
KUALA LUMPUR: The government must formulate industry-friendly policies to keep Malaysia's rare earth elements (REE) sector attractive to investors, experts said.
Universiti Malaysia Kelantan Research Management Division director Associate Prof Dr Abdul Hafidz Yusoff said REE mining projects require long-term planning, with returns on investment sometimes taking up to 20 years.
"Government policies must be industry-friendly, allowing mining companies to operate for at least 15 to 20 years instead of short-term permits of only three to five years.
"Royalty rates should be reasonable and not overly burdensome for investors.
"Some states plan to impose royalties as high as nearly 50 per cent, discouraging potential investments.
"Meanwhile, competitive tax rates should be implemented to encourage the establishment of REE processing plants within Malaysia," he told the New Straits Times.
REE are a group of 17 that act as key ingredients for glass, lights, magnets, batteries, and catalytic converters, and are used in everything from cell phones to cars.
Malaysia holds significant REE deposits, particularly in states like Terengganu, Kelantan, Kedah, Perak, and Negri Sembilan.
"Typically, raw REE extracted is exported in the form of REE carbonate, which is valued at approximately RM 20,000 per tonne.
"However, if processed into single elements, the price can soar to hundreds of thousands of ringgit per tonne.
"China, which dominates REE mining technology, particularly in the extraction of REEs from ion-adsorption clays—deposits that are also abundant in Malaysia.
"However, the Chinese government has imposed a ban on the export of REE-related technology to other countries," he said.
Hafidz added that the main challenge Malaysia faces is the lack of mature REE separation technology, which has resulted in an accumulation of unsold REE carbonate due to the inability to process it further.
"If this situation persists, the industry may become reluctant to continue mining operations due to the inability to sell their products.
"Malaysia must urgently acquire REE separation technology and develop a robust REE processing industry to sustain and expand the sector."
On Wednesday, an engagement session with members of Parliament was held to provide insights into the government's plans and direction for developing the national REE industry.
A total of 73 MPs from both the government and the opposition attended the session.
The session included a briefing delivered by officers from the Natural Resources and Environmental Sustainability Ministry (NRES) and the Department of Minerals and Geoscience.
It was moderated by NRES Minister Nik Nazmi Nik Ahmad, with Special Select Committee on Environment, Science and Plantation chairman Datuk Ahmad Amzad Mohamed participating as a panellist alongside Special Select Committee On International Relations And International Trade chairman Wong Chen and Julau MP Datuk Larry Sng Wei Shien.
Speaking to the New Straits Times, Ahmad Amzad said there was a strong consensus during the engagement session that Malaysia must accelerate efforts to develop its REE industry.
"The general feedback from attending MPs indicated broad agreement that Malaysia should not hesitate in advancing the development of its rare earth elements sector."
During the one-and-a-half-hour session, he shared insights from his committee's findings and addressed questions raised by MPs.
Ahmad Amzad also highlighted that Terengganu holds nearly half of Malaysia's total REE deposits, with an estimated raw value of RM810 billion, according to the Department of Minerals and Geosciences.
He said while the ministry outlined a general timeline for implementation, no detailed discussions were held on specific plans.
"Upstream activities, such as exploration and mining, must begin to ensure a stable supply of REE to support midstream processing facilities," he said.
"Without adequate supply, investments in processing plants will not be viable.
"Malaysia will continue to incur losses if it keeps exporting raw REE to China, as midstream processing would significantly increase returns."
Ahmad Amzad also said that Lynas Malaysia Sdn Bhd had confirmed its capability to process Malaysia's REE and expressed willingness to invest in a separate facility dedicated to processing local deposits.
"In addition to Lynas, local technology has also shown the ability to process Malaysia's REE, but it needs to be scaled up to a commercial level," he added