Indonesia and Malaysia were considered amongst the most liberal Muslim countries in the world; even more secular than the officially 'non-religious' Turkey. Although Muslims in these two states were quite observant in their religious practices, they never crossed the boundaries and interfered in the affairs of the state. Malaysia, in particular, was cited as an example of cultural and religious harmony as there are significant populations of Hindus and Chinese besides the simple majority of the Muslims. Indonesia also has nearly 14% non-Muslims, which is a big figure compared to more 'staunch' countries of the Middle East.
Despite the cultural and religious plurality, religious tensions were almost unheard of until a few years ago. First, it was Malaysia where minority ethnic groups complained of discrimination in jobs at the hand of the majority Malays. Indonesia, on the other hand, is passing through a semi-violent stage of Islamic militancy. The trend has seen a massive surge in recent years with the rise of Islamic militants. The recent killing of a major Indonesian militant might decelerate the rise of extremism but there are other organizations that are ready to pick up the pieces and continue their 'mission.'
One of the worrying trends in recent months is the public acceptance of strict Islamic penalties for drinking and other 'crimes.' A Malaysian woman accepted the sentence of caning meted out by an Islamic court; the charge was drinking in public. The legislative council of Aceh, northwestern province of Indonesia, passed a law that will allow the stoning of adulterers. Fortunately, the governor of Aceh has enough sanity left not to ratify that bill.
Malaysia, on the other hand, is continuing with its harsh implementation of Islamic sentences. An Islamic court has ordered an unmarried couple to be caned, as they were trying to have sex in a car. The couple, along with the woman who publicly drank, is awaiting their punishments.
The countries known for their moderate atmosphere and relaxed cultural settings are seeing the downfall of Islamic extremism. Indonesia already faces a big challenge of Islamic extremism and terrorism; Malaysia, on the other hand, is trying its best to follow its southern neighbor. Both of these countries do not have a Muslim majority, and there can be serious repercussions of an 'Islamization' campaign.
Malaysia, in particular, suffers, as Muslims are just a simple majority in this country and any over-emphasis on Islamic punishments can disturb the ethno-religious balance of the country. The discrimination against non-Muslims/non-Malays is a big issue and it can blow up to unimaginable proportions if not controlled. While Indonesia is trying to curb the growth of extremist elements, the Malaysian government is actually encouraging it (or at least not doing anything about it).
The strategic location of these countries in South East Asia and the vulnerability of international trade routes in case of any internal mayhem can disrupt international peace. Indonesia is the largest Muslim country in the world; both the American and Chinese interests intermingle in this region and any untoward situation can prove disastrous. Malaysian and Indonesian governments need to rethink their options in this regard; Indonesia is already doing that but Malaysia looks stern on its position.