Photo: Ministry of Finance Malaysia
This transcript is from a CSIS event hosted on April 25, 2025. Watch the full video here.
Gregory B. Poling: Good afternoon. Good afternoon. Thank you all so much for coming out on a Friday afternoon. That makes me particularly appreciative. And thanks all of you who chose to watch online because it’s a Friday afternoon; it’s better than nothing. No, in all seriousness, thank you very much.
We are honored to host the next iteration of our ASEAN Leadership Forum, the first of this year. For those who don’t know me, I’m Greg Poling. I direct the Southeast Asia Program here at CSIS. And this is a now roughly quarterly speaker series that we’ve been doing for senior leadership from across Southeast Asia for the last few years.
I’m particularly happy today because this is the first time that we’ve had a senior representative from the Malaysian government speak at this iteration of the series, and I believe the first time that we’ve been able to host a senior representative of your government since before the pandemic. So well overdue and truly an honor.
Very brief housekeeping. Everything you’re going to hear today is going to be on the record. The video will be streaming live on YouTube and on our website, and then will be available afterward in perpetuity or until they shut down YouTube.
We encourage those in the room to ask questions when we get to that part of the program. We have a stand mic here in the room. Those online can also ask questions. You’ll have to type it in, and then my team will send it up and we’ll read it out.
And the event today is being made possible by general support to CSIS.
So, with that let me make the introductions and get out of the way. We’re here today to hear from His Excellency Amir Hamzah Azizan, who is a senator and the minister of finance II of Malaysia, the minister of finance I being the prime minister. That’s not fair. (Laughter.) This is a position that he has held since December of 2023. Prior to entering politics, Mr. Azizan had a distinguished career in business: senior leadership positions, including as CEO of the Employees Provident Fund; Tenaga Nasional Berhad, which is the electric utility in Malaysia; and the CEO of Petronas Dagangan Berhad, which is the retailer – right? – the downstream retailer, and Petronas Lubricants International. Mr. Azizan holds a bachelor of science from Syracuse University. And he’s here this week originally for, I guess, just the World Bank meetings, although I suspect there might have been some things added to the agenda since the trip was originally planned.
So, with that, please join me in welcoming up His Excellency.
(Applause.)
Amir Hamzah Azizan: Salaam aleikum and a very good afternoon to all distinguished guests. Thank you, Greg, for the welcome.
But maybe a correction. I am not a politician. (Laughs.) I try very, very hard to make sure that people understand that I have been volunteered into the government, and actually I’m serving and trying to help do change in things within a Malaysian perspective, and I offer a lot more technocratic support to the government in this instance.
But let me begin by some opening comments, then I understand we’ll have some Q&A. So, if you’ll allow me, I will proceed with the opening comments.
First, let me start by first saying it’s indeed a privilege for me to be here for this forum, and a little bit of a surprise that we’ve not been here for a long while. But I’m happy to be here to share a little bit of a perspective between what Malaysia issues are, and especially with respect to U.S. and Malaysia cooperation; and also, given that this year Malaysia is chairing ASEAN, a little bit of a perspective in terms of how ASEAN perspectives, particularly with what’s transpiring in this point of time, may be in issues that are moving along.
I think we all understand that the world is navigating an extremely complex global environment. Open dialogue and strategic collaborations remain, though, an extremely important element to actually secure a better future as we move along. So it is extremely important that we actually continue to have open conversations, so that we can find a common ground that we can all work towards so that we can push the globe to a better space ahead.
From a Malaysian perspective, I think when we look at things we uphold a proactive and strategic economic agenda, reinforcing our global partnerships while promoting sustainable and inclusive growth. In an increasingly interconnected world, economic polices must be forward looking, resilient, and adaptable. Probably adaptability is the key at this juncture. Our longstanding relationship with the U.S. has been built on mutual respect. And shared economic interests continues to expand across multiple sectors including in trade, investment, climate cooperation, security, and education. For Malaysia, this means leveraging strategic partnerships, and ensuring sustainable growth, and reaffirming our commitment to regional and global economic cooperation.
The Malaysia-U.S. relationships remain robust and diverse. In April this year both countries celebrated our 11th anniversary of its comprehensive partnership, highlighting a decade of strengthened collaboration. The U.S. continues to be one of Malaysia’s main trading partners, contributing significantly to Malaysia’s trade growth. Malaysia looks forward to continuing to explore further opportunities for expanding and diversifying Malaysia’s and U.S. bilateral trade for mutual benefit.
