VZCZCXRO5442
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHKL #0096/01 0480852
ZNR UUUUU ZZH
P 170852Z FEB 10
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC PRIORITY 3805
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGV/USMISSION GENEVA 0002

UNCLAS SECTION 01 OF 04 KUALA LUMPUR 000096 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EEB/TPP/BTA: J GIBLIN AND M INGENERI 
DEPT PASS USTR: B WEISEL AND K EHLERS 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: ECON ETRD MY
SUBJECT: MALAYSIA EXPRESSES INTEREST IN TRANS-PACIFIC 
PARTNERSHIP TO DEPUTY USTR MARANTIS 
 
Sensitive but Unclassified. Not for Internet distribution. 
 
¶1. (SBU) Summary: Deputy USTR Marantis accompanied by the 
Ambassador discussed the Trans Pacific Strategic Economic 
Partnership (TPP) and other trade issues in meetings with 
Malaysia's Minister of International Trade and Industry 
Mustapa, and several other Ministerial level officials during 
his visit to Malaysia February 3 ) 4.  The ministers noted 
Malaysia's "in principle" desire to join the TPP but noted 
that stakeholder feedback would be needed before the cabinet 
made a final decision on entering into TPP negotiations. 
Mustapa said MITI was currently leading the stakeholder 
consulting process and would be preparing the final 
recommendation to the cabinet on the TPP.   Minister Yakop, 
the Head of the Prime Minister,s Economic Planning Unit 
(EPU), said that MITI was focusing on  stakeholder input on 
sensitive issues like government procurement.   Minister of 
Domestic Trade Ismail assured DUSTR Marantis that Malaysia 
was moving on core trade negotiating issues including 
competition policy and IPR issues.  Minister of Finance II 
Husni acknowledged the cabinet,s essentially positive 
orientation toward the TPP but said government procurement 
continued to be a sensitive issue and Malaysia would be 
looking for flexibilities in this area. DUSTR Marantis made 
it clear that GP had to be included in the negotiation but 
that countries could negotiate set asides.   In their meeting 
with DUSTR Marantis, Malaysian business community 
representatives expressed support for and interest in the TPP 
but noted outstanding concerns among some firms about 
managing government procurement and certain Malaysian labor 
issues would need to be addressed The US business community 
in Malaysia expressed support for the TPP.  Malaysia's press 
coverage of DUSTR Marantis' visit focused on the potential of 
the TPP to revitalize the US-Malaysia trade relationship. 
End Summary. 
 
TRANS-PACIFIC PARTNERSHIP 
------------------------- 
 
¶2. (SBU)  Malaysia's Minister of International Trade and 
Industry, Mustapa Mohammed, informed Deputy U.S. Trade 
Representative Marantis and the Ambassador in a meeting 
February 3 that Malaysia "in principle" would like to move 
forward on the Trans-Pacific Strategic Economic Partnership 
(TPP) subject to certain parameters that are yet to be 
defined.  Mustapa outlined a timeline for the GOM to move 
forward, noting that MITI Secretary General Rahman will take 
the month of February to consult with various stakeholders 
and prepare a recommendation to the cabinet.  The parameters 
for Malaysia's negotiating position would then be worked out. 
 Mustapa had implied that Malaysia was hoping to complete 
this process before the first round of TPP negotiations in 
March.  However, upon hearing from DUSTR Marantis that 
Malaysia may not be able to participate in that meeting, 
Mustapa said that the GOM may then take "a bit more time." 
Malaysia's public position on TPP, he said, will remain that 
they have been informed about it and are seeking more details. 
 
¶3. (SBU) Mustapa agreed with DUSTR Marantis that the work 
done during the FTA negotiations should help Malaysia should 
it seek to join the TPP.  He recognized that the same issues 
that held up the FTA negotiations would remain the major 
obstacles for Malaysia with the TPP, namely service sector 
reform, liberalization of financial services, and government 
procurement.  Mustapa stated that both sides have no problem 
understanding each other's positions but bridging the gap 
remains challenging.  However, with U.S.-Malaysia bilateral 
trade slipping on a relatively large scale, Mustapa was 
hopeful that joining the TPP negotiations would reenergize 
the trade relationship. 
 
