A sample of xenotime, a main ore mineral containing rare earth elements, is displayed at the Natural History Museum in London Britain, June 6, 2025. REUTERS/Isabel Infantes
PETALING JAYA: Malaysia’s strategic push into rare earth elements (REEs) and its decision to maintain a ban on the export of raw materials, has been described as sound in principle, but its success will depend on the country’s ability to deliver on execution.
Last week, Malaysia and the United States inked a memorandum stating the country’s commitment to expedite the development of critical minerals and REE in partnership with US companies.
Under the deal, Malaysia commits to refraining from banning or imposing quotas on exports of REE to the United States, while ensuring no restrictions on the sale of rare earth magnets to US companies.
Rare earth materials are essential for high-tech manufacturing, including electric vehicles, semiconductors and missiles.
The memorandum was signed by Prime Minister Datuk Seri Anwar Ibrahim and US President Donald Trump on the sidelines of the recent 47th Asean Summit and Related Summits.
Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz subsequently clarified that despite signing a critical minerals deal with the United States, Malaysia will maintain a ban on the export of raw rare earths to protect its domestic resources.
He stressed that REEs must be processed locally before export.
KSI Strategic Institute for Asia Pacific (KSI) economic adviser Anthony Dass said the government’s rare earth policy was “sound in principle” but warned that execution, not intent, will determine its success.
“Moving up the value chain instead of exporting raw minerals is the right call,” he told StarBiz.
“But this requires advanced refining technology, strict environmental standards, trained manpower, and huge capital – all of which Malaysia currently lacks in the rare earth segment.”
Without those fundamentals, Dass said the ban on raw export risks becoming an empty gesture rather than a catalyst for adding value.
Malaysia is estimated to have 18.2 million tonnes of non-radioactive rare earth reserves valued at about RM747.2bil, according to CIMB Research.
The research house said the move supports upstream diversification and the New Industrial Master Plan 2030 objectives to expand value-added downstream activities.
Dass noted that while Malaysia’s stance of banning raw exports applies equally to all trading partners, maintaining such “neutrality” between major powers like the United States and China could be economically tricky.
“The reality is that both superpowers want reliable access to rare earths.
“If Malaysia insists on neutrality, it may end up being courted by both or pressured by both.
“Either way, the country must have institutional strength and policy clarity to avoid being squeezed,” he added.
A mining industry expert said Malaysia’s vast reserves can indeed be leveraged, but only if the country addresses significant and interconnected challenges.
“The core issue is not a shortage of rare earths in the ground as they are relatively abundant,” he said.
“The main challenge lies in the processing and separation of these elements, which is a complex and capital-intensive process.
“Unlocking this potential means building new, resilient and sustainable supply chains from start to finish.”
Dass said Malaysia’s policy credibility ultimately hinges on consistency and follow-through.
“We tend to announce bold industrial shifts, but risk back pedaling when political winds change or when execution proves difficult,” he added.
According to Dass, the rare earth policy must be coordinated across ministries, with clarity on what ‘processed’ means and how environmental and safety standards will be enforced.
With the right framework, he believes Malaysia could attract both Western and Asian investors seeking diversified and sustainable rare earth supply chains.
Rare earths have taken centre stage in global trade dynamics, after China, which has long dominated the supply of the critical materials, tightened export controls and their processing technology.
However, following talks with the United States, China announced on Oct 30 that it would suspend for one year its newly introduced export controls on rare earth materials.
The temporary pause aims to “study and refine specific plans”, signalling a cautious approach amid concerns from major economies seeking secure and diversified supply chains.
