SCENESETTER FOR VISIT TO MALAYSIA BY ADMIRAL

S E C R E T SECTION 01 OF 04 KUALA LUMPUR 000956

NOFORN
SIPDIS

FOR EAP/MTS AND INR, PACOM PLEASE PASS TO ADMIRAL WALSH,
GENERAL NORTH, AND VICE ADMIRAL BIRD

E.O. 12958: DECL: 11/25/2029
TAGS: MCAP MARR MASS MOPS PGOV PREL PTER OVIP MY
SUBJECT: SCENESETTER FOR VISIT TO MALAYSIA BY ADMIRAL
WALSH, GENERAL NORTH, AND VICE ADMIRAL BIRD

Classified By: Classified by Deputy Chief of Mission Robert G. Rapson f
or reason 1.4 (b and d).

Summary and Introduction
--------------


1. (C) Embassy Kuala Lumpur warmly welcomes your visit to
Malaysia. You will be participating in the Airpower and
Maritime Conferences and meeting high ranking defense
officials not only from Malaysia, but from other countries
around the world who are participating in this year's
Langkawi International Maritime and Aerospace (LIMA)
Exhibition. Prime Minister Najib Tun Razak is also expected
to be present for the LIMA Signing Ceremony and to open the
LIMA 09 Gala Dinner.


2. (C) Your visit comes at a moment of increasing opportunity
in the U.S.-Malaysia relationship generally. In his first
seven months in office, Prime Minister Najib has demonstrated
a more pragmatic and action-oriented approach than his
predecessor, Abdullah Badawi. The Mahathir era
anti-Americanism is gone, replaced by pragmatic engagement.
Najib has explicitly endorsed strengthened ties with the
United States (where he is traveling this week). In this
context, our efforts are focused on continuing our good
security cooperation with Malaysia, expanding the trade and
investment dimensions of our ties, and deepening our
partnership on key global issues, including Malaysia's
diplomacy towards Iran and Afghanistan. End Summary and
Introduction.

The Broader Relationship
--------------


3. (C) Robust trade and investment ties remain the solid
foundation of our relationship with Malaysia, our 18th
largest trading partner (bilateral trade totaled USD 44
billion in 2008). The GOM has been an important partner on
counterterrorism when it serves Malaysia's own security
interests, and we enjoy expanding law enforcement cooperation
as well as evolving military-to-military ties. Our
people-to-people ties build on decades of Malaysian students
studying in America (5,400 Malaysian students studied in the
U.S. during in 2007-2008). The emergence of new
administrations in both our countries has provided expanded
opportunities to pursue vigorous public outreach to
often-skeptical, but now more receptive, Muslim Malay
audiences. Given its biodiversity, we have included Malaysia
in regional environmental initiatives to protect rainforests
and coral reefs.

Najib and His Cabinet Seek Better U.S.-Malaysia Ties
-------------- --------------


4. (C) Early in our new Administration numerous prominent,
senior interactions with Malaysia included attention to the
relationship from the President (his 20-minute phone call
with Najib in June),Secretary Clinton, and Deputy Secretary
of State Steinberg. We have been able to underscore the
importance of security cooperation through a variety of
public and private events, including the travel to the U.S.
of the head of the Royal Malaysian Police and his key
counterterrorism advisor, the visit to KL of the USAF
Thunderbirds, and a steady pace of naval port calls with
attendant bilateral training that rivals in quantity and
quality some of the most popular destinations in the region.
In addition to the President,s historic summit meeting with
ASEAN leaders in Singapore, Minister for International Trade
and Industry Mustapha and USTR Ambassador Kirk had a
productive meeting, helping us to refine our bilateral and
regional approach to trade issues with Malaysia and pointing
the way toward serious Malaysian consideration of the
Trans-Pacific Partnership. PM Najib, who is in New York and
Washington on a private trip November 23-25, has expressed
strong interest in meeting President Obama in Washington. No
dates have yet been fixed.