Malaysia remains committed to positioning ourselves as a premier destination for high-value investments, particularly in semiconductors and digital technology. As a critical player in the global semiconductor supply chain, we continue to attract multinational cooperations by offering a robust industrial ecosystem, skilled talent pool, and investor-friendly policies. Strategic collaborations with global tech companies have been able to drive innovation, enhance technology capabilities, and creating high-skill job opportunities in Malaysia. In the digital sector, Malaysia is now expanding its 5G infrastructure, AI development, and cloud computing capabilities, ensuring businesses operate in a highly-connected and technologically advanced environment.
At the same time, we are also accelerating our green transition by attracting investments in renewable energy, EVs, and hydrogen technology. Malaysia actually launch our national energy transition roadmap less than two years ago. We aim to position ourselves as a regional hub for sustainable industries while meeting carbon-neutral targets by 2050. Incentives for clean-energy investments, coupled with public-private partnerships, are driving the shift towards a more sustainable and resilient economy. By fostering an open, innovation-driven investment climate, Malaysia seeks to strengthen regional competitiveness, deepen global trade linkages, and create long-term economic opportunities for businesses and investors. I look forward that during this conversation today there may be some of these issues that you may want to poke a little bit on, and we’ll try to elaborate a little bit on it.
Before we go a little bit further, let me take this opportunity to maybe share a little bit about Malaysia’s economy and how we’ve done in the recent future – recent past. As geopolitical uncertainties escalate, Malaysia recognizes the importance and the need to stay focused and resilient, undeterred by external challenges. Global uncertainties have reached unprecedented levels, posing risks to highly open economies like ours – in particular our semiconductor industry, which contribute approximately about 28 percent of our total exports to the U.S. Any disruption could pose economic implications, making it crucial for Malaysia to adapt and adopt proactive strategies to safeguard our economic interests, and making sure that the global supply chain still remains intact.
Despite these challenges Malaysia’s economic fundamentals remain strong and resilient, mainly supported by robust domestic demand, a while – a well-diversified economy, and sustained investments. Malaysia remains well-positioned to navigate global uncertainties. I think we’ve proven that. And as we looked in the numbers that we saw in 2024, we registered a GDP growth of 5.1 percent, an improvement from 3.6 percent the previous year. This year, we are actually – well, we were actually looking at growth between 4 ½ to 5 ½ percent, and I think we will still continue to have a positive growth. But if you asked me today predict a number, I think I would have to have a fantastic crystal ball to make it work, right?
When I look at other measures, other multilateral bodies have also indicated that at the moment the global growth and global trade will decline, and they have indicated that Malaysia may see its growth reduced down to 4.1 percent. The good thing is it’s still a positive growth, yeah? The key for now is actually not to fixate too much about the number, but actually to understand what are the levels and the tools that we have to help us manage a much more highly volatile environment along the way.
And I think one of the key things that Malaysia has been trying to do over the last three years or so is actually resetting its economy. This is important because, as you all know, Malaysia has been industrializing and trying to push its economy ahead, and it is a middle-income – high middle-income economy on a global scale. But in order to become a high-income country, I think we all have to punch through and break through the middle-income trap.
And one of the key challenges we have is actually we have to look again at how we redesign our economic base. And in this instance, what Malaysia did was about a year-and-a-half ago we rolled out a new Madani Economic Framework which is talking about how do we high-grade our economy, looking at how we also focus about redressing balance for society, build a better societal protection network, and also increase living wages in the country. This was important because a stable society provides a much more conducive environment for progression in the country. At the same time, we also want to restrengthen our social nets and enhance good governance in the country. Sounds easy, nice words that people put on the – on the table. But the key was actually focusing on actions that we can take to address and actually move the country forward.
So if I peel away what we’ve been doing over the last two years or so, it’s about how do we attract the right type of investments come to Malaysia. Malaysia wants to push it up into a higher scale, so we want to attract higher-level activity, higher-level investments. And in order to do that, we had to refine, again, what are the priority segments that we want. So when we rolled things out, we rolled out a new industrial master plan laying quite clearly what are the key things that we want. And we focused on building from the base that we actually have.
So historically we’ve always been pretty good at the E&E and semiconductor space, and we need to actually move it ahead – testing, assembly, OSAT, packaging were also key things that have grown in the Malaysian system. And if you look at the semiconductor space, we started in 1971. But it’s still an economy that still had a lot of multinationals coming to operate using base systems that exist in the country, but the deepening of the domestic ecosystem was still probably not so strong.
