Identifier
Created
Classification
Origin
08KUALALUMPUR1127
2008-12-31 08:35:00
CONFIDENTIAL
Embassy Kuala Lumpur
Cable title:  

PM ABDULLAH GOES TO IRAN, ANNOUNCES GO-AHEAD FOR

Tags:  PREL PARM EFIN ECON ETRD ENRG ETTC MUNC KNNP 
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VZCZCXRO7711
PP RUEHBC RUEHCHI RUEHDE RUEHDIR RUEHDT RUEHHM RUEHKUK RUEHLH RUEHNH
RUEHPW RUEHROV
DE RUEHKL #1127/01 3660835
ZNY CCCCC ZZH
P 310835Z DEC 08
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC PRIORITY 2186
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUCNIRA/IRAN COLLECTIVE PRIORITY
RUCNISL/ISLAMIC COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 2551
RUEHRL/AMEMBASSY BERLIN PRIORITY 0207
RUEHBY/AMEMBASSY CANBERRA PRIORITY 2720
RUEHLO/AMEMBASSY LONDON PRIORITY 0561
RUEHFR/AMEMBASSY PARIS PRIORITY 0207
RUEKJCS/SECDEF WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHHMUNA/HQ USPACOM HONOLULU HI PRIORITY
C O N F I D E N T I A L SECTION 01 OF 03 KUALA LUMPUR 001127 

SIPDIS

FOR EAP, NEA, AND INR

E.O. 12958: DECL: 12/30/2018
TAGS: PREL PARM EFIN ECON ETRD ENRG ETTC MUNC KNNP
IR, MY
SUBJECT: PM ABDULLAH GOES TO IRAN, ANNOUNCES GO-AHEAD FOR
IRANIAN BANK IN MALAYSIA

REF: A. A. KUALA LUMPUR 1105 -- AMB MEETS MFA PRIOR TO
IRAN VISIT

B. B. KUALA LUMPUR 1045 -- PM TO VISIT IRAN

Classified By: Political Counselor Mark D. Clark for reasons 1.4 b and
d.

Summary and Comment
-------------------

C O N F I D E N T I A L SECTION 01 OF 03 KUALA LUMPUR 001127

SIPDIS

FOR EAP, NEA, AND INR

E.O. 12958: DECL: 12/30/2018
TAGS: PREL PARM EFIN ECON ETRD ENRG ETTC MUNC KNNP
IR, MY
SUBJECT: PM ABDULLAH GOES TO IRAN, ANNOUNCES GO-AHEAD FOR
IRANIAN BANK IN MALAYSIA

REF: A. A. KUALA LUMPUR 1105 -- AMB MEETS MFA PRIOR TO
IRAN VISIT

B. B. KUALA LUMPUR 1045 -- PM TO VISIT IRAN

Classified By: Political Counselor Mark D. Clark for reasons 1.4 b and
d.

Summary and Comment
--------------


1. (SBU) Malaysian Prime Minister Abdullah Badawi conducted a
four-day visit to Iran December 21-24. The public reporting
of the visit exclusively highlighted and at times exaggerated
Malaysia-Iran trade and economic partnerships. The PM and
his entourage, which included a number of cabinet ministers,
MPs, and trade officials, met with Iranian President Mahmoud
Ahmedinejad and Foreign Minister Manuchehr Mottaki and other
senior officials. Noticeably absent from any official
statements or media reports were discussions regarding
controversial topics, such as Iran's ongoing nuclear program.
The Malaysian and Iranian leaders trumpeted increasing
bilateral trade and investment, along with expanding tourism
and growth in the Iranian student population in Malaysia.
The leaders announced several Memoranda of Understanding
(MOUs) and the go-ahead for Iran's Bank Mellat to operate in
Labuan, Malaysia's offshore financial center.


2. (C) Comment: Abdullah's visit to Teheran appeared to be
the latest installment in the outgoing Prime Minister's
efforts to bolster Malaysia's trade and investment ties with
Muslim-majority nations, including Iran. The Malaysian
delegation kept the public focus on commercial gain and
largely avoided wading into controversial issues. The
apparent approval for Bank Mellat to open in Labuan stands
out as the most significant development stemming from
Abdullah's visit. Prior to the trip, the Ambassador had
urged senior Foreign Ministry officials to use the visit to
convey to Iran the international community's expectations

regarding its nuclear development program, but we have no
indication yet whether Abdullah addressed this subject or in
what manner. Our MFA contacts did not have any additional
information from this visit, as the delegation members were
unavailable due to the holidays. We will seek further
information on PM Abdullah's visit to Iran in future
meetings. End Summary and Comment.


Promoting Trade and Tourism
--------------


3. (U) PM Abdullah originally committed to visiting Teheran
during the Iran-Malaysia Economic Commission held in November
in Malaysia. Foreign Minister Rais Yatim, speaking to the
press prior to departure, said that the primary objective of
the December 21-24 visit was to strengthen bilateral ties and
explore joint venture opportunities between the corporate
sectors in the two countries. "Sanctions imposed on (Iran) by
the UNSC coupled with the political developments in the U.S.
make it necessary for Malaysia to see from near what
businesses can be explored without causing any
misunderstanding," he added.



4. (U) Upon arriving in Tehran, Prime Minister Abdullah noted
in his official statement the increase in trade volume
between Iran and Malaysia. He said that Iran was Malaysia,s
third largest trading partner in Middle East, with bilateral
trade in 2007 amounting to USD 1.042 billion, up (modestly)
from USD 1.022 billion in 2006. (Note: According to
Malaysian trade statistics, Iran is the 33rd largest export
destination for Malaysia, with exports of USD 1.23 B, or 0.29
percent of total Malaysian exports. Iran is the 27th largest
import source for Malaysia, with imports of USD 1.75 Billion,
or 0.49 percent of total Malaysian imports. Exports to Iran
consist mostly of palm oil, rubber, cars, consumer
electronics, and other manufactured goods. Imports from Iran
are mostly crude oil. End Note.)


