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WIKILEAKS: UMNO QUESTIONS ANWAR IBRAHIM OVER "FOUNDATION FOR FUTURE" ROLE
Ibrahim Ali FINALLY admits that Malaya was colonised for 400 years
WIKILEAKS: PM ABDULLAH'S AIDE ON ANWAR, ELECTIONS AND NAJIB
WIKILEAKS: ABDULLAH MEETS WITH HAMAS, FAILS TO INFORM ABBAS
WIKILEAKS: PROMINENT HUMAN RIGHTS LAWYER FACES DEATH THREAT
The Federation of Malaya Independence Act 1957
WIKILEAKS: GOVERNMENT-LINKED COMPANIES: UNRAVELING THE TANGLED WEB
So you want to teach us history, is it?
ABU: ‘anything but Umno’ or ‘asal bukan Umno’
WIKILEAKS: MALAYSIAN GOVERNMENT PROCUREMENT IN THE FTA

WIKILEAKS: UMNO QUESTIONS ANWAR IBRAHIM OVER "FOUNDATION FOR FUTURE" ROLE

Posted: 15 Sep 2011 01:00 AM PDT

State news agency Bernama and mainstream press outlets carried stories May 20-21 reporting that Khairy publicly demanded an explanation from former Deputy Prime Minister Anwar Ibrahim over Western press reports that Anwar had close connections to outgoing World Bank President Wolfowitz and played a role in the appointment of Shaha Ali Reza to work at the Foundation for the Future.

THE CORRIDORS OF POWER

Raja Petra Kamarudin

1. (C) Summary: Prime Ministerial son-in-law and UMNO youth leader Khairy Jamaluddin has publicly called on opposition figure Anwar Ibrahim to explain his role in the Foundation for the Future and his connections with outgoing World Bank President Wolfowitz. Anwar, as Foundation chairman, issued a statement clarifying the Foundation's appointment of Shaha Ali Reza in 2006. With the government's dominance of the mainstream media, UMNO will attempt to use this story to weaken Anwar's reformist and Islamic credentials, and portray Anwar as somehow in America's pocket. End Summary.

2. (U) State news agency Bernama and mainstream press outlets carried stories May 20-21 reporting that Khairy publicly demanded an explanation from former Deputy Prime Minister Anwar Ibrahim over Western press reports that Anwar had close connections to outgoing World Bank President Wolfowitz and played a role in the appointment of Shaha Ali Reza to work at the Foundation for the Future. Khairy told reporters: "Anwar must explain his role in the scandal.... Anwar has to explain because this is an irregularity and abuse of power at the international level."

3. (SBU) Khairy's remarks followed media accounts in late April that attempted to draw connections between Anwar and the World Bank President. The Malaysian media carried the stories on the eve of the highly-charged Ijok by-election, which pitted Anwar's opposition party against a candidate from the ruling National Coalition (ref A). Anwar's campaign strategy focused heavily on criticism of corruption in UMNO and the National Coalition, and in particular focused attacks on Deputy Prime Minister Najib Tun Razak.

4. (U) Anwar Ibrahim, writing as Foundation for the Future chairman, issued a statement on May 20 in reaction to the "incessant propaganda from the UMNO controlled media." Anwar's statement described the Foundation's decision in mid-2006 to "regularize" Shaha Ali Reza's assignment by the World Bank to work at the Foundation. His statement concluded that "the Foundation will not hesitate to institute legal action" should there be no clarification by the media. Malaysian papers carried reports of Anwar's statement on May 21-22.

5. (U) Post has received a number of local media inquiries on this issue. Per instructions, we have referred these journalists to the Department.

6. (C) Comment: After enduring Anwar Ibrahim's sharp criticism over corruption and DPM Najib's alleged links to a murder scandal (reftels), UMNO has seized on Western press accounts of Anwar's role at the Foundation for the Future as a means to hit back.

By implying that Anwar's actions constituted "abuse of power" and by highlighting press reports of Anwar's connections to a former senior U.S. official, UMNO will attempt to undermine the opposition leader's reformist and Islamic credentials.

We expect UMNO also to use the story, at least behind the scenes, to help propagate a belief that Anwar is somehow in America's pocket. With its effective control over the mainstream media, the ruling National Front government will be able to stir this pot if and when it best suits UMNO's purpose.

LAFLEUR (MAY 2007)

Ibrahim Ali FINALLY admits that Malaya was colonised for 400 years

Posted: 14 Sep 2011 05:03 PM PDT

Ibrahim Ali finally admits that Malaya was colonised over a period of 400 years. Actually the Portuguese colonised Melaka exactly 500 years ago in 1511 and the Northern states paid tribute to and were vassals of the Kingdom of Siam while the Southern states were part of the Riau Empire.

THE CORRIDORS OF POWER

Raja Petra Kamarudin

Perkasa: 'Melayu dijajah 400 tahun, tindakan afirmatif dua dekad DEB mana cukup'

(The Malaysian Insider) - Presiden Perkasa, Datuk Ibrahim Ali, menegaskan orang Melayu dan Bumiputera telah dijajah lebih 400 tahun dan, oleh itu, tidak mungkin boleh maju dalam dua dekad sejak Dasar Ekonomi Baru (DEB) dilaksanakan.

Tempoh 20 tahun DEB berakhir 1990 dan matlamat dasar itu diteruskan menerusi dasar-dasar susulan sejak itu.

Sehubungan itu kata beliau, orang Melayu dan Bumiputera sewajarnya diberi masa dengan menganggap bahawa tempoh DEB antara 1970 hingga 1990 sebagai fasa pertama dan era selepas 1990 sebagai "fasa kedua."

"Harus diingat bahawa Melayu dan Bumiputera telah dijajah lebih 400 tahun. DEB hanya dilaksanakan dari 1970 hingga 1990.

"Mana mungkin (kaum yang) dijajah 400 lebih boleh maju, berjaya dalam tempoh 20 tahun dan waktu DEB dilancar dan dilaksanakan, orang Melayu dan Bumiputera belum bersedia dan serba kekurangan," kata Ibrahim dalam satu kenyataan dikeluarkan hari ini.

Ibrahim menggunakan rujukan dijajah dengan tempoh pelaksanaan memajukan orang Melayu dan Bumiputera ketika negara berhadapan dengan polemik sama ada Tanah Melayu benar-benar dijajah oleh British dan kuasa asing.

***********************************

Sovereignty of Malay Rulers a legal fiction

DR CHANDRA MUZAFFAR, The Star

In the midst of the controversy over Mat Sabu and Bukit Kepong certain views have been expressed about British rule which may have the unintended effect of confusing rather than enlightening.

It is true that the Malay states – unlike Penang, Malacca and Singapore – were not British colonies in the formal sense. Nonetheless, they were under British rule. The sovereignty of the Malay Rulers was a legal fiction.

The Ruler was required in both the Federated and Unfederated Malay States to seek, and act upon, the advice of the British Resident or Adviser "on all questions other than those touching Malay Religion and Custom".

