VZCZCXRO6158
RR RUEHAST RUEHCHI RUEHDT RUEHHM RUEHLN RUEHMA RUEHNH RUEHPB RUEHPOD
RUEHTM
DE RUEHKL #0615/01 1960920
ZNR UUUUU ZZH
R 140920Z JUL 08
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC 1363
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 03 KUALA LUMPUR 000615 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MTS AND OES 
OES FOR BHOWARD AND TSCOTT 
DOE FOR EMCGINNIS, DWELLING AND MSCOTT 
 
E.O. 12958: N/A 
TAGS: PGOV EAGR MY
SUBJECT: Malaysia Scenesetter for DOE DAS Secretary Ed McGinnis and 
DAS Craig Welling 
 
¶1. (SBU) SUMMARY:  Embassy Kuala Lumpur looks forward to your July 
21-23 visit as an opportunity to advance important and continuing 
discussions with the government of Malaysia (GOM) on nuclear energy 
and the Global Nuclear Energy Partnership (GNEP). The visit will 
allow you to explore Malaysia's plans to develop nuclear energy 
under its new National Energy Policy (NEP). The GOM is studying the 
possibility of using nuclear energy after 2020 as a form of "clean 
energy." An overview of Malaysia's political environment, energy 
sector, science and technology arena, nuclear energy development, 
U.S.-Malaysia economic ties and security partnership, and 
Malaysia-Iran relations follows. END SUMMARY. 
 
POLITICAL SCENE 
 
¶2. (SBU) On March 8, Malaysia held national elections in which the 
Barisan Nasional (BN) coalition suffered its worst performance since 
1969, losing its two-thirds majority in parliament and control of 
five states to the opposition. Prime Minister Abdullah Ahmad Badawi 
faces a ground swell of dissatisfaction even within his own party. 
Despite calls for his resignation, PM Abdullah announced that he 
plans to remain in office until 2010, at which time he would hand 
over to Deputy Prime Minister Najib. Abdullah's dominant UMNO party 
begins a five-month election process on July 17, a process that is 
focused on the ongoing leadership struggle in the party. 
 
¶3. (SBU) The government must contend with a resurgent opposition led 
by former Deputy Prime Minister Anwar Ibrahim, who has pledged to 
bring down the BN government by mid-September through defections by 
BN parliament members. The BN struggle with the opposition hit high 
gear as an aide linked to government officials lodged a criminal 
complaint of sodomy against Anwar, while Anwar released information 
implicating DPM Najib in a high profile murder case. Against a 
heated political backdrop, and insinuations that the U.S. supports 
Anwar, the GOM took umbrage at the USG's public statement that 
Malaysia should follow the rule of law in pursuing Anwar's case, 
leading to a letter from the Malaysian Foreign Minister to Secretary 
Rice decrying our "interference." Malaysia's political arena thus 
remains highly sensitive and fluid. 
 
ECONOMIC TIES 
 
¶4. (SBU) The Malaysian and U.S. economies are closely linked with 
strong trade and investment ties. The U.S. has large investments in 
Malaysia's energy, electrical and electronic, and manufacturing 
sectors. The U.S. launched free trade agreement (FTA) negotiations 
with Malaysia in mid-2006. The U.S.-Malaysia FTA negotiations will 
enter its 8th Round in Washington D.C. this week (July 14 to 18). 
Areas of particular concern include government procurement, 
intellectual property rights (IPR), and services liberalization, 
especially in the financial sector. 
 
SCIENCE AND TECHNOLOGY AGREEMENT 
 
¶5. (SBU) Malaysia has one of the strongest high technology sectors 
in the region. The U.S. is in the process of negotiating both a 
bilateral U.S.-Malaysia science and technology (S & T) agreement and 
a multilateral U.S.-ASEAN S & T agreement. It is anticipated that 
both agreements will be concluded by the end of this year. However, 
IPR and customs duties remain areas for further negotiation. High 
tech U.S. firms with a presence in Malaysia include Dell, Microsoft, 
Agilent Technologies, Finisar, and Western Digital. 
 
ENERGY SECTOR 
 
¶6. (SBU) The Malaysian federal government holds the rights to the 
nation's petroleum reserves through its national company Petronas 
(Petroleum Nasional Berhad), established in 1974 to execute, oversee 
and chart the course of the sector's development. Malaysia's oil 
output has grown from 80,000 barrels per day (bbl/d) in 1974 to 
approximately 695,278 bbl/d in 2007. 
 
