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Leadership in Managing the Bilateral Affairs: A Case Study of Malaysia-US

Relations Post 2008-2009 Global Economic Crunch

Conference Paper · June 2020

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 Leadership in Managing the Bilateral Affairs:
A Case Study of Malaysia-US Relations Post 2008-2009 Global Economic
Crunch

Mas Juliana Mukhtaruddin and Misrinah Misban

Fellows, Institute for Malaysian Political Analysis (MAPAN), UUM
&
School of International Studies
COLGIS, UUM
(mas@uum.edu.my, misrinah@uum.edu.my)

ABSTRACT

Since 1957, Malaysia and the United States have long established diplomatic ties. Both
nations have been recognized as the major actors at regional and global levels. The
leadership of Malaysia and the US play a critical part in enhancing their bilateral relations.
However, it is undeniable that relations between countries may be wobbly if unfortunate
events happened in the middle of the steady bilateral relationship, such as the 2008-2009
Global Economic Crunch. Originated in the US at the end of 2007 and further disturbing
the world's economic and fiscal arrangement. Subsequently, that economic crisis widened
to the European nations, China, India and moderately altered the Malaysian economy. The
unavoidable consequences are due to the complex trade activities among the countries in
the international markets. Thus, the main focus of this paper is to analyze Malaysia’s
leadership in managing the Malaysia-US ties post 2008-2009 Global Economic Crunch.
The discussion concentrates on the political engagement between both countries.

Keywords: Leadership, Najib Razak, Barack Obama, Donald Trump, Bilateral Ties,
2008-2009 Global Economic Crunch

The 7th International Conference on International Studies (ICIS) 2018

7th-9thDecember 2018, Universitas Prima Indonesia (UNPRI), Medan, Indonesia

1
 INTRODUCTION

Bilateral ties between Malaysia and the United States (US) are deemed to be the link between

a big power state and a small country. The US is recognized internationally as a superpower,

while Malaysia is known as a developing country/third world country (Sodhy, 2012).

Generally, this bilateral relationship clearly illustrates the power imbalance between the two

nations. Since 1957, Malaysia and the US work together to uphold secure and robust ties. In

this regard, Malaysia is aware that relations with the US will affect Malaysia’s foreign policy

and consider this bilateral relationship as an uneven link (Kuik, 2015). Nevertheless, both

nations tried to balance the unequal power connection through various strategic partnerships

over the past 61 years. Malaysia and the US have and are cooperating on several aspects

including politics, security, economic, social and educational.

Malaysia and the US possess different societies and civilizations, but these two countries have

put priority in achieving mutual benefits and set aside differences and contradictions that apply

to the well-being of their respective nations. It can, therefore, be concluded that the

international relations established between country and global actors have been influenced by

elements such as power, governance, leadership, globalization, security, technology and

economics. As a result, the relationship between actors in the international and international

systems is created through two situations either cooperation or tension. However, Kuala

Lumpur-Washington relationship managed to cooperate well and entertained the differences in

views on external policy aspects between the leadership of these two nations. The US has

acknowledged Malaysia as a major trading nation and has a strategic geopolitical position in

the Southeast Asian region.

2
The responsibility of a political leadership is greatly significant in enhancing the connections

amongst nations. Particularly important in building a salient partnership in this globalized era,

the world of uncertainty. Koon (2015: 403) affirmed that “Foreign policy decision-making in

Malaysia has been in the hands of the leadership of the United Malays National Organization

(UMNO), the dominant political party in coalition governments that have held power since

independence.” Thus, political leadership plays a crucial role in bolstering the Malaysia-US

relations.

Malaysia during the leadership of Prime Minister Najib Razak linked closely with the US

administration on political and economic cooperation to accomplish their short-term and long-

term objectives. For example, both countries have worked together to promote trade and

investment, diplomacy among the people, regional and international peace, education,

environment, and other aspects. Prime Minister Najib Razak had shown to the international

and regional communities that Malaysia welcomed a robust tie with the US under the

governance of President Obama (Saravanamuttu, 2012: 49). Khadijah Md. Khalid (2011) also

stated that Prime Minister Najib Razak ascertained to enhance salient ties with the Obama’s

government. In addition, Malaysia considers the US as the key economic partner and is able to

increase US technology capital investments in Malaysia. Therefore, the development of

Malaysia-US bilateral relations as in the time of Prime Minister Najib Razak and President

Barack Obama was depicted as enthusiastic (Johnson, 2010). This relationship has a positive

prospect and fosters bright cooperation between the two nations.

