SCENESETTER FOR VADM CROWDER'S VISIT TO MALAYSIA

S E C R E T KUALA LUMPUR 000367

SIPDIS

PACOM FOR VADM CROWDER, COMMANDER, 7TH FLEET

E.O. 12958: DECL: 05/09/2018
TAGS: MCAP MARR MASS MOPS PGOV PREL PTER OVIP MY
SUBJECT: SCENESETTER FOR VADM CROWDER'S VISIT TO MALAYSIA

Classified By: POLITICAL SECTION CHIEF MARK D. CLARK, REASON 1.4
(B AND D).

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Summary
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1. (C) Malaysia is important to us because it is an
economically successful, stable, predominantly Muslim country
that, over the longer term, may be able to support us more
strongly in places like the Middle East. It is strategically
located on the Straits of Malacca, through which one quarter
of the world's trade flows, and it borders five of the other
nine ASEAN countries. Military-to- military cooperation is
improving, with 9 US Navy ship visits to Malaysian ports
thus far in 2008, 22 visits in 2007, and 23 in 2006. This is
up from only five ship visits in 2003. Recently initiated
engagement with the Royal Malaysian Navy's developing
submarine force has successfully forged a relationship in
this critical warfare capability. Our security relationship
also finds expression in regular high level visits and
counterpart visits. Behind the scenes, Malaysia has been a
good partner in the war on terror. The overall tone in
Malaysian-American relations has improved considerably since
Abdullah Badawi became Prime Minister in late-2003, and we
seek to translate this into substantive improvements.
Bilateral relations eroded under Abdullah's vituperative
predecessor Dr. Mahathir Mohamad, but Abdullah brought with
him a friendlier style and an interest in projecting a more
moderate image, both for himself and for his country.


2. (C) While the surprise results of the March 2008 election
have remade Malaysia's political landscape and severely
shaken the ruling coalition, our bi-lateral relations have
remained on an even keel. Malaysia is our sixteenth largest
trading partner, and many major American companies have
invested here. We have increased senior-level exchanges
since Abdullah came aboard, for example conducting our first
ever Senior Dialogue with the Foreign Ministry at the
Assistant Secretary level in May 2005. Malaysia has acceded
to the IAEA Additional Protocol, and participates as an
observer in PSI exercises. Malaysia has played a positive
role in helping to stabilize Aceh, Mindanao, and East Timor.
Malaysia's traditional approach to global issues, which
Abdullah has continued albeit at a lower decibel level,
remains an impediment to closer bilateral cooperation.
Malaysia actively participates in the Non-Aligned Movement
(NAM) and the Organization of Islamic Conference (OIC),often
adopting distinctly third-world positions on issues of
importance to us. Our public affairs environment is also
challenging. The Malaysian public is strongly opposed to
our policies in the Middle East and the Persian Gulf. A
strong "post- colonial overhang" also colors Malaysian
attitudes toward the U.S. role in Southeast Asia. With
Abdullah we have nevertheless been able to pursue a set of
broad common interests, and pragmatism generally rules in
bilateral security relations. End Summary.

Security Cooperation
--------------


3. (C) The bilateral military interaction remains strong; and
we, along with Embassies Jakarta and Manila, are
implementing the Regional Security Initiative (RSI) concept
through a maritime policymakers' conference in Sabah. The
objective is to encourage the three nations to share
information, data and intelligence on a national interagency
level and tri-laterally to create a common operational
picture to enhance their effectiveness in maritime
enforcement. These visits, and the relationships developed,
have fostered strong mil-mil cooperation between the United
States and Malaysia, and have not been adversely impacted by
recent leadership changes. Ship visits have significantly
increased and received greater visibility. Security-related
training sponsored by the United States for military and law
enforcement participants, including Malaysia's new coast
guard, Malaysian Maritime Enforcement Agency, has also been
on the rise. Although the possibility of a terrorist threat
to the Malacca Strait has received the bulk of international
attention, the fact is that although pirate attacks
illustrate vulnerabilities, we have never identified any
terrorist activities in the Straits. Conversely, terrorists
operate regularly in the Sulu/Sulawesi Sea corridor and we
are focusing increasingly on this theater.


4. (C) The Malaysian-initiated coordinated surface patrols
and "Eyes in the Sky" program, a regional aerial monitoring
of the Straits of Malacca, have been more effective in
creating a perception of security than actual operational
capability. However, a reduction in incidents of piracy and
improved risk assessment by Lloyds of London has eliminated
the GOM's resource allocation to the programs and they
continue in their limited implementation. A pirate attack
and kidnapping of sailors in the Straits on August 13, 2007,
was the first high-seas abduction in over two years but was
followed in April 2008 by another violent attack and robbery
have captured attention.


