those negotiations did not ultimately conclude in an agreement, Malaysia is an active participant
in the TPP negotiations.
The United States periodically has raised concerns about human rights and democracy issues in
Malaysia. In March 2014, after Malaysia’s highest appeals court overturned the acquittal of
Anwar Ibrahim, now a prominent opposition leader, on a separate sodomy charge—a decision
that many observers deemed politically motivated and that potentially barred Anwar from seeking
a state governership—the U.S. State Department said, “The decision to prosecute Mr. Anwar and
his trial have raised a number of concerns regarding the rule of law and the independence of the
courts.”3
3 Jen Psaki, “Conviction of Malaysian Opposition Leader Anwar Ibrahim,” U.S. Department of State, Washington, DC,
March 7, 2014, http://www.state.gov/r/pa/prs/ps/2014/03/223148.htm.
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The official U.S. reaction to Malaysia’s most recent nationwide parliamentary elections in May
2013, in which opposition parties alleged that widespread electoral fraud contributed to the ruling
coalition’s victory, was muted. A State Department spokesman said, “We were pleased to see
Malaysians across the political spectrum engaged in the electoral process in large numbers with
unprecedented enthusiasm.” He also noted, however, “We are aware of concerns about voting
irregularities and note that the opposition parties faced significant restrictions on access to the
media. Addressing these issues is important to strengthen confidence in the electoral process.”4
Malaysia’s Economy
Prior to the 2008 global financial crisis, Malaysia had been one of the fastest growing economies
in the world over the past 25 years (see Table 1). Malaysia was able to recover from the global
recession and an economic downturn in 2009 comparatively quickly, and its economic
performance in early 2014 was close to its pre-crisis level. At the same time, however, Prime
Minister Najib remained under some domestic pressure to find ways of achieving the nation’s
self-proclaimed goal of becoming a developed nation by 2020, while addressing the country’s
regional and income disparities.
Malaysia’s economy is regionally and sectorally diversified. The State of Selangor, which
surrounds the capital of Kuala Lumpur, is the largest contributor to the nation’s GDP, followed by
Kuala Lumpur. The State of Johor, located next to Singapore, and the State of Sarawak, on the
island of Borneo, also are significant contributors to the GDP. These four regions are Malaysia’s
most prosperous areas and form the core for the nation’s manufacturing and services sectors. By
contrast, the states of Kedah, Kelantan, Perak, and Perlis, along the border with Thailand, as well
as the State of Sabah on the northern tip of the island of Borneo, are relatively poorer regions of
Malaysia with less manufacturing and services activity.
Table 1. Selected Indicators for Malaysia’s Economy
2007 2008 2009 2010 2011 2012 2013
Real
GDP
Growth
6.3% 4.8% -1.5% 7.2% 5.1% 5.6% 5.0-6.0%
Nominal GDP (billions 193.6 231.0 202.3 246.8 287.9 303.5 326.3
of U.S dollars)
Per Capita Income
7,218 8,460 7,278 8,729 10,012 10,381 10,687
(U.S. dollars)
Inflation
Rate—CPI
6.4% 6.1% 0.6% 1.7% 3.2% 1.7% 2.0-3.0%
Unemployment
Rate
3.3% 3.3% 3.7% 3.4% N.A. N.A. 3.1%
Exchange Rate
3.44 3.33 3.52 3.22 3.06 3.09 3.09
(Ringgits/$)
Sources: 2007-2012 data from the World Bank; 2013 data from Malaysia’s Economic Planning Unit.
Notes: GDP—gross domestic product; CPI—consumer price index; N.A.—not available.
4 Patrick Ventrell, U.S. Department of State Daily Press Briefing, Washington, DC, May 6, 2013, http://www.state.gov/
r/pa/prs/dpb/2013/05/208988.htm#Malaysia.
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Malaysia also is economically divided along urban/rural lines and between its ethnicities.
Malaysia’s urban centers, such as Kuala Lumpur, are relatively prosperous and support a growing
middle class, while its rural areas are comparatively underdeveloped. Malaysia’s major ethnic
groups face differing economic conditions. The Chinese-Malaysians are generally prosperous and
play an important role in the nation’s commercial and trade sectors. The Indian-Malaysians are
split into a comparatively wealthy few and a comparatively poor many. Though they constitute a
majority of the population, Malays and other indigenous people (i.e., bumiputra), traditionally
have been considered economically disadvantaged, leading to the 1971 introduction of the New
Economic Policy (NEP) mentioned above.
Roughly half of Malaysia’s GDP comes from the services sector. Manufacturing provides an
additional 26% of GDP and mining contributes 13%. Agriculture supplies 11% of GDP. Trade-
related services (such as finance, insurance, and business services) and tourism-related services
dominate the services sector. Malaysia mainly manufactures consumer electronics, much of it
parts and components for export and use in regional manufacturing supply chains. Malaysia
exports three major crops: cocoa, palm oil, and rubber.
