DAS KASOFF REVIEWS TRADE ISSUES WITH MALAYSIAN

C O N F I D E N T I A L SECTION 01 OF 02 KUALA LUMPUR 000463

SENSITIVE
SIPDIS


DEPT FOR EEB/TPP/BTA AND EAP/MTS,
TREASURY FOR OASIA AND IRS,
STATE PASS FOR USTR - WEISEL AND EHLERS,
GENEVA FOR USTR

E.O. 12958: DECL: 11/12/2018
TAGS: ECON ETRD PGOV MY
SUBJECT: DAS KASOFF REVIEWS TRADE ISSUES WITH MALAYSIAN
OFFICIALS

Classified By: Economic Counselor Matthew J. Matthews, reason 1.4 (b an
d d).


1. (C) Summary: In meetings with Department of Commerce
Deputy Assistant Secretary Kasoff June 4-5, senior officials
at Malaysia,s Ministry of Trade and Industry and the
Ministry of Domestic Trade June signaled that Malaysia was
ready to demonstrate more flexibility on key FTA negotiating
issues. They also noted that the Government of Malaysia was
working to improve IPR enforcement and was planning to have
legislation on competition policy in place by the end of the
year. Plans were also under discussion for shifting the lead
on export controls from the Ministry of Foreign Affairs to
the Ministry of International Trade and Industry. End Summary.

Economic Reform and Trade Policy


2. (C) MITI Secretary General Rahman told DAS Kasoff in a
June 5 meeting that MITI was focused on two elements of
Malaysia,s ongoing economic reform program: liberalization
of the services sector and creation of supportive conditions
for faster growth of SMEs. He said that MITI hoped for the
announcement of more liberalization measures for services
that would address reduced bumi equity requirements,
facilitation of access for service sector talent, and
service sector regulatory reform. On the US-Malaysian FTA
negotiations, Rahman said, Malaysia had been sending signals
to the United States at senior levels and was looking for
signs from us in response. Malaysia was also looking at the
P-4, the TPP, and APEC-wide agreements, as well as EU
options with ASEAN. DAS Kasoff said that Malaysia needed to
signal that it was ready to engage comprehensively on all
chapters of the bilateral agreement. Rahman responded that
the GOM was moving toward a more comprehensive approach that
included government procurement, but Malaysia needed to be
convinced that it could do a deal that would lead to
increased investment, better market access and capacity
building. He added that Malaysia was moving toward more
open positions even on topics like government procurement
and competition policy and the government was working on
reforms to increase transparency as well.

Removal of Pork Import Ban and Halal Issues


3. (SBU) DAS Kasoff welcomed Malaysia,s decision to remove
the temporary ban it placed on pork imports, but informed
Secretary Rahman that the U.S. had continuing concerns
about the trade restrictive implications of new standards
Malaysia had introduced for halal certification. Kasoff
noted that the U.S. hoped Malaysia would return to
internationally accepted codex standards. Rahman said the
promulgation of the new halal standards had been done under
the Prime Minister,s Department but he noted that in
response to concerns that had been raised, the GOM recently
decided to study the new halal certification requirements
further.

Export Controls


4. (C) Emphasizing that Malaysia was a key trading hub and
that stepped up international efforts to prevent illegal
shipments of dual use items was a key priority for the U.S.,
DAS Kasoff asked Rahman for a status update on Malaysia,s
draft export control law. Rahman noted that Ambassador
Keith had just raised U.S. concerns on this with Minister
Mustapa. He noted that the Ministry of Foreign Affairs
(MFA) had the lead and that the draft bill currently was
under review by the Attorney General,s Chambers. It was
more or less agreed, Rahman said, that MITI would be the
license issuing agency once the law was passed and went into
force, but the GOM was working to make sure it had an
effective approach to carrying out export licensing without
disrupting trade or placing burdens on private sector firms.
He added that the government was struggling with a
particularly big problem with regard to Scomi, which was
producing a dual-use item used in centrifuges, so the GOM
needed to proceed carefully. (Note: Scomi is a politically
connected Malaysian engineering company listed on the stock
exchange which does substantial business with countries of
concern like Iran. Its major stockholder is the son of

KUALA LUMP 00000463 002 OF 002


former PM Abdullah. Also note that Scomi execs were
designated by the U.S. recently. End note.)


5. (C) Rahman told Kasoff the GOM was working on capacity
building and welcomed the opportunity to participate in
international conferences on export controls like the
upcoming program in Turkey. EconCouns noted that the Embassy
had a senior EXBS Officer who was dedicated to providing
training in Malaysia and other countries in the Southeast
Asia region, but that the Ministry of Foreign Affairs had
stalled efforts to provide export control related training
in Malaysia, including a training proposal the Embassy made
to MITI in March on export licensing which MITI staff had
said would have been very useful. In reply, Rahman noted
that MITI Minister Mustapa was aware of this problem and
revealed that plans were now afoot to shift the lead on
export controls from MFA to MITI. That, he said, would
enable MITI to work directly with the Embassy.

Strengthening IPR Protection


6. (SBU) On IPR, DAS Kasoff pointed out to Secretary General
Rahman that the US appreciated the increase in IPR related
prosecutions but noted that the US was concerned at the
weakening in Malaysia,s IPR enforcement efforts of late.
Rahman agreed that Malaysia,s enforcement efforts had been
lacking over the past year and assured DAS Kasoff that the
Najib government was intent on doing better on enforcement
in the year to come.


7. (SBU) In a separate meeting with DAS Kasoff on June 4,
Ministry of Domestic Trade and Consumer Affairs (MDTCA)
Deputy Secretary General Daud bin Tahir reiterated
Malaysia's intention to improve Intellectual Property Rights
(IPR) enforcement. Daud said that the new Minister wants to
"go all out" to protect IPR. He described the ministry's
approach to first target the "hotspot" areas, with the goal
of reducing the number of hotspots this year by 80 percent,
and entirely eliminating the hotspots by 2012. (NOTE:
Hotspots are the market areas or shopping centers with the
most widespread sales of counterfeit products.) Daud
emphasized the need for "balanced enforcement" with programs
to increase consumer awareness of IPR combined with
enforcement efforts directed at the supply sources of the
illegal products. He said that MDTCA planed to introduce
reward programs to find the illegal producers of the
infringing products. DAS Kasoff offered to look into
possible capacity building assistance in IPR sector through
the Commercial Law Development Program (CLDP). Daud said
that Malaysia needs capacity building for judges and
prosecutors, especially with the increased use of the IPR
courts.

Liberalizing Markets and Competition Policy


8. (U) Turning to Malaysia,s recent services sector
reforms, Daud said that GOM would introduce a competition
law before the end of the year. He said that the market
liberalization initiative being drawn up by the Prime
Minister Department,s Economic Planning Unit (EPU) was
substantial. It was designed to reduce bureaucracy and
create a more competitive and market-oriented environment
for businesses. Daud said there were specific proposals for
liberalized participation in distributive trade and the
reduction of price controls.


9. (U) This message was not cleared by DAS Kasoff before he
left Kuala Lumpur.
RAPSON