KUALA LUMPUR-Rare earths remain a critical and strategic resource that Malaysia must and capitalise on for its long term advantage and geopolitical returns, as any missteps or short-sightedness on the country’s part will invite a negative result.

The imminent decision on the fate of Lynas’ operating licence remains a crucial case in point and must not be led by emotions and political needs and pressure alone. For as much as the Lynas dilemma has captured a huge swath of the local political scene over the past decade, this extends beyond obvious political and monetary calculations.

Lynas operations in Malaysia have been viewed in a negative light, with critics zooming in on claimed adverse environmental impact and the persistent view of being taken advantage of by the West.

Efforts to portray the truth and the greater importance to our country in economic and strategic returns have been drowned out by the prevailing negative sentiments and inability to grasp the bigger picture.

China, after years of heavily mining rare earths, started to raise the cost of rare earths and to restrict exports and then used its supply as the strategic leverage and tool in its diplomatic ties with other countries. This has compelled other countries with rare earth deposits to start their own ventures to reduce their overdependence on China.

Lynas is born out of this context, where it is the world’s only significant rare earths producer outside China. Its 800-million US dollar (RM3.35 billion) plant in the east-coast town of Kuantan has been granted a conditional licence to operate, and is now in a race to meet the condition of completing its cracking and leaching facility of the new processing plant at Kalgoorlie, Australia by July this year, after which the company will not be allowed to import raw materials containing naturally occurring radioactive material.

Other ASEAN countries have been able to attract billions of foreign direct investment in downstream manufacturing of high performance magnets and other related technologies which need rare earths and create thousands of new jobs.

Malaysia has the opportunity to be a world leader in this industry that supports technologies used every day, like cars and smartphones, as well as future facing industries such as electric vehicles and wind turbines, and we must play our card well.

Lynas has spent over a decade developing in-house expertise in the field, creating an estimated 4,600 jobs and adding over RM4.8 billion to Malaysia’s gross domestic product since 2013.

Malaysia must not let this opportunity of having the biggest rare earth supply outside China slip away but instead use it to advance its geopolitical strength and advantage. It can be further developed to create an impactful stepping stone towards giving positive messages and assurances to other critical industries and top manufacturers in the crucial high impact field including semiconductor and high technology industries.

Lynas has always been an easy target and scapegoat, but the similar issue recently in the extraction of rare earths in Kedah and Perak has been out of the spotlight, despite the theft incidents and the huge deposits at our disposal in which the contracts were awarded to Chinese companies.  

If Lynas’ licence is halted or compromised, it will send a negative message to other investors, especially now that there has been an increase in interest and strategic pulling factor in Malaysia that has seen higher focus and investment in high impact sectors particularly the semiconductor industry and the increased investment by Intel, among many others.

As seen in other industries and fields that have been quickly dominated and seized upon by China, we can either be wise and strategic in our country or succumb to the conventional trap and be beholden to China’s geopolitical moves.

China’s dominance in major projects and economic ventures ranging from the ECRL to the Kuantan Industrial Park (MCKIP) and the big rare earth ventures in Perak and Kedah, exposes Malaysia to vulnerabilities, compromising its national interests and sovereignty. This on top of China’s presence in the other fields, particularly in the digital technology and cybersecurity.

China is applying its South China Sea strategy in the Malaysian rare earths sector by moving bit by bit under the radar so as not to generate a backlash. This can be seen in the ventures in Kedah and Perak in rare earths, being given the lucrative contracts but with a bigger eye on halting Western access to rare earths.

It could potentially push for the takeover of the Lynas plant, which will link up with its presence in Kedah and Perak. Sources of rare earths from these two states will then be easily channelled to Kuantan for processing and will also potentially involve its established presence in Kuantan through the Industrial Park. It will also seek to capitalise on this to galvanise the completion of the ECRL to speed up the transport of raw materials and the processed end product, in completing its control of the whole supply chain of this strategic resource.

We cannot afford to be trapped in overreliance on easy and cheap credit and expertise that supersede the growth of our local talent and must start the shift to value and rules based approach.

It is high time we break free from China’s orbit, and stand for our own long term calculations and national interests. There must be a prevailing and overarching decision making process that involves all stakeholders, policymakers and the public in determining the best path forward in managing our vital resources.

*Collins Chong Yew Keat is a foreign affairs analyst with University of Malaya.*