| WIKILEAKS: PRESS STIFLED IN ALTANTUYA MURDER TRIAL OVER MENTION OF PRIME MINISTER Posted: 20 Oct 2011 01:00 AM PDT 
The short-lived exception was the English language newspaper The Sun, which included the quotations from Razak in its early morning February 21 edition. Sources at newspaper confirmed to us in confidence that the Ministry of Internal Security compelled The Sun to withdraw and recall thousands of copies of their first run paper in which the original quote was included. Prime Minister Abdullah serves concurrently as Minister of Internal Security. THE CORRIDORS OF POWER Raja Petra Kamarudin 
Classified By: Political Section Chief Mark D. Clark for reasons 1.4 (b and d). 1. (C) In the latest turn of the ongoing Altantuya murder trial (reftels), accused political insider Abdul Razak Baginda, who has remained calm and composed through most of the proceedings, unleashed an emotional tirade shortly after the February 20 noon recess on the trial's 90th day. Referring to the Prime Minister by his nick-name "Pak Lah", Razak reportedly exclaimed: "You can die, Pak Lah! (in Malaysian - "Matilah kau, Pak Lah!") I'm innocent!", according to unpublished journalist accounts. Local newspapers and the government news service Bernama reported the fact of the outburst, but did not print Razak's statements. The short-lived exception was the English language newspaper The Sun, which included the quotations from Razak in its early morning February 21 edition. Sources at newspaper confirmed to us in confidence that the Ministry of Internal Security compelled The Sun to withdraw and recall thousands of copies of their first run paper in which the original quote was included. Prime Minister Abdullah serves concurrently as Minister of Internal Security. 2. (C) Razak Baginda, who is on trial for abetting two police officers in murdering Mongolian Altantuya Shaariibuu, had appeared uneasy throughout the morning session of court on February 20. Razak's father, Abdullah Malim Baginda had whispered something to him shortly before the trial had begun for the morning and apparently upset the accused. Razak had remained quiet throughout the morning hearings, but just after the noon recess was called and as he was leaving the courtroom he kicked and banged the door and yelled "You can die, Pak Lah! Die, Pak Lah! I am innocent. I am innocent." He was later seen crying before his lawyer while his mother attempted to comfort him. 3. (C) Comment: Speculation is rife in Malaysia's on-line community concerning what it was that set off Razak Baginda outburst, including conspiracy theories alleging the Prime Minister's office had urged Razak to implicate Deputy Prime Minister Najib Abdul Razak (see also ref B) in return for sparing Razak a guilty verdict and its mandatory death sentence. Regardless, the Internal Security Ministry would want to limit any possibly inflammatory reference to the Prime Minister at the trial, and particularly at this juncture due to the proximity of Malaysia's general election to be held on March 8. Any connection between the Prime Minister and the murder trial would be scandalous. The GOM reportedly has worked hard to "drive (the case) from public view" (ref B) and is not about to allow the case to influence the coming elections. KEITH (February 2008) |
| WIKILEAKS: BLUE LANTERN PRE-LICENSE END USE CHECK ON APPLICATION 05-050085478 (U) Posted: 19 Oct 2011 01:00 AM PDT Reason for request: the Foreign Intermediate Consignee, Kontena Nasional Global SDN BHD, is identified on the license application as the "Malaysian government's appointed freight forwarder." Kontena Nasional is, however, also the freight forwarder frequently utilized by a Malaysian-based front company to divert U.S.-origin electronics and aircraft spare parts to Iran. THE CORRIDORS OF POWER Raja Petra Kamarudin
Classified By: MULTIPLE SOURCES 1. (U) This is an action message. See paragraphs 2-4. 2. (U) The Department's Office of Defense Trade Controls Compliance (PM/DTCC) requests post assistance in conducting a pre-license check for the export of plastic bonded explosives to Malaysia. Post is requested to complete this Blue Lantern check within 30 days. Lack of response to a Blue Lantern check will affect pending and future licenses involving parties to this license. 3. (S//NF) Reason for request: the Foreign Intermediate Consignee, Kontena Nasional Global SDN BHD, is identified on the license application as the "Malaysian government's appointed freight forwarder." Kontena Nasional is, however, also the freight forwarder frequently utilized by a Malaysian-based front company to divert U.S.