Malaysia-Europe Relations | Research & Encyclopedia Articles

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Foreign relations of Malaysia Summary

Malaysia-Europe Relations

In world affairs, Malaysia maintains close relations with the United States, the European Union (EU), and Japan. Malaysian relations with the European nonmembers of the EU are still insufficiently developed, and there is a growing need for reinforcement of these relations, especially more effective economic cooperation. Trade between non-EU European countries and Malaysia is the most dynamic feature of this relationship, which also includes cultural and scientific exchange. The EU's dialogue with Malaysia has always been an inseparable part of the EU's (and before it the European Community, or EC's) relations with the Association of Southeast Asian Nations (ASEAN). The EU has no bilateral cooperation agreement with Malaysia. Economic cooperation between the EU and Malaysia is carried out mainly through regional programs, both within the framework of the 1980 ECASEAN Cooperation Agreement and through other programs.

Between 1967, when ASEAN was established, and the beginning of the 1990s, there were no particular political disagreements between the EC and ASEAN. In the 1990s, however, different approaches to political and social questions—particularly human rights, trade policy, and the impact of globalization— emerged. After the collapse of the Soviet bloc, the conflicting interests of these two regions became clearer. These conflicts have been mostly ideological, rather than economic, since both regions are trying to develop their own political and ideological cultures.

The Cenotaph, a British World War I memorial in Kuala Lumpur, Malaysia, is a reminder of the British colonial presence in Southeast Asia. (PAUL ALMASY/CORBIS)

In 1995 the European Parliament accepted the EU's new Asian strategy, wherein the ASEAN situation was considered. With the issuance of "Creating a New Dynamic in EU-ASEAN Relations" in 1996, a renewed focus was placed on the dialogue between Europe and Malaysia. During their official visit to Malaysia in 1996, EU leaders declared that they wished to develop a more meaningful political dialogue with Malaysia through a more frequent and direct exchange of views.

Asia-Europe Institute

There were series of Asia-Europe ministerial meetings in the 1990s, in which Malaysia took part. One important result was the establishment of the Asia-Europe Institute at the University of Malaya, the main mission of which is to further the integration of the Malaysian and European economies. Other principal tasks of the institute are promotion of the exchange of information on strategic business issues, analysis of the role of European banks in Asia before and after the 1997 Asian financial crisis, and comparison of the investment strategies of Asian and European banks. These tasks are undertaken in an effort to support the integration of the two financial systems.

Eu-Malaysia Trade

In 1998, the EU was the third most significant export destination of Malaysian goods (behind ASEAN members and the United States), with a share of 16 percent ($12 billion). Among EU members the main Malaysian export partners were the United Kingdom and Germany, with 4 percent and 3 percent of total exports respectively. The EU was the fourth largest source of Malaysian imports (behind ASEAN members, Japan, and the United States) with a share of 12 percent ($7.1 billion). Among EU members the main Malaysian import partners were Germany and the United Kingdom, with 4 percent and 3 percent respectively. In 1998, Malaysia had a trade surplus of $5.1 billion with the EU, compared to a surplus of $250 million in 1997.

Malaysia's main exports to the EU are electronic equipment, textiles, and palm oil and palm oil products. The main imports from the EU are machinery, chemicals, and transportation equipment. Malaysia has adopted a broad range of import restrictions, especially on automobiles and heavy machinery.

Eu Aid

The EU has never provided general development aid to Malaysia, but some specific activities have been funded, including forestry and pharmaceutical projects and support for refugees. European development assistance began in 1987 and for the most part has been limited to the environmental sector. The EC-Malaysia Forest Programme was agreed upon in 1992, after which several projects were implemented. The main purpose is to improve the efficiency of forest harvesting and reduce logging damage. Another aim of forestry projects is to contribute to the conservation and sustainable management of natural forests and their biological diversity. Forestry projects for Sabah, totaling $419,000, were implemented in 1998. Total funding since 1980 for other activities amounted to nearly $6.5 million.

Along with Singapore, Japan, the United States, and Taiwan, the EU is among the largest sources of foreign investment in Malaysia. In Sarawak, the EU is the main source of foreign investment, accounting for 30 percent of the total between 1995 and 2000. EU industrial investments in Sarawak come mainly from six countries: Netherlands (natural gas), United Kingdom (forestry and nonmetallic minerals), Germany (metals), Portugal (electronics), Finland (chemicals), and France (food manufacturing).

Anglo-Malaysian Relations

Great Britain has a special relationship with Malaysia, as it was the colonial power that controlled the Malaysian peninsula from the late eighteenth into the twentieth century. In 1786, the British acquired Penang Island, establishing a settlement called Georgetown. In 1826, the British formed the Straits Settlements, a colony that included Melaka (Malacca) and the islands of Penang and Singapore. The British later colonized the interior of the Malayan peninsula when tin was discovered. By the beginning of the twentieth century, Britain had established many protectorates on the Malayan peninsula, as well as in East Malaysia (the states of Sabah and Sarawak in North Borneo). By 1914, Britain had either direct or indirect colonial control over all the lands that now comprise Malaysia. After World War II, Britain united its territories on the peninsula as the Union of Malaya (1946); Sabah and Sarawak became crown colonies. In 1948, Britain created the Federation of Malaya, which became an independent state within the Commonwealth in 1957.

Several critical issues affected Anglo-Malaysian economic and business relations in the last decades of the twentieth century. In the early 1980s, diplomatic relations deteriorated when Mahathir Mohamad, Malaysia's prime minister, launched a "Buy British Last" campaign to protest skyrocketing fees for overseas students and restricted landing rights at London Heathrow airport. In 1981, "Buy British Last" became state policy, the goal of which was to decrease Malaysia's economic dependence on England. The policy was reversed later in the decade. In February 1994, Anglo-Malaysian relations were disturbed for a second time, when Malaysia's cabinet decided that British companies would be excluded from competing for any new government construction contracts. As a whole, the Malaysian relationship with Britain was cool in the 1990s, but commercial relations began to pick up in the latter half of the decade.

The Future

In the latter half of the 1990s, EU-ASEAN relations were complicated by Myanmar's joining ASEAN, as the EU looked unfavorably on Myanmar's record in supporting democracy and human rights. The future of Malaysia-Europe relations to a large extent depends on the political situation in Malaysia— in particular political stability and human rights. Street protests in the fall of 1998, calling for the resignation of Mahathir Mohamad, unsettled Malaysia's reputation as one of the most politically stable countries in Southeast Asia. By 2000, the human-rights situation in Malaysia had deteriorated, largely because of Mahathir's determination to crush his political rivals.