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NOT FOR COMMERCIAL USE
Malaysia’s Relations with
Saudi Arabia and Iran:
Juggling the Interests
Mohd Fauzi Abu–Hussin1
Asmady Idris2
Mohd Afandi Salleh3
Abstract
The Middle East region, especially the oil-rich Arab economies, is regarded as one
of Malaysia’s important economic and trading partners. Economic and political
changes at the global and regional level have simultaneously shifted Malaysia’s
interests in the region. At the same time, there has also been rising interest from
countries in the region to expand their economic relationships with Malaysia.
Apart from the United Arab Emirates, which is Malaysia’s largest trading partner
in the Middle East region, Saudi Arabia and Iran are now becoming more visible
for their contributions toward the Malaysian economy. Economic interest cer-
tainly is the main driving force behind the latter’s efforts to enhance its connec-
tion with these countries. Efforts to reap economic benefit from these countries
and to attract petro-dollar investments would also have negative consequences
on Malaysia’s domestic, social, and religious affairs due to an influx of Arab and
Iranian people coming into the country. Religious extremism and sectarianism
are among the challenges that Malaysia is encountering and the authorities are
quite critical of those ideologies, and over the years, the teaching of Wahhabism
and Shiism have been banned in the country. Could this affect Malaysia’s connec-
tion with those countries in the Persian Gulf? How has the government engaged
with these local issues without jeopardizing its economic inter-connection with
Saudi Arabia and Iran? Given that they are two contrasting countries, how has
Malaysia balanced its relationships with these two states?
1
Faculty of Islamic Civilization, Universiti Teknologi Malaysia (UTM), Johor, Bahru, Malaysia and
Visiting Scholar, University of Cambridge, United Kingdom.
2
International Relations Programme, Faculty of Humanities, Arts & Heritage, Universiti Malaysia
Sabah, Malaysia.
3
Faculty of Law and International Relations, Universiti Sultan Zainal Abidin, Kuala Terengganu, Malaysia.
Corresponding author:
Mohd Fauzi Abu–Hussin, Faculty of Islamic Civilization, Universiti Teknologi Malaysia (UTM), 81310
Johor Bahru, Johor, Malaysia.
E-mail: mohdfauziabu@utm.my
Article
Contemporary Review
of the Middle East
5(1) 46–64
2018 SAGE Publications India
Private Limited
SAGE Publications
sagepub.in/home.nav
DOI: 10.1177/2347798917744294
http://journals.sagepub.com/home/cme
NOT FOR COMMERCIAL USE
Hussin et al. 47
Keywords
Malaysia, Iran, Saudi Arabia, Persian Gulf, religious ideologies
Introduction
In the early days of Malaysia’s independence, particularly during 1957–1962, the
country’s relations with the Middle Eastern region were only confined to two
states, the Kingdom of Saudi Arabia and Egypt. Malaysia, at the time, had only
two diplomatic missions in the region, namely a Malayan Consulate in Jeddah
(the Embassy was later established in Riyadh in 1964) (Idris, 2006b) and the
Embassy in Cairo, which were set up in 1958 and 1960, respectively. This situa-
tion was due to the nature of the early interactions, which mainly took the form of
religious activities such as performing pilgrimage to the Holy City of Mecca and
pursuing religious studies at Al-Azhar University in Egypt (Ahmad, 1984; Boyce,
1968; Dalton, 1967; Idris, 2006b; National Archive of Malaysia, 1083/1963).
Since then, Malaysia has begun to enhance its diplomatic relations with other
Middle Eastern nations including Turkey (1964), Iran (1970), Oman (1973),
Kuwait (1974), UAE (1983), Jordan (1994), Yemen (1999), Bahrain (2003), Qatar
(2004), and Lebanon (2005).1
As its engagement with the Middle East has risen, Malaysia has expanded its
bilateral relationships with the oil-rich economies of the Arab region. The most
notable are its relationships with Saudi Arabia, the UAE, and Iran. Aside from the
strong economy in the region and the UAE, which has been Malaysia’s largest
trading partner (Abu-Hussin, Salleh, & Nasir, 2015), Malaysia’s relationship
with Saudi Arabia and Iran is interesting to analyze since they have conflicts with
each other and both have political influence in the region. It is noted that Malaysia
has shown great interest in Iran in recent years, while still maintaining a strong
relationship with Saudi Arabia. Many have also argued that the Arab countries
have been shifting their economic interests toward Asia as their direction for the
hydrocarbon exports and investment (Davidson, 2010; Niblock, 2013).
Given the aforementioned dynamics, Malaysia’s growing interest in engaging
with the Middle East and the influence of economic and religious dimensions, this
paper will focus on analyzing its interactions with two countries in the Persian
Gulf, Saudi Arabia and Iran, which have been growing in recent years. The major
factors behind this are the economic transformations and dynamic political
approaches that intensifying the relationships. Malaysia and these countries in
the Gulf benefit from the mutual relationship, especially in trade and investment
relations. Although both these countries have contributed uniquely to its economy,
there is growing concern regarding the influence of Wahhabism and Shiism on
Malaysian society, as Malaysia is considered a modern moderate Muslim country
with a Sunni majority population.
Given this background, this article seeks to answer the following questions:
What has been the influence of the Wahhabi and Shia doctrines in Malaysia? What
has been the approach of the Malaysian government in engaging with these
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48 Contemporary Review of the Middle East 5(1)
local issues without jeopardizing its economic and diplomatic engagements with
those countries in the Persian Gulf? What has been Malaysia’s strategy to balance
the Gulf powers (Iran and Saudi Arabia) in reaping economic benefit from both
of those countries? In discussing these questions, the paper is divided into four
parts: the first discusses Malaysia’s diplomatic–political relations with Saudi
Arabia and Iran; the second discusses contemporary economic interactions; the
third discusses repercussions of Malaysia’s interest in Saudi Arabia and Iran on its
domestic and international affairs; and the fourth discusses the future of these
relations and offers some tentative policy recommendations.
