Updated June 9, 2020
Malaysia
Overview
from the country’s Malay majority. During its lengthy
The Federation of Malaysia is a majority Muslim
period in power, UMNO enacted a series of economic and
parliamentary democracy in Southeast Asia. It has an
social preferences for bumiputera (ethnic Malays and
ethnically and religiously diverse population of 32.6
indigenous peoples), and it derived much of its appeal from
million, with a Malay majority and large ethnic Chinese and
issues of ethnic identity. Mahathir was an UMNO member
Indian minorities. Malaysia is considered a middle-income
until 2016, when he left to form a new party, Bersatu.
country, relatively prosperous among Southeast Asian
nations.
The subsequent 2018 election led to a peaceful and
democratic change of government in a region where many
Malaysia has undergone significant political upheaval in
analysts have perceived a decline in democratic institutions
2020, as shifts in its ruling coalition deposed Prime
in recent years. Many heralded the peaceful transfer of
Minister Mahathir Mohamad and brought his former party-
power as a sign of democratic development in a country
mate Muhyiddin Yassin into power on March 1, just as the
long seen as an authoritarian democracy. However, some
country’s Coronavirus Disease 2019 (COVID-19) outbreak
analysts argued that the pace of political and economic
was expanding. Mahathir’s ouster through non-electoral
reform under Mahathir’s government was slow. In early
processes raised questions about Malaysia’s democratic
2020, rivalries within two of its three component parties led
system, as the country had undergone its first democratic
to a vote of no confidence in Mahathir and the rise of
change of government less than two years earlier. The
Muhyiddin, a veteran politician who suffered a bout of
ruling coalition now includes two parties that had been
cancer in 2018, on March 1.
defeated in those historic 2018 elections. The new
government’s initial response to the spread of COVID-19
The new coalition’s future remains unclear, as it is
garnered criticism, as Malaysia saw a rapid rise of COVID-
uncertain whether Muhyuddin has a safe parliamentary
19 cases before closing its borders on March 18, 2020. The
majority. On May 18, Malaysia’s parliament held a one-day
spread has since stabilized.
session, declining to vote on an opposition challenge to
Muhyuddin’s government, and recessing due to COVID-19
Despite its chaotic political processes, Malaysia plays an
concerns. The move drew criticism from the opposition, as
active role in regional diplomacy, and it has been a partner
have moves by Malaysia’s Attorney General to drop
in various U.S. initiatives in Asia, including trade and
corruption charges against two prominent UNMO leaders.
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 Trans-
Pacific Partnership (CPTPP), although it has not yet ratified
the agreement.
Malaysia was an original member of the Association of
Southeast Asian Nations (ASEAN), seeing itself as both a
regional leader and a moderate voice within the Islamic
world. Despite generally cooperative bilateral relations with
the United States, some issues block closer ties, including
Malaysian opposition to much of U.S. policy in the Middle

