PM ABDULLAH TAKES OVER DEFENSE PORTFOLIO AHEAD OF

C O N F I D E N T I A L SECTION 01 OF 03 KUALA LUMPUR 000821

SIPDIS

FOR EAP, EAP/MTS AND INR

E.O. 12958: DECL: 09/17/2028
TAGS: PGOV PREL PINR MARR KDEM MY
SUBJECT: PM ABDULLAH TAKES OVER DEFENSE PORTFOLIO AHEAD OF
RUMORED PARTY SHOWDOWN

REF: A. KUALA LUMPUR 815 - SEPT 16 ANTI-CLIMAX

B. KUALA LUMPUR 810 - UPROAR OVER ISA

Classified By: Political Section Chief Mark D. Clark, reason 1.4 (b and
d)

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


1. (C) Prime Minister Abdullah Badawi took over the Defense
Minister portfolio from his deputy Najib Tun Razak with
immediate effect on September 17, one day ahead of a rumored
showdown within Abdullah's ruling United Malays National
Organization (UMNO) party. In return, Najib assumed the
Finance Minister I portfolio from PM Abdullah. Abdullah and
Najib also reaffirmed their commitment to Abdullah's plan to
hand over power to Najib in 2010, a key element to Abdullah's
effort to gain reelection as UMNO president in December.
These developments took place as multiple sources indicated
that other UMNO leaders with some backing by former PM
Mahathir could try to use the September 18 UMNO Supreme
Council meeting to attack Abdullah's transition plan in an
effort to force Abdullah out. Abdullah's remarks that
Opposition leader Anwar Ibrahim is "a threat to the economy
and probably security" heightened concerns among the
Opposition that the Prime Minister could use the Internal
Security Act against Anwar. September 18 witnessed the
defection of a small Sabah party from the governing National
Front (BN) coalition, a development symbolically important to
the Opposition.


2. (C) Comment: In the context of UMNO's ongoing leadership
struggle, the Defense portfolio is more critical than
Finance. Abdullah's sudden takeover of the Defense Ministry
puts one important center of power under the Prime Minister's
supervision. The timing appears tied to positioning ahead of
tomorrow's crucial UMNO meeting and could be a reaction to
reports that Najib and UMNO leaders would move against
Abdullah. Abdullah's Cabinet swap also undermines Najib's
strong base, and patronage network with the armed forces,
including military intelligence, built up through his nine
years as Defense Minister. As the UMNO struggle intensifies,
Anwar Ibrahim waits in the wings and will attempt to seek
advantage from splits in the ruling party, or possible
defections of prominent UMNO leaders who lose the fight.
Abdullah's reference to Anwar as a "threat" represents
ominous talk, given the ISA arrests on September 12. We
include suggestions for "if asked" press guidance on the
questions of ISA and the Cabinet changes at the end of this
message. End Summary and Comment.

Surprise Cabinet Swap
--------------


3. (U) Following a September 17 Cabinet meeting, Prime
Minister Abdullah joined by Deputy Prime Minister Najib held
a press conference to announce a swap in cabinet portfolios
between the two leaders, with Abdullah taking over Najib's
role as Defense Minister and Najib assuming the duties of
Finance Minister I from Abdullah. Abdullah noted the
importance of the Finance Ministry and described the swap as
a way for Najib to gain further experience in preparation for
becoming the next Prime Minister. At the press conference,
Najib said, "I thank Abdullah for the confidence he has shown
in appointing me as Finance Minister...the decision is
magnanimous and its shows his sincerity in picking me as his
successor."

Reaffirming Abdullah's Transition Plan
--------------


4. (SBU) Abdullah used the press conference to reaffirm the
two leaders' commitment to the transition plan in which
Abdullah would step down in favor of Najib by June 2010, a
plan that has come under renewed attack within UMNO. "I
stress that Najib and I are committed to the plan that we
have agreed to." (Comment: In the face of earlier calls for
his resignation in favor of Najib, Abdullah brokered the
transition plan as a means to gain reelection in UMNO's
December party polls. End Comment.) Abdullah added that,
"The transition is flexible. It is up to me. It (the
handover) will be no later than 2010, but it may be sooner."

KUALA LUMP 00000821 002 OF 003


In line with Abdullah's reinforcement of the transition plan,
Najib stated that he would not accept any nomination's for
the UMNO presidency as he, too, was committed to the
succession plan.

