Podcast: Trump Deal Blowback Belies Big Malaysia Stakes

From new US trade pact to future China competition fears, a business lens on regional and global implications of Malaysia's shifting geoeconomic position.

INTRODUCTION

ASEAN Wonk: Welcome to the ASEAN Wonk Podcast where we bring you expert insights and regional perspectives on Southeast Asia and Indo-Pacific geopolitics and geoeconomics. I'm your host, Dr. Prashanth Parameswaran. And if you haven't already, do make sure you're subscribed to the ASEAN Wonk platform at www.aseanwonk.com so you don't miss any of our full posts.

Our guest today is Datuk Siobhan Das, who is the CEO of the American Malaysian Chamber of Commerce (AMCHAM Malaysia) based in Malaysia. We’ll start our conversation talking through some recent developments, including the wider implications of the new U.S.-Malaysia agreement on reciprocal trade and the Malaysia ASEAN chairmanship. Stay tuned as we go through a number of other forthcoming developments, including geoeconomic challenges posed by US-China competition and prospects for Southeast Asia’s economic story.

Note: The transcript that follows the above free clip preview has been lightly edited for clarity and organized into sections for ease of quick browsing. For all ASEAN Wonk Podcast episodes, full video and audio podcasts, along with edited and sectioned transcripts as well as block quotes, will be a premium product for our paying subscribers, but we will include a short free transcript preview and a clip for all readers to maintain accessibility. Paying subscribers can find the rest of the full transcript and the full video podcast right below the paywall. If you have not already, do consider subscribing, and, if you have already done so and like what you see and hear, do consider forwarding this to others as well who may be interested. Thank you for your support as always!

NEW TRUMP DEALS IN PERSPECTIVE

ASEAN Wonk: So welcome to the podcast Siobhan, and let’s start with the elephant in the room which is the US-Malaysia trade deal. We’ve heard pockets of domestic criticism on sovereignty and so on. My understanding talking to officials is that they went into this with eyes wide open, and they had to weigh these considerations against the fact that this was a U.S. administration that was taking a pretty tough line on these issues. There was also a preference for Malaysia being a first mover relatively speaking, leveraging the ASEAN Summit and the fact that President Trump was going to be in Malaysia. And also getting past this notion that Malaysia was being left behind in some of the big strategic decisions in US policy and being a trusted partner in some of these key sectors. I’m interested to hear your thoughts. And also, more broadly, what does this mean for companies? There’s a lot of talk about challenges, but what does it mean in terms of the opportunities for companies that are looking at this U.S.-Malaysia relationship more broadly?

Datuk Siobhan Das: Thank you very much for having me on and for asking AMCHAM to come and talk on this, Prashanth. Great to see you again as well. You know, this is a really interesting time, and you’re right on all the things that you said there. It was a very interesting negotiation. It’s not your typical FTA. It came to being because of the tariffs that the Trump administration was putting on across the globe. It’s not just Malaysia. It’s right across the globe, and everybody is impacted. And I think everybody was trying to figure out what is it that we needed to do to be able to still engage with the United States. The United States is the world’s largest consumer market. It is one of the trading partners for a number of different countries and an important trading partner.

And Malaysia is no different. Significant trading partner for Malaysia. I think it’s the number two trading partner, and the US is the number one investor in Malaysia. So this was a critical agreement to be able to come to. And there’s a lot of US businesses that have landed in Malaysia over the last fifty years. We represent a host of those, and we’ve seen that grow over the last fifty years. A very significant number of them are in the semiconductor field. So it was very important for Malaysia to understand what that market was to its economy. And I think you’re absolutely right. I think Malaysia did take a very pragmatic and very practical look at what they needed to do to maintain that market. This is not to the exclusion of any other market, but it’s with the significance that the American market has to its actual driver of its own economy. it had to really think about it and say: okay – what is it that we need to do to preserve the drivers of our economy? The goals that we’ve already set through in the NIMP – the New Industrial Master Plan – and how do we achieve those goals? If we don’t make this deal, you know, how does that set back our own growth? How does it set back what we want to achieve as a country in terms of moving up the value chain, in terms of quality jobs for our people? So I think the country needed to look at how does this agreement shape what our future is.