Contemporary Diplomatic Relations
In recent years, diplomatic relationships between Malaysia and the most influen-
tial powers (economically and politically) in the Persian Gulf have been growing.
There have been active engagements between Malaysian leaders and the leaders
of Saudi Arabia and Iran. The leaders of those countries have also been giving
particular attention to their diplomatic relationship with Malaysia. It is widely
known that the Saudi relationship with Iran is constantly intense. Regarding this
situation, this paper raises the question, are the two countries competing with
each other to expand their influence in Malaysia? In analyzing this question, an
overview of the current interactions in Malaysia’s relationships with these two
countries is briefly discussed as follows.
Kingdom of Saudi Arabia
Malaysia’s diplomatic engagement with Saudi Arabia in the modern era began
shortly after the independence of Malay Federation (the former name of Malaysia)
in 1957 with the visit of the first prime minister Tunku Abdul Rahman to the
Kingdom in 1958. In a demonstration of the Saudi importance to Malaysia,
the Prime Minister performed pilgrimage to Mecca to thank God for giving
Malaya full independence from the British (Idris, 2006a). With the formation of
Malaysia in 1963 (through the merging of Malaya with the former British
Singapore (West Malaysia) and Sabah and Sarawak in North Borneo (East
Malaysia), the country continued its instrumental relationship with Saudi Arabia.
The most significant contribution of the relationship in early 1960s was the Saudi
engagement in solving the confrontation issue between Malaysia and Indonesia
(Abu-Hussin & Salleh, 2016; Harun, 2009). This marked the beginning of diplo-
matic relations between Malaysia and Saudi Arabia and the consolidation of the
particularly close relationship between the Tunku Abdul Rahman and King Faisal
of Saudi Arabia (Al-Sudairi, 2013).
King Faisal visited Malaysia in 1970 to foster support for his concept of Islamic
solidarity and to strengthen friendship between Muslim nations (Algabri, 2006).
One aspect of the much vaunted solidarity among Muslim countries is the common
stance taken by Malaysia and Saudi Arabia on the Palestinian issue and the
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Hussin et al. 49
Palestinian people’s right to establish an independent state (Idris & Radzi, 2008).
Von der Mehden (1993) argued that the growth of Islamic resurgence in the
Malaysian domestic politic had also pressured the government to become more
involved in the worldwide Muslim issues.
Abdul Rahman’s successors, Abdul Razak and Hussein Onn, visited Saudi
Arabia in 1975 and 1976, respectively. These two visits were considered high-
profile exchanges to strengthen political ties between the two countries, but they
also contributed to Malaysian economic development. Al-Sudairi argues that the
success of these visits was evident in the massive amounts of financial assistance
that were secured from the Saudis (Al-Sudairi, 2013). These funds were desig-
nated for the construction of religious institutions and to support religious activi-
ties, especially preaching activities, and to provide fiscal and financial support for
Malaysia’s economic development (Idris, 2013). Almost US$250 million in the
form of loans was received and directed mainly toward financing projects under
the Third Malaysian Economic Plan (1976–1980) (Idris, 2010).
Diplomatic engagement between Saudi Arabia and Malaysia became more
notable when Mahathir Muhammad led the country. Under Prime Minister
Mahathir (1981–2003), foreign policy emphasized ASEAN regional cooperation,
closer relations with Islamic countries (especially those in the Middle East), and
implementation of the “Look East” Policy. This policy was particularly fruitful
in promoting the country’s economic growth and strengthening political and
economic relations with developing nations (Idris, 2010, p. 146). Mahathir first
visited Saudi Arabia as Malaysian premier in 1982 and the visit had both diplo-
matic and economic components in that he not only sought financial assistance but
also contributed to the Saudi-hosted discussions on the Iran–Iraq war (Idris, 2010,
p. 147). The visit secured a small amount of financial aid for development projects
in Malaysia, including a US$10.6 million loan to build five hospitals and a US$58
million for construction of the East–West Highway (Idris, 2010, p. 150).
From 2000 onwards, a shift in Malaysian–Saudi relations occurred. Following
visits to Malaysia in October 2000 by the then second deputy prime minister
(Prince Sultan bin Abdulaziz), and the second Saudi–Malaysian commission
meeting in May 2001, both countries agreed to foster economic cooperation
(Idris, 2010). A 2001 visit to the Kingdom by Deputy Prime Minister Abdullah
Ahmad Badawi (who became the Malaysian prime minister in 2003) was another
step toward cementing closer relations. Abdullah’s successor, Najib Razak, was
invited for an official visit to Saudi Arabia soon after he became prime minister in
2009 and a second visit quickly followed in 2010.
The visit to Malaysia by King Salman in March 2017 marked another impor-
tant development in the bilateral relations. Being the third Saudi King to visit
Malaysia, his agenda extended beyond ordinary economic missions, which were
the King’s aim during his tour of the Asian countries. Apart from Malaysia, King
Salman also visited Indonesia, Japan, and China with the aim of enhancing
Saudi Arabia’s economic relationship with the Asian region. Malaysia gained
economic benefits from the visit, such as Saudi Aramco participation in
Malaysia’s largest petrochemical refinery complex in Johor, further extension of
educational cooperation and exchange of labor resources. However, the most
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50 Contemporary Review of the Middle East 5(1)
significant contribution of this new era of Malaysia–Saudi relations is the commit-
ment from both countries to intensify and concert the Islamic world’s efforts to
confront extremism, reject sectarianism, and move the Islamic world toward a
better future (BERNAMA, 2017). With regard to this initiative, both countries
also agreed to establish the Global Centre for Peace, which would be based in
Malaysia under the name of King Salman Centre for International Peace.