Anwar a Threat to Economy, Security
--------------


5. (C) During the news conference PM Abdullah took a
question related to the challenge posed by Opposition leader
Anwar Ibrahim, who has vowed to gain majority support in
Parliament and thereby topple Abdullah's government.
Abdullah reportedly replied that Anwar's actions have had
negative consequences for Malaysia's economy by shaking
investor confidence. The Prime Minister added that, "I see
(Anwar) is a threat to the economy and probably security."
News of these remarks caused an immediate stir among
Opposition members and supporters, who in communication with
Poloffs interpreted this as a possible justification for
invoking the Internal Security Act (ISA) to detain Anwar and
other opposition leaders. (Note: The ISA's broad provisions
allow for detention of individuals who threaten the country's
security or economic life. End Note.)

Maneuvering Ahead of Crucial UMNO Meeting
--------------


6. (C) Abdullah's announcement of the Cabinet change
occurred one day before a crucial meeting of the UMNO Supreme
Council, which will take up the issue of the Prime Minister's
transition plan. Multiple embassy sources, from both UMNO
and the Opposition, have told us that opponents to Abdullah
intend to use the meeting to challenge the Prime Minister's
intention to stay in power, either indirectly by questioning
the transition plan, or directly. The opponents include UMNO
veteran leader Tengku Razaleigh Hamzah (who is not in the
Supreme Council),UMNO VP Muhyiddin Yassin, and possibly
Najib himself. On September 16, Razaleigh publicly attacked
Abdullah's hand-over plan as undemocratic. Tengku
Razaleigh's political aide John Pang (protect) told Polchief
on September 15 that Abdullah was aware of the risk and
prepared to use a cabinet reshuffle to stop a challenge by
either Najib or Muhyiddin.


7. (C) Former Prime Minister Mahathir, who is vehemently
committed to bringing down Abdullah, reportedly is supporting
this attack using his money and residual influence, according
to Pang and other sources. Pang and, separately, an
Opposition source noted that Mahathir had met Najib on
September 14 or 15; Pang thought the meeting had not gone
well. Pang also noted that Muhyiddin remained non-committal
to Mahathir in a recent meeting together Razaleigh.
Razaleigh accepted Mahathir's backing to challenge Abdullah,
Pang said, but was caution of falling under the control of
Mahathir, his former nemesis.

Benchmarks
--------------


8. (C) Comment: Abdullah needs the UMNO Supreme Council
meeting to re-endorse his transition plan, ideally deciding
that the plan does not require UMNO divisions' approval, or
that of the party's general assembly in December, and
restricting UMNO debate on the issue. This would help to
lock in the Abdullah/Najib ticket as the only option.
Abdullah's opponents will look for a decision that
contradicts the Prime Minister's assertion that this is a
done deal, stresses the need for grassroots endorsement, and
refers the plan to debate among the UMNO divisions, thereby
opening a door for challengers Razaleigh and Muhyiddin. A
more dramatic outcome to the UMNO Supreme Council meeting
would be a motion of no confidence in the Prime Minister.
The window for formal UMNO actions on the leadership election
is closing soon as Malaysia moves toward the major Muslim
holidays on October 1-2 marking the end of the fasting month
and the key UMNO divisional elections begin almost
immediately thereafter on October 9. If the likes of
Razaleigh and Muhyiddin fail in their attempt to open up the
leadership contest, the question of whether they break with
the party will be important. End Comment.

SAPP Defects from Ruling Coalition

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--------------


9. (SBU) The Sabah Progressive Party (SAPP) withdrew from
the UMNO-led BN coalition on September 17, reducing the size
of BN's majority from 140 to 138 members of Parliament (MPs)
over the opposition's 82. It is not known whether the two
MPs will join the opposition in supporting Anwar Ibrahim to
be the next Prime Minister; if so, Anwar would still need
another 28 shifts to force a change in government. In a
statement harshly critical of BN, SAPP President Yong Teck
Lee stated that the reasons for SAPP's withdrawal is due to a
combination of factors: the failure to embrace Sabahan
interests; the lack of good leadership, direction, and spirit
within the BN; the failure to reform the judiciary; and
recent political ploys that Lee called "shameful."


10. (SBU) It appeared to be a relatively quiet day for the
Anwar camp. As of late on September 17, Anwar Ibrahim had
yet to release any significant comments on the day's
developments.

Suggested Press Guidance
--------------


11. (U) Post offers the following suggestions for "if asked"
press guidance:

Q: IS THE OPPOSITION LEADER IN DANGEER OF ISA DETENTION?

A: We are not aware of any Malaysian government decision to
make further arrests under the Internal Security Act.

We repeatedly have made clear that the United States strongly
supports the rule of law, the respect for due process, and
freedom to peacefully exercise political rights as
fundamental principles of democracy.

(If pressed)

We firmly believe that national security laws, such as the
ISA, should not be used to curtail or inhibit fundamental
democratic liberties and the peaceful expression of political
views.

Q: WHAT IS THE U.S. VIEW OF MALAYSIA'S CABINET CHANGES?

A: The cabinet changes are an internal matter for the
Malaysian government.
KEITH