Trade Relations with the United States
Malaysia is a significant trading partner for the United States, but the United States is an even
more important trading partner for Malaysia. In 2013, Malaysia was the 25th largest market for
U.S. exports and the 18th largest supplier of U.S. imports. By contrast, the United States was
Malaysia’s 4th largest export market (after Singapore, China, and Japan) and the 4th largest
supplier of imports (after China, Singapore, and Japan).
Table 2. Official Merchandise Trade Figures: Malaysia and United States
(U.S. dollars in billions)
Malaysia Trade Data
U.S. Trade Data
Exports to United
Imports from
Imports from
Exports to
Year
States
United States
Malaysia
Malaysia
2013 N.A. N.A. $27.3 $13.0
2012 $19.7 $15.9 $26.7 $12.9
2011 $18.9 $18.1 $26.5 $14.2
2010 $19.0 $17.5 $26.6 $14.0
2009 $17.3 $13.9 $23.9 $10.4
2008 $24.9 $17.0 $31.6 $13.0
Source: International Monetary Fund, Direction of Trade Statistics; U.S. International Trade Commission
The two nations report significantly different amounts for their bilateral trade, with the United
States listing higher values for imports from Malaysia and lower values for exports to Malaysia
over the last five years (see Table 2).5 As a result, the United States reports a higher bilateral trade
deficit with Malaysia, while Malaysia reports a lower bilateral trade surplus.
5 The discrepancy between the official Malaysian and U.S. trade statistics is not unusual. The United States evaluates
its exports and imports differently from most other nations, but the methods of accounting are equally accurate.
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In merchandise trade, electrical machinery and equipment dominate trade flows in both
directions, reflecting Malaysia’s role as a major source for consumer electronics. According to
official 2013 U.S. trade data, $5.4 billion in electrical machinery and equipment (as listed under
harmonized tariff schedule (HS) 85) was exported to Malaysia and $14.8 billion was imported
from Malaysia, representing 42% of total exports and 54% of total imports. Other major exports
to Malaysia were (in order) aircraft and aircraft parts (HS 88)—$1.6 billion; and machinery and
mechanical equipment (HS 84)—$1.4 billion. Other major imports from Malaysia were (in order)
machinery and mechanical appliances (HS 84) —$4.0 billion; optical, photographic,
cinematographic, medical or surgical instruments and apparatus (HS 90)—$1. 6 billion; and
rubber and rubber articles (HS 40)—$1.4 billion.
According to the U.S. Bureau of Economic Analysis (BEA), U.S. services exports to Malaysia in
2012 totaled $2.45 billion, and services imports from Malaysia totaled $1.36 billion. About one-
third of U.S. services exports to Malaysia and over half of the services imports from Malaysia
were business, professional, or technical services.
Over 600 U.S. companies operate in Malaysia, many in the electronics and information
technology industries. Total U.S. foreign direct investment (FDI) in Malaysia as of the end of
2012 was $12.39 billion. Roughly half of this was in manufacturing (largely electronics), and
about a quarter was in mining. By contrast, Malaysia has very little FDI in the United States.
According to BEA, the total value of Malaysia’s FDI in the United States as of 2012 was $662
million.
Trans-Pacific Partnership Negotiations
Both Malaysia and the United States are parties to the ongoing negotiations to create a new trade
agreement known as the Trans-Pacific Partnership (TPP).6 The United States entered into
negotiations with the four members (P4)—Brunei, Chile, New Zealand, and Singapore—of the
Trans-Pacific Strategic Economic Partnership in 2008. Malaysia was accepted as the ninth
negotiating party in October 2010.7 The Obama Administration has made the successful
conclusion of the TPP talks a major priority for its international trade policy.8
Prior to joining the TPP talks, Malaysia had been negotiating a bilateral trade agreement with the
United States since March 2006.9 In October 2010, the U.S. Trade Representative officially
notified Congress that the bilateral trade talks would be folded into the TPP negotiations. Talks on
the bilateral trade agreement reportedly had stalled on several issues, including
• Malaysia’s government procurement policies, which give preferential treatment
for certain types of Malaysian-owned companies;
• provisions for intellectual property rights (IPR) protection; and
6 For more about the TPP negotiations, see CRS Report R42694, The Trans-Pacific Partnership (TPP) Negotiations
and Issues for Congress, coordinated by Ian F. Fergusson.
7 Australia, Peru, and Vietnam joined the TPP talks in 2008. Mexico and Canada joined in 2012, and Japan in 2013.
Under an agreement among the negotiating nations, a new member cannot join the negotiations unless it gains consent
from all the current parties to the talks.