But, again, this is not to the exclusion of any other country, because I think Malaysia rightfully so has to diversify its markets. It’s matured enough over the years to be a leader and an innovative leader in the region, and it is going out slowly into different markets. And I think that’s great to see, and we’re all excited that a lot of the investments that are coming into Malaysia are actually using Malaysia as a base to leapfrog or enter different markets that Malaysia provides. I think Malaysia has nine FTAs, and that provides a very attractive base for a lot of U.S. companies to come to Malaysia. So I think the opportunity to get this right was really powering behind what the negotiators were looking for to try and find a deal that could balance what they need to move forward with. So I think the approach by MITI (Ministry of Investment and Trade) was correct to look at that balance.

NEW UPGRADE AND INTRAREGIONAL COMPETITION IN SOUTHEAST ASIA

ASEAN Wonk: One of the other aspects that I think was a little missed amid the focus on the trade aspect was the fact that we also technically had an elevation of the US Malaysia relationship to the level of a comprehensive strategic partnership. That’s the first upgrade that we’ve seen for a Southeast Asian country under the second Trump administration. Skeptics thought the relationship was not doing well in terms of the optics particularly if you look at the start of the Gaza war. So the fact that Malaysia has been able to get to an upgrade is a bit of a missed point. I think you’ve talked about this publicly that the intraregional competition in Southeast Asia for investments has actually been increasing over the past few years, and for Malaysia to get on the map and stay on the map in terms of the United States and the investment landscape, it also needs to do a bit more. Do you think that this upgrade also does help Malaysia position itself a little bit more on the map?

Datuk Siobhan Das: I think there’s a lot that’s happened in the last few months that has raised Malaysia’s profile. I think also there’s been a lot of understatement about the role that Malaysia has played. I think we just haven’t given it the recognition that it actually exists. I think this is where the strength is. There is a there there: I think that the both sides were at pains to really understand what was valuable in the relationship. And I think when they actually studied what was there, they came to the conclusion that, yes, there’s still work to be done, but, fundamentally, there is a level of trust and compliance that can be worked on and upgraded. And I think that’s where the relationship is pointing towards. Malaysia has the potential and is already a trusted partner. It’s got the rules and regulations and it has proven ability to play to global rules, to play to the needs of a monitored environment. It has all the foundations there, and it’s playing within those rules.

So I think it’s really establishing the trust and we’re making it more visible that there is that relationship. Whether it is – and this is not an area that we get into – but the security relationship between the US Malaysia is quite strong, but the commercial relationship and the strength of that commercial relationship with the commercial law that’s in place, the strength of the IP laws. Yes. Like I said, I’m not going to say that it’s perfect, but there’s work to be done. We can improve the transparency. We can improve our traceability. And I think that’s what the relationships and the acts and agreements that have come to place will support. And I think that’s what people are excited about in the sense that: okay, we have now clarity. Businesses now know, okay: we’re at nineteen percent on certain things, but they’re in various sectors that are important to the relationship. Those sectors have been given a different level of tariffs that can keep it competitive for U.S. business. Because a lot of that Malaysian business that does go back to the United States is important to the U.S. value chain. A lot of the businesses that are based here also supply the rest of the world. So, you know, that one is less of a concern. But nonetheless, once you’re complying to the United States’ needs, you’re going to be compliant to a lot of the international standards as well.

But this is nothing new. Malaysia’s already been doing this. It’s already compliant. It’s already shown its ability to be in that global value chain. And it’s not been looked at and regarded as an emerging market or a third world market. The US businesses that are here use and look at operations that are based here as first world. And once they’re qualified, once a Malaysian organization or a company is qualified to work with a US company, you’re qualified globally. So this is the strength of what Malaysian companies can actually do. And I think this is really important because what the agreements do is elevate Malaysian companies to be able to get plugged into the US ecosystem. And by doing that, they become globally recognized as well. So they become much more competitive, not just in the region, not just to the United States, but also globally. And I think that’s where the true value is for not just US companies, but anybody plugged into that ecosystem. And therefore, it gives the opportunity for a Malaysian company to decide whether or not the United States is a marketplace it wants to go to. And if it’s excited about it, then there’s a pathway. This is what you need to do. If it doesn’t want to play in that marketplace, then that’s a choice it has to have. But without these agreements, Malaysia may or may not have had that choice. So I think this is really an opportunity for Malaysian companies to make some really interesting decisions about how they want to innovate, how they want to grow.