Islamic Republic of Iran
Unlike Malaysia’s engagement with Saudi Arabia, which has been driven by
deep religious connections and affiliations (Abu-Hussin & Salleh, 2016;
Abu-Hussin et al., 2015), Malaysia’s connection with Iran has always been influ-
enced by the latter’s political situation, the US-led economic sanctions over the
nuclear controversy and Malaysia’s domestic politics. Engagement with Iran
beyond the economic and business domains has always been politicized domesti-
cally because Malaysian Muslims are Sunni majority while Iran is a Shia majority
country. The Iranian revolution of 1979 became a major concerned to Kuala
Lumpur in order to control any adverse effects and threat to the religious and
political stability in the country (Von der Mehden, 1993, p. 67). Hence, any
efforts to strengthen the diplomatic relationship with Iran would likely have an
impact on Malaysia’s domestic politics. Nevertheless, there is growing interest
from both countries after economic sanctions on Iran have been lifted, as
Malaysia is expanding its economic relationships with the wider region.
Historically, Malaysia’s diplomatic relations with the Iran began with the estab-
lishment of its embassy in Tehran in 1970, and followed by the establishment of an
Iranian Embassy in Kuala Lumpur in 1980 ( Ministry of Foreign Affairs, 2014a).
Despite facing various issues and challenges, Malaysia’s relationship with Iran has
been stable. The relations have never been broken off despite the eruption of the
Iranian Revolution in 1979, which turned Iran into an Islamic Republic. Since
becoming an Islamic state, however, Iran has been facing tougher challenges in
maintaining its diplomatic relations, especially with the Western world but also
with its Muslim counterparts. Prior to the revolution, Iran was governed by the
Pahlavi dynasties, which formed close alliances with the US vis-à-vis containing
the former Soviet influence in the Middle East. Nevertheless, Iran’s close relations
with the US soured due to the downfall of the Pahlavi regime, which was overtaken
by Ayatollah Khomeini as the Supreme Ruler of the Islamic Republic.
Relations between Malaysia and Iran were recorded as early as 1968, and were
driven by economic motives when 13 Iranian businessmen, led by Mr Ali Akbar
Mahnoudji, Iranian Chief Trade Council, met Malaysian Trade Minister Dr Lim
Swee Aun in Kuala Lumpur. Because of the meeting, the first Malaysian Prime
Minister, Tunku Abdul Rahman Putra al-Haj, and Dr Manoutchehr Marsbar,
Iranian ambassador to Malaysia, signed an MoU on trade agreements on
15 January 1968. In fact, this meeting was held in conjunction with the visit of King
Shahanshah and the Queen Shabanou to Malaysia to seek audience with the King
of Malaysia (National Archive of Malaysia, 2001a, 2001b). Since then, diplomatic
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Hussin et al. 51
exchanges have continued between these leaders. One of the major examples is
the visit of King and Queen of Malaysia to Iran to attend Iran’s 2,500-year
celebration of the Persian Empire on 10 October 1971 (National Archive of
Malaysia, 12 October 1971).
Approaching the 1980s and 1990s, the Malaysia–Iran relations had been
growing positively. Several official encounters continued and these included
Majid Hedayatzadeh Razri’s (Iranian ambassador to Malaysia) meeting with the
fourth Malaysian Prime Minister Dr Mahathir on 11 January 1983; Mohamed
Reza Motshed’s (Iranian ambassador to Malaysia) meeting with Malaysian
Information Minister Dato’ Mohamad Rahmat on 18 January 1988 (National
Archive of Malaysia, 2001c); and Omer Suleiman al-Hashmi’s (Iranian ambas-
sador to Malaysia) audience with the King of Selangor on 22 July 1992 (National
Archive of Malaysia, 22 July 1992b).
President Mohammad Khatami (1997–2005) paid an important visit to
Malaysia in 2002. During his visit, an MoU of economic cooperation was signed
in areas of tourism, trade and the promotion, and protection of investments
(National Archive of Malaysia, 22 July 1992a). His visit to Malaysia indicated that
the bilateral relations had grown in maturity and that both governments enthusiastic
to venture into various economic activities. This visit was followed by the visit of
the Prime Minister Abdullah Ahmad Badawi to Tehran on 21–22 December 2008
to sign three agreements of cooperation in the areas of technology, anti-drug
campaigns, and car manufacturing (Press TV, 2013).
Since the economic sanctions were lifted on Iran, both countries have aimed to
elevate their bilateral relations. This aim was manifested by the Prime Minister of
Malaysia Najib Razak during the visit of Iranian President Hassan Rouhani in
October 2016. The visit was notable in further strengthening the relationship
between the two nations and Rouhani’s interest in expanding bilateral relations
with Malaysia is motivated by the existing diplomatic relationship and commit-
ments shown by the Malaysian leaders to further enhance bilateral relations. Prior
to this visit, Malaysia’s deputy prime minister was invited to the Rouhani’s presi-
dential inauguration, and Mahathir Mohammad (former prime minister and now
an advisor to the opposition) also attended the event in 2013.
