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• WIKILEAKS: MALAYSIAN RACIAL ECONOMIC PREFERENCES CRITIQUED AT CONFERENCE IN KL
• WIKILEAKS: MALAYSIA'S CENTRAL BANK: LET'S MAKE A DEAL! REGULATION BY NEGOTIATION
• WIKIELAKS: 2007 UMNO GENERAL ASSEMBLY FIZZLES, BUT KHAIRY STANDS OUT
• WIKILEAKS: VIDEO OF JUDGE FIXING ROCKS MALAYSIA'S JUDICIARY
• WIKILEAKS: IRAN BLOCKED, AGAIN, FROM MALAYSIA ARMS SHOW
• WIKILEAKS: PENAN TRIBAL LEADER'S DEATH RAISES SUSPICIONS
• The point we are making
• SUBJECT: UMNO YOUTH OFFICIAL ON HEATED PARTY CONTESTS AND MONEY POLITICS
• WIKILEAKS: Iran outdoes U.S. in FDI; Foreign Bank to Open in KL. Malaysia Economic Update July 2007
• WIKILEAKS: KHAIRY AND UMNO YOUTH FOCUS ON FTA, PALESTINE IN JULY 18 LUNCH WITH AMBASSADOR

WIKILEAKS: MALAYSIAN RACIAL ECONOMIC PREFERENCES CRITIQUED AT CONFERENCE IN KL Posted: 10 Oct 2011 01:00 AM PDT In response to Lim's presentation, a number of members of the audience spoke out angrily, including a member of the Government's Economic Planning Unit (EPU) who resorted to a personal attack on Lim rather than on the points he raised. Another critic in the audience, Ms. Aminah binti Pit Abdul Rahman who had been a government employee for 23 years, became visibly agitated and reminded the audience that ethnic Malays comprised 60 percent of the population; therefore, she argued (or rather shouted) that the government targets should be raised from 30 percent to 60 or 70 percent. THE CORRIDORS OF POWER Raja Petra Kamarudin 1. (SBU) Summary:  Malaysia's race-based economic preferences were roundly criticized at the annual National Economic Outlook Conference hosted by the Malaysian Institute of Economic Research (MIER). In the keynote address, the Crown Prince of the State of Perak called for national unity and pragmatic economic policies designed to improve the country's competitiveness, essentially a polite rejection of race-based policies. Stronger attacks on Malaysia's racial preferences were made by a former World Bank economist and an Australian academic who argued that incentives in Malaysia's economy were becoming increasingly distorted, leading to a loss of competitiveness.  While no one expects the government of Malaysia to undertake policy change in this sensitive area in the near term, it is notable that a government-funded think tank provided the forum for this much needed debate.  End Summary. CROWN PRINCE OF STATE OF PERAK CALLS FOR CHANGE 2.  (U) In his keynote address the Crown Prince of the State of Perak called for "pragmatism and fairness," a subtle attack on the government's current policies in terms of both its economic agenda and its divisive racial preferences.  On the economic front, he described Malaysia as "squeezed between the low-cost economies of China and Vietnam and the high-technology economies of Japan and South Korea," and called for "the most competitive, innovative and flexible responses." 3. (U) He cited the oft-repeated mantra that Malaysia needs to move "up the technological ladder"; however, a far greater part of his address focused on social and human capital, which he said were essential to development.  He said Malaysia must foster networks among its different ethnic, religious, and territorial groups.  He called for "increasing opportunities for bonding and bridging in residential neighborhoods, classrooms and the workplace, all with the understanding that more cultural mix is better." 4. (U) Alluding to the ongoing brain drain, the Crown Prince asked, "Can entrepreneurs, scientists, and technologists be nurtured without an enabling political, social, economic and cultural environment?  Can they flourish in the presence of perverse incentives and disincentives? ...There are countries today whose citizens are highly educated and whose scientists and engineers are at the leading edge in their fields but who want nothing more than to leave their countries.  Countries must change in line with the aspirations of their citizens or they risk losing their best and brightest." MEASURING WEALTH BY RACE 5.  (SBU) Lim Teck Ghee, a leading economic analyst and former World Bank staffer, calmly explained his earlier study on distribution of wealth among Malaysia's racial groups (reftels) which concluded that the wealth of ethnic Malays had already exceeded the government's targets.  His conclusion effectively challenged the stated basis of the government's racial preference policies. Lim also briefly reviewed several other studies that had reached similar conclusions. Two studies from the late 1980s suggested that that the lower classes bore the highest social costs of the racial preference policies, while a small group among the upper classes enjoyed the benefits.  Two other studies, one from 1989 and another from 2002, concluded that the government's wealth targets for ethnic Malays had been reached or exceeded, as did Lim's own 2006 study. 6. (U) Lim reviewed some of the findings and recommendations of his earlier study on the impact of Malaysia's racial policies on the economy and society. First, he pointed out that the government holds more than a third of publicly traded corporate equity, but that government-controlled companies reflected little entrepreneurial or manufacturing capacity.  He recommended that government-owned entities be managed by competent professionals with expertise in the business of the company under their charge.  Senior management positions should not be determined on the basis of race. 7. (U) Second, he pointed out that the current practice of distributing 30 percent of initial public offerings (IPOs) to individual ethnic Malays generally benefited only an elite few who often divested the shares immediately for huge profits.  Lim recommended that Malay IPO allocations not go to individuals unless a mechanism could be introduced to ensure that the beneficiaries played a prominent role in the management of these companies.  One option would be to make such allocations to existing trust agencies for Malays and to community-based trust agencies for Malaysian Indians and residents of Malaysian Borneo.  [Note:  among these two groups are some of Malaysia's poorest people.  End note.] 8. (U) Third, Lim said GOM regulations and policies were stymieing entrepreneurial development and hindering domestic and foreign investment.  Ethnic preferences undermined entrepreneurial endeavors and the creation of a competitive economic environment.  The GOM could better achieve its goals through capacity building efforts such as education and skills training rather than through forced equity restructuring. ECONOMIC FREEDOM: FROM 9TH TO 60TH PLACE 9. (U) More Malaysian feathers were ruffled when Wolfgang Kasper, Emeritus Professor of Economics, University of New South Wales, Australia, displayed graphs demonstrating a direct correlation between economic freedom and prosperity and cited the Cato Institute's "Economic Freedom of the World" 2007 Annual Report which ranked Malaysia as 9th most free country in 1990 but as 60th in 2005.  Kasper described Malaysia as having reached that halfway point in its development and outlined the elements of the rest of the journey: secure property rights, free markets, and a small, rule-bound, non-corrupt government.  He summed up his analysis of Malaysia as follows:  "The politicization of economic life leads to stagnation and social convulsion, a prospect that only the unrealistic and naive can face with self-satisfied complacency.  It seems to me that it would be much more naive and unrealistic to tolerate the cancer of crony capitalism and heavy reliance on pervasive, top-down bureaucratic controls and big government.... It is the big political challenge of the present generation of decision makers to abandon short-sighted, selfish rent-seeking in order to ensure that the vision of the developed-country shore ahead can be attained." RESPONSES FROM THE AUDIENCE 10. (U) In response to Lim's presentation, a number of members of the audience spoke out angrily, including a member of the Government's Economic Planning Unit (EPU) who resorted to a personal attack on Lim rather than on the points he raised.  Another critic in the audience, Ms. Aminah binti Pit Abdul Rahman who had been a government employee for 23 years, became visibly agitated and reminded the audience that ethnic Malays comprised 60 percent of the population; therefore, she argued (or rather shouted) that the government targets should be raised from 30 percent to 60 or 70 percent.  Some respondents in the audience were upset about Kasper's comments, with one indignantly noting that Malaysia should be praised for progress achieved. 11. (SBU) Comment: In the run-up to national elections, due by April 2009 but expected before April 2008, there has been increased attention paid to the GOM's economic and social policies in general and its 37-year old race-based economic preference policies in particular. There is widespread concern among non-Malays that these policies are marginalizing them and therefore breaking down Malaysia's social cohesion.  Many of the country's best and brightest non-Malay youth are migrating, perceiving little long-term hope of being treated as anything but second-class citizens in Malaysia. Many ethnic Malays, on the other hand, maintain a more defensive posture, apparently convinced of the rhetoric that they are more deserving of special protections because of their past disadvantage.  Their outbursts at the conference in response to criticism of the status quo [except, of course, that of the Crown Prince of Perak] were more emotional than pragmatic. Despite a handful of such outbursts, the overwhelming majority of the audience remained silent.  At lunch a Malay who had been government employee for many years expressed gratitude for Kasper's presentation on economic freedom, telling econoff, "We need foreigners to say these things."  While little change can be expected in the near term, the biggest news is that these kinds of issues can be discussed at all in a conference hosted by a government-funded think tank.  The conference would appear to be another example where Prime Minister Badawi's government is ready to allow more open debate as a first step toward possible revisions in policy at a future date when it becomes politically feasible to do so. KEITH (December 2007)

WIKILEAKS: MALAYSIA'S CENTRAL BANK: LET'S MAKE A DEAL! REGULATION BY NEGOTIATION Posted: 09 Oct 2011 01:00 AM PDT Similarly, BoAM has not been able to take advantage of its global internet bank because the server for that was located in Hong Kong. According to one BoAM representative, BNM said connecting to a server outside of Malaysia -- whether for internet banking or credit risk management -- was "outsourcing." When the bank argued that connecting to the box would not result in any Malaysians losing their jobs, BNM countered that, in the event of a financial crisis, foreign banks were likely to "flee the country" unless they had sufficient "brick and mortar" invested here. BoAM responded that, in the event of a disaster, there was no back-up system for its Malaysian customers without a connection to an outside server as is done elsewhere in the region. THE CORRIDORS OF POWER Raja Petra Kamarudin Classified By: ECON COUNSELOR MATT J. MATTHEWS, FOR REASONS 1.4 (b) and (d) 1.  (C) Summary:  A number of U.S. financial services firms operating in Malaysia have described various informal practices undertaken by staff at Bank Negara Malaysia, the Central Bank, designed to encourage US firms to shift investment and jobs to Malaysia in return for regulatory approvals.  In some cases the staff's demands to support Malaysian government policies are quite direct, while in other more subtle cases, the central bank's regulatory and licensing approvals conveniently and predictably follow investment decisions made by U.S. firms that contribute toward the government's development initiatives.  U.S. firms attribute these actions by Bank Negara to an effort to earn bragging rights for its support of the GOM's development plans.  