8 Penny Pritzker, “America’s Economic Future in the Asia-Pacific,” remarks as delivered at the Johns Hopkins
University School of Advanced International Studies, Washington, DC, April 17, 2014.
9 For more information about the bilateral trade talks, see CRS Report RL33445, The Proposed U.S.-Malaysia Free
Trade Agreement, by Michael F. Martin.
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• market access for key commodities and services.
These same issues reportedly pose problems in the TPP negotiations. The language in a proposed
chapter on state-owned enterprises has supposedly been an area where the United States and
Malaysia have significant differences of opinion.10 One issue on which Malaysian TPP
negotiators reportedly have found common ground with at least some Americans engaged in TPP-
related advocacy is a proposed exclusion of tobacco. A letter signed by 45 U.S. state attorneys
general in January 2014 called on the U.S. Trade Representative (USTR) to support the
Malaysian proposal to “carve out” tobacco from all provisions of the TPP.11 They asserted that
this measure would “preserve the ability of state and local governments to regulate tobacco
products to protect the public health.” Meanwhile, the USTR has advanced an alternative
proposal that contains general exceptions necessary to protect life and health—and applies those
to tobacco—but allows the invocation of dispute settlement over tobacco control regulations.
Prime Minister Najib repeatedly has expressed his support for the TPP but faces strong opposition
to the trade agreement at home. Malaysia’s farmers want greater access to the U.S. market, but
are concerned about increased competition from U.S. agricultural exporters. Some Malaysian
manufacturing sectors are apprehensive about increased competition from major U.S.
corporations. Malaysia’s health care providers and the population in general are worried about
access to affordable pharmaceuticals if IPR provisions supported by the United States are
included in the TPP agreement. Some of the possible provisions on government procurement and
state-owned enterprises are viewed by some Malaysians as unacceptable infringement on
Malaysia’s sovereignty and its system of ethnic preferences. Finally, opposition politicians have
strongly criticized the government for a lack of transparency in pursuing the negotiations. Under
Malaysian law, a TPP agreement, if concluded, must be approved by the Cabinet, with Parliament
able to question government ministers on issues addressed in the agreement.
Other Trade Issues
While the TPP negotiations are the main focus at present, other issues also affect trade relations
between Malaysia and the United States. The United States has had concerns about Malaysia’s
IPR protection and would like greater market access for U.S. exports. USTR placed Malaysia on
its Special 301 Watch List in 2000 for allegedly inadequate IPR protection, but removed it in
2011. In addition, according to USTR, Malaysia’s tariffs and other restrictions on the import of
automobiles, automobile parts, and agricultural goods (e.g., regulations on halal food) exceed
international norms and restrict U.S. trade with Malaysia. Finally, Malaysia maintains limits on
foreign ownership in certain sectors (for example, architectural, engineering, and financial
services), as well as licensing and registration restrictions that block greater access for U.S.
companies and individuals.12
Malaysia will assume the chair of ASEAN in 2015, during which the 10 ASEAN members are to
finalize their ASEAN Economic Community (AEC) agreement and the 16 nations negotiating the
10 “Malaysia Flags Major TPP Outstanding Issues, Says U.S. Needs TPA to Close,” Inside U.S. Trade, February 28,
2014.
11 “45 State Attorneys General Call for Tobacco Carve Out in the TPP”, Action on Smoking & Health website, January
28, 2014, http://ash.org/45-state-attorneys-general-call-for-tobacco-carve-out-in-the-tpp.
12 “2014 National Trade Estimate Report on Foreign Trade Barriers,” Office of the United States Trade Representative,
Washington, DC, March 2014.
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Regional Comprehensive Economic Partnership (RCEP) are supposed to conclude their talks.
RCEP is a proposed regional trade agreement among the 10 ASEAN members (Brunei, Burma,
Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, and Vietnam), plus
Australia, China, India, Japan, New Zealand, and South Korea—similar to the proposed TPP.
RCEP negotiations are in their initial stages, but the 16 nations involved have set a goal of
concluding the agreement by 2015. Some observers perceive RCEP as a competitor to the TPP,
and worry that Malaysia and other nations that are a party to both talks will shift their focus to
RCEP if the TPP talks stall. USTR has stated that it sees the two trade agreements as
complementary and that the United States is not interested in joining the RCEP negotiations at
this time.
Domestic Politics
Malaysia has enjoyed a high degree of political stability since it gained independence in 1957.
Political coalitions led by the United Malays National Organization (UMNO), the country’s
dominant political party, have ruled Malaysia without interruption since independence. The
present coalition is known as Barisan Nasional (BN, or National Front). Each of Malaysia’s seven
Prime Ministers has been a member of UMNO, a Malay-nationalist party that draws its
membership from the country’s Malay majority. The head of state is technically the monarch of
Malaysia, the Yang di-Pertuan Agong, a position that rotates among the sultans of nine Malay
states every five years. The monarch’s powers are largely ceremonial.
