INVESTING IN SEMICONDUCTORS
Central to the Malaysian proposal is the recently introduced National Semiconductor Strategy, under which the Malaysian government will invest RM25 billion (US$5.33 billion) to transform the nation into a global semiconductor hub.
Plans are underway to develop an integrated circuit design park in Selangor and a “Silicon Island” off the coast of Penang. These projects reflect Malaysia’s efforts to not only position itself at the forefront of the global semiconductor industry but also create new alternatives away from China and the United States.
Malaysia’s bid to attract investments beyond the US-China rivalry is not unique, but the country is well-positioned to succeed. Despite lacking a large domestic market, Malaysia offers excellent infrastructure and connectivity, a reliable and skilled workforce, an extensive network of free trade agreements, and pro-business policies. Domestic political challenges appear to be dissipating, further enhancing Malaysia’s appeal as a stable and attractive investment destination.
That said, Malaysia’s neutrality claim would attain more credibility if Anwar embraces the Indo-Pacific construct with the same zeal. The US-China competition, particularly over Taiwan and the South China Sea, continues to pose significant risks.
Still reeling from the global economic disruptions from the Russia-Ukraine war and the COVID-19 pandemic, US-China decoupling strategies are contributing to an increasingly fragmented global trading system. Malaysia, with its highly open economy and strategic location in the Indo-Pacific region, stands to lose considerably if tensions escalate.
Naturally, as with other small and middle powers, Malaysia wants to ensure its economy remains insulated, or at worse, resilient to these challenges. By providing an avenue for alternative supply chains to develop, it reduces the risk of disruption which was one of the major factors affecting the Malaysian economy in recent years.