In fact, Malaysia and the US have cooperated in various main aspects, such as two-way trade,

economic partnership Association of Southeast Asian Nations (ASEAN), Asia-Pacific

Economic Cooperation (APEC) and World Trade Organization (WTO) and defense

3
cooperation in handling the terrorist threats at the local and global grounds. Hiebert and Cory

(2015) clearly illustrated that in 2015, Malaysia holds two significant posts, and firstly,

Malaysia takes on the hefty responsibility of ASEAN chairmen and secondly, acts as a non-

permanent member at the United Nations Security Council (UNSC).

The US under President Barack Obama’s presidential term (2009-2017) took an approach to

re-attention to nations in the Asian region since their defeat in the Cold War. During his

leadership, President Obama foreign policy posture has indicated an improved and heightened

commitment to cooperate with countries in the Asia Pacific, including Malaysia (Kuik, 2012).

The same was also highlighted by Malaysian Prime Minister, Najib Razak (2009 to 2018)

particularly in bolstering the bilateral ties between Kuala Lumpur and Washington. This close

relationship has been welcomed despite the fact that the US attained a new president in 2017,

President Donald Trump who has won the 45th presidential election in place of President

Barack Obama.

On top of that, the US recognized Malaysia as an important ally and essential means to

bolstering ASEAN. Thus, the international relations that are intertwined are influenced by such

factors power, governance, leadership, globalization, security, technology, and economy.

Furthermore, the continuity of relations between countries in the international system is

characterized in the form of cooperation and conflict. The understanding of state leadership is

crucial in requiring strong and stable relationships. Thus, this paper will briefly begin with the

2008-2009 Global Economic Crunch background and later analyze the Malaysia-US bilateral

relations in the era of Prime Minister Najib Razak leadership that concentrates on managing

their bilateral ties post 2008-2009 Global Economic Crunch, particularly on the political aspect.

4
 BACKGROUND OF THE 2008-2009 GLOBAL ECONOMIC CRUNCH

In the first phase of the new millennium, the world witnessed two vital episodes that

destabilized the connections amongst actors in the global system. Firstly, the September 11,

2001 attacks (9/11) and second, the 2008-2009 Global Economic Crunch. Apparently, those

episodes had numerous good and bad implications for the global society. Living in this

globalized world, no nation can work in isolation. Interactions among international actors are

crucial for their long sustainability. The activities of each state in executing their strategic

national interests will affect the decision making of the other nations. Today’s world situation

is very competitive and challenging. The established relationship between the international

actors will lead to two points, either in the course of cooperation or conflict.

Basically, the 2008-2009 Global Economic Crunch started in the US at the end of 2007. It took

place when most of the Americans were incompetent to reimburse their debts and bank loans.

Mahani Zainal Abidin & Rasiah, (2009) depicted that the crisis when there happened “an asset

bubble caused by an array of financial derivatives that, inter alia, drove the sub-prime

mortgage boom, exploded into a housing and banking crisis with a cascading effect on

consumer and investment demand.” Hence, it contributed to the drastic reduction in housing

sales and further increased the unsteadiness of the US fiscal system. The US economy was in

a severe downturn at the end of 2008 and has resulted in massive unemployment and a fall in

domestic spending. On the peak of that, many large commercial banks in the US are either

driven to join other banks or be declared insolvency.

Schaefer (2011) affirmed that one of the largest commercial insolvency cases in the US record

was the instance of Lehman Brothers. Actually, ‘Lehman was the fourth-largest U.S.

5
investment bank at the time of its collapse, with 25,000 employees worldwide’ (Lioudis, 2017)

and the collapsed of the Lehman Brothers Banks were much due to the housing crisis in the US

(Sraders, 2018). Subsequently, the turmoil expanded rapidly to large banks and key European

companies. Finally, the crisis has also affected major economic countries like China, India and

many more. The effects are very pronounced and became spreadable to various financial

sectors around the world. The 2008-2009 Global Economic Crunch was a clear evidence that

the world is in a state of interdependence amongst each other, no country can isolate itself. Or

in other words, no individual country in the world can alienate from the influence of the US

economy. Therefore, the mutuality of the world economy between nations has produced a

complex atmosphere compared with the other international crises.

