Malaysian rare-earth anger links up with poll reform calls – Asia Times

BANGKOK – With Western countries and Japan seeking to get around China’s domination of the crucial but mis-named “rare earths” sector, a potentially game-changing processing site slated for Malaysia looks set to become a major election issue as that country gears up to vote.

Opposition politicians and local activists from Kuantan – where Australia’s Lynas Corp hopes to build a processing plant for rare earth minerals mined in Australia – are protesting against the project.  The plant will provide “a crucial link in developing a non-Chinese supply of rare earth metals,” according to Yaron Voronas of the Technology and Rare Earths Center, an online forum for the industry.

The 17 materials, which are not rare but are difficult to mine in commercially viable amounts, are growing in economic and strategic importance because they are a key component in high-tech devices such as mobile phones and computers, as well as military hardware such as night-vision goggles and guided missiles.

Despite having only around 35% of estimated global rare earth deposits, China supplies approximately 95% of the global market, as mining and processing in western countries has been largely mothballed over environmental worries.

Green concerns have animated protests against the proposed Malaysian site, which awaits the granting of a Temporary Operating Licence from the Malaysian Atomic Energy Licensing Board. The licence initially approved in February but was then postponed, pending an appeal by locals and activists who have come out against the project.

The fracas looks set to be entwined in Malaysia’s fractious party politics as speculation grows that Malaysia’s Prime Minister Najib Razak will call national parliamentary elections soon — with whispers about an early June vote to coincide with school holidays.

In the meantime, opposition-linked activists will stage renewed public demonstrations on April 28, after the findings of a parliamentary committee set up to assess electoral reform options were dismissed as “flawed” by opposition leader Anwar Ibrahim.

Anwar hopes to make history by leading his opposition coalition to victory in the elections, an outcome that would mean a change of government away from the United Malays National Organisation (UMNO)-led administrations that have ruled the country continuously since Malaysia’s 1957 independence from Great Britain.

The opposition made gains in the last 2008 elections, but hopes of an outright win are stymied, they feel, by a rigged electoral system. Tens of thousands of Malaysians protested in Kuala Lumpur last July against the current electoral system.

The parliamentary committee recently issued 22 recommendations, including suggestions that the Election Commission operate separately from government and that the required election campaign period be extended to a still-short 10 days, up from the current seven.

The government is not bound to implement the committee recommendations, and electoral reform campaign leader Ambiga Sreenevasan told Asia Times Online that “there were recommendations that we agreed with and some that we did not.”

Today April 10, the Malaysian Government continued its pre-election reform drive, announcing a parliamentary bill aimed at replacing the draconian and oft-criticised ISA, which allowed someone suspected of undermining national security to be detained indefinitely without charge. According to a press release from the Malaysian Prime Minister’s office “the new Security Offences (Special Measures) Bill 2012 stipulates that the police may detain a person suspected of terrorism or security offences for a period of not more than twenty-eight days.”

The Kuantan rare-earths plant is getting caught up in the pre-election jostling. Anti-Lynas campaigners Himpunan Hijau were contacted for comment by Asia Times Online, but did not respond by time of writing. However Ambiga Sreenevasan, who heads a Malaysian electoral reform campaign known as Bersih (or “clean”) confirmed to Asia Times Online that the anti-Lynas group will join the upcoming April 28 Bersih rally, saying “their cause is as urgent as ours.”

However, Lynas says that the proposed plant “has been subjected to a deliberate, highly politicised campaign based on lies and misinformation” and claims that the project “is safe for its employees, surrounding communities and the surrounding environment.”

In an email to Asia Times Online, a company spokesperson cited the International Atomic Energy Agency (IAEA) view “that Malaysia’s laws and regulations regarding radiation safety are ‘comprehensive’ and ‘conform to IAEA standards.'”

If the plant is cancelled, it could hurt Malaysia’s investor-friendly image. Alyson Warhurst, CEO of Maplecroft, a London-based business and political risk consultancy, says that the plant is “crucial to Prime Minister Najib Tun Razak’s aspirations to transform Malaysia into a high-income and fast growing economy by 2020.”

She believes that if the Lynas operation is ultimately foiled by public protests or for domestic political reasons, it “would not be a welcome signal to other multinationals contemplating investment in the country.”

While the fate of the proposed plant will have broader implications for Malaysia, it stands to change how the increasingly important global rare-earths market works. If the plant goes ahead, it will make Malaysia the second-largest processor of rare earths in the world, and a vital supplier to Japanese industries currently dependent on Chinese supplies.

Fears that Beijing could use its dominance to strangle supplies emerged in late 2010, when China imposed a two-month embargo on exports of the materials to Japan, after a diplomatic row when Japan arrested a Chinese fishing vessel captain, accusing him of ramming his boat into Japanese coastguard vessels near the Japanese-controlled but disputed Senkaku islands known as the Diaoyu in China.

The rare-earths row has become entangled in domestic politics in the United States, with US-China relations likely to be a key foreign policy issue come the presidential election later in 2012.

With Republican candidates sucking up news space, US President Barack Obama took to banging the anti-China drum in March, when the US, European Union and Japan announced a joint complaint to the World Trade Organisation (WTO) over China’s restrictions on supply of rare earths and alleged preferential treatment for domestic companies using rare earths.

The US hopes to move away from relying on other countries for rare earths, however. A recent Pentagon report said that the US defense industry will meet its rare earth needs using domestic supplies by 2013 – perhaps relying on Molycorp, a California-based company that is re-starting rare earth extraction in the US.

However industry insiders see flaws in American plans. Jack Lifton, co-founder of Technology Metals Research, which advises companies involved in the rare earths sector, says that “the US government is doing everything wrong if its goal is to make the US self-sufficient in rare earths,” believing that the WTO case will merely drive prices for rare earths down and make life difficult for any revival of the domestic US rare-earth industry.

So it seems unlikely, for now, that US businesses can meet rare-earth needs by relying on potential domestic supply. The Pentagon report adds that defence industry uses “represent a small fraction of US consumption.”

The controversial Lynas Malaysia project, could, therefore, assume increased importance in the eyes of companies such as Apple, Research in Motion and others who need rare earths to make their products.

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