By: C Shraddha

The relationship between Indonesia and Malaysia is one of historical richness. This can be mapped back to the 7th century when the archipelagos were indispensable parts of ancient kingdoms and empires of Majapahit, Johor-Riau, Aceh and Srivijaya. As the colonial powers spread their reign across continents, they carved up territories in Indonesia and Malaysia through different treaties. In 1641, Malaya fell into the reign of the Dutch, who were succeeded by the British Empire in 1824 through the Anglo-Dutch Treaty. Under the treaty, Malaya was to be under the governance of the United Kingdom, while the East Indies was dominated by the Dutch.
The region witnessed shifting power dynamics throughout the war. During World War 2, Japanese forces had a stronghold over Malaya and the East Indies. However, this proved to be futile when the brutal defeat of the Japanese forces in Hiroshima and Nagasaki, combined with the rise of nationalism within the East Indies, led to the declaration of independence by Soekarno and Mohammad Hatta. However, despite their efforts, the Dutch forces were fixated on recolonising the region. What followed was a violent four-year war from 1945 to 1949, which ended with the transfer of sovereignty from the Netherlands to Indonesia during the Dutch-Indonesian Round Table Conference.
The life of the archipelago was navigated by the Malay way of life, which consisted of three primary elements- the language, the religion of Islam, and the notion of the Kingdom. Adhering to the structures of a kingdom, the dominant ethnic community in the archipelagic Southeast Asia spoke the Malay language and followed Islam. Because of their interlinked identities, leaders of newly independent Malaysia and Indonesia shared familiar strategic apprehensions of the regional order. The leaders viewed the region as a singular unit represented and protected by the Malay World. Nevertheless, this common outlook marked the extent of their strategic alignment.
The two nations differed widely on their strategic interests. Indonesia viewed itself as the superior nation due to its momentous independence struggle, its territorial vastness and population density. Malaysia faded further into the background as the Soekarno regime asserted its dominance in a bid to establish Indonesia’s strategic foothold over archipelagic Southeast Asia. In his eyes, the two countries lacked any common strategic interest. Indonesia did not consider Malaysia powerful or capable enough to be perceived as a reliable ally. So, instead, they aimed to overpower Malaysia.
Malayan leaders, however, opted for a contrary stance. They believed that the survival and security of the archipelagos depended on each other. In 1963, then-Prime Minister Tunku Abdul Rahman expressed the country’s interest “to forge the closest links with Indonesia.” Common identities and shared strategic interests became the pillars on which these imagined ties were placed. For the leaders, Indonesia was not only their nearest neighbour, rather they shared deep “sentimental and blood ties” with each other. However, their geographical proximity to Indonesia facilitated the realization of mutual strategic dependence.
The sheer influence and power possessed by Indonesia could be observed in the way it unintentionally impacted Malaysia’s foreign policy. Their two common links inculcated an understanding of the necessity of the Malay Archipelago for the survival of the states, the geographical expanse of Indonesia necessitating Malaysia to establish itself closer. “As we were too small to stand alone, our only hope for security was to live in close association with Indonesia in particular, and other countries in Southeast Asia in general,” Tunku expressed. Their need to position themselves closer to Indonesia generated unified aspirations of peace.
To maintain and promote peace, cooperation, and stability in Southeast Asia, they established the Association of Southeast Asian Nations (ASEAN) in 1967, along with the Philippines, Thailand, and Singapore. This period in the Indonesia-Malaysia relationship was “marked by friendship, harmony and cooperation.” The newly established Suharto government aimed to reverse the old ways of political confrontation with Malaysia and actively engage in building regional cooperation. Considered to be the most influential player in Southeast Asia, the country’s involvement in the establishment of ASEAN undoubtedly ensured harmony and stability in the region.
Despite their commitment to uphold ASEAN goals, the Indonesia-Malaysia relationship is not one without skirmishes. Sipadan and Ligitan, two islands in the Sulawesi Sea, became the epicentre of the territorial dispute between the two nations. Although territorially compact, the question regarding the ownership of these Islands and the continental shelf consequently led to the involvement of international bodies. The negotiations reached an impasse as both sides insisted on using maps that excluded each other’s claim to the two islands. Consequently, in 1969, all negotiations were suspended as Indonesians claimed that it was beyond their power to negotiate the sovereignty of the Islands. For the Indonesians, the questions regarding the ownership of the Islands were to be left unsettled while maintaining the status quo. However, as far as Malaysian negotiators were concerned, the Sipadan and Ligitan belonged to Malaysia.
In December 1979, the Malaysian government issued a new map that showed Sipadan and Ligitan as part of their territory, thus publicizing the dispute. By February of the following year, the Indonesian government “formally objected to the new map”. However, the resulting discussions between President Soeharto and Prime Minister Hussein Onn failed to resolve the territorial dispute. Subsequently, the usage of the Islands by private dive companies, rising ownership claims over the territory by Malaysia and violation of status-quo led the countries to consult the International Court of Justice in 2002. The sixteen-to-one ruling of the court under Judge Shigeru Oda favoured Malaysia’s claims to the islands of Sipadan and Ligitan.