Unfortunately, the use of regulatory oversight authority by Bank Negara staff to prod U.S. firms to expand investment and jobs in Malaysia raises serious questions about the central bank's role as a neutral regulator safeguarding financial stability. U.S. firm in Malaysia believe concluding an FTA that includes obligations to liberalize the financial services sector will be the most effective way to address this issue.  End Summary. GETTING CONNECTED REQUIRES "REINVESTING" IN MALAYSIA 2.  (C) In one case reported to Economic Counselor and Treasury's Financial Attache for Southeast Asia, Bank of America Malaysia (BoAM), a wholly-owned subsidiary of Bank of America (BoA), has been unable to expand its business up to now largely because the central bank, Bank Negara Malaysia (BNM) would not permit the subsidiary to connect to the parent company's Electronic Credit File (ECF), the bank's centralized credit-decision making and risk management tool. Across the globe, BoA approves credit decisions and maintains all its credit files electronically on a single system.  In Malaysia, however, BoAM has been forced to make loan applications on paper and send them via fax, maintaining originals in a bulletproof safe. 3.  (C) In April, after several years of negotiation, BoAM finally secured approval from BNM to connect to its global server by promising to "compensate" for using off-shore credit analysis and risk management tools by "reinvesting" in Malaysia.  BNM had cited data secrecy provisions in disallowing the connection, but this prudential issue was not part of the negotiation.  Instead, BoAM reported that the key part of the negotiation revolved around the question of what the bank would "bring back into Malaysia" if it were allowed to "take this out." 4.  (C) Similarly, BoAM has not been able to take advantage of its global internet bank because the server for that was located in Hong Kong. According to one BoAM representative, BNM said connecting to a server outside of Malaysia -- whether for internet banking or credit risk management -- was "outsourcing."  When the bank argued that connecting to the box would not result in any Malaysians losing their jobs, BNM countered that, in the event of a financial crisis, foreign banks were likely to "flee the country" unless they had sufficient "brick and mortar" invested here.  BoAM responded that, in the event of a disaster, there was no back-up system for its Malaysian customers without a connection to an outside server as is done elsewhere in the region. 5.  (C) BNM came back to the "brick and mortar" question, pointing out that HSBC had invested $28 million in back-office operations in Cyberjaya, making a significant contribution toward the government's goals of becoming a regional hub for back-office operations and building up the government-initiated cyber-city.  BoAM responded that their operations in Malaysia were much smaller than those of HSBC and that $28 million represented roughly half their total business in the country; therefore they could not possibly commit to such an investment.  BoAM asked what was required to "reinvest" in Malaysia, but BNM told them, "We do not have a framework for that."  So it became clear, according to the bank representative, that BoAM was expected to bring something to the table.  Finally, BoAM offered to build a $1.5 million Global Disaster Recovery Center for its internet banking system and hire two Malaysians to operate the system. BNM then agreed to allow them to connect to the server in the U.S. DIRECTED LENDING FOR HOUSING AND SMALL BUSINESSES 6.  (C)  Directed lending also has been a problem.  BNM set an individually-determined housing loan quota for all banks. BNM instructed BoAM to finance 50 low-income housing units (at less than RM60,000 each).  BoAM pointed out several difficulties they would have in meeting this quota.  First, BoAM did not do private mortgage lending in Malaysia, only corporate lending, and as such would have difficulty in assessing credit risk in this consumer market.  Second, very little housing was available at that price in Kuala Lumpur and BoAM had no presence outside the capital city, due to BNM restrictions on foreign conventional banks.  Homebuyers from outside the city were unlikely to travel to KL to apply for a mortgage loan, the bank pointed out. 7.  (C) BNM relented, imposing instead a RM 20 million quota in loans to small and medium-sized enterprises (SMEs).  BoAM had been able to meet only about RM 5 million of that quota, so every year it paid a fine.  Bank headquarters, however, became increasingly concerned about its reputation risk for not complying with BNM's quota, and sent BoAM back to the negotiating table with BNM.  Finally, BNM removed the official quota but established a "target" whereby BoAM was expected to make RM 5.6 million in loans to SMEs, 50% of which must be to SMEs owned by ethnic Malays. GE COURTS BANK NEGARA 8.  (C) Separately, Stuart Dean, General Electric President for Southeast Asia, described a similar approach to getting approval from BNM.  GE has not been able to enter the Malaysian market because BNM will issue licenses only to banking institutions and GE Money is a finance company. According to Dean, Malaysia has the largest consumer finance market among the five countries in Southeast Asia in which it operates, which also include Thailand, Indonesia, Singapore, and the Philippines.  If they could enter the consumer finance market, he argued, GE could double its business in Malaysia. 9.  (C) Dean described his company's relationship with BNM as "excellent" and said he was optimistic that GE would get the approval they needed.  In working with the Malaysian government, it was necessary to show them how Malaysia would benefit from any proposal, he explained.  GE recently decided to move 100 of its "backroom" positions to Cyberjaya to serve its clients in Singapore, Hong Kong, and the Philippines. This supports three key goals of the GOM:  back-office operations, regional operations, and a boost to the cyber-city.  GE also provides scholarships -- another high priority for the GOM which recognizes that the country's acute shortage of skilled labor is one of the major barriers to its development.  Last week, press reports announced that GE planned to invest in yet another high-priority government initiative, the "Iskandar Development Region" bordering Singapore, in partnership with the government-linked company UEM World. AMERICAN INTERNATIONAL ASSURANCE GROUP 10.  (C) Brad Bennett, CEO of American International Assurance Group (AIG) said he was confident that the company would get the approvals it needed because it was contributing to the country's explicit development goals.  While the GOM does not state outright that it will award approvals to companies that invest in the government's targeted sectors and initiatives, the company makes the investments and then "trusts" that the regulators will come through.  A year ago, Bank Negara was very helpful in working out a solution for AIG's requirements to incorporate locally and meet foreign equity thresholds, and is assisting the company in navigating the approvals required from various ministries for a data/call center to service the region.  Bank Negara specifically requested AIG not to publicize its plans to invest in the data/call center.  Bennett believes this is to allow Central Bank Governor Zeti to take credit for bringing in this high priority investment.  "It will be a political feather in her cap," he told Econoff.  AIG's next priority is to get a license for Islamic insurance, as the company perceives that its market share will decline as customers switch from conventional insurance to a Sharia-compliant product. 11.  (C) Comment:  Malaysia has a complex regulatory system whereby approvals are awarded on a case-by-case basis after what often are lengthy negotiations.  U.S. companies operating here have spent years investing time and money in the negotiating process and in developing good relationships with Malaysian regulators.   U.S. firms do not wish their various ongoing negotiations with Bank Negara to become the subject of government-to-government discussions that could undermine the deals these companies are working so hard to complete.  However, these financial sector companies do hope that the successful conclusion of an FTA with Malaysia will create a more transparent and liberalized operating environment which will eliminate the need for such interactions with Bank Negara in the future.   Finally, the aggressive effort by Bank Negara to use what should be prudential or regulatory tools for the benefit of unrelated government policies should raise some questions about how it will implement any "prudential carve outs" in the FTA. Clearly some of the policies imposed by BNM on the banks actually undermined their global risk management capabilities.  End Comment. KEITH (OCTOBER 2007)

WIKIELAKS: 2007 UMNO GENERAL ASSEMBLY FIZZLES, BUT KHAIRY STANDS OUT Posted: 08 Oct 2011 01:05 AM PDT UMNO Vice President and controversial Chief Minister of Malacca Mohd Ali Rustam, just weeks after telling the press that UMNO did not need the votes of the ruling coalition's Chinese or Indian constituents, pledged that "in the coming election, BN (Barisan Nasional) will win in Kelantan." Mohd Ali claimed the Islamic Party of Malaysia (PAS) only won control of the Kelantan State Assembly in 2004 because UMNO members in Kelantan had failed to register to vote. THE CORRIDORS OF POWER Raja Petra Kamarudin Classified By: Political Section Chief Mark D. Clark for reasons 1.4 (b, d). 1.  (C) Summary:  The United Malays National Organization (UMNO) held its 58th Annual General Assembly in Kuala Lumpur from November 5 - 9 and despite the usual fanfare proved to be little more than a pep rally for the upcoming general election.  Although party elections remain a year away, changes were bothrumored and evident in UMNO's Youth, Women's, and Young Women's organizations.  Son-in-law to the Prime Minister and Deputy Youth leader Khairy Jamaluddin appeared to be the heir apparent for the Youth chief post and rumors continued to float that Youth and Sports Minister Azalina Othman Said would challenge International Trade Minister Rafidah Aziz for the top Women's post next year. Considerably toned down from last year's convention, delegates abandoned attacks against other ethnic groups as the party focused on issues of unity, solidarity and electoral preparedness.  Khairy Jamaluddin was the charismatic star of the assembly and seemed to set the agenda for his father-in-law, party president and Prime Minister Abdullah Badawi.  Khairy and Abdullah spoke on a number of similar issues, including the necessity of ending fuel subsidies and of the need for the police to deter illegal street demonstrations.  Abdullah threatened the opposition not to challenge his authority and resolve, but found himself and the whole assembly upstaged by a mass street protest on November 10 (ref A).  Recent mass demonstrations seem to have undermined UMNO's election optimism, and Abdullah finds himself in a particularly difficult position of having to repeat his performance of the 2004 general elections when his coalition parties won 90 percent of the seats in Parliament. End Summary. Focusing on the general election 2. (SBU) UMNO's 58th Annual General Assembly, which ran November 5 - 9, was little more than a pep rally for the upcoming general election, and one whose impact lasted less than 24 hours as public attention shifted to the successful opposition-led Bersih rally on November 10 (ref A) and the ensuing street demonstrations that dominated November and December.  Gone were the television cameras which showed to Malaysia's minorities the hate speeches of the 2006 assembly and the political maneuvering of the Abdullah - Mahathir rivalry.  Instead, UMNO politicians from the grassroots to the Supreme Council pledged solidarity, tolerance, and above all else, electoral success.  Leaders warned members to steer clear of divisiveness ahead of the general elections, focused on interracial themes, and promised that party elections and internal politics could wait until after the general elections were held.  