UMNO’s position at the center of the ruling coalition reflects the importance of ethnicity, and to a
lesser degree religion, in Malaysian politics. In the 1970s, in an effort to reduce tensions between
the nation’s Muslim Malay majority and minority groups (primarily Chinese and Indian), UMNO
leaders implemented the NEP. At the same time, UMNO recruited smaller parties that represented
the country’s Chinese and Indian communities into the ruling coalition. In the decades since, the
question of the NEP’s bumiputra preferences, and more broadly of ethnic identity, has become
one of the defining issues in Malaysian politics.
Over the past two national elections, in 2008 and then 2013, Malaysian politics has become
increasingly competitive. The BN coalition failed to win two-thirds of the Parliament’s seats in
these elections, for the first time. Minority voters in particular shifted their support to opposition
parties because of disillusionment with corruption and with the persistence of what many
minorities consider to be discriminatory pro-Malay affirmative action policies. The primary
opposition coalition is known as the Pakatan Rakyat (PR, or People’s Alliance) and consists of
three major parties: the Democratic Action Party (DAP), the Parti Keadilan Rakyat (PKR, or
Keadilan), and the Parti Islam se-Malaysia (PAS). PR is a loose coalition that represents
dramatically different constituencies and policy agendas. The poor fortunes of the ruling
coalition’s minority-based parties have raised concerns among some Malaysian observers about
the potential for growing ethnic polarization in the country.13
In May 2013, the BN won nationwide parliamentary elections, but the results were controversial.
The BN won only 47% of the popular vote compared with 51% for the opposition coalition, but
won 133 out of Parliament’s 222 seats—over 60% of the Parliament. Opposition parties alleged
that widespread electoral fraud contributed to the BN’s victory, and a series of public protests
13 Huihui Ooi, “What’s Next, Malaysia?” Atlantic Council, The New Atlanticist blog, May 16, 2013,
http://www.atlanticcouncil.org/blogs/new-atlanticist/whats-next-malaysia.
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ensued, drawing tens of thousands of people to several protests in Kuala Lumpur. Some political
observers believe the ruling coalition’s performance in the elections has weakened Prime Minister
Najib’s political position, and therefore Najib may take a cautious stance on controversial
economic reforms and foreign policy initiatives, such as the TPP.14
Malaysia’s political landscape is marked by several obstacles to achieving a more robust
democracy. Uneven election districting has long elevated the importance of rural electoral
districts, and Malaysian election laws require that the states of East Malaysia also retain
disproportionate numbers of parliamentary seats—both of which work to UMNO’s advantage, as
many of these districts are UMNO strongholds. Opposition leaders frequently face government
harassment and legal action that many allege is intended to be defamatory.15
The position of opposition leader Anwar Ibrahim is of particular sensitivity in Malaysia, and in
U.S.-Malaysia relations. From 1993 to 1998, Anwar was the country’s Deputy Prime Minister, a
UMNO member who was widely considered the heir apparent to longtime Prime Minister
Mahathir. After a public break with Mahathir in 1998, Anwar was arrested and accused of
sodomy, a crime under Malaysian law. In response to the accusations and evidence of abuse in
detention, in October 1998 the U.S. Senate passed S.Res. 294, which called on the Malaysian
government to hold a fair trial for Anwar and to preserve the right to express political views
freely. U.S. government officials and many international groups criticized the subsequent trial as
politically motivated, but Anwar was convicted in 1999 and remained in prison until 2004, when
Malaysia’s Supreme Court overturned the conviction. He subsequently became the most
prominent figure in the country’s political opposition. In 2008, Anwar was arrested again for a
separate sodomy charge. He was acquitted of the charge in 2012, but, in March 2014 Malaysia’s
highest appeal court overturned the acquittal and reinstated the charge, sentencing him to five
years in prison and potentially costing him the chance to stand in an important state election.
International human rights groups long have criticized other aspects of Malaysia’s human rights
record. The State Department’s 2013 Country Report on Human Rights Practices reported, “The
most significant human rights problems included obstacles preventing opposition parties from
competing on equal terms with the ruling coalition; restrictions on freedoms of speech, assembly,
association, and religion; and restrictions on freedom of the press, including media bias, book
banning, censorship, and the denial of printing permits.”16 The State Department gave Malaysia a
poor rating (Tier 2 Watch List) in the 2013 Trafficking in Persons report, which noted that the
country is home to more than 2 million undocumented foreign laborers.17
The Najib government has taken some incremental steps to reduce restrictions on freedom of
expression. In September 2011, Najib announced that Malaysia’s longstanding Internal Security
Act (ISA) would be repealed. Seven months later, in April 2012, Parliament passed a new law
called the Security Offenses (Special Measures) 2012 Act (SOSMA), which relaxed some of the
ISA’s provisions, stating that “no person shall be arrested or detained … solely for his political
belief or political activity” and limiting the period individuals can be detained by police without
formal charge. However, SOSMA toughened other provisions; for example, allowing police to
14 Jeremy Grant, “Knives out for Malaysia PM Najib Razak,” Financial Times, February 5, 2014.
15 “Malaysia: Anwar Ibrahim Decision ‘A Bleak Day for Justice’,” Amnesty International, March 7, 2014.