5. (C) Malaysia concluded a new 505 agreement in 2006 that
will allow us to utilize 1206 funds to put CT equipment into
the vulnerable Sulu and Sulawesi Seas border areas of Sabah
where terrorists are known to transit. Congress has approved
funds for building and installing coastal radars in eastern
Sabah and the first sites have been identified and
contracted. A joint forces command and control center funded
under 1206 is planned for this year to functionally link the
various radar sites. Malaysia has not signed either a PSI or
Article 98 agreement. In general, Malaysia remains open to
bilateral cooperation that strengthens its own defense
capacity, but the GOM will quickly raise the principles of
sovereignty and territorial integrity when discussing
international security regimes and coordination, such as for
the Straits of Malacca. Malaysia's only multilateral
defense arrangement is the Five Power Defense Arrangement,in
place since the 1940's, with the UK, Singapore, Australia and
New Zealand.


6. (S) 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 could attract increased attention from
ideological foes on the Islamist right, and from some
mainstream politicians pandering to the conservative Islamic
vote. 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 high tensions in the
Middle East. The GOM cited concerns about the growing
visibility of training in eastern Sabah and, in 2006, decided
to review on a case basis proposed training events involving
foreign military forces in that region.


7. (C) Malaysia has an excellent record in UN Peacekeeping
Operations. They have committed forces to various UN
operations since the early 1960s. Currently, 360 Malaysian
troops are participating in Malaysia's second rotation to
UNIFIL (Lebanon) and the GOM has offered a contingent of up
to 1000 soldiers if the need arises. Malaysia has a well
developed Peacekeeping Training Center that provides
specialized training for the troops it sends into the field
as well as personnel from foreign militaries. The USG has
obligated almost 1.1 million dollars for GPOI funds that
focus on developing Malaysia's PKO training to UN DPKO
standards.


8. (S) Malaysia maintains friendly relations with Iran,
including a growing commercial relationship. The Foreign
Ministry's support for Iran's attempted participation in a
Defense Services Asia (DSA) military sales exhibition, held
in Kuala Lumpur April 2008, highlights the challenges we face
on the Iran issue. Iran initially was permitted to exhibit
weapons at the arms show and their exhibit, which violated UN
sanctions, was only dismantled after strong interventions by
the U.S. and others. De facto opposition leader Anwar
Ibrahim criticized the Malaysian government for bowing to
U.S. pressure on this matter. Malaysia has lent rhetorical
support to Iran's right to develop "peaceful" nuclear
technology but has also consistently maintained that it will
implement UN decisions on Iran, including sanctions regimes.
After the latest UNSC resolution, Prime Minister Abdullah
called for Iran to respect UNSC resolutions on its nuclear
program. Malaysia, however, has not yet submitted its report
to the UN on implementation of UNSC sanctions or taken other
discernible actions to implement the UN restrictions on Iran.
Recent actions by Malaysian firms have generated concerns of
violations of U.S. laws and the Massena Arrangement and a
Malaysian company was among those recently sanctioned under
the Iran Non-proliferation Act for its role in shipping
proscribed materials to Iran. The activities of local firms
doing business with Iran need to be closely monitored. One
Malaysian firm has signed an agreement for a multi-billion
dollar investment to develop enormous natural gas fields in
Iran, a deal which has drawn condemnation from U.S.
congressional voices in light of the Iran Sanctions Act.
Additionally, Iranian and Malaysian firms have recently inked
deals to develop oil refineries in both Malaysia and Iran,
and Iran is purported to be a principal investor in a
proposed oil pipeline to span northern Malaysia and link the
Andaman and South China Seas.

Recent Mil-Mil Talks
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9. (C) In May 2007, Malaysia hosted the annual Bilateral
Training and Consultative Group (BITACG) meeting in Port
Dickson. BITACG is a forum used to promote and strengthen
mil-mil relations through discussions of bilateral exercises,
intelligence exchanges, C4 issues, logistics engagement, and
defense cooperation. Malaysia also hosted a BITACG mid-year
review in Kuala Lumpur in November 2007. Additionally,
Malaysia co-hosted an annual conference for military
intelligence chiefs in the Asia-Pacific region (APICC) held
in September 2007. In September 2006, the U.S. Navy
initiated annual Submarine Staff Talks which have been
successful in fostering a close relationship with the Royal
Malaysian Navy as they develop their Scorpene submarine
program.


