India-Malaysia Relations: A Deep-Rooted Partnership | UPSC

Introduction

• India and Malaysia officially upgraded their bilateral ties to a Comprehensive Strategic Partnership during the visit of Malaysian Prime Minister (PM) Anwar Ibrahim to India in August 2024. 
• This marks a significant enhancement in their relationship, building upon the 2010 Strategic Partnership and the 2015 Enhanced Strategic Partnership.
• The upgraded partnership encompasses many areas, including trade, defence, digital technology, education, and culture. 

History of India-Malaysia Relations

• Ancient Ties: India’s relations with Malaysia date back over a millennium, primarily influenced by the Chola Empire (9th-13th centuries). The Cholas established strong maritime trade routes, fostering cultural and economic exchanges with the Malay Peninsula. Rajaraja Chola I and Rajendra Chola I even exerted control over parts of Southeast Asia, including present-day Malaysia.
• Post-Independence Cooperation:
  • • Establishment of Diplomatic Relations (1957): India established diplomatic relations with the Federation of Malaya in 1957.
    • Strengthened Relations (1960s): Relations strengthened due to the personal friendship between Prime Ministers Nehru and Tunku Abdul Rahman. Political, economic, and socio-cultural ties flourished during this period.
    • Enhanced Strategic Partnership (2015): In 2015, during Prime Minister Modi’s visit to Malaysia, the relationship was elevated to an Enhanced Strategic Partnership, reflecting deeper cooperation in various sectors.

Read also: Understanding India’s Involvement in the Russia-Ukraine Crisis | UPSC

Areas of Cooperation

Geopolitical Cooperation:

• • India and Malaysia are key members of multilateral forums:  NAM, G-15, G-77, Commonwealth of Nations, Asia-Pacific Economic Cooperation (APEC), Indian Ocean Rim Association (IORA). Their collaboration through ASEAN and East Asia Summits has consistently enhanced regional and global diplomacy. For instance, in 2023, during the ASEAN Summit, both countries reiterated their commitment to the ASEAN-India Strategic Partnership, focusing on maritime security and regional stability.

Geo-strategic Cooperation:

• • • Defence Ties (Since 1993): The signing of the defense cooperation memorandum in 1993 initiated joint military exercises and regular defense meetings. In 2022, the bilateral military exercise Harimau Shakti was held in Malaysia, where both armies collaborated on counter-terrorism operations. Similarly, Exercise Samudra Lakshmana (Navy) and Udara Shakti (Air Force) continue to promote defense collaboration and readiness.
    • Malacca Strait Cooperation: The Malacca Strait, one of the world’s busiest shipping routes, is crucial for regional trade and security. India and Malaysia’s ongoing collaboration on security in the Malacca Straits, especially through initiatives like the 2022 Malacca Strait Patrol agreement, strengthens maritime security, ensuring safe passage for international trade and addressing piracy.

Geo-economic Cooperation:

• • • Bilateral Trade: Malaysia stands as India’s third-largest trading partner within the ASEAN region, while India holds the position of Malaysia’s largest trading partner in Southeast Asia. Bilateral trade between India and Malaysia reached USD 19.5 billion in 2022. Major exported items from India to Malaysia include petroleum products, aluminium & products of aluminium, buffalo meat, organic chemicals electric machinery. Major exported items from India to Malaysia include engineering goods, petroleum products, organic and inorganic chemicals, meat, dairy and poultry products. In July 2023, India expanded its meat exports to Malaysia following discussions on removing trade barriers during high-level meetings.
    • FDI and Investments: Malaysia is the 31st largest investor in India, with investments in technology, manufacturing, and services. Key Malaysian companies like Apollo Hospitals and Yes Bank have made notable inroads into the Indian market, while Malaysian construction companies like Sunway Construction Group have a prominent presence in India, constituting the largest concentration outside Malaysia. 
    • ASEAN-India Business Summit 2023: Celebrating 30 years of ASEAN-India cooperation, the summit highlighted a renewed focus on digital economy and sustainable development. Major Malaysian and Indian stakeholders discussed plans for improving green technology exchanges, setting the tone for future collaboration in renewable energy.

