KUALA LUMPUR, March 6 -- The presence of Lynas Malaysia has for more than a decade sparked debate over how Malaysia should balance high-value industrial investment with environmental safeguards.

Operated by Australia-listed Lynas Rare Earths Ltd, the Kuantan-based facility began operations in 2012 and remains one of the largest rare earth processing plants outside China.

Rare earth elements are critical components in electric vehicle motors, wind turbines, smartphones, advanced electronics and defence systems, making them increasingly important as countries transition towards clean energy and high-tech manufacturing.

Yet from its early days, the plant has also been the subject of public protests and regulatory scrutiny over concerns in...