KUALA LUMPUR, Aug 18 — Malaysia is banning exports of unprocessed rare earths while at the same time attempting to court downstream investment to retain their value added at home, Investment, Trade and Industry Minister Datuk Seri Tengku Zafrul Aziz said.

Speaking in an interview with US-based CNBC’s “Squawk Box Asia”, Tengku Zafrul said Malaysia has discussed its rare-earth strategy with both Washington and Beijing during broader negotiations.

“Today, we engage both sides. And to be fair, both China and US have never said that you can't supply to the other, right? You can't not do business with the other,” he said.

He also said that both countries have reminded Malaysia that it cannot have two different standards on rare earth exports.

“So we have to be consistent, to be neutral. You have to consider, we can't have policies which differentiates our relationship with one party to the other, to one country to another. 

“So that's, I think, key. Once you do that, then it's very hard to defend that neutrality position,” he added.

Tengku Zafrul pointed to the moratorium on rare earth elements exports, highlighting Australian miners Lynas as among firms operating under rules that permit exports after processing.

“So what we are doing now is we're saying that, look, we invite all companies to come to Malaysia and to be part of the supply chain to invest in the downstream activities of rare earth, and then we can then export the value-add of those right now,” he said.

Tengku Zafrul argued the approach maximises economic spillovers and strengthens the case for keeping processing domestic.

He also framed the policy as a way to anchor higher-value activity in Malaysia while staying open to all buyers under equal rules.

Earlier this month, Tengku Zafrul announced that Malaysia will no longer allow the export of raw rare earth minerals, in a move to promote local downstream development.

Tengku Zafrul said Malaysia remains open to foreign investment, but it must involve local processing, job creation, and technology transfer.