In other words, decision-making powers were effectively in the hands of the British.

Apart from laws and treaties which established the actual locus of authority with the British, every important dimension of the economy was under their control. Issues pertaining to land, resources, labour, capital and market in the Malay states were all determined by British policy and British interests.

This made the situation in the Malay states no different from the three British colonies in their vicinity. Indeed, it was British control over both the internal and external economy of the Malay states that rendered them de facto colonies.

Economic control led to the exploitation of Chinese and Indian workers in the tin mining and plantation sectors and the marginalisation of the Malay masses in the peasant sector.

The creation of a dual economy with the commodity based, exported oriented sector directed towards the colonial metropolis was a common characteristic of most colonial economies. In reality, the Malay states bore all the iniquities and injustices associated with colonial rule.

It is mainly because there was de facto colonialism that Umno in the 50s and Parti Kebangsaan Melayu in the 40s championed the cause of merdeka (independence) from the British.

They were focussed upon the substance – rather than the form – of British rule.

WIKILEAKS: PM ABDULLAH'S AIDE ON ANWAR, ELECTIONS AND NAJIB

Posted: 14 Sep 2011 01:00 AM PDT

Wan Farid told us in January (ref A) that Abdullah had decided not to welcome Anwar back into UMNO, and there was certainly no hint in our May 15 meeting that UMNO views of Anwar had softened following the heated Ijok by-election. On the contrary, UMNO Secretary General Radzi Sheikh Ahmad on April 31 told reporters, "He (Anwar) will not be taken back. Period."

THE CORRIDORS OF POWER

Raja Petra Kamarudin

Summary

1. (S) Wan Farid (protect throughout), a political aide to Prime Minister Abdullah Badawi, argued in a May 15 meeting with polchief that opposition figure Anwar Ibrahim's strategy of addressing national issues in the recent Ijok by-election backfired as voters demonstrated that they care most about local rice bowl matters that only the ruling National Coalition (BN) can address.

Lacking his own party machinery, Anwar remains very dependent on the Islamic Party of Malayia (PAS) for grassroots organization. Two recent by-elections signaled a weakening of ethnic Chinese support for the BN, though in the end Chinese voters would have little alternative but to endorse the ruling Coalition.

Wan Farid and other advisors have recommended PM Abdullah curtail international travel after June and concentrate instead on touring Malaysian states in preparation for the next election. International affairs would not play an important role with voters on election day.

Prime Minister Abdullah concluded that Deputy Prime Minister Najib had no connection to the sensationalistic murder of a Mongolian woman, and the PM continues to support Najib's party position. There remains concern, however, over information the defense counsel could raise in the June murder trial of Najib's former advisor and two policemen. End Summary.

Anwar Miscalculates in Ijok

2. (C) Opposition figure Anwar Ibrahim miscalculated in the April 28 Ijok by-election by focusing on national issues, Wan Farid told polchief May 15, echoing commentary in many Malaysian political circles.

(Comment: The Ijok by-election was seen as the final litmus test of political party support before the next national election; BN defeated Anwar's candidate by 59 to 40 percent. End Comment.)

For example, Anwar tried to attack DPM Najib and BN using the Mongolian murder case (ref B), but most voters remained ignorant of the issue and, Wan Farid joked, thought that Altantuya (the murder victim) was the latest Indonesian pop singer.

In addition, Anwar's People's Justice Party (PKR) had almost no grassroots presence, Wan Farid noted, and had to rely very heavily on the opposition Islamist party, PAS. In the end, PAS members would not go all out to support Anwar and PKR.

Wan Farid noted with satisfaction that television cameras caught Anwar Ibrahim dancing a jig at an Ijok campaign rally and that such "un-Islamic" behavior would not go down well with PAS members.

(Comment: Government-controlled television media gave widespread coverage to Anwar's modest dance along with commentary that such movements were inappropriate for an Islamic leader. End Comment.)

UMNO Machine Dominates

3. (C) BN and the leading United Malays National Organization (UMNO), in contrast to Anwar, knew that voters focused on local rice bowl issues, Wan Farid affirmed. Malaysian voters responded to immediate projects in their neighborhoods, not to abstract national concerns. BN has the resources to deliver the communities' needs and UMNO has the extensive party machinery that can allocate one party worker for every five voters. No other party comes close to UMNO in this regard.

Chinese Support Wanes, but Has No Alternative

4. (C) Wan Farid admitted that ethnic Chinese support for BN had waned based on results in the past two by-elections, Machap and Ijok. A decrease in Chinese support "supposedly" is a result of the heated Malay racial rhetoric and "kris-waving" during UMNO's party conference in November 2006, at least that was the rationale of Chinese leaders within BN.

However, the Chinese were practical people and in the end they would endorse BN as their only realistic alternative, Wan Farid concluded.

(Comment: DPM Najib's political secretary Fatmi Salleh (protect) expressed similar concerns over BN's loss of Chinese voters during an April 16 meeting with polchief. Fatmi's comments followed the previous by-election in Machap, which witnessed a BN win, but also a significant decrease in BN votes in several Chinese sub-districts. End Comment.)

PM Advised to Curtail Foreign Travel, Focus on Pre-Campaign

5. (C) Wan Farid said that he and other advisors had asked PM Abdullah to curtail his overseas travel after planned trips in June to Afghanistan, the Middle East and Russia. Instead, beginning in July the Prime Minister should begin touring all Malaysian states in preparation for the national election (the date for which has yet to be set).

The Prime Minister still might travel abroad for "must do" events, such as the UN General Assembly. Otherwise, Abdullah should spend his time within Malaysia. In response to our question, Wan Farid said international affairs would play little or no role with voters come election day.

Although advisors wanted the PM to begin pre-campaign activities in July, they also were weighing the "feel good" factor among voters. This would depend somewhat on money from government contracts under the Ninth Malaysia Plan reaching medium-scale businesses, a consideration that would support holding elections in a year's time, Wan Farid noted.

Najib Retains Abdullah's Confidence

6. (S) Wan Farid said Prime Minister Abdullah had concluded his deputy Najib Tun Razak was not involved in the 2006 murder of a Mongolian woman, Altantuya Shaariibuu (ref B).

(Comment: In late 2006, Wan Farid reportedly carried out an inquiry at Abdullah's behest that supported this conclusion, ref A.)

Najib's former advisor Razak Baginda and two police officers from Najib's security detail will stand trial in June for the murder of the Mongolian national. Wan Farid said Razak Baginda initially had asked for Najib's intervention.

Najib might have agreed, Wan Farid said, if this had been "only a case of corruption," but Najib did not wish to get involved in a murder cover-up. As a result of Abdullah's continued support, Najib's government and party positions were not in jeopardy.

