By Samirul Ariff Othman

KUALA LUMPUR, Malaysia: Malaysia’s defence budget from 2021 to 2024 tells a story of a nation trying to modernize its military while being stuck in a financial straightjacket. The bulk of its military spending—over 60-70%—goes to salaries, maintenance, and operational costs, leaving little for new weapons systems, research, or modernization efforts.

That’s like trying to upgrade your car for a cross-country race but spending most of your money on gas and oil changes instead of a new engine. And in today’s Indo-Pacific security environment—where China is flexing its military muscles in the South China Sea, tensions over Taiwan are heating up, and regional players like the Philippines and Vietnam are rapidly upgrading their defence capabilities—Malaysia is at risk of falling behind.

Look at the numbers. The defence budget has stagnated at around RM15-18 billion annually, but most of it goes into keeping the lights on rather than investing in the future. Meanwhile, Malaysia’s navy struggles with outdated ships, its air force lacks modern fighter jets, and its biggest procurement project—the Littoral Combat Ship (LCS)—has been plagued by delays and scandals. This is happening while China is sending its coast guard and maritime militia into Malaysia’s Exclusive Economic Zone (EEZ), pressing its territorial claims over Malaysian waters.

The South China Sea and the New Reality of ASEAN Security

For decades, Malaysia relied on a quiet, diplomatic approach to dealing with Beijing. The old idea was simple: don’t provoke China, keep economic ties strong, and rely on ASEAN to manage tensions. But that approach is showing cracks, because the geopolitical landscape is shifting fast. The Philippines, under President Marcos Jr., has embraced a more aggressive approach, strengthening military ties with the United States, Japan, and Australia. Vietnam, meanwhile, has spent years investing in submarines, missile systems, and modern air defences—ensuring that if China tries anything, it will pay a price.

Then there’s India, with its “Look East–Act East” policy, deepening ties with ASEAN to counter China’s growing influence. The U.S. is stepping up in the region, Australia and Japan are reinforcing their defence commitments, and even Europe is paying attention. Malaysia, however, still seems caught in the past—underfunded, underprepared, and relying too much on diplomacy at a time when hard power is becoming more important.

The Historical ASEAN Playbook No Longer Works

Back in 1971, Malaysia helped shape the Zone of Peace, Freedom, and Neutrality (ZOPFAN), which was meant to keep Southeast Asia free from great power interference. It worked for a while, as ASEAN’s founding fathers, through the Bangkok Declaration (1967) and the Kuala Lumpur Declaration (1971), prioritized regional stability. But in today’s reality, ASEAN’s unity is fragile, China is more aggressive, and neutrality no longer guarantees security. Indonesia, the region’s traditional non-aligned leader, is also worried about China’s growing influence in the Natuna Islands, proving that even Jakarta sees the need for a more robust defence posture.

This brings us to a fundamental question: what does Malaysia want to be in this new security order? It can either remain stuck in a cycle of underfunding its military while hoping diplomacy is enough—or it can take control of its own security future by making smart investments and strategic alliances.

How Malaysia Can Take Charge of Its Defence Future
First, Malaysia must shift its budget priorities, putting more money into Development Expenditure (DE) so it can actually buy and build the equipment it needs. That means new ships, upgraded aircraft, better surveillance systems, and modern cybersecurity capabilities.

Second, regional cooperation must be more than just talk. Malaysia should work closely with Vietnam, the Philippines, and Indonesia on joint maritime security patrols. It should also leverage ASEAN’s defence mechanisms, like the ASEAN Defence Ministers’ Meeting (ADMM-Plus), to push for a more unified response to China’s growing assertiveness.

Third, diversify security partnerships. Malaysia doesn’t need to abandon its neutral stance, but it can do what Indonesia does—engage with multiple partners, from Japan to India to Australia, without overcommitting to any one power. A stronger relationship with India, for instance, fits naturally with New Delhi’s Look East–Act East strategy and could help Malaysia counterbalance China’s growing influence.

The Bottom Line

Malaysia is at a crossroads. The days when diplomacy alone could protect its sovereignty are fading, and the reality is clear—without a stronger, more modern military, Malaysia’s ability to secure its interests in the South China Sea will continue to erode. The Philippines and Vietnam have already read the writing on the wall. The question is: will Malaysia act before it’s too late, or will it remain stuck in an outdated playbook while the security environment changes around it?

*Economist Samirul Ariff Othman is an adjunct lecturer at Universiti Teknologi Petronas, international relations analyst and a senior consultant with Global Asia Consulting. He did his graduate studies at Macquarie University in Sydney, Australia.*