The presence of undocumented Indonesian migrant workers in Malaysia has emerged as another point of contention between the two countries. Conversely, the harsh treatment of Indonesian formal and informal sector labourers by Malaysian employers, combined with the inaction of the Malay government in protecting the exploited, has further aggravated this relationship. The labour movement of Indonesian workers to Malaysia accelerated in the aftermath of the 1997 Asian Financial Crisis as the country’s rapid modernisation and development during the 1980s and 1990s rendered it an attractive site for impoverished Indonesian workers. However, the influx of Indonesian workers coincided with an increase in crime rates in Malaysia, specifically in the 1990s. Indonesian migrants were convicted of various crimes, including petty theft, rape, robberies and murders. In 2001 alone, approximately 1,051 Indonesian workers were arrested for such offences. Additionally, Malaysian forces also discovered the smuggling of weapons in illegal migrant squatter camps throughout Peninsular and East Malaysia. Notably, an estimate showcases that up to 36 per cent of prison inmates throughout Malaysia are illegal Indonesian immigrants.
The rising workers, illegal and otherwise, seemingly altered the social fabric of the Malay way of life. The assimilation of Indonesian immigrants into the community and identity raised concerns amongst the Islam-following citizens as the former used shared ethnicity and language as a strategy to proselytise the Malay society. This was perceived as a substantial threat to the culture and identity of the nation, to the extent that a Malaysian Cabinet Minister described it as the “biggest threat facing Muslims in Malaysia today.” While both countries have undertaken several legislations to reduce the flow of illegal workers across the borders, the economic disparity and demand for cheap labour have rendered the efforts inadequate.
The relationship between Indonesia and Malaysia is historically intertwined. This interconnectedness has given birth to differential claims of ownership over certain cultures and traditions. The cultural disagreement started in 2007 when a Malaysian Ministry of Tourism ‘Malaysia Truly Asia’ campaign included the Indonesian Reog Ponorogo dance and the traditional Rasa Sayange song. This angered the Indonesian public, who accused Malaysia of appropriating and claiming their cultural heritage.
Another dispute arose in 2009 when a documentary on Malaysian cultural heritage titled ‘Enigmatic Malaysia’ showcased a clip of Pendet dance from Bali. Soon, protests erupted across Indonesia for misrepresenting and claiming unlawful ownership over their culture. Soon after, the Malaysian Minister of Culture and Tourism apologised to their Indonesian counterpart. However, the apology was criticised by certain members of the Indonesian government, who considered it to be insufficient in proportion to the actions committed.
However, the behaviour of the governments in dealing with matters of cultural heritage has shifted significantly over the years. In 2020, Indonesia and Malaysia jointly nominated Pantun, a traditional form of poetry, to UNESCO for its addition to the Representative List of the Intangible Cultural Heritage (ICH) of Humanity at the ICH Intergovernmental Committee sessions in France and Jamaica. This was the first time both governments had jointly proposed a cultural heritage. Now, Pantun has officially become Indonesia and Malaysia’s first shared cultural heritage added to the ICH list.
Over the years, the relationship between the two archipelagos has become more amicable. On January 27, 2025, Indonesian President Prabowo Subianto was honoured with the Darjah Kerabat Johor Yang Amat Dihormati Pangkat Pertama or The Most Esteemed Royal Family Order of Johor award from the Johor Kingdom during a state visit. The award was presented by Malaysia’s King, the 17th Yang di-Pertuan Agong, Sultan Ibrahim, at the country’s national palace.
The state visit reflected the renewed interests of both countries to ensure strong bilateral relations. Ever since his inauguration, Prabowo has visited Malaysia multiple times, indicating the country’s need to maintain amicable relations with its neighbour. During a recent media briefing, Prime Minister of Malaysia, Anwar Ibrahim, called Prabowo a “close friend”, while the latter expressed that he views the archipelagos as “strong regional partners with the same interests as the ASEAN founder.”
Economic cooperation has become a cornerstone in strengthening the peaceful ties between the two nations. In 2022, the countries surpassed US$ 27 billion in bilateral trade, with palm oil, electronics and petroleum products topping the list. From April 2024 to April 2025, the exports of Indonesia to Malaysia increased by 6.55 per cent, while imports increased by 17.2 per cent. The status of the two countries as renowned palm oil producers was reflected in the 2025 year-on-year growth in Indonesia’s export to Malaysia, with the export of Palm oil growing by 846 per cent. Regardless of past disputes in the palm oil sector, both countries have undertaken efforts to ensure sustainable palm oil practices, including the establishment of Malaysian Sustainable Palm Oil (MSPO) and Indonesian Sustainable Palm Oil (ISPO) certification programmes.
The Indonesia- Malaysia relationship is one rooted in centuries of shared history, community, geography and identity. While this relationship has witnessed its fair share of friction and competition, both nations have increasingly prioritised cooperation. They recognise each other’s importance in ensuring peace, stability, and security in the Southeast Asian region. In the ASEAN spirit of dialogue and non-confrontation, the nations have not only managed to address sensitive issues diplomatically but have also continued to ensure cooperation with each other on regional matters. While old tensions may not fully disappear, continued diplomatic measures, shared regional aspirations, economic interdependence, and a unique cultural identity shared between the two neighbours ensure the possibility of a prosperous and united future.