So what the government is actually trying to do now is actually to look at supporting the growth of the secondary ecosystem, bringing in a bit higher support by local industries to nurture itself up, deepening design mechanisms, putting in advanced packaging, and so on by putting in better policy, better incentives so that we can attract things coming in – at the same time, addressing new sectors that were coming in that are much more adjacent to what we already have skillsets about. So it wasn’t a surprise when Malaysia evolved to become one of the better datacenters in Asia, and it also wasn’t a surprise that AI also was taking off from what we can do and offer in Malaysia. So in that instance, what was important was actually to articulate where do we want to prioritize, focus on skillset we had, resources that we had, to push it up.
So last year was a good year. Last year we achieved a FDI rate of 343 billion ringgit of new FDIs coming into the country, attracted by building what we’ve already got, attracted by a competitive position that exists.
The second thing that the government actually wanted to do was actually build resilience within the system. If I only depend on FDIs, then there is risk. At some point, things may be a bit more volatile. So what actually done is actually look, again, in terms of the strength that exists within the Malaysian system. Our institutional investment mechanisms are actually quite strong. We have a lot of pension funds. We have a lot of sovereign wealth funds that exist within the Malaysian environment. So what we did was to align them to look at exploring more domestic investments in Malaysia. We encouraged them to refine and pick up segments of industry that aligned with the government desire to push it ahead, and what we’ve seen is that this been stepping up investments in this space.
Historically, the institutions would invest somewhere between 400 to 440 billion ringgit over a five-year period. Last year they committed to stepping up a further 125 billion (ringgit) over the next five years. So that’s good, because now the foreign direct investment engine was running, domestic direct investment engine is also running, so we then focused about what we do with society in general.
And in this instance, one of the key drivers was actually wages. Last year we started to address by public sector wage, by doing an adjustment so we could put money in the hands of our citizens, and also address increasing minimum wage in the country. This February, minimum wage went up from 1,500 ringgit a month to 1,700 (ringgit), and it’s likely that in the next two to three years we’ll push it up again to about 2,000 (ringgit). That’s important, because as money gets into the hand of citizenry they spend, and they create a private consumption engine that is actually working, underpinning it. So, in effect, what we’re trying to do is actually build a stronger base for the economy to move ahead, and that’s why I think the GDP has responded well in terms of the growth that’s coming in.
At the same time, we also needed to address imbalances that exist because Malaysia, when COVID hit its worst part, deployed quite a lot of government interventions by providing subsidies along the way, and it strained our fiscal space. The last three years where we’ve been spending time is actually to dial back the subsidies – not to say subsidies are necessarily all bad, but actually to make sure that subsidies are spent in the right segment they are entitled to it and to remove misallocations that actually occurred. And because of that, what we’re seeing as a result we’ve been able to reduce our fiscal deficit from 6.1 percent. Last year, it dropped to 4.1 (percent). And this year, we anticipate it will come down towards a 3.8 percent on GDP. Good signs, because fiscal space gives us better opportunity to look at where we can deploy capital in a better form.
Nice areas, well designed, and moving along well – until this year, when we had a bit more volatility. So how is Malaysia reacting to the volatility that we have? I think the reality is a rising tide rises all ships; a receding tide brings everybody down. We all have to react to things that is going through the system. But what we should be doing is actually focusing on things and levers that we actually have in our hand, because I cannot change things that are beyond my control. But things that I have in my hand and we deploy, we do, we shift, we get better outcomes and build resilience within the system. So that’s the theme of what the government is trying to do.
The tariff that was announced on liberation day was probably a surprise to a lot of people not for the tariff, but to the size and scale of the announcement, yeah? But Malaysia, and as ASEAN chair, has decided to take a practical approach. The practical approach is to recognize that there are some core principles that we value.
We value that if you look at the history of the world, the world has gotten prosperous on the back of globalization. It’s gotten prosperous on a much more open and trading basis. So we want to continue to suggest that a multilateral system is probably a good system to continue to protect.
The second thing that we are also anchoring on is to make sure that a rule-based system is actually retained, because when you have clear structures, you have clear rules, people who want to invest can actually deploy capital in a better form because they trust that the system will look after them in areas when things are challenged along the way. And I guess one of the short-term outcomes that is actually challenging the world today is the changes that’s happened over the last 20-something days has actually rattled and created a lot of uncertainty and volatility, and financial investors/businesses can’t play. They can’t invest. So the best thing that they do is they sit at the sidelines. But when they sit at the sidelines, economic effects flow through the system. So what we want to do is actually to suggest that we need to bring back – make the engine start to run again.