Contemporary Economic Interaction:
Economic Diversification
Malaysia’s economic strategy to diversify its trading and investment partners
led to the serious engagement with the Gulf region. Although Malaysia’s pres-
ence in the region is not as significant as that of other countries, the economic
benefits and contributions from the Gulf have been substantial in diversifying
Malaysian trading partners and sources of investment. Under the auspices of
Malaysia’s New Economic Model (NEM) (Bank Negara Malaysia (BNM),
2010; National Economic Advisory Council, 2010), international trade strate-
gies became major factors in prompting the paradigmatic change. The NEM,
which was introduced in 2010, devoted particular attention to emerging markets,
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52 Contemporary Review of the Middle East 5(1)
including Muslim countries in the Persian Gulf. This initiative paid closer atten-
tion to emerging global markets, especially those in the Middle East that were
marked by international trade experts as potential markets for the Malaysian
economy (Hajat, 2008).
At least four main factors have driven Malaysia’s intention to reap economic
benefits from the rich countries, in particular Saudi Arabia and Iran: interest in
attracting surplus wealth from oil-exporting Arab countries during oil booms;
Arab countries’ economic diversification strategies to reduce their dependence
on oil income; the lifting of the UN sanctions on Iran; and finally Malaysia’s
participation in economic cooperation with Muslim countries through its mem-
bership in the Organization of Islamic Cooperation (OIC). Diplomatic engage-
ment between Malaysia and several Middle Eastern countries became more
important when Malaysia was appointed to chair the OIC (previously known as
Organization of Islamic Conference) from 17 October 2003 to 13 March 2008
(Ministry of Foreign Affairs, 2014b), and hosted the 10th OIC summit in
Putrajaya in October 2003.
Malaysia’s economic relationships with Saudi Arabia and Iran are predomi-
nantly determined by energy resources. For example, Saudi Arabia is the largest
supplier of Malaysia’s crude oil imports. In 2012, these imports reached a level of
US$1.4 billion. Such heavy dependence on Saudi oil has led to a continual trade
deficit with the Kingdom. The same pattern can be seen from Malaysia’s trade
with Iran. Malaysia produces its own crude oil and exports to the international
market, it leaves an amount insufficient for domestic consumption and has
contributed to the deficit.
Iran has counts for 20 percent of Malaysia’s total trade with Middle Eastern
countries (Idris & Yusoff, 2016), the third largest share behind the UAE and
Saudi Arabia. The total value of Malaysia’s trade with Iran in 2012 reached
US$1.4 billion, with exports valued at RM1.14 billion and imports at US$300
million. Since 2013, however, Malaysia’s trade with Iran has slightly decreased,
with total trade of US$1.0 billion in 2013, and only US$500 million in 2015
(Table 2). This decrease is argued to be largely due to the US-led economic
sanctions against the Islamic Republic over its nuclear program (Kaur, 2013).
Malaysian exports to Iran include palm oil, crude rubber, chemicals and chemical
products, wood products, rubber products and machinery, appliances, and
parts. Meanwhile, approximately 83 percent of Malaysia’s imports from Iran
consist of crude petroleum and petroleum products (MATRADE, 2013; G15
Organisation, 2008).
Malaysia’s total trade with Saudi Arabia, Iran as well as the UAE (a major
trading partner in the Middle East) constitutes approximately 4 percent of its total
exports. Malaysia’s strategy of diversifying its international market, which was
initiated in 2010 under the Malaysia’s new economic model has significantly
affected export volumes to these countries (Abu-Hussin & Salleh, 2012). In 2011,
for example, exports to Saudi Arabia were recorded at US$1.2 billion, an approx-
imate increase of 40 percent from 2010, and export volumes remained at that
figure until 2014. Meanwhile, exports to Iran were approximately US$1 billion
annually for the 2011–2013 period (see Tables 1 and 2).
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Hussin et al. 53
Table 1. Trade Between Malaysia and Saudi Arabia (Value in US$)
Year Exports Imports Total Trade Balance of Trade
2005 474,281,088 1,544,257,826 2,018,538,914 –1,069,976,738
2006 530,332,661 2,331,001,497 2,861,334,158 –1,800,668,836
2007 717,195,010 1,971,942,524 2,689,137,534 –1,254,747,514
2008 1,052,595,702 2,263,023,163 3,315,618,865 –1,210,427,461
2009 813,312,850 1,111,323,754 1,924,636,604 –298,010,904
2010 893,930,623 2,007,812,609 2,901,743,232 –1,113,881,986
2011 1,295,894,809 2,766,995,379 4,062,890,188 –1,471,100,570
2012 1,225,206,499 2,444,812,630 3,670,019,129 –1,219,606,131
2013 1,081,332,025 1,974,680,716 3,056,012,741 –893,348,691
2014 1,172,786,295 2,829,086,751 4,001,873,046 –1,656,300,456
2015 878,281,303 1,933,797,964 2,812,079,267 –1,055,516,661
2016 812,912,537 2,559,221,697 3,372,134,234 –1,746,309,160
Source: UNCOMTRADE Database, available at http://comtrade.un.org/db/default.aspx
Table 2. Trade Between Malaysia and Iran (Value in US$)
Year Exports Imports Total Trade Balance of Trade
2005 358,638,429 347,176,349 705,814,778 11,462,080
2006 440,847,142 582,757,935 1,023,605,077 –141,910,793
2007 617,949,298 428,785,344 1,046,734,642 189,163,954
2008 733,442,050 764,238,805 1,497,680,855 –30,796,755
2009 682,143,340 323,468,395 1,005,611,735 358,674,945
2010 848,926,122 398,189,222 1,247,115,344 450,736,900
2011 1,050,423,104 577,909,791 1,628,332,895 472,513,313
2012 1,140,433,266 342,737,429 1,483,170,695 797,695,837
2013 995,684,781 40,871,969 1,036,556,750 954,812,812
2014 666,949,809 57,304,278 724,254,087 609,645,531
2015 501,058,130 35,843,165 536,901,295 465,214,965
2016 521,335,061 154,825,064 676,160,125 366,509,997
Source: UNCOMTRADE Database available at http://comtrade.un.org/db/default.aspx
Investment Relations
In terms of investments, Saudi Arabia has been contributing significantly more to
the Malaysian economy than Iran. The UAE is also actively involved in invest-
ment activities and Malaysia actively participates in the Emirati economic devel-
opment through its private companies (Abu-Hussin, 2013; Majid, 2010).