Diaspora Cooperation:

• Malaysia is home to 2.95 million people of Indian origin, the second-largest Indian diaspora globally. Malaysia hosts the third largest PIO community in the world after the US and UAE.  A recent example is the 2023 Indian Diaspora Conference in Kuala Lumpur, which focused on leveraging the diaspora’s contributions to trade and cultural diplomacy between both nations.

Cultural Cooperation:

• • • Cultural Institutions: The Indian Cultural Centre in Kuala Lumpur continues to foster Indian arts and culture. In 2023, the Centre celebrated India’s 75th Independence Day by organizing a series of cultural festivals showcasing Indian classical music and dance. It has also expanded its programs to include digital learning, offering virtual classes on Indian languages and heritage.
    • Literary Connections: The ancient ties between the two countries are reflected in local literary traditions such as Hikayat Seri Rama (Malay adaptation of Ramayana). Recent efforts to preserve this shared heritage include the joint project launched in 2022 between Indian and Malaysian cultural bodies to digitize these literary works and make them accessible to scholars globally.
    • Shared Heritage: Malaysia’s Hindu temples, such as the Sri Veera Hanuman and Batu Caves Temple, are major cultural symbols. In 2023, Malaysia hosted a large-scale Thaipusam festival attended by thousands of Indian devotees, reflecting the ongoing cultural connections between India and Malaysia.

• Food Security and Agriculture: India and Malaysia have engaged in a significant trade deal allowing the export of 100,000 tons of rice from India to Malaysia, despite India’s prior ban on non-basmati white rice export and the lifting of Malaysia’s palm oil import ban.

Significance of India-Malaysia Relations

Geopolitical Importance:

• India-Malaysia ties are critical to India’s Act East Policy, enabling India to expand its influence in Southeast Asia and deepen engagement with the ASEAN region. In 2022, during the ASEAN-India Summit, both countries reiterated their commitment to closer cooperation, particularly in maritime security and regional stability. India’s outreach to the Global South is also strengthened through its diplomatic ties with Malaysia, as evidenced by joint statements during the 2023 Global South Summit aimed at promoting economic and development cooperation.

Geostrategic Importance:

• The strategic partnership between India and Malaysia, especially in the Malacca Strait, is key for regional security. The 2022 Malacca Straits Patrol agreement between India, Malaysia, Indonesia, and Singapore is a recent example of how these countries work together to secure one of the world’s most critical shipping lanes. Additionally, joint efforts on counter-terrorism were strengthened in 2023, with both nations conducting security talks to combat extremism in Southeast Asia, reaffirming their commitment to regional peace and stability.

Geo-economic Importance:

• • • Comprehensive Economic Cooperation Agreement (CECA): The CECA between India and Malaysia, signed in 2011, is critical for increasing bilateral trade. Recent negotiations in 2023 focused on upgrading this agreement to include emerging sectors like digital technology and green energy, which are pivotal in helping India reach its target of $2 trillion in merchandise exports by 2030.
    • Local Currency Trade: India and Malaysia have been exploring local currency trade (INR-MYR) as an alternative to using the US dollar. In 2023, the Reserve Bank of India and Bank Negara Malaysia initiated discussions on creating a framework for this, which would reduce exchange rate risks and boost economic resilience for both countries.
• Cultural Importance: Events like the 2023 International Yoga Day celebration in Kuala Lumpur, attended by thousands of Indian-origin Malaysians, further solidified cultural bonds. 
• Tourism: Various agreements, including the India-Malaysia visa waiver for diplomatic and official passport holders, a tourism-focused memorandum of understanding in 2010, a bilateral agreement on employment and workers’ welfare in 2009, and a revised air services agreement in 2017, have significantly contributed to the growth of tourism between the nations.