So, as ASEAN, we have all agreed that hanging on to multilateralism and hanging on to rule-based is important. We’ve also recognized that it’s important that we have dialogue to be able to get to a better place in the short term. And in order to do that, the position ASEAN has taken is we will not retaliate on the first move along this line. What we – what we want is an encouragement to have conversations so that we can find a better path going forward. Hence, I think we’re seeing dialogues actually beginning. We may not know what the outcome of the dialogue is, but it is a positive start.
The second thing that I think what ASEAN and Malaysia is also trying to do is manage things that are in its hand. So one of the key features that we’re looking from an ASEAN perspective is ASEAN’s GDP of its 10 member states is about 3.98 trillion U.S. dollars. Total population within ASEAN is just shy of about 700 million people. It is significant. However, inter-ASEAN trade is only 21 percent. So what can we do as ASEAN to actually create more integration along the way to control some amount of destiny in our own hands? So it was good to see this crisis triggering a lot more harmonization within ASEAN so that it can do things within its own hand. And I think this will also lead us to work much closer together with other regions in order to bring better resilience to the system and diversification. Not a(n) overnight answer, but when done builds a stable system over time.
Hence, currently our focus is twofold: design for the long term, work through the plans that we actually got, execute the economy Madani Framework to our best ability, build cushions to be able to manage through, but open dialogue and align with our partners so that we can get to a point that better outcomes can be achieved. And I think by doing this we will create a new paradigm going forward. And what we hope to do is to actually have more and more people also begin to embrace along the same path. I think it was a positive sign that actually discussion’s ongoing, so maybe we’ll find a smoother path as we move ahead. But it’s important that the world continues to work together as one, as opposed to the world fractures into blocs going in the future.
So I think my message is twofold. From a Malaysian context, for an economy that has shown good progress of turning around and growing, we want that to continue going forward. For an economy that has got resolve and capacity to manage, we want that to continue to go forward. But what we need to do is work well together, and we need systems that will bind us all in a better form, and we need better alignment to be achieved. And I by nature am an optimist. I think we will get there in some form. The road may have challenges, but let’s work it through. What we can control, we do more. And by doing more, we create resilience in the system and we dampen effects. But alignment will give us good outcomes in the future.
So I think that’s my message for us today in terms of what Malaysia is doing, how it’s been doing things along the way, and philosophy of how is one’s manage. I know in the Q&A you will ask me more things along the way. I will try to answer as best I can, but I apologize in some areas I may not have all the data. But suffice to say it’s important that we talk about what you would like to understand in terms of Malaysia particularly and maybe some philosophies along ASEAN. Thank you.
(Applause.)
Mr. Poling: Thank you very much, Mr. Minister.
So, for those online, feel free to write in any questions you have. For those in the room, I’m going to ask a couple so don’t go to the stand mic just yet; I don’t want you to have to stand back here. But I’ll let you know as we wind down.
So I’d like to start with the ASEAN response, and then we can talk a bit about Malaysia. I imagine the audience will want to as well. But on the evening before President Trump announced the pause on most reciprocal tariffs – all those except the ones on China – ASEAN had announced plans for an ASEAN-U.S. economic framework that was supposed to focus on, quote, “frank and constructive dialogue.” And that’s certainly been the messaging out of Kuala Lumpur as ASEAN chair, that this has to be a unified response. But we’ve also seen individual members – I mean, individual Southeast Asian governments understandably pursuing their own bilateral negotiations with the Trump administration. So could you speak a little bit more about that balance between the ASEAN framework that Malaysia hopes to see and the realities that these are 10 individual countries with very different tariff rates?
Minister Azizan: I think we always have to take in cognition of the fact that the state of development within ASEAN can be very different from one member state to the other. Countries like Singapore is probably very high up the value chain, and other members may not be so high up the value chain. And the nature of their exports and imports are also very different. And the skillsets that exist in the country are very different. ASEAN, as a bloc, has potential. Hence, one of the key things that we’re trying to do is actually work much tighter together on the things that we can work within ourselves. So that – I think there is no misalignment in that instance. And we will continue to push to enable greater inter-ASEAN trade, and predictability and deployment of joint projects in infrastructure, and so on. That is beneficial for the ASEAN economy overall.
However, this shift that’s actually happened in the global trading environment needed a response. So the first response that ASEAN said was actually, don’t fight it, yeah, because when you actually dig in positions you don’t create an environment that conversations can actually occur. Hence, the nonretaliatory mechanism that we talked about. Second, we said, let’s go to core principles. What do we want? We want a multilateral trading mechanism to continue to exist. We want a rule-based mechanism to continue to exist. And I think each member states have agreed on those high-level principles.