Throughout the week UMNO owned and controlled newspapers ran headlines with themes of "SOLIDARITY" and "WE'RE READY". Auxiliaries look toward succession 3. (SBU) As is the annual fare for all UMNO General Assemblies, the Youth, Women's and Young Women's assemblies occupied the first two days of the conference.  Despite pledges to delay maneuverings for party leadership positions until after the general elections, rumors continued to circulate that Youth and Sports Minister Azalina Othman Said would challenge International Trade Minister Rafidah Aziz for the top Women's post next year.  Young Women's leader Noraini Ahmad has already surpassed the maximum age for membership in UMNO's Puteri organization, and her speeches clearly indicated this was her farewell year as Young Women's (Puteri) chief.  Youth Chief and Education Minister Hishamuddin Hussein was also on his farewell tour, evidenced by nearly every Youth speech thanking him for his leadership and honoring him as the inspiration of UMNO Youth.  At one point early in the Youth assembly, a video was played with accolades for Hishamuddin's leadership and concluded with a clip of Deputy Youth chief Khairy Jamaluddin raising the national flag during the recent Independence Day celebration. Hishamuddin then began his address by speaking of unity and continuity within UMNO Youth, symbolically placing the future of UMNO Youth into the care of his deputy Khairy. Abdullah's leitmotif 4. (C) UMNO President and Prime Minister Abdullah Badawi opened the 2007 General Assembly in his typical lack-luster, uncharismatic style, but touched on his standard tranche of issues that promised to be campaign topics for the upcoming elections.  While a noticeable number of UMNO delegates read newspapers or napped, Abdullah spoke for some 80 minutes on Islam, government linked companies (GLCs), public services, growth corridors, human capital and education.  Noticeable sound-bites for upcoming Barisan Nasional campaigns were scattered throughout his speech, and Abdullah made frequent reference to harmony among Malaysia's various communities and national development projects that would address the needs of all Malaysians. Nevertheless, the Malay agenda remained an underlying message and attracted the most audience interest. Abdullah ensured that threats to Malay supremacy would not be tolerated: "Other communities must appreciate the sensitivities of Malays," Abdullah said. "Basic matters relating to the sanctity of religion, beliefs and practices, Malay interests and the social contract between the communities are sacred to us and should not be raised. Similarly, the basic issues that were agreed upon at the time the Federal Constitution was drafted are non-negotiable." 5. (SBU) As he has done every year since 2004, Abdullah gave particular attention to Islam and reiterated his concept of Islam Hadhari or "Civilizational Islam".  Of note, Abdullah stated: "UMNO is committed to strengthening Islam and will not apologize for doing it.  Islam promotes moderation. . . We give the assurance that UMNO will not endorse a narrow interpretation of Islam.  UMNO opposes the culture of violence...Islam must be identified as a religion that dispenses justice, prohibits inequity and rejects violence." Abdullah spent considerable time touting Malaysia's efforts and successes in the Islamic finance sector and in the halal food sector.  He promised that Malaysia would continue its efforts aimed at becoming "a premier global Islamic center." "We're ready, Pak Lah. Call the elections" 6. (C) Over the proceeding two days, dozens of delegates addressed the assembly with their usual calls for limiting the number of foreign workers in Malaysia, demanding expanded use of the Malay language in public schools, and encouraging development in the Malay heartland.  However, notwithstanding the usual ethno-centric appeals to the UMNO base, the topic of the coming general elections always returned.  UMNO Vice President and controversial Chief Minister of Malacca Mohd Ali Rustam, just weeks after telling the press that UMNO did not need the votes of the ruling coalition's Chinese or Indian constituents, pledged that "in the coming election, BN (Barisan Nasional) will win in Kelantan."  Mohd Ali claimed the Islamic Party of Malaysia (PAS) only won control of the Kelantan State Assembly in 2004 because UMNO members in Kelantan had failed to register to vote.  "I hope after this assembly, the delegates can prepare a list of members who have yet to register as voters and register them so that they can vote in the coming elections."  Indeed, delegates throughout the convention waited with baited breath for the Prime Minister to call the elections, but such an announcement was not forthcoming.  As one Puteri delegate said in her closing speech, "We're ready, Pak Lah.  Call the elections.  We just can't stand it anymore." UMNO is not racist, says Khairy 7. (SBU) Even the first son-in-law, Khairy Jamaluddin, spoke of the upcoming elections and warned BN's component parties to be happy with their share of the pie.  "No one should accuse UMNO of being a racist party or label the Malay agenda as being a racist agenda," he said. "If we look at the allocations of electoral seats, the truth is UMNO could have contested more seats than what it has now, but this was not the case, as we are willing to give way for our BN partners to be better represented.  If we are racists, we would not give away Malay majority seats," Khairy argued.  With echoes of the 2006 assembly, Khairy warned that if any minority group wanted to raise issues of political equality among the races, then UMNO Youth would reciprocate by asking for equal economic clout. Khairy sets Abdullah's agenda 8. (C) Khairy's speeches, emotionally eloquent and charismatically superior to almost all the other delegates, were not limited to defending the Malay agenda.  He also set the tone for many of the topics that would later be covered in his father-in-law's final address to the assembly.  Two of the principal topics which Khairy introduced for Abdullah were, firstly, the need to end gasoline subsidies, and secondly, a demand for a police crackdown on the November 10 Bersih rally (ref A). 9. (C) Venturing away from his typical racial and political pandering, Khairy ventured into new waters by addressing issues of the nation's economic longevity, and tied future budgetary concerns to the government's RM40 billion in yearly subsidies for gasoline, natural gas, and agricultural produce.  Khairy recognized the political suicide in ending subsidies outright, but argued that RM40 billion each year in the government coffers could "build at least two cities just like Putrajaya, nine bridges like the Penang bridge, or about 500,000 low-cost houses."  Khairy argued that the government should implement a tiered subsidy system; continue subsidies for the poor but not the rich: "Why should we be giving subsidies to well-to-do people? This is not fair."  With oil prices hovering at USD100 per barrel, Khairy argued, the current subsidies could not continue, or it would eventually bankrupt the country.  Just "don't do it drastically" he asked. "Give us notice so that we can brace ourselves and not make it too burdensome on the people." 10. (C) In his final speech on November 8, Khairy also lambasted the opposition for calling on 100,000 people to take to the streets to demand "a clean election" (ref A). Khairy boasted that UMNO could certainly match their numbers in the streets, but such an act would only cause a riot. Instead, he called on "the police to arrest the organizers of the illegal rally."  Nevertheless, despite his charismatic delivery, Khairy utterly missed the irony of his words when he issued the challenge: "To these people, I call on them to stop going to the streets and behaving like monkeys, and instead go to the polls if they want to challenge us," for only five weeks prior Khairy was leading street demonstrations in front of the Burmese embassy to protest the junta's violent crackdown on pro-democracy protesters (ref B). Abdullah agrees subsidies cannot continue 11. (SBU) In his closing remarks to the 58th General Assembly, Abdullah Badawi returned to his Wagnerian leitmotif and preached of economic prosperity, religious tolerance and the need to "grow human capital".  Highlighting the economics section of his speech, however, were talks of ending subsidies.  Abdullah agreed that fuel subsidies could no longer be sustained with the steep rise in global oil prices. He proposed a two-tier structure to ensure the impending price increase was affordable to those in the lower income groups. "For those who can pay, we set the price a little higher," said the UMNO president, but he did not indicate when the price increases would take effect.  "We will restructure and subsidize at suitable rates and this will be the approach we will take in the future," Abdullah said, admitting that the RM40 billion-a-year subsidy for fuel was too much for the government to bear.  "If the subsidy is reduced, we will have a lot of money to develop our country," he said, echoing Khairy's words from the day before. Abdullah: I will not be challenged! 12. (C) As calls from the Coalition for Clean and Fair Elections (Bersih) resonated through the alternative media, NGO, and opposition network for a November 10 march on the national palace (ref A), Abdullah again was compelled to echo the words of son-in-law Khairy and called on the police to arrest the leaders of the "illegal demonstration."  "They challenge our laws and our public order.  They challenge the people because the people want safety, security and lasting stability.  That's what they challenge, not me.  But I say, I will not be challenged," declared Abdullah.  "What changes do you want?  Wait until the elections, then we will see together who will win.  Or are you afraid of the elections, " Abdullah mocked.  On the morning of the Bersih demonstration, Malaysia's newspapers headlined his warning: "I will not be challenged!"  And yet, as the morning rose on November 10, and tens of thousands assembled in Kuala Lumpur from around the country to participate in the Bersih rally, UMNO's week-long annual general assembly was upstaged and lost all public resonance. Comment 13. (C) So similar were the key points of the PM's speech with Khairy's that some observers half-heartedly joked that Khairy must have written Abdullah Badawi's closing remarks. It seems improbable that there was no correlation of the two men's speeches, but it was Khairy and not Abdullah that had the most to gain from this year's assembly.  Khairy's foray into the technical and economic realms of UMNO politics marked a strong departure from his previous role defending issues such as Hishamuddin's love affair with the Malay dagger (keris) and championing calls for Palestinian independence.  The 2007 UMNO assembly marked a new era for the heir apparent, and his path to the UMNO Youth chair currently appears unchallenged and unimpeded. 14. (C) UMNO's principal objective in this year's assembly was to saddle the horses and prepare the foot soldiers for battle in the upcoming general elections.  UMNO also intended the general assembly's messages to reassure its BN partners, particularly MCA and its Chinese voters, in sharp contrast to last year's divisive racial rhetoric that went out unfiltered to the Malaysian public.  The ensuing street demonstrations of November and December, however, sapped away any momentum from this year's UMNO gathering.  The government's counter-attack through its harsh law enforcement approach following the November 25 ethnic Indian protest appears to be an attempt to retake the initiative.  Nevertheless, the recent mass demonstrations seem to have undermined UMNO's election optimism, and Abdullah finds himself in a particularly difficult position of having to repeat his performance of the 2004 general elections when his coalition parties won 90 percent of the seats in Parliament. KEITH (December 2007)

