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Malaysian government to prioritize environment amid efforts to boost mining

Malaysia's government is inviting foreign investors to help the country boost its rare earths exploration, mining and processing capacity amid a broader push to boost mining's contribution to national GDP, but it will not sacrifice the environment just for economic benefit.

Minister of Water, Land and Natural Resources Xavier Jayakumar Arulanandam outlined the government's plans to boost mining investment at the Critical Materials conference in Perth, Australia, Oct. 8, which was run by geopolitical think tank Perth USAsia Centre.

The minister said Malaysia needs to balance the needs of industry, the environment and community in its efforts to "revitalize" the mining sector, whose 155 operating mines only contributed 0.7% to the country's national GDP in 2018.

Arulanandam's ministry is formulating a strategy of an integrated land use framework in 2019 to establish mining zones so the government can open up areas to attract international investors to develop mineral resources.

In 2020, the government will conduct "institutional" reform by restructuring agencies under Arulanandam in the creation of a Mineral Development Board.

In this process, the coordination of federal, state and local governments will be prioritized as individual jurisdictional issues "sometimes lead to unconducive policies and decisions," the minister said.

Arulanandam said mining is "not a promoted industry" in Malaysia and does not enjoy the "benefits and privileges" of other industries such as manufacturing, services and energy, while the government is also studying its "unattractive" fiscal regime to boost private sector investment.

While the government has started some of its own initiatives to boost social and environmental standards, the minister said "Malaysia needs genuine investors" to explore and develop its mineral resources, including setting up downstream value-adding industries to process locally produced mineral commodities into critical minerals.

Yet while the government wishes to promote mineral resources development as a revenue-generating activity, the minister said it is also "very serious" about sustainability and environmental protection.

"Sustainability and responsible mining would be given priority over any economic justification in developing any mineral resources," Arulanandam said.

The comments came nearly two months after the government granted Australia-listed company Lynas Corp. Ltd. a six-month extension to operate the Gebeng rare earths processing plant in Malaysia.

Sovereign risk

Lynas CEO Amanda Lacaze later told the conference's delegates that the company initially built its plant in Malaysia at the invitation of the then-Malaysian government, which offered a stable political environment, respect for the rule of law, access to key inputs, a skilled English-speaking workforce, proximity to markets and an "excellent" port facility.

Yet over the past year, political activism in Malaysia has "cost us dearly," Lacaze said, adding that the company's 2025 plan to diversify its industrial footprint is in direct response to ensuring that it mitigates sovereign risk, adding processing capacity and extending its product range and capabilities.

Exploring for, mining and processing its own rare earth minerals to produce rare earth compounds metals, alloys and compounds was the key example Arulanandam cited as part of the government's efforts to support mining. This would lead to the establishment of manufacturing plants.

However, to achieve this, the minister said Malaysia needs best practices and management of rare earths mining from "relevant, well-established countries in rare earth industries" to build up local expertise and capacity building.

"International investors are welcome on a government-to-government basis, or on a private-company basis, to help develop Malaysia's mining industry," Arulanandam said.

"Sustainable mining is our priority to ensure protection of the environment and the people," the minister said. "In mineral resources development, it must be a win-win situation where the investors be they local or foreign the government and community benefit."