¶7. (SBU) Malaysian production of liquid natural gas (LNG) continues 
to grow, with the nation now ranking as the world's third largest 
exporter. In 2007, Malaysia produced 5,854 standard cubic feet of 
LNG per day. U.S. petroleum companies operating in Malaysia are 
ExxonMobil, Murphy Oil, ConocoPhillips, and Hess, with Hess 
operating in the Joint Development Area between Malaysia and 
Thailand. 
 
¶8. (SBU) Petronas contributes approximately 36.5% percent of the 
federal government's revenue in 2007. According to Oil & Gas 
Journal, Malaysian proven oil reserves have increased from 4.6 
billion barrels in 1996 to 5.35 billion as of the end of 2007. 
 
KUALA LUMP 00000615  002 OF 003 
 
 
Proven gas reserves are 75 trillion cubic feet. As production tapers 
off from offshore wells in shallow waters, Petronas is focusing more 
on Malaysia's gas reserves and moving overseas with operations in 29 
countries. 
 
¶9. (U) The Malaysian government significantly reduced fuel subsidies 
on June 5, raising fuel prices for gasoline by 40.6% and diesel by 
63.3% overnight. Regular gasoline increased to RM 2.70 (US$ 0.84) 
per liter while diesel grew to RM 2.58 (US$ 0.81) per liter. 
 
NUCLEAR ENERGY 
 
¶10. (U) The Malaysian government recently announced that it is 
prepared to develop renewable energy, including nuclear energy, 
under a new National Energy Policy. Deputy Minister of Energy, Water 
and Communications Datuk Joseph Salang Gandum stated that the GOM is 
studying the possibility of using nuclear energy by 2010 as it is 
currently regarded as a "clean energy" source. 
 
¶11. (SBU) Malaysia has two institutes that work closely with the 
country's nuclear equipment and facilities: the Malaysian Nuclear 
Agency (MNA) and the Atomic Energy Licensing Board (AELB). The 
Malaysian Nuclear Agency was first established in 1972 as the Center 
for Application of Nuclear Malaysia (CRANE) and has since undergone 
several name changes. In 2006, it was renamed as the MNA with the 
mandate to introduce and promote the application of nuclear science 
and technology for national and sustainable development. To do so, 
MNA operates four programs: research and technology development, 
technical support, commercialization and technology planning and 
management services. Under the Ninth Malaysia Plan (9MP), the MNA 
concentrates its R & D into six priority areas: advanced alternative 
energy, biotechnology, nanotechnology, information and communication 
technology (ICT), advanced materials, and advanced manufacturing 
sectors. (Note: On June 23 Minister of Science, Technology and 
Innovation Maximus Ongkili recently declared that Malaysia plans to 
place greater emphasis on developing its biotechnology industry. End 
Note.) Located 50km (approx. 31 miles) outside of Kuala Lumpur, MNA 
is strategically located near higher learning institutions, AELB, 
the Federal Administrative Center in Putrajaya (the de facto 
capital), and the Multimedia Super Corridor in Cyberjaya. 
 
¶12.  (SBU) The Prime Minister's Department established the Atomic 
Energy Licensing Board in 1985 in order to enforce the atomic energy 
licensing act (Act 304), which legislates the safe and peaceful use 
of radiation and nuclear technology. Since 1990, the Ministry of 
Science, Technology and Innovation (MOSTI) has overseen AELB. Under 
Act 304, AELB has the responsibility to advise the GOM on the 
development of nuclear technology; to exercise and supervise the 
production, application, and use of atomic energy and related 
matters; to establish, maintain and develop scientific and technical 
cooperation with other entities on nuclear matters or atomic energy; 
and to perform obligations arising from agreements, conventions, or 
treaties relating to nuclear matters or atomic energy where Malaysia 
is a party. Dato Abdul Aziz Raja Adnan has served as the current 
Director General of AELB for nearly ten years. (Note: DG Raja's 
current term will expire within the next few months. It is uncertain 
whether his term will be renewed. End Note.) AELB is located 5km 
(3.1 miles) down the road from MNA. 
 
