Malaysia Halts Rare Earth Exports to Boost Local Investment

• Aug 19, 2025

Malaysia has announced it will ban the export of unprocessed rare earth minerals, a move aimed at retaining greater economic value within the country by encouraging investment in downstream industries. The policy, confirmed by Investment, Trade and Industry Minister Tengku Zafrul Abdul Aziz, is designed to shift Malaysia from simply supplying raw resources to becoming a hub for processing and higher-value activities.

Speaking to CNBC’s Squawk Box Asia, Tengku Zafrul explained that Malaysia had consulted both Washington and Beijing about its rare earth strategy. He stressed that Kuala Lumpur remains committed to neutrality between the two global powers. “Both sides have reminded us that Malaysia cannot apply different standards. Consistency is key if we are to defend our position as a neutral player,” he said.

A moratorium on raw exports is already in place, with exceptions granted to firms such as Australia’s Lynas Rare Earths, which operates under requirements to process locally before sending products abroad. The minister emphasized that Malaysia welcomes international companies but expects them to contribute directly to the domestic supply chain.

“What we are saying is: we welcome companies to invest in Malaysia, participate in the supply chain, and develop downstream rare earth activities here. Only then can the processed output be exported,” Tengku Zafrul explained. He argued that this approach maximizes economic spillovers, fosters technology transfer, and creates new job opportunities.

The government believes anchoring higher-value activities at home will ensure the benefits of the rare earth industry extend to local communities and strengthen Malaysia’s industrial base. At the same time, the minister reiterated that the policy will treat all buyers equally under a non-discriminatory framework, ensuring fairness regardless of geopolitical pressures.

Earlier this month, Tengku Zafrul confirmed that the ban on unprocessed exports was crafted to boost domestic processing, enhance employment, and attract technology partnerships, while maintaining an open environment for foreign investment. By requiring value-added production within its borders, Malaysia hopes to position itself as a reliable and competitive player in the global rare earth supply chain.