This incident has caused the panic situation not entirely in the US, but also in the international

community. Nevertheless, major economic countries like China and India had managed well

in confronting the 2008-2009 Global Economic Crunch, although the normal export market in

every single country declined. Meanwhile, Malaysia also seemed to face the problem in a

positive manner. The impact of the US economic slowdown on Malaysia is not as crucial as

the time of the 1997-1998 Asian Financial Crisis (New Straits Times, 2008). Moreover, Khoon

and Mah-Hui (2010) in their writing, ‘The Impact of the Global Financial Crisis: The Case of

Malaysia’ argued that the 2008-2009 Global Economic Crunch has toughly knocked Malaysia

but slightly dissimilar from the 1997-98 Asian Financial Crisis.

In this case, the Malaysian government chose a similar solving style as the 1997-98 Asian

Financial Crisis to cope with the 2008-2009 Global Economic Crunch. According to Mahani

Zainal Abidin & Rasiah, (2009), the government insisted on the public sector holding a

predominant purpose in repairing the economy through maintains strong fundamentals and a

6
robust financial sector. Bank Negara Malaysia (BNM) was devised to face the 2008-2009

Global Economic Crunch based on the sour experience of the 1997-98 Asian Financial Crisis

by regulating the monetary segment and not upsetting the livestock marketplace. Malaysia is

capable of increasing domestic demand, inducing a solid and balanced external reserve despite

the economic downturn. The US has suffered a bad impact on the international economy, and

Malaysia was able to cope with the challenge in its own right. Thus, the following section will

discuss the development of Malaysia-US relations post the 2008-2009 Global Economic

Crunch.

THE DEVELOPMENT OF MALAYSIA-US TIES POST 2008-2009 GLOBAL

ECONOMIC CRUNCH

The leadership of Prime Minister Najib Razak and President Obama have focused robustly on

the political, economic and security cooperation between the two nations. The bilateral ties

were tightened in order to achieve their short-term and long-term goals. For example, both

countries have worked together to strengthen their political ties, promote trade and investment,

diplomacy among the people, regional and international peace, education, environment, and

other aspects. Thus, strengthening political relations between leaders is an important

component in any international relationship. Malaysia-US bilateral ties in the era of Najib

Razak’s leadership since 2009 to 2018 witnessed more sturdy and mature cooperation than

earlier Malaysian premiers. The advancement of this optimistic bilateral relationship

demonstrates the potential of deeper cooperation relations between Malaysia and the US

(Johnson, 2010).

7
PRIME MINISTER NAJIB RAZAK AND PRESIDENT BARACK OBAMA ERA

The role of the leaders in enhancing bilateral ties is very vital. After the 2008-2009 Global

Economic Crunch, Malaysian political leadership has given high priority in boosting the

bilateral relations with the US. Kuala Lumpur-Washington relations continued to be resilient

following the visits of political leaders of both countries (Sodhy, 2012). In order to strengthen

this bilateral relationship, the leadership of both nations must continue to strengthen the

relationship between them. Kuala Lumpur and Washington relations under the leadership of

Prime Minister Najib Razak and President Obama were seen to be better than the previous

leadership. A close relationship cemented the continuity of Malaysia-US bilateral relations. On

the US side, they appreciate the nature of Prime Minister Najib Razak who is open-minded and

easy-going. According to Mohamed Jawhar Hassan, former Chairman and Chief Executive of

the International Institute of Strategic Studies (ISIS) suggested that Prime Minister Najib was

a Western-minded and accessible man.

The mature relations between the two sides continue to be strengthened by exchanged visits

between the leadership of the states. The visits of Malaysian and US government officials have

been a key factor in fostering bilateral ties between the two countries, as it illustrates the long-

term ties between Kuala Lumpur and Washington. Sodhy (2012: 55) explained that strong

political developments have been seen between leaders from both sides. For example, on 12-

13 April 2010, Prime Minister Najib Razak met Obama at the Nuclear Security Summit in

Washington. The meeting between the two leaders was seen as a positive boost to Malaysia-

US bilateral relations. Prime Minister Najib Razak’s visit to the US shows a sense of

cooperation between the US business community and the Malaysian side. (Mehta, 2010).