WIKILEAKS: VIDEO OF JUDGE FIXING ROCKS MALAYSIA'S JUDICIARY Posted: 07 Oct 2011 01:00 AM PDT The reference to Wee Choo Keong seems to confirm that Lingam was talking to Chief Justice Fairuz as it was Fairuz who in 1995 as an election court judge upheld an election petition contesting DAP candidate Wee's victory as a Member of Parliament in Kuala Lumpur's Bukit Bintang district. Instead of calling for fresh election, Fairuz made an unprecedented decision by dismissing Wee and naming the losing Barisan Nasional MCA candidate Dr. Lee Chong Meng the winner. THE CORRIDORS OF POWER Raja Petra Kamarudin Classified By: Political Section Chief Mark D. Clark for reasons 1.4 (b and d). Summary 1. (C) Former Deputy Prime Minister Anwar Ibrahim rocked Malaysia's legal establishment on September 19 when he held a press conference to release an eight minute videotaped conversation purportedly showing a phone conversation between a famously corrupt Malaysian attorney and the current Chief Justice of Malaysia's Federal Court engaged in a judge fixing scheme.  The Malaysian Bar Association and opposition parties called for immediate inquiries into the allegations and for the establishment of a royal judicial commission to investigate the Chief Justice.  Malaysian political leaders, including current Deputy Prime Minister Najib Razak, downplayed the revelations in the press, calling into doubt the authenticity of the taped conversation.  Government controlled and influenced newspapers printed but downplayed the release of the tape, often burying the article to the lesser-read center pages, and avoided printing the names of the judges and political leaders discussed in the tape. There is speculation that Anwar released the tape at this time in an effort to strengthen his appeal in a recently dismissed defamation suit against former Prime Minister Mahathir.  It may also be true that the tape is intended to force the retirement of Chief Justice Ahmad Fairuz whose ordinary contract expires in October 2007.  End Summary.  Anwar alleges Chief Justice involved in "judge fixing" 2. (U) Malaysia's judiciary came under the spotlight again on September 19 after former DPM and de facto Peoples Justice Party (PKR) leader Anwar Ibrahim released an eight-minute video clip showing senior Malaysian lawyer VK Lingam in a mobile phone conversation allegedly with current Chief Justice Tun Ahmad Fairuz Sheikh Abdul Halim fixing the appointment of "friendly" senior judges.  The video supposedly filmed in 2002, was posted on the online news portal Malaysiakini and on PKR's party website.  At the time the tape was allegedly recorded, Ahmad Fairuz was the Chief Judge of Malaya, in charge of all High Court judges in Peninsular Malaysia.  Among the cases "discussed" by the chief justice and the senior lawyer were Anwar's appeals and the potential appointment of Ahmad Fairuz as the Chief Justice of the Federal Court-- an event which eventually took place in 2003 when he bypassed several other senior judges in line for the position.  At the September 19 press conference, Anwar claimed the revelations proved that his previous appeals against his sodomy and abuse of power convictions were tainted and that he was denied a proper and fair trial. Explosive Conversation 3. (U) In the video clip, VK Lingam is heard telling a person alleged to be Fairuz that "key players" should be nominated for judicial appointments in order to hear cases and deliver judgments accordingly.  He exhorted Fairuz's loyalty and "sacrifices" and added that even former Chief Justice Tun Eusoff Chin had told him that Fairuz is "110% loyal."  Lingam stressed, "We want to make sure our friends are there for the sake of the (then) PM (Mahathir) and the sake of the country. Not for our own interest, we want to make sure the country comes first." 4. (U) Also implicated in the conversation were business tycoon and former PM Mahathir crony Vincent Tan and his business partner Tengku Adnan Tengku Mansor, then minister in the PM's Department, and currently the Tourism Minister. Based on Lingam's conversation, both Tan and Adnan had apparently played an instrumental role in the appointment of judges as well to secure the honorific title of 'Tan Sri' for Ahmad Fairuz.  Towards the end of the eight-minute video clip, Lingam acknowledged, "you (Fairuz) have suffered... so much you have done, for the election, Wee Choo Keong, everything. . .nobody would have done all this. . . God bless you and your family."  The reference to Wee Choo Keong seems to confirm that Lingam was talking to Chief Justice Fairuz as it was Fairuz who in 1995 as an election court judge upheld an election petition contesting DAP candidate Wee's victory as a Member of Parliament in Kuala Lumpur's Bukit Bintang district.  Instead of calling for fresh election, Fairuz made an unprecedented decision by dismissing Wee and naming the losing Barisan Nasional MCA candidate Dr. Lee Chong Meng the winner. VK Lingam "Judge Fixer Extraordinaire" 5. (SBU) VK Lingam is a senior lawyer who came into the spotlight during former Chief Justice Tun Eusoff Chin's term (1994 - 2000) in office.  Dubbed locally as the "judge fixer extraordinaire," Lingam was a sought after lawyer as he had the ears of the then Chief Justice and his clients won all their cases.  Lingam's relationship with the former Chief Justice was so close that their families were known to go on joint holidays paid for by Lingam.  There were also allegations that Lingam wrote some of the judgments for his own cases.  In one example of a defamation case involving his client Vincent Tan against journalist the late MGG Pillai, it was alleged Lingam who wrote the judgment in his firm and dispatched the "floppy disc with the judgment" to the judge's chambers.  He was also implicated in the Perwaja Steel Mill fiasco (a failed development project during Mahathir's era) where government appointed auditors investigating the failure of the project found exorbitant fees paid to Lingam's firm "for unsubstantiated services."  However, Lingam's influence within the judiciary waned during the term of Chief Justice Dzaiddin (2000 - 2003) until Fairuz was named the Chief Justice in March 2003.  Lingam represented former PM Mahathir in a defamation suit filed by Anwar Ibrahim for calling him a homosexual at a press conference in 2005.  In July 2007, Judicial Commissioner Tengku Maimon Tuan Mat dismissed the suit without hearing the merits of the case and ruled that the suit was "obviously unsustainable" and "clearly an abuse of the court process."  The former DPM has filed an appeal against the decision.  Reactions to the Expose 6. (U) Former DPM Anwar stated that the revelations proved his appeals against his sodomy and abuse of power convictions "were tainted" and that he was denied a proper and fair trial.  He added that the "scandalous" expose, "serves to collaborate our allegations of a political conspiracy of the highest level and corruption of the highest judicial office, seriously bringing into question the impartiality of judicial proceedings, including mine."  Anwar, who was sacked as Deputy Prime Minister in 1998, spent six years in jail after he was convicted of sodomy and corruption charges.  Although his sodomy conviction was later overturned, the corruption verdict was upheld.  He added that the People's Justice Party will file a special appeal with the Conference of Rulers (a constitutionally formed council of Malaysia's nine sitting monarchs and four non-royal governors), to assume their "constitutional roles" and take appropriate action.  The party has also lodged a report with the Anti-Corruption Agency (ACA) and the Bar Council. 7. (SBU) Responding to the expose, Bar Council President Ambiga Sreenevasan urged the government to establish a royal commission of inquiry to investigate the video and the judiciary.  She pointed out that rumors and allegations of such machinations have been rife and therefore, "With the emergence of this video clip, the concerns expressed by various quarters in relation to the judiciary can no longer be swept aside."  Echoing the Bar Council President's call, former UN Rapporteur on the Independence of Judges and Lawyers Param Cumaraswamy (who helped represent Anwar Ibrahim in his defamation suit against Mahathir) told poloffs that only an independent commission of inquiry and "nothing less" will be able to clear the tainted image of the judiciary. However, he acknowledged that the UMNO centric government does not have the "political will to investigate the shenanigans in the judiciary." 8. (U) Opposition leader Lim Kit Siang stated in a letter to PM Abdullah that Chief Justice Fairuz should be suspended citing constitutional provisions that allow the removal of a Federal Court judge for ethical breach.  He added that he had asked the Prime Minister to appoint an Acting Chief Justice and take "concerted efforts to restore public confidence in the independence, impartiality, professionalism, and integrity of the judiciary."  Human Rights NGOs have also called on the Chief Justice to resign and urged the government to conduct a judicial review of all politically connected cases including former DPM Anwar Ibrahim's cases, appointment of judges and the sacking of the former Chief Justice and two Supreme Court Judges in 1988. A Mooted Response from GOM and Local Media 9. (SBU) The GOM's response to the allegation has been extremely feeble.  Minister in the Prime Minister's Department Mohd Nazri Abdul Aziz, who handles the law portfolio, stated that anyone with evidence of wrongdoing involving the appointment of judges should forward it to the proper authorities to investigate.  He added he would wait for the ACA to complete its investigations before making further comments.  Similarly, Attorney General Gani Patail opined, "No criminal offense appears to have been committed in the video recording" but added that he was getting further opinion on the matter and studying other information in the video clip.  Current Deputy Prime Minister Najib Razak commented to the press that the "Government will first confirm the authenticity of the video before deciding on the next course of action." 10. (SBU) Interestingly the mainstream newspapers, all government controlled or heavily influenced, carried the story but downplayed the news by placing it far from the front page and by not naming the people mentioned in the clip.  Instead the printed press chose terms like "a prominent lawyer", a "very senior judge", "a number of prominent judges", "a prominent businessman and a politician, both of whom were close to the then Prime Minister". UMNO-owned, Malay language newspapers did not publish former DPM Anwar Ibrahim's press conference September 20 but instead carried pictures of the Chief Justice breaking fast with the King and the Prime Minister at an official function. However, in the September 21 edition although they still had pictures of the Chief Justice breaking fast with prominent UMNO politicians, the Malay papers carried a brief report on the issue, buried in the back pages of the paper.  Even "The Sun", an English language newspaper considered "more independent" than the other newspapers buried the news among other reports, seemingly because Vincent Tan, who is mentioned in Lingam's conversation with Fairuz, owns the paper.  Former High Court judge Visu Sinnadurai opined to poloffs that the poor response from the government and the press was because, "it was former DPM Anwar who released the video."  He told poloffs that the GOM will naturally maintain a distance when any issue involves the former DPM. Comment 11. (C) Malaysia's judiciary has suffered from allegations of corruption and political interference since the constitutional crisis of 1988 when the PM Mahathir fired the Chief Justice and several other judges and stripped from the constitution clauses guaranteeing the independence of the judiciary.  Anwar's allegations and video-taped evidence came as little surprise to the nation, but highlighted and reinforced long-held doubts concerning the lack of independence in Malaysia's judicial system.  The allegations of judge fixing involve several senior UMNO leaders and supporters, and it is highly doubtful the Government will find the political will to thoroughly and honestly investigate the veracity of the claims.  Set against the back-drop of Malaysia's pending elections, Anwar's release of the tape appears to have political, as well as personal, motivations.  Anwar's PKR party, and the opposition in general, have focused many of their recent campaigns on anti-corruption platforms, and this story adds another anti-corruption arrow in the opposition's campaign quiver. These accusations also give weight to Anwar's claims that he was unjustly convicted in 1998 and therefore should not be prevented from contesting a seat in parliament in the next election.  While such a contention will undoubtedly fail before the UMNO-controlled election commission, it reinforces Anwar's PR-influenced role as a victim of a corrupt system. 12. (C) Given the story's limited billing and self-censorship among the mainstream press, it is likely the story will wither on the vine.  In general, only Fairuz's contract extension lies on the chopping block.  Fairuz has reached the mandatory retirement age for judges of 66, but it is common practice for the Chief Justice to receive an intial six-month extension possibly followed by subsequent extensions up to the age of 68.  It is commonly held among Malaysia's legal professionals that Fairuz was seeking his initial extension in October when his current contract was set to expire. Whether the axe will swing remains a question. KEITH (September 2007)

