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Malaysia wants to move up the global value chain by building a full rare earths industry, from mining to high-value manufacturing ‘mine-to-magnet’. How well do we understand the benefits and challenges of developing the rare earth industry domestically? On this episode of #ConsiderThis Melisa Idris speaks with Professor Emeritus Dr Tham Siew Yean from UKM’s Institute of Malaysian and International Studies (IKMAS). She’s also a Visiting Senior Fellow at the ISEAS-Yusof Ishak Institute in Singapore, a Board Member of ISIS Malaysia, and a Trustee of Khazanah Research Institute.
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00:00Hello and good evening. I'm Melissa Idris. Welcome to Consider This.
00:14This is the show where we want you to consider and reconsider what you know of the news of the day.
00:20So Malaysia wants to move up the global value chain by building a full rare earths industry
00:27from mining to high value manufacturing, what's called mine to magnets.
00:34Now joining us on the show today to help us consider the benefits and the challenges
00:38of developing the rare earth industry domestically, I have Professor Emeritus Dr. Tam Siu Yen
00:46who is from UKM's Institute of Malaysian and International Studies, better known as ICMAS.
00:51She wears several hats, among which are she's also a visiting senior fellow at the RCS Youth
00:57of Asia Institute in Singapore. She's a board member of ISIS Malaysia and a trustee of Kazanah
01:03Research Institute. Prof Tam, welcome to the show. Thank you so much for joining me today.
01:07So I think a lot of people are familiar with the term or with rare earths and know that it's being
01:14used in many essential technologies today from our smartphones to our electric cars.
01:22But I'm hoping you give us a lay of the land in terms of what the global rare earth industry looks
01:27like. So talk to me a little bit about where supply and demand is coming from.
01:32Good evening, Melissa. Thank you so much for inviting me to this program.
01:36Okay, if we look at the global context, we have what I call excess demand. So demand for rare earth
01:45is growing because of its use in modern technologies. So these are increasing very rapidly. As long
01:53as there's demand for new technologies, there will be demand for rare earth. But supply, unfortunately,
01:58it's constrained. It's constrained to the few countries that have the rare earth in terms
02:05of mining, as well as the mining technology. And the few countries that have the processing
02:13technology and the technology to produce the magnets used for both commercial purposes as
02:22well as well as for defense. So we have this what we call dual use technology. So now we come
02:33to the geopolitics of it. The geopolitics of it is that processing technology as well as the
02:43magnet technology is dominated by China dominated 85 to 90%. Mining is a bit more distributed. There
02:51there are a few countries mining. But it's the processing technology as well as the technology
02:58to produce magnets, which are dual use. So you can use it for defense, for missiles. So that
03:07brings the geopolitical dimension in this race for rare earth. And why there is increasing,
03:17you see an acceleration in the efforts to diversify supply chain. Because countries like US would see
03:26China as a threat. And would also spearhead this view that China is a threat because it dominates.
03:36Okay, so I did not know that there was a dual use for rare earth elements. So you can use it for consumer,
03:46commercial purposes, but also for defense. And when you talk about mining and processing and the magnets
03:53themselves, so there's upstream, midstream and downstream. And let's talk about each of these
03:58these separate areas of the value chain. And why Malaysia wants to develop the entire supply, the entire value chain.
04:07So when we talk about mining, you said lots of different areas can mine. But Malaysia also has rare earth deposits.
04:16So maybe talk to me there. How well does Malaysia actually understand our rare earth resources? Do we have a lot? Maybe you can give us a layer of the
04:28land? Okay, if we look at the rare earth elements and the deposits, it has been detected actually through
04:37satellite images that they can see it. I think this was reported in one of the Malaysia documents plan documents for
04:47rare fighting that you can see from the satellite images, you can see the patches where the rare earth is on the surface,
04:56because it only captures the surface, you see. The problem is that the surface does not tell you the
05:04whole story. It cannot tell you what sort of ores are there, what sort of grades of ore, how much of it,
05:12because it's beneath the ground. So it doesn't penetrate to beneath the ground, because sometimes this can be
05:18like 30 metres beneath the ground. So yes, yes, yes, yes, the images and also the government reports
05:27tell us they are there in Kedah, Kelantan, Trengano, Perak, and a few other states. But it cannot tell you
05:36what an investor needs to know, how much, how far deep do I have to go to take it out, and how extensive it is.