10. (SBU) Malaysia has put forth a regional Humanitarian
Assistance/Disaster Relief (HA/DR) Center initiative that is
promising, and has wide support in the government. The MAF
has identified Subang Airfield as a likely choice for the
center which would be administered under UN (World Food
Program - WFP) auspices. Subang, the former international
airport, served as the focal point for Malaysia's tsunami and
Yogyakarta relief efforts. The facilities are modern and are
available. Malaysia is an ideal location for a regional
HA/DR center- centrally located, modern, stable, and Islamic.
Malaysia is no further than two hours by air to almost any
country in the region. Avian influenza (AI) preparedness is
another promising area of bilateral cooperation. The
Ministry of Health and the Malaysian Armed Forces (MAF)
Health Services have been excellent partners in conducting
preparedness training for pandemic influenza. Previous
assessment teams (PACOM and MARFORPAC) have assessed Malaysia
as a significant country in assisting in a pandemic influenza
response. While not identified as a donor nation, Malaysia
has the potential to assist in a regional response in the
near term. To date, PACOM has provided an AI Subject Matter
exchange and a bioterrorism workshop co-hosted by the
Ministry of Health and MAF Health Services. The country
team has requested exercises on medical surveillance and
containment of a pandemic outbreak. PACOM's efforts in
furthering Malaysia's capacity as a regional responder are
critical to the country team in this regard.

Bilateral Ties--Working to Improve the Substance
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11. (S) In our bilateral relations, the GOM has begun
matching improvements in tone with improvements in substance.
PM Abdullah has openly espoused improved relations with the
U.S., and values the good rapport he established in his
meetings with the President. In 2006, Secretary Rice met
with PM Abdullah and FM Hamid at the ASEAN Regional Forum and
President Bush met with PM Abdullah on the sidelines of the
UNGA. Also in 2006, the GOM acceded to our long-standing
urging and signed the IAEA Additional Protocol; and the
Malaysians have also started sending observers to recent PSI
exercises. Nevertheless, Malaysia's support for U.S.
positions in the United Nations has not improved under
Abdullah as Malaysia consistently votes in disagreement with
the United States on nearly all measures we have classified
as "important votes."


12. (C) Beneath the turbulent power politics, we continue to
benefit from close counter-terrorism cooperation, albeit with
Guantanamo access an increasingly sore point. Although they
keep the details closely held, the GOM has been a key partner
on counterterrorism. Early round-ups in 2001-2002 of scores
of Jemaah Islamiyah (JI) suspects helped ensure there have
been no terrorist attacks here. However, Malaysian
extremists, as illustrated by a series of arrests in
Malaysia's Borneo states in 2006, still have the capability
to support JI operations elsewhere. Two Malaysian citizens
were among the 14 high value U.S. detainees transferred to
Guantanamo in 2006. In 2003, Malaysia established the
Southeast Asia Regional Center for Counterterrorism
(SEARCCT),which runs a full schedule of GOM-focused and
multilateral training courses, many conducted with U.S.
support. We and our colleagues in Manila, Jakarta and other
Southeast Asian posts have embarked on a regional effort to
strengthen these countries' border controls. In cooperation
with GOM, we undertook a Border Control Assessment Initiative
(BCAI) in eastern Sabah with participants from the Department
of State, Homeland Security, USCG and JIATF West. We are
providing some technical assistance to the GOM for the
drafting of an export control law -- important to our
non-proliferation goals -- but Malaysia has moved very slowly
on establishing an export control regime.

Malaysian Foreign Policy and U.S. -- A Mixed Bag
-------------- ---


13. (S) Abdullah champions his development-focused vision of
Islam -- albeit with limited impact to date -- within the
Organization of the Islamic Conference (OIC),which Malaysia
will continue to chair through early 2008. Malaysia supports
Abbas, Fatah, the MEPP roadmap, and Iraqi reconstruction.
However, the Malaysian public remains highly critical of our
Middle East policies, and the GOM is consistently critical of
Israel, with which it has no diplomatic relations. Malaysia
attended the Annapolis Conference last November, and has
expressed a keen interest in helping further the MEPP.


14. (S) Malaysia surrendered the chairmanship of the
Non-Aligned Movement in September 2006, but as past chair
remains a member of the leadership troika. During
Malaysia's tenure it supported NAM positions defending Iran's
nuclear program, and engaged with such problematic
international players as Zimbabwe, Cuba and Venezuela. The
GOM nevertheless tells us that they argued for moderate
approaches within the NAM on such issues as Iran. Abdullah
hosted Hugo Chavez for a visit to Malaysia in August 2007,
and assured Chavez of his support for Venezuela's election to
the Latin American chair on the UN Security Council. This
was followed by a well publicized visit to Venezuela by
Abdullah in December to explore stronger commercial ties. In
October 2007, North Korean Premier Kim Jung Il visited
Malaysia with a large economic entourage.