WIKILEAKS: IRAN BLOCKED, AGAIN, FROM MALAYSIA ARMS SHOW Posted: 06 Oct 2011 01:00 AM PDT The Ambassador sent a message to the Prime Minister alerting him to the impending U.S. withdrawal. Within 90 minutes, Defense Ministry Secretary General Abubakar informed DATT that Malaysia had rescinded its approval for the Iranian exhibit because Iran had "broken its promise" by displaying unauthorized items. Foreign Minister Rais Yatim, acting on instruction from the Prime Minister, telephoned the Ambassador and confirmed the same decision and rationale. Rais Yatim stood by the Foreign Ministry's position that Iran's participation in DSA (exhibiting certain non-lethal gear and apparently small arms as negotiated with the Iranians) would not violate UNSCRs. THE CORRIDORS OF POWER Raja Petra Kamarudin Classified By: Political Section Chief Mark D. Clark for reasons 1.4 (b and d). Summary 1.  (C) Malaysia on April 22 blocked Iran from participating in the Defense Services Asia (DSA) military sales exhibition. This followed a week of decisions in favor of Iran and reversals, and continuous interventions by the Embassy and our UK and French counterparts.  The Malaysians reached a compromise withIran on April 19 and again on April 21, allowing Iran to display certain small arms and defensive gear (still in violation of UNSCRs).  The Ambassador called Prime Minister Abdullah on April 21 and alerted him to the situation.  On the morning of April 22, Iran violated its agreement with Malaysia by preparing a display that included rockets and artillery shells, prompting the Defense Ministry to order a halt to Iran's participation.  The Foreign Minister confirmed this decision in a call to the Ambassador, but did not concede that Iran's participation in DSA would constitute a violation of UNSCRs.  Another serious concern pertains to the import from Iran into Malaysia of various arms and arms related items, a clear violation of UNSCR 1747 regardless of the exhibition.  We believe these concerns may be usefully addressed by P3 or UN sanctions committee discussions with the Malaysian mission in New York.  Our forceful response to the DSA incident should help us as we pursue other nonproliferation concerns with Malaysia.  End Summary. Weekend Back and Forth 2.  (C) Embassy engagement, including by the Ambassador and DATT, continued through the April 19-20 weekend following the preceding four days of diplomatic interventions (reftels) aimed at convincing Malaysia to rescind its permission to allow Iranian participation in the DSA.  After several GOM decisions to stop Iran and subsequent reversals in Iran's favor, Embassy DATT received assurances from the Defense Ministry ahead of the April 20 kick-off ceremony that Iran would not be allowed to formally participate in DSA. Throughout our discussions, the Defense Ministry referred to the Foreign Ministry's support for Iran and the Foreign Ministry's interpretation of UNSCRs as allowing Iran to join the DSA military sales exhibition. Iran Regains Permission 3.  (C) On April 21, the first day of the public exhibition, we learned that the Defense Ministry had given the Iranian entities permission to open their booth.  This followed a meeting between the Iranian ambassador and Defense Ministry Secretary General Abubakar.  Defense Ministry officials and DSA representatives informed us that Iran would display small arms and non-lethal gear (a compromise discussed by Iran and Malaysia on April 19).  Contractors reconstructed the Iranian booth on the evening of April 21. Ambassador Phones Prime Minister 4.  (C) The Ambassador phoned Prime Minister Abdullah Badawi late on April 21 after a hastily scheduled meeting with Deputy Prime Minister/Defense Minister Najib Tun Razak did not materialize (Najib delegated the meeting to his Secretary General).  The Ambassador alerted the Prime Minister to the DSA situation, and explained that we may be forced to withdraw official U.S. participation out of respect for the UNSC sanctions and not as an effort to embarrass Malaysia. The Prime Minister said he was unaware of the situation and would speak with Defense Minister Najib. Rockets and Artillery Rounds - Iranians Go Too Far 5.  (C) On the morning of April 22, the Iranian exhibit appeared ready to open with a wide-ranging display that included 155mm and 125mm artillery rounds; various surface-to-surface and anti-tank rockets, and armor piercing rounds; surveillance gear, including night vision devices; protective gear for nuclear, biological, chemical threats (MOPP suit); models of naval vessels; and advertisements for aircraft parts.  (Note: We have forwarded a more detailed inventory to EAP/MTS and ISN.  End Note.)  DATT drew Defense Ministry officials' attention to this extensive display and informed them that on instruction from Washington we would withdraw official U.S. participation, including U.S. military exhibits, immediately upon the opening of the Iranian exhibit.  The Ambassador sent a message to the Prime Minister alerting him to the impending U.S. withdrawal. 6.  (C) Within 90 minutes, Defense Ministry Secretary General Abubakar informed DATT that Malaysia had rescinded its approval for the Iranian exhibit because Iran had "broken its promise" by displaying unauthorized items.  Foreign Minister Rais Yatim, acting on instruction from the Prime Minister, telephoned the Ambassador and confirmed the same decision and rationale.  Rais Yatim stood by the Foreign Ministry's position that Iran's participation in DSA (exhibiting certain non-lethal gear and apparently small arms as negotiated with the Iranians) would not violate UNSCRs. 7.  (C) UK officials informed us of their meeting later on April 22 with Secretary General Abubakar in which he said Malaysia had been "hurt and offended" that a "friendly nation" (Iran) had taken advantage of Malaysia's hospitality. Abubakar described Iran's exhibit of large ordinance as a "clear breach" of UN sanctions.  It remained unclear how and on what basis Malaysia drew the line between acceptable and unacceptable military items for DSA display. 8.  (C) U.S., UK and French missions coordinated and shared information throughout the dispute over Iranian participation at DSA.  We also kept the Australian mission informed, while the UK and France worked to include Germany. Comment 9.  (C) While aggressive diplomatic intervention by the U.S. and its allies has stopped Iran's participation the DSA arms show (at least as of this hour - DSA will continue for another two days), we recognize at least two serious concerns that should be addressed with Malaysia.  First, Malaysia does not agree with the P3 interpretation of UN sanctions against Iran, particularly paragraph 5 of UNSCR 1747, which would prohibit Iran's participation in a defense sales and marketing event and prohibit Iran's marketing of small arms and non-lethal military gear.  (Beyond Malaysia's own position, greater UNSC or P3 clarity on this issue and advance work with scheduled defense exhibitions may help to prevent similar situations from arising at the last minute; we note that Malaysia appeared unaware of the 2007 Brazil precedent prior to our demarche.) 10.  (C) Second, Iran's transfer to Malaysian territory of various arms and arms-related materiel for this exhibition appears to be a clear violation of UNSCR 1747.  This transfer, however, apparently has not met with any Malaysian government restrictions or concerns, outside of the question of what would be on public display at DSA. 11.  (C) We believe that a P3 or 1747 sanctions committee approach to Malaysia's UN mission, addressing the DSA incident and Iranian transfer of arms and arms-related materiel, represents a useful way to proceed.  Such an approach could clarify authoritative interpretations of UNSCRs, and reinforce the international community's serious concern over respect for UN sanctions on Iran.  A P3 or sanctions committee approach in New York would provide a good basis for follow-on discussions with the Foreign Ministry and GOM senior officials in Kuala Lumpur. 12.  (C) As a silver lining, the painful DSA incident has signaled clearly to the Prime Minister, the Defense Minister and the Foreign Minister that we view UN sanctions on Iran, related to Iran's non-compliance with UNSC demands regarding its nuclear program, as a very serious matter.  This should help us as we pursue other nonproliferation concerns with Malaysia. KEITH (April 2008)

WIKILEAKS: PENAN TRIBAL LEADER'S DEATH RAISES SUSPICIONS Posted: 05 Oct 2011 01:00 AM PDT An official from Borneo Resource Institute (BRIMAS), a Sarawak-based human rights NGO, told poloff villagers' suspicions were strengthened because several weeks prior to his disappearance, a senior member from the Samling company visited the village. The company representative offered money to the villagers for their cooperation with the logging company. After they refused to take the money, the representative warned villagers they faced "dire consequences". THE CORRIDORS OF POWER Raja Petra Kamarudin Classified By: Classified by:  Political Section Chief Mark D. Clark fo r reasons 1.4 (b and d). Summary 1.  (C) Penan tribal members in the East Malaysian state of Sarawak found tribal headsman and anti-logging activist Kelesau Naan dead on December 17, 2007, after he went missing for two months.  Police initially refused to open an investigation until Malaysia's Human Rights Commission (SUHAKAM) intervened.  Kelesau's death has raised Penan suspicions, as yet unsubstantiated, of possible logging industry involvement and left the indigenous ethnic group without a strong leader to protect their traditional land rights against ongoing logging efforts.  End Summary. Death of a Tribal Leader 2.    (SBU) Kelesau Naan, a Penan tribal headman in the East Malaysian state of Sarawak was found dead, on December 17, 2007, at a riverbank near his village after missing for two months.  Kelesau was active in protecting indigenous people rights to customary land for over twenty years.  He was a lead witness against the logging industry's efforts to encroach into protected lands.  Kelesau, one of the Penan headmen in the Ulu Baram district of Sarawak, often erected barricades preventing loggers from entering the Penan tribal homeland.  In 1998, several land rights activist persuaded Kelesau and other Penan elders from Baram to file a land rights suit against the state government and Samling, a prominent timber company.  The lawsuit remains pending in the Miri High Court.  Tensions between the indigenous people and logging companies escalated in recent months over logging issues in Upper Baram region. 3.  (C) Kelesau's skull and bones were found on the rocky banks of the Segita River.  He disappeared two months earlier while checking on an animal trap.  His family identified his remains based on Kelesau's traditional bead necklace, watch, and sheath of his machete, found on his body.  