Malaysia prime minister convinced Elon Musk to invest in the country by freeing Tesla and SpaceX from ‘nitty gritty’ bureaucracy

How did Anwar Ibrahim, prime minister of Malaysia, capture an early lead in the race to woo Tesla CEO Elon Musk?

In July, electric carmaker Tesla established a regional headquarters in the country, and started to sell cars directly to consumers. That same month, Malaysia allowed satellite internet service Starlink, offered by Musk's SpaceX, to start operations in the country.

In an interview with Fortune editor-in-chief Alyson Shontell and Fortune China executive editor Maiwen Zhang, Anwar explained how he convinced Musk to back Malaysia, outmaneuvering other world leaders like Indonesia President Joko Widodo and South Korea President Yoon Suk-Yeol.

“I made it clear and blunt to him that he does not need to worry about all the other nitty gritty bureaucratic encumbrances that he may face in dealing with some other countries,” he said.

Malaysia exempted both Tesla and SpaceX from its decades-old rules on local ownership. Unlike other foreign automakers, Tesla can sell cars directly to Malaysian consumers without working with a local partner. Starlink was also exempted from local rules that restrict foreign companies to owning up to 49% of Malaysian internet providers. (These rules were designed to uplift the so-called bumiputera—the Malay majority and other indigenous groups—yet have proven ineffective at lowering income inequality.)

Anwar says he told Musk that he was ready to enact changes quickly to attract investment. “I want to effect change, and I want to do it now,” he said. “Whatever is necessary will be done.”

Past history may have helped too. The Southeast Asian country has an extensive track record of hosting high-tech manufacturing, including Intel's first offshore site in Penang, which opened in 1972. Malaysia also was an early customer of SpaceX. Upon the company’s launch in 2009, “many countries, even those in the West did not have much confidence in [SpaceX], but Elon said that we had faith in [the company],” Anwar said in a speech to Malaysia’s finance ministry in July.

Yet in his interview with Fortune, Anwar said the country previously lacked “clear policy and commitment by the leadership,” which dissuaded Musk—and business leaders like him—from investing more in the country until now.

Who else is investing in Malaysia?

Tesla and SpaceX aren’t the only companies interested in Malaysia.

German chipmaker Infineon, which makes semiconductors for the automotive industry, will expand its presence in northern Malaysia with $5.5 billion in new spending over the next five years. Chinese carmaker Geely will also invest $10 billion in Malaysia’s still-in-development auto-making hub in Tanjung Malim, in the northwestern state of Perak.

The commitments are part of a broader economic policy that the prime minister dubbed “Malaysia Madani,” which targets sustainable development and international competitiveness. ("Madani" is an Arabic word with connotations of modernity and civility, and is also an acronym for the Malay terms for sustainability, innovation, respect, trust and compassion.)

Malaysia's U.S.-China strategy

Luring foreign companies and governments to Malaysia is key to the initiative. After visiting China in late March, Anwar won a $40 billion investment commitment from Beijing that will go towards sectors like petrochemicals and automobiles. The Malaysian prime minister has also praised China's Belt and Road Initiative, the country's sometimes controversial program of global infrastructure investment.

“The Chinese have been quite aggressive in their investment portfolio into Malaysia,” Anwar told Fortune. Beijing had earlier funneled money towards infrastructure, but Anwar said he has pushed China to "go beyond that," and instead consider investing in manufacturing and data centers.

The prime minister dismissed concerns that geopolitics might sandwich his country uncomfortably between Washington and Beijing. “We don’t have that much of a problem,” he said. “I explained to my colleagues in the States: 'Look, it’s an important neighbor, it’s not a zero-sum game.'” Anwar even signaled an openness to work with Huawei, the Chinese telecoms provider blacklisted by the U.S. for alleged ties with China’s military.

Anwar is eager to see investments from Musk and others transform Malaysia into a high-tech economy.

“I was just in one of the indigenous villages in the hills. To them, connectivity means Starlink,” he says.

This story was originally featured on Fortune.com

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