Identifier
Created
Classification
Origin
06KUALALUMPUR1259
2006-07-07 08:49:00
SECRET
Embassy Kuala Lumpur
Cable title:  

SCENESETTER FOR THE VISIT OF CNO ADMIRAL MULLEN

Tags:  PREL PGOV MARR ECON PTER MY 
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S E C R E T SECTION 01 OF 05 KUALA LUMPUR 001259 

SIPDIS

SIPDIS

E.O. 12958: DECL: 07/07/2016
TAGS: PREL PGOV MARR ECON PTER MY
SUBJECT: SCENESETTER FOR THE VISIT OF CNO ADMIRAL MULLEN


Classified By: DCM David Shear for reasons 1.4 b and d.

S E C R E T SECTION 01 OF 05 KUALA LUMPUR 001259

SIPDIS

SIPDIS

E.O. 12958: DECL: 07/07/2016
TAGS: PREL PGOV MARR ECON PTER MY
SUBJECT: SCENESETTER FOR THE VISIT OF CNO ADMIRAL MULLEN


Classified By: DCM David Shear for reasons 1.4 b and d.


1. (S) SUMMARY: Malaysian-American relations are good and
improving; we are currently conducting negotiations for a
Free Trade Agreement with Malaysia. This moderate,
Muslim-majority state is our tenth-largest trading partner
worldwide. Our robust and growing military-military
cooperation is receiving greater public attention, along with
some criticism from retrograde quarters. While moving slowly
away from the anti-Western rhetoric of former Prime Minister
Mahathir Mohamad, Malaysia continues to oppose us on some key
international issues. Counterterrorism cooperation is
largely good, but we remain concerned about the release of
certain suspects and the level of surveillance of those
suspects. Malaysia and its neighbors increasingly realize
the importance of maritime security, but enforcement efforts
are hampered by sovereignty concerns and a lack of resources.
A new Malaysian coast guard is slowly getting its sea legs.
Malaysia supports the Mindanao peace talks but has differed
sharply with Thailand over separatist violence. The
Malaysian government is making progress in implementing a
non-proliferation regime, and we continue to press hard for
endorsement of the Proliferation Security Initiative (PSI).
End Summary.

Political Landscape
--------------


2. (C) While Malaysia has plenty of warts, it remains a rare
example of an Islamic-majority country that is stable,
civilian-led and prosperous. Malaysia has also maintained a
largely tolerant social system and a tightly managed
democracy, with the same multi-racial coalition in power
since independence in 1957. While we continue to urge the
government of Malaysia to improve its own governance, we also
recognize the constructive role Malaysia can play in the
Islamic world.


3. (C) Prime Minister Abdullah Badawi is a breath of fresh
air after the long-serving and vituperative Mahathir Mohamad,

who retired in late 2003. Abdullah promotes a tolerant,
progressive approach to religion that he calls "Islam
Hadhari" (civilizational Islam). He is publicly committed to
fighting corruption and reining in costly mega-projects,
though his government's follow-through has been
disappointing. Corruption in government procurement,
including defense contracts, remains a problem. Abdullah's
mild-mannered and cautious approach has also led critics to
question his leadership and effectiveness, but his ruling
coalition remains secure. Abdullah's chief potential rival,
Deputy Prime Minister (and Defense Minister) Najib Razak,
plays the role of a loyal bulwark. After two years in power,
Abdullah has appealed to the public for patience in
delivering reform. As long as the economy continues to grow
healthily, the public will grant him that. Recent bitter
criticism of Abdullah by Mahathir does reflect some nostalgia
within the ruling party for more lavish spending and more
decisive leadership, but does not directly threaten
Abdullah,s hold on power.


4. (C) One of many subjects on which Mahathir has criticized
Abdullah is the growing mil-mil cooperation between the
United States and Malaysia, particularly with regard to the
greater frequency of high-visibility ship visits. We have
been pleased by the overwhelmingly positive media coverage
our ship visits have received, in contrast to the quiet
arrivals of past years. The flip side to this is that our
visits are getting increased attention from ideological foes
on the Islamic right, and from Mahahtir,s opportunistic
criticism. Deputy Prime Minister Najib has stoutly defended
our cooperation before Parliament, and we do not see that our
engagement is under threat. However, we do need to be
cognizant of our increased military visibility and sensitive
to GOM concerns, particularly with rising tensions in the
Middle East, where Malaysians strongly sympathize with the
Palestinians.