-origin electronics and aircraft spare parts to Iran, e.g., see Ref. A-F as recent examples. PM/DTCC would therefore like to conduct a Blue Lantern check to confirm this order for explosives with the Foreign End User. 4. (U) ACTION: Please contact the Foreign End User, Royal Malaysia Police, and verify its request for the exact quantity and specific type of commodity listed below. Please also confirm intended use. END ACTION. 5. (U) License Information: DDTC Case Number 05-050085478 COMMODITY: Advanced Cutting Explosive (ACE) ASSY, KYX 1800-5400 GR/FT, P/N D10515-2400-1, Military Stock Number 1375-01-328-8048, MK 145/MM53 QUANTITY: 500 meters LICENSE VALUE: USD 90,385.00 APPLICANT: Ensign-Bickford Aerospace & Defense Company 640 Hopmeadow Street Simsbury, Connecticut 06070 USA SOURCE: Ensign-Bickford Aerospace & Defense Company Highway 175 Graham, Kentucky 42344 USA FOREIGN INTERMEDIATE CONSIGNEE: Kontena Nasional Global SDN BHD 12th Floor West Wing, Wisma Consplant 2 Selangor Darul Ehsan MALAYSIA FOREIGN CONSIGNEE: Interarms SDN BHD 73M, Medan Setia 1, Plaza Damansara Bukit Damansara 50490 Kuala Lumpur MALAYSIA FOREIGN END USER: Royal Malaysia Police Bukit Aman 50560 Kuala Lumpur MALAYSIA STATEMENT OF PURPOSE: For use by the Bomb Disposal Unit of the Royal Malaysian Police for training and operational purposes. 6. (U) Additional documentation submitted in support of license application: A) Interarms SDN BHD Purchase Order Number KKDN/POL/PT/43/2007, dated 13 August 2007. B) U.S. Department of State DDTC DSP-83 Non-Transfer and Use Certificate, signed by Omar Bansir (no date), Manager Interarms; signed by Adnan B. Abd. Latif (13 Aug 2007), Logistic Department, Royal Malaysia Police; and signed by Marhizah Bt Abdul Razak (17 Ogos 2007), Malaysia Ministry of Internal Security. C) Malaysia Ministry of Internal Security End User Certificate, cites Contract No. KKDN/POL/PT/43/2007 and Reference KKDN/PL(S)1118/27(18), and signed by Marhizah Bt Abdul Razak (dated 17 Ogos 2007). 7. (U) Please slug reply for PM/DTCC - BLUE LANTERN COORDINATOR and include the words "Blue Lantern" and the DDTC Case Number in the subject line. POC on this case is Peter Sabatini, PM/DTCC, phone: 202-663-2819; ClassNet email: sabtinipj@state.sgov.gov; OpenNet email: sabatinipj@state.gov. The 2006 Blue Lantern Guide Book is available on OpenNet at http://fsi.state.gov/fsi/spas/default.asp?ID= 1588 Department thanks Post for its assistance in this matter. RICE (FEBRUARY 2008) |
| WIKILEAKS: PROSECUTOR DOWNBEAT ON ALTANTUYA MURDER CASE Posted: 18 Oct 2011 01:30 AM PDT In another incident a witness testified that she had seen previous photos of the victim with Deputy Prime Minister Najib Abdul Razak, and both the prosecution and the defense leapt to their feet to have the testimony stricken from the record. The same witness also testified that hers and the victim's immigration records showing entry to Malaysia had been mysteriously deleted. THE CORRIDORS OF POWER Raja Petra Kamarudin
Classified By: Political Section Chief Mark D. Clark for reasons 1.4 (b and d). 1. (C) Deputy Public Prosecutor Noorin Badaruddin, a member of the prosecution team in the Altantuya murder case (reftel), told Polchief during an informal conversation January 30 that there was almost no chance of winning guilty verdicts in the on-going trial of defendants Razak Baginda, a close advisor to Deputy Prime Minister Najib Tun Razak, and two police officers. She described the trial as interminably long. Nearly seven months after the trial began (but with only 83 days of actual hearings), the prosecution now is presenting its 63rd witness out of an anticipated 80 and the defense has yet to make its case. (Note: The prosecution notified 132 potential witnesses that they might be called to testify. End Note.) Noorin anticipated the trial would continue for several more months and said that she actively sought excuses to escape from the courtroom monotony. 