16 2013 Country Report on Human Rights Practices: Malaysia, U.S. Department of State, Washington, DC, February
27, 2014, http://www.state.gov/j/drl/rls/hrrpt/2013/eap/220209.htm.
17 Trafficking in Persons Report 2013, U.S. Department of State, Washington, DC, June 19, 2013.
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intercept communications without judicial approval. Human rights groups have criticized the new
measures as still overly restrictive.18
Malaysia’s Diplomacy and Regional Relations
Malaysia harbors a strong self-image as one of Southeast Asia’s regional leaders, and as a
moderate, Muslim-majority state that can be a political and economic model for others in the
Islamic world. It also has been a mediator in seeking to resolve some regional conflicts, most
prominently peace talks between the Philippine government and a separatist group in the southern
Philippines.
Malaysia was one of the six founding members of ASEAN, Southeast Asia’s primary multilateral
forum, and it has been a steady proponent of the consensus-based model for regional
coordination. Kuala Lumpur was chosen to chair ASEAN in 2015, the year the body hopes to
complete the proposed ASEAN Economic Community agreement to strengthen trade and
investment bonds. Malaysia is active in many ASEAN initiatives, including the ASEAN Defense
Ministers Meeting-Plus (ADMM+), where it worked with Australia as co-chairs of a multilateral
maritime security exercise in September 2013.
Among other important issues for Malaysia in its relations with neighboring countries are
managing relations with Singapore, with which Malaysia has a deep economic interdependency;
dealing with the sometimes-violent separatist movement active in southern Thailand, along
Thailand’s borders with Malaysia; combatting piracy in the Straits of Malacca along with
Indonesia and Singapore; repelling Philippine armed groups that claim parts of Malaysian
territory in Sabah; and managing immigration and migrant labor communities from Indonesia,
Burma, and other neighbors.
South China Sea Maritime Disputes
Malaysia is one of four Southeast Asian nations with maritime territorial disputes with China (the
others are Brunei, the Philippines, and Vietnam). It generally has pursued a less forceful
diplomatic approach with China than have the Philippines and Vietnam, and it has sought to have
all parties agree to a Code of Conduct to manage behavior in disputed waters. Negotiations
between ASEAN’s 10 members and China over such a code began in September 2013. Chinese
claims in the South China Sea overlap with the Exclusive Economic Zone (EEZ) to which
Malaysia is entitled under international law, including the U.N. Convention on the Law of the
Sea. Malaysia’s own claims also overlap with territorial claims made by the Philippines, Vietnam,
and Taiwan.
Because Malaysia is farther geographically from China than the Philippines and Vietnam,
incidents at sea between its vessels and vessels from China comparatively are less frequent than
Sino-Philippine or Sino-Vietnam incidents. However, in 2013 and 2014 Chinese naval vessels
operating as far south as James Shoal, about 50 miles north of the Malaysian coast in Borneo,
raised concerns in Malaysia that Chinese territorial assertions in Malaysian-claimed waters may
grow more frequent. Observers note that Malaysian economic interests in the South China Sea—
18 See Human Rights Watch, Smoke and Mirrors: Malaysia’s “New” Internal Security Act. June 19, 2012.
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particularly in oil and gas development—are considerable. Chinese maritime law enforcement
vessels reportedly have interfered with the operation of vessels operated or contracted by
Malaysia’s state energy company Petronas.19
Over the past decade, Malaysia regularly has sought to foster more cooperation among Southeast
Asian claimants in efforts to resolve their own disputes and to bolster their claims in disputes with
China. For example, in 2007 Malaysia joined Vietnam in submitting a joint extended continental
shelf claim to the U.N. Commission on the Limits of the Continental Shelf—a submission that
China formally protested. Malaysia’s maritime territorial dispute with Brunei was resolved when
the two countries signed a boundary agreement in April 2009, facilitated by a subsequent
agreement between Petronas and the Brunei government to develop energy blocks off Borneo
Island. Some observers describe the agreement as a potential model for utilizing joint
development as a means to resolve territorial disputes.20
Security Cooperation
The Malaysian military participates in a variety of cooperative security activities on a bilateral
and multilateral basis with partners from Southeast Asia and outside the region. Malaysia is a
member of the Five-Power Defense Arrangement (FPDA), an agreement between Malaysia,
Australia, New Zealand, Singapore, and the United Kingdom to coordinate for mutual defense.
