From Samirul Ariff Othman
In an increasingly fragmented global trading landscape, small and medium-size countries face hard strategic choices.
The recently concluded Malaysia-US trade deal and Singapore’s leadership in the Future of Investment and Trade (FIT) Partnership represent two divergent approaches — but both arise from the same reality: the old rules no longer guarantee protection.
Malaysia chose pragmatism. Confronted with the threat of a 25% tariff under the US’s revised “reciprocal tariff” regime, it struck a deal to reduce the tariff to around 19%. In return, Malaysia committed to more than US$150 billion in strategic purchases — LNG, semiconductors, technology, and more.
On paper, it is a win for access. But in reality, it is not a growth strategy — it is a hedge for survival, bought through transactional diplomacy.
It shields exports today but increases vulnerability tomorrow — to regulatory compromise, policy drift, and US domestic cycles. Access is gained, but leverage is lost.
Singapore, on the other hand, took a principled and long-term view. Alongside 13 other World Trade Organization members — New Zealand, Switzerland, the UAE, and others — it launched the FIT Partnership to defend and modernise the multilateral rules-based system.
This is not idealism; it is strategic calculation. For a resource-scarce country, the law of the jungle favours the powerful.
Rules matter. Multilateralism matters. FIT is Singapore’s attempt to keep the system alive by reshaping it. The agenda includes digital trade, investment facilitation, and regulatory coherence. This is not shelter — it is architecture.
These two strategies — Malaysia’s bilateral deal-making and Singapore’s coalition-building — mirror broader trends.
One seeks protection through concessions. The other seeks relevance through leadership. Both are legitimate. But both carry risks.
If the global system slips further into protectionism, Malaysia’s approach may buy short-term breathing room but offer no long-term leverage. If multilateral reform gains traction, FIT countries will shape the rules — while others scramble to catch up.
For Asean, this divergence poses a larger test. Can regional cohesion hold when member states pursue fundamentally different survival logics?
The danger is clear: countries acting alone may extract temporary gains but risk long-term marginalisation. The lesson is equally clear: we must combine principle with pragmatism. Tactics without vision lead to stagnation. Vision without leverage leads to irrelevance.
And so we return to the central question: what is the point of power, if it does not deliver progress?
Power and leadership
In any functioning democracy, the pursuit of power is natural. It reflects a healthy political environment. But for a country still in transition — still aspiring to be an advanced, high-income nation — power must be linked to outcomes.
That means achieving consistent trade and budget surpluses, growing exports of goods and services, securing realised foreign direct investment — not just announced potential — and building strong external reserves.
National defence must be real, not rhetorical. Growth must be earned, not imagined.
If these outcomes are not met, then the pursuit of power becomes hollow. What is the point of ambition if it leads only to static statistics and declining competitiveness?
Malaysia today risks falling into the classic “middle-power syndrome” — growing complacent with present comforts, while the region moves ahead.
This is the midfield trap: satisfaction with today’s figures while ignoring tomorrow’s realities. It is the mindset of accountants pleased with what they have, instead of entrepreneurs chasing what’s next.
Singapore has no such illusions. As a small state with no natural endowments, economic competitiveness and defence capability are not optional — they are existential.
The same awakening is occurring in Indonesia, Vietnam, the Philippines, Thailand, and Myanmar. Once, large populations were seen as a burden. Today, they are an advantage.
Domestic markets are expanding, the middle class is rising, and defence spending is increasing — not out of aggression, but out of necessity. In an unfair world, strength is insurance. Real or imagined enemies require real capabilities.
And us?
We remain too casual. Our lack of urgency has become a strategic liability. We are being squeezed between Singapore’s clarity of purpose and the growing confidence of our neighbours.
Add China and India to the equation, and the pressure becomes undeniable. If we do not act decisively, we risk becoming mere spectators in the evolving power map of Asia.
If Malaysia wants to remain relevant in the emerging global order, it must not choose between strategies. It must do both.
Yes, engage tactically, as it has done with the US. But also participate actively in rules-based coalitions like FIT.
Do not just operate within the market — help shape the norms that govern it.
Strengthen from within. Do not depend on external partners to shield us. Power must be exercised with discipline, not sentiment. It must not be used to preserve mediocrity — but to produce excellence.
In 2024, Asean attracted over US$230 billion in foreign direct investment — but nearly 60% of that went to just three countries. The competition is real. The window is narrow. The time for comfort has passed.
As history reminds us: when small states abandon rules, they end up ruled.
Let us not reach that point. Let us lead, not lag.
Samirul Ariff Othman is an economist, international relations analyst, adjunct lecturer at Universiti Teknologi Petronas, and a senior consultant with Global Asia Consulting. He is also an FMT reader.
The views expressed are those of the writer and do not necessarily reflect those of FMT.