8
The visit also has paved the way for strong economic opportunities between the two countries.

On that very occasion, Prime Minister Najib Razak met President Obama and this opportunity

was taken as a catalyst for enhancing bilateral political ties and economic opportunities

between Malaysia and the US. In this regard, Mehta (2010) expressed that Prime Minister Najib

Razak’s visit to the US is a trigger for ‘good sign’ and ‘business-friendly approach’ with US

business companies on economic cooperation opportunities. Subsequently, on June 2012 in

Putrajaya, Senator John McCain and Joseph Lieberman from the US met Prime Minister Najib

Razak and voiced their satisfaction on the economic, political and social changes in Malaysia

under his leadership.

The highlight was when President Obama made an official visit to Malaysia in 2014 with the

purpose of strengthening bilateral ties towards a more strategic partnership (Alagappa, 2014).

Thus, he was the second US president to visit Malaysia after the first visit by 36th US President

Lyndon Baines Johnson on October 30, 1966, 52 years ago. On April 26 to 27, 2014, President

Obama made an official visit to the Asian region including Malaysia (Dalphino, 2014;

Brandon, 2014). His ultimate goal was to enhance bilateral ties to the level of ‘comprehensive

partnership’. The focus of the US-Malaysia comprehensive partnership is the key policy in

bilateral ties, designed to unify all aspects of political and diplomatic cooperation, trade and

investment, education and people to human relations, security and defense cooperation, and

collaboration on the environment, science and technology, and energy (Dalphino, 2014).

President Obama’s visit was a historic event in the Malaysia-US bilateral relations. Munir

Majid (2014), Senior Visitor Fellow at the London School of Economics and the Center for

Political Science, International Affairs, Diplomacy and Strategy (LSE IDEAS), stressed that

the most important achievement of President Obama’s visit to Malaysia was that when bilateral

9
relations were upgraded to comprehensive partnership phase. President Obama’s visit also

brought economic ties between Malaysia and the US to a new spike. It is also an important

event for both countries, especially in terms of trade cooperation (New Straits Times,

25.04.2014).

The victories of both leaders in the general elections in 2012 (President Obama) and 2013

(Prime Minister Najib Razak) have further strengthened bond between Kuala Lumpur and

Washington. Both of these leaders make phone calls to congratulate their victory in the

elections in their respective countries. On President Obama’s re-election in 2012, Prime

Minister Najib Razak pointed out that Malaysia is a moderate Muslim country in line with

President Obama’s administration efforts to work closely with Islamic countries. The Prime

Minister Najib Razak said that as a moderate Muslim nation, Malaysia is ready to help the US

to be more involved with Muslims (The Star Online, 08.11.2012). Furthermore, he extended

his view of Malaysia’s role as a modest Muslim state capable of acting as a facilitator between

the Islamic world and the West. According to Prime Minister Najib Razak, the nature of

moderation in Islam is a good influence especially in addressing issues of violence and

radicalism (New Straits Times, 10.07.2018).

President Obama has made an unprompted call to Prime Minister Najib to congratulate his

success in the 13th general election (GE13) in Malaysia. Where the victory is a political

achievement and has won strong support from the people and major political parties in

Malaysia. This support is the result of the ability and efficiency of Prime Minister Najib Razak

and his dynamic leadership. During the talk, President Obama also promised that the US will

continue to increase and widen the scope of bilateral ties with Malaysia. President Obama states

10
that the US and Malaysia will continue to strengthen bilateral ties through regional and

international cooperation (The Star Online, 14.05.2013).

A close and personal relationship between leaders is essential in fostering a strong bilateral

relationship. Prime Minister Najib Razak and President Obama often communicate formally

and informally. Both premiers had a solid friendship and close tie. Several personal

communications between Prime Minister Najib Razak and President Barack Obama have taken

place. On June 26, 2009, at 9.10pm President Obama telephoned Prime Minister Najib Razak

for 20 minutes duration illustrated the close relationship between the two leaders. In addition,

according to the Malaysian National News Agency (BERNAMA), Prime Minister Najib Razak

stated in their conversation that Malaysia should be proud of being a modest Muslim nation,

and there is a harmonious multiracial society (The Star Online, 27.06.2012).