The Malaysian and Singaporean militaries cooperate very closely. Malaysia periodically conducts
bilateral military exercises with its larger neighbors, China and India. Through the ASEAN-led
security groupings—the ASEAN Regional Forum (ARF), the ASEAN Defense Ministers’
Meeting (ADMM), and the ADDM Plus—Malaysia has participated actively in regional security
dialogues and cooperative activities. As an example of the potential for conflict avoidance
mechanisms in the region, in 2013 Malaysia and Vietnam agreed to establish a “direct
connection” communication link between a Malaysian naval base and Vietnam’s Southern
Command.21 In the Straits of Malacca, the Malaysian military and maritime law enforcement
work closely with counterparts from Singapore and Indonesia on anti-piracy measures that have
considerably lessened the incidence of piracy in the heavily traveled waters over the past decade.
Conflict Mediation and Promotion of Moderate Islam
Malaysia promotes itself as a leading voice for moderate Muslim countries; Kuala Lumpur
maintains good relations with the United States and other Western countries while speaking out
for Islamic causes, such as the status of the Palestinians. Malaysia is an active participant in the
Organization of Islamic Conferences (OIC), and even has launched its own initiative, the Global
Movement of Moderates (GMM), to diminish extremist voices and improve the public image of
Muslims worldwide.
Within Southeast Asia, Malaysia has played an active role as a mediator in conflicts between
rebel Muslim groups and the central government in both Thailand and in the Philippines.
Malaysia helped to broker a 2014 peace agreement between Manila and the Moro Islamic
19 Carlyle A. Thayer, “Can ASEAN Rise to the Chinese Challenge?” Yale Global Online. March 18, 2014.
20 See, for instance, Clive Schofield, “Maritime Energy Resources in Asia: Legal Regimes and Cooperation,” National
Bureau of Asian Research, February 2012.
21 “Malaysia boosts its regional defense cooperation,” United Press International, November 1, 2013.
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Liberation Front (MILF), a group that seeks more autonomy for the Muslim minority in the
southern Philippines.
The Mysterious Disappearance of Flight MH370: What Did We Learn?
In the early morning hours of March 8, 2014, Malaysia Airlines Flight MH370, flying from Kuala Lumpur to Beijing,
ceased normal communication with air traffic control ers and deviated from its course. The path of the missing
aircraft was uncertain for more than a week after its disappearance. Eventually, data from military radar in the area
and from satellites operated by the British company Inmarsat determined the flight’s likely trajectory: the aircraft
appeared to have veered west over the Malay Peninsula and then flew south over the Indian Ocean. Malaysian
authorities announced on March 24 that the flight “ended in the southern Indian Ocean;” the crew and 239
passengers presumably died.22 As of mid-April 2014, there was no clear cause for the diversion of Flight MH370 and
its presumed crash into the ocean.
In the international and Malaysian reporting on the plane’s disappearance, several narratives emerged that attempt to
draw broader conclusions from this incident. Critics of the Najib government argue that the Malaysian authorities
performed poorly in this crisis and displayed an endemic inefficiency, poor coordination, paternalism, and
incompetence.23 Defenders of the government’s performance point out that the case of Flight MH370 was uniquely
complex and that few governments have the capacity for handling such an incident.24
The need for international cooperation in locating the missing aircraft showcased both the strengths and weaknesses
of cooperative efforts in the Asia-Pacific region. On one hand, observers (in China, especially) criticized the Malaysian
government for being too slow to share information and for being unwilling to reveal data from military sources.25
The ad hoc response from the international community showed the limits of existing international organizations to
handle such an incident. On the other hand, many countries contributed military and civilian resources to locating the
plane and coordinated their search efforts.26
The United States assisted Malaysia in several aspects of the response. FBI agents aided in the investigations of
passengers and crew in Malaysia. Officials from the National Transportation Safety Board (NTSB), along with technical
advisers from Boeing and the Federal Aviation Administration (FAA), helped to determine the trajectory of Flight
MH370. The U.S. military mobilized a number of ships and aircraft, including highly specialized equipment, to search
for the downed plane at a cost of at least $7.3 million through mid-April 2014.27 A senior U.S. official praised the
Malaysian government for its efforts and asserted that the cooperative effort to investigate the plane’s disappearance
could help to build bilateral ties.28
U.S.-Malaysia Security Relations
In a 2002 speech in Washington, DC, then-Defense Minister Najib Razak called the cooperative
U.S.-Malaysia defense relationship “an all too well-kept secret.”29 Despite discord at the political
leadership level, the United States and Malaysia have maintained a steady level of defense
cooperation since the 1990s, and several aspects of that cooperation improved in the 2010s as the
22 “Transcript of Malaysian Prime Minister Najib Razak’s statement on flight MH370,” Associated Press, March 24,
2014.