GEOCONOMIC IMPLICATIONS OF ASEAN SECTORAL AGREEMENTS AND MALAYSIA’S ASEAN CHAIRMANSHIP YEAR

ASEAN Wonk: Just zooming out a little bit, Malaysia also just chaired ASEAN this year. And there’s a whole host of geoeconomic areas there that I know businesses are looking at more generally with respect to the region and globally. Artificial intelligence. The Digital Economy Framework Agreement pushed it out to next year. The ASEAN Power Grid. What are some of the sectors that you see as areas of greatest opportunities for business, not just regionally, but also, places where Malaysia can contribute as a country that has played a really important role in some of these areas like semiconductors? And during the pandemic actually is when perhaps US consumers actually became more aware of that role that Malaysia plays in the semiconductor supply chain.

Datuk Siobhan Das: Absolutely. The semiconductor trade is absolutely vital, and I think this is something that Malaysia can play and does play a really important role with the number of exports. I think the number is that ten percent or eleven percent of all electronics passes through Malaysia in some way, shape, or form. And so it was very important for Malaysia to retain this position. And not just as an assembly test because it is moving up the value chain, and we’re getting innovation here. There is design happening here. So it just gives us security in the fact that there is a marketplace. And so SMEs and even companies wanting to come here can dedicate that investment to be able to reach that marketplace. So I think semiconductors is going play a vital role going forward.

But flowing on from that, these are other sectors that are going to grow. We’re already seeing growth and commitment by medical devices, medical technology that are building up on top of this semiconductor base that has been matured over fifty years. So you’re seeing that come. And when medical devices come, there’s so many rules and regulations and permits that they have to get here. Once it’s in Malaysia, you’re unlikely to see them leave very quickly because it’s hard to get in and want to see it. And if Malaysia can be the fifth global hub for medical devices, this would be a really important thing for Malaysia, not just for the US trade, but also regionally. And I think that’s a really important sector we need to be looking at in medical technology and medical devices. But also in addition, aerospace. And I think aerospace, there is a huge opportunity here, not just in parts, but also in development in different areas. So, of course, the MRO (maintenance, repair and overhaul) development here is very important to have.

But also, you’ve got companies that are actually innovating and finding homes in the ecosystem in Malaysia, which also can then tap into the ASEAN framework that is there so we can make sure that the inputs are coming from ASEAN, that we can build the hub that ASEAN that can provide. And I think that’s what’s exciting about what happened at ASEAN. This work on interoperability, this work on regionalization, and how do we use the interconnectivity within ASEAN with Thailand, Vietnam, Indonesia, Singapore. How do we all work together? And I think that’s what’s really important. I’m really glad that in Malaysia’s chairmanship, they really pushed a lot of the interoperability and the regionality. And I think that’s what’s going to really drive not just Malaysia, but the whole ASEAN coming together and providing opportunities for the rest of the lesser developed ASEAN countries to come into the framework.

And then with the digital agreement, as you said, we’ve got a little bit more ways to go. But there’s a lot of commitment towards that. And I think that’s something we’re making great progress on, and once we can get better data flows, making sure that we have a trusted network across the region, this is all going to play and make sure that ASEAN grows harmoniously and together. So, yes, it’s going to be, you know, you’ve got Singapore and Timor Leste at the extremes, but everybody else in between can actually start to say, well, you know, how do I plug in and look towards that plug in? And I think that’s what’s really important is how do we build together. And, of course, you’re going to have interregional competition. Everybody’s going to want to have a little to get ahead of each other, and there’s nothing wrong with that you know? Competition always is a driver of innovation. We’re looking forward to it. And I think Malaysia should try to strive and move forward, but also how do we look at areas and how do we plug into each other as well.

CHALLENGES TO REALIZING NEW GEOECONOMIC OPPORTUNITIES

ASEAN Wonk: In some of these conversations – on supply chains, for example – it’s often forgotten that governments can shape some of these conversations on supply chain movements and such, but, ultimately, it’s going to be the businesses that actually have to do the moving. To that point, you talked about some of the opportunities and the sectors there. But from a business perspective, what are some of the top challenges that you see to some of these opportunities in Malaysia as well as regionally and globally that businesses are facing that might be a little bit underappreciated from those that look primarily at geopolitics or at governments?