05:46It has to be extensive, because it's very capital intensive. If it's a small patch, it's not worth it.
05:53So you basically, after the images, you have to go in and do prospecting. So you actually have to
06:03examine the land by every square inch, and find out how much there is, and whether there's enough to
06:12make it economically viable. Okay, is it very much like the oil and gas industry, when they talk about
06:19exploration? Okay, so this is very similar, because you also need to map out and see how much you have,
06:25and what it requires to extract those resources from the earth. And that's where the complication lies,
06:33isn't it? Because for one thing, there are, it's capital intensive, and it's expensive, it's very
06:41expensive. But also, jurisdictionally, resources are of the purview of states. Whereas there is a
06:52national interest to develop the rare earth industry. Talk to me about that.
06:56Yeah, the mapping shows the rare earth is, the bulk of it is in four states, Kedah, Kelantan,
07:05Tringganu, and Perak. Now, there are also some in the other states, but the bulk of it, so
07:13the mining license comes from the state. So you need the state's permission to mine, as well as to
07:21prospect. So it's expensive. The state does not have the technology, nor the money, to do all this
07:34stuff. So they need a technology and a partner. An investor. An investor. Technological and monetary
07:42partner. That's true. That's true. So the state makes this decision on its own. Federal is looking at
07:54overall industrial development and how it can contribute towards growth, but it's under the
08:00jurisdiction of the state. So there are a lot of environmental concerns, environmental issues
08:10associated with mining, of which the federal government is, of course, very concerned. So, for example,
08:21a lot of the stuff is actually in the forest or near the forest areas. And these are gazetted, right?
08:29Okay. Forest reserves. Yeah. So the federal government wants to protect the forest,
08:35but the state wants to take out the minerals. So, of course, we can talk about different mining
08:41technology. So if you do the open cast mining, then you have to chop down all the trees and that's an
08:48environmental disaster, right? Because you will kill all the habitats and the wildlife, you know, and our
08:55biodiversity will all disappear if you chop down all the forest. So, of course, there's great resistance,
09:02you know, the, you must protect the forest, carbon sinks, you know, so the,
09:11then the option is, you know, yes, we can take it out, we can use alternative methods.
09:15I have heard that before. What do you think about that, Prof. Dr. You don't have to chop the forest. So
09:21the counter argument is we are not going to chop the forest, we are going to do in situ leaching. So this in
09:29situ leaching basically, you have already identified where the minerals are, you drill,
09:36you drill in and you flush in chemicals to flush out the stuff. It's very water intensive,
09:43uses a lot of water, uses chemicals, you need to use chemicals to flush this stuff out.
09:49So it's true. You don't chop down trees. That doesn't make it environmentally friendly.
10:01Because you flush in the chemicals, you flush out the stuff. And you have to do this carefully,
10:06because you, you don't want this chemical water to seep into your underground water or your river water,
10:12or contaminate the soil around, you know, you can do that. Of course, they say you can do the pond,
10:19and the pond will keep all that wastewater and it will not leak. But nothing is leak proof. We have our
10:28monsoon weather, you know, torrential downpour. So you can have overflow, the embankment may break,
10:34and then all the stuff will flow out into the river. Oh, you do you remember the media report about the
10:41Blue River? Oh, yes, I do. Okay, so that was the mining activity in Perak. And there was the media
10:50report last year, November about the river turning blue because of the pollutants coming out from the
11:00mining activity. So in the end, what happened is that the company was told to stop mining while they
11:07investigate. So they investigated that was in November, and they investigated over like one or two months,
11:15and they found that there was some irregularities in terms of regulatory compliance. But the blue water
11:24was not associated with the mining activity. That was the finding. That was the finding. So in January,
11:31the company was allowed to resume mining. Talk to me a little bit about that because so we have the
11:39environmental and the health concerns that loom large in mining projects, particularly in something like
11:47mining for rare earth or prospective rare earth. When we think about public buy-in, the social license,
11:57so beyond the mining license, there also needs to be a social license. How important is a social license?
12:03And what happens if communities remain unconvinced that this won't harm their environment or their health?