23 Hui Mei Liew Kaiser, “Tall Stories,” Foreign Policy, March 25, 2014.
24 “Tough for Malaysia if foreign govts slow to react or not forthcoming with info,” Star (Malaysia), March 20, 2014
25 Gordon Lubold, “The Fear of Sharing and the Search for Flight 370,” Foreign Policy, March 30, 2014.
26 Santha Oorjitham, “Missing MH370: Unprecedented level of cooperation,” Star (Malaysia), March 21, 2014.
27 For more information on U.S. military participation in the search for flight MH370, see the U.S. Defense Department
website, “Navy Assists Search for Malaysian Airliner,” http://www.defense.gov/home/features/2014/0314_flight370.
28 Yoichi Kato, “INTERVIEW/ Evan Medeiros: China’s attempt to isolate Japan worsens bilateral relations,” Asahi
Shimbun, April 6, 2014.
29 Najib bin Abdul Razak, “U.S.-Malaysia Defense Cooperation: A Solid Success Story,” remarks as prepared for
delivery at the Heritage Foundation, Washington, DC, May 3, 2002.
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overall relationship warmed. The Obama Administration’s strategic rebalancing to the Asia-
Pacific region has put more emphasis on bolstering security ties with Malaysia and other so-
called “emerging partners.”
During the 2000s, a major focus of U.S.-Malaysia security cooperation was counter-terrorism
activities aimed at terrorist networks operating in Southeast Asia.30 Malaysia itself has not been a
base for major terrorist or insurgent groups, but it played a central role as a moderate Muslim
voice against terrorism and as a capacity-building partner, establishing the Southeast Asia
Regional Centre for Counter-Terrorism in 2003. Based on a 2002 bilateral Memorandum of
Understanding on counter-terrorism, the law enforcement and intelligence communities of the
United States and Malaysia also have enhanced their cooperation in areas such as tracking
financial flows. In FY2013 and FY2014, the United States provided Malaysia with $2 million in
assistance through the International Narcotics Control and Law Enforcement (INCLE) program
and the Nonproliferation, Anti-Terrorist, Demining and Related Programs (NADR).
The U.S. and Malaysian defense establishments have built solid ties through frequent military
exercises, combined training, ship visits, and military education exchanges. Every year, dozens of
Malaysian officers study at U.S. professional military education institutions through International
Military Education and Training (IMET) programs. The United States and Malaysia jointly fund
these exchanges to build interpersonal connections and to improve the professionalism of the
Malaysian military. In 2013, the U.S. and Malaysian militaries conducted over 75 cooperative
activities, highlighted by jungle warfare training at a Malaysian facility, bilateral exercises like
Kris Strike, and multilateral exercises like Cobra Gold, which is held in Thailand and involves
thousands of personnel from several Asian countries plus the United States. Since 2010, Malaysia
has participated in the biennial “Rim of the Pacific” (RIMPAC) multilateral naval exercises held
near Hawaii. U.S. military vessels dock at ports in Malaysia for re-supply, for maintenance, and
to allow U.S. servicemembers to build ties with their Malaysian counterparts.
As the number of U.S. ship visits to Malaysia rose from single digits in the early 2000s, to 10s of
visits in the late 2000s, and then to more than 30 visits in 2011, the U.S. Navy began to
investigate the suspicious port-hosting contracts of a Malaysian businessman, Leonard Glenn
Francis. In 2013, the Navy concluded that Francis’s company, Glenn Defense Marine Asia (Glenn
Marine), had bribed high-ranking American officers and bilked the Navy out of tens of millions
of dollars.31 The Glenn Marine scandal led to the investigation of two admirals and a Navy-wide
review of similar supply contracts around the world.
U.S.-Malaysia security cooperation extends around the world, to include peacekeeping, counter-
piracy, and reconstruction operations. As mentioned above, from 2010 until 2013 Malaysia
deployed a contingent of 40 military medical personnel to Afghanistan, where they made
contributions to public health (especially women’s health) and clean water access. The U.S. and
Malaysian navies cooperate to combat piracy near the Malacca Strait and, as part of the
international counter-piracy coalition, off the Horn of Africa. Malaysia is a large contributor to
U.N. peacekeeping operations, and has roughly 900 personnel serving in several missions, as of
April 2014. In December 2013, Malaysia became the first country to complete the peacekeeping
30 For more information, see CRS Report RL34194, Terrorism in Southeast Asia, coordinated by Bruce Vaughn.
31 Christopher Drew and Danielle Ivory, “Navy Was Warned of Contractor at Center of Bribery Inquiry,” New York
Times, November 20, 2013.
