Identifier
Created
Classification
Origin
09KUALALUMPUR771
2009-09-17 10:18:00
SECRET
Embassy Kuala Lumpur
Cable title:  

SCENESETTER FOR DEPUTY SECRETARY STEINBERG'S VISIT

Tags:  MY PGOV ECON PREL PMIL 
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VZCZCXRO0910
OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHKL #0771/03 2601018
ZNY SSSSS ZZH
O 171018Z SEP 09 ZDK
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3209
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 2633
RUEHUL/AMEMBASSY SEOUL PRIORITY 1776
RUEHKO/AMEMBASSY TOKYO PRIORITY 2674
S E C R E T SECTION 03 OF 04 KUALA LUMPUR 000771

SIPDIS

E.O. 12958: DECL: 09/09/2019
TAGS: MY PGOV ECON PREL PMIL
SUBJECT: SCENESETTER FOR DEPUTY SECRETARY STEINBERG'S VISIT
TO MALAYSIA

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KUALA LUMP 00000771 003.2 OF 004


Malaysian law enforcement, which is overly reliant on an
intelligence approach to CT, so that Malaysia has yet to
properly prosecute, convict, and sentence any individual;
rather, they are all detained under the ISA. That said,
while the Government has committed to a review of the ISA,
there are no immediate plans to weaken or eliminate it.
Malaysia has cooperated with Thailand regarding the
insurgency in southern Thailand, but sees the problem mainly
as an internal Thai political challenge. Malaysia previously
supported the peace process between the Philippine Government
and the MILF in the southern islands, but withdrew its
contingent for the International Monitoring Team in Mindanao
in late 2008. The Ministry of Foreign Affairs has indicated
that Malaysia is considering a return to Mindanao, but has
not specified a time frame.

Global Financial Crisis and Economic Reforms
--------------


8. (SBU) Malaysia,s economy is expected to contract around
five percent in 2009 and recover slowly in 2010. The global
recession led to dramatic declines in exports and investment
this year in Malaysia, resulting in a recession since the
first quarter of 2009. Malaysian policy makers responded
with monetary easing and two fiscal stimulus packages worth a
total of USD 19 billion, but the Central Bank does not expect
a rebound until the fourth quarter of 2009 because Malaysia
remains dependent on the resumption of growth in its key
export markets, including the U.S., the EU, and Japan.
Hence, the political stakes are high for Najib, who must
ensure that the economy continues to provide growth and
prosperity to a large middle class. Najib has used the
recession to push forward economic reforms needed to keep
Malaysia competitive. He announced reforms in the services
sector to some race-based equity requirements and some
liberalization in the financial services sector. Though of

limited immediate economic impact, these reforms send a
powerful message that ethnic Malays increasingly will have to
compete on a level playing field with other races in
Malaysia, and, perhaps over time, with foreign competitors.
Najib,s recognition that reforms are needed also presents
opportunities for our trade and investment agenda
specifically with regard to government procurement and
competition policy, among others. Malaysia continues to
signal its desire to resume negotiating a bilateral Free
Trade Agreement with us even though Najib has yet to deliver
on a cabinet decision to negotiate sensitive chapters on
government procurement and competition policy. He has
authorized informal discussions on these topics. AUSTR
Weisel proposed informal discussions on these and other
elements of the agreement during her September visit to KL to
ensure both sides continue to make progress, even as USTR,s
trade policy review continues. The Malaysian side is
considering that proposal.

Political Discord at Home
--------------


9. (C) Najib came to power in the midst of domestic political
discord that raises long-term questions regarding the
continued dominance of his ruling UMNO party, in power since
independence in 1957. He replaced former PM Abdullah Badawi,
who was eased out after the ruling National Front (BN)
coalition lost its perpetual two-thirds majority control of
Parliament--and five out of 13 states--in the March 2008
general elections. Najib is determined to restore BN's
dominance, but he must contend with rising public
expectations for better governance and a resurgent political
opposition, led by charismatic former Deputy Prime Minister
Anwar Ibrahim. Najib will find it difficult to identify and
implement popular political reform measures while still
maintaining UMNO's tight control over state levers of power
and patronage. With a weakened ruling coalition, a maturing
opposition, and a more sophisticated electorate with access
to more information, Malaysia's polity is struggling to
adjust to a new and more competitive political environment.
The ongoing proceedings against Anwar (adjourned until
November 3),accused of sodomy in a politically-motivated
prosecution, continue to generate political friction
domestically and internationally.


10. (SBU) On September 14, Najib told members of the
diplomatic community that he was committed to promoting
Malaysia as a model Islamic country with multicultural
tolerance. It is notable that he felt the need to assure the
assembled diplomats. His comments came amid increased
concerns over religious intolerance. Two recent incidents
highlight this concern and have sparked a public outcry. A
Muslim woman convicted of drinking a beer in a hotel lobby of

KUALA LUMP 00000771 004.2 OF 004


a religiously conservative state was set to receive a
punishment, now suspended, that included 6 lashes with a
bamboo cane. International media attention embarrassed the
GOM, which is trying to quietly drop the case, but the effort
is complicated because Shari'a law is administered at the
state level. Religious discord was also fomented on August
28 when a group, claiming to be local Muslim residents,
protested the placement of a Hindu temple into their
neighborhood by dragging a severed cow-head on which they
stomped and spat in front of riot police. Although the
police took little action against the Muslim perpetrators,
they reacted swiftly to disperse and arrest Hindu
participants of the peaceful candlelight protest organized in
response. Some of the "cow-head incident" demonstrators were
later arrested after much protest in the blogosphere.

Trafficking in Persons
--------------


11. (SBU) On June 16, the U.S. released the 2009 Trafficking
in Persons (TIP) report, which classified Malaysia as a Tier
3 country, for lack of significant efforts to combat human
trafficking. In the months following Malaysia's
classification as Tier 3, the Government took constructive
measures on a number of fronts to address the trafficking
issue. Post has recognized a significant shift in the GOM
approach to TIP and and an improved level of discourse with
the USG on this sensitive issue. The GOM has arrested five
immigration officials in connection with the trafficking of
Burmese refugees at the Thai border, and such trafficking
apparently has ceased; announced that the TIP Council would
be releasing a TIP Action Plan in the coming months; issued
prosecutorial directives on the handling of TIP cases under
the guidance of the Attorney General's Chambers; and has
negotiated a new MOU with Indonesia (to be announced shortly)
that would drop any provisions for employers to hold migrant
workers' passports. TIP Ambassador CdeBaca visited Kuala
Lumpur August 25-27, and met with several senior government
officials, including Foreign Minister Anifah Aman. The
Embassy is coordinating a follow-on action plan for engaging
the GOM on measures needed in the coming months to address
human trafficking.


KEITH