15. (C) Nevertheless, the GOM issued a public condemnation
of North Korea's nuclear testing and publicly supports UNSCR
1718, although it has no enthusiasm for sanctions. In the
past, Malaysia supported the return to the six- party DPRK
nuclear talks and criticized North Korea's truculence. The
Malaysian government is publicly supportive of China's
"peaceful rise", welcoming in particular China's growing
imports of Malaysian products, despite lingering suspicions
among some officials of China's long-term intentions.


16. (C) Malaysia has played an increasingly prominent role
in addressing conflicts facing its Southeast Asian neighbors.
In 2006 Malaysia completed its earlier peacekeeping mission
to East Timor following the armed uprising that led to
deployment of Australian, Malaysian and Portuguese forces,
and dispatched a new deployment of Malaysian police to that
country. The GOM has also taken a leading role as the
facilitator for the southern Philippines peace process.
Malaysia's sympathies for the Muslim Moro population and
geopolitical calculations vis-a-vis the Philippines do not
make it a neutral broker, but Malaysia has nonetheless hosted
negotiations and contributed observers to the International
Monitoring Team in the southern Philippines. Malaysia's
recent decision to withdraw its soldiers from the
International Monitoring Team in Mindanao as a means to
pressure Manila in the MILF negotiations could result in an
end to Malaysia's facilitation role. Geography and
cross-border ethnic bonds make Malaysia a de facto safe haven
for southern Thai insurgents, though the GOM has not
supported or encouraged this. The Malaysians have urged the
Thai government to resolve peacefully the unrest in Southern
Thailand, with its ethnic Malay Muslim population, and
Malaysia and Thailand are cooperating on new border security
measures. Malaysia is especially chagrined by Burma's
intransigence and political crackdown on the recent democracy
movement, especially since Malaysia championed Burma's entry
into ASEAN. Although they have publicly criticized the
Burmese regime, PM Abdullah and FM Hamid appear to be at a
loss as to what to do next. Malaysia joined other ASEAN
nations in condemning Burma's actions against the protesting
Buddhist monks in September but has otherwise taken a
staunchly non-interference position in regards to Burma's
domestic politics. Most recently, the GOM refused to join
the U.S., E.U., and others in condemning the Burma's
referendum process on a proposed constitution. The GOM
firmly backs the consensus ASEAN argument that Burma is not a
threat to international peace and security.

Political/Economic Landscape
--------------


17. (C) The surprise results of the March 2008 election have
remade Malaysia's political landscape and severely shaken the
ruling coalition. A resurgent opposition increased its
parliamentary representation from to 82 seats, denying the
Ruling party a two-thirds majority for the first time in
decades. In the wake of this election shock, the political
scene remains fluid and UMNO's leadership question
unresolved. PM Abdullah Badawi so far has persevered in the
face of calls to immediately step down from within his UMNO
party, acknowledging that he eventually would resign in
favor of Deputy Prime Minister Najib Tun Razak, but only
after reelection as party president in December 2008 and a
further two-year grace period. Despite urgings from other
UMNO leaders, Najib has not pressured Abdullah. An active
push by Najib or heightened concern over losing power due to
sharp opposition challenges could result in UMNO elites
pushing Abdullah out prior to the December 2008 party
assembly.


18. (C) The embattled Abdullah has seemingly courted public
support outside UMNO by announcing planned policy reforms he
originally promised in 2004. These include a judicial
appointments commission and a strengthened Anti- Corruption
Agency, measures more popular with the opposition, which is
also calling for a repeal of the Internal Security Act
(ISA). Abdullah also has scaled back plans to reduce fuel
subsidies, recognizing his weakened administration could not
carry such unpopular actions. With UMNO divided and a more
prominent (and potentially powerful) opposition, Malaysia is
experiencing greater press freedom, though as the Home
Ministry's recent politically motivated closure of a Tamil
newspaper demonstrated, no permanent legal reforms underpin
the current democratic openings. The state retains
authoritarian levers from the Mahathir era.


19. (S) The opposition Peoples' Alliance, led by Anwar
Ibrahim, is testing itself in four newly-claimed state
governments, including Malaysia's richest state Selangor
(surrounding Kuala Lumpur). In their first weeks in power,
opposition state executives tried to set themselves apart
from UMNO and its National Front (BN) by addressing ethnic
minority grievances, promoting clean governance, and
announcing populist economic decisions. Abdullah's central
government is fighting back by redirecting federal revenue
support outside of state government channels and in some
cases setting up parallel local authorities. In Parliament
opposition MPs have marching orders to aggressively challenge
the government side at every turn, and Parliament's first
session on April 30 immediately descended into a cacophony
of insults. Anwar continues to publicly prod BN with claims
that he has 30 BN MPs ready to cross over, which would bring
down the BN government. UMNO elites, who have never lost
power, would be sorely tempted to preempt such a move by
imposing emergency measures, and rumors of the government's
intention to use ISA provisions of imprisonment without
trial have circulated within the opposition.