Regarding investment relations with Saudi Arabia, frequent visits to the Kingdom
by Malaysian leaders have been effective in attracting investments. Although the
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54 Contemporary Review of the Middle East 5(1)
investment amounts have been relatively small compared to Malaysia’s major
sources of foreign direct investment, such as Japan and the US, the injection of
Saudi funds was particularly important in the critical infrastructure projects.
For example, in the early 1990s, Saudi investment was critical to the Malaysian
economic transformation from an agriculturally based economy to one based on
manufacturing. Saudi funds were converted into investments in high-profile
industrial projects. Between 1990 and 1997, RM 139.6 million (equivalent to
approximately US$40 million) was poured into eight Malaysian projects, mostly
in industrial-manufacturing sectors such as food processing, plastics, textiles and
textile products, and electrical and electronic goods (Idris, 2007; Malaysia
Industrial Development Authority, 2003).
The Saudi interest in Malaysia’s industrial development continued between
1997 and 2000 with investments of approximately US$28.5 million. During
2000–2002, investments declined to US$22.9 million, but then increased dramati-
cally in 2003–2004, when US$216.8 million (BNM, 2005) was poured into
diverse projects such as animal waste management technology, youth develop-
ment, and construction (M. G. A. Khan, 2003). Between 2004 and 2008, Saudi
investment slowed down again and only recorded US$31.8 million, most of which
went into the Iskandar Malaysia development area, Islamic banking2 and property
ventures (Yap, 2008). Since 2009, companies from Saudi Arabia have also
ventured into new manufacturing projects involving chemical-based products,
with investments worth US$698 million and accounting for 6 percent of Malaysia’s
total foreign direct investments (FDIs) Malaysian Investment and Development
Authority (MIDA), 2012). The Saudi Arabian investment total of US$733 million
in 2011 ranked the Kingdom fifth in Malaysia’s investment sources, after
Japan, Korea, the US, and Singapore (Foley, 2012; Malaysian Investment and
Development Authority, 2012). Despite this ranking, the actual percentage of
Saudi Arabia’s FDI remains low compared to that of the others; however, the
Saudi participation in the economy is also significant in terms of promoting
growth and balancing China’s increasing interest in Malaysia and the Southeast
Asian region (Foley, 2012, p. 78).
Malaysia has also been involved in Saudi infrastructure development and is
regarded as an important partner for the Kingdom, along with giant investors such
as Japan, the UAE, the US, Britain, France, and the Netherlands (BERNAMA,
2011a). The relationship includes some close economic cooperation and partner-
ship; partnership between the Malaysian government-owned company 1 Malaysia
Development Berhad (1MDB) and Petro-Saudi International Limited (PSI), which
is owned by Prince Turki bin Abdullah, a son of the king and (from 2014) Riyadh
governor, is an outstanding example of Malaysian–Saudi cooperation. These two
companies are involved in a US$2.5 billion joint venture in oil exploration and
production in Malaysia and elsewhere (Kamil, 2009).
Meanwhile, Malaysia’s relationship with Iran has not been significantly capi-
talized upon economically despite the interest shown by both parties. A number of
agreements, such as the 1968, 1989, and 2002 Trade Agreements, have led into
joint ventures. These endeavors included a US$6 billion deal to develop areas of
Iran’s massive offshore gas fields in 2007; a joint automotive venture between
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Hussin et al. 55
Iran Khodro and Proton in 2008; a joint company between the National Iranian
Oil Engineering and Construction Company and Malaysian SKSD to construct
the Kedah Refinery in Malaysia in 2009; and the formation of the Iran–Malaysia
Businessmen Council in Kuala Lumpur in 2009 (Ariel & Frasco, 2010; Ilias,
2010; MATRADE, 2013).
Moreover, Malaysia’s active participation in Iranian Trade Fairs has indirectly
helped to diversify the economic ties, so that the relationship is not merely
dependent on petroleum-based products, particularly Malaysia’s imports from
Iran. This participation also promotes other Malaysian products that could attract
more Iranian companies to execute a joint venture project. Exports palm oil to the
Islamic Republic of Iran are highly important for Malaysia as Iran is a major
export destination in the Middle East (Malaysian Palm Oil Council, 2014).
The encouraging performance of trade with Iran as well as the current penetration
of Malaysian palm oil into Iranian society has further consolidated the degree of
economic cooperation for the coming years.
Overall, there has been a rising trend of trade and investment relations between
Malaysia and these countries. Saudi Arabia has made important contributions in
its economic engagement, and while Iran’s involvement has been rather minimal,
huge potential is expected to be explored as Malaysia is aiming toward a free trade
agreement with Tehran. The purpose of the Malaysia–Iran FTA proposal was to
boost the bilateral trade, especially to boost oil palm exports, which are currently
Malaysia’s biggest exports to Iran and face a 40 percent tariff (Damodaran, 2016).
It can be safely argued that the enhancement of Malaysia’s economic relationship
with Iran is a rather new development, especially since the UN sanctions ended.