Economic Situation
--------------


5. (C) In his early days, PM Abdullah made rural development
and control of government spending, partly as a means to
encourage private sector led growth, his top economic
priorities. So far, only his reduction of the government's
deficit -- now down to 3.8 percent of GDP -- can be chalked

KUALA LUMP 00001259 002 OF 005


up as a clear success. Abdullah's partisans say that the
Ninth Malaysia Plan (9MP; a five year plan for economic
policy and development spending) will be the vehicle for
advancing his other economic goals, but the 9MP, unveiled on
March 31, seemed more like "business as usual." 35% of the
funding in 9MP is earmarked for completing projects started
in 8MP. Abdullah has emphasized the need for fast
implementation of 9MP (a tacit acknowledgment of the
perceptions weak follow through by his government) and
created a new government agency to focus on the problem.


6. (C) Meanwhile cuts in government subsidies for gasoline
and diesel fuel -- one of the tools used to rein in the
deficit -- have proved highly unpopular, and raised concerns
about inflation. Increases in prices of other
government-managed commodities, such as electricity, are in
the works. For now, the economy is in reasonably good shape,
with projected growth of around 5.0 percent in 2005 and
official inflation of around 4.8 percent (although private
analysts believe the real rate of price increases is much
higher). However, the government may be facing a tough
choice in the coming year between stimulating the economy to
get back on a higher growth track, or raising interest rates
to control inflation.

Malaysia's International Posture
--------------


7. (C) Malaysia currently is the chair of the Non-Aligned
Movement (NAM),the Organization of the Islamic Conference
(OIC) and of ASEAN. Malaysia hosted the ASEAN Summit and the
East Asia Summit last December, and will host the ASEAN
Regional Forum (ARF) ministerial this summer. Secretary of
State Rice is plans to attend the ARF meetings in July.
Malaysia backed the six-party DPRK nuclear talks and has
supported Iraqi reconstruction efforts, but has been
overeager to embrace Hamas and defend the Iranian nuclear
program. The foreign ministry seems to be moving slowly away
from some of Mahathir's anti-Western rhetoric and policies,
but retains friendships with troublesome states like Cuba,
Zimbabwe, Sudan, Syria and Uzbekistan.


8. (C) The Malaysian government publicly supports China's
"peaceful rise" and signed a defense cooperation MOU with
China, despite lingering suspicions among senior Malaysian
military officials of China's long-term intentions. An April
visit by China's defense minister received very little
coverage in the local press. While Malaysia and Singapore
quarrel frequently over issues like water pricing, land
reclamation, and transportation links, the two retain a loose
defense relationship under the aegis of the Five Power
Defense Arrangement (FPDA),along with the United Kingdom,
Australia and New Zealand. Malaysia has actively supported
peace efforts in the southern Philippines and Aceh in
Indonesia. While a maritime boundary dispute with Indonesia
in the Sulawesi Sea remains unresolved, Malaysia maintains
generally good relations with all its ASEAN neighbors.
Malaysia also enjoys good relations with India, and held
their first navy-to-navy staff talks with India earlier this
year. Deputy Prime Minister Najib visited India in June in a
visit that many read as a careful attempt to build bridges
with a long-term counterweight to China.

Counterterrorism
--------------


9. (S) Malaysia has generally been a reliable and
constructive partner on counterterrorism. In 2003, Malaysia
established the Southeast Asia Regional Center for
Counterterrorism (SEARCCT),which now runs a full schedule of
multilateral training courses, many conducted with U.S.
support. Early round-ups in 2001 and 2002 of scores of
Jemaah Islamiyah (JI) suspects crippled that organization's
activities in Malaysia. Over 70 suspected terrorists remain
in custody under the Internal Security Act (ISA),a
"preventive" measure that has also been used to jail
political opponents of the government in the past. To our
knowledge, prosecutions and trials of the terrorist suspects
are not planned. Drawing on their experience in defeating a
communist insurgency, the Malaysians take a "rehabilitative"
approach for some terrorists, keeping them under police
supervision in "restricted residence." Several leading
figures (such as JI financier Wan Min) have been released
from ISA detention without warning. We remain concerned that
surveillance of released terrorist suspects may be inadequate

KUALA LUMP 00001259 003 OF 005


and their "rehabilitation" may be incomplete or insincere.
JI, while weakened, still has the capability to strike here,
and the Malaysians need to remain vigilant.


