Rare Earth Elements: State Jurisdiction Must Be Respected

Rare Earth Elements (REE) have been making headlines as global demand for high-tech manufacturing, clean energy technology, and defense applications accelerates. Malaysia’s reserves, though often understated, are strategically significant. But in the rush to secure lucrative export deals and attract foreign investment, one critical legal and political reality is being sidelined: REE falls under the jurisdiction of the state governments, not the federal government.

Under the Federal Constitution of Malaysia, matters concerning land and natural resources, including minerals and mining rights, are under the control of the states. The federal government may legislate on mining safety, environmental standards, and certain licensing matters, but ownership and direct exploitation remain a state prerogative. This is not a technicality, it is a safeguard against unilateral decision-making that could sideline local interests.

A Question of Consent and Respect

When the federal government engages with foreign entities, be it for exploration rights, export agreements, or investment deals, without first obtaining state consent, it is essentially overstepping constitutional boundaries. This raises a fundamental question: Is the federal government prepared to create unnecessary foreign pressure on state governments by making commitments it has no legal authority to enforce?

Imagine a scenario where a federal minister signs a Memorandum of Understanding (MoU) with a foreign corporation for REE development in a specific state without the Menteri Besar’s agreement. The foreign investor, believing it has a binding deal, pours resources into feasibility studies and lobbying, only to be blocked by the state for lack of legal approval. The outcome? Diplomatic tension, potential lawsuits, and strained federal-state relations.

Foreign Pressure and Local Autonomy

Malaysia’s geopolitical standing is already sensitive, particularly when dealing with powerful economies eager to lock in REE supply chains. If the federal government bypasses state governments, it risks creating a dynamic where foreign parties pressure states directly or indirectly, possibly framing the state as “anti-investment” if it refuses to proceed. This is not just politically dangerous; it erodes the spirit of federalism and sets a precedent for ignoring constitutional safeguards.

The Smarter Path Forward

To prevent such pitfalls, any REE-related engagement with foreign entities should follow a transparent, state-first consultation process:

• State-Federal Alignment: The federal government can play a facilitating role, helping states access foreign expertise, technology, and markets, but not at the cost of bypassing state consent.
• Unified Negotiation Framework: Create a national REE policy where states have equal representation in decision-making, ensuring that deals benefit both the local community and the national economy.
• Legal Clarity in Agreements: All MoUs, contracts, or joint ventures must explicitly state that implementation is contingent upon state approval.

A Final Word

In Malaysia’s federal system, respecting state jurisdiction is not merely a matter of political courtesy, it is a legal requirement. By ignoring this, the federal government risks not only constitutional breaches but also damaging Malaysia’s credibility in international business. Foreign investors should be made to understand from the outset that any REE project is a state-owned opportunity facilitated, not dictated, by Putrajaya.

The question is not whether Malaysia should engage globally in the REE sector, it must. The real question is: Will we do so in a way that strengthens our federalism, or will we invite unnecessary foreign pressure onto our states?