5. (C) Najib has a more nuanced sense than his predecessor,
Abdullah Badawi, of international politics as well as
Malaysia's place in the region and the world. Najib places a
priority on foreign relations beyond Malaysia's traditional
reference points of the Non-Aligned Movement (NAM) and the
Organization of the Islamic Conference (OIC). Although it
would be inapt to describe Najib as pro-Western, the
UK-educated Prime Minister recognizes the benefits to

KUALA LUMP 00000956 002 OF 004


Malaysia of engaging the U.S., sustaining access to our
market and U.S. investment, along with rapidly developing
ties to China and India, and of participating in
international institutions. He has given explicit
instruction to his cabinet to greatly improve relations with
the U.S.


6. (C) DefMin Zahid Hamidi has also emphasized Malaysia's
desire to strengthen our bilateral military relationship,
Malaysia's role in anti-piracy and UN peacekeeping, and
Malaysia's potential assistance to Afghanistan. Zahid has
expressed hope that a compromise, possibly involving reduced
fees and some form of cost-sharing, could be achieved in the
near-term regarding commercial port fees charged U.S. naval
vessels. Zahid has indicated some concern with China's
activities in the South China Sea, but also encouraged broad
U.S. engagement with China.

MIL-MIL Cooperation
--------------


7. (C) Assistant Secretary Gregson,s ongoing dialogue with
Malaysian military policy counterparts is of a piece with
Assistant Secretary Campbell,s dialogue with Ministry of
Foreign Affairs Secretary General Rastam. The Malaysian
military has consistently been more willing to engage with us
and more willing to be seen doing so than its civilian
counterparts. In contrast to some of its neighbors, the
Malaysian military is not a key player in either foreign
policy or the maintenance of public order. It is accordingly
free to focus on the nation,s defense and is keen to
increase training and exercise opportunities with us, within
well established boundaries and with the necessary
concurrence of the Foreign Ministry. With about two dozen
ports calls per year, we have a robust program of naval
exchange, our investment in maritime domain awareness in East
Malaysia is developing well, and our nascent cooperation with
the Malaysian Coast Guard is also maturing. KL continues to
resist inclusion in prominent multilateral exercises, such as
Cobra Gold, which it observes, out of concern that it not
taint Non-Aligned Movement or Organization of the Islamic
Conference credentials. Nevertheless, we are steadily
expanding our cooperation, including by embedding a C-130
pilot in a Malaysian unit, increasing our senior NCO
exchanges and looking for NCO training opportunities, and
focusing on humanitarian assistance and disaster relief
exercise opportunities, talking in mil-mil channels about
pandemic preparation, and developing a more and more robust
program of institutional and personnel exchanges and visits,
including record numbers of naval port calls.


8. (C) Looking ahead, one key policy objective is to elicit
politically and symbolically important assistance from
Malaysia to Afghanistan in mil-mil channels, in Afghanistan.
The Malaysians are training teachers already and enjoy warm
and friendly relations with the Afghans. We understand PM
Najib told the Australians that Malaysia was preparing to
begin a program of police training, albeit to Afghan civilian
police in Malaysia, not in Afghanistan. Our British and
Australian colleagues are also encouraging the Malaysians to
do more for Afghanistan. KL,s preference is civilian
training in Malaysia, not in-country in Afghanistan.


9. (C) Langkawi International Maritime and Aerospace (LIMA)
Exhibition: Your participation in this exhibition will help
advance relationship building at the highest defense official
level. LIMA was founded in 1991 and is now one of Asia's
premier destinations for aerospace and maritime manufactures
looking to enter or expand within Asian-Pacific markets in
the defense, enforcement, and civil sectors. This year's
exhibition will include over 318 exhibitors, 71 warships and
vessels, and 53 aircraft from over 55 countries. The GOM
takes a lot of pride in hosting the event, but military and
exhibitor participation in the bi-annual show has been on the
decline since its peak in 1999. Our air engagements via
flyover by our B52 and our naval engagements via port calls
by our destroyers give us opportunities to showcase our
capabilities and assets that are appropriate for Malaysia as
it looks forward to making its armed forces more capable and
joint in all their future operations. All the key Malaysian
defense leaders from Defense Minister, CDF, SecGen, and
Service Chiefs will be present at LIMA to hold office calls
and to host dinners, some of which you are scheduled to
attend. Other key defense officials from other countries in
the region and around the world will also participate,

KUALA LUMP 00000956 003 OF 004


including: Bangladesh, Brunei, Cambodia, Canada, Chile,
China, East Timor, Fiji, France, Germany, India, Indonesia,
Italy, Korea, Myanmar, New Zealand, Oman, Pakistan, Papua New
Guinea, Philippines, Qatar, Saudi Arabia, Singapore, South
Africa, South Korea, Spain, Sri Lanka, Thailand, Turkey, the
United Kingdom, and Vietnam.

