SG4's resource boom needs more than just optimism

Vast rare earth reserves could transform the economies of Kedah, Kelantan, Terengganu and Perlis. But without reliable infrastructure, sound investment terms and tangible benefits for local communities, the promised prosperity could remain buried beneath the ground.

The recent State Government 4 (SG4) economic forum painted a compelling economic future. The target of 7 per cent annual growth and a combined GDP of RM723.75 billion by 2050 sounds transformative.

But the crucial question is simpler: will this wealth actually reach the kampung, or will it remain a slide in a forum presentation?

The enthusiasm is not unfounded. The numbers are genuinely staggering. Malaysia is estimated to hold substantial rare earth element (REE) deposits, with a potential value of hundreds of billions of ringgit, and roughly 70 per cent of the country’s reserves lie within the SG4 states.

Kedah alone hopes to generate RM1 billion in revenue within two years. Terengganu is actively courting foreign technology partners to build a domestic value chain rather than simply exporting raw ore.

Yet the gap between ambition and execution is where most resource booms falter. The most sobering intervention at the forum came from the Economy Minister, who highlighted a fundamental contradiction: how can the states attract high-value investment when Kedah’s water reserve margin stands at zero per cent and Kelantan continues to grapple with chronic water supply problems?

No factory, whether manufacturing supermagnets or processing ore, can operate without a reliable water supply. No investor will commit billions to a state where basic infrastructure remains unreliable. The federal government has allocated billions in development expenditure across the four states, but the question remains whether this money will translate into pipes, roads and power grids, or merely more announcements.

The second hard truth is that rare earths are not simply a matter of digging and selling. Malaysia currently occupies the lower end of the value chain, exporting raw ore while the real money – in separation, refining and magnet manufacturing – is made elsewhere. The federal government’s phased plan to ban raw exports and encourage downstream development is a step in the right direction. However, it requires technology partners willing to transfer knowledge and expertise, not merely extract resources.

Terengganu’s approach of seeking sustainable partnerships based on open technology is a sensible starting point. But these are first steps, not the destination. The risk is that the SG4 states, eager for quick revenue, become little more than quarries supplying foreign processors, bearing the environmental costs while retaining little of the economic value.

What would a smarter strategy look like in practical terms?

First, fix the basics. Water, electricity and roads may not be glamorous, but they are the foundations on which tourism and manufacturing are built. A tourist will not return to a homestay without running water; a semiconductor company will not establish a plant in a state with no water reserve margin. The SG4 states must make infrastructure their foremost economic priority, not an afterthought.

Second, negotiate as a bloc, not as four supplicants. The states’ combined control over 70 per cent of Malaysia’s REE reserves gives them significant bargaining power. They should present a united front to the federal government and foreign investors on royalty structures, environmental standards and local employment requirements. Former prime minister Tun Dr Mahathir Mohamad’s call for a “common vision” is sound in principle, but it must be translated into concrete action: shared processing facilities, coordinated infrastructure planning and a unified investment pitch rather than four competing ones.

Third, tourism development must build on existing strengths, not imagined possibilities. Perlis has its cross-border trade and tranquil landscapes; Terengganu has its islands and cultural heritage; Kelantan has its distinctive culinary traditions and crafts. These assets do not necessarily require massive new infrastructure investments. They need cleanliness, accessibility and credible marketing. The forum’s emphasis on tourism risks becoming little more than a buzzword unless it is linked to specific, small-scale improvements that local communities can deliver.

Finally, the people must see the benefits. Dr Mahathir warned that wealth would amount to little if the people did not share the same dreams. The deeper issue is trust. If REE mining proceeds and communities see only trucks carrying ore away while their wells run dry and their roads remain unpaved, the political backlash could be severe. The states should establish transparent community benefit funds linked to extraction volumes, with funding channelled into visible local projects such as clinics, scholarships and small business grants. These would demonstrate a tangible link between resource wealth and everyday life.

The SG4 states are not wrong to dream big. The resources are real, and geopolitical demand for critical minerals is genuine. But a sleeping giant does not wake up simply by announcing that it is awake. It must stretch, test its limbs and do the unglamorous work of standing upright.

For ordinary people in Kedah or Kelantan, the measure of success will not be the GDP target for 2050.

It will be whether the tap runs when they turn it on, whether their children can find well-paying jobs without having to leave their hometowns, and whether the land they live on remains healthy enough to sustain farming. That is the standard by which this economic strategy should ultimately be judged.

The views expressed here are the personal opinion of the writer and do not represent those of Twentytwo13.

Image: UniSZA Holdings Sdn Bhd.