Opinion: What New Zealand can learn from Malaysia’s preparations for a more uncertain world

The Asia New Zealand Foundation delegation (Antje Fiedler second from left) at the 39th Asia-Pacific Roundtable in Kuala Lumpur, held over three days in June and July

In late June, I travelled to Kuala Lumpur as part of a New Zealand delegation supported by the Asia New Zealand Foundation, to attend the 39th Asia Pacific Roundtable.

Convened by ISIS Malaysia on behalf of the ASEAN Institutes of Strategic and International Studies, the Roundtable is Southeast Asia's flagship track II gathering and involves several hundred officials, analysts and academics meeting off the record to speak frankly about the pressures bearing down on the region.

This year's theme, "accelerating agency and action", asked where regional leadership might be found amid ongoing geopolitical turbulence, and what smaller states can do about circumstances they did not choose.

From a business perspective, the uncertainty generated by recent global events was impossible to miss: geopolitical tensions are rising, tariff escalation has returned, and supply chains are being reconfigured. Countries face pressure to choose not only markets, but sides. 

Malaysia’s response to intensifying geoeconomic competition, however, is pragmatic and clear. Keep the relationships. Defend the rules. But build more leverage within them. 

A recurring message from Malaysian speakers was the importance of maintaining ties with all major trading partners while defending the open, predictable and rules-based trading system that has served the region well. 

For many sectors, this may look like business as usual. For strategic sectors, it is anything but.

Malaysia is not merely holding on to an old order. It is also trying to strengthen its position in whatever comes next.

Rare-earth resources make that shift visible. A 2019 government estimate put Malaysia’s rare-earth resources at around 16.1 million metric tonnes. But that figure should not be confused with proven, economically recoverable reserves. Malaysia does not yet possess all the domestic technological capabilities required to extract and process its own rare-earth resources at scale.

The greater prize, therefore, is not simply what lies in the ground. It is the capability built around it.

That means separation and refining. It means advanced materials and magnet manufacturing. It means specialist knowledge, local participation and knowledge spillovers that allow Malaysian firms to enter higher-value stages of the chain.

Malaysia’s recent policy direction reflects this. It has said it will maintain its ban on exports of unprocessed rare earths so that more value is added domestically. It is seeking foreign joint ventures, domestic processing and greater Malaysian participation. Technology transfer, local job creation and downstream activity are increasingly part of the bargain Malaysia seeks from foreign investors. 

"The question is therefore not simply who will buy Malaysia’s resources. It is which partners can help Malaysia build the capabilities it does not yet possess."

The question is therefore not simply who will buy Malaysia’s resources. It is which partners can help Malaysia build the capabilities it does not yet possess.

China has indicated that it is prepared to provide technical and technological assistance in rare-earth processing, although discussions have been preliminary and Beijing has sought to confine cooperation to state-linked companies. 

But Malaysia is not looking in only one direction. 

In March 2026, Malaysia renewed Australian miner Lynas Rare Earths’ operating licence for 10 years. Under the renewed licence, Lynas is expected to direct one percent of its annual gross sales towards research and development supporting Malaysia’s domestic rare-earth industry.

Lynas and South Korea’s JS Link also signed a partnership to develop a magnet factory in Malaysia. The planned facility will have an annual capacity of 3,000 tonnes of permanent magnets, supply automotive, wind energy and electronics value chains, and is expected to create up to 400 jobs.

These moves suggest a more deliberate approach to partnership. Malaysia is not choosing one partner for everything. It is asking what each relationship can contribute.

Ultimately, Malaysia is trying to maintain the old while shaping the future. It is maintaining access to existing markets while seeking greater influence over where value is created. 

So, what might New Zealand take from Malaysia’s example?

According to the New Zealand Government's Critical Minerals List, New Zealand produces or has he potential to produce 21 of the 37 'critical minnerals' listed

New Zealand also has a potential stake in critical mineral value chains. The government’s first “critical minerals list” contains 37 minerals and says New Zealand produces, or has the potential to produce, 21 of them. That potential should not be overstated. Rare earth elements are not rare per se. They are relatively common in the Earth’s crust but rarely occur in concentrations that can be extracted economically. New Zealand has identified geological potential, but not commercially proven reserves. 

If commercially viable deposits are discovered, New Zealand could follow Malaysia’s model to strategically develop partnerships for value creation and knowledge spillovers. 

The wider lesson, however, goes beyond minerals. The question for New Zealand is not simply whether we can extract more resources. It is whether strategic resources can be used to build wider and more enduring economic capabilities and relationships. 

Are we too focused on developing export markets for near-term gains? Or are we also asking which international partnerships could generate broader knowledge spillovers through research collaboration, specialist skills, infrastructure, capacity development, investment, new firms and access to downstream markets? The key question is not only what a partnership produces, but what it leaves behind.

Malaysia demonstrates that resource policy can also be industrial policy. International partnerships should be assessed according to the domestic capabilities and spillovers they generate. Investment and export revenue matter, but so do technology transfer, local participation, workforce development, stronger supplier networks, research capability, infrastructure and opportunities for related industries. 

This requires strategic policy, but not a narrow choice of partners. Maintaining a wide range of international relationships gives New Zealand firms better access to different markets, technologies and sources of expertise. For New Zealand small-and medium-sized enterprises in particular, switching markets is rarely straightforward. Optionality matters. 

The lesson, then, is not to abandon business as usual, but to make it more strategic. Keep markets open. Preserve choices for firms. But use partnerships more deliberately to build capabilities at home. 

Once a country settles for a narrow position near the bottom of a value chain, moving upwards becomes much harder. Resources are exported once. Capabilities compound. 

Concluding thoughts

The Strait of Malacca seperating Malaysia from Indonesia is one of the world's most important maritime trade routes

Malaysia can maintain a diplomatic hedge partly because it has something material to hedge with: a position astride the Strait of Malacca, a manufacturing base, and resources that several major powers would like on their own terms. Equally, it can pursue capability-building – insisting on domestic processing and technology transfer, and pursuing partnerships with Australian and Korean companies while also holding preliminary discussions with China – precisely because it has not foreclosed any of those relationships in advance.

Diplomatic optionality creates room for economic bargaining; economic leverage gives the diplomatic position substance. Remove either and the other weakens.

New Zealand faces a similar underlying trade-off, although from a different position. Its diplomatic room for manoeuvre may have narrowed at a time when the material foundations – whether mineral, technological or otherwise – for a more firmly aligned approach remain comparatively limited. 

This narrowing may also have flow-on effects on New Zealand’s commercial opportunities. Thus, while Malaysia is geopolitically closer to the action, its pragmatic business-as-usual approach has coincided with considerably stronger economic performance.

In the March 2026 quarter, Malaysia’s GDP was 5.4 per cent higher than a year earlier, compared with a year-on year growth of 1.5 percent in New Zealand. Although this comparison does not establish that Malaysia’s approach caused the difference, it highlights the potential value of maintaining economic and diplomatic optionality. 

Ultimately, New Zealand needs to use its geopolitical advantages and its resource potential smartly, or else it will find itself left behind in both foreign policy and business.   

About the author

Antje Fiedler is an associate professor at the University of Auckland Business School, specialising in entrepreneurship and international business. She is the director of the New Zealand Asia Institute (NZAI).

The Foundation's Asia in Focus initiative publishes expert insights and analysis on issues across Asia, as well as New Zealand’s evolving relationship with the region.