Villagers of Long Kerong previously searched the area without finding his body and suspected he was murdered and his remains later placed in the area to make it look like an animal killed him. An official from Borneo Resource Institute (BRIMAS), a Sarawak-based human rights NGO, told poloff villagers' suspicions were strengthened because several weeks prior to his disappearance, a senior member from the Samling company visited the village.  The company representative offered money to the villagers for their cooperation with the logging company.  After they refused to take the money, the representative warned villagers they faced "dire consequences". Police Don't Investigate; Family Asks SUHAKAM for Help 4.    (C) Kelesau's son, Nick Kelesau, lodged a police report in Marudi, two weeks after the recovery of Kelesau's skeletal remains.  The BRIMAS official told poloff that police at the district nearest to the Penan village were initially reluctant to accept the police report, which forms the basis for a police investigation.  Police tried to persuade the villagers to drop the case and consider Kelesau's death an accident.  Nick insisted and the police subsequently accepted the report.  However, neither police nor government officials investigated the case.  Instead, police classified the cause of death as "sudden death." 5.  (C) Unhappy over the initial police response, Kelesau's son lodged a report with SUHAKAM.  Nick also claimed a person representing logging companies offered him up to 25,000 Ringgit ($7,820) to retract his statement in which Nick claimed his father was murdered.  The BRIMAS official believed SUHAKAM's intervention, and calls from local NGOs to investigate Kelesau's death, caused Sarawak state police headquarters to take over the investigation from the local police district.  State Police Commissioner Mohamed Salley announced the reopening of the investigation and exhumed Kelesau's remains for analysis on February 29.  Police released the postmortem report on March 17, which stated death resulted from unspecified natural causes.  The pathologist assigned to conduct the autopsy told reporters it was difficult to ascertain the cause of death because the skeletal remains were incomplete. Comment 6.    (C) At this point, we do not have any further information to suggest foul-play in Kelesau's death, but the circumstances of the case and the local police's initial poor response naturally raise suspicions among the Penan.  The logging industry is politically very well connected in Sarawak.  During the 1990s, two other Penan villagers, both anti-logging activists, similarly disappeared after threats by logging company representatives.  Kelesau's death may well take the wind out of the sails of the Penan's effort to protect their traditional lands.  It remains unclear if other Penan tribal elders or Kelesau's son will take up the mantle. KEITH (April 2008)

The point we are making Posted: 04 Oct 2011 05:45 PM PDT One bone of contention with the opposition in Malaysia is the absence of a Shadow Cabinet or Shadow government. Since Malaysia's system is modelled after the British Westminster system, let us do a comparison between Malaysia and the UK to see where we have fallen short, in particular with regards to the Shadow Cabinet. THE CORRIDORS OF POWER Raja Petra Kamarudin Malaysia has a population of 27 million. There are 222 parliamentary constituencies in Malaysia. Malaysia has 31 Ministers and 40 Deputy Ministers. (See the full list of Malaysian Ministers here: http://www.pmo.gov.my/?menu=cabinet&page=1797)   The UK has a population of 72 million. There are 650 parliamentary constituencies in the UK. The UK has 24 Ministers. (See the full list of British Ministers here: http://www.direct.gov.uk/en/prod_dg/groups/dg_digitalassets/@dg/documents/digitalasset/dg_187701.htm) There are 27 members in Britain's Shadow Cabinet. (See the full list of Shadow Ministers here: http://www.bbc.co.uk/blogs/pm/2010/10/that_shadow_cabinet_in_full.shtml)   In Malaysia, we do not have a Shadow Cabinet from Pakatan Rakyat like what is being practiced by the UK and most Commonwealth countries that also practice the Westminster system of government. The strange thing, though, is that after the 1999 general election, Barisan Alternatif did have a Shadow 'government' (not only a Shadow Cabinet but Cabinet committees as well). Now, Pakatan Rakyat somehow does not seem to see the need of continuing with this practice. Why do we need a Shadow Cabinet or a Shadow government and what purpose will it serve? Well, maybe this extract from Wikipedia can explain it better: The Shadow Cabinet (also called the Shadow Front Bench or Shadow Ministry) is a senior group of opposition spokespeople in the Westminster system of government who, together under the leadership of the Leader of the Opposition, form an alternative cabinet to the government's, whose members shadow or mark each individual member of the government. Members of a shadow cabinet are often but not always appointed to a Cabinet post if and when their party gets into government. It is the Shadow Cabinet's responsibility to pass criticism on the current government and its respective legislation, as well as offering alternative policies. In the United Kingdom and Canada the major opposition party and specifically its shadow cabinet is often called His or Her Majesty's Loyal Opposition. The adjective "loyal" is used because, while the role of the opposition is to oppose Her Majesty's Government, it does not dispute the sovereign's right to the throne and therefore the legitimacy of the government. However in other countries that use the Westminster system (for example, New Zealand), the opposition is known simply as The Parliamentary Opposition instead of shadow. Some parliamentary parties, notably the British Labour Party and the Australian Labour Party, elect all the members of their shadow cabinets in a partyroom ballot, with the Leader of the Opposition then allocating portfolios to the Shadow Ministers. In other parliamentary parties, the membership and composition of the Shadow Cabinet is generally determined solely by the Leader of the Opposition. In most countries, a member of the shadow cabinet is referred to as a Shadow Minister. In Canada, however, the term Opposition Critics is more usual. (Wikipedia)

SUBJECT: UMNO YOUTH OFFICIAL ON HEATED PARTY CONTESTS AND MONEY POLITICS Posted: 04 Oct 2011 01:00 AM PDT Money politics would be key to candidates' success, Suffian commented, as "this is the way UMNO does business," and UMNO delegates would expect compensation. UMNO politicians from Sabah in particular were known for their willingness to sell their support. Suffian recalled earlier party elections in which delegates took home cars, motorcycles, appliances, stock options in government-linked companies, and pre-paid credit cards, in addition to cash.  THE CORRIDORS OF POWER Raja Petra Kamarudin Classified By: Political Section Chief Mark D. Clark, reason 1.4 (b and d). Summary 1.  (C) Many UMNO party branches and divisions could nominate a Najib/Muhyiddin ticket despite Prime Minister Abdullah's confirmation that he will stand for reelection in the December party contest, UMNO party youth official Suffian Awang told us on June 17.  Eleven candidates would vie seriously for three UMNO vice president slots, while there could be a three-cornered race for the powerful Youth chief position.  Suffian stated matter-of-factly that heated party contests would enrich UMNO delegates as candidates would utilize old-style money politics to buy support.  End Summary. Grassroots to Endorse Najib/Muhyiddin 2.  (C) Mohamed Suffian Awang, Youth division leader from Kuantan for the ruling United Malays National Organization (UMNO) party, provided polchief on June 17 with purported "grassroots" perspectives on upcoming UMNO leadership contests.  Suffian, who also sits on the UMNO Youth national executive council, anticipated that upcoming UMNO branch elections (July-August) and division elections (October-November) would result in nominations for current Deputy Prime Minister/Deputy UMNO President Najib Tun Razak to replace embattled Abdullah Badawi as party leader, together with nominations for UMNO Vice President Muhyiddin Yassin to fill the number two slot.  UMNO divisions would endorse a Najib/Muhyiddin ticket even though PM Abdullah has made it clear he will stand for reelection in UMNO's national elections in December and Najib has publicly reaffirmed his loyalty to Abdullah.  "The grassroots will have their say," and support Najib to replace Abdullah, Suffian said, echoing a message we have heard repeatedly, including from Najib's political secretary (reftel). 3.  (C) Suffian emphasized that Muhyiddin in particular has clearly committed himself to gaining election as the UMNO Deputy President "come what may."  Suffian also remarked that UMNO veteran leader Tengku Razaleigh's campaign to gain nominations to challenge Abdullah for the UMNO presidency has attracted some grassroots attention, as evidenced by the UMNO crowds Razaleigh has gathered as he tours the country. 4.  (C) Within UMNO, Suffian contended PM Abdullah came in for recent criticism as an inconsistent leader, including the sudden announcement of the fuel price increase which contradicted the government's earlier plan for a price rise in August.  Many in UMNO saw Abdullah's approach to reforms as catering to an opposition agenda, not an UMNO agenda, and there was widespread UMNO dislike of de facto judicial reform Minister Zaid Ibrahim. Stiff Competition for VP Slots 5.  (C) Beyond the struggle for party's top two positions, the UMNO election cycle will feature fierce competition for the three elected Vice President slots.  Suffian believed there were 11 senior leaders seriously competing for three VP positions at this point, namely five cabinet members (Home Minister Syed Hamid Albar, Education Minister Hishamuddin Hussein, Foreign Minister Rais Yatim, Higher Education Minister Khalid Nordin, and Minister without portfolio Ahmad Zahid Hamidi); Chief Ministers from four states (Ghani Othman of Johor, Ali Rastum of Malacca, Mohamad Hasan of Negeri Sembilan, and Adnan Yaakob of Pahang); and two former Chief Ministers (Shahidan Kassim of Perlis and Abdul Rahim Tamby Chik of Malacca). Race for Youth Chief 6.  (C) Suffian said the contest to replace Hishamuddin Hussein as the powerful UMNO Youth chief currently appears to be a three-cornered race featuring Mahathir's son Mukhriz, PM son-in-law Khairy Jamaluddin and former Selangor Chief Minister Khir Toyo.  Khir Toyo was positioning himself as a man of the people as opposed to Mukhriz and Khairy whose positions depending on their family connections.  Khir Toyo's reputation had suffered, however, after UMNO's shocking loss of Selangor state to the opposition parties. Show Me the Money 7.  (C) UMNO activists and would-be delegates to the national party elections were ecstatic with this year's stiff competition because it meant that they would collect larger payments from candidates, Suffian stated matter-of-factly. Money politics would be key to candidates' success, Suffian commented, as "this is the way UMNO does business," and UMNO delegates would expect compensation.  UMNO politicians from Sabah in particular were known for their willingness to sell their support.  Suffian recalled earlier party elections in which delegates took home cars, motorcycles, appliances, stock options in government-linked companies, and pre-paid credit cards, in addition to cash.  (Note: Some UMNO delegates at the 2004 national party elections received compensation roughly equivalent to $95,000 in today's valuation, according to Embassy sources.  End Note.) Comment 8.  (C) Suffian is not a first-tier UMNO leader but we report his statements as representative of comments we have heard from a number of UMNO voices, particularly those who want to see Najib replace Abdullah by year's end.  Najib recently and publicly restated his loyalty to Abdullah and his support for an orderly transition.  Najib, however, has not spoken out yet against "grassroots" efforts to nominate a Najib/Muhyiddin ticket for the December elections, efforts that Najib's own camp appears very willing to encourage. KEITH (June 2008)