12:12Okay, let's just talk about the mining alone. I think it's very difficult to have the mine might buy-in
12:22because your forest is being affected, right? So for example, the illegal mining is reported by the
12:30people who live in the forest because they see the water being contaminated. So and then you see all these
12:39protests when the river water turns blue. So I think it's very difficult to actually, I think it's very
12:47difficult. You will have protests and the government will have to respond to the protests. What I think
12:54needs to be improved is actually in terms of environmental governance is always about transparency,
12:59right? So if you have mining activities, you have to say what you are doing and the safeguards.
13:06And of course, there must be trust. I mean, if you announce you have safeguards and there's no trust,
13:15that's equivalent to no communication, right? Right, yeah. I'm just wondering, Prof Tam,
13:21if there is a regulatory framework that governs rare earth at any point of the stream? Let's focus on
13:31upstream first. Do we have regulation or is that specific to rare earth or does it fall under all
13:38mining? For all, for everything. We have the DOE, the Environmental Impact Assessment. So there are
13:44structures in place. Yes, yes. But does it need to be tailored or updated for rare earth given that this
13:51is quite a new ambitions for Malaysia? I think the environmental safeguards are there. Actually, we have
14:02good regulations but implementation, enforcement, monitoring is something that I think needs to be improved.
14:13Prof Tam, if I had a penny or 10 cents for every time a guest on Consider This said that, I would be a very rich woman.
14:23But I'm glad that you made the distinction between talking about mining first. And let's move on to refining.
14:29So we've gone from upstream to midstream, which talks about the mineral processing, the management of
14:36waste residue and the like. Processing and refining has been described as the most difficult stages. You
14:42mentioned China dominates in this area. Yes. What makes it so technologically and economically challenging?
14:51First, very few people have the technology, right? Besides China is Australia. So Australia Linus is doing
14:59processing in Malaysia. It's capital intensive to set up the plant. It uses a lot of water.
15:09Because you have to separate the chemicals, you use a lot of water. It's a chemical process.
15:14Yes. You need chemicals to separate the elements. And the chemical process produces the toxic material,
15:23the waste material, the tailings. Is the waste radioactive? Yes. I think the concern is whether
15:34it is kept at the acceptable level. So if you see the history of the protests against processing in
15:42Malaysia is always about, is it kept, is it within the regulatory, acceptable level? So when there's the
15:51term non-radioactive rare earth elements, it means it's still radioactive, but below the threshold.
15:57Is that accurate to say? Actually, the elements are radioactive. It's whether you can
16:05keep it at a safe level. Keep it at a safe level. Okay.
16:08Does Malaysia have the capability to build that technological capacity to refine rare earth?
16:18At this point in time, no. We are dependent on Linus. Linus is the one that is
16:25processing the rare earth in Malaysia. The rare earth is imported from their mine in Australia and
16:32it's processed in Malaysia and then it is exported. Okay. But there is an export ban in place.
16:39Oh, that's for the raw materials, not the refined materials. Not the refined materials.
16:45Why I'm asking is if Malaysia has ambitions from mine to magnet that includes refining these minerals,
16:52materials. How do we do that domestically with Malaysian-made technology? Or are we dependent on
17:02a foreign partner to be able to do this? We will always be dependent on a foreign partner.
17:07At this point in time, we have some mining technology, processing technology we don't have. So we will need a
17:17technology partner. Linus has been in Malaysia since 2012. Okay, so that's about more than 10 years.
17:27So we come to this tricky thing called transfer of technology.
17:34So, you know, what do we mean when we talk about transfer of technology? Usually,
17:39usually it means that they have trained people in to do the process. They have to,
17:44where are they going to get the workers to use to do the processing if they don't train workers.
17:52So, of course, workers are being trained. The skills are being developed. They know how
17:57to manage these complex chemical processes. So we have that in terms of the skill development.
18:06But skill development doesn't carry you to product development. It's quite far apart.
18:13Okay. I have so many more questions about midstream. But since you brought up product
18:18development, I want to move to downstream. Okay. Which is, which I guess promises the highest value
18:24add. Yes. What are the main obstacles you've made reference to? What are the main obstacles
18:29Malaysia has in moving into these segments? We already have. We already have a few players in the
18:36making magnets. There's a Japanese company and it's a Swiss company making magnets for quite a long while.
18:44The inputs are all imported. They make the magnets and it's all exported. So they are already here.