Thus, Malaysia’s economic relationship and level of interaction with Iran, while
strong, are less robust than with other traditional trading partners and sources of
foreign investment.
Influence of Domestic Affairs
Malaysia’s engagement with these two countries has not been driven solely by
economic interest and the interest in seeking additional sources of investment.
Religious affiliation plays an important role in the connection between the two.
However, though Muslim Malaysia’s cultural and religious identity differs from
those countries. Among the social and cultural repercussions of the close ties
between Malaysia and the countries in the Persian Gulf is the issue of religious
ideology and sectarianism, that is, Wahhabism and Shiism. Since Saudi Arabia is
known for being home to the Wahhabi ideology while Iran is a home of the Shii
ideology, closer engagement beyond economic and diplomatic interests with these
countries, particularly Iran, would garner negative perceptions, especially from
Malaysian Muslims, and thereby adversely affecting the domestic politics.
With Malaysia’s strong diplomatic relationship with Saudi Arabia as well as
Iran, a better understanding of people’s mobility and migration has been devel-
oped. On the other hand, with the current understanding on education, scientific,
and labor exchange, security, etc. Malaysia is expected to receive people from
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56 Contemporary Review of the Middle East 5(1)
these countries. People from most of the Gulf countries are entitled to enter the
country with a 90-day visa on arrival that gives them an advantage to do business
or visit Malaysia for quite long periods. This 90-day visa enables them to stay
longer in Malaysia by allowing them to pass through Singapore or Indonesia and
come back to Malaysia for visa renewal. Reports also show that for people from
these Gulf countries, getting a longer period visa is much easier in Malaysia than
in other countries around the world.
This is especially true for the Iranians, who face difficulty in traveling outside
the country as only 40 countries allow them to get a visa on arrival, yet very few
of these countries are significant destinations for them. A country such as Malaysia
is a significant destination to Iranian travelers either as visitors, businesspeople,
or students (Bani Kamal & Hossain, 2017). In 2011, when Malaysia was projected
to become an international educational hub, Iranian students did not miss the
opportunity to come to Malaysia to further their studies (Krich, 2011). At one
point, during the peak, records show that Iranian students constituted 80 percent
of international students in Malaysia (FARS News Agency, 2016).
One source estimates that there are approximately 200,000 Iranians are study-
ing, working, or waiting for visas to Malaysia (Bani Kamal & Hossain, 2017).
Another source claims there are approximately 80,000 Iranians and 15,000 Iranian
students in Malaysia (Idris & Yusoff, 2016; Sedgley, 2012). Although the exact
number is difficult to determine, the existing figures suggest that Iranians form one
of the largest diasporas in Malaysia. The figures also suggest that Malaysia hosts
the largest Iranian community in East and Southeast Asia. One might argue that the
influx of Iranians into Malaysia was not motivated by the country’s attractiveness
but rather by the desire to escape from their disappointment with their local politics
and their disagreement with the previous president, Ahmadinejad (Bani Kamal &
Hossain, 2017). Thus, this could explain the lack of interest from the Iranians to
closely engage with the local Malaysians. Their presence in Malaysia, however, in
some ways incurs unwelcoming remarks from the locals.
One might ask, how could the presence of Iranian badly influence the
Malaysia’s religious affair? Although Malaysia is a Sunni majority country and
the presence of Shia followers is rather minimal, the issue of Shiism in Malaysia
is relatively significant. Shiism is banned in Malaysia and further, any efforts to
spread Shia teachings would be prosecuted. Despite this fact, there are still
Shia followers in Malaysia and it has been argued that Shia ideologies have
spread into Malaysia through diplomatic means, marriages, education, and culture
(Mastura, 2015). Malaysia is portrayed as a modern and liberal Muslim country.
Nevertheless, regarding religious tolerance, especially toward religious sectarian-
ism, the actions taken by Malaysia have been rather defensive and any efforts to
spread religious ideologies other than the Sunni Shafi’i thought are considered a
threat. Regarding Iranian presence in Malaysia and their practice of Shiism, Jamil
Khir Baharom, a Minister in the Prime Minister’s Department who is responsible
for the religious matter at hand, once said, “We never harass Shia followers! … but
it’s just that they are banned from spreading the ideology.” Former Prime Minister
Tun Mahathir also said, “If in Iran, they [Iranians] want to follow their religion
[Shiism], it’s up to them but if they come here, please don’t disturb us.”
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Hussin et al. 57
Despite the authorities’ concerns regarding the spread of Shia ideology in
Malaysia, the Iranian diasporic community in Malaysia has engaged in the spread
of Shiism on several occasions, though the number of such occasions might be
small. Reports show that since the influx of Iranians into the country in 2011, the
numbers of Shia followers in Malaysia have been increasing (Marcinkowski,
2013). Though since Shiism is banned, Shia followers in Malaysia is estimated
approximately around 300,000 (Bakar, 2013; BERNAMA, 2013).
On the other hand, the spread of the Wahhabism ideology, which is associated
with Saudi Arabia, has also been a concern among the Malaysia’s religious authority.
Though Malaysia is intensifying its relationship with Saudi Arabia on various
levels of cooperation, this does not mean it is also importing the Wahhabi ideology
into the local religious sphere. On the other hand, the Saudi government has
been consistent in supporting religious activities and institutions in Malaysia.
The support comes in various forms, such as providing funding for religious and
educational institutions, disseminating copies of al-Quran and Islamic books, and
providing scholarships to Malaysians to study in Saudi Arabia. There are also
several Malaysian religious movements and educational institutions that are
allegedly associated with the Wahhabi ideology (Abu-Hussin & Salleh, 2016).
