VZCZCXRO4361
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHKL #0983/01 3110833
ZNR UUUUU ZZH
P 060833Z NOV 08
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC PRIORITY 1924
INFO RUEHRC/USDA FAS WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 1639
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION

UNCLAS SECTION 01 OF 02 KUALA LUMPUR 000983 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EEB/TPP/BTA AND EAP/MTS, TREASURY FOR OASIA AND 
IRS, STATE PASS FOR USTR - WEISEL AND BELL, STATE PASS FOR 
FEDERAL RESERVE AND EXIMBANK, STATE FOR FEDERAL RESERVE SAN 
FRANCISCO TCURRAN, USDOC FOR 4430/MAC/EAP/J.BAKER, USDA FAS 
FOR OA/BIG, ITP/AAD, COMMERCE FOR 4430/MAC/MICHAEL HOGGE, 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: EAGR ECON ETRD KIPR MY PGOV EINV
SUBJECT: MALAYSIAN TRADE MINISTER ON BILATERAL FTA AND APEC 
 
¶1. (SBU)  Summary: Malaysia's Minister for Trade Muhyiddin 
congratulated the Ambassador on the U.S. elections, noted 
that Malaysia looked forward to continuing efforts to expand 
trade and investment ties with U.S. and expressed the hope 
that the U.S. would not shift to a more protectionist trade 
stance in the face of the financial crisis and global 
economic downturn.  The Ambassador assured Muhyiddin that the 
U.S. would continue engaging on a wide range of international 
economic policy challenges. In the bilateral context, the 
Ambassador told Muhyiddin, the best way for Malaysia to 
foster stronger trade and investment ties was to send clear 
signals to Washington conveying its willingness to negotiate 
a high quality FTA, including tough areas like government 
procurement and financial services.  Muhyiddin said the 
government was committed to economic reforms in key areas, 
that change would take time, and that it would be helpful if 
the U.S. was less ambitious.  With regard to APEC, Muhyiddin 
said Malaysia would be represented by the Deputy Prime 
Minister at the Leaders Meeting.  The trade agenda aside, 
Muhyiddin said the GOM expected there would be substantive 
discussion of international efforts to handle the financial 
crisis and the global economic slowdown. End Summary. 
 
TIME VS AMBITION 
 
¶2. (SBU) Comment:  Having a comfortable lead in his own 
effort to gain UMNO Party support for his move into the 
Deputy Prime Minister slot next March, Muhyiddin exuded ease 
and confidence during the meeting.  However, he was not as 
well briefed by his staff on the status of our FTA talks as 
might have been expected.  He was under the impression that 
preparations were still underway for a round at the end of 
November, and had to be told that the timing of a future 
round still depended on an evaluation of intersessional 
progress of the FTA work plan.  More importantly, while 
Muhyiddin made it clear the Government of Malaysia sees the 
economic necessity to move on domestic reforms that would 
make Malaysia more competitive and help clear the path for 
negotiating all aspects of a comprehensive FTA, its 
continuing concern over domestic political sensitivities 
drives its need for a longer timeframe for achieving that 
goal or alternatively a "less ambitious outcome."  Given that 
Malaysia has such clear difficulties moving away from its 
imbedded system of protectionist preferences for the Malay 
majority so important to UMNO hardliners, it was somewhat 
ironic that the Minister chose to express concern that the 
new U.S. administration might shift to more protectionist 
policy settings in an effort to preserve jobs at home. End 
Comment. 
 
WORKING TO KEEP ADDRESS INTERNATIONAL ECONOMIC ISSUES 
 
¶3.  (SBU)  Minister Muhyiddin opened his meeting November 5 
with Ambassador Keith by extending congratulations on the 
just concluded U.S. elections.  He emphasized that Malaysia 
looked forward to continuing to work constructively with the 
next U.S. administration to expand our bilateral trade and 
investment ties. He also expressed the hope that the current 
financial crisis and global economic slowdown would not 
detract from the next administration maintaining an active 
trade agenda.  This was important, he noted, given that the 
U.S. was Malaysia's largest export market, and Malaysia was 
already facing a substantial weakening in its exports due to 
the global economic downturn. Malaysia's GDP growth next 
year, he added, had already been revised downward to 3.5 
percent.  The Ambassador made clear to Muhyiddin that the 
consistent message from the USG was that "we are all in this 
together" and he assured the minister that the U.S. would 
continue working closely with other nations to address the 
policy challenges presented by the financial crisis.  He 
pointed to the upcoming mid-November G-20 meeting in 
Washington D.C. called for by President Bush as an ongoing 
example of our active engagement. 
 