East, and U.S. concerns over some Malaysian economic
Source: CIA World Factbook.
and human-rights policies.
U.S.-Malaysia Relations
Democracy and Politics in Malaysia
The relationship between the United States and Malaysia is
Until May 2018, Malaysia had been ruled by a single
a complex one. Bilateral ties deepened following the
political coalition since its independence from the United
Obama Administration’s strategic “rebalancing” to Asia,
Kingdom in 1957. The Barisan Nasional was led by the
and the relationship was elevated to a “Comprehensive
United Malays National Organization (UMNO), a Malay-
Partnership” in 2014. More recent political developments in
nationalist party that draws its membership predominantly
both countries have led to uncertainties about the future. In
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Malaysia
the 1980s and 1990s, under Mahathir, Malaysia was one of
property rights, and market access for key goods and
the leading voices behind building the East Asia Economic
services. Malaysia’s economy is divided along regional and
Caucus, and “Asia-only” regional institutions that excluded
ethnic lines; a wide-ranging economic program known as
the United States. Since then, Malaysia has generally
the New Economic Policy (NEP) attempts to address
welcomed a broader U.S. role in the region.
socioeconomic disparities by privileging ethnic Malays and
other indigenous groups (collectively known as bumiputra)
Many argue that broad sensitivities in Malaysia constrain
in government contracts, education, and government hiring.
the establishment of a deeper strategic relationship. Areas
of friction in U.S.-Malaysia ties have included U.S.
Malaysia’s External Relations
concerns about human rights, as well as Malaysia’s
Malaysia pursues active diplomacy on numerous regional
opposition to U.S. military interventions in the Middle East
and global issues. Efforts to promote moderate Islam and
and U.S. support for Israel. The United States has criticized
marginalize religious extremism have been a major part of
the Malaysian government for weak human rights
Malaysian diplomacy, including acting as a mediator in
protections, constraints on press freedom, economic
conflicts between Muslim separatist groups and the central
policies based on ethnic preferences, and prosecution of
government in both the Philippines and Thailand.
opposition political leaders like Anwar Ibrahim.
Malaysia has cordial relations with its neighbors, and has
U.S.-Malaysia security cooperation includes numerous
promoted cooperation among the 10 ASEAN countries.
military exercises, ship visits, and military education
Issues Malaysia prioritizes include managing relations with
exchanges. One major focus of U.S.-Malaysia security
Singapore, with which Malaysia has deep economic
cooperation is counterterrorism activities aimed at terrorist
interdependency; combatting piracy in the Straits of
networks operating in Southeast Asia. Reportedly, the U.S
Malacca along with Indonesia and Singapore; repelling
Navy has operated P-8A Poseidon maritime patrol aircraft
Philippine armed groups that claim parts of Malaysian
from bases in Malaysia, as the two countries explore ways
territory; and managing immigration and migrant labor
to bolster maritime security cooperation in the South China
communities from Burma, Indonesia, and other neighbors.
Sea. The U.S. and Malaysian navies cooperate as part of a
multilateral effort to combat piracy near the Malacca Strait
China-Malaysia Relations
and off the Horn of Africa.
Malaysia has long adopted careful hedging strategies to
balance its relations with China and the United States. It has
Relations were complicated in July 2016, when the U.S.
assumed a relatively low profile in ASEAN’s quarrels with
Department of Justice announced its intention to seize more
China over tensions in the South China Sea, pursuing a less
than $1 billion in allegedly misappropriated assets from
confrontational diplomatic approach than have the
Malaysian sovereign wealth fund 1MDB. Former Prime
Philippines and Vietnam despite its own territorial disputes
Minister Najib was chair of the 1MDB Advisory Board, and
with China. Malaysia prioritizes the negotiation of a Code
investigators say nearly $700 million of the fund’s capital
of Conduct between ASEAN and China to govern behavior
was routed into banks linked to the former Prime Minister.
in disputed waters. However, in recent years, Malaysia has
Najib was ousted from power in the 2018 elections and
grown increasingly alarmed by China’s assertions and
faces four charges of abuses of power and 21 charges of
activity in disputed waters. For a six-month period in 2019
money laundering. He remains a Member of Parliament and
and 2020, Chinese vessels harassed Malaysian energy
is once again part of the governing coalition following
exploration vessels in Malaysia’s declared Exclusive
Mahathir’s ouster.
Economic Zone.
Malaysia’s Economy
Under Mahathir, Malaysia was publicly skeptical of the
Malaysia is the United States’ 18th largest trading partner,
terms of Chinese foreign investment under Beijing’s Belt
with $52 billion in two-way trade in 2018. The United
and Road Initiative (BRI). During the 2018 election
States ran a $26.5 billion trade deficit with Malaysia that
campaign, Mahathir criticized his predecessor’s moves to
year, the U.S.’s eighth-largest bilateral deficit. Electrical
court Chinese investment, and promised to review the terms
machinery and equipment dominate bilateral trade flows in
of Chinese investments in Malaysia. Malaysia announced in
both directions, reflecting Malaysia’s role as a major site
April 2019 that it would go ahead with a renegotiated East
for consumer electronics manufacturing. Malaysia is an
Coast Rail Link investment deal that reportedly will cost
important part of regional consumer electronics supply
one-third less than first planned. Muhyuddin’s government,
chains, manufacturing parts and components that are
consumed with political questions and the COVID-19
exported and assembled elsewhere. It is also a major
response, has not signaled its positions toward the BRI.
producer of oil and natural gas—some of its reserves are
However, some Chinese investments, including port
located in disputed waters in the South China Sea.
modernization projects, the East Coast Rail Link, and
employment-generating manufacturing investments, align
The United States and Malaysia undertook free trade
with Malaysia’s own development goals.
agreement negotiations from 2005 to 2008, but did not
conclude an agreement. Those talks were later folded into
Ben Dolven, Specialist in Asian Affairs
the TPP negotiations, which resulted in an agreement from
Bruce Vaughn, Specialist in Asian Affairs
which the United States withdrew in 2017. The United
States’ main trade-related concerns are Malaysia’s
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government procurement policies, protection of intellectual
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Malaysia


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https://crsreports.congress.gov | IF10316 · VERSION 4 · UPDATED

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