Other than that, Prime Minister Najib Razak and President Barack Obama were seen playing

golf together. On December 4, 2014, both leaders played golf at the ‘Marine Corps’ base in

Kanehoe Bay, Hawaii. Prime Minister Najib Razak expressed that, playing golf together

illustrated the closeness contact between him and President Obama. While playing golf, they

both took the opportunity to strengthen the bilateral relationship between Malaysia and the US

in the future (Mas Juliana Mukhtaruddin, 2015). A close and consistent leadership relationship

has helped strengthen Malaysia-US relations in the era of Prime Minister Najib Razak and

President Barack Obama.

Furthermore, the strengthening of bilateral ties is also manifested through membership in

political and economic entities. Malaysia-US has worked hard to improve their bilateral ties.

According to former US Ambassador to Malaysia, James Keith, he noted that many American

11
societies recognized Malaysia as their main trading partner (BERNAMA, 02.10.2013).

Therefore, the Malaysia-US Foundation or the ‘Malaysia-America Foundation’ (MAF) was

established on October 1, 2013, headquartered in Kuala Lumpur and Washington, DC. MAF

is a non-profit organization, an organization dedicated to improving people’s relations and

mutual understanding between Malaysia and the US (Facebook, 2014).

The foundation was co-chaired by former US Ambassador to Malaysia James Keith and Munir

Majid. The MAF is tasked with coordinating programs that will enhance Malaysia-US bilateral

ties and, more importantly, help to deepen understanding and communication between the

people of both countries. Keith also pointed out that MAF needs support from Malaysia and

the US and will also work with the Malaysia-US Association as well as leading organizations

focused on Southeast Asia and Southeast Asia to promote the relationship between AS-Asia

(BERNAMA, 02.10.2013).

The US recognized Malaysia as one of the international and regional players during the Najib

Razak administration. The year 2015 is a significant year for Malaysia because she took two

major offices in the Southeast East Asian Nations (ASEAN) and the United Nations (UN).

Firstly, Malaysia was the chairman of ASEAN and holds the non-permanent seat in the UN

Security Council (UNSC). Hiebert and Cory (2015) stated that the US regarded Malaysia as

the key partner and key to strengthening ASEAN’s position in the Southeast Asian region.

Based on these positive and positive responses, in November 2015, President Obama for the

second time visited Malaysia after the first visit in 2014. He attended several main meetings,

namely the Asia-Pacific Economic Cooperation (APEC) 2015 Summit in Manila (November

18-19, 2015), the 27th ASEAN Summit (November 18-22, 2015) includes the ASEAN-US

Summit (November 21, 2015) and the 10th East Asia Summit (EAS) (November 21-22, 2015)

12
in Kuala Lumpur. This indicates the US high commitment and trust especially towards

Malaysia and generally to the entire Southeast Asian region (Syed Azahedi Syed Abdul Aziz,

2015).

Moreover, Malaysia-US also collaborated on the security front, especially in combating

terrorist threats. It is also a key agenda in bilateral relations and is part of the comprehensive

partnership between Kuala Lumpur-Washington. Between cooperation in this aspect is to have

close military relations, information exchange, law enforcement, and coordination to identify

terrorist threats and establish advisory centers on issues related to violence (Sullivan, 2014). In

realizing domestic, regional and global terrorism cooperation, Malaysia and the US have

organized several military programs such as the ‘U.S. Navy Seventh Fleet’s Cooperation Afloat

Readiness and Training (CARAT), the International Military Education and Training (IMET)

and multilateral exercises such as ‘Cobra Gold’ program (Sullivan, 2014).

PRIME MINISTER NAJIB RAZAK AND PRESIDENT DONALD TRUMP ERA

The Malaysia-US relations reached another phase when President Donald Trump replaced

President Obama as the 45th US President on January 20, 2017. It has opened a new chapter in

their bilateral relations. The leaders exchange visits still essential in boosting the bilateral ties

between the two countries. President Trump administration sent US Secretary of State, Rex

Tillerson on August 8, 2017, for a two-day official visit to Malaysia. He was among the US

highest official in the President Trump administration (BERNAMA, 07.08.2013). This clearly

demonstrates the keen bilateral relations between Washington and Kuala Lumpur under the

leadership of President Trump.