Foreign Policy and Foreign Relations
--------------


10. (C) While Malaysia's NAM-centric foreign policy (which
has led Malaysia to vote opposite the U.S. position on almost
all important UN issues) is unlikely to change dramatically,
prospects exist for identifying and working together on
shared foreign policy priorities. U.S. support for Malaysia
joining the Somalia anti-piracy Contact Group was a useful
start to moving Malaysia toward more engagement in
multilateral security structures. Malaysia is a leading
member of ASEAN, and could play a more positive role in
Southeast Asian conflict resolution and ASEAN's approach to
Burma to bring about democratic change in that country.


11. (C) Outside of relations with its immediate neighbors
within ASEAN and its continuing aspirations to play a leading
role within the NAM and OIC, foreign policy in Malaysia
generally takes a back seat to domestic issues and the ruling
party,s focus on consolidating its power after being shaken
in March 2008 general elections. The one foreign policy
issue that resonates with the Malaysian public is the
Israel-Palestine conflict, where predominantly Muslim
Malaysians (55 percent of the population) identify with the
Palestinians and attack U.S. support of Israel.

CT and Law Enforcement
--------------


12. (S) The main thrust of our counterterrorism cooperation
is civilian-to-civilian, and cooperation is generally good.
Early round-ups in 2001-2002 of scores of Jemaah Islamiyah
(JI) suspects helped prevent terrorist attacks here, but
Malaysian extremists remain engaged in JI operations
elsewhere. Two Malaysians were among the 14 high-value U.S.
detainees transferred to Guantanamo in 2006; Malaysia has a
pending request for their return. Growing domestic political
pressure to do away with preventive detention laws,
principally the Internal Security Act (ISA),could pose a
long-term challenge to Malaysian law enforcement, which is
overly reliant on administrative detention. Inter-agency
engagement has also increased with the newly formed Malaysian
Maritime Enforcement Agency (MMEA),which has broad maritime
law enforcement, humanitarian, and security responsibilities
similar to the U.S. Coast Guard.

Non-proliferation, Iran and Security Issues
--------------


13. (S) The GOM supports the Non-Proliferation Treaty (NPT)
regime, with emphasis on the need for all countries to
denuclearize; it has praised current U.S.-Russia disarmament
negotiations. Malaysia claims to enforce the letter of UNSCR
resolutions, but it has not entered into the spirit of
putting pressure on Iran to relinquish its nuclear weapons
development programs, perhaps primarily due to the widespread
public perception here that Iran's denial of a weapons
program can be taken at face value. The recent revelations
that Iran was operating an additional nuclear enrichment in
Qom has been an eye-opener to the Malaysian leadership, but
they have sent us mixed signals on any intention to join
international efforts to prevent Iran from developing nuclear
weapons.


14. (S/NF) Malaysia maintains a USD 1.2 billion trade
relationship with Iran with growing two-way investment as
well. Iranian front companies continue to operate in
Malaysia, resulting in the transshipment of sensitive
technology to Iran. In some instances, the GOM has
cooperated in stopping such shipments when supplied with
clear evidence tied to UNSCR-mandated sanctions. Despite our
objections, Bank Mellat subsidiary First East Export Bank was
given a license in 2009 and is now operating in Malaysia,s
Labuan offshore financial center. The GOM supports UNSCR
resolutions concerning North Korea and has publicly denounced
continued North Korean saber rattling, although the North
Koreans also use Malaysia as a platform for regional
activities.

KUALA LUMP 00000956 004 OF 004



The Economy
--------------


15. (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(with data not yet
available) 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.

Domestic Politics
--------------


16. (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 near-perpetual two-thirds majority
control of Parliament--and five 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.
KEITH