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