In fact, on some occasions, the Saudi government has given support to religious
movements by providing scholarships and education funding, and quite recently,
a Medina-based University has been established in Shah Alam, Selangor.
Given the aforementioned discussion, claims regarding the direct connections
of these religious movements and institutions are difficult to validate (Idris,
2013). Malaysia’s religious authority has been keeping an eye on those activities,
fearing the influence of the Saudis’ Salafi-Wahhabi Islam. The Malaysian
Religious Agency sees Wahhabism as a threat to Malaysia’s security that is as
dangerous as Shiism and closely monitors it, where possible, to ensure there is
no growth of extremism (Abu-Hussin & Salleh, 2016; Manimaran, 2011). Unlike
the Shia teachings, which are totally banned in Malaysia, the Wahhabi ideology
is only treated as a threat to national security and no single person has been
convicted because of this ideology. However, the National Fatwa Council of
Malaysia (an Islamic edict council) discourages the practice and spreading of the
Wahhabi ideology, even though Wahhabism emerged within Hanbali school,
the dominant school of thought in Central Arabia, and hence more or less have
similar practices.
The Malaysian government and local Muslims are less welcoming of the
two ideologies subscribed to by the majority of Saudis and Iranians. Religious
understanding and practice in Malaysia are shaped by Shafi’i school and is very
much influenced by the Sunni school of thought; practising other schools of
thought is highly discouraged and prohibited.
Undeniably, Shiism and Wahhabism, could become the thorn in Malaysia’s
harmonious relations with Iran and Saudi Arabia. How has Malaysia been dealing
with these issues while maintaining its close relationships with the countries in the
Persian Gulf? Meanwhile, Malaysia’s policy has also been favorable toward
Saudi Arabia. How has this affected its connection with Iran? The following
discussion answers these questions.
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58 Contemporary Review of the Middle East 5(1)
Balancing the Interests
Malaysia’s commitment to cooperation with Saudi Arabia has also been extended
to the issue of security. For example, Malaysia pledged to support Saudi Arabia in
Bahrain during the civil unrest there in 2011 (2011b). Malaysia even offered to
deploy its military as peacekeepers, if requested. This commitment reflects not
only a favorable attitude toward Saudi Arabia but also a strong undercurrent of
anti-Shia sentiment that has been particularly manifest since the Arab uprisings
and is also being played out in the Malaysian domestic politics; 2013 was a turbu-
lent year and was marked by arrests that often cited violations of a fatwa issued in
1996 that banned the promotion and, at least technically, the practice of Shia
Islam in Malaysia.
The Shiism issue is sometimes used as a tactic to damage political opponents
(Shanahan, 2014). Taking advantage of the febrile atmosphere, Ahmad Zahid Hamidi,
the Home Affairs Minister, accused Muhammad Sabu, ex-deputy president of the
Pan–Malaysian Islamic Party (PAS, the main opposition party), of being Shia
himself.3 Sabu’s denial and counter-accusations of an anti-Shia campaign being
waged by United Malays National Organisation (UMNO, main ruling party)
brought the case to court.
These incidents had repercussions upon Malaysia’s relationship with Iran,
resulting in a boycott on Malaysian goods launched by a group of unhappy Iranian
traders (Sulong, 2014). Although the boycott was not official, the campaign
caused unstable relationship between Malaysia and Iran, while at the same time,
it appeared to suggest a strengthening of the Saudi–Malaysian relationship.
However, the Malaysian ruling party has subsequently been very careful to closely
engage with Iran to alleviate tensions surrounding the issue of unpleasant senti-
ment toward Malaysian Shias. Iranian officials in Malaysia denied that there had
been a boycott campaign even though trade between Malaysia and Iran declined
in early 2014. Since then, Malaysian officials have been extra cautious over
anti-Shia issues to maintain their usual, ongoing relationship with Iran.
It is clear that without a careful approach, in particular without a moderate
Malaysian foreign policy, the bright climate of the relations could turn cloudy.
Thus, in dealing with this issue, the Malaysian government seems to apply a
double-edged sword that involves being stricter at home, and at the same time
appearing appeasing and wise in justifying its domestic policy in the eyes of the
Iranian and Saudi counterparts (Idris, 2013). Regarding the spread of Wahhabi
ideology, whose influence is rather minimal and has not impeded the Malaysian–
Saudi relationship, the Malaysian government takes a more covert approach to
minimizing the influence of Wahhabism to preserve good diplomatic relations
with Saudi Arabia (Idris, 2013).
Meanwhile, despite Shia ideologies slowly becoming widespread and posing
a threat to the country, the diplomatic relationship and ties with the Iran are not
easily broken as they are linked to a few important sectors, mainly petroleum.
However, these influences are controlled by the government to a certain extent.
In response to the calls from certain parties to cut-off relations with Iran, which
has been blamed for spreading banned Shia teachings, Malaysian Foreign
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Hussin et al. 59
Minister Datuk Anifah Aman has firmly argued that the Shia issue was a
domestic matter and to be dealt with internally by the concerned authorities.
At the same time, he also clearly explained the importance of Iran to Malaysia
by stating:
Iran is an important partner to Malaysia and it is Malaysia’s foreign policy to be friendly
with all countries, based on mutual respect, to foster goodwill and cooperation in all
areas of interest for mutual benefit …. The call does not in any way reflect the views of
the Government of Malaysia. (Anifah, 2013)
On the issue of the Iranian nuclear program, Malaysia has stated its position that
all signatories to the nuclear Non-Proliferation Treaty (NPT), including Iran,
should have the right to develop nuclear power as long as it is used for peaceful
energy, and not to build nuclear weapons, which could destabilize world stability
(Ariel & Frasco, 2010).
