VZCZCXRO2999
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHKL #1474/01 2740849
ZNR UUUUU ZZH
R 010849Z OCT 07
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC 0039
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC

UNCLAS SECTION 01 OF 03 KUALA LUMPUR 001474 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR EB/TPP/MTA/IPC AND EAP/MTS 
STATE PASS USTR FOR B. WEISEL, D. BELL, J. GROVES 
USDOC FOR JENNIFER BAKER 
COMMERCE PASS USPTO FOR P. FOWLER 
 
E.O. 12958: N/A 
TAGS: ETRD EINV KIPR MY
SUBJECT: DOMESTIC TRADE MINISTRY: NEW SECRETARY GENERAL ROCKING THE 
BOAT 
 
¶1. (SBU) Summary: Mohd Zain bin Mohd Dom, Secretary General of the 
Ministry of Domestic Trade and Consumer Affairs (MDTCA), is 
spearheading efforts to create a more business-friendly ministry. 
Zain's appointment to the Ministry's third ranking position in early 
2007 has brought welcome access for a range of non-government actors 
with an interest in the ministry's policy-making process.  Given the 
MDTCA's key role in such areas as intellectual property protection, 
competition, and domestic retail trade, significant positive change 
based on private sector input could improve Malaysia's business 
climate substantially.  Zain is seeking such input as the government 
continues to finalize a draft competition law, despite being legally 
constrained from sharing draft text.  He is also seeking more 
commercial sector input for the MDTCA's changes to distributive 
trade guidelines and to its nascent efforts to formulate a broad 
intellectual property policy. In a recent courtesy call by Econ 
Counselor and econoff, as well as a candid talk to Amcham members, 
Zain outlined his vision for the ministry.  He also commented to 
Econ Counselor and econoff on several FTA-related issues, including 
his guarded optimism that progress could be made in the talks on 
IPR, competition, and even government procurement, provided the U.S. 
shows some additional flexibility. End summary. 
 
¶2. (SBU) In a speech to the American Malaysian Chamber of Commerce 
on September 4, Zain outlined a vision of an MDTCA as attuned to the 
needs of commercial interests as it is to consumer interests.  He 
noted that upon his arrival in the ministry there was a general lack 
of interest among staff in seeking out viewpoints from relevant 
non-government actors, for example from the business industry with 
regards to development of a competition law, or amendments to the 
distributive retail trade policy.  Likewise it was difficult for 
such interested parties to obtain meetings with MDTCA official to 
express their views. 
 
¶3. (SBU) Zain said he is determined that the MDTCA obtain a wide 
range of views on policy matters, as the ministry must know the real 
world experience of non-government actors in order to implement 
effective policy. As an example, he noted the MDTCA's distributive 
retail trade policy, which was revamped in late 2004 without the 
participation of many affected commercial interests, and with little 
regard to its investment implications.  Thus the 2004 guidelines 
have had to undergo several subsequent revisions to account for the 
complaints of commercial interests.  Zain said he even heard 
accounts from domestic industry representatives that indicated they 
were considering moving their future investments overseas because of 
the increased restrictions caused by the distributive retail trade 
policy amendments. 
 
¶4. (SBU) Although Zain mentions the strong political support he has 
received from the Prime Minister and MDTCA Minister Shafie Apdal, he 
told Amcham that he is realistic about the continued strong 
opposition in some quarters of the government, which will continue 
to inhibit the MDTCA from moving forward as fast as Zain would 
prefer.  Zain also is pushing for more autonomy among lower-level 
bureaucrats to limit the number of decisions that are bumped to 
senior ministry officials (and inevitably delaying decisions).  As 
he told Amcham, he foresees MDTCA as a "thinking ministry" that will 
seek solutions to problems rather than narrowly interpret laws and 
regulations. 
 
Pending Competition Law - The Legal Limits of 
--------------------------------------------- 
Transparency 
------------ 
 
¶5. (SBU) Zain has promised greater industry and NGO involvement in 
the government's longstanding efforts to finalize a draft 
competition law.  He is constrained by the Official Secrets Act from 
sharing the actual text of the draft bill outside the government, 
however. To compensate, Zain is providing industry and consumer 
groups with summaries of the concepts and goals of each article in 
the draft legislation in the hope that the groups would then be able 
to provide more useful input.  Many of those groups have already 
complained that without the actual draft text and its myriad 
details, it will be difficult to make truly useful comments. Thus 
Zain expects a difficult discussion, especially given the disparate 
interests of the three groups (government, industry, and NGOs).  He 
has pushed for this novel approach towards greater transparency, 
which he says has the backing of the PM and the Minister of Domestic 
Trade.  At the end of the day, Zain said, he would only recommend 
moving forward on the draft after these interest groups have 
expressed general consensus with MDTCA's approach. He added that the 
eventual competition law would not be set in stone, but was a first 
step to creating a flexible government approach to enforcing 
 
KUALA LUMP 00001474  002 OF 003 
 
 
competition. 
 