2. (C) By all accounts the trial has been a prosecutorial embarrassment from its inception, leading many to speculate that the ineptitude was by design. On the eve of the trial Malaysia's Attorney General Abdul Gani Patail dropped his lead prosecutors and replaced them with less experienced attorneys. Similarly, a lead counsel for one of the defendants (Zulkifli Noordin) abruptly resigned before the trial "because of (political) attempts to interfere with a defense he had proposed, in particular to protect an unnamed third party." Then in the first 30 days the prosecution fumbled through a series of key witnesses whom later had to be impeached for proffering testimony contradictory to their pre-trial statements. In one case, a police officer testified that police interrogators "tortured and coaxed" her to make pre-trial statements which were untrue. Subsequent witnesses testified that police reports and phone records had been changed and that other evidence had been tainted and should therefore be thrown out. In another incident a witness testified that she had seen previous photos of the victim with Deputy Prime Minister Najib Abdul Razak, and both the prosecution and the defense leapt to their feet to have the testimony stricken from the record. The same witness also testified that hers and the victim's immigration records showing entry to Malaysia had been mysteriously deleted. Neither the prosecution nor the defense pursued a line of questioning regarding that testimony. 3. (SBU) The protracted nature case has led at least one regional newspaper to speculate that "the case is being deliberately delayed to drive it from public view." Malaysia's daily newspapers rarely mention the case's latest developments, and it is unprecedented in Malaysian judicial history that a murder trial could drag on for seven months and still not give the defense an opportunity to present its case. Such an environment has led many to conclude that the case was too politically sensitive to yield a verdict before the anticipated general elections. KEITH (February 2008) |
| WIKILEAKS: CONTROVERSIAL SQURES OF CHRISTIAN BOOKS Posted: 17 Oct 2011 01:00 AM PDT The Malaysian Council of Churches immediately condemned the confiscation. Council Secretary Reverend Herman Shastri stated on January 17 that the government officials have "no right (to confiscate the Christian books) and have over stepped their bounds." Shastri argued that such actions offended the sensitivities of Christians, and he urged the government to take immediate action to stop enforcement officials from undermining inter-religious harmony. 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) Ministry of Internal Security officials confiscated some Christian children's books from stores in early January. Officials took the action because the books contained pictures of Moses and Noah, and they judged portraits of these figures, who are also prophets in Islam, would offend Muslims. On January 21, the Ministry returned all the books following public condemnation by the Malaysian Council of Churches. In a separate case, the Evangelical Church of Borneo filed a lawsuit after Ministry of Internal Security officials confiscated children's Sunday school books. The books are in the Malay language and use "Allah" when referring to God in contravention of a GOM decision to reserve the term "Allah" for Muslims. Separately, the Internal Security Ministry recently banned 11 books on Islam. While the GOM took corrective action in one instance, institutional mandates and policies based on the preeminent position of Islam will continue to generate controversy in multi-religious Malaysia. End Summary. Christian Books Confiscated, Returned 2. (U) The Ministry of Internal Security's Publications and Al-Koran Texts Control Department confiscated several Christian children's titles containing pictures of Moses and Noah from bookstores in early January. Ministry officials deemed the pictures were "offensive caricatures of prophets" recognized by Islam. The Malaysian Council of Churches immediately condemned the confiscation. Council Secretary Reverend Herman Shastri stated on January 17 that the government officials have "no right (to confiscate the Christian books) and have over stepped their bounds." Shastri argued that such actions offended the sensitivities of Christians, and he urged the government to take immediate action to stop enforcement officials from undermining inter-religious harmony. On January 21, Deputy Internal Security Minister II Fu Ah Kow announced that the ministry had returned the Christian titles to bookstores. A representative from one of the largest publications companies confirmed to poloff that government authorities returned all confiscated books. God by any other name 3. (U) In December 2007, leaders from the Evangelical Church of Borneo, in the East Malaysian states of Sabah and Sarawak, filed a lawsuit against Prime Minister Abdullah and the government