ECONOMIC PLANNING UNIT 
---------------------- 
 
¶4. (SBU)  Nor Mohamed Yakop, Minister in the Prime Minister's 
Office in charge of the Economic Planning Unit (and former 
Finance Minister II) told DUSTR Marantis February 4 that MITI 
had raised the prospect of the TPP at a Cabinet meeting the 
previous week and there had been no major issues raised. 
However, he added that there were some chapters of concern, 
such as government procurement, and that Trade Minister 
Mustapa was tasked to get stakeholder views on the TPP.  He 
was unsure of the timing for MITI to return to the Cabinet 
with its report, but commented that Malaysia joining the June 
2010 TPP negotiation round could be realistic.  Yakop agreed 
that it would be good for Malaysia to join the TPP early to 
 
KUALA LUMP 00000096  002 OF 004 
 
 
"add flexibility" in the negotiations and noted that 
investors take comfort when countries belong to trade and 
investment arrangements to maintain open and competitive 
markets.  He saw joining TPP as a possible marketing tool for 
increasing FDI to Malaysia.  Yakop listed Malaysia's 
advantages for FDI as a young population, good 
infrastructure, and a business friendly government. 
 
 
MINISTER OF FINANCE II 
---------------------- 
 
¶5. (SBU)  In his February 4 meeting with DUSTR Marantis, 
Finance Minister II Ahmad Husni Mohammad Hanadzlah (Husni) 
began by inquiring about the status of the bilateral FTA. 
Marantis listed several difficult issues that held up the FTA 
negotiations, including government procurement (controlled by 
the Ministry of Finance), and explained the U.S. was now 
focusing its negotiating energy on the TPP.   Husni queried 
on the scope of the TPP and asked if there would be 
additional "flexibility" in the TPP, especially with regard 
to government procurement.  Marantis explained that Malaysia 
would need to negotiate the difficult issues including 
government procurement, although it could, like the U.S. and 
other members, request reasonable set asides.  With regard to 
financial services, Husni described Malaysia's Financial 
Sector Master Plan as gradual liberalization, indicating that 
additional Malaysian flexibility in this area would come 
slowly.  Echoing Yakop, Husni said that the TPP had been 
raised once in Cabinet, and that its priority was discussed, 
adding that only after papers were submitted by  MITI 
Minister Mustapa, would the full Cabinet will consider the 
GOM,s approach to the TPP. 
 
Ministry of Domestic Trade 
-------------------------- 
 
¶6. (SBU)  DUSTR Marantis met February 4 with Minister of 
Domestic Trade Ismail Sabri Yaakob (Ismail), Secretary 
General Mohd Zain (Zain), Deputy Secretary General Daud Bin 
Tahir, and Malaysian Intellectual Property Corp.(MyIPO) 
Director General Kamel Mohamad (Kamel).   At the minister,s 
direction, SecGen Zain explained that his ministry understood 
that the bilateral FTA was not going forward.  He said that 
Ministry of Domestic Trade saw competition policy, government 
procurement, and IPR issues as significant issues that 
Malaysia needed to study and understand before being able to 
commit to the TPP negotiation.  Zain said that GOM needed to 
know what exactly is "high standard" trade agreement, and 
what would be expected of Malaysia.  DUSTR Marantis responded 
that the negotiating mandate for TPP participants should 
include all areas covered in our bilateral and that Malaysia 
would have to take up specific questions with the TPP members 
 
¶7. (SBU)   Minister Ismail assured DUSTR Marantis that 
Malaysia was moving on key issues.  He was pushing for rapid 
completion of the new "Competition Act", a competition policy 
law currently under review by the Attorney General (AG) and 
expected to be tabled to Parliament in March.  He said he was 
aware that Malaysia's lack of a competition law had been an 
impediment to the U.S.-Malaysia FTA negotiations.  Ismail 
said that the competition law had been tabled to the Cabinet 
once already and was returned to the AG for revisions.  He 
expected to receive the law from the AG's office next week 
and that passage would not be controversial.  Ismail also 
discussed IPR issues, stating that Malaysia was toughening 
almost all of its IPR related laws in 2010 and he expected 
amendments to be table between March and June and enacted 
prior to year end. Ismail also described the enhanced 
enforcement efforts, directly or indirectly resulting from 
our work on the FTA, and most likely transferable to TPP 
framework. 
 
BANK NEGARA 
----------- 
 
¶8. (SBU)  DUSTR Marantis also met  with Bank Negara Malaysia 
(BN) Deputy Governor Ooi Sang Kuang (Ooi), to discuss how 
Malaysia,s ongoing financial sector reform program would 
play into its ability create more negotiating room in 
financial services. Ooi was accompanied by Assistant Governor 
Sukdave Singh, Director of Financial Sector Development Abdul 
Rasheed Ghafur, Director of Monetary Policy Fraziali Ismail, 
and International Department Deputy Director Kristina Rai. 
Ooi told DUSTR Marantis that during 2009 Malaysia liberalized 
its financial services sector through allowing higher equity 
 
KUALA LUMP 00000096  003 OF 004 
 
 
participation rates and issuing new licenses and is committed 
to continue liberalizing its financial services sector over 
the next 10 to 15 years.  Singh explained that BN is now 
forming a liberalization master plan for the next 10 years. 
BN sees liberalization as strategic in nature and that 
gradually adding competition will make their economy more 
efficient and able face the intense competitive pressures 
from China, according to Singh. 
 