WIKILEAKS: Iran outdoes U.S. in FDI; Foreign Bank to Open in KL. Malaysia Economic Update July 2007 Posted: 03 Oct 2011 01:00 AM PDT After the Asian financial crisis in 1998, the Central Bank directed the mergers of many local banks, resulting in only ten domestic banks by 2000 down from 54 banks just two years earlier. In 2006 CIMB bought Southern Bank, bringing the number to nine. Nazir said the merger process is lengthy, and it can take two to three years for the new bank to become competitive. (Note: only two Malaysian banks currently have assets over RM 10 billion: Nazir's own CIMB Group and Maybank.) THE CORRIDORS OF POWER Raja Petra Kamarudin 1.  (U) Summary: Malaysia's top investor for the first five months of 2007 is Iran, due to a joint venture by the National Iranian Oil Company (NIOC) and SKS Ventures Sdn. Bhd. to build a refinery in the northern region of peninsular Malaysia. The Central Bank approved another joint venture for Bank of Baroda and two other Indian banks, marking the first new foreign conventional bank to be approved in many years. Other developments include increased tourism, a flap over pricing of the new Harry Potter book, and a slightly increased forecast for economic growth.   End Summary. Malaysia's Top Investor Year-to-Date: IRAN 2. (U) Iran has emerged as the leading foreign investor in the country for the period January through May 2007, at least in terms of approved projects.  Iran's new status is the result of a single large refinery in which the National Iranian Oil Company (NIOC) has a large stake.  The refinery, which will be built in the northern state of Kedah, is a joint venture with Malaysian company SKS Development Sdn. Bhd., a sister-company to SKS Ventures which made press earlier this year when it announced plans to develop the Ferdows and Golshan gas fields in Iran.  Both SKS Development and SKS Ventures are owned by Malaysian tycoon Syed Mokhtar al-Bukhari. The NIOC stake in the new refinery is reported to be less than 50%. U.S. investment approvals drop to fifth place 3. (U) U.S. investment approvals are running in fifth place this year, after adecade or more of the U.S. being Malaysia's top foreign investor.  According to the government investment approval agency, Malaysian Industrial Development Authority (MIDA), Iran's investment of USD 874 million, or 19% of total approved foreign investment, is ahead of Netherlands (USD 653 million), Japan (USD 518 million), Singapore (USD 378 million) and the U.S. (USD 299 million). Average monthly approvals are up slightly for investment from the U.S. and Japan and significantly for investment from the Netherlands and Singapore.  Total approved foreign investments were USD 3.6 billion for the first five months of the year and USD 5.5 billion in 2006. Comment 4. (SBU) It is too soon to tell whether the year-to-date project approvals will lead to a significant increase in actual foreign direct investment.  Comparing the YTD monthly average for January through May 2007 to the monthly average for 2006 shows a 57% increase.  This is hardly realistic. It is more likely that, with national elections around the corner, the GOM is approving everything that comes across the desk in an effort to boost the figures.  How many of these proposals ever break ground is yet to be seen. However, the one large refinery jointly financed by NIOC and SKS Ventures is expected to break ground within the next month or two. Foreign Conventional Bank Approved 5. (U) According to the GOM's "Financial Sector Master Plan," developed in 2001, this year was supposed to be the year that the financial sector would be liberalized, after a series of government-imposed clampdowns in the beginning of the 2001-2010 period covered by the plan.  A series of gradual liberalizations have been evident since January, and according to press reports, the GOM recently approved the application of a new foreign conventional bank - the first in many years.  Bank of Baroda, India's fifth largest lender, has been granted approval to set up a joint venture with two other conventional Indian banks, Punjab National Bank and Andhra Bank, in early 2008.  Bank of Baroda currently has a representative office in Kuala Lumpur which it opened in August 2004. Earlier press reports alluded to a long, complex series of negotiations between Malaysia's central bank and Bank of Baroda. This will be the first Indian bank permitted to open a branch in the country, albeit a year later than planned.  (Note:  as part of Malaysia's drive to become a global hub for Islamic finance, several Middle East-based Islamic banks opened their doors in Malaysia earlier this year.) Visit Malaysia Year 2007 and 50th Independence Day Celebrations 6. (U) The Visit Malaysia Year 2007 tourism campaign was launched nationwide this year to celebrate Malaysia's 50 years of independence from the British, which culminates with the Merdeka National Day on August 31.  Many activities and programs such as cultural performances and street shows have been lined up to promote Malaysia as a tourist destination both domestically and internationally. 7. (U) The tourism industry continues to see increasing arrivals and to contribute higher earnings to the Malaysian economy.  A total of 17.55 million international tourists visited Malaysia in 2006 and this year Malaysia is targeting 20.1 million tourists who are expected to spend RM40.5 billion (approximately USD 11.8 billion). As of March this year, Malaysia recorded 1.7 million visitors, an increase of 10.9 percent compared to the same period last year. Tourists from elsewhere in Southeast Asia usually make up the bulk of arrivals to the country, including a large number of Singaporeans who come for day trips.  Double digit growth was recorded for visitor arrivals from Singapore, Indonesia, China, Japan, Saudi Arabia, Canada, Australia, Russia and others.  According to the Tourism Board website there has been a drop in arrivals from Thailand for the past three months caused by violence in southern Thailand. New Approach to Promoting Tourism 8. (U) According to Zulkipli of Malaysia's Tourism Board, the government is "very interested" in attracting more tourists from the Middle East, North Africa and Russia, all of which are believed to have high growth potential and high average expenditure per tourist, though their tourists travel only in limited seasons.  He noted that Middle Eastern tourists in particular are attracted to Malaysia for cultural, religious and dietary reasons, with the largest numbers of tourists coming during the summer.  In addition, he surmised that many Arab tourists have avoided visiting the United States and Western Europe, where they may face visa difficulties and could feel "less welcome." 9. (U) In the past, Malaysia marketed itself as a holiday destination, and is now promoting itself as a shopping haven in a move to increase the flow of tourists' receipts.  The board is hoping to attract more U.S. tourists, which tend not to travel much to Malaysia given its great distance from the U.S. While in New York recently, the tourism board also aggressively promoted Malaysia's attractiveness for medical tourists and for the MICE (meetings, incentives, conferences and exhibitions) market. Issues affecting tourism growth 10. (U) Malaysia's poor maintenance of public toilets, unscrupulous taxi drivers, the prevalence of itinerant beggars in tourist zones, and general lack of cleanliness have been hot issues for the government as it seeks to attract more tourists from abroad, according to tourism board officials.  Last year the government installed high-tech toilets in several key shopping areas, and local authorities and the Housing and Local Government Ministry are pressuring restaurants and hotels to ensure that toilets are kept clean. Hotels Try to Conserve Energy 11. (U) Econ FSN spoke with Shaha of the Hotel Association, who said he is optimistic that Malaysia will achieve the predicted number of tourists, provided no unforeseen global events such as a bird flu outbreak or a tsunami occurs. He said electricity is the second largest cost to hotels after salary, which is why his group has asked Malaysia's power company and the trade ministry (MITI) to provide appropriate incentives to ease the burden on hotels.  The hotel industry is in operation 24 hours a day, and cannot adjust its operations to off-peak hours like the industrial and manufacturing sector.  Hotels have made efforts to increase energy efficiency to mitigate the increased cost of power, according to Shaha, but older hotels have found this difficult.  The hotel industry also has asked MITI for incentives to cover new equipment for hotels undergoing renovations and upgrading. Pricing Flap Over Harry Potter 12. (U) Malaysia's biggest book chains (MPH, Popular, Harris, and Times) briefly launched a boycott of the new Harry Potter book to highlight how their business is threatened by two hypermarkets, Tesco and Carrefour.  The two hypermarkets initially marketed "Harry Potter and the Deathly Hallows" at the discounted price of RM69.60 (approximately USD 20), far below its recommended retail price of RM109.90 (approximately USD 32).  Minister of Domestic Trade and Consumer Affairs (MDTCA) Shafie Apdal defended the hypermarkets, saying such discounts benefit the public.  Shafie's move was somewhat unusual in that the MDTCA is often called upon to support smaller scale Malaysian retailers; at the same time, the ministry expends considerable resources to ensure that Malaysian consumers are not overcharged for the large number of staple products subject to government price controls. MIER Raises Its Economic Growth Forecast 13. (U) The Malaysian Institute of Economic Research (MIER) has revised Malaysia's economic growth upwards to 5.7% year-on-year in 2007 from 5.6% forecast a month ago.  Despite the revision, the growth projection is still below the official estimate of 6%.  MIER executive director Mohamed Ariff said the Malaysian economy is underperforming as it is capable of 6.5% growth.  He blamed the relatively slow growth to weak domestic investment.  He also commented that although FDI inflows to Malaysia have increased in 2006 after bottoming out in 2005, they are still below pre-crisis levels and lag behind Singapore and Thailand. Call to Hasten Mergers of Malaysian Banks 14. (U) Nazir Razak, CEO of CIMB Group, Malaysia's second-largest banking conglomerate, announced at a conference on the banking sector that, in his view, the Central Bank should intervene to force the acceleration of mergers of domestic banks. This would make them more competitive and better able to withstand the forces of liberalization, he said.  After the Asian financial crisis in 1998, the Central Bank directed the mergers of many local banks, resulting in only ten domestic banks by 2000 down from 54 banks just two years earlier.  In 2006 CIMB bought Southern Bank, bringing the number to nine.  Nazir said the merger process is lengthy, and it can take two to three years for the new bank to become competitive. Alternatively, he suggested that the Central Bank should raise the minimum shareholder asset level from its current RM 2 billion (USD 588 million) to RM 10 billion (USD 2.9 billion) to force out the smaller players.  (Note: only two Malaysian banks currently have assets over RM 10 billion: Nazir's own CIMB Group and Maybank.) Government To Leave It to Market Forces 15.(U) Responding to Nazir Razak's call for government intervention to force further bank mergers, Second Finance Minister Nor Mohamed Yakcop said the government has no objection to further consolidation in the banking sector.  However, the minister said Malaysia is not planning to introduce new measures to speed up the process. LaFleur (July 2007)

