Identifier
Created
Classification
Origin
06KUALALUMPUR705
2006-04-18 08:45:00
CONFIDENTIAL
Embassy Kuala Lumpur
Cable title:  

SCENESETTER FOR UNDER SECRETARY OF THE AIR FORCE DR. RONALD SEGA

Tags:  PREL MASS MARR PTER ECON MY 
pdf how-to read a cable
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C O N F I D E N T I A L KUALA LUMPUR 000705 

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SIPDIS

C O R R E C T E D COPY CLASSIFICATION

E.O. 12958: DECL: 04/18/2016
TAGS: PREL MASS MARR PTER ECON MY
SUBJECT: SCENESETTER FOR UNDER SECRETARY OF THE AIR FORCE DR. RONALD SEGA

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

C O N F I D E N T I A L KUALA LUMPUR 000705

SIPDIS

SIPDIS

C O R R E C T E D COPY CLASSIFICATION

E.O. 12958: DECL: 04/18/2016
TAGS: PREL MASS MARR PTER ECON MY
SUBJECT: SCENESETTER FOR UNDER SECRETARY OF THE AIR FORCE DR. RONALD SEGA

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


1. (C) SUMMARY: Malaysian-American relations are good and
improving; on March 8 we notified Congress of our intention
to conclude a Free Trade Agreement with Malaysia. This
moderate Muslim-majority state is our tenth-largest trading
partner worldwide, and we have robust military-military
cooperation. 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, but is
no closer to signing an Article 98 agreement with the U.S.
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 and have encouraged Malaysians to increase
support for moderation and progress in the Middle East.


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. His 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.

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


4. (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
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, contained little in the way of drama or new
initiatives. Abdullah has emphasized the need for fast
implementation of 9MP (a tacit acknowledgement of the
perceptions weak follow through by his government) and
created a new government agency to focus on the problem.


5. (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, may be
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 3.8 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
--------------


6. (C) Malaysia currently is the chair of the Non-Aligned
DR. RONALD SEGA

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 ministerial this summer. Secretary of State
Rice has told the ASEAN foreign ministers of her plans to
attend the ARF meetings in July. Malaysia backs the
six-party DPRK nuclear talks and supports 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. The Malaysian government is
publicly supportive of China's "peaceful rise" and recently
signed a defense cooperation MOU with China, despite
lingering suspicions among senior Malaysian military
officials of China's long-term intentions. Malaysia has
actively supported peace efforts in the southern Philippines
and Aceh in Indonesia.

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


7. (C) 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
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.


8. (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
tool in fighting terrorism and other forms of transnational
crime.

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


9. (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
currently comprises separate flights by Malaysia and
Singapore (Indonesia has "temporarily" dropped out for
operational capacity reasons),with crews that 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. Talks on establishing an EiS
standard operating procedure continue, with a view towards
reactivating Indonesian participation and bringing Thailand
into the program.


10. (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
DR. RONALD SEGA
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 summer 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.


11. (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
--------------


12. (C) Malaysia's new coast guard began limited operations
on November 30, 2005. The government's goal is to reduce
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, and has recruited about 1,000
personnel from these and other existing agencies. The navy
vessels will transfer with their crews intact. MMEA hopes to
fill its 4,000 approved positions within a year.

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


13. (C) 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
--------------


14. (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.

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


15. (C) 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.
DR. RONALD SEGA


16. (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.


17. (C) 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
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.

... But No Progress on Article 98
--------------


18. (C) Malaysia has steadfastly rebuffed our efforts to
conclude an Article 98 agreement, citing unspecified "policy
reasons." Though Malaysia is "studying" the Rome Treaty that
created the International Criminal Court (ICC),we believe
they are unlikely to sign the treaty because of their own
concerns over sovereignty. The Malaysians have told us that
since they are not party to the Rome Treaty, they see little
reason to conclude an Article 98 agreement with us.
LAFLEUR