for banning the importation of Christian publications using "Allah" when referring to God. This followed the August 2007 seizure at Kuala Lumpur International Airport of a shipment of Christian children's books destined for Sunday school programs in Sabah. Deputy Internal Security Minister Johari Baharom justified the action by saying only Muslims could use the term "Allah" (to describe God) as "it is a Muslim word." He added that we cannot let other religions "use it because it will confuse the people." Minister Abdullah Mohammed Zin, responsible within in the Prime Minister's Department for religious affairs, backed Johari's comments, referring to a 1986 Cabinet decision that reserved the name "Allah" and several other Arabic terms for the exclusive use of Muslims. 4. (U) In their suit, church officials are seeking a declaration that they have the constitutional right to use the word "Allah" in all their religious publications and practices, and not just within the church. They claim that the GOM failed to take into account that Malay language-speaking Christians had used "Allah" in printed Malay language materials since 1629. Church officials also seek a court ruling against any faith having exclusive right to the use of any word. A magistrate's initial hearing of the case on January 29 failed to set any date for further action before the court. 5. (U) Separately, the Internal Security Ministry banned 11 books about Islam in a decision finalized on January 17 under the Printing Presses and Publications Act, according to media reports. Officials found that the books deviated from state-sanctioned interpretation of Islam. Eight of the books are English languagetexts from U.S. publishers, while three are Malay language texts. During 2007, the Ministry banned a total of 85 books of various subjects because of religious or sexual content, according to Embassy records. Comment 6. (C) Government machinery set up to uphold the state-approved interpretation of Islam and protect Muslim sensitivities has again generated controversy in Malaysia's substantial non-Malay/non-Muslim community. The number of books seized may be limited, but the symbolism and precedent of officials confiscating Christian children's books are nevertheless damaging to inter-faith relations. The Internal Security Ministry's quick about-face in one highly publicized case suggests that some senior leaders recognize the risks to religious and ethnic harmony. Institutional mandates and policies based on the preeminent position of Islam remain firmly in place, however, and we can expect further controversies of this sort in multi-religious Malaysia. KEITH (January 2008) |
| WIKILEAKS: EMBASSY RAISES RELA ROLE WITH MALAYSIAN IMMIGRATION Posted: 16 Oct 2011 01:00 AM PDT RELA, a volunteer auxiliary security force under the Home Affairs Ministry, has attracted criticism for reported abuses by RELA members primarily when rounding up illegal immigrants. RELA members receive a bounty for each illegal immigrant detained. Largely untrained RELA members have been accused of stealing the belongings of suspected illegal immigrants, extortion, using unnecessary force, and mistakenly detaining foreign tourists and legal residents. Given the lack of recognition for refugees under Malaysian law, RELA also has targeted refugee communities for immigration round ups, drawing concern from the UNHCR among others. THE CORRIDORS OF POWER Raja Petra Kamarudin
1. (SBU) Summary: Members of Malaysia's People's Volunteer Corps (RELA) began taking up guard duties at immigration detention centers beginning January 15, according to press reports. Government officials describe RELA's assignment as a stop-gap measure while responsibility for the immigration detention centers shifts from the Prison Department to the Immigration Department. Given RELA's poor reputation, Consular Chief raised questions about RELA's role with a senior Immigration official on January 22. In response, the official emphasized the temporary nature of RELA's assignment. Separately, RELA members reportedly raided two unsanctioned Burmese refugee camps over the past five days. We will continue to raise the issue of RELA with the Malaysian government and coordinate with UNHCR on refugee protection. End Summary. 