Malaysia's Rare Earth Pact With US Powers High-tech Revolution To Move Up The Value Chain

By Samantha Tan

PUTRAJAYA, Nov 2 (Bernama) -- Malaysia’s partnership with the United States in critical minerals unlocks new flows of American investment and technology, as well as the development of downstream rare earth elements (REE) capabilities, from extraction and separation to advanced manufacturing.

Malaysia sits on an estimated 16.2 million tonnes of rare earth deposits that are underutilised.

Rather than exporting unprocessed ore, Malaysia will partner with US companies to develop downstream capabilities from extraction to refinement and the manufacture of high-value products, according to Universiti Malaya's foreign affairs, strategy, and security analyst Collins Chong Yew Keat.

The new US-Malaysia critical minerals pact smartly galvanises an opening for mutual benefit, he noted.

Chong said American firms bringing in capital and technology can invest confidently in Malaysia's mining and processing projects, given the nation’s stable policy environment and strong regulatory mechanisms.

"There are immense advantages for Malaysia in the rare earth cooperation. It positions Malaysia as a key player in the global supply chain for high-tech manufacturing. Rare earth elements are vital to sectors including semiconductors, electric vehicle batteries, wind turbines, and even defence technologies, so it is a much sought-after geopolitical asset," he told Bernama.

Technology and knowledge transfer

Chong argues that the US brings not only the needed technological and knowledge transfer capacity, but most importantly, the values-based mechanisms and structural framework based on the pillars of trust, oversight, standards, and rights compliance. All these are critically needed for the nation's transition from an extractive model and export-based economy to one that is values-based towards its high income ambition. 

This, he stated, also further integrates the US presence in this region in providing the needed economic and security umbrella, while offering continuous access to the world's biggest and most affluent market by far. 

He noted that by fostering local processing and value-added industries, Malaysia could capture a greater share of profits and employment from its mineral wealth instead of merely exporting raw ores.

Leveraging US technical expertise and investment would, he added, enhance Malaysia's industrial growth, create skilled jobs, and open new export streams. 

Trade pact 

Chong noted that the United States has been Malaysia's third-largest trading partner since 2015, with exports worth RM161.3 billion in 2023, the second highest on record, driven largely by electrical and electronics products. 

Under the new trade pact, Washington will maintain a 19 per cent tariff on most Malaysian exports, while Malaysia will cut or eliminate duties on 98.4 per cent of US goods, ensuring stable access to each other's markets.

"Access to the most important, the biggest and richest market in the world of 330 million affluent consumers provides Malaysian businesses with opportunities that no country can match. Securing stable, fair, and resilient trade relations with Washington is therefore vital for Malaysia's economic growth and productivity," he continued.

Chong said American companies have invested more than RM200 billion in Malaysia since 2021, including US$16 billion pledged in 2024 by tech giants such as Google, Microsoft, Amazon, and Oracle to expand data centres and artificial intelligence (AI) infrastructure, with over 600 US firms now operating locally and employing over 312,000 Malaysians.

He said US President Donald Trump's recent visit to Malaysia has also further solidified technological cooperation by removing barriers and opening new avenues for innovation and digital trade.

“By assuring that Malaysia will not impose any new digital services tax that discriminates against US firms, Malaysia welcomes American tech companies as partners in its digital transformation,” he said, adding that this will encourage continued investment from major players such as Google and Microsoft to develop Malaysia's AI and cloud computing sectors.

Chong said both nations are also exploring collaboration in space technology, biotechnology, and advanced manufacturing, areas where Malaysia stands to benefit from American expertise, which aligns perfectly with Malaysia's own development blueprints that priortise moving up the value chain.

-- BERNAMA