20. (C) Malaysia has been a difficult political partner in
the past. Malaysians nurse strong anti-colonial sentiments.
They are fiercely protective of their sovereignty and
(among the Muslim Malay majority) resent perceived ill
treatment of Islam by the West. Malaysian intellectuals tend
to hold a "Euroskeptic" view of U.S. foreign policy in
general and like to cast themselves as defenders of "third
world" interests. Former Prime Minister Mahathir played on
these sentiments to generate political support for himself
and his ambitious economic agenda. When he relinquished his
post in 2003, he left behind a modernized economy but also
strained relations with much of the West. Today, however,
Malaysia presents us with important transformational
opportunities. In terms of its economic development,
educational achievement, public welfare, and political
stability, Malaysia stands out among Muslim-majority nations.
The Malaysians project a version of Islam that emphasizes
modern learning and economic development, and, over the
longer term, could lend additional support to progressive
forces in the Middle East and Iraq. We also share strong
common East Asian regional interests in stability and
prosperity. Malaysian counter-terrorism cooperation is
indispensable in defeating Jemaah Islamiyah (JI) in the
region.


21. (C) Malaysia's economy is among the more open, diverse,
and better- developed within the Islamic world and in ASEAN.
The United States is Malaysia's largest trading partner, and
Malaysia is now the 16th largest trading partner for the
United States after two-way bilateral trade dropped 12
percent in 2007 to $46 billion in 2007, but strong trading
relationships remain in the electronics and energy sectors.
Malaysia believes it has limited direct exposure to the U.S.
sub-prime market in part because of lessons learned from the
1997-8 Asian financial crisis, though it does expect the
economic slowdown in the U.S. will dampen growth in Malaysia
this year. While the U.S. was Malaysia's largest source of
foreign direct investment for more than a decade, Japan
surpassed U.S. FDI to Malaysia in 2006 after the signing of a
limited trade partnership agreement between those two
countries. This year, a joint venture between a private
Malaysian company and the National Iranian Oil Company to
build a refinery here has put Iran as the largest foreign
investor year-to-date, while the U.S. has slipped to fifth
place after the Netherlands, Japan, and Singapore.

Malaysia's "Civilizational Islam"
--------------


22. (C) Malaysia is hardly an ideal democracy, but it can
still serve as a reference point for evolving Islamic
societies elsewhere. The Malay people, traditionally known
for their social tolerance, have become more religiously
conservative in recent years, but Prime Minister Abdullah has
enshrined the Malay political elite's continued preference
for moderation in his "Islam Hadhari" or "Civilizational
Islam" policy. Abdullah's key message is that Islam can
become a leading world civilization again only if it embraces
economic development, education, innovation and tolerance.
Observers are wary of a longer-term trend toward greater
divisions between the Muslim Malay majority and other ethnic
groups, and religious minorities increasingly complain of
growing Islamization, as highlighted by the controversy
surrounding Deputy Prime Minister Najib's comments last year
that Malaysia is an "Islamic state." Nevertheless, Malaysia
has kept inter-ethnic tensions well under control by
regional and world standards for almost 40 years.

Suggested Talking Points
--------------


23. (U) We suggest the following talking points for your
official meetings in Malaysia.

-- Thank Malaysia for their hosting of a notable increase in
ship visits and note the positive media attention these
visits have received.

-- Burma: We urge Malaysia join us in taking an active role
in encouraging Burma to permit urgently needed humanitarian
assistance to enter the country and to grant international
humanitarian relief workers access to the affected areas.
How could Malaysia and the U.S. cooperate in assisting the
Burmese population?

-- Congratulate Malaysia's efforts in combating Jemaah
Islamiyah (JI) and other terrorist groups, including efforts
to deny terrorist transit through the tri-border area of the
Sulu and Sulawesi seas. Note our excellent cooperation on CT
issues and hopes that this will continue.

-- Note Malaysia's role as a facilitator for the southern
Philippines peace process, and express our desire to see
progress in the talks despite Malaysia's recent decision to
withdraw its soldiers from the International Monitoring Team
in Mindanao.

-- Iran: Stress the importance we place on international
respect for the UNSC resolutions as a means to support a
diplomatic solution to Iran's nuclear program.


KEITH