Updated May 22, 2019
Malaysia
Overview
UMNO member until 2016, when he left to form a new
The Federation of Malaysia is a majority Muslim
party, Bersatu.
parliamentary democracy in Southeast Asia. It has an
ethnically and religiously diverse population of 31.8
The 2018 election led to a peaceful and democratic change
million, with a Malay majority and large ethnic Chinese and
of government in a region where many analysts have
Indian minorities. Malaysia is considered a middle-income
perceived a decline in democratic institutions in recent
country, relatively prosperous among Southeast Asian
years. Despite uneven electoral representation favoring
nations.
Malay-dominated districts and strong government influence
over media outlets, Mahathir’s coalition won 122 seats in
Malaysian politics underwent substantial change in 2018,
Malaysia’s 222-seat parliament. Polling suggested that
when an opposition coalition known as Pakatan Harapan
Malaysian voters were deeply concerned with corruption
(Alliance of Hope), led by former Prime Minister Mahathir
under the government of Prime Minister Najib Razak, who
Mohamad, defeated the ruling Barisan Nasional coalition in
has since been indicted for money laundering related to his
nationwide elections. It was the first change of government
chairmanship of 1MDB, a sovereign wealth fund.
in Malaysia’s history. Mahathir, who had been Prime
Minister from 1981-2003 under the ruling coalition before
later forming an opposition party, ran a campaign
promising to fight the corruption of the previous
government. Many heralded the peaceful transfer of power
as a sign of democratic development in a country long seen
as an authoritarian democracy.
Malaysia plays an active role in regional diplomacy, and it
has been a partner in various U.S. initiatives in Asia,
including trade and security initiatives as well as efforts to
combat terrorism and religious extremism. It is one of four
Southeast Asian nations that have territorial disputes with
China in the South China Sea, and its export-led economy
has encouraged it to undertake trade negotiations with the
United States and others. Malaysia was a member of the
Trans-Pacific Partnership (TPP), from which the United
States withdrew in 2017, and it is one of 11 members of the