2. (U) According to Malaysian press accounts, approximately 1,840 RELA members on January 15 began to take up duties as guards at immigration detention centers across Malaysia, with the exception of Sabah (due to Sabah's separate authority over immigration matters). Home Affairs Minister Radzi Sheikh Ahmad told reporters that by March RELA would be responsible for 13 detention centers. The GOM is shifting responsibility for the detention centers from the Prisons Department to the Immigration Department, both under the Home Affairs Ministry. As RELA gradually assumes its new role, it takes over from guards from the Prisons Department. Minister Radzi indicated that RELA's role would last approximately one year while the government hired 1,100 new Immigration guards. Government statements in November 2007 suggested RELA's role at detention centers could remain necessary for up to two years. 3. (SBU) RELA, a volunteer auxiliary security force under the Home Affairs Ministry, has attracted criticism for reported abuses by RELA members primarily when rounding up illegal immigrants. RELA members receive a bounty for each illegal immigrant detained. Largely untrained RELA members have been accused of stealing the belongings of suspected illegal immigrants, extortion, using unnecessary force, and mistakenly detaining foreign tourists and legal residents. Given the lack of recognition for refugees under Malaysian law, RELA also has targeted refugee communities for immigration round ups, drawing concern from the UNHCR among others. 4. (SBU) Embassy's Consular Chief called on Immigration Director General Wahid bin Md. Don on January 22 and raised questions concerning RELA's deployment to the detention centers. Consular chief noted that supervision of immigration detention facilities is a key government responsibility and Malaysia's handling of this function would attract international attention. Wahid responded that RELA's involvement at the detention centers represented a stop-gap measure until the Immigration Department could recruit and train 1,100 new immigration enforcement officers to staff the centers. In the interim, Wahid emphasized that RELA members would provide only security and not overall management of the detention centers, and he stressed the temporary nature of RELA's new role. In addition, the government planned to hire another 3,000 new immigration enforcement officers to detect and detain illegal immigrants, implying that this would take away some pressure to use RELA in such a role. 5. (SBU) Separately, Embassy received reports and documentary evidence of a RELA raid on January 19 on a refugee camp in the jungle near Putrajaya. (Note: The GOM does not recognize or sanction any refugee camps. End Note.) The camp contained about 75 Chin refugees, and had received prior warnings that it should disband. RELA reportedly burned the camp, and took or destroyed the refugees' belongings. The New Strait Times daily also reported the destruction of the camp, but stated that RELA Director-General Zaidon Asmuni denied RELA started the fires. Instead, he pointed fingers at a local municipal council, whose president denied knowledge of the raid. (Note: RELA raids on camps sometimes occur following complaints by local residents or landowners. End Note.) The news report stated RELA detained 23 persons following the raid. Embassy also received a report of a RELA pre-dawn raid on January 23 on a second Burmese refugee jungle camp, which contained over 150 ethnic Chin. RELA reportedly detained 26 refugees, including a four-month old baby. Post forwarded the information to the UNHCR. 6. (SBU) Comment: Post will continue to monitor actions by RELA and seek ways to impress upon the Malaysian government that RELA's treatment of refugees and illegal migrants will be a matter of U.S. and international attention. Post continues to coordinate closely with UNHCR on matters pertaining to refugee protection and, together with Refcoord Bangkok, facilitate UNHCR and U.S. refugee processing entities' access to refugees in immigration detention. KEITH (January 2008) |
| WIKILEAKS: MALAYSIAN GOVERNMENT DECIDES PROTON Posted: 15 Oct 2011 01:00 AM PDT Given the political sensitivities surrounding both Proton and its pyramid of local suppliers, most of which are owned by ethnic Malays, only a foreign partner could have demanded the kinds of reforms necessary to make the company competitive. Unfortunately, as long as the government continues to subsidize Proton's losses, neither the national automaker nor its vendors will have the incentive to become globally competitive. In the case of Proton, the GOM's unwillingness to upset its spoils system has once again undercut its efforts to rationalize the economy.
