MEET THE FTA NEGOTIATORS: PART 3

C O N F I D E N T I A L KUALA LUMPUR 000947

SIPDIS

SIPDIS

STATE PASS USTR FOR B. WEISEL AND J. JENSEN
TREASURY FOR OASIA
COMMERCE FOR 4430/MAC/EAP/MAC/BAKER

E.O. 12958: DECL: 05/23/2016
TAGS: ETRD EFIN ELAB ECPS MY
SUBJECT: MEET THE FTA NEGOTIATORS: PART 3

REF: A. KUALA LUMPUR 0678

B. KUALA LUMPUR 0743

C. KUALA LUMPUR 0930

Classified By: Economic Counselor Colin Helmer for reasons 1.4 b & d.


1. (SBU) Summary and introduction: Many of Malaysia's lead
negotiators for the different FTA chapters took part in our
Trade and Investment Framework (TIFA) discussions, but others
are new faces. Econ counselor and econoffs are calling on
all of the new negotiators to take their measure in advance
of the negotiation. Refs A & B reported on previous calls.

Financial Services
--------------


2. (C) Econ officers met with Nor Shamsiah Yunus (goes by
Nor Shamsiah),Assistant Governor of Bank Negara, Malaysia's
central bank, and Jeremy Lee, Deputy Director of the
International Department. When econoffs asked why Nor
Shamsiah, who supervises regulatory matters, was selected to
be lead negotiator for financial services, Lee chimed in,
"Because (Bank Negara) Governor Zeti considers these
negotiations so important!" Nor Shamsiah noted she has past
experience from negotiations on financial services at the WTO
and suggested that this was why she was chosen. However, it
is noteworthy that the International Department had this
responsibility in Malaysia's other bilateral FTA's and that
Governor Zeti apparently intervened to put one of her top
officials in charge.


3. (SBU) Nor Shamsiah expressed skepticism that Malaysian
financial services firms could be competitive in the U.S.
market. Thus she saw all the FTA benefits in this sector
accruing to the U.S. side. When econ counselor observed that
the U.S. market for Islamic financial services might be
underserved and provide an opportunity for Malaysian firms to
get their foot in the door, Nor Shamsiah said this would not
be possible because of U.S. deposit insurance rules.
Econoffs suggested that the diverse U.S. financial services
market provided a variety of means for reaching out to
potential customers. They proposed savings and loan
associations, or credit unions as alternatives, if a
federally chartered bank was not an option. Nor Shamsiah
said she would like to hear from U.S. negotiators how
Malaysian firms might be able to offer Islamic financial
services in the U.S. She also wanted to know how the Federal
government would bind the states in services where they
retain regulatory authority, such as insurance.


4. (C) Comment: Nor Shamsiah is considered by many to be a
future candidate for Governor of Bank Negara. She has
significant government experience but lacks familiarity with
the private sector, having spent her whole career at Bank
Negara. She is personable and engaging, but staunchly
supports the Bank's protection of Malaysia's domestic
financial services firms and its use of its regulatory
authority to advance the government's bumiputera policy (Ref
C). Opportunities to pursue Islamic finance in the U.S. may
be the most significant incentive we can offer to Bank Negara
in return for opening Malaysia's market to U.S. firms. We
encourage U.S. negotiators to come prepared to discuss this
Islamic finance in detail at the first FTA round in Penang,
June 12-15.

Labor
--------------


5. (SBU) Political and economic officers called on Choy Lup
Bong (goes by Choy) Under Secretary in the Labor Policy
Division of the Ministry of Human Resources to discuss
arrangements for the first round of negotiations on the labor
chapter. Choy, who recently accompanied Minister of Human
Resources Fong Chan Onn on a visit to the U.S., said Minster
Fong became aware on his trip that the FTA's labor component
would require a significant effort from his Ministry. Choy
indicated that Fong probably would provide a briefing to the
National Labor Advisory Council (NLAC),a body which brings
together representatives from government, employer
federations and labor unions, following the first round.
Fong chairs the NLAC and may use this group to keep
stakeholders informed as the negotiations go forward. Choy
recommended that labor negotiations be held the week of June
26 (instead of June 12 with the other FTA chapters) to allow
U.S. negotiators to meet with G. Rajasekaran, Secretary
General of the Malaysian Trade Union Congress (MTUC),
Malaysia's largest trade union umbrella organization.
(Comment: We concur with this recommendation. Rajasekaran's
comments on the FTA will be influential with the public, in
particular union members.)


6. (SBU) Choy seemed very pro-U.S. for a Malaysian
government official. He spoke effusively about Minister
Fong's visit to Seattle, where they toured the headquarters
of Boeing and Microsoft.

Telecommunications and E-Commerce
--------------


7. (SBU) Econoffs met with K. Anbalangan (goes by Anba)
Acting Under Secretary of the International Communications
Division of the Ministry of Energy, Water and Communications,
who will be the lead negotiator for the Telecommunications
and E-Commerce chapter. Anba said he had represented
Malaysia in telecoms discussions at the WTO. He clearly had
studied the telecoms chapters of U.S. FTA's and raised a
number technical questions about how they would apply to
Malaysia's situation. However, his main focus was on "what
do U.S. firms want in this market?" He pressed this point
repeatedly, suggesting that as U.S. firms had shown no strong
commercial interest in this sector up to now, U.S.
negotiators should be moderate in their requests.


8. (SBU) Anba gave the impression of being a tough and
aggressive negotiator. He indicated he sees little scope for
Malaysia to benefit from these two FTA chapters, and as such
sees little incentive to be flexible in his approach to them.
LAFLEUR