WIKILEAKS: KHAIRY AND UMNO YOUTH FOCUS ON FTA, PALESTINE IN JULY 18 LUNCH WITH AMBASSADOR Posted: 02 Oct 2011 01:00 AM PDT In response to the Ambassador's question, Khairy said he believed UMNO would not provide live transmission of its 2007 convention in order to avoid the controversy of last year (when live broadcast of UMNO's chauvinistic rhetoric provoked concerns among non-Malays). He explained that UMNO and the other parties had to be seen as aggressively defending the interests of their respective ethnic groups, but behind closed doors "the parties don't talk like that to each other." THE CORRIDORS OF POWER Raja Petra Kamarudin Classified By: Ambassador Christopher J. LaFleur for reasons 1.4 (b and d). Summary 1.  (C) Khairy Jamaluddin, influential son-in-law of PM Abdullah, underscored his oft-publicized concerns about the FTA, in particular regarding agriculture and government procurement, during the Ambassador's July 18 lunch for leaders of UMNO Youth, an important component of the dominant United Malays National Organization party.  Khairy took exception to any attempt to adjust long-standing government preference policies for ethnic Malays and argued that an FTA would tip the terms of trade unfairly in the U.S. favor.  The Ambassador attempted to dispel misconceptions about the rice trade and impact on Malay preferences, while encouraging Khairy to focus on an FTA's long term positive effects to the Malaysian economy.  Khairy described the Malay grassroots concern over Palestine.  He also explained UMNO's process for selecting candidates.  Another leader confirmed current UMNO Youth Chief Hishammuddin's intention to seek an UMNO vice president position.  UMNO Youth leaders expressed their support for U.S. Embassy public affairs programming, such as the English language teaching assistants, joint cultural activities and the International Visitor Program.  If PM Abdullah remains in office long enough, the astute and palpably ambitious Khairy may well be able to consolidate his political position and become a long-term force in Malaysian politics.  End Summary. Lunch for Youth Leaders 2.  (SBU) The Ambassador hosted a lunch on July 18 for UMNO Youth leaders, led by UMNO Deputy Youth Chief Khairy Jamaluddin, the ambitious and influential advisor to his father-in-law PM Abdullah Badawi.  UMNO Youth Secretary Abdul Rahman Dahlan and seven other Youth leaders accompanied Khairy, while A/DCM, polchief, econoff and FSN political specialist joined the Ambassador. Khairy Highlights FTA Concerns 3.  (SBU) Much of the lunch conversation revolved around the proposed U.S.-Malaysia free trade agreement (FTA).  Khairy underscored his oft-publicized concerns about the FTA, in particular regarding agriculture and government procurement. He said Malaysian rice farmers remained anxious about the possibility of increased competition from U.S. rice imports. The Ambassador countered that an FTA was unlikely to make U.S. rice much more competitive in Malaysia, given Malaysia's preference for rice varieties not typically grown in the U.S., as well as continued strong competition from other Asian suppliers.  He added that the U.S. and Malaysian agriculture sectors were largely complementary and thus should both benefit from an FTA.  Responding to Khairy's concern that U.S. sanitary/phytosanitary measures constituted a non-tariff barrier that would impede Malaysian agricultural exports, the Ambassador assured him that negotiators were working to ensure the harmonization of such measures under the FTA to the benefit of exporters in both countries. 4.  (C) Khairy underscored the particular sensitivity within Malaysia on the inclusion of government procurement in the FTA.  Long-standing preference policies for ethnic Malays were a key component of such procurement, and the government could not accept any attempt by the U.S. to limit such policies.  The Ambassador responded that the oft-repeated assertion that the U.S. intended to seek changes or even abolishment of the preference policies was not true, adding that the U.S. also incorporated preference policies within its own federal government procurement programs that it would seek to preserve under the FTA.  He asserted that Malaysia could benefit substantially from access to the significant U.S. government procurement market that would come with an FTA. 5.  (C) Khairy briefly raised a number of other concerns about the FTA.  He claimed U.S. investors would have a leg up on Malaysians under the FTA in any potential investment dispute; econoff countered that the FTA would include dispute settlement provisions that would be similar to those used by the WTO, and that were designed to be impartial and applied infrequently.  Khairy alleged that an FTA would turn the terms of trade in the U.S.'s favor, and attract U.S. investors who would reap substantial profits on the backs of ordinary Malaysians, similar to what he claimed had occurred in Singapore following implementation of its FTA with the U.S.  The Ambassador encouraged Khairy to focus instead on the long term positive effects to the Malaysian economy from an FTA with the U.S, such as the growth of higher-paying jobs and the training of young Malaysians in the new, higher-value-added industries that were precisely those Malaysia needed to attract in the face of growing competition from rapidly developing Asian neighbors.  While Khairy signaled he remained skeptical, he concluded that he could agree to an FTA "in principle" but insisted that the details of any agreement would be critical. Grassroots Concerns about Palestine, Middle East 6.  (C) Beyond the FTA, Khairy explained that at the UMNO grassroots constituents continued to be concerned about events and trends in the Middle East, with Palestine and Iraq as key issues, along with the War on Terror and U.S policies. He said he had read the latest National Intelligence Estimate report on Iraq and added the report contends that Iraq war has increased Islamic radicalism, and has made the terror threat around the world worse contrary to U.S. policy objectives.  UMNO members believe Malaysia, as OIC Chairman, should play a more "influential" role in the Middle East. Khairy, however, expressed his disappointment that, "Washington does not seem to consider and take note of Malaysia as a moderate voice."  The Ambassador explained U.S. policy toward Palestine, and highlighted the importance of responsible governments assisting countries like Afghanistan and Iraq to overcome their formidable difficulties.  He emphasized that as a successful Muslim-majority country, Malaysia could assume an important role in this regard. UMNO Internal Developments 7.  (C) Khairy explained that UMNO Youth leaders are currently involved in the UMNO divisional meetings that would elect delegates to the annual UMNO general assembly in November.  Fortunately, UMNO did not face the same contentious issues as last year, Khairy said, a clear reference to Mahathir's challenge in 2006.  In response to the Ambassador's question, Khairy said he believed UMNO would not provide live transmission of its 2007 convention in order to avoid the controversy of last year (when live broadcast of UMNO's chauvinistic rhetoric provoked concerns among non-Malays).  He explained that UMNO and the other parties had to be seen as aggressively defending the interests of their respective ethnic groups, but behind closed doors "the parties don't talk like that to each other." 8.  (C) Khairy explained UMNO's internal procedures for selecting national and state-level candidates, describing a process of bargaining between UMNO divisions, chief ministers in each state, and the Prime Minister/UMNO President who holds the final say.  He commented that there would not be much "horse trading over seats" among UMNO's coalition partners for the coming general election as all parties would adhere to the seat allocations from the 2004 general election.  He argued that UMNO's concessions to its non-Malay coalition partners, such as nominating a Malaysian Indian Congress party member to run in a Malay majority area, represented laudable inter-ethnic politics, but this went largely unappreciated by outside observers. 9.  (C) Youth secretary Abdul Rahman Dahlan stated that current UMNO Youth Chief Hishammuddin Tun Hussein would very likely vie for a seat as one of three UMNO vice presidents, thus vacating the top position in UMNO Youth.  Hishammuddin currently is making the rounds to officiate at UMNO divisional meetings to better establish his credentials for a vice presidential slot. Interest in Public Affairs Programming 10.  (U) The Youth leaders expressed interest in the Embassy's successful English Language Teaching Assistant program in the state of Terengganu, and hoped the program could be expanded to other states.  They also valued the U.S. International Visitor Program and appreciated that the Embassy had sent a number of their members to the United States for under this mechanism.  They recalled U.S. Embassy support for a recent cultural event and hoped for more joint cultural activities in the future.  The Ambassador encouraged close contacts between UMNO Youth and Embassy offices, and the Youth leaders said they wished to continue the dialogue with U.S. diplomats. Comment 11.  (C) UMNO Youth represents a pivotal group in Malaysian politics, as it serves as the springboard for most future UMNO leaders and acts as the party's most aggressive defender of Malay rights and privileges.  This was our first meeting with Khairy since he led a rambunctious street demonstration against Secretary Rice's visit nearly one year ago.  Khairy's well-publicized opposition to some US policies notwithstanding, the reality is that our scheduling of this event was delayed by his extended vacation in the United States this summer (and his wife, the PM's daughter, remained behind to take a seminar).  There is no question that this classic son of the cosmopolitan Malay elite is carefully shaping his political profile to bolster his efforts to take over the UMNO Youth leadership, faux street radicalism included.  In this, he follows the well-worn course of other ambitious young Malay politicians, including Hishammuddin and past UMNO Youth President, and now Deputy PM, Najib. However, Khairy has even greater need to reinforce his street cred with the Malay grassroots to counter the enmity of many more senior UMNO politicians resentful of Khairy's meteoric rise and oft-rumored manipulation of his father-in-law.  In this respect, it was obvious that UMNO Youth officials did not include Mukhriz Mahathir in their delegation, despite his position as international relations bureau chief, owing to the rivalry between Khairy and Mahathir's son.  Mukhriz' absence was further evidence that the Mahathir family's political strength has waned following the former-PM's failure to depose his successor last year. 12. (c) Although Khairy unquestionably owes the speed of his ascent largely to his marriage, the fact remains that he is one of the most articulate and politically astute operators of his generation.  The Oxford-educated Khairy comes across as well-spoken and well-read, but also as sharp-edged and unnecessarily acerbic,especially in addressing familiar targets of Malay intellectuals (such as U.S. Middle East policy).  At the same time, he frequently voices admiration about U.S. democracy and closely follows U.S. political developments (as well as other facets of American life; his most recent newspaper column was a paean to the Apple iPhone he acquired in LA last month).  However, at 31, Khairy has yet to acquire the ease, self-confidence and political polish exuded by current Youth Chief (and Education Minister) Hishammuddin.  If PM Abdullah continues in office for several more years, as now appears likely, Khairy may well have enough time to consolidate his position.  If so, this palpably ambitious young man could be a major factor in Malaysian politics for decades to come. 13.  (C) Not surprisingly, Khairy approaches the FTA with an eye on the potential near-term implications to his political ambition, rather than the more intangible long-term benefits that an FTA would bring to Malaysia.  His skepticism about the FTA is politically popular, and contrasts with the government's infrequent and somewhat hapless attempts to promote the FTA (leaving the Embassy in the position of having to explain to Malaysians why the FTA will benefit Malaysia).  Although we do not expect Khairy to abandon his public skepticism, we believe he will be more amenable to standing aside following the next elections and we will continue to push our views with this influential group of UMNO Youth leaders. LAFLEUR (July 2007)

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