7. (C) Wan Farid was certain that government prosecutors would limit their trial activities to the murder itself and the three defendants; prosecutors would not follow up on allegations of related corruption or other suspects. Wan Farid admitted, however, that there remains concern that the defense counsel would bring up extraneous information that could embarrass Najib or the government: "You can't predict or control what the defense will say in open court."

Future Foreign Minister?

8. (C) Wan Farid stated that Foreign Ministry Parliamentary Secretary Ahmad Shabery Cheek was UMNO's choice to succeed Syed Hamid Albar as Foreign Minister at some point in the future. Ahmad Shabery Cheek "is being groomed for the role," Wan Farid claimed, while noting Shabery's qualities as an effective UMNO politician.

(Comment: We do not have other indications that the relatively young Shabery, who is not known as an UMNO heavyweight, will be the next Foreign Minister. End Comment.)

Comment

9. (C) Wan Farid speaks as an insider and loyalist to PM Abdullah. Although he argued that Anwar Ibrahim posed no real political challenge, Wan Farid nevertheless focused much of our discussion and his criticism on the former Deputy Prime Minister and far less on the leading opposition party PAS.

10. (C) Guessing the timing of the next national election remains a popular pastime for Malaysian elites and Kuala Lumpur's diplomats. Despite reference to the time needed for public funds to trickle down, Wan Farid left us with a clear impression he expected the elections to take place this year.

Election Commission officials quietly have begun training public school administrators on managing polling stations, one sign that the election might take place in the near term.

An unsubstantiated rumor among school officials pegs the election in the August/September 2007 timeframe. Malaysia has never held a national election during the Muslim fasting month, which this year falls mid-September to mid-October.

If Abdullah is looking to capitalize on a "feel good" factor, scheduling elections in proximity to the 50th Independence Day celebrations on August 31 might provide an opportunity.

LAFLEUR (MAY 2007)

WIKILEAKS: ABDULLAH MEETS WITH HAMAS, FAILS TO INFORM ABBAS

Posted: 13 Sep 2011 01:00 AM PDT

According to local contacts, President Abbas and the Palestinian Authority were unaware of Khalid's visit until after the delegation had arrived in Kuala Lumpur. Palestinian Ambassador to Malaysia, Abdel Aziz Abou Gouche, reportedly only learned of the visit because he had a staff member on the same flight.

THE CORRIDORS OF POWER

Raja Petra Kamarudin

1. (U) Summary: Malaysian Prime Minister Abdullah received a senior Hamas delegation on March 3, apparently without President Abbas' prior knowledge. Abdullah used the occasion to call for lifting of international sanctions and to reiterate that Malaysian support for the Palestinian government would continue. This is not the first time Malaysia has fallen afoul of the Fatah-Hamas divide. End Summary.

2. (U) Khalid Meshaal, leader of the political bureau of the Palestinian party Hamas, and a group of four other Hamas party delegates arrived in Kuala Lumpur on Saturday, March 3, for unannounced meetings with Prime Minister Abdullah Badawi and Foreign Minister Syed Hamid Albar. A press statement from the Malaysian Foreign Ministry announced that the parties discussed the current situation in Palestine, the recent meeting of Palestinians in Mecca and the formation of a unity government. The statement noted that PM Abdullah called for international support for the unity government and the lifting of sanctions on the Palestinian National Authority, while reiterating that Malaysia "would continue to provide whatever assistance, within its means, to the Palestinian unity government."

3. (U) In a separate statement to the press from his office in the southern state of Johor, FM Hamid Albar opined that the Palestinian unity government would most likely be fully established "in a week's time." Hamid stated that Khalid's visit was intended to convey to Malaysia the latest developments in the efforts to form a unity government.

4. (C) According to local contacts, President Abbas and the Palestinian Authority were unaware of Khalid's visit until after the delegation had arrived in Kuala Lumpur. Palestinian Ambassador to Malaysia, Abdel Aziz Abou Gouche, reportedly only learned of the visit because he had a staff member on the same flight. Foreign diplomats noted Gouche was not invited to attend the meeting and protested to the Malaysian Foreign Ministry concerning the visit. Apparently no one from the Palestinian Liberation Organization / Fatah was invited to participate in the meetings with the Malaysian PM and FM, and the Malaysian Foreign Ministry claimed it did not know that President Abbas was unaware of the meeting. Our sources indicate the Hamas visit was arranged during Abdullah's visit to Syria on February 25-27.

5. (C) Comment: Malaysia made a similar faux pas in May 2006 when delegates from both Hamas and Fatah were invited to represent Palestine at the Non-Aligned Movement conference held in Kuala Lumpur (reftel). Both factions claimed to represent the foreign policy objectives of the Palestinian state, and both parties left in anger. Months later, Foreign Ministry officials still spoke bitterly about the ordeal, particularly the disruptive antics of the Hamas delegate. We will seek opportunities to learn more about the Hamas visit to Malaysia.

LAFLEUR (MAY 2007)

WIKILEAKS: PROMINENT HUMAN RIGHTS LAWYER FACES DEATH THREAT

Posted: 12 Sep 2011 01:00 AM PDT

Zainur Zakaria, former Bar Council President and current President of Lawyers in Defense of Islam (a new NGO created in July 2006), asked the approximately 10,000 audience members, "Are we willing to allow non-Muslims and those who are not well versed in Islam to interpret our religion for us?" The audience members replied "Never!" Clearly audible at that point is at least one audience member who shouted "Kill them!"

THE CORRIDORS OF POWER

Raja Petra Kamarudin

Summary

1. (C) Prominent Muslim lawyer and human rights activist Malik Imtiaz has become the target of a death threat printed on a leaflet and distributed via email beginning in mid-August.

On August 24 Imtiaz privately told us he believes the death threat was orchestrated by several newly established Muslim NGOs that intend to silence him due to his leading role in the Lina Joy apostasy case (ref A) and his participation as a panel member at recent public fora meant to defend constitutional protection of non-Muslims' religious freedom.

Both Muslim and non-Muslim leaders have condemned the death threat against Imtiaz, even as opposition MPs lament the lack of a response by Malaysia's ruling coalition. The Prime Minister's policy of stopping public discussion of controversial religious freedom issues will not resolve matters. End Summary.

Religious Tensions Culminate in Death Threat

2. (SBU) The death threat against Imtiaz came to light after the Muslim Youth Movement (ABIM) exposed the threatening leaflet to the press on August 19. The President of ABIM, Muhammad Yusri, denounced the Malaysian language leaflet, saying, "Differing views on Islam must be resolved through Islamic morals and ethics and not by force." The leaflet contains the words "Wanted: Dead" in large typeface above a photograph of Imtiaz.

Beneath the photo and Imtiaz' full name, the leaflet text reads: "This is the face of the traitor lawyer against Islam who is supporting the apostasy case of Lina Joy. Spread this to our brothers so that they recognize this traitor. If he is found dead on the roadside, let him be. Do not help!"

3. (SBU) As a prominent human rights lawyer, President of the Human Rights Society of Malaysia (HAKAM), and protem Secretary of the Malaysian Civil Liberties Society, Imtiaz has long been at the forefront of defending human rights and religious freedom in Malaysia.

