The Reality of Malaysia's Rare Earth Industry: A Look Beyond the Headlines

My master's research paper, a mixed-methods study on developing a sustainable rare earth elements (REE) industry in Malaysia, explored a critical disconnect between national ambitions and on-the-ground realities. These are some of my key findings, which seem particularly relevant to current debates. Please note that the research is not peer reviewed. Whisk AI Generated Image Federal Policy vs. State-Level Practice Malaysia's federal government announced a moratorium on unprocessed REE exports, effective January 1, 2024, with the aim of maximizing economic value by building a domestic value chain (see https://www.straitstimes.com/asia/se-asia/malaysia-to-ban-exports-of-rare-earths-as-demand-soars-amid-trade-row). However, a closer look at state-level dynamics reveals a more complex picture:

State Control: Mineral resources, with the exception of hydrocarbons through the 1974 Petroleum Development Act, belong to individual states. This grants state governments significant and (I would add) ultimate control.
Perak's Exemption: Perak, home to Malaysia's first REE mining facility in Kenering (see https://mcreresources.com/our-project/) , has requested for an exemption from this moratorium (https://www.thestar.com.my/news/nation/2024/03/19/perak-mb-requests-state-be-excluded-from-nr-ree-export-moratorium). There has been no information on the response for the requesr for exemption from the Federal Government othen than acknowledgement in Parlimen (see https://www.nst.com.my/news/nation/2024/03/1024679/comply-nr-ree-export-moratorium-minister-reminds-state-govts) . Despite the moratorium announcement, Perak state government has enjoyed substantial revenue, with MYR30 million in royalties from February 2023 to May 2024 (see https://www.thestar.com.my/metro/metro-news/2024/07/11/perak-collects-rm31mil-in-royalties-from-rare-earth-carbonate-export) through the sale of unrefined Rare Earth Carbonate (REC).
A Broader Landscape: While the federal policy sets a clear intention, the existence of state exemptions and active sales—especially in collaboration with major international players like the China Rare Earth Corporation (see https://www.mbincperak.com/news-events/perak-mb-to-seek-latest-chinese-technology-in-rare-earth-mining) —indicates that the path to a fully integrated domestic value chain is not straightforward.

The Challenge of Processing: Why We Export Raw Materials My research suggests that Malaysia is currently unable to capture the higher returns from REE processing due to several significant hurdles:

Dependence on Foreign Technology: Malaysia heavily relies on foreign technology and investment for processing, which limits national economic gains and technical sovereignty. We currently lack the internal capacity and must depend on external expertise to process REE (see https://www.nst.com.my/news/nation/2025/05/1215346/rm800bil-buried-potential-malaysia-held-back-rare-earth-tech-gap).
China's Technological Dominance: China controls the lion's share of global REE processing technology. Reports even suggest laws preventing the export of this technology, making it incredibly difficult for Malaysia to acquire the necessary expertise to refine its own ore (see https://www.reuters.com/markets/commodities/china-bans-export-rare-earths-processing-technologies-2023-12-21/).
Unadopted Strategic Blueprints: The 2014 "Blueprint for The Establishment of Rare Earth-Based Industries in Malaysia" (see https://www.akademisains.gov.my/blueprint-for-the-establishment-of-rare-earth-based-industries-in-malaysia-full-report/) advocated for a complete value chain, but it was never fully adopted. This historical lack of implementation has contributed to the current gap in domestic processing capabilities.
Limited Local Capabilities: Existing facilities, like the Lynas plant in Gebeng, are designed to process lanthanide concentrates from Australia—not the Ion Adsorption Clay that is predominantly mined in Malaysia. This highlights a fundamental mismatch in our current infrastructure.

In essence, while federal policy is pushing for a domestic value chain, the lack of local refining technology and the dependence on foreign expertise continue to restrict Malaysia to exporting raw materials, preventing it from realizing the full economic potential of its REE industry. I believe these findings offer a valuable perspective on the complexities of developing this critical national industry I welcome any thoughts or insights from the community.