THE CORRIDORS OF POWER Raja Petra Kamarudin
1. (SBU) Summary: After nearly two years of back-and-forth negotiations with Volkswagen, the Malaysian government has decided that government-controlled auto maker Proton would no longer pursue a strategic partnership with the German auto manufacturer or any other foreign partner (including General Motors, with which it had also held discussions). Rather than look to a foreign partner to help revive the perennial loss-maker, the government announced that the firm was doing well and should be given a chance to turn around. Its auto sales were expected to more than double in Asia, particularly for its new models. Industry experts claim the government backed off the idea of Proton taking on an international partner because hundreds of local vendors would be unlikely to survive the kinds of reforms a world-class partner would demand. Many of these vendors are owned by ethnic Malays who enjoy protected status in multicultural Malaysia. Taking action to force Proton to reform therefore would be unpalatable to part of the government's key Malay constituency, a particular concern to UMNO now with a national election on the horizon. End summary. 2. (U) The Malaysian Cabinet has decided that national automaker Proton would no longer pursue a foreign partner. In announcing the decision on November 20, Finance Minister (II) Nor Mohamed Yackop said that recent signs of a financial turnaround by Proton had convinced the government that Proton could prosper without a foreign partner. These signs included stronger than expected orders for Proton's new Persona model. The announcement came as a surprise to most analysts, given reports that Proton was in the final stages of negotiations with Volkswagen which would have allowed the German automaker an equity (though likely not controlling) stake in Proton. (General Motors reportedly was also still in the running as an alternative to VW). Malaysian Automotive Association (MAA) President Aishah Ahmad publicly voiced doubts about the durability and depth of Proton's supposed turnaround, noting that a partnership with a foreign manufacturer would have been good for Proton's branding, and that Proton still needs to develop a sustainable, long term strategy to reverse its years-long slide from dominating the Malaysian market. SMOKE AND MIRROR PROFITS 3. (U) Boosted by the sale of land and the wrap-up of some project development costs, Proton posted a million-dollar profit for its second quarter ending September 30, compared to USD 75 million in losses in Q2 last year in a long succession of multi-million dollar losses. Revenue was up 3% over second quarter figures last year due to a 1.3% increase in auto sales. Although this growth was modest, Proton Chairman Mohammed Azlan Hashim pointed to it as an indication that Proton's sales would rise from their current levels of 30,000 to 40,000 units per model to between 100,000 and 150,000 units per model by 2011, primarily through greater exports to China, India, ASEAN, and to a lesser extent Iran. HOPES PINNED ON NEW MODELS, ASIAN DEMAND 4. (U) Ministry of International Trade and Industry Minister Rafidah Aziz told the press that Proton had its own strategic plans to capture regional markets, especially in India, China and Southeast Asia. She said the American and European automotive markets were different and "not for us"; rather, the growth market is in Asia. Proton recently signed partnerships with the Governments of China and Thailand, including a deal to allow for the export of 30,000 Proton cars to China by the end of the year. At an auto show in Thailand this week, Proton unveiled its new fuel-efficient model, the Savvy, its new sportscar the Neo, and its re-designed Gen.2, all of which Proton expects will help improve its sales in Asia. As recently as July Rafidah had told the press that the government was interested in selling its 43 percent stake in Proton that it holds through government investment arm Khazanah (the government indirectly controls additional shares of Proton, including 12 percent through the Employee Provident Fund and 8.8 percent through national petroleum corporation Petronas). BUT QUALITY AND COMPETITIVENESS A PROBLEM 5. (U) At a recent panel discussion on Creating Global Champions Mr. Rameli bin Musa, Executive Vice Chairman for Ingress Corporation, a tier one vendor for Proton, said that a lot of vendors depended on Proton. He described some of the challenges Ingress faced when the company began supplying auto parts for Honda and Toyota, including much tougher quality standards. Another panelist, Mr. Yong Poh Kon, President of the Federation of Malaysian Manufacturers, elaborated on this point, explaining that where Proton capped defective parts at 200 parts per million, Honda demanded no more than six per million, and Toyota ten per million. This level of quality was one reason Malaysian auto parts suppliers were reluctant to venture beyond Proton for business, he said. 6. (U) Also at the conference, Akifumi Kuchiki, Executive Vice President of Japan External Trade Organization (JETRO) pointed out that Thailand quickly was becoming the "Detroit of Asia" and that Malaysia was being left behind. He suggested that Malaysia could focus on exporting automatic compact cars, while firms in Indonesia and Thailand could engage more in exporting pickup trucks and multipurpose vehicles, respectively. He said some of the constraints facing the Malaysian auto industry included an insufficient supply of unskilled labor, a need