But we’re also practical in understanding that there may be differences between each state, and there may be differences in prioritization that each state may want. So therefore, bilaterals will continue to have to exist. But what ASEAN will do is we’ll find alignment between the bilateral discussions that are happening, and we will share information in terms of how discussions are actually managing through along the way, and what seems to be working, so that we can come to a better outcome overall. I don’t fault anybody for having that sort of stand. But we must have the ability to talk to each other, whereby we don’t in the discussions make things worse for other ASEAN members.
Hence, there are regular communications ongoing between ASEAN members to make sure we don’t paint other members into corners. So I think that’s the best outcome, giving flexibility that addresses the gaps of development growth, while allowing members to exercise their sovereign right to actually move on.
Mr. Poling: The other elephant at the room, besides the government here, is the government in Beijing. Just last week, Xi Jinping was in Malaysia, signed, I think, more than 30 memoranda of understanding with the Malaysian government. But there’s also been a bit of a sharp edge to recent Chinese rhetoric, noting that Beijing will seek to punish any country that strikes deals with the Trump administration that are contrary to China’s interests. Which must put Malaysia and everybody else in South Asia in a difficult position amid this U.S.-China trade war. How is the government in KL thinking about navigating that dilemma?
Minister Azizan: Well, we all live in the spaces that we live in. So we got to trade. We got to do things as we move along. So I think realism, practicality must take hold. I think in the ideal state then everybody will shake hands, hug each other, and life will be good. But the world is not so simple in that instance. But the reality is human beings have always operated on the basis of finding, where they can, common ground so they can interact. Because through the interaction that actually things get built. It’s through the interactions that actually trade actually happens. And I think that’s what’s been underpinning growth in society for a long time.
So while the U.S. position and the Chinese position may have very different stances along the way, what ASEAN has been good at over all the years is actually to maintain some sense of neutrality, some sense of being able to trade with each other, to trade with both sides without getting into very difficult gaps or mess along the way. And I think that’s what we will continue to want to do because much more harmonious, much more open mechanism allows a better outcome than a fractured mechanism. The sum of the parts – surely the whole is better than the sum of the parts. And we are being able to prove that in the past, and we want to continue to work towards that in the future.
Mr. Poling: Thank you.
All right, let’s go to our audience. And for those in the room, if you have a question, please head over to the stand mic. Tom, do you want to head up there? We’ve got it in the back of the room. While you make your way I’ll read out Murray’s question on the screen, if that’s OK.
So our first online is from Murray Hiebert, who’s a nonresident here at CSIS and also the head of research at BowerGroupAsia. Murray asked: Can you tell us about what Malaysia has put on the table regarding the tariffs, and how did U.S. officials respond? Did they suggest any next steps in Malaysia-U.S. tariff talks?
Minister Azizan: I think the reality is that, OK, the tariff came on on April 2nd, right, and there was dialed back a week after that – a week and a half after that, or something to that effect. So we are probably 21 days since announcements of liberation day. A lot of countries have been trying to put into the basis to actually initiate the discussion. So Malaysia has done the same. First, we put in requests that we want to have a conversation. We address and shape what we want to talk about along the way. I think this week we’ve we had our first round of conversations with the administration to see how do we frame good way forward.
And I think in that framing of a way forward the important thing was to articulate, like, what’s the outcome that is beneficial for all? And what’s important in the dialog is to actually create clarity in terms of what’s at stake along the way. I think, as most people will know, that when you have your first discussion let’s put things on the table. Let’s make it transparent. Let’s agree in a frame how we will proceed forward. And I think that’s where we are. The good thing is we’ve had our first conversation. The good thing is the conversation was received well enough. Next is a number of steps that will have to come after that. We’ve also always seen that over the years in order to lock up any bilateral arrangement, to lock up trade agreements, it takes a while to work through the technicalities. But it starts with first conversation and first principles, and then continued dialog to close the gaps.
Mr. Poling: Thank you.
All right, Tom. And please introduce yourself.
Question: Thank you, Greg. I’m Tom Reckford with the Malaysia-America Society.
And I’d actually like to ask a touchy question. When Prime Minister Anwar Ibrahim was running for office, leading his party, he made a big point about the need for reform in the new economic policy. But as we know, not very much has been done about it. This, of course, is the affirmative action program designed to raise up the role of the Malays the Bumiputera. But wouldn’t the economy do better if there would be some limits on the new economic policy and an effort to reintegrate the community of Malaysia Chinese and Malaysia Indians?