Most recently, he represented the Bar Council during Federal Court arguments in the Lina Joy apostasy case. Imtiaz supports Joy's efforts to legally apostatize from the Muslim faith. The Federal Court is expected to rule at any time in that case.

The case will likely determine the degree to which Shari'a courts have authority over apostasy applications (they have virtually always declined such applications), setting a clear precedent for future cases and symbolically hitting at the core constitutional issue of the definition of ethnic Malays as Muslims.

Imtiaz also served as a panel member at recent public forums organized by "Article 11," a group of 13 local NGOs that support enforcement of constitutional protections that guarantee religious freedom for non-Muslims.

4. (C) Imtiaz told us that he believes several newly established Muslim activist groups orchestrated the death threat, but he did not provide us with specific information to support his statements. He told us that he takes the threat seriously, but remained "undeterred" in his efforts related to religious freedom.

Mosques Used to "Defend Islam" Against Apostasy

5. (C) While Imtiaz has faced the opprobrium of many Muslims for his outspoken stances on religious freedom issues, recent criticism by some Muslim leaders has become much more pointed and personal.

We recently viewed video footage taken on July 23 at the Federal Territories Mosque in Kuala Lumpur. The video contains strong criticism of Imtiaz by several Muslim speakers who attacked Imtiaz' ethnicity (he is a child of Pakistani immigrants to Malaysia) and accused him and other Article 11 leaders of being ignorant on Islamic issues.

Later at the event, well-known lawyer Kamar Ainah concluded her speech by saying, "I'm concerned about the current government. We cannot depend on them. We need to continue our struggle ourselves to protect and defend our religion." Imtiaz told us other mosques were also used during July and August to spread similar messages intended to motivate audience members to "defend Islam."

6. (C) At these mosque-based events in Kuala Lumpur, organizers handed out two pamphlets to tens of thousands of Muslim faithful that urged them to support their faith.

One pamphlet, entitled "Islam Humiliated; Muslims Challenged," claimed that the Bar Council supported apostasy among Muslims. It described Koranic and Hadith traditions that claim those who renounce Islam must be executed, and it urged all of Malaysia's Muslims to sign a petition in defense of Islamic values and principles.

As of August 22, according to PEMBELA (translated as "Defenders;" another recently created Muslim NGO), the pamphlet distributors had collected 500,050 signatures on the petition. The second pamphlet, entitled "Efforts to Bring Down the Dignity of Islam and Threaten the Identity of the (Malay) Race," focused on the potential impact of the Lina Joy case and called on all Muslims "to defend the honor of Islam."

Silence from the Governing Coalition

7. (C) While the death threat against Imtiaz was immediately criticized by many Muslim and non-Muslim leaders, we are not aware of senior public GOM condemnation of the threat and we do not know if the GOM has taken action behind the scenes. During debate in parliament, opposition leader Lim Kit Siang expressed his "grave disappointment" at the ruling National Front's silence on the issue. He described the situation as "most ominous for Malaysia."

Ivy Josiah, President of the Women's Action Organization and an organizer of Article 11 fora, in commenting on the GOM's silence concerning the death threat, described GOM officials as "cowards," and asked, "How can they remain silent on something like this?"

8. (C) Comment: The death threat against Imtiaz followed a series of emotional clashes in recent months that pitted self-described "defenders of Islam" against "defenders of the constitution." The two groups represent significant portions of Malaysia's population that have found little common ground on religious issues.

The PM's recent calls to stop public discussion of these issues may temporarily dampen tensions, but a policy of stifling debate will not make such fundamental differences go away.

With local observers pointing to widening gaps between the views of Malaysia's Muslim and non-Muslim populations, the Malaysian Government will need to exhibit stronger leadership in order to safeguard religious freedom and tolerance, and to reject clearly any calls for religiously-motivated violence such as the threats against Imtiaz.

SHEAR (August 2006)

The Federation of Malaya Independence Act 1957

Posted: 11 Sep 2011 04:59 PM PDT

Any such agreement as aforesaid may make provision for the termination of Her Majesty's sovereignty and jurisdiction in respect of the said Settlements, and of all other Her power and jurisdiction in and in respect of the Malay States or the Federation as a whole, and the revocation or modification of all or any of the provisions of the Federation of Malaya Agreement, 1948, and of any other agreements in force between Her Majesty and the Rulers of the Malay States.

THE CORRIDORS OF POWER

Raja Petra Kamarudin

WIKILEAKS: GOVERNMENT-LINKED COMPANIES: UNRAVELING THE TANGLED WEB

Posted: 11 Sep 2011 01:00 AM PDT

High tariffs and bureaucratic impediments to importing a car -- including limits on the number of approvals and required signatures from three separate government ministries -- clearly were designed to benefit the government-owned automobile manufacturer Proton. On the other hand, Khazanah, the largest GLIC, recently bought back from Singapore a controlling share in Pantai, the company granted sole authority to issue Malaysian medical clearances for foreign workers.

THE CORRIDORS OF POWER

Raja Petra Kamarudin

1. (SBU) Summary: The Malaysian government's ability to control market access through its holdings in government-linked companies (GLCs) is an important consideration in our ongoing FTA negotiations.

Unraveling the tangled web of government holdings is difficult. Much information is publicly available, but tracing through the linkages between government and commercial entities requires close familiarity with the local market and major players. Even then the results can be controversial, as demonstrated by a recent report that leaked from a local think tank.

One of our objectives in the FTA negotiations is for the Malaysian government to compile an annual report on GLCs -- as was done in the U.S.-Singapore FTA. Even knowledgeable Malaysian officials will find this a daunting task, but they could be persuaded that it fits with the government's program for improved GLC performance. End summary.

Big Players, Thin Skins

2. (U) According to a Malaysian Government website, Government- Linked Companies (GLCs) -- commercial companies in which the GoM has a direct controlling stake) employ 5 per cent of the national workforce, account for approximately 36 per cent of the market capitalization of the Bursa Malaysia (the local stock exchange), and comprise 54 per cent of the benchmark Kuala Lumpur Composite Index.

The Government of Malaysia manages its holdings in the GLCs through seven investment holding companies, or Government-Linked Investment Corporations (GLICs). The GLICs have differing mandates with varying roles and degrees of responsibility with regard to executing Government policies and initiatives, particularly regarding industrial policy and development initiatives.

While a number of Malaysia's GLCs have been loss makers for decades, some efforts are being made to improve their accountability and profitability (see reftel).

3. (U) The role of the GLCs in the Malaysian economy is a sensitive matter, as they are inextricably linked with the government's effort to advance the economic standing of Bumiputeras (ethnic Malays).