10. (C) While the Malaysian leadership firmly opposes
terrorist organizations at home, it is deeply uncomfortable
with any association of Islam with terrorism, and frequently
lectures us on the need to eschew terms such as "Islamic
terrorists" or "jihadists." Reflecting the broad support for
the Palestinian cause among the majority here, the Malaysian
government has no relations with Israel and often argues for
the need to address the "root causes" of terrorism in the
Middle East. In February, negotiators from the United States
succeeded in reaching an agreement here on a text for a
bilateral Mutual Legal Assistance Treaty (MLAT). We are
hoping the treaty will be ready for signature in time for the
Secretary of State's July visit. The treaty will be a good

SIPDIS
tool in fighting terrorism and other forms of transnational
crime.

Maritime Security
--------------


11. (C) In July 2005, the insurer Lloyd's of London
designated the Strait of Malacca (SOM) as a "war-risk zone,"
raising premiums for shippers transiting these waters. This
prompted a flurry of public cooperation among the littoral
states -- Malaysia, Singapore and Indonesia, plus neighboring
Thailand -- including conferences of foreign ministers and
military chiefs. On September 13, 2005, the three littoral
countries launched an "Eyes in the Sky" (EiS) program to
conduct international aerial surveillance of the Strait. EiS
originally comprised separate but coordinated flights by
Malaysia and Singapore with observers from each of the three
countries onboard each flight. Resource-strapped Indonesia
did not contribute flights until the three countries signed
an Agreement on 21 April 2006 that firmly set terms of
reference and standard operating procedures. This Agreement
states that "hot pursuit", which is a sensitive issue with
the neighboring littorals, must be guided by bilateral
agreements. Malaysia does not have a working bilateral hot
pursuit agreement with either Singapore or Indonesia. Crews
use binoculars to survey shipping traffic and make non-secure
radio transmissions to shore and ship facilities of the three
littoral states. Malaysia has also committed a single
Beechcraft B-200 with infrared capability, to enable some
night-time surveillance. Thailand continues to participate
in discussions but the government has not given the military
approval to join EiS.


12. (C) EiS represents an important symbolic step forward for
the littoral states' cooperation on SOM security, but could
be difficult to sustain without international support. DPM
Najib has told the media on several occasions that Malaysia
would welcome international involvement in Eyes in the Sky.
Our working-level contacts remain vague, however, on what
sort of American assistance might be accepted in this
sovereignty-conscious region. Malaysia will host a meeting
this September sponsored by the International Maritime
Organization (IMO) in which the littoral states are to
identify and prioritize their needs for assistance in
enhancing SOM security. On February 15-17, the USG hosted a
meeting of key SOM user states at Coast Guard Island,
Alameda, California, to discuss the possible range and scope
of such assistance.


13. (C) Meanwhile, the Sulu Sea remains an under-monitored
passageway for terrorist elements in transit between
Indonesia and Mindanao. Terror groups have also carried out
a number of kidnappings for ransom in the area. While the
region has little value for international shipping compared
to the Malacca Strait, it is tremendously important to the
travel and fundraising operations of groups like JI and Abu
Sayyaf. Together with Embassies Jakarta and Manila, we have
focused on this region as a specific theater for building
capacity and cooperation between the governments of Malaysia,
Indonesia and the Philippines. Significant new resources,
which we are in the process of identifying and prioritizing,
will be required to make these efforts successful.

