Executive summary
Background and overview
- Malaysia-India ties were elevated to Comprehensive Strategic Partnership (CSP) during Prime Minister Dato’ Seri Anwar Ibrahim’s maiden state visit to India in August 2024. The terms of CSP, which is the structural and functional manifestation of India’s Act East Policy (AEP) to Malaysia, are currently being finalised. CSP must adequately shape bilateral terms of engagement and the trajectory of strong Malaysia-India ties, as its strength will ultimately determine AEP’s value to Malaysia.
- Malaysia-India ties in the last decade have been marked by highs and lows. After the Najib-Modi era upgrading of relations, the relationship turned sour after a diplomatic row in 2019 before experiencing a pandemic-induced reset. The Anwar-Modi summit in New Delhi marked the dawn of a new era in ties despite existing irritants while CSP can be seen as the culmination of the reset of ties since 2020.
- This policy brief explores the challenges and opportunities marking the ongoing bilateral relationship from the political and economic perspectives. It also offers recommendations to make CSP fit for purpose in the new era.
Political relations
- Bilateral political relations are shaped by (1) semantics and perception; (2) high- level visits and bilateral institutional mechanisms; and (3) multilateralism and inter- regionalism.
- AEP has grown into a central component of India’s Indo-Pacific strategy, though its impact on Malaysia remains limited by differing priorities and perceptions. High-level engagements have strengthened bilateral ties but irregularities in mechanisms like the joint commission meeting (JCM) and Foreign Office consultation (FOC) impede progress. Shared membership in multilateral frameworks, such as the Indian Ocean Rim Association (IORA), Indo-Pacific Economic Framework (IPEF) and BRICS+ offers opportunities for collaboration, with Malaysia valuing India’s balancing role, though overlapping initiatives and bureaucratic delays hinder deeper engagement in Indian-led mechanisms like the International Solar Alliance (ISA) and Coalition of Disaster Resilient Infrastructure (CDRI).
- CSP should highlight Malaysia’s key role in India’s AEP and regularise FOCs and JCMs to ensure cohesive updates. CSP should also prioritise cooperation mechanisms focused on the Global South, aligning with India’s initiatives to strengthen bilateral ties and advance shared goals. Additionally, CSP should propose establishing a Malaysia- India Bilateral Coordination Council to facilitate idea exchanges, support multilateral cooperation and enhance regional collaborations.
Economic relations
- Economic relations are described as the cornerstone of Malaysia-India ties but efforts to develop trade, investment and commercial linkages have been largely piecemeal at best and inertial at worst. The implementation of existing institutional arrangements, such as forums, committees and a bilateral free trade agreement, remains inadequate.
- Bilateral trade stands at almost US$17 billion in 2023, a five-fold increase since 2003, but the relative contribution of India to Malaysia’s total trade (and vice versa) has declined in the last decade. At the sectoral level, the products traded between the two countries have increased in sophistication towards manufactured goods but commodities, such as mineral fuels and palm oil, continue to contribute substantially to trade flows. In investment, despite growth in the value of approved projects in the last year, Malaysia remains a small source of and destination for FDI with India, particularly in the often talked about semiconductor industry.
- CSP should enhance bilateral trade and investments by strengthening investment and trade promotion in line with the countries’ respective comparative advantages, updating the Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA) to reflect contemporary realities and effectively operationalising existing initiatives, such as provisions calling for the mutual recognition of professional qualifications. It should also encourage economic cooperation through regular government and business engagement, taking the form of a ministry-to-ministry technical working group and business forums respectively.
Finally, CSP needs to advance collaboration in science and technology through a memorandum of understanding on semiconductor cooperation, which should identify opportunities not only for the outsourcing of Malaysia’s back-end processes but also for equal partnership in the design of microchips in line with Indian capabilities.