CLEAR SIGNALS NEEDED ON FTA 
 
¶4.  (SBU) With regard to developing our bilateral economic 
relationship, Ambassador Keith said our bilateral FTA 
 
KUALA LUMP 00000983  002 OF 002 
 
 
negotiations provided the most effective means of achieving 
significant gains for both sides.  The Ambassador noted that 
the last round in July had gone well but that additional work 
needed to be done to set up the next round. He emphasized to 
Minister Muhyiddin that the most important thing Malaysia 
could do in this regard was to send the U.S. administration 
clear signals that Malaysia was prepared to negotiate all 
aspects of the FTA, including sectors that have proven 
difficult for Malaysia such as government procurement and 
financial services.  Recent comments from the DPM on 
Malaysia's willingness to reform Malaysia's restrictive "New 
Economic Policy" and to liberalize services were good but the 
GOM needed to be specific about these plans in terms of 
content and timing to convince the U.S. government that a 
quality agreement was achievable. 
 
¶5.  (SBU) Muhyiddin replied that Malaysia was keen to see the 
FTA concluded and pointed out that the cabinet had already 
approved a slightly expanded mandate (covering competition 
policy) and that the cabinet would consider a wider 
liberalization of and an expanded mandate for services in the 
coming weeks.  The NEP, he cautioned, was still a very 
politically sensitive topic.  He had been forced to publicly 
elaborate on the DPM's comments, clarifying that the 
government was only contemplating amendments where Malaysian 
firms were already competitive.  Muhyiddin said he understood 
that Malaysia's protectionist measures undercut its economy 
in the long-term and that Foreign Investment Committee 
restrictions limited access to much-needed foreign 
investment.  Moreover, he said, it was clear to GOM that 
other countries in the region like Thailand and Vietnam 
catching up to Malaysia.  Nevertheless, as much as we want to 
move toward liberalization, the government felt it needed to 
move gradually and carefully. He assured the Ambassador the 
GOM realized it needed to review existing restrictions and 
that it was doing so with the intention of removing 
unnecessary barriers.  As an example, Muhyiddin said, pending 
cabinet approval, next week the government would release a 
more rapid timetable for liberalization of certain services 
called for under the ASEAN FTA. Still, he added, it would be 
helpful if the US was "not too ambitious" in its goals for 
the FTA.  The Ambassador replied that the U.S. wanted an 
agreement that was good for both sides but the U.S. was 
determined to conclude comprehensive "quality" agreements and 
that would not change. 
 
MULTILATERAL AND REGIONAL DEALS AND APEC 
 
¶6. (SBU)  Noting that the Government of Malaysia was somewhat 
concerned about protectionist rhetoric used during the U.S. 
presidential election, Muhyiddin said Malaysia continued to 
give priority to the Doha round. Although it was locked out 
of the Green Room at the last WTO Ministerial, Malaysia hoped 
that parties to the agreement would preserve what was agreed 
on then and move forward.  As for regional trade 
arrangements, Malaysia's starting point was always ASEAN.  As 
far as Malaysia was concerned, he said, every option, whether 
ASEAN plus 3, ASEAN plus six, or the FTAAP all were seen from 
the point of view of ASEAN.  Given the uneven levels of 
development of member countries, Muhyiddin said, flexible 
timelines and a building block approach were necessary for 
progress.  As for the FTAAP, it was a long-term project, but 
Malaysia was supportive of the second stage study being done 
by APEC member economies.  Muhyiddin confirmed that he would 
attend the APEC Trade Ministers meeting in Lima Peru and that 
Foreign  Minister Rais would attend the ministerial. 
However, Deputy Prime Minister Najib (recently nominated as 
the next President of UMNO) would stand in for the PM at the 
Leaders Meeting.  Muhyiddin said he expected discussions 
would focus on the financial crisis and approaches to dealing 
with the global economic slowdown. 
KEITH