¶9. (SBU) After listening to Marantis describe the benefits of 
the TPP, Ooi emphasized that Malaysia "trade oriented" and 
said that Malaysia wants to participate in global, regional 
and bilateral trading arrangements which promote greater 
trade, investment, and regional integration.  He added that 
Asia is driving global growth and the region and that 
Malaysia was redefining its growth model to promote domestic 
demand and growth through increased regional integration. 
Ooi suggested Malaysia could raise the TPP for discussion at 
regional forums such as ASEAN. 
 
¶10. (SBU)  In response to questions on the basis and 
structure of the TPP, DUSTR Marantis said that the agreement 
will be based on the P4 agreement but that the difficult 
issues raised in the U.S.-Malaysia bilateral FTA 
negotiations, such as government procurement, services and 
financial services, would be part of the TPP.   Ooi commented 
that the pace of Malaysian financial services sector reform 
may not suit the TPP negotiations, but that there could be 
some flexibility to dovetail with the TPP. 
 
Malaysian PRIVATE SECTOR VIEWS 
------------------------------ 
 
¶11. (SBU)  DUSTR Marantis met separately on February 3 with 
retired President of the Federation of Malaysian 
Manufacturers (FMM) Yong Poh Kon (Yong), current FMM Vice 
President Paul Low and Vice President of the Malaysian 
Textile Manufacturers Association Y.H. Tan and Malay Industry 
and Development Board General Manager Rajini Ramlan.  Yong 
opened that as a trading nation Malaysia benefits from free 
trade agreements (FTAs) and that the FMM is in a position to 
push the government toward participating in the TPP if it 
benefits Malaysia.  Yong added that at an FMM council meeting 
last week, council members questioned the need for the TPP 
since Malaysia has FTAs with most of the initial partners, 
with the notable exception of the United States.  Marantis 
explained the benefits of the TPP over a bilateral FTA for 
Malaysia, which included reigniting foreign investor interest 
in Malaysia and reinforcing ongoing GOM economic reform 
efforts. 
 
¶12. (SBU)  On government procurement, Yong said FMM was very 
supportive of U.S. efforts to seek reforms which would make 
Malaysia,s government procurement system open and 
transparent. Rajini, however, raised Malay concerns regarding 
the U.S. position on politically sensitive Bumiputra (ethnic 
Malay and other indigenous ethnicities) preferences in 
government procurement sector.  Rajini described the ethnic 
preference policies as contributing to Malaysian political 
stability and an important component of Malaysia's economic 
development.  Yong queried whether Malay concerns could be 
handled by negotiating "margins of preference" in government 
procurement.   DUSTR Marantis responded that a government 
procurement chapter that provided greater market access to 
firms from TPP countries would be part deal, but Marantis 
added that there is a misperception in Malaysia that the U.S. 
has an all or nothing negotiating stance on GP in free trade 
agreements.  In fact, the U.S. has set asides for some 23% of 
our $250 billion government procurement market.  Our goal was 
to establish a transparent system which increased market 
access while taking into consideration each country,s 
political goals and sensitivities. 
 
¶13. (SBU)  Yong asked DUSTR Marantis whether the TPP would 
use the same U.S. template that was the foundation of the US- 
Malaysian bilateral negotiations.  He noted that Malaysian 
businesses have similar objectives to Americans in 
transparency and fair competition, but they were hopeful that 
there would be some flexibility with regard to  labor 
standards which some firms believed could damage Malaysian 
manufacturing competitiveness unless differences in the legal 
structure of Malaysia,s protections for workers was taken 
into consideration.   DUSTR Marantis explained that the labor 
section would include the five core International Labor 
Organization (ILO) standards, including freedom of 
association and the right to collectively bargaining. 
 
KUALA LUMP 00000096  004 OF 004 
 
 
 
AMCHAM and the PRESS 
------------------- 
 
¶14. (U)  Following DUSTR Marantis' speech on US trade policy 
at a lunch hosted by the American Chamber of Commerce, U.S. 
businesses noted support for U.S. engagement in the TPP and 
expressed hope that Malaysia would choose to participate in 
the TPP as well.  The Malaysian press coverage of DUSTR's 
Marantis' visit focused on the importance of the TPP as a new 
negotiating platform and how Malaysian participation in TPP 
could help Malaysia expand its trading relationship with the 
U.S. 
 
¶15. (U) USTR delegation has cleared this cable. 
KEITH