Mahalil Amin Abd Malek (mahalilamin@might.org.my), Ahmad Hafizi Mohamed @ Adam (hafizi@might.org.my), Ts Azreen Abd Aziz (azreen@might.org.my) and Azilatul Adilah Azizan Senior Principal Assistant Secretary, Strategic Technology, and Science and Technology Applications Division, Ministry of Science, Technology and Innovation (MOSTI)
Present Situation
Malaysia’s strategic advantage in the global rare earth elements (REE) industry, with its rich deposits and established processing capabilities, presents a promising future. The REE sector, spanning upstream (exploration and mining), midstream (processing and refining), downstream (component manufacturing) and end applications (electronics, green energy and defence), is bolstered by a robust supporting industry. The supporting industry, comprising research institutions, policy frameworks and logistics, plays a crucial role in sustaining the ecosystem. As global demand for REEs rises, Malaysia is poised to seize both opportunities and challenges, thereby securing its technological sovereignty in this critical sector.
REE Resources and Potential Development
Based on estimated reserves, China is the world’s largest holder of rare earth oxide (REO), with approximately 44 million metric tonnes, followed by Brazil, India, Australia and several other countries. Global rare earth mine production has nearly tripled since 2010, with the majority of output coming from China and the United States. This significant increase highlights the exponential growth trend in rare earth production over the past decade.
Reserves of rare earths worldwide as of 2024, by country (in 1,000 metric tons REO)
Global rare earths mine production volume 2010-2024
Asia, particularly China, Vietnam, India and Malaysia, holds the largest share of global REE reserves, positioning the region as a dominant force in the industry. Malaysia, Vietnam and Myanmar collectively contribute significant reserves, strengthening Southeast Asia’s strategic importance in REE production. As demand for REEs grows, driven by industries such as green technology, electronics and defence, Asia and ASEAN nations are set to be key players in securing global supply and reducing dependency on Western refining capabilities.
Malaysia is endowed with substantial REE resources, including an estimated 16.1 million metric tonnes of non-radioactive rare earth elements (NR-REE), valued at approximately RM1 trillion. This positions the country among the world’s key holders of REE reserves, offering a strategic advantage in the global shift toward green technologies and advanced manufacturing. As Malaysia assumes the chairmanship of the Association of Southeast Asian Nations (ASEAN) in 2025, it has a timely opportunity to lead the region toward a more inclusive, sustainable and resilient economic future. Under its leadership, Malaysia aims to strengthen ASEAN’s role as a central driver of growth in the Asia-Pacific, with a focus on economic resilience, regional peace, and shared prosperity. The development of Malaysia’s REE sector aligns closely with national and regional priorities to transition toward high-value, sustainable industries. By leveraging its REE potential, Malaysia can champion regional collaboration in sustainable mining, midstream processing, downstream manufacturing and the development of the ecosystem. These efforts will support ASEAN’s ambitions to become a key player in critical technologies such as electric vehicles, renewable energy, semiconductors, etc. Malaysia’s chairmanship provides an ideal platform to promote transparent governance, sustainable resource management, and greater investment in REE-related research and innovation. By positioning REE development as a regional strategic priority, Malaysia can help unlock long-term economic value while reinforcing ASEAN’s relevance in the global economy.
Distribution of global rare earth element consumption 2022, by end use
In response, Malaysia, through its ministries and agencies, has demonstrated its commitment to the REE sector by launching several initiatives, including key national strategic documents to provide long- term guidance for developing the REE sector. These include the Mineral Industry Transformation Plan 2021–2030, the Blueprint for the Establishment of Rare Earth-Based Industries in Malaysia, the National Advanced Materials Technology Roadmap 2021–2030, the New Industrial Master Plan 2030 (NIMP 2030), the Standard Operating Procedure (SOP) for the Non-Radioactive Rare Earth (NR- REE) mining industry, the Business Model for the Development of the NR-REE Industry in Malaysia, and the National Mineral Policy. Additionally, several on-the-ground projects have been implemented, involving collaboration among the federal ministry, state governments, institutes of higher learning and the private sector. These projects include the development of a rare earth mining pilot plant, talent development programmes, and research activities focused on advancing relevant technologies. Despite these developments, several challenges remain, including the involvement of international counterparts in the industry, institutional capacity, and the need to strengthen locally developed technology solutions.
Geopolitical Issues and Industry Challenges
The global REE industry is significantly influenced by geopolitical tensions, trade restrictions, and supply chain monopolies. In 2010, China halted REE exports to Japan following a maritime incident involving a Chinese fishing vessel and a Japanese coast guard ship. As a result, global rare earth prices surged tenfold within a year. This triggered an international policy response, with governments calling for the diversification of REE production beyond China. Today, China continues to dominate the sector, controlling over 60% of global REE production and refining capacity. It has leveraged this position to impose export restrictions and influence global market dynamics. Ongoing developments, such as the US-China trade war, the European Union’s supply chain diversification strategies, and Australia’s push for independent REE processing facilities, present both challenges and opportunities for countries like Malaysia.