renamed Comprehensive and Progressive Agreement for
Source: CIA World Factbook.
Trans-Pacific Partnership (CPTPP).
More than one year into Mahathir’s government, numerous
Malaysia was an original member of the Association of
questions remain about Malaysia’s political trajectory. The
Southeast Asian Nations (ASEAN), and it sees itself as both
sometimes fractious coalition consists of four highly
a regional leader and a moderate voice within the Islamic
diverse parties and includes both former members of
world. Despite generally cooperative bilateral relations with
UMNO and longtime opposition politicians. One of the
the United States, some issues remain obstacles to closer
partners is Parti Keadilan, led by Anwar Ibrahim, a former
ties, including Malaysian opposition to much U.S. policy in
UMNO leader and Deputy Prime Minister who broke with
the Middle East, and U.S. concerns over some Malaysian
then Prime Minister Mahathir in the 1990s and was twice
economic and human-rights policies.
convicted and jailed for sodomy and corruption. Many
observers considered those charges to be motivated by
Democracy and Politics in Malaysia
Mahathir’s desire to sideline a popular critic of his
Until May 2018, Malaysia had been ruled by a single
government. Mahathir has said Anwar will succeed him in
political coalition since its independence from the United
the current government (Anwar’s wife, Wan Azizah Wan
Kingdom in 1957. The Barisan Nasional was led by the
Ismail, is now Mahathir’s deputy prime minister), but he
United Malays Nasional Organization (UMNO), a Malay-
has indicated no timetable for such a transition. Some
nationalist party that draws its membership predominantly
Malaysian political analysts express concerns that the pace
from the country’s Malay majority. UMNO enacted a series
of political and economic reform under the new government
of economic and social preferences for bumiputera (ethnic
has been slow, and the government has rekindled some
Malays and indigenous peoples), and it derived much of its
long-standing disputes with neighboring Singapore.
appeal from issues of ethnic identity. Mahathir was an
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Malaysia
U.S.-Malaysia Relations
which the United States withdrew in 2017. The United
The relationship between the United States and Malaysia is
States’ main trade-related concerns are Malaysia’s
a complex one. Bilateral ties deepened following the
government procurement policies, protection of intellectual
Obama Administration’s strategic “rebalancing” to Asia,
property rights, and market access for key goods and
and the relationship was elevated to a “Comprehensive
services.
Partnership” in 2014. More recent political developments in
both countries have led to uncertainties about the future. In
Malaysia’s economy is divided along regional and ethnic
the 1980s and 1990s, under Mahathir, Malaysia was one of
lines; a wide-ranging economic program known as the New
the leading voices behind building the East Asia Economic
Economic Policy (NEP) attempts to address socioeconomic
Caucus, and “Asia-only” regional institutions that excluded
disparities by privileging ethnic Malays and other
the United States. Since then, Malaysia has generally
indigenous groups (collectively known as bumiputra) in
welcomed a broader U.S. role in the region, but Mahathir
government contracts, education, and government hiring.
has recently made several statements critical of U.S. naval
operations in the South China Sea.
Malaysia’s External Relations
Malaysia pursues active diplomacy on numerous regional
Many argue that broad sensitivities in Malaysia constrain
and global issues. Efforts to promote moderate Islam and
the establishment of a deeper strategic relationship. Areas
marginalize religious extremism have been a major part of
of friction in U.S.-Malaysia ties have included U.S.
Malaysian diplomacy, including acting as a mediator in
concerns about human rights, as well as Malaysia’s
conflicts between Muslim separatist groups and the central
opposition to U.S. military interventions in the Middle East
government in both the Philippines and Thailand. Malaysia
and U.S. support for Israel. The United States has criticized
has good relations with its neighbors, and has promoted
the Malaysian government for weak human rights
cooperation among the 10 ASEAN countries. Issues
protections, constraints on press freedom, economic
Malaysia prioritizes include managing relations with
policies based on ethnic preferences, and prosecution of
Singapore, with which Malaysia has deep economic
opposition political leaders like Anwar Ibrahim.
interdependency; combatting piracy in the Straits of
Malacca along with Indonesia and Singapore; repelling
U.S.-Malaysia security cooperation includes numerous
Philippine armed groups that claim parts of Malaysian
military exercises, ship visits, and military education
territory; and managing immigration and migrant labor
exchanges. One major focus of U.S.-Malaysia security
communities from Burma, Indonesia, and other neighbors.
cooperation is counterterrorism activities aimed at terrorist
networks operating in Southeast Asia. Reportedly, the U.S
Malaysia has assumed a relatively low profile in ASEAN’s
Navy has operated P-8A Poseidon maritime patrol aircraft
disputes with China over tensions in the South China Sea,
from bases in Malaysia, as the two countries explore ways
pursuing a less confrontational diplomatic approach than
to bolster maritime security cooperation in the South China
have the Philippines and Vietnam. Malaysia prioritizes the
Sea. The U.S. and Malaysian navies cooperate to combat
negotiation of a Code of Conduct between ASEAN and
piracy near the Malacca Strait and off the Horn of Africa.
China to govern behavior in disputed waters.
Relations were complicated in July 2016, when the U.S.
China-Malaysia Relations
Department of Justice announced its intention to seize more
Malaysia has long adopted careful hedging strategies to
than $1 billion in allegedly misappropriated assets from
balance its relations with China and the United States.
Malaysian sovereign wealth fund 1MDB. Former Prime
Under Mahathir, Malaysia has been publicly skeptical of
Minister Najib was chair of the 1MDB Advisory Board, and
the term of Chinese foreign investment under Beijing’s Belt
investigators say nearly $700 million of the fund’s capital
and Road Initiative (BRI). During the 2018 election
was routed into banks linked to the former Prime Minister.
campaign, Mahathir criticized his predecessor’s moves to
court Chinese investment, and promised to review the terms
Malaysia’s Economy
of Chinese investments in Malaysia. He was quoted ahead
Malaysia is the United States’ 18th largest trading partner,
of the election saying: “Some countries see only the project
with $52 billion in two-way trade in 2018. The United
and not the payment part of it. That’s how they lost chunks
States ran a $26.5 billion trade deficit with Malaysia that
of their country. We don’t want that.”
year, the U.S.’s eighth-largest bilateral deficit. Electrical
machinery and equipment dominate bilateral trade flows in
That said, some Chinese investments, including port
both directions, reflecting Malaysia’s role as a major site
modernization projects, an East Coast Rail Link, and
for consumer electronics manufacturing. Malaysia is an
employment-generating manufacturing investments, still
important part of regional consumer electronics supply
align with Mahathir’s own goals, which have included
chains, manufacturing parts and components that are
making Malaysia into a developed nation by 2020.
exported and assembled elsewhere. It is also a major
Malaysia announced in April 2019 that it would go ahead
producer of oil and natural gas—some of its reserves are
with a renegotiated East Coast Rail Link that reportedly
located in the South China Sea.
will cost one-third less than first planned.
The United States and Malaysia undertook free trade
Ben Dolven, Specialist in Asian Affairs
agreement negotiations from 2005-2008, but did not
Bruce Vaughn, Specialist in Asian Affairs
conclude an agreement. Those talks were later folded into
the TPP negotiations, which resulted in an agreement from
IF10316
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Malaysia


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https://crsreports.congress.gov | IF10316 · VERSION 3 · UPDATED

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