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training program run by the U.S. State Department’s Office of the Global Peace Operations
Initiative.
Malaysia has purchased high-technology U.S. weapons systems in the past, notably the F/A-18D
Hornet strike fighter aircraft, but its recent major defense purchases mostly have been of
European equipment. The most modern Malaysian fighter aircraft is the Russian Su-30MKM
Flanker, and the French “Scorpene” design won the contract for Malaysia’s only two submarines.
The Malaysian defense budget for FY2013 was $4.72 billion. Reportedly, U.S. defense firms are
interested in establishing close partnerships with their Malaysian counterparts to cooperate in
military procurement.32
Outlook
Many observers believe that, in the near term, bilateral U.S.-Malaysia relations may benefit from
the same factors that have produced warmer ties in recent years: Prime Minister Najib’s relatively
pro-American alignment and the Obama Administration’s rebalancing strategy. President
Obama’s April 2014 visit to Malaysia could boost the relationship somewhat, although
expectations are low for tangible policy outcomes. The main policy challenge for Washington and
Kuala Lumpur in the immediate future will be the TPP negotiations. The result of the negotiations
and the domestic process of ratification, in which Congress would play a key role, will be a major
factor in defining the overall state of U.S.-Malaysia relations.
The future of domestic politics in Malaysia is difficult to forecast with confidence. The ruling BN
coalition no longer has a stranglehold on political power, but the opposition coalition PR has been
unable to gain a parliamentary majority in the last two national elections. The distribution of seats
in favor of rural constituencies and the deference of the mainstream press to government
narratives will continue to favor the UMNO-led coalition. On the other hand, dissatisfaction with
government inefficiency and corruption could give the opposition enough popular support to
capture a majority in the next elections, which must be held by 2018. The government’s treatment
of Anwar Ibrahim runs the risk that it could engender more sympathy for the opposition leader
and could backfire on UMNO in the long run.
Many observers believe the NEP’s set of ethnic preferences also will be a key issue for Malaysia
in the years ahead. Although the NEP has been given some credit in addressing Malaysia’s
income disparities and maintaining peaceful relations among ethnic groups, it also has fostered
resentment among Malaysia’s Chinese and Indian minorities. The NEP policies favoring
bumiputra-owned domestic companies in government hindered earlier FTA negotiations with the
United States. However, many analysts see the NEP as a bedrock of the Malaysian political
economy and believe that any move strongly to scale back preferences for bumiputra would face
deep opposition from many members of the Malay ethnic majority.
Prime Minister Mahathir long promoted a “Vision 2020,” which sought to make Malaysia into a
developed country by that year, and the 2020 goal has been taken up by subsequent UMNO-led
governments. Although Malaysia’s GDP has grown steadily in the last decade, rebounding
quickly from the 2008-2009 global financial crisis, several challenges remain. Within Southeast
32 Andrew Shapiro, “U.S.-Malaysia Partnership,” remarks as prepared for delivery at Malaysia Armed Forces Defense
College, Kuala Lumpur, Malaysia, February 15, 2012.
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Asia and worldwide, Malaysia faces stiff competition from other low-wage countries attempting
to promote their manufacturing sectors and grow exports. Some observers argue that the quality
of the education system is not sufficient for development of a high-technology economy. Many of
Malaysia’s top students go abroad for higher education, or find work overseas after graduation, a
phenomenon known as “brain drain.” At the same time, the TPP and RCEP trade agreements
could be an opportunity to grow the Malaysian economy through expanded trade.
Many of Malaysia’s challenges in the years ahead will mirror those of other Southeast Asian
nations. Like others in ASEAN, Malaysia continually seeks to balance the involvement of the
United States, China, Japan, India, and others in regional affairs, while maintaining its own
independence and that of ASEAN broadly. Malaysia competes with other Southeast Asian nations
as an exporter and as a destination for foreign investment, but Southeast Asia as a region also
competes with other parts of the world. Southeast Asian nations must decide how deeply to
proceed with economic integration aimed at promoting a broader regional trading and investment
hub. As ASEAN’s chair in 2015, the organization’s target year for completing an ASEAN
Economic Community, Malaysia will face challenges in balancing the region’s trade and
investment agendas, while also providing leadership on regional security issues such as lowering
tensions in the South China Sea.
Author Contact Information
Ian E. Rinehart
Analyst in Asian Affairs
irinehart@crs.loc.gov, 7-0345
Acknowledgments
Portions of this report were written by the following people:
Ben Dolven, Specialist in Asian Affairs, 7-7626, bdolven@crs.loc.gov
Michael F. Martin, Specialist in Asian Affairs, 7-2199, mfmartin@crs.loc.gov
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