to upgrade the skills of its skilled labor, and an inadequate supply of quality parts manufacturers. Malaysia also needed to liberalize and deregulate national auto policies if it wanted to attract foreign firms in the support industries. COMMENT: 7. (SBU) Comment: The Malaysian Cabinet's decision to prohibit Proton from taking a foreign partner surprised most industry watchers, likely including Proton itself, which had appeared on the cusp of signing a deal with VW. With the government focused on upcoming elections, however, politics trumped economic rationality. Although long a supporter of Proton's efforts to seek a foreign partner, the government decided in the end that it was not yet ready to permit a fundamental shift away from a 20-year tenet of Malaysian industrialization - the promotion of a national car. Given the political sensitivities surrounding both Proton and its pyramid of local suppliers, most of which are owned by ethnic Malays, only a foreign partner could have demanded the kinds of reforms necessary to make the company competitive. Unfortunately, as long as the government continues to subsidize Proton's losses, neither the national automaker nor its vendors will have the incentive to become globally competitive. In the case of Proton, the GOM's unwillingness to upset its spoils system has once again undercut its efforts to rationalize the economy. KEITH (December 2007) |
| WIKILEAKS: Malaysia's 2008 Budget: Pork Sold Separately Posted: 14 Oct 2011 01:00 AM PDT The issue the Prime Minister isn't bringing up for this election-year budget is the problem of declining oil revenues. Petronas provides 35 to 40% of the GOM's budget. However, Malaysia is projected to be a net importer of oil within the next several years, based on a continued trajectory of 4% annual increases in domestic demand. This is a major problem because Petronas is obliged by the GOM to provide oil and gas for the domestic market at subsidized prices and it is responsible for covering the price gap between international and domestic prices. THE CORRIDORS OF POWER Raja Petra Kamarudin
1. Summary: On September 7, Prime Minister Abdullah Ahmad Badawi unveiled his 2008 budget proposal. Billed as a "fiscally responsible" budget, it projects a deficit of 3.1%, down from 3.2% in 2007. Although spending is up, the GOM projects higher GDP growth will generate more than adequate additional revenue flows to compensate for it. The Prime Minister (PM) also announced that he expects the private sector, including foreign investors, to help fund government-initiated development plans. While the budget contained some important new tax provisions including a welcomed decrease in corporate tax rates, simplified tax collection on dividends, and enactment of additional tax preferences for the Islamic financial sector, the most important tax reform measure, implementation of the new Goods and Services Tax (GST) proposed in 2004, was missing. In a panel discussion following the release of the budget, Ministry of Finance officials insisted it was still on the table. However, absent up-front support from the PM and with elections just around the corner, the GOM is unlikely to submit a GST proposal to Parliament in the coming year. This leaves the GOM without an answer to how it will reduce its dependence on revenues from the oil sector, even though depleting oil reserves imply this revenue stream will shrink in the near future. Absent tax broadening measures like the GST, the GOM, which currently gets 38 percent of its revenue from the national oil company, will find it increasingly difficult to maintain its fiscal deficit within manageable bounds over the next decade. End summary. First, what the budget didn't do: 3. For an election year budget, many Malaysians were surprised by what it did not do. A widely anticipated voter-friendly cut in the top individual income tax bracket did not materialize, but neither did any additional "sin" taxes (on tobacco or alcohol) which the GOM tends to increase every year. Consistent with its billing as a "fiscally responsible" budget, no large new development projects were announced as part of the budget. However, the Prime Minister already had announced plans to invest heavily in three regions on the peninsula, including the "Iskandar Development Region" bordering Singapore, plus Northern and Eastern Corridor Regional Development Plans. Similar regional development projects are rumored to be in the works for East Malaysia as well. The Prime Minister announced that he is relying in large part on the private sector to finance these government initiatives. Reducing the deficit? A closer look at the numbers: 4. A closer look at the numbers shows that the GOM's formula for lowering the deficit is a result of two underlying assumptions, both of which have been received with some skepticism by local analysts. The first assumption is that real GDP will grow by 6 percent to 6.5% - a projection that analysts find somewhat optimistic. (Currently GDP is growing at approximately 5.7%.) The second assumption is that the private sector - particularly foreign investors - will provide the lion's share of the funding needed for the three regional development plans laid out by the Prime Minister. Spending up 2.5% from last year 5. Total budget expenditures (operating and development) for 2008 are RM 168.8 billion ($ 48.2 billion) in 2008, up 2.5% from RM 164.7 billion ($ 47 .1 billion) in 2007. Operating expenses up: 6. Operating costs will grow 4% to RM 128.8 billion ($ 36.8