Minister Azizan: OK. Thank you. As you said, you’re going to ask a touchy question. But let me be practical in how I frame the answer of what is important for us to address. When you look at poverty, yeah, poverty doesn’t choose you whether you are Malay, Chinese, or Indian. If you are in poverty, you are in poverty, yeah? If you look at economic development, economic development can be very diverse from one region to the other. But if you are able to lift people out of poverty, if you are able to lift regional development to a better state, the outcomes are good along the way. So I think where we want to approach things, we want to go to the first common denominator and recognize what the base is today.
Hence, if you look at the interventions that the government has been doing today, it talks about how do we address poverty eradication in the country? How do we create more valuable jobs and lift the quality of life of people in there? And it doesn’t distinguish whether you Malay, Chinese, or Indians along that way. But this is the base level that we have to fix at this point of time. And that’s where I think we are putting a lot of effort and attention.
Where we are putting effort and attention is also to address the social contract that exists between government and society. And in that social contract, it says we help oversee, manage, and help you progress forward. You trade us off by giving us the right to look after the money that you put inside it. And we will spend the money in a better form. So hence, the priority for the government is actually, how do we distribute that so that the greater good of the whole society actually pushes up?
And I think that’s what the government wants to prioritize today, because there are gaps that exist today that we want to close. That is color-blind, religion-blind, race-blind along the way. So spending more money in schools is a good outcome. Spending more money into hospitals is a good outcome, yeah? And I think that’s where we are prioritizing. The other bits, we will catch up. But let us get the basic things addressed in the right form today. And you will see that that’s what the government has been doing in trying to narrow the gaps in the core delivery under the economy Madani Framework.
Question: Thank you.
Mr. Poling: Thank you.
Let’s go back to our online audience. We have a question from an anonymous viewer: What does Malaysia view as China’s unique value proposition for Malaysia’s economic growth in the next few years?
Minister Azizan: It’s very, very broad question. You talk about unique value proposition, I’m not sure what unique value proposition actually is. But the key is actually can we find ways and means that growth and prosperity can be jointly enjoyed by both sides? And I think when President Xi visited last week, yeah, that planned visit was been there for a while. A state leader of the stature of President Xi doesn’t overnight decide, hmm, today let me go somewhere. It’s a plan, structure, big mechanism. And there’s a lot of effort that’s been done to see where there are opportunities for both sides to work and cooperate to common growth goals.
So where Malaysia and China have come to an understanding that there are cooperation elements to be done, whether that’s in terms of technology, that’s in terms of education, that was what was underpinning the MOUs that were actually entered into. The MOU still take a lot of time to maybe be executed, but the principle was it cannot be one way. It had to be both ways, that both sides will have to find a common gain that is coming. I think that exists in any relationship one may have between one country to the other. Which is why, if you look at Malaysia as an economy, we are a very diverse economy.
We trade with all countries. The U.S. is the third-largest trading partner to Malaysia. China is number one. Singapore is number two. The EU is number four. No country is greater than 15 percent because, by nature, we are working towards growth across all elements. And in that form, when you have this sort of value proposition, you put it, both sides got to find what can we do for both joint interests, rather than singular way of moving ahead? So it was a very broad question. So I gave you a broad answer. (Laughter.)
Mr. Poling: Before we take the next one, if I can just take the prerogative of the chair to ask a quick follow up: What then is the unique value proposition of the U.S., right? What does the U.S.-Malaysian economic relationship provide that is perhaps different than what, or the same, as what the Malaysia-China economic relationship provides?
Minister Azizan: I think if you look at the U.S.-Malaysian relationship, it’s been there for decades upon decades along the way. It was built up from early businesses. It was built up from people like me that over the years came here to be educated and grew within the system, partnerships that get built along the way and embedded into the economy that binds us all together. So now we have a prosperous relationship that runs. So from Malaysian perspective, we’ve always welcomed the U.S. as an investor into Malaysia. And we have big names that have come into the Malaysian context, whether you talk about Intel, you talk about Microsoft, Amazon, and stuff. So they brought growth value proposition for the country.
At the same time, we integrated with the value systems and the supply chain mechanisms of these companies that came to Malaysia. And we found a way that it helped strengthen both sides, because from the value chains that they got within Malaysia they were able to sell it elsewhere around the world. And that’s what globalization did. It picked the best things that you could get along the way, combined it all, and then it put new propositions that will increase value overall on a global scale. So I think we want to continue to have a great partnership, as we have done with the U.S. over the years. We want to deepen that partnership. We want greater balance in that partnership, where higher technology jobs, better exchanges, better partnerships, more new areas of growth can be jointly explored. And that’s where I think we will gain along the way. And both sides should gain on that same manner.