KUALA LUMP 00001127 002 OF 003




5. (SBU) Abdullah also pointed out the significant increase
in the number of tourist arrivals from Iran to Malaysia. He
said that in 2007, a total of 27,215 Iranians visited
Malaysia compared to 9,419 in 2002. (NOTE: An estimated 21
million tourists arrived in Malaysia in 2007, thus Iranians
constitute approx 0.12 percent of all arrivals.) He also
said that Malaysia would streamline the visa application for
Iranian applicants, as Malaysia has done for other countries.
(Note: Iranians can visit Malaysia visa free for up to 14
days for tourism and social visits, and can obtain business
visas for up to 14 days upon arrival. End Note.)


"Malaysia and Iran Share Common Views"
--------------


6. (SBU) Abdullah and the Malaysian delegation avoided
statements on controversial issues, spoke only vaguely on
political/security matters, and did not touch on Iran's
nuclear program in any public comments. Abdullah also did
not distance Malaysia from any of Iran's positions. Sticking
to generalities, Abdullah used his joint press conference
with Ahmedinejad to state, "Malaysia and Iran share common
views on many international issues affecting the peace and
security of the world. We have pledged to work closely
together especially in multilateral forums such as the United
Nations for global stability, progress and prosperity."


Three MOUs
--------------


7. (SBU) Abdullah's visit to Iran featured the signing of
three MOUs covering, respectively, establishment by
Malaysia's national car maker Proton of a vehicle assembly
plant in Iran, counter-narcotics efforts, and cooperation in
science and technology. The Proton agreement appeared to be
the most tangible of the three MOUs. Iran already imports
Protons for use as taxis in Tehran. In the area of science
and technology cooperation, Abdullah mentioned the "sharing
of experience and expertise" between the Malaysian Multimedia
and Development Corporation and the Masshad and Khorsan
Provincial Governments in Iran to build information
technology parks.


8. (SBU) In addition to the MOUs, the PM also noted
Malaysian investments in Iran's construction sector,
specifically in housing and road construction, and in Iran's
oil and gas sector. Prime Minister Abdullah stated that
Petronas, the national oil/gas company and the leading
Malaysian investor in Iran, "would continue to consolidate
its operations in Iran." Abdullah also noted the activities
of SKS ventures in the oil/gas sector. (Note: SKS Ventures,
a private company owned by Malaysian tycoon Syed Mokhtar,
signed an MOU in 2007 to develop Iran's Gulshan and Ferdoz
gas fields, but little information has surfaced since then.
Following press reports of the SKS deal, Embassy requests
from 2007 to meet with representatives of SKS Ventures went
unacknowledged. End Note.) PM Abdullah's visit did not
produce more information on proposals to build Iranian
refineries in Malaysia, which have made no visible progress.


Bank Mellat Conditionally Approved for Offshore Center
-------------- --------------


9. (U) In his opening address after arriving in Teheran, PM
Abdullah stated, "I am aware of the interest of the Mellat
Bank of the Islamic Republic of Iran to open its offshore
branch in Labuan, Malaysia's international offshore financial
sector (sic). When this project becomes reality, it will be
another milestone in the area of financial cooperation
between our two countries." Subsequently, at a joint press
conference with Ahmedinejad on December 23, PM Abdullah was
more definite and stated, "An Iranian bank will be opening an
offshore branch in Labuan...."


KUALA LUMP 00001127 003 OF 003



10. (SBU) A contact at the Malaysian central bank told
econoff on December 30 that Bank Mellat had not applied for a
license to operate in Malaysia proper, but had submitted its
application to the Labuan Offshore Financial Services
Authority (LOFSA) to open an offshore branch in July and had
recently been granted "conditional approval." He was unable
to identify the "conditions" involved, or to speculate as to
a time frame before Bank Mellat would open its doors in
Labuan. While the central bank has the authority to grant or
deny licenses for Malaysia proper, offshore companies are
under the supervision and regulation of LOFSA directly. In
line with previous demarches, Post has conveyed concerns over
the opening of Iranian bank offices to both the central bank
and to LOFSA, and we continue to press LOFSA for further
details.

Background on Labuan's Offshore Banking Center
-------------- -


11. (U) The Labuan International Business and Financial
Center (IBFC) is a jurisdiction "that offers a liberal
operating environment and low rates of tax as well as ensures
confidentiality of investors' information," according to the
LOFSA website, www.lofsa.gov.my. A total of 58 banks, nine
of which are investment banks, maintain offices in Labuan.
Having an offshore license in Labuan does not authorize a
company to do business elsewhere in Malaysia or to conduct
transactions in Malaysian Ringgit, but an offshore bank
licensed in Labuan is permitted to open a "marketing office"
in Kuala Lumpur.


12. (U) Offshore businesses are governed by a separate set of
offshore legislation, including the Offshore Banking Act of
1990 (available at www.lofsa.gov.my). Offshore financial
service providers are also subject to the same anti-money
laundering and counter-financing of terrorism (AML/CFT)
legislation in place throughout Malaysia, and are required to
report suspicious transactions to Malaysia's Financial
Intelligence Unit (FIU),seated in the central bank.


13. (U) The Labuan IBFC was established to bring
international players to Malaysia, and typically serves
businesses operating in the region. Malaysia continues to
strive to become a global hub for Islamic Finance, a goal
highlighted on LOFSA,s website as well.
KEITH