Read also: Understanding Sexual Harassment of Women at Workplace | UPSC

Challenges in India-Malaysia Relations

• Zakir Naik’s Extradition: Malaysia’s continued refusal to extradite Zakir Naik, who faces charges of hate speech and money laundering in India, has remained a contentious issue. Despite multiple requests from India, as of 2023, Malaysia has maintained its stance, citing concerns about Naik’s safety. This ongoing dispute has caused diplomatic friction, with India reiterating its requests during several high-level meetings.
• Political Criticism: Malaysia has been critical of India’s internal policies, such as the Citizenship Amendment Act (CAA) and the reorganization of Jammu and Kashmir. In 2022, former Malaysian Prime Minister Mahathir Mohamad publicly condemned India’s policies, further straining relations. The criticism has led to diplomatic disagreements, including India’s reduction of palm oil imports from Malaysia in response to these comments, although trade has since normalized.
• Economic Hurdles: High import tariffs and trade restrictions continue to impede bilateral trade. For instance, India’s imposition of higher tariffs on Malaysian palm oil in 2023 affected trade volumes, despite efforts to enhance economic cooperation. Similarly, Malaysia’s restrictions on certain Indian exports, like steel and textiles, have limited the growth potential of bilateral trade, creating barriers to a more balanced economic relationship.
• Diaspora Concerns: The Indian diaspora in Malaysia faces challenges, including issues of illegal immigration, worker exploitation, and human trafficking. In 2023, reports of Indian migrant workers facing exploitation in Malaysian plantations surfaced, leading to calls for stronger labor protection measures. Additionally, during the COVID-19 pandemic, hundreds of Indian workers were detained in Malaysia, which sparked diplomatic tensions. The Malaysian government has since pledged to improve worker protections, but concerns remain.
• Rising Chinese Influence: China’s growing economic and political influence in Malaysia presents a challenge for India’s regional strategy. In 2023, Malaysia signed new agreements with China, focusing on infrastructure projects under the Belt and Road Initiative (BRI), further entrenching Chinese influence in the region. This shift complicates India’s geopolitical interests, as Malaysia’s increasing dependence on China could affect its position on key regional issues where India seeks a stronger role, such as maritime security in the Indo-Pacific.

Way Forward

• Revised CECA: India and Malaysia need to expedite the revision of the Comprehensive Economic Cooperation Agreement (CECA) to incorporate emerging sectors such as fintech, semiconductors, and defense technologies. This will help both nations target a bilateral trade value of $25 billion. For example, during the ASEAN-India Business Summit 2023, both countries expressed interest in expanding trade cooperation in green technology and the digital economy. Including these sectors in the revised CECA will open new investment opportunities and drive growth in bilateral trade.
• Closer Economic Collaboration: Improving economic collaboration through initiatives like avoiding double taxation, expanding air connectivity, and enhancing customs assistance can significantly boost trade and tourism. In 2023, discussions between Air India and Malaysia Airlines to increase direct flights between major cities were highlighted as a step to improve business and tourism exchanges. Similarly, the India-Malaysia Joint Trade Committee has been working on a mutual customs assistance agreement to streamline trade operations and reduce barriers.
• Defense Technology Cooperation: India and Malaysia should foster deeper partnerships in defense technology through joint research initiatives. Collaborations in fields such as cybersecurity and drone technology could enhance both nations’ defense capabilities. For instance, India’s Defense Research and Development Organization (DRDO) and Malaysia’s defense firms could collaborate on joint projects, which was discussed during the DEFEXPO 2022. Strengthening defense ties will contribute to the security of the Indo-Pacific region, where both countries have mutual interests in ensuring maritime stability.
• Strengthen ASEAN Integration: Leveraging Malaysia’s prominent role within ASEAN can help India strengthen its Act East Policy and further integrate into Southeast Asia. For instance, Malaysia played a key role during the 2023 ASEAN Summit in advocating for enhanced India-ASEAN connectivity and infrastructure projects. By deepening this cooperation, India can bolster regional partnerships and enhance its influence in trade, security, and diplomatic engagement within the ASEAN framework. This can also facilitate cooperation on shared challenges like climate change and sustainable development.