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DE RUEHKL #1763/01 2630928
ZNY CCCCC ZZH
P 200928Z SEP 06
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC PRIORITY 7564
INFO RUEATRS/DEPT OF TREASURY WASH DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/USDA FAS WASHDC

C O N F I D E N T I A L KUALA LUMPUR 001763 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS USTR FOR BARBARA WEISEL, JERI JENSEN 
USDOC FOR 4430/MAC/EAP/BAKER 
TREASURY FOR OASIA 
 
E.O. 12958: DECL: 09/20/2016 
 
TAGS: ETRD EINV EAGR MY
SUBJECT: U.S.-MALAYSIA FTA - GOM WORKING BEHIND THE SCENES 
 
 
Classified By: Deputy Chief of Mission David Shear for Reason 1.5 (b) 
 
¶1. (C) Summary.  The new Deputy Secretary General for Trade 
in the Ministry of International Trade and Industry (MITI) 
assured econoffs that Malaysian negotiators would soon obtain 
Cabinet approval to address the key substantive issues in our 
bilateral FTA talks.  She said MITI was engaging in extensive 
interagency discussions out of the public eye to iron out 
interagency differences and make Cabinet approval more 
straightforward.  She acknowledged the importance of 
inter-sessional work, but said this must wait for cabinet 
approval first.  She confirmed that Malaysian negotiators 
understand that U.S. TPA legislation imposes a real deadline, 
but observed that the accelerated schedule runs counter to 
Malaysia,s preferred way of doing business.  She speculated 
that the U.S. and Malaysia would be able to reach agreement 
on goods market access and investment with relative ease, but 
said devising a mutually acceptable approach to services 
would continue to challenge negotiators.  Our sense is that 
MITI is finding the Malaysian inter-agency process more 
difficult than expected, but that the government,s 
commitment to the negotiations remains firm.  End summary. 
 
¶2. (C) Rebecca Fatima Sta Maria, MITI,s new Deputy Secretary 
General for Trade, assured econoffs in a get-acquainted 
meeting September 20 that Malaysian officials are working 
hard behind the scenes to move the FTA process forward. 
Rebecca said MITI is engaging in extensive discussions with 
other relevant ministries to iron out issues, with the goal 
of presenting to the cabinet a draft paper on negotiating 
authority that could be approved by ministers without 
difficulty.  She claimed that MITI was "almost there" in 
terms of finalizing a draft.  She also noted that MITI is 
working more closely with Parliament given its increasing 
attention to the FTA process.  She suggested such engagement 
would be beneficial over the long run, but slowed the 
bureaucratic process to a certain extent. 
 
¶3. (C) Econ Counselor underscored the importance of 
inter-sessional work to ensure a productive third round, and 
noted in particular the U.S desire to exchange market access 
offers.  Rebecca said that Malaysia understood that 
inter-sessional work was important, though it would continue 
to be constrained until after cabinet approval of the draft 
paper granting negotiating authority.  Econ Counselor 
suggested that there might be non-controversial areas that 
could be discussed in advance of the Cabinet approval, such 
as currently stalled efforts to hold a DVC on biotechnology 
regulatory systems.  Rebecca took the idea on board, but 
appeared visibly uncomfortable with the idea of talking in 
advance of the Cabinet ruling.  (Comment:  MITI officials 
clearly want to avoid activities that might be construed as 
presuming on the Cabinet,s prerogatives.) 
 
¶4. (C) Econ Counselor stressed that TPA expiration is a 
genuine deadline that would necessitate a lot of work on both 
sides in order to reach an agreement by early 2007.  Rebecca 
responded that the GOM recognizes the tight negotiating 
schedule that TPA imposes, but added that it is forcing 
Malaysia to accelerate its consideration of many issues that 
it would prefer to deliberate over time.  She added that some 
Malaysian negotiators were taken aback by the urgent tone in 
some earlier negotiating sessions, which "grated" on 
Malaysian feelings.  She underscored the Malaysian preference 
for seeking mutual agreement through gradual persuasion, 
which of course is a time-consuming process. 
 
¶5. (C) Rebecca provided her personal view on several FTA 
issues from the perspective of an official who is relatively 
new to the process (though she said she has been involved 
behind the scenes in developing the Malaysian position on the 
investment chapter).  She speculated that both sides would be 
able to reach agreement on goods market access issues with 
relative ease, given Malaysia,s generally low-tariff 
approach to most goods.  She also suggested that Malaysia 
would accept a negative list approach in the investment 
chapter.  However, she said that devising a mutually 
acceptable approach to negotiating a services chapter would 
continue to pose a challenge. 
 
¶6.  (C) Comment:  Rebecca emphasized the depth and 
extensiveness of the Malaysian inter-agency consultations, 
and the pains MITI officials are taking to ensure that all 
parties are on board with the paper that will be submitted to 
the Cabinet.  Our sense is that this process has proved more 
difficult than expected, and undoubtedly was complicated by 
the recent turnover in leadership at MITI.  However, she also 
made clear that MITI expects a smooth passage through Cabinet 
once inter-agency differences are ironed out.  This 
reinforces the message that we have been hearing from other 
corners, notably in Prime Minister Abdullah,s comments to 
the press in New York, that the government,s commitment to 
the negotiations remains firm. 
LAFLEUR