MALAYSIAN TRADE MINISTER SUPPORTS FTA NOGOTIATIONS

UNCLAS SECTION 01 OF 02 KUALA LUMPUR 000401 DEPT FOR EEB/TPP/BTA AND EAP/MTS STATE PASS USTR - WEISEL AND BELL USDA FAS FOR OA/BIG, ITP/AAD COMMERCE FOR 4430/MAC/MICHAEL HOGGE STATE PASS FEDERAL RESERVE AND EXIMBANK STATE PASS FEDERAL RESERVE SAN FRANCISCO TCURRAN USDOC FOR 4430/MAC/EAP/J.BAKER TREASURY FOR OASIA AND IRS GENEVA FOR USTR SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON ETRD EINV EAGR KIPR MY SUBJECT: MALAYSIAN TRADE MINISTER SUPPORTS FTA NOGOTIATIONS Sensitive but Unclassified - Not for Internet Distribution ¶1. (SBU) Summary: In a meeting with the Ambassador on the eve of his visit to the U.S., Minister for Trade Muhyiddin Yassin reaffirmed Malaysia's desire continue FTA negotiations with the U.S. and noted it was understood that Malaysia needed to create additional negotiating flexibility. Malaysian negotiators were working on options for services. For politically sensitive areas like government procurement competition policy where a cabinet mandate to negotiate was still lacking, Muhyiddin said he would encourage other ministries to at least initiate informal scoping discussions with U.S. counterparts. The Minister told the Ambassador the US remained one of Malyasia's most important trade and investment partners and he would continue to work to build the relationship. End Summary. ¶2. (SBU) Minister Muhyiddin told the Ambassador during a May 12 courtesy call that he had exchanged views on the WTO and our bilateral FTA with USTR Ambassador Schwab during the ASEAN trade ministers meeting in Bali and he reiterated that he would like to see faster progress in the FTA negotiations. At the same time, he said, there were many technical difficulties that had to be addressed and the cabinet had yet to approve mandates to discuss sensitive topics like financial services and government procurement or competition policy. While Malaysia thought it would be difficult to meet the level of ambition that the U.S. had in mind for services, the GOM was looking for additional flexibility. Muhyiddin also said he hoped that an informal discussion (not a negotiation but a preliminary exchange) on government procurement could be initiated where both sides could set out potential parameters during the next round in July. In the case of the Government of Malaysia, he said, this would include setting out what it absolutely could not do in the government procurement area. ¶3. (SBU) The Ambassador said he welcomed the Minister's forward leaning approach and was pleased both sides had agreed to hold another round of negotiations in July. Ambassador Schwab, he added, believed this FTA was doable. While not wishing to rush the process, the Ambassador encouraged the Minister to ensure his negotiators made as much progress as possible in the July round as election driven political calendars in both countries would make scheduling follow-on rounds more difficult in the near term. The Ambassador also welcomed Muhyiddin's support for seeking increased flexibilities in services and encouraging negotiators to exploring initial ideas for government procurement. These and other sensitive chapters were essential elements in the U.S. view of a comprehensive agreement, the Ambassador said. Contrary to recent Malaysian press reports, the Ambassador said, government procurement was always a requirement of US FTAs and there was in fact a significant coverage of government procurement in the US-Chilean FTA. By taking important steps such as concluding a comprehensive FTA with the U.S. and by completing legislation for an export control regime, the Ambassador said, Malaysia would be putting itself in a strong strategic position for continued economic development in the 21st century. Muhyiddin reiterated that he would like to see the FTA negotiations move more quickly but noted getting other ministries to speed up on chapters where they had an important say was difficult process. Recrafting Investment Missions -------------- ¶4. (SBU) Minister Muhyiddin noted he looked forward to his upcoming trip to Detroit and New York to promote US direct investment in Malaysia. Muhyiddin said this trip, which had been in the works before he assumed the role of Trade minister following the March elections, had a less targeted approach than he desired. Nevertheless, he still hoped to wrap up a few major investment deals while he was in the U.S. Muhyiddin told the Ambassador he had met with the Deputy Prime Minister to work out a set of special incentives to offer to the U.S. firm National Instruments during this trip and he planned to pursue more targeted opportunities in sectors important to Malaysia economic development in subsequent trips to the U.S. Rather than speaking at large gatherings, Muhyiddin said, in the future he would visit large U.S. corporations, meet CEOs and do small roundtable discussions. The Ambassador offered the Embassy's assistance in facilitating the KUALA LUMP 00000401 002 OF 002 Minister's visit to the U.S. and encouraged Muhyiddin to include Washington, D.C. on his next trip. The Minister said he looked forward to doing so. ¶5. (SBU) The Ambassador also encouraged the Minister to consider additional steps Malaysia could take to improve its investment environment. Muhyiddin agreed that Malaysia could do more to become a truly attractive location for FDI and he welcomed comments from US businesses on how to do it. He also emphasized that post election Malaysia was in business-as-usual mode. Previewing a message he would deliver to investors in the U.S., Muhyiddin said the federal government would not treat state governments that were now under the control of opposition parties in a discriminatory manor. Investors could go to any state and be assured they would receive every benefit that Malaysia had to offer investors. He said all the states had made it clear that they continue to welcome foreign investment. If the states made any changes, it would only be to improve the investment environment. KEITH