¶13. (SBU) Several individuals from the National Nuclear Security 
Administration (NNSA) and the DOE's Global Threat Reduction 
Initiative (GTRI) have met with officials at AELB within the last 
year. In March 2008, Dr. Ken Apt from the International Nuclear 
Safeguards and Engagement Program (INSEP) led a three person team 
which met with DG Raja to discuss future USG-Malaysia collaboration 
on nuclear infrastructure preparedness and exchanges between AELB 
and subject-matter experts (SMEs) at U.S. National Laboratories. In 
April 2008, Mr. Greg Herdes from the Pacific Northwest National 
Laboratory also spoke with DG Raja regarding the GTRI and to conduct 
a site inspection of a facility possessing Category 1 radioactive 
sources. Mr. Herdes will return to AELB in August 2008 with a team 
of five individuals from various U.S. national laboratories to lead 
a workshop on physical protection and security management of 
radioactive sources. The team will also discuss future cooperation 
on physical protection upgrades for sterilization irradiators and 
radioactive sources. 
 
MULTI-FACETED SECURITY RELATIONSHIP 
 
¶14. (SBU) Malaysian leaders have taken a strong stance against 
terrorism and the United States is working closely with the GOM to 
fight this global threat. The U.S. and Malaysia also share a strong 
military-to-military relationship with numerous exchanges, training, 
 
KUALA LUMP 00000615  003 OF 003 
 
 
joint exercises and visits. Although we are not treaty allies, the 
U.S. and Malaysia collaborate closely in the military sphere. The 
U.S. spends about one million dollars a year to train Malaysian 
military personnel, and U.S. military personnel train in Malaysia's 
jungle warfare training center. Our militaries also conduct a series 
of bilateral exercises in the area during the year. Our 
military-to-military relations have improved further in recent years 
and this close relationship greatly contributes to the overall peace 
and stability of the region. 
 
¶15. (SBU) Malaysia has signed the International Atomic Energy Agency 
Additional Protocol and has sent observers to Proliferation Security 
Initiative exercises, but has been reluctant to undertake efforts in 
other related areas. Malaysia does not yet have an export control 
regime. Following revelations in 2003/2004 that a Malaysian company 
was part of the A.Q. Khan black market network, Malaysia began 
drafting export control legislation. The U.S. has provided technical 
advice, but the draft legislation remains pending. 
 
MALAYSIAN-IRAN RELATIONS 
 
(SBU) Malaysia retains friendly relations with Iran, including a 
burgeoning commercial relationship. Malaysia has lent rhetorical 
support to Iran's right to develop "peaceful" nuclear technology, 
while maintaining that it will respect UN decisions on Iran, 
including sanctions regimes. Nonetheless, Malaysia has not yet 
submitted its report to the UN on implementation of UNSC 1737 and 
1747 sanctions or taken other discernable actions to implement UN 
restrictions on Iran. In contravention of UN sanctions, the 
Malaysian Foreign Ministry approved Iran's participation in a 
defense sales exhibition held in April 2008 in Kuala Lumpur; the 
Defense Ministry rescinded the approval after the event began. 
Malaysia has worked actively with its NAM partners to support Iran's 
position before the IAEA. The U.S. sanctioned one Malaysian freight 
forwarder under the Iran Non-Proliferation Act for its role in 
shipping proscribed materials to Iran. Another Malaysian company 
reportedly has signed an agreement for a multi-billion dollar 
investment to develop two large natural gas fields in Iran and has 
finalized a joint venture to build an oil refinery in Malaysia with 
30 percent financing from the National Iranian Oil Company. Iran is 
expected to be the primary supplier of crude for this refinery as 
well as a buyer of refined products. 
 
SUGGESTED THEMES FOR CONSIDERATION 
 
¶16. The following themes are provided for your reference during your 
meetings in Malaysia: 
 
-- Recognize Malaysia as a regional leader in the research and 
development of biotechnology, nanotechnology, advanced alternative 
energy, advanced materials, ICT, and advanced manufacturing. 
 
-- Encourage Malaysia to become an observing country with the 
potential to become a partner nation in the Global Nuclear Energy 
Partnership. 
 
-- Recognize Malaysia as a partner of the U.S. in terms of promoting 
peaceful and safe uses of technology, including nuclear energy. 
 
-- Urge Malaysia to recognize that appropriate export controls are 
an important aspect of building confidence related to transfer of 
nuclear technology. 
 
¶17. We hope you will enjoy your visit to Malaysia and look forward 
to ensuring that your visit will be a success. 
 
KEITH