Recently, a respected local think tank produced a report for the government that, i.a., included recommendations on the management of GLCs and their use as agents of the government's socioeconomic policy. The report asserted that through the GLCs, Bumiputeras already hold sufficient corporate shares to have surpassed the government's headline goal of owning 30% of Malaysia's wealth (government statistics say Bumis only own 18.9%). This claim caused such a stir that the president of the think tank publicly repudiated the study. The chief researcher resigned in protest.

(Comment: We will report on this controversial study in more detail in a separate message.)

One Hand Washes the Other

4. (U) Sometimes the government exerts itself to protect the GLCs, and sometimes it's the GLCs that serve the government.

One Khazanah employee commented to Econoff that the driving reason for the re-acquisition was not good business but rather, "national pride." There was an understanding that Khazanah would have a majority stake but decision-making would remain in the hands of the company.

Through a Glass Darkly

5. (U) The level of publicly available information about Malaysia's seven GLICs varies considerably. Khazanah, the largest GLIC (owned by the Ministry of Finance), publishes its holdings in a flow chart posted on its website, www.khazanah.com.my.

Permodalan Nasional Berhad (PNB), a GLIC established specifically to promote the economic advancement of ethnic Malays (Bumiputeras), publishes financial data in its annual report available on its website, www.pnb.com.my.

Some of the other GLICs have websites, but offer differing amounts of information on their holdings and strategies. In addition, these figures continually change as fund managers buy and sell on an ongoing basis.

6. (U) Information on the ownership of publicly-traded GLCs can be found in their annual reports. The Malaysian Securities Commission enforces requirements regarding publication of financial data on publicly-traded firms. Most listed companies disclose their top 30 shareholders, listing the percentage ownership of each.

Summing up the percentages of shares held by the various GLICs among the top 30 is the first step to determining the share of government control. However, it also is important to note which GLICs are major shareholders, as the different GLICs are charged with different objectives) some more politically driven than others.

For example, the Employee Provident Fund (EPF) is charged with investing the retirement savings of Malaysian workers) a responsibility not as politically charged as Permodalan Nasional Berhad's (PNB) mandate to advance the economic interests of ethnic Malays. However, almost all the GLICs have at some point made sales or purchases of corporate shares in support of government objectives.

You Can't Know the Players without a Score Card

7. (U) When tallying up GLIC holdings familiarity with the local players, including the multiple layers of subsidiaries of the GLCs, is essential. For example, Cement Industries of Malaysia (CIMA) lists only two GLICs in its top 30 shareholders with a combined holding of about 13%. However, CIMA's top non-GLIC shareholder is UEM World, in which Khazanah holds a controlling interest.

UEM World holds nearly 54% of CIMA. At first glance, the government share appears to be 13 per cent, but tracing the linkages among GLIC subsidiaries it becomes clear that CIMA is effectively government controlled.

8. (U) Some other companies provide this information more clearly. For example, Pharmaniaga Berhad, a pharmaceuticals manufacturer, includes in its annual report a list of indirect holdings following its list of direct holdings. The list of the company's top thirty shareholders does not indicate a majority government stake, but the indirect holdings present quite a different picture: non-GLIC shareholder Trinity Saga is held by UEM World, which is controlled by Khazanah.

Add up all the pieces and in fact the government has a controlling interest in Pharmaniaga. Without being familiar with the multiple layers of ownership, Trinity Saga's GLIC connections would be easy to miss.

9. (U) Another example is Malaysian Airline System Berhad (MAS), which lists Penerbangan Malaysia Berhad with a 69.34 per cent holding. The government created this company solely to purchase MAS planes and lease them back to the airline. It is wholly owned by Khazanah. Another 11 per cent of MAS is held by the Employees Provident Fund (EPF). The third-largest shareholder is Amanah Raya Nominees. This is a government-managed trust fund for ethnic Malays.

10. (U) Publicly listed companies include the names of their Boards of Directors in their annual reports, often including bios and photos as well. Sometimes the annual report lists Board Members as Independent or Non-Independent as well as Executive or Non-Executive. Again, knowing the local players is essential to determining who has real decision making authority.

Islamic Banks behind the Veil

11. (U) Fundamental concepts underlying Islamic finance preclude Islamic banks from publishing lists of their shareholders. All depositors are considered shareholders and banks are reluctant to make available to the public a list of top depositors, complete with the size of their accounts. Khazanah's website reports that Khazanah owns 30% of Bank Muamalat, a local Islamic Bank, but Bank Muamalat's annual report does not list its shareholders.

Non-Traded Companies Face Some Disclosure

12. (U) Non-listed companies are not regulated by the Securities Commission, but by the Commission of Companies in Malaysia (CCM). Regulations require non-listed companies to send annual financial statements to the CCM, which will release the information for a nominal fee (currently less than USD 3.00). Most of the larger companies submit financial data regularly; however, enforcement for some smaller companies has been inconsistent. A proposed merger of the SC and the CCM could lead to tighter scrutiny.

Two Golden Shares

13. (U) The government retains a Golden Share in two companies, MAS and Telecom Malaysia, dating from the time when these companies were 100 per cent government-owned. The Golden Share effectively gives the Government veto power on Board decisions. Other corporations offer regular shares with one vote per share. We are not aware of any companies besides these two with special voting rights.

Untangling the Web

14. (SBU) Comment: In view of the role GLCs play in Malaysia's economy and the government's use of GLCs as policy agents, increasing the transparency of GLIC and GLC activities is an important goal in our FTA negotiations. But compiling the sort of annual report that Singapore is obliged to produce by our FTA with that country will be a major challenge for Malaysian officials. Not only are the relationships between government and commercial entities more complex in Malaysia than they are in Singapore; the political sensitivities are far, far higher.

Malaysian officials will find reporting on GLCs a daunting task, but could be persuaded that this would support the government's agenda for improved GLC performance (reftel). End comment.

SHEAR (October 2006)

So you want to teach us history, is it?

Posted: 09 Sep 2011 09:05 PM PDT

Gerakan is offering Mat Sabu a scholarship so that he can go and learn history. Actually, they need not do that. Even I can teach history, real history. To start off, let's read the Colonial Office report dated 1st July 1948 about what really happened in Malaysia, which eventually led to the declaration of The Malayan Emergency. Read this report to the British Cabinet properly and you will know the truth. It all started as a class struggle between the haves and the haves-not, just like all over the world at that time during the post-WWII era.

THE CORRIDORS OF POWER

Raja Petra Kamarudin

Gerakan 'offers' scholarship to Mat Sabu to study history

(Bernama) - Gerakan says it is ready to offer a scholarship to PAS deputy president Mohamad Sabu to study history at a local university since "he seems to still lack knowledge of the country's past."

Gerakan president Dr Koh Tsu Koon said today that Mohamad Sabu could be regarded as a "history illiterate" after his statement that Communist Party of Malaya member Mat Indera was the real hero in the Bukit Kepong tragedy in Johor in 1950 where policemen and their families were killed.