18:51The thing is that what we want is a vertically integrated value chain. So that means we mine the
18:58ore, we process it ourselves, then we make the magnets. That's the vision, right?
19:04That's the vision. But of course, we don't have the technology. So the idea is that you want to get in
19:10more foreign direct investment in this manufacturing capabilities, boost our capability and be able to
19:21at some point in time develop the product ourselves. But that comes back to the transfer of technology.
19:30What is usually transfer is the process. Nobody is going to tell you how to make the product, right?
19:39That's an industry secret.
19:40Yeah. It's your comparative advantage. So are you going to give it to me?
19:47Understood. Okay. I want to talk about the current policy in place and what you hope to see going
19:56forward? So we have this really ambitious dream of building this value chain. But when you look
20:03across the value chain, Prof Tam, where do you see the most acute risks?
20:12Actually, there is at every stage. What I think is difficult is that you want the vertically integrated
20:20chain in Malaysia when you don't have the technology and you actually don't have the capital. I think that
20:27part is very tricky because it requires huge coordination. So you must be able to mine the ores,
20:36enough of it for you to set up a processing plant. And then the processing plant will produce the stuff
20:43that these manufacturers want. Right. So you need to coordinate. You see in the case of Perak,
20:50they had a pilot project. That's right. And they mine the ores. There's no buyer in Malaysia. So they
20:58have to have it exported. So they were given the waiver from the export ban because there's nobody buying it
21:04in Malaysia. Linus doesn't buy from us. They buy from their own mines in Australia. So the ores cannot
21:13be processed here because we don't have a buyer, a manufacturing plant, sorry, a processing plant here
21:21that says, I'll take your ores and I'll process it. Okay. Can I ask you about the geopolitics you referenced
21:31a little bit earlier? Does that limit Malaysia's or actually the question is how does that affect
21:38Malaysia's room to manoeuvre when we're looking for a partner? Technology partner. Because essentially
21:44you need a partner but there are geopolitical considerations of both sides. Yes. Yes. I'm
21:51referring to the US and China essentially. Yes. So this is the key issue in terms of technology partner
21:58China because China has the technology but they also said they are not going to transfer technology.
22:06They also said that they will not transfer. So in the ideal, they have the technology
22:13but they said they won't transfer plus US doesn't want China in the equation. So that's also another
22:22limitation. So in terms of technology partner what is happening is like this. We have a liners here
22:33processing which is expanding their production capacity. They are going to expand the processing.
22:42This I think probably has to do with their license renewal being up in March 2026. Oh,
22:49it's coming up soon. Yes. So they have expanded their production capacity. They have partnered with a Korean
22:57technology company to manufacture magnets. So they have a little vertical integration there.
23:05Liners brings in the ores. It's processed in Malaysia. It's sold to a manufacturing plant
23:11which are working with them in terms of manufacturing the magnet. So they have that little vertical integration
23:19there. Except that our miners, the ores are not in the loop. Oh, because there's no vertical. We don't have,
23:30we don't have, they are prospecting. They are not yet mining. They will mine when they can find
23:38the partner and the money. Wow. I see so many hurdles to our ambitions. So in the
23:48couple of minutes that we have left, can I ask you what, based on your research, your observations,
23:53you've been working on this for several years. What is it that you would like policy makers, both state
23:59and federal to prioritize or to focus on moving forward? I really think they need to improve their
24:09coordination because this is a sector that straddles a few agencies and it's not all within one agency.
24:17So mining is under the state under NRES and then the processing is under the AELB,
24:29Atomic Energy Licensing Board because of the radiation. That's under MOS-T and then the manufacturing is under ME-T.
24:39So you need to coordinate across the agencies as well as between the federal and the state.
24:45That's a lot of players involved. Yeah, yeah, yeah. So there are multiple players without even the
24:52consultation yet. So you have to consult your public. Public, yes. And also involved industry as well.
25:00Yes, yes. Prof Tam, thank you so much for laying it out. I feel I have a clearer understanding of our
25:07ambitions and the challenges that lie ahead. But thank you for your time and sharing your work with us. I
25:12appreciate it. Thank you for having me. That's all the time we have for you on this episode of Consider This.
25:17I'm Melissa Idris signing off for the evening. Thank you so much for watching and good night.
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