Updated July 21, 2022
Malaysia
Overview
period in power, UMNO enacted a series of economic and
The Federation of Malaysia is a majority Muslim
social preferences for bumiputera (ethnic Malays and
parliamentary democracy in Southeast Asia. It has an
indigenous peoples), and it derived much of its appeal from
ethnically and religiously diverse population of 32.7
issues of ethnic identity.
million, with a Malay majority and large ethnic Chinese and
Indian minorities. Malaysia is considered a middle-income
Figure 1. Malaysia in Brief
country and is relatively prosperous among Southeast Asian
nations.
Malaysia has undergone significant political upheaval in
recent years, as three separate coalition governments have
held power since the last national election in 2018. In a
country that had been led by a single political coalition
since independence in 1957, the period of instability has
raised questions about the strength of Malaysia’s political
institutions and about Malaysian democracy, as two of the
ruling coalitions were formed without elections. The current
government is headed by Prime Minister Ismail Sabri
Yaakob, who came to power in August 2021 following the
collapse of the previous government. The next general
election is due in 2023, although some observers believe the
government will go to the polls early in an attempt to
consolidate its legitimacy through elections.

Many observers heralded the 2018 election as a peaceful
and democratic change of government in a country long
Despite its chaotic political processes, Malaysia plays an
seen as an authoritarian democracy, even though the elected
active role in regional diplomacy, and it has been a partner
Pakatan Heripan coalition was led by Mahathir Mohamad,
in various U.S. initiatives in Asia, including trade and
who was previously Prime Minister and UMNO leader for
security initiatives as well as efforts to combat terrorism
nearly two decades. The elected coalition, however,
and religious extremism. Malaysia was a founding member
collapsed in February 2020, and power transferred to a
of the Association of Southeast Asian Nations (ASEAN),
coalition which included the main Barisan Nasional
and sees itself as both a regional leader and a moderate
components, headed by Prime Minister Muhyiddin Yassin.
voice within the Islamic world. Despite generally
In August that coalition lost its majority in the lower house
cooperative bilateral relations with the United States, some
of parliament, resulting in a transfer of power to another
issues constrain closer ties, including Malaysian opposition
Barisan Nasional coalition headed by Prime Minister
to much of U.S. policy in the Middle East, and U.S.
Ismail, an UMNO vice president.
concerns over some Malaysian economic and human-rights
policies.
U.S.-Malaysia Relations
The relationship between the United States and Malaysia is
Malaysia is one of four Southeast Asian nations that have
complex. In the 1980s and 1990s, under Mahathir, Malaysia
territorial disputes with China in the South China Sea, and
was one of the leading voices behind building the East Asia
its export-led economy has encouraged it to pursue a
Economic Caucus, and “Asia-only” regional institutions
variety of trade negotiations. Malaysia was a member of the
that excluded the United States. Since then, Malaysia has
Trans-Pacific Partnership (TPP), from which the United
generally welcomed a broader U.S. role in the region.
States withdrew in 2017, and it is one of 11 members of the
Bilateral ties deepened following the Obama
renamed Comprehensive and Progressive Agreement for
Administration’s strategic “rebalancing” to Asia, and the
Trans-Pacific Partnership (CPTPP), although it has not yet
relationship was elevated to a “Comprehensive Partnership”
ratified the agreement.
in 2014.
Democracy and Politics in Malaysia
More recent political developments in both countries have
Until May 2018, Malaysia was ruled by a single political
led to uncertainties about the future. Many argue that broad
coalition since its independence from the United Kingdom
sensitivities in Malaysia constrain the establishment of a
in 1957. The Barisan Nasional was led by the United
deeper strategic relationship. Areas of friction in U.S.-
Malays National Organization (UMNO), a Malay-
Malaysia ties have included U.S. concerns about human
nationalist party that draws its membership predominantly
from the country’s Malay majority. During its lengthy
rights, as well as Malaysia’s opposition to U.S. military
interventions in the Middle East and U.S. support for Israel.
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Malaysia
The United States has criticized the Malaysian government
Following the February 1, 2021, coup in Burma, Malaysian
for weak human rights protections, constraints on press
officials have been among Southeast Asia’s most outspoken
freedom, economic policies based on ethnic preferences,
critics of the Burmese military regime, arguing against
and prosecution of opposition political leaders like Anwar
including representatives of the military government in
Ibrahim.
regional meetings, and for engaging members of Burma’s
National Unity Government (NUG) in exile. Approximately
U.S.-Malaysia security cooperation includes numerous
150,000 members of Burma’s Rohingya minority are in
military exercises, ship visits, and military education
