ISEAS this week released a new commentary arguing that Malaysia’s claim to neutrality in the US–China rivalry is undermined by sector-level structural alignment, particularly in semiconductors, which constrains the country’s real policy freedom even when aggregate trade and investment figures appear balanced.
The commentary states that Malaysia should measure and manage neutrality at the sector level, not merely the macro level, and use multilateral governance frameworks to reduce dependence on any single power in critical supply chains.
Quote:
Malaysia tries to stay neutral at the macro and whole-of-economy levels. The government uses diversification, alongside diplomatic engagement, to avoid overdependence on either the US or China. Yet neutrality at the macro level is increasingly constrained because of structural alignment at the sectoral level. Structural alignment refers to how specific industries become embedded in ecosystems dominated by a certain country, oftentimes a major power. This happens through accumulated know-how, critical raw materials, proprietary technologies, processing capacity, and dominant standards— in ways that create high exit costs for co-actors, and hence geoeconomic leverage for the dominant player.
Read the full commentary: Neutrality by sector: Malaysia’s geoeconomic alignment under Anwar