¶6. (SBU) Of U.S. efforts to negotiate a competition chapter in the 
U.S.-Malaysia FTA, Zain noted that Malaysian negotiators continued 
to be constrained by the Cabinet's decision earlier this year to not 
negotiate a competition chapter. He added that the ministry would 
not likely seek a revised decision by the Cabinet unless the U.S. 
was to indicate some new flexibility in this area. 
 
Distributive Retail Trade - Yet Another Look 
-------------------------------------------- 
 
¶7. (SBU) Zain noted both to econoffs and to Amcham that the GOM 
should be willing to examine the current preference programs for the 
bumiputera (ethnic Malays), including the 30 percent equity 
requirement for direct selling operations.  Changes were needed to 
limit the ability of a small group Malays to benefit financially 
from the preference policy by selling access to non-Malays (the 
so-called "ali baba" syndrome).  However, he also admitted that it 
is politically difficult to have an open discussion of preference 
policies in Malaysia. In addition, existing foreign operators in 
Malaysia had already accepted the equity restrictions, making it 
difficult to convince politicians to relax current policy to allow 
future entrants more relaxed terms. 
 
IPR - Government Pledges Funds, Seeks Ideas 
------------------------------------------- 
 
¶8. (SBU) Zain told the Amcham that formulating and implementing 
Malaysia's national IP policy (announced by the Prime Minister 
earlier this year) was an MDTCA priority.  The ministry needs to 
report to a task force chaired by the PM by the end of the year on 
how to use the targeted funding of RM 5 billion (USD 1.4 billion), 
and welcomed private sector suggestions.  Zain extolled the 
potential from the recent advent of a separate intellectual property 
court in Malaysia, but said work continues on expanding the court to 
locations other than Kuala Lumpur. 
 
¶9. (SBU) As with competition, Zain told econoffs that some degree of 
flexibility from the U.S. side on some key remaining sticking points 
in the IPR discussions would give the Malaysian negotiating team 
greater ability to convince senior officials to agree to more 
flexible negotiating terms.  On the up side, when asked how much 
negotiating space the GOM had on IPR, Zain said that the GOM had a 
general commitment to meet international standards on IPR in order 
to ensure Malaysia was well positioned to move up the value chain. 
Therefore, there was room to push the GOM to sign on to existing 
multilateral treaties. 
 
Other FTA Issues 
---------------- 
 
¶10. (SBU) Government procurement: Zain told econoffs that he did not 
foresee much chance for movement on negotiating a government 
procurement chapter, as Cabinet ministers looked at the issue from 
the UMNO political perspective first. From that perspective, heading 
into the next elections, there was not a single item that was hotter 
and more sensitive in the FTA talks.  He did say, however, that if 
USTR laid out some flexible options, perhaps GOM negotiators could 
take them back to Cabinet in hopes of creating a bit of negotiating 
room. 
 
¶11. (SBU) Financial Services:  Zain was less pessimistic about 
financial services, however, saying Malaysia was moving in a good 
direction on liberalization and that the political sensitivities for 
UMNO were narrower in scope - focused as they were on elite special 
interests in the financial sector that objected generally to 
liberalization.  Since ongoing banking sector consolidation would 
probably result in three large, internationally competitive domestic 
institutions, there should be room for specific commitments for 
gradual easing of restrictions on foreign institutions. Such 
commitments could include new licenses and/or more branching. 
 
¶12. (SBU) Labor and Environment:  Zain believes the GOM could reach 
accommodation on these chapters.  The PM, he noted by way of 
explanation, was more forward leaning on environment issues than 
others, including Rafidah - a point which came out in their comments 
at the APEC Leaders meeting, where Rafidah objected to its inclusion 
on the agenda but the PM saw no difficulty in addressing it. 
 
Comment 
------- 
 
 
KUALA LUMP 00001474  003 OF 003 
 
 
¶13. (SBU) Given Zain's long previous tenure at the Ministry of 
International Trade and Industry (MITI), where he most recently led 
Malaysia's Multilateral Trade Office, it's not surprising that he is 
more attuned to the concerns of commercial interests.  Over the 
years MITI has steadily implemented policies designed to attract 
foreign investment into Malaysia, and Zain appears determined that 
MDTCA policies not adversely impact Malaysia's ability to continue 
to attract such investment.  Zain's appointment to the top civil 
servant job at the MDTCA broke with the tradition of having a career 
ministry official move up to the top job through the ranks, and 
reflected the PM's genuine interest in creating a more 
business-friendly government.  We understand that Zain's appointment 
was engineered by Tan Sri Sidek Hassan, the PM's Chief Secretary 
(the government's most senior civil servant), who formerly was 
Zain's boss as MITI Secretary General; Sidek also co-chairs Pemudah, 
the PM's public-private sector initiative which aims to simplify 
business operations in Malaysia by improving government services. 
Despite having these heavy-hitters on his side, Zain will continue 
to be challenged by MDTCA staffers who are just gradually learning 
how to formulate policy in a more transparent manner. 
 
KEITH