An Integrated Indo-Pacific: Insights Into Malaysia-U.S. Relations

Positioned between two Indo-Pacific superpowers in India and China, custodians of one of the world’s most important trade routes, and poised to become an innovation and technological hub, Malaysia occupies a unique position in geopolitics. Given the recent elevation of Malaysia as a partner country in BRCIS and its chairmanship of ASEAN upcoming in 2025, the spotlight will be set upon the nation. With the backdrop of the World Bank/IMF meetings, Meridian hosted Minister Datuk Seri Amir Hamzah Azizan in partnership with The Boeing Company to delve into his efforts to elevate Malaysia in the Indo-Pacific. 

Here are some top takeaways from the program

1. Fiscal Reforms and Economic Growth

The Malaysia Budget 2025, presented as the Third MADANI Budget by Prime Minister YAB Dato' Seri Anwar Bin Ibrahim, outlines a strategic roadmap for the nation's economic growth and reforms. With a record RM421 billion allocation, this new budget aims to tackle critical issues such as inequality, infrastructure development, and public welfare, all while attempting to uphold fiscal responsibility. Economic growth has been supported by strong domestic performance, which highlights the resilience of local sectors. The Malaysian government is counting on this resilience (and help from FDI) to save money by cutting key subsidies in diesel, electricity, and chicken, among others. Amid heightened uncertainty in the region, Malaysia’s budget is expected to create a stable foundation for the country’s economic future; GDP is forecasted to grow between 4.5%-5.5% in 2025.

2. A Leading Neutral Nation

As Malaysia navigates its unique geopolitical position, Prime Minister Anwar Ibrahim continues his strategy to remain independent and non-aligned both economically and geopolitically. While joining the United States as one of the founding 14-member’s of IPEF, Malaysia’s largest trading partner for 15 consecutive years has been China.  During the BRICS Summit in Kazan Russia, Malaysia was elevated to a partner country within the BRICS alliance, along with neighbors Thailand and Indonesia. Malaysia actively maintains an impartial, neutral position regarding rising tensions between Beijing and Washington which allows them to simultaneously enjoy trade benefits with both. As Malaysia assumes the chairmanship of ASEAN in 2025, the mantle of leadership will be on them to set the vision for 10-member state bloc.    

3. Digitalization and Cybersecurity Investment

With a focus on supporting start-ups, fostering AI development, and promoting digital transformation across industries, the Malaysian government has introduced several initiatives to encourage public-private collaboration and investments in cutting-edge technologies. Included in the new budget are plans for a National AI Office, RM50 million for AI education programs, and another RM50 million in matching digital grants to help Micro-, Small and Medium-sized Enterprises (MSMEs) adopt digital technologies, promoting innovation and operational efficiency. As the 2025 chair of ASEAN, the new ASEAN AI Safety Network (included in budget 2025) will focus on regional collaboration to promote the safe and responsible use of AI and address the potential risks of AI technologies.

4. Educational and Talent Retention Initiatives

The Malaysian government recognizes the need for targeted educational opportunities in STEM and actuarial sciences to support economic growth. By addressing talent retention and developing specialized skills, they aim to remain competitive amid a regional talent shortage. The government is looking to collaborate with the private sector to build training initiatives to tap into a relatively young population eager to work. Tangentially, a renewed focus on tourism post-COVID is also seen as an important factor in driving growth for the country. The sector looks posed for a robust comeback after recovering from the pandemic.  

5. A Potential Semiconductor Giant

International companies in Korea, Japan, China, and the West are flooding Malaysia with tech investments, all related to the U.S.-China tech war. Malaysia is the sixth-largest semiconductor exporter in the world, and tech giants like Intel and Nvidia are investing billions into the country’s semiconductor industry to shore up their supply chain and production capabilities. The Biden Administration’s recent tariff hike on Chinese exports will benefit Malaysia as equipment manufacturers look elsewhere for buyers and investment opportunities. Undeniably influential in the technology and manufacturing fields, Malaysia is prime real estate for international businesses and a key player shaping trade dynamics in the Indo-Pacific.