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The Ripple Effect: Economic Implications of Malaysia’s Opposition to Israel in International Institutions
Nov 5, 2024
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According to FreeMalaysiaToday, out of the 64 member nations within the Asian Development Bank, Malaysia was the only country that voted against the admission of Israel into the Asian Development Bank (ADB) (FreeMalaysiaToday, 2024). This blog discusses the economic implications to Malaysia and Asia as a whole with the exclusion of Israel into ADB. These implications can be categorized into two sectors; the implications on the Malaysian economy and the Asian economy as a whole.
Let's start by looking into the ripple effects on Malaysia's economy. On 29 August 2024, Malaysia unequivocally condemned Israel’s continued aggression in the occupied Palestinian territories. With Malaysia’s stance being as clear as broad daylight and with recent opposition to Israel's admission to the ADB, this can help Malaysia strengthen their ties with countries that share similar views. This will enable more frequent economic collaborations with nations that emphasize solidarity for Palestine such as Indonesia and Pakistan. Indonesia trades large amounts of palm oil, electronics and agricultural products with Malaysia, whereas Pakistan has a growing trade relationship particularly in textiles and rubber products.
However, by voting against Israels’ membership, Malaysia might lose out on potential economic collaborations. Due to the exclusion of Israel in the ADB, Malaysian exports could have also missed the opportunity to discover new markets overseas. Foreign investors may also be more reluctant to invest in Malaysia as a strong political stance is often perceived to cause instability within a country.
With the rejection of Israel into the Asian Development Bank, it can have very profound implications on Asia’ economy as a whole. Due to Malaysia’s objection, economic ties and collaborations among member countries with Israel may be hindered which will affect collective economic growth. On top of that, Malaysia’s strong political stance may encourage member countries to also take up a similar stance, which will put a strain on geopolitical tensions (Ministry of Foreign Affairs, 2024). Prosperity and harmony tend to go hand in hand, whereas ongoing tensions may deter investments from Asia as a whole.
According to Daily Express, any action taken should be thoroughly thought through to ensure there will be no knee jerk effect that will impact Asia’s economy negatively (Daily Express,2024). This is to ensure stability and prosperity is maintained without having one's eyes blinded by short term benefits.
How Malaysia and Asia as a whole should navigate through these unpredictable geopolitical landscapes to ensure economic growth is a topic worth looking into.
Written by:
Lee Yuan Jun
1st Year Student at Taylor's University,
Bachelor of Business (Honours) in Finance and Economics
References:
FreeMalaysiaToday (2024) ‘Malaysia objected to Israel joining Asian Development Bank, says govt source’, 30 September 2024 [Online]. Available at: Malaysia objected to Israel joining Asian Development Bank, says govt source | FMT (freemalaysiatoday.com) (Accessed: 9 October 2024)
Ministry of Foreign Affair. (2024, August 24). Malaysia Unequivocally Condemn Israel’s Continued Aggression In The Occupied Palestinian Territories (Opt). Retrieved from MALAYSIA UNEQUIVOCALLY CONDEMNS ISRAEL’S CONTINUED AGGRESSION IN THE OCCUPIED PALESTINIAN TERRITORIES (OPT) - Press Releases - Portal (kln.gov.my)
Daily Express (2024) ‘Malaysia objected to Israel joining Asian Development Bank, says govt source’, 30 September 2024 [Online]. Available at: Malaysia objected to Israel joining Asian Development Bank, says govt source | Daily Express Malaysia - Sabah's Leading News Portal (Accessed: 9 October 2024)
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This was an interesting read! But perhaps the argument that Malaysia's global political stance could discourage foreign investment seems a bit oversimplified. Yes, it’s undeniable that political stances can stand as an unnerving backdrop for investor perception. However, giving it full credit for persuading investors away from Malaysia feels overindulgent, especially considering Malaysia’s political stability, regional partnerships, and established diplomatic relationships. Plus, in many cases—even the morally gray ones, more often than not—foreign investors look beyond the "stance" and towards stability and infrastructure.
Therefore, despite Malaysia’s objection to Israel’s entry into the ADB, the country is still well-positioned to attract a healthy level of investment, potentially even more from nations that share and respect its choice.
Similarly, one could say that Malaysia is limiting its trading potential in sectors where Israel excels, like defense and technology. However, it’s important to consider the potential diplomatic benefits of this position. Malaysia now has a stronger platform to voice its perspective on global stages, which could attract economic partnerships across the Muslim world and its neighbors, including the Middle East, North African countries, and even China. I’d say it’s high time to foster new diplomatic relationships—especially with nations that are oil-rich, mineral-abundant, and tech-booming.
Regardless, kudos to the writer behind this! I’m looking forward to hearing your thoughts on how the U.S. elections might impact Malaysia. I've been thinking about Trump's proposed tariffs and the potential response from the Federal Reserve. Makes me wonder what's next for the ringgit against the dollar if the Fed decides to hike interest rates.