13
The Malaysian Ministry of Foreign Affairs stated that the visit by the US State Secretary will

open up opportunities for both countries to discuss and exchange views in various aspects of

bilateral, regional and global relations especially in common interest issues (BERNAMA,

2017). Furthermore, US Secretary of State, Rex Tiller did meet with the Prime Minister Najib

Razak at the Parliament building and discussed various issues. The priorities highlighted by

both sides are related to terrorist threats, maritime security in the Southeast Asian region and

increased nuclear activity by North Korea (Lopez, 2017). On North Korea’s nuclear issue, the

US is confident of Malaysia’s global role in an effort to influence North Korea’s under the Kim

Jong-un administration to stop their nuclear weapon testing.

Later, on September 11 to 13, 2017, Prime Minister Najib Razak made a three-day official visit

to Washington on the basis of an invitation from President Donald Trump. This also crafted a

historic moment in Kuala Lumpur-Washington relations when Prime Minister Najib Razak had

the opportunity to meet with President Trump in his first year of government. The meeting was

held at Oval’s office in the White House and has been a history of six decades of bilateral ties

between Malaysia and the US. Relations which are characterized as achieving the

‘comprehensive partnership’ level are further strengthened in various forms of cooperation.

Both leaders have agreed to continue forming close ties with the strengthening of diplomatic,

economic, security and people-to-people relations.

The meeting between Prime Minister Najib Razak and President Trump has successfully

injected new synergies in their bilateral relations. Nevertheless, the meeting between Malaysia

and the US leaders did not address several issues such as the US withdrawal from the Trans-

Pacific Partnership (TPP) clusters, the ‘1 Malaysia Development Berhad (1MDB) crisis and

the imprisoned of Anuar Ibrahim. They are more interested in discussing various forms of

14
collaboration that capable of maximizing mutual benefits and boosting their ‘compressive

partnership’. Among the things that they focused were on Malaysia’s trade and investment

issues in the US, working together to combat terrorism such as the threat of ‘Daesh’ terrorist

threats, strengthening security ties between the two countries , put pressure on North Korea

regarding their nuclear test issues, the importance of preserving South China Sea waters,

strengthening its commitment in US-ASEAN strategic cooperation, striving to stop the

humanitarian crisis in Myanmar and strengthen the relationship between the two sides (Office

of the Press Secretary, 2017).

Therefore, the US is very hopeful and seriously looking forward to enhancing the bilateral ties.

With this ‘comprehensive partnership’ status, Kuala Lumpur-Washington has positive

prospects for achieving peace, prosperity, stability, and agreement in their bilateral relations

(Office of the Press Secretary, 2017). Therefore, at present Malaysia-US bilateral ties are at a

close level despite changes in the US administration. Hence, since the Prime Minister Najib

Razak meeting with President Trump on September 2017, the Malaysia-US ties has led to

another level in the direction of Malaysia-US relations. Malaysia is not only a trading partner

and partner in combating global terrorism for the US but is also recognized as a ‘significant

global player’ (Ahmad Zaini Kamaruzzaman, 2017).

CONCLUSION

Since and after the 2008-2009 Global Financial Crisis, the leadership of Malaysia and the US

have been able to strengthen Malaysia-US bilateral relations in political, economic and security

aspects. From a political perspective, the relationship between the two nations lies in the

warmth and close leaders contact and able to tolerate the differences between each other. Thus,

the leadership of the country plays a key role in fostering robust bilateral relations, 2014 marked

15
the historic year in their ties. The Malaysia-US relation has uplifted to the level of

‘comprehensive partnership’. Malaysia and the US have collaborated on various levels,

whether domestic, regional or global. The US respect Malaysia for her significant role in

promoting peace, security and universal prosperity through the concept of moderation. While

on other occasions, the US also recognizes Malaysia as their major trading partner in the

Southeast Asian region and willing to work together in combating the regional and global

terrorist threats.

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