If you look at China, China also may offer certain other things. And we will also look at that, so long as it also still facilitates the development of Malaysia in what fits our needs along the way. So while the U.S. helped and were party of technology elements, were a party of global supply chain movements, China also helped us in building infrastructure in the country – trains, some ports, and stuff like that. But our partnership has always been a Malaysian play. So we found ways that we could coexist, building on strength to gain for both sides. I think that’s the important thing to remember – a balanced relationship that balances both sides actually makes the whole thing run on a better form.
Mr. Poling: Thank you.
All right, let’s go back to the online audience. Nerida King with ASPI – USA, not Australia – asks: How is Malaysia preparing for a possible resumption of U.S. reciprocal tariffs, both tactically and strategically? They’re not going to let this one go. (Laughter.)
Minister Azizan: Of course. It is a hot topic that’s actually moved on along the way.
I think the reality is we have faith that it is important that we work together to find a resolution. Conversations are ongoing. And how we close the gap will facilitate that to get it to a better space. And I’m hopeful that we’ll be able to achieve that, yeah? But if we are unable to achieve that, then we need to also understand what can we do by ourselves, yeah? It may not be the best outcome. It may be a weaker amount of outcome. But we still need to continue to survive. And in that instance, what can Malaysia or other countries react? They can react by finding like-minded people who actually want to trade and continue to do things together. They may find areas that we can work together as one, say, for example, ASEAN.
If we work together as one, it is a market that is reasonable enough in size, we can increase intra-ASEAN trade, then we have elements to be able to cushion blows that actually goes in. Not a perfect solution, but it helps. And I think that’s all you can do. Find things that is in your hand, find things that you have control about, execute that to the best of your ability. The rest, improve things as you come along. But if those don’t work, there’s something else that you have on this side. The ASEAN approach will also mean that we’re happy to continue to work towards opening up more free trade arrangements with other regions who want to continue to prosper along the same line. And hopefully, we’ll also get further ahead along that line, yeah? But ultimately the best outcome is everybody comes along in that same place and we all prosper together.
Mr. Poling: Any other questions from the in-room audience before we move on? OK, let me ask another hypothetical then. Right now, a lot of the anxiety and the attention is on the bilateral U.S.-China tariffs, which have gotten to, you know, levels that effectively will force decoupling if they – if they aren’t removed. If 90 days from now, we still have 100-plus percent tariffs both ways between the U.S. and China, what would that decoupling mean for Malaysia?
Minister Azizan: (Laughs.) The reality is, I don’t know. (Laughter.) I don’t want to speculate what the conditions like that can be. And I need to live in the real world, rather than a speculative world. And in the real world, my focus should be what can I do today. What can I work on to build capability that the economy can navigate according to what the navigation can lead to? So, for example, as I said, find common interests. So in ASEAN, the desire to actually deal with moving to a greener future is an important element. We are still a growing region. So our GDP growth moves from 5 to 8 percent along the way, power consumption in this area is very high. But hopefully what we do with power consumption, we don’t continue to chop trees, we don’t continue to mine too much on coal and use that as a fossil fuel, but we enable renewables.
So within ASEAN, what we can do is actually prioritize infrastructure growth that are good in nature to actually fill the needs of the future, but support economic needs of today. Because it creates economic activity, yeah, because it’s necessary. So Malaysian intent, for example, we know that by 2050 we want to be net zero. And that was a commitment that Malaysia makes. And when Malaysia makes a commitment, it will follow through on a commitment. For us, it means that in the grid we have to dislodge coal. To dislodge coal, we have to bring in renewable products into the system.
While there are opportunities to add solar in Malaysia, to do a bit more hydrology and put more dams in Malaysia, it’s probably not enough to cater for the needs of the future. So the answer resides in connecting ASEAN through the ASEAN power grid, so that people who are better endowed can realize the gift that God gave them, commercialize that, export it to us, so both party gains. We get stable green power, say, Vietnam gets a new wind farm that gets built, a solar farm that gets built. Jobs are created. Economic activity is created. And we gain control of what is necessary along the way, and we cushion blows. So, again, I’m a practical man. Let’s focus about what we can do and realize those, because that helps us. Because it’s a necessary transition that we want.
Mr. Poling: Thank you.
Another question.
Question: Thank you, Minister.