Additionally, geopolitical tensions in the South China Sea and rising concerns over resource nationalism pose a further threat to the stability of global supply chains. These dynamics underscore the urgent need for Malaysia to accelerate the development of its domestic REE capabilities. This acceleration is crucial to reduce external dependencies and enhance its strategic standing in the global REE landscape. Recent measures, such as the reciprocal tariffs introduced by the United States government, also highlight shifting trade sentiments. In this context, Malaysia must strategically position its REE resources within the global supply chain, leveraging government-to-government (G2G) cooperation and regional alliances to ensure long-term security, sustainability and economic benefit. Despite its potential, Malaysia’s REE industry is heavily reliant on foreign technology and expertise, particularly in refining and high-tech applications. This dependence exposes the country to supply chain vulnerabilities, geopolitical risks, and limited value capture from its natural resources. Moreover, environmental concerns, regulatory uncertainties, and insufficient local talent development further complicate efforts to establish a self-sustaining REE ecosystem. The increasing global competition, particularly from China, which dominates the REE supply chain, necessitates a strategic shift toward greater technological sovereignty, a matter of utmost urgency and importance .
Comparison with Malaysia’s Petrochemical Industry Development
Malaysia’s current REE industry can be compared to the early days of its petrochemical industry. In the early 1970s, Malaysia possessed abundant hydrocarbon resources but lacked the downstream capabilities to refine and produce value-added petrochemical products. To address this gap, the government implemented strategic interventions, including the establishment of PETRONAS and the adoption of the Production Sharing Contract (PSC) framework. Collaborations with multinational corporations (MNCs) under this model played a crucial role in Malaysia’s transition strategy, laying the foundation for its transformation into a global petrochemical hub. A similar approach can be taken for REEs. Instead of merely exporting raw materials, Malaysia must develop refining and manufacturing capacities to capture greater economic value.
By leveraging these lessons, Malaysia can chart a path towards high-value REE applications rather than continuing as a raw material supplier. The strategic shift promises long-term economic gains and technological sovereignty. Several countries have taken proactive steps to ensure the sustainability of REE supply and reduce dependency on dominant suppliers:
Regulatory Reform and Governance Framework
To ensure the sustainable and strategic growth of Malaysia’s rare earth elements (REE) industry, it is important to continuously enhance the regulatory and governance framework. Existing legislations such as the Mineral Development Act 1994, Environmental Quality Act 1974, and Atomic Energy Licensing Act 1984 (Act 304) provide a solid foundation, particularly for upstream activities including mining and the management of naturally occurring radioactive materials. However, there is room to refine these frameworks to better support the evolving needs of the REE value chain, including responsible mining practices, green processing technologies, waste and residue management, and traceability. As land and mineral resources fall under state jurisdiction, stronger alignment between federal and state regulatory approaches is vital to ensure consistent implementation, reduce fragmentation, and promote shared environmental and social responsibility. Clearer enforcement protocols will further improve transparency and boost investor confidence.
In this context, the Special Task Force for the Development of the REE Industry, chaired at the ministerial level, plays a pivotal role not only in coordinating national policy direction and ensuring regulatory coherence, but also in overseeing the formulation of technology strategies throughout the REE sector. The Task Force is instrumental in guiding regulatory improvements, aligning technological initiatives with national priorities and ensuring that Malaysia’s REE industry remains responsive, future- focused and globally competitive.
The Role of a National Aggregator in Advancing Malaysia’s REE Industry
The National Aggregator can play a pivotal role in developing the REE industry in Malaysia, supported by a seamless regulatory framework and a structured operational model tailored to the context of REE industry in Malaysia. The national aggregator can also spearhead efforts to streamline the industry and government supply chains, facilitate the investment in technology, penetrate the global market access, and facilitate the collaboration with state and federal governments for the Moonshot programme.
Advancing Technology Development for Strategic Sovereignty
From a technological standpoint, several research universities in Malaysia are actively engaged in research and development activities across the entire rare earth value chain, from upstream exploration to midstream processing and downstream applications. In addition, the involvement of private companies, government-linked companies (GLCs), and relevant agencies demonstrates both the capacity and commitment to advancing REE technology development. According to findings from a workshop conducted by the Ministry of Science, Technology and Innovation (MOSTI) and the Malaysian Industry-Government Group for High Technology (MIGHT), Malaysia has strong potential to elevate its homegrown technological capabilities through strategic partnerships with key players across the value chain. The development of indigenous technologies is critical to strengthening the nation’s science, technology and innovation (STI) ecosystem. This can be achieved through coordinated collaboration involving GLCs, state governments and government-to-government (G2G) arrangements.
To build technology sovereignty, Malaysia can implement several strategic mechanisms through G2G (government-to-government) and G2B (government-to-business) collaborations:
Driving the Moonshot Programme The Moonshot Programme represents an ambitious, long-term initiative designed to push Malaysia’s REE industry beyond conventional growth models. The goal of Malaysia’s Moonshot Programme is to transform the country into a global leader in the advanced REE industry by:
• Becoming a world-class REE refining and manufacturing hub for high-tech applications, including EVs, semiconductors, aerospace and green energy.
• Achieving technological sovereignty by reducing reliance on foreign expertise and developing indigenous capabilities in REE processing, component manufacturing and recycling.
• Leading the sustainable REE industry with green extraction technologies and circular economy principles, ensuring long-term economic and environmental sustainability.
• Positioning Malaysia as a strategic REE player in the global supply chain, creating high-value exports, attracting foreign investments, and fostering innovation-driven industrial growth.