New Coast Guard
--------------


14. (C) Malaysia's new coast guard began limited operations
on November 30, 2005. The government's goal is to reduce

KUALA LUMP 00001259 004 OF 005


overlap and turf battles among the 11 Malaysian agencies
tasked with patrolling the country's seas and waterways. The
coast guard, officially named the Malaysian Maritime
Enforcement Agency (MMEA),will possess 72 vessels
transferred from the navy, marine police, marine department,
and fisheries department. MMEA has recruited about 1,300
personnel from these agencies, although the vast majority
came from the Royal Malaysian Navy (RMN). The impact of the
large, mid-grade officer exodus from the RMN to MMEA, in
fact, has caused the RMN to halt any further transfers. RMN
vessels transfer with their crews intact. MMEA hopes to fill
its 4,000 approved positions within a year.

Mindanao Peace Talks, JI Presence
--------------


15. (S) Malaysia has facilitated peace talks between the
Philippine government and the Moro Islamic Liberation Front
(MILF),and the negotiations have had some success with the
sticky issue of "ancestral domain." The talks are hosted by
the Malaysian External Intelligence Organization, which in
the past covertly supported separatist activities in
Mindanao. JI presence at MILF training camps remains a
concern, though the MILF has publicly disavowed any
connection to JI. We continue to press the Malaysians to
make clear to the MILF that it must sever its connections to
JI and Abu Sayyaf.

Southern Thailand Strains Relations
--------------


16. (C) Separatist violence in southern Thailand has killed
over 1,000 people since January 2004, and attacks continue
almost daily. The Malaysian government has repeatedly denied
Thai accusations that it supports the separatist groups,
though the people on both sides of the porous border share
Malay ethnicity and the Muslim religion. Families and
business interests straddle the border as well. In August
2005 Malaysia offered temporary refuge to 131 Thai citizens
who said they were fleeing their government's crackdown in
the south. The issue, which has also involved the UN refugee
agency, rubbed raw nerves in Kuala Lumpur and Bangkok, as
government officials abandoned the usual neighborly ASEAN
rhetoric for sharp verbal attacks on each other. The
rhetoric toned down somewhat after the Malaysians returned
one of the 131 asylum seekers, who was wanted on criminal
charges in Thailand, but picked up again in June when the
Thai Interior Minister claimed explosive devices set off in
Thailand had been manufactured in Malaysia. The Thai MFA
quietly retracted the charge, and the rhetorical cycle was
reset to a cooling phase.

Slow Progress on Non-proliferation and PSI ...
-------------- -


17. (S) In 2003, a private Malaysian company (partly owned by
PM Abdullah's son) was found to have manufactured and shipped
nuclear centrifuge parts to Libya. The company pleaded
ignorance, but the case underscored the need for Malaysia to
adopt effective export controls. The government is moving
ahead with plans to adopt such controls, including the
conclusion of an Additional Protocol (AP) with the
International Atomic Energy Agency (IAEA) on November 22,

2005. The AP provides a sound policy framework for the
implementation of nuclear-related export controls.


18. (C) We continue to urge Malaysia to participate in
Proliferation Security Initiative (PSI) meetings and
exercises. Malaysia sent two observers in August 2005 to a
PSI exercise in Singapore, and three observers in April 2006
to a PSI exercise in Australia. The government has said it
supports PSI "in principle," and that it would take part in
PSI operations on a case-by-case basis. We have been told
that the government is considering an endorsement of the PSI
Statement of Interdiction Principles, which would allow full
participation in PSI events. However, elements within the
foreign ministry remain adamantly opposed, perceiving that
the PSI is targeted against "friends" of Malaysia, like Iran,
Pakistan and China.


19. (S) As the chair of the Non-Aligned Movement (NAM),
Malaysia has been too supportive of Iranian claims that its
nuclear program is a peaceful one. More recently, the GOM
has moved somewhat away from behavior that bordered on
"coaching" the Iranians. The EU-3 made considerable efforts

KUALA LUMP 00001259 005 OF 005


to get Malaysia to exert a restraining influence on Iran.
While it appears the Malaysians have privately counseled Iran
to exercise restraint, it does not seem these words had much
influence on the Iranians. Malaysia failed to condemn
Ahmadinejad's threat to "wipe Israel off the map" and gave
President Ahmedinejad a red carpet welcome in Kuala Lumpur as
the IAEA was referring his repeated violations to the United
Nations Security Council.
LAFLEUR