Regional Impact of the Presence of Saudi Arabia and Iran
For many years, the economic dimension has been the driving factor behind
Malaysia’s relationship with these Saudi Arabia and Iran. However, given the
current geopolitical situation, such as the tension between the US and China and
the uncertain political situation in the South China Sea, the relationship between
Malaysia and Saudi Arabia has gone beyond economic interest. Both countries’
agreement to cooperate militarily by developing joint training and exercise
areas and exchanging military experiences could be seen as part of a strategic
partnership to balance the influence of powers in Southeast Asia. At the same
time, the establishment of the King Salman Centre for Global Peace reflects
both countries’ commitment to countering extremist ideologies and misconcep-
tions about Islam while also changing the narrative of extremism that is associ-
ated with Islam in the long run.
The issues of religious extremism in Southeast Asia generally and in the
Philippines and southern Thailand in particular are of major concern to Malaysia
and its neighbors. In the same vein, Saudi Arabia has also given its commitment
to cooperate with Indonesia in tackling the terrorism issue. Both countries have
agreed to train their military officers in each other’s countries to counter Daesh
(Islamic State of Iraq and Syria) militants (Whiteside, 2017). Saudi Arabia has
also come to support, directly and indirectly, the Malay-Muslims of southern
Thailand to have their right for an autonomy. The supports come in various
means including financial, education as well as giving the Malay-Muslims in
Southern Thai opportunity to work in Saudi Arabia (Von der Mehden, 1993).
Personal interviews and visit to Southern Thai indicate that there are groups
associated with Saudi Arabia and their presence creates a perception of
Wahhabi’s link in the region. While the perception of extremism is highly asso-
ciated with Islam and radical Islam is very much influenced by the Wahhabi
ideology, Saudi Arabia gives strong commitment to tackling the radical issue in
the Southeast Asian region. It can also be safely argued that the presence of
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60 Contemporary Review of the Middle East 5(1)
Saudi Arabia in Malaysia will have positive impact on the regional security
threats.
Meanwhile, with Saudi Arabia’s current initiatives in Southeast Asia that
involve Malaysia as a strategic partner and both countries’ agreement expressed
concern over “the growing Iranian interference in the internal affairs of the Arab
countries” (G. A. Khan, 2017). One may ask, will these recent moves affect
Malaysia’s relationship with Iran? For Malaysia, assuring global peace is very
important. Its stance of being non-aligned in international politics is re-affirmed
in its foreign policy. Without sacrificing its economic interests and diplomatic
relationships, Malaysia is balancing its economic interests in the Persian Gulf as
much as possible, similar to how it has always balanced its economic interests in
the Far East. With the lifting of the UN economic sanctions on Iran, there has been
emerging interest from Malaysia to expand its relationship with Iran. Rouhani’s
visit in 2016 was important in enhancing the economic relationship between the
two countries and marked a new era in Malaysia’s relationship with Iran. Both
countries agreed to boost economic ties, through which Malaysia is seeking a new
market for its oil palm exports as Iran is seen as a potential market. Interest toward
these two conflicting countries, Iran and Saudi Arabia, is aimed toward gaining
economic benefit.
Concluding Remarks
Malaysia’s relationships with Saudi Arabia and Iran are now intensifying with
greater emphasis on economic benefits. Although both Saudi Arabia and Iran
are two conflicting countries, Malaysia is positioning itself to be as neutral as
possible while safeguarding and maintaining harmonious religious practice
among local Muslims. The Malaysian government has guarded religious policies
and promoted Malaysia’s version of Islam and Islamic preaching. Neither
Wahhabism nor Shiism is accepted in Malaysia. Although the religious issue has
had repercussions on Malaysia’s close relationships with Iran and Saudi Arabia,
as well as on Malaysian domestic politics and religious practices, the safe approach
for Malaysia is to detach the religious issue from its trade and economic relations
with these two countries.
In a nutshell, it is safe to say that Malaysia has been consistent in its foreign
policy since the era of the second Prime Minister Tun Razak, who introduced a
“Non-Alignment” policy, a big shift from the Tunku Abdul Rahman’s pro-Western
policy, to befriend all countries irrespective of differences in ideology or systems
of government. This policy was also nurtured by the longest serving Malaysian
Prime Minister Mahathir Mohammed, who threw strong support behind the idea of
“prosper thy neighbour” when he stated: “… we realised that the best way to help
ourselves was to help others. By doing so you don’t simply generate gratitude and
goodwill, you also create partners and friends” (Mohamad, 2011, pp. 618–626).
In short, pragmatism will continue to dominate Malaysian foreign policy in matters
pertaining to interests abroad. The relations with the Muslim world and its strategy
to expand economic relations with Muslim countries might further boost Malaysia’s
bilateral relations with the countries in the Persian Gulf in the future.
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Hussin et al. 61
Notes
1. The stated years refer to when Malaysian embassies were established in those Middle
Eastern countries. However, diplomatic relations may have been formed earlier.
2. In strengthening the Islamic financial sector through the Malaysian Islamic Finance
Council (MIFC) and with strong support from the Central Bank of Malaysia (BNM),
the government encourages foreign Islamic banks to establish their businesses in
Malaysia. Saudi Islamic banking’s Al Rajhi Banking & Investment Banking has been a
key player in Malaysia’s Islamic finance industry. The bank now has 24 branch offices
throughout Malaysia.
3. Muhammad Sabu is now a leader of the National Amanah Party (AMANAH), a new
faction from PAS that was established when the progressive group in the Islamic Party
was structurally removed from the leadership during the 2013 party’s Convention.
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