Taiwan has suspended bilateral investment negotiations with Malaysia following controversial remarks by Prime Minister Anwar Ibrahim regarding Taiwan’s political status.
Anwar’s One China Remarks
During an August interview with Al Jazeera, Anwar described Taiwan as part of China, period
and stated that this position was accepted by all.
When asked if he would condemn Beijing for using force against Taiwan, the prime minister compared the situation to a Malaysian state attempting to secede, noting he would use force to protect the sanctity and unity of
Malaysia.
Anwar later defended his stance by noting that Malaysia’s policy regarding one China dates back to the time of second prime minister Abdul Razak Hussein, while also stating that any resolution to the dispute should be reached peacefully.
The Ministry of Foreign Affairs in Taipei issued a strong condemnation at the time, stating that Anwar had absurdly implied that Taiwan is a separatist Chinese province and openly rationalized China’s stance on taking Taiwan by force.
Diplomatic Friction Suspends Bilateral Trade and Investment Talks
Expanded bilateral trade talks originally scheduled for late October were shelved as a direct result of the diplomatic friction, according to Nikkei Asia. Ministry of Foreign Affairs spokesperson Hsiao Kuang-wei confirmed the suspension during a press conference, stating the measure was necessary to safeguard national sovereignty, economic security, and the rights of Taiwanese investors.
However, we continue to communicate with the Malaysian side, hoping the Malaysian government will acknowledge the close investment relationship and long-standing mutual trust between the two countries, thereby creating favourable opportunities to resume negotiations,
Hsiao Kuang-wei, Ministry of Foreign Affairs Spokesperson
The suspension highlights the economic tension between the two nations, which saw bilateral trade in goods total RM233 billion last year. This friction comes as Malaysia attempts to balance strengthening economic ties with China while simultaneously attracting capital from Taiwan, a key partner in Taiwan’s New Southbound Policy launched in 2016.
Bilateral trade reached NT$1.73 trillion, equivalent to 213.5 billion ringgit, during the first eight months of the year, representing a 39.9% increase compared to the same period in the prior year, driven largely by electrical and electronic products.
Semiconductor Sector Impact
Major Taiwanese technology firms have poured capital into Malaysia in recent years. In 2024, construction began on a NT$48.5 billion semiconductor testing and packaging plant by Siliconware Precision Industries. Early last year, its parent organization, ASE Technology Holding, inaugurated its fifth packaging and testing facility in Penang, which was part of a NT$9.83 billion expansion effort.
Phison Electronics, founded by Malaysian-born entrepreneur Pua Khein-Seng, has invested NT$808 million through its MaiStorage subsidiary based in Selangor.
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Lin Kai-min, honorary president of the Taiwan Chamber of Commerce in Malaysia, noted that existing business operations remain stable because companies have already committed substantial capital. However, he warned that geopolitical uncertainty could cause investors to reconsider where they locate future investments or sensitive operations.
Lin added that while Malaysia is still an attractive destination, Taiwanese companies serving US and European clients are increasingly focused on protecting technology, export controls, and supply chain security. He also noted that investors have other options within Southeast Asia.
William Ng, president of the Small and Medium Enterprises Association of Malaysia, added that while current Taiwanese manufacturing operations remain intact, future investments could shift toward Vietnam or Thailand if Malaysia’s perceived neutrality changes.