Sustainable management of rare earth elements (REE) in Malaysia offers significant economic opportunities, but balancing these with environmental and national security concerns is critical.
Sustainable management is the foundation for ensuring a balanced approach to economic, social, and environmental needs, safeguarding resources for future generations.
This framework requires long-term planning and responsible management of natural resources, particularly in the context of Rare Earth Elements (REE) in Malaysia. These elements play a critical role in high-tech industries, green technology, and national security.
Malaysia is blessed with large quantities of REE. Among its significant natural resources are bauxite, copper, gold, iron ore, natural gas, petroleum, timber, and recently, REE. These minerals, particularly REE, are crucial for high-demand industries such as electronics, renewable energy, and defence applications.
According to the Malaysian Investment Development Authority (MIDA), by 2030, 18.2 million tonnes of REE are expected to be extracted, with an estimated value of RM747.2 billion. Additionally, there is the potential for investment to reach RM100 billion, while creating 4,000 job opportunities.
While these resources offer significant economic opportunities, their extraction processes are complex and potentially harmful to the environment.
As Malaysia ramps up efforts to develop its REE industry, it faces the dual challenge of maximising economic gains while mitigating environmental risks and ensuring national security. REE is difficult to mine due to its tendency to occur with other elements in the Earth’s crust.
Two primary methods of extraction are used in Malaysia: Ion Adsorption Clay (IAC) extraction and mineral-based mining. IAC extraction is considered less environmentally damaging, whereas mineral-based extraction requires deeper excavation, similar to methods used in Malaysia’s tin mining industry. REE is critical to modern technology, particularly in renewable energy and military applications.
For example, REE is vital in manufacturing wind turbines, electric vehicles, and defence technologies like guided missile systems.
Global demand for REE is expected to rise dramatically, driven by the growth of green technologies aimed at achieving net-zero carbon emissions by 2050. In this context, Malaysia has a significant opportunity to become a key player in the global REE market.
However, the environmental impact of REE extraction is a major concern. The process of recovering REE generates large amounts of toxic waste, including radioactive materials. The history of REE extraction in Malaysia, particularly the operations of Lynas Corporation in Pahang, has sparked public concern about the disposal of radioactive waste and its potential impact on public health and the environment.
Ensuring the safety of communities near mining sites and mitigating the environmental impact of extraction activities are critical challenges that the government must address.
Illegal mining activities further complicate the situation. Malaysia has experienced significant illegal mining of REE, particularly in forest reserves and private lands, leading to environmental degradation and loss of national revenue. These activities are driven by the high market value of REE and weak enforcement of existing regulations.
For instance, it was reported that 16,000 tonnes of rare earth oxide, valued at RM818 million, were illegally mined and exported from Malaysia. This undermines the country’s efforts to control its valuable resources. This illegal trade not only poses environmental risks but also threatens the rule of law by fostering bribery and corruption.
In response to these challenges, the Malaysian government has taken steps to regulate the REE industry more effectively. The National Physical Planning Council approved guidelines for REE mining activities in August 2024. These guidelines prohibit mining in forest reserves, impose an export ban on raw materials, and designate specific areas where mining is permitted.
While these guidelines are a step in the right direction, they are primarily advisory, and their enforcement remains a challenge. A more comprehensive and enforceable policy framework is needed to ensure sustainable and responsible REE extraction.
Malaysia’s current REE policies are fragmented and lack the coherence necessary to manage the complexities of REE extraction and its impacts. While the Mineral Development Act of 1994 governs mining activities, it does not specifically address the unique challenges posed by REE.
Additionally, the division of responsibilities between federal and state authorities creates governance gaps, making it difficult to implement a unified strategy for REE management. This lack of coordination can lead to conflicting priorities, particularly regarding environmental protection and economic development.
A study from the Chinese Academy of Science has shown that in-situ leaching techniques, though considered less harmful, can still result in groundwater pollution. Malaysia must learn from these experiences and ensure that environmental safeguards are in place to prevent long-term damage to ecosystems and public health.
The regulatory framework for REE mining must be strengthened to include stricter environmental controls and better enforcement mechanisms.
One of the most critical steps in ensuring sustainable REE management is the establishment of a dedicated central task group. This group should be responsible for overseeing all aspects of REE extraction, from planning and permitting to waste management and environmental monitoring.
By centralising authority, the task group would ensure that policies are implemented uniformly across federal and state levels, reducing governance gaps and ensuring a holistic approach to REE management. This task group needs to facilitate conversation, collaboration, and co-creation between government agencies, private sector stakeholders, and local communities.
A specific legal framework for REE, similar to the Petroleum Development Act of 1974, which governs Malaysia’s oil and gas sector, should be established. This new legislation would grant exclusive rights for REE extraction to the central task group, ensuring that the federal government retains control over these valuable resources.
The law should also outline clear procedures for licensing, environmental protection, and revenue-sharing between federal and state governments, ensuring that all stakeholders benefit from REE development.
The sustainable management of Malaysia’s rare earth resources is critical for the country’s future economic growth and environmental well-being. While REE presents significant opportunities for technological advancement and economic development, these opportunities must be balanced against the potential environmental and security risks.
By creating a central task group, enacting comprehensive legislation, and strengthening environmental protections, Malaysia can ensure that its REE resources are managed sustainably and contribute to long-term national security and economic resilience.
Colonel Anuar Che Mi is a senior officer in the Royal Malaysian Air Force and is currently attending the National Resilience Course at the National Resilience College Putrajaya.
