This study examines history, current status and development of higher educational policies in Malaysia and Singapore. In particular, this study pays attention on policy changes and internationalization strategies since the late 1990s. Malaysia and Singapore, both as multi-ethnic societies and newly established states, was once one country before the separation in 1965. However, political factors such as nation-building and economic factors such as competitiveness have shaped different paths for these two countries. This paper raises following research questions. What are the policy changes of higher education in these two countries in the post-separation era? What are the commonalities and the differences? What are the future prospects? This study finds that development of higher education in Malaysia and Singapore was strongly influenced by political economic factors of both domestic and international environments. Although two countries were common in that the role of the state has been strong as both had to go through nation-building, higher education policies in Malaysia was much more influenced by political factor as it has adopted the ethnic quota system for preferential treatment for its ethnic Malays. Also the two countries differed their polices in responses to higher education needs since 1990s. Malaysia expanded private educational market and steered international competitiveness centering on state universities. In contrast, Singapore slowly expanded size of state universities and pursued the quality of state universities. Recent development of international strategies of higher education in these countries reveals implications for future discussion on quality and direction of higher education in Korea and other Southeast Asian countries, as well as global level discussion on internationalization of higher education.