Datuk Siobhan Das: Well, if you take geopolitics and government aside and you start looking at what’s really driving business growth, cost is always going to be king. But it’s not always the main reason why people choose a location. If you look at the risk map, they outweigh a lot of the different aspects. So access to energy. Access to energy is absolutely critical right now. So if and when the ASEAN Power Grid can come into being, this is going to give ASEAN a much, much better focus on the what it can deliver. So power, access to power, access to renewable energy. So these are really, really important things. Your customer is going to be looking for renewables. How are you going to deliver that? That doesn’t mean that you’re not going be using traditional forms. It’s how do you plug in renewables?

You’re also going to be looking at supply chains in this world right now. Where’s the tariff? What are the limitations of the tariff? I don’t think anybody’s leaving countries, but which lines of my product are going to be best suited to be closer to customer? And closer to customer doesn’t necessarily mean close to the United States. It could mean my customer is in Asia, so therefore, I need to be in Asia. So these are all decisions that businesses need to make. Also, inputs. Cost of transporting inputs is going up, you know? You cannot just rely on ships or air traffic sending you those inputs. So if you can develop your local ecosystem, then your costs are going to be managed. So can you develop local inputs? And I think this is where ASEAN has a real opportunity to develop its ability and its SMEs can get into developing key inputs and being able to have a regional supply chain. And I think this is something that’s a promise.

Malaysia has increasingly got a fantastic robust ecosystem that is increasingly being able to provide inputs to the US supply chain and the Western supply chain, and it should be encouraged to do more. And I think the Malaysian government is encouraging its SMEs and its Malaysian businesses to look at how do we plug in to innovate so that it could actually supply into those ecosystems and be part of the trading mechanism. So I think this is the Malaysian government saying: how do we support our SMEs? How do we help them gain access to finance? How do we get them access to capacity building and capability growth? And I think with all the regional work that’s been done in ASEAN in individual countries themselves and supporting SMEs and with the ART (Agreement on Reciprocal Trade) as well. Access to finance, access to knowledge of the secure market that is there will give businesses confidence that they can now spend money on training, spend money on investing in new equipment, spend money on innovation and design so that they can be part of that and not just rely on being a minor input, but actually be part of the innovative cycle. Working with regional teams. Being able to develop regional teams working with the Thais, working with the Vietnamese or even the Philippines or in India or anywhere else so you can develop that knowledge.

And I think that’s what’s really interesting. The more businesses can see, okay, this is what’s happening and those supply chain movements, they are going to be kind of like, okay: how do we shorten and strengthen them? But of course, are they going to move? Supply chains move all the time. They move more than you think, but it’s a cost. It costs to move supply chains. And I think one of the things that we need to be very aware of is the role of people and talent mobility, and how do we increase the ability for people to move so that you can actually share that knowledge, to be able to bring that knowledge across the board and vice versa. There are centers of excellence across Asia that the United States, that you know, maybe the Europeans may need. So how do we showcase what innovation’s been done here and how do we spread it across the world and vice versa? So talent mobility is going to be absolutely critical. And I think this is something we would like to see how we can impress on businesses; how do we make that easier.

So there’s lots of challenges. Supply chain is exciting, but we need to be able to keep an eye on what really is core to us and core to the businesses. And each business is going to have a different business model. There’s no one size fits all. So governments need to be able to be adaptive enough to understand that each company has a different business model. You cannot use one paintbrush and paint the one patina across and say the industry behaves this way. It doesn’t. Everybody has a different business model.

BEYOND TRUMP TRADE DEALS AND CHOICES: US-CHINA GEOECONOMIC COMPETITION AND HOW BUSINESSES ARE NAVIGATING IT

ASEAN Wonk: Right. To the point that you raised earlier as well about the calibration that these countries have to make when they’re sort of managing relationships with different powers. So if you’ve got a relationship with the United States and you’ve got one with China, how do you manage that? One of the things the trade agreement has gotten focus on is some of the provisions for example that focus on if you’re doing x, y, and z with another country, that might affect how the United States is going to treat you in certain areas. I’m wondering if we could zoom out a little bit from the Malaysia case and look at some of the geoeconomic impacts of US-China competition and the pressures that they’re exerting on different governments and how they’re thinking about the choices that they’re making. What are the downstream implications of that for businesses and how they’re thinking about the choices that they’re making, not just today, but five years, ten years, fifteen years down the line?

Datuk Siobhan Das: Okay…

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