I want to ask about fiscal monetary coordination, in the sense that, you know, one of the fiscal priorities is to make sure that deficit is going down. But on the other side, the central bank has sustained overnight policy rate of 3 percent. And there is, like, some differences in between the fiscal-monetary side of these, but I want to ask if there’s any contingency frameworks in the case if there are more uncertainties and volatility in the market in the upcoming times. For example, U.S. financial tightening or, let’s say, Red Sea oil issues. Are there any sort of fiscal-monetary coordination that has been planned on how the government is going to respond to that? Thank you.
Minister Azizan: I think our commitment in terms of fiscal responsibility and improving fiscal space is a commitment that the government took on. And it wants to get there. And in some of the ways it’s trying to get there, it is actually taking back what has been an inefficient way of deployment, and to bring it into a simpler form. So I’ll give you a very simple example, diesel. For a long while, diesel was a subsidized fuel in Malaysia. We were selling diesel at two ringgit and 15 cents, when, if you went to an open market, it will be three ringgit-something along the way. So that means the government subsidized $1.20 of the diesel fuel price. Not efficient.
We recognize that some parts of society may still need some support, yeah? So as long as I can support that segment of society, yeah, and for the ones who can afford it pass the true cost through, I get to do both things, right? I protect the vulnerable and I claw back fiscal saving. When Malaysia was selling diesel at two ringgit and 15 cent, yeah, actually, the leakages that occurred doesn’t necessarily happen. Leakage within the Malaysian context also we had a lot of smuggling that occurred, smuggling of diesel products that went across border along the way. Diesel was meant to be used at retail for personal consumption, but businesses were coming to the petrol station to take it. They go back, they siphon it out, they use it for business. And a business should be able to pay for those diesel.
So when we do subsidy rationalization, what we do is we rebalance. We protect people who needed to be protected. We put the price at market. So we take away the arbitrage that exists. And the saving is realized. So I think there’s still room for us to be able to do that. And as we create room, we create fiscal space. And when we have fiscal space, if there are shocks to the system the fiscal space gives us the capacity to manage. If you look at Bank Negara’s OPR rate that exists, it’s at 3 percent today. During the lowest point that you got to equal to 1.75. When everybody was hiking like mad as trying to deal with inflation, yeah, Ben Nagara also raised what they raised in measured form along the way. And they hit a fairly accommodative rate of 3 percent, which was comfortable for businesses to be still able to do business, but signaled the right message along the way.
So you look at what are the other outcomes of it. Inflation. Last year, inflation hit 1.8 percent. This year – up to March this year, our tracking numbers are indicating headline inflation of 1.4 percent. So inflation is under control. The rate is at 3 percent. There’s no pressure for the government at this point in time on that. Now, if things get difficult is the tool available to be looked at? It’s available to be looked at. But we don’t take that preemptive decision today. We only use it when necessary to be used along the way. So for us, create space. Whether that space is a monetary space or whether that space is a fiscal space, that ability to use tools when necessary is a very powerful tool that we need to keep.
Mr. Poling: We have just a few minutes left, and it is a Friday – (laughter) – so maybe we should try to leave everybody with a little bit of optimism. If we were to squint and imagine what a positive U.S.-Malaysia economic relationship would look like under the Trump administration, what would Malaysia be looking for? You know, without global trade wars, what would Malaysia hope to see from this administration as an economic partner?
Minister Azizan: I think Malaysia has always been a good economic partner to the U.S., yeah? That’s why the U.S. has always been among Malaysia’s highest foreign investor in the country. We provide an environment that U.S. companies are able to prosper in Malaysia. Intel has been in Malaysia since 1971. If you go back to other companies, they’ve been even longer, since independence along the way. So what we want is the ability for us to continue this relationship, create these things. But the U.S. companies are given opportunities to prosper within the space, yeah, can compete within the space, to grow, to integrate what they have within Malaysia within their global supply chain. That’s a great outcome.
And I think it can continue to go that path because both parties treat each other with respect. Both parties work to integrate things along the way, and work to a common outcome. And a common account is to make the outcome bigger rather than smaller. So I always believe it’s better to talk about how do you make the cake bigger, than let’s argue about how you cut the cake into little bits. Because then nothing gets added. And I think our historical relationship has allowed us to make cakes bigger. Let’s go back to making cakes, yeah? Let’s not argue about how you cut cakes into little bits.
Mr. Poling: Thank you. OK, with that I’d like you all to join me in thanking His Excellency Amir Hamzah for joining us today. (Applause.)
(END.)