Malaysia, although the nation has not signed the 1951 U.N.
exchanges. One major focus of U.S.-Malaysia security
Refugee Convention or the 1967 Protocol Regarding the
cooperation is counterterrorism activities aimed at terrorist
Status of Refugees. Other regional issues Malaysia
networks operating in Southeast Asia. The two countries
prioritizes include managing relations with Singapore, with
have worked together to bolster maritime security
which Malaysia has deep economic interdependency;
cooperation in the South China Sea. The U.S. and
combatting piracy in the Straits of Malacca along with
Malaysian navies cooperate as part of multilateral efforts to
Indonesia and Singapore; repelling Philippine armed groups
combat piracy near the Malacca Strait and off the Horn of
that claim parts of Malaysian territory; and managing
Africa. Malaysia in 2022 sent military forces to participate
immigration and migrant labor communities from Burma,
in the United States’ Rim of the Pacific (RIMPAC)
Indonesia, and other neighbors.
exercise, the world’s largest international maritime
exercise.
China-Malaysia Relations
Malaysia has long adopted careful hedging strategies to
Malaysia’s Economy
balance its relations with China and the United States. It has
Malaysia is the United States’ 17th largest trading partner
assumed a relatively low profile in ASEAN’s quarrels with
and the United States is Malaysia’s third largest trading
China over tensions in the South China Sea, pursuing a less
partner after China and Singapore. Bilateral trade in goods
confrontational diplomatic approach than have the
with the United States was $71.4 billion in 2021. U.S. direct
Philippines and Vietnam despite its own territorial disputes
investment in Malaysia was $13.5 billion in 2020.
with China. Malaysia prioritizes the negotiation of a Code
Electrical machinery and equipment dominate bilateral
of Conduct between ASEAN and China to govern behavior
trade flows in both directions, reflecting Malaysia’s role as
in disputed waters. However, in recent years, Malaysia has
a major site for consumer electronics manufacturing.
grown increasingly alarmed by China’s assertions and
Malaysia is an important part of regional consumer
activity in disputed waters. Since 2019, Chinese vessels
electronics supply chains, manufacturing parts and
have regularly harassed Malaysian energy exploration
components that are exported and assembled elsewhere. It
vessels in Malaysia’s declared Exclusive Economic Zone.
is also a major producer of oil and natural gas—some of its
reserves are located in disputed waters in the South China
Malaysia is part of some Chinese foreign investment
Sea.
projects under Beijing’s Belt and Road Initiative (BRI).
During the 2018 election campaign, Mahathir criticized his
The United States and Malaysia undertook free trade
predecessor’s moves to court Chinese investment, and
agreement negotiations from 2005 to 2008, but did not
promised to review the terms of Chinese investments in
conclude an agreement. Those talks were later folded into
Malaysia. However, Malaysia announced in April 2019 that
the TPP negotiations, which resulted in an agreement from
it would go ahead with a renegotiated East Coast Rail Link
which the United States withdrew in 2017. The United
investment deal that reportedly will cost one-third less than
States’ main trade-related concerns are Malaysia’s
first planned. Some Chinese investments, including port
government procurement policies, protection of intellectual
modernization projects, the East Coast Rail Link, and
property rights, and market access for key goods and
employment-generating manufacturing investments, align
services. Malaysia’s economy is divided along regional and
with Malaysia’s own development goals.
ethnic lines; a wide-ranging economic program known as
the New Economic Policy (NEP) attempts to address
Congressional Interest
socioeconomic disparities by privileging bumiputera in
In the 117th Congress, interest in Malaysia manifests itself
government contracts, education, and government hiring.
through proposed regionally focused legislation such as
H.Res. 1106, S.Res. 616, and S. 2845, which express
Malaysia’s External Relations
support for ASEAN. H.R. 1083 calls for a strategy for
Malaysia pursues active diplomacy on numerous regional
engagement with Southeast Asia and ASEAN. H.R. 3524
and global issues. Efforts to promote moderate Islam and
and S. 1169 would make it U.S. policy to strengthen and
marginalize religious extremism have been a major part of
advance diplomatic, economic, and security cooperation
Malaysian diplomacy, including acting as a mediator in
with regional partners such as Malaysia.
conflicts between Muslim separatist groups and the central
government in both the Philippines and Thailand. Malaysia
Ben Dolven, Specialist in Asian Affairs
is also a member of the Five Power Defence Arrangement
Bruce Vaughn, Specialist in Asian Affairs
with Australia, New Zealand, Singapore, and the United
Kingdom.
IF10316
Malaysia has cordial relations with its neighbors, and has
promoted cooperation among the 10 ASEAN countries.
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Malaysia


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https://crsreports.congress.gov | IF10316 · VERSION 6 · UPDATED

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