"It is obvious that he is history illiterate. Hence we are ready to offer him a scholarship for him to learn historical facts at a local university from historians such as Prof Dr Khoo Khay Kim," he told reporters at the Gerakan Aidilfitri open house at the party HQ in Cheras.

Koh said the PAS leader, better known as Mat Sabu, should heed history and not "label" things as he liked

ABU: ‘anything but Umno’ or ‘asal bukan Umno’

Posted: 08 Sep 2011 08:35 PM PDT

Since the house in Seremban is not registered in the AG's name, this means the house does not belong to him and what Malaysia Today reported is therefore false. And this would also mean that the investigation is now complete and no further action needs to be taken against Gani Patail.

THE CORRIDORS OF POWER

Raja Petra Kamarudin

Pressure on MACC chief to clarify Ho Hup 'visit'

(Malaysiakini) - Malaysian Anti-Corruption Commission chief commissioner Abu Kassim Mohamed should issue a statement on the graft busting body's "visit" to Ho Hup's Bukit Jalial headquarters two days ago.

Social Care Foundation chairperson Robert Phang said the MACC's quiet role would help allay fears that it will not be intimidated when acting or investigating allegations of corruption of a person while acting without fear or favour.

"MACC's Abu Kassim should issue a statement with his pledge that the MACC would not be intimidated or influenced by any person stature and that action would be taken to investigate regardless that the subject or suspect may be a 'big fish' and not just some 'ikan bilis'.

"If only Dato Seri Abu Kassim would make that announcement, that would allay all public cynicism and skepticism. That would assure the public not to worry because MACC is vigilant and alert to allegations that are already circulating in the public domain," he said in a statement.

Phang added that this is the only way that the MACC can regain the rakyat's trust and confidence.

It was reported yesterday that Ho Hup officials admitted the MACC had visited them on Wednesday, contrary to an earlier report which appeared in political blog Malaysia Today, terming it a raid.

The report also carried a denial from Ho Hup officials that documents were taken in the half-hour visit. Allegations in the public domain from Malaysia Today since last month had linked attorney-general Abdul Gani Patail with the construction giant.

This follows claims that Ho Hup had paid for the renovations of Gani's house in Seremban in return for a favour done to one of its former directors. Gani had vehemently denied owning any property there.

Leave of absence advice

Phang in the statement also said it would be commendable for the government and the MACC be transparent in this matter.

"It would be more commendable for all parties if the investigation can be transparent. Already talk is rife that the visit and seizure of Ho Hup's documents are to achieve some other ulterior objective namely to destroy evidence of any misconduct by the AG. That perception is unfortunate," he said.

Thus, one way in which Gani, the MACC and the government can show transparency in this mater is to ask Gani to go on leave of absence until the investigations are over, he added. "

"This would sweep away all the dust of suspicion that otherwise would linger on in this matter."

The social activist had resigned as MACC advisory board member when claims surfaced in blogs that he was involved in corrupt practices. To protect the anti-graft body's integrity, Phang quit the committee.

He was eventually cleared by the MACC of the allegations which had surfaced earlier this year.

"I ask AG Gani Patail to be selfless in this and do what I had done when an unfounded allegation was made against me earlier this year. Then, Gani Patail would earn my respect as a true patriot."

Phang also clarified his earlier statement titled 'AG Gani Patail: MACC must show independence and not impotence' which may have upset certain MACC quarters.

He said it was not to demean the MACC but to challenge, motivate, provoke and fire-up the anti-corruption entity and its officers so they would be vigilant in the fight to stem corruption.

"After all, I still regard myself as part of the MACC support group," he said.

***************************************

That was what Malaysiakini reported. What was not reported, however, was that the MACC officers who raided Ho Hup's office told the Ho Hup staff that Malaysia Today's report about AG Gani Patail owning a house in Seremban is not true. According to the MACC, the house is not registered in Gani Patail's name. So this means the house does not belong to him.

Since the house in Seremban is not registered in the AG's name, this means the house does not belong to him and what Malaysia Today reported is therefore false. And this would also mean that the investigation is now complete and no further action needs to be taken against Gani Patail.

The fact that the MACC has already come to a conclusion means we can expect what the result is going to be. It is going to be No Further Action or NFA. And the AG is, again, going to get off scot free like the investigation on his pilgrimage to Mekah.

A few of Ho Hup's staff have been summoned to the MACC office for their statement to be recorded. But since they have already been told that the allegation against the AG is a lie, they will have to make sure that their statement dovetails with the conclusion already made by the MACC. It would be foolish for them to make a statement opposite to this and contradictory to what the MACC told them -- that the allegation is not true.

In the meantime, to make sure that no one deviates from the story which the MACC has already decided is the 'true story', Dato TC Low is being made to face a criminal charge. Further to that, his sister, Low Lai Yong, is facing 11 charges for various technical offences under the Companies Act and Securities Commission Act. Each charge is subject to a bail of RM 1 million!

That should frighten everyone and which will ensure that everyone toes the line and says what the MACC wants them to say.

And, as a final nail in the coffin, the Social Care Foundation chairperson, Robert Phang, is also being investigated to determine whether he is working in concert with Malaysia Today. That, of course, is meant to frighten Robert Phang in the hope that he will back off or else suffer the allegation of being Raja Petra Kamarudin's 'team member'.

Now do you know why we need changes? Now do you know why we need to kick out Umno and Barisan Nasional come the next election?

Honestly, I do not know whether Pakatan Rakyat can be a better government. But for sure they can't be worse than what we are seeing thus far.

We may need to forget about whether Pakatan Rakyat can be better than Umno or Barisan Nasional. We may need to just embark on ABU (anything but Umno or asal bukan Umno). That may be our only hope for change.

WIKILEAKS: MALAYSIAN GOVERNMENT PROCUREMENT IN THE FTA

Posted: 08 Sep 2011 01:00 AM PDT

In one instance, Prime Minister Abdullah's sister-in-law arranged a $400 million contract to purchase military cargo aircraft from Airbus. The Prime Minister announced the purchase following his return from a visit to France. There had been no indication that the Malaysian military were in the market for a new cargo aircraft prior to this announcement. The U.S. executive asserted that PM Abdullah's brother told him this deal was "done for political or other reasons, such as commission."

THE CORRIDORS OF POWER

Raja Petra Kamarudin

C O N F I D E N T I A L KUALA LUMPUR 001034

SIPDIS

STATE PASS USTR FOR B. WEISEL AND J. JENSEN

COMMERCE FOR 4430/MAC/EAP/BAKER

TREASURY FOR OASIA

E.O. 12958: DECL: 06/05/2016

TAGS: ETRD, EFIN, EINV, MY

SUBJECT: MALAYSIAN GOVERNMENT PROCUREMENT IN THE FTA

REF: A. KUALA LUMPUR 0930

B. KUALA LUMPUR 0797

Classified By: Charge' David B. Shear for reasons 1.5 (A & B).

1. (C) Summary: Government procurement plays a large role in the Malaysian economy -- valued at an estimated 20% of GDP. The Government of Malaysia has formal procurement rules and officials explain that they are designed to serve a variety of goals, including economic development and the improvement of ethnic Malay economic status.

American firms operating in Malaysia complain that implementation of the rules lacks transparency; they suggest that corruption is a significant problem, particularly for larger contracts; and they find "bumiputera" set asides for ethnic Malays restrictive, if not prohibitive. U.S. firms would like to see more discipline in the process so that procurement goes to tender through a definable, systematic and fair system. They also would like greater market access, perhaps through a phase out of bumiputera preferences over an agreed timeframe. Finally, they want a mechanism that would allow them to submit questions and complaints about tender awards and have them answered in a timely fashion.

2. (C) Phasing out bumiputera preferences may not be feasible, but even achieving transparent, rules based procurement would make a big difference to U.S. firms. Linking our goals to international "best practices" may make them more acceptable to Malaysian officials. We also can point to Prime Minister Abdullah's public statements about the importance of improving public service delivery and defeating corruption as support for our position. End Summary.

GOM Procurement - The Theory

3. (U) Government of Malaysia (GOM) procurement policies are consistent with the "bumiputera policy" that aims to advance the economic interests of ethnic Malays (REF A). The government frankly acknowledges that it uses tenders and contracts to advance the development of a Malay business community. Malaysian bidders are extended a preference that varies with the contract size, and bumiputera firms enjoy an additional preference factor.

For example, the Ministry of Defense's general guidelines state that all tenders under RM 100,000 ($27,778) will be reserved for bumiputera companies.

International tenders will be offered only if the goods and services are not available locally. Each ministry prepares the contract specifications and tender documents and advertises for bids.

For international tenders, bidders have at least 56 days to submit bids and must furnish a tender deposit (195 days for defense tenders). Bids are evaluated on technical and financial grounds. The agency's tender board or the Ministry of Finance awards the contract. The American Malaysian Chamber of Commerce (AMCHAM) estimates that government tenders accounted for about 20% of Malaysia's GDP in 2004.

4. (U) A ministry may directly purchase from known suppliers when procuring goods, services or works under RM 50,000 ($13,889). For purchases of RM 50,000 ($13,889) to RM 200,000 ($55,556), a ministry must solicit quotations from at least five suppliers or contractors, each of whom must be registered with the government. Companies must register with the Government Procurement Management Division at the Ministry of Finance and there is now a system of e-registration.

Procurement of goods, services and works above the value of RM 200,000 ($55,556) must be considered and awarded by Tender Boards established at each federal ministry. However, goods and services tenders over RM 30 million ($8.3 million) and works tenders over RM 50 million ($13.9 million) must be referred to the Ministry of Finance.

Its Government Procurement Management Division procures common-use items (e.g. office equipment and supplies, furniture and vehicles) via Federal Central Contracts usually made through open local tenders. Federal and state agencies are required to purchase from these contracts.

Government-linked companies (GLCs) are not bound legally by the Government's procurement procedures. In practice, some GLCs allow foreign companies to bid directly, others allow for no foreign competition, and still others seem to require companies to follow the basic Ministry of Finance guidelines.

5. (U) GOM rules state that all tenders must be advertised in at least one local newspaper in the Malay language. International tenders must be advertised in one Malay and one English newspaper. Some procurement opportunities can also be accessed through Malaysia's myGovernmet website (www.gov.my/MYGOV/BI/MISC/GovernmentTender) or the respective ministries' homepages.

There also are a number of private or quasi-private companies that offer websites purporting to list all government tenders. Not all of the ministries advertise their tenders online, nor do all of them do so in English. In any case, many of the tender announcements require the prospective bidder to buy tender documents from the ministry in person, which would only be possible after showing an original Ministry of Finance registration document.

6. (U) Malaysia has not signed on to the WTO Government Procurement Agreement (GPA), and has not entered negotiations or sought observer status. It has declined to include government procurement in its bilateral FTA agreements to date. Malaysia's lack of participation in GPA has a negative impact on U.S. companies in Malaysia because they are not allowed to participate in U.S. government procurement. One example is Dell Computers, which maintains a special assembly line in the U.S. for USG sales, since cannot source from its factory in Malaysia.

GOM Procurement - In Practice

7. (SBU) In actual practice, many Malaysian government tenders do not follow the government's procurement rules. In fact, even obtaining a copy of the Ministry of Finance circular detailing the rules can be a challenge.

(Note: USTR requested a copy of Finance's procurement regulations at the first TIFA discussions with no success. Econoff recently reiterated this request with the same results. End Note.)

Malaysia's procurement process falls short in three key areas: lack of transparency, outright corruption, and bumiputera requirements and preferences.

Lack of Transparency

8. (SBU) Members of the American-Malaysian Chamber of Commerce (AMCHAM) would like much greater transparency in how contracts are awarded, and have recommended a model similar to what exists in Singapore (i.e., the Ministry of Finance posts all tenders online, indicates which companies were chosen for the tenders, and the criteria which determined their selection). While many U.S. firms chafe at Malaysia's policy of granting most government tenders to bumiputera firms, they acknowledge this practice is similar to some USG procurement, with certain projects earmarked for bids from qualified small and minority-owned businesses, or with those firms receiving additional "points" in the decision process. AMCHAM's general stance on the issue of bumiputera preferences is that it would like to see them reduced, and eventually removed, over time so this sector will be more open to competition.

9. (SBU) However, simply increasing transparency would benefit AMCHAM members. If Malaysia were to clearly indicate which projects are earmarked for qualified bidders from particular groups, foreign bidders could plan accordingly. However, GOM agencies frequently award contracts without having gone through the established bidding process. There also are instances of government agencies being directed to purchase products through designated local or bumiputera firms.

Frequent Favouritism

10. (C) In some cases, a prime contractor is selected without a formally announced tender. For example, the Chinese language daily Nanyang Siang Pau recently reported that a project from the Ninth Malaysia Plan (9MP) to develop the South Johor economic region (a contract worth RM 10.2 billion or $2.8 billion) has been directed to UEM World Berhad, apparently without tender. UEM is owned by Khazanah, the GOM's development arm, and is the largest land owner in the south Johor region. There are widespread rumors that projects from the Ninth Malaysia Plan (9MP) (REF B) are being handed out with no formal tendering process.

11. (C) A representative of a U.S. aerospace company complained about the basic unfairness of a system that does not follow a transparent procedure. All too often, tenders never actually get to the bidding stage; an award is simply announced. While his firm has had success in Malaysia, he observed he cannot plan when and where he should spend his resources to compete. There is simply no way to know what is coming and when, especially in the military arena.

Malaysia's Ministry of Defense has a published reference book with basic policies and procedures, explaining registration requirements, but does not always follow these procedures. In any case, while his company may deal with different ministries on different tenders, he explained that: "Finance controls it (procurement). Regardless of the rules, they are in control."

12. (C) The government programs manager of a U.S. ICT firm complained about a similar lack of transparency in the decision-making process. His firm once made the short-list for a tender with Malaysia Telecom (a government linked company), but lost to another company that did not even bid. While the winning company may have been qualified, Malaysia Telecom never explained its decision or why it had selected a contractor who had not expressed enough interest to participate in the tender process.

A Caveat on Transparency

13. (C) The U.S. aerospace executive observed, however, that sometimes U.S. firms have been able to work the system to their advantage. He cautioned that one potential unintended consequence of the FTA negotiations might be an unraveling of various waivers and special arrangements obtained by U.S. companies currently operating in Malaysia. Over time, the GOM has offered different incentives to different companies to attract their investments. Should the FTA negotiations instill more discipline into the system, some of these preferences could be affected. He also stressed that if old laws stay on the books, the GOM always has the option of simply reinstating them. He noted that the capital controls Malaysia enacted during the 1997 Asian financial crisis were not new, but rather a case of the GOM enforcing laws that it had relaxed.

Corruption

14. (C) Corruption is a significant problem, particularly for larger contracts. The U.S. aerospace firm has done fairly well on the commercial side of its business, but has not won a major defense contract in Malaysia in over a decade. The U.S. executive described a variety of defense deals made over this period through shadowy agreements with no tendering process.

The executive described similar scenarios for procurement of T91 Polish tanks and SU-30 Russian Aircraft, alleging that the sellers, as well as Malaysian politicians, agents, civil servants and military personnel all received a 30% "commission." Once, someone purporting to work for Deputy Prime Minister Najib approached him about a deal suggesting, "you will get a part of it." He declined this offer.

15. (C) The ICT company manager agreed that "there is corruption. Transparency is just a nice word for it." He described how his firm must work through partners who file the tender, saying that he does not always know what is going on with the tendering process. "After all, the Chairman could go to jail if he knows too much," he stated. Malaysian political parties, including the ruling United Malay National Organization (UMNO), rely on "money politics" for much of their operating funds. Projects or tenders often are awarded as political patronage, with a cut of the funds circulating back to the party through different channels.

16. (C) Malaysian firms also are targets of corruption. The ICT firm executive related the experience of a cousin, whose firm had bid on a government tender. A ministry tender board informed her that she had won, but instructed her to double the amount of her bid. Concerned about the suggested corruption, she withdrew her bid. Our contact plans to discuss this case with another cousin at the Anti-Corruption Agency, but has no confidence that action wQl be taken.

Bumiputera Requirements and Preferences

17. (C) The U.S. aerospace firm has not found the system of bumiputera procurement to be an impediment and simply works through a Malay middleman. The firm prefers to maintain 100% ownership of its local branch, rather than developing a local partnership that would permit it to bid directly. The U.S. executive would, however, like to see the FTA confirm a commitment to open tendering throughout the GOM and its related GLCs. He is concerned, for example, that Permodalan Nasional Berhad (or PNB, a Malaysian government investment trust), in its capacity as purchasing agent for Malaysian Airlines, will make decisions behind closed doors that could lock his firm out of the commercial aircraft market.

18. (C) The government accounts for 30% of the U.S. ICT firm's business in Malaysia. Our contact at the firm believes agencies lack the freedom to select the best contractor due to the bumiputera preferences. Our contact also admitted that his business plan requires partners in some areas and he would not bid on all contracts as a prime. But in areas such as services (consulting, designing, and maintenance and support, etc), he would like the customer to be able to approach his firm, or for his firm to be able to bid directly on government tenders, so it can bring its best practices to the table. Also, our contact suggested that local companies often are poor project managers. His firm must take on management of many contracts even though it is not the prime. Lamenting his firm's inability to bid directly, he said: "By not being flexible and open to foreign competition, it adds to costs. The prime contractor adds their mark up. Are they giving the best service? Are they giving any service? Sometimes yes and sometimes no."

19. (C) A senior manager at another U.S. ICT firm suggested the "rules are restrictive but not prohibitive." He explained that his company does about 30% of its business in Malaysia with the government through various middleman companies or as a subcontractor on larger tenders. He would also bid directly for some projects if the rules allowed. But he cautioned that many U.S. firms would still not want to bid on everything due to the heavy GOM regulations regarding bonding. He said that while he is often comfortable with taking on specific risk as a subcontractor on a portion of a large tender, neither he nor his parent company would necessarily want to take on the bond for the whole tender. Without a significant change in the bonding rules and the requirements for contract completion, this executive would still choose carefully in responding to tenders.

20. (SBU) In its FTA submission, AMCHAM reported on a number of other cases that describe the impact of the bumiputera preferences and the lack of transparency in the system. The most egregious and recent of these cases was the October 2005 Ministry of Finance Directive that government agencies may only procure roadway, decorative, and outdoor lighting from three bumiputera companies. Any ministry that does not comply will be penalized and the unauthorized contractors could be blacklisted from future GOM tenders.

21. (SBU) The Ministry of Finance took eight months to respond to AMCHAM's request for a meeting to discuss this case. In a May 2006 meeting, Finance Secretary General Sri Izzuddin bin Dali explained the Ministry had reviewed these companies and confirmed their qualifications. He submitted that there would be a new circular posted on ministry's website that more clearly explained the matter and that the number of approved companies would be increased, most likely to six. He did not respond to questions about tendering procedures and why foreign companies were not allowed to bid.

He clearly stated that only companies which are majority bumiputera-owned would be qualified to bid.

Government Procurement in the FTA

22. (C) The Malaysian government's high sensitivity concerning government procurement is suggested by the repeated efforts of GOM officials to try to remove this subject from the FTA agenda, despite clear statements from USG officials that it must be on the table. The topic also has come under scrutiny in parliament and has been a target of public concern in the press. No other issue has received such intense local attention. Nevertheless, there are tactics with the potential to make this issue more amenable to negotiation.

23. (C) Those goals involving transparency, responsiveness and simply getting the GOM to follow its own rules should be easier to tackle, although some Malaysian officials bristle at the suggestion that their system is not transparent. Even though Malaysia is not a party to the GPA, couching our objectives in terms of "international best practices" may make them more acceptable. We also can point to Prime Minister Abdullah's public statements about the importance of improving public service delivery and defeating corruption. Such linkages could be the "sugar" that helps Malaysian negotiators accept the "medicine" of procurement reform.

24. (C) As noted REF A, the bumiputera preferences will be the most difficult element of these negotiations. Eliminating them, even with a phase out period, would be an unrealistic objective. A more feasible approach might be to seek a "de minimis" level below which bumiputera preferences would be allowed to remain, but above which contracts would be open to international competition. Even this may be more than the Malaysian government could concede, but merely instilling discipline, transparency and responsiveness in the current system would make a big difference to U.S. firms.

SHEAR

Kredit: www.malaysia-today.net

Sabtu, 17 September 2011

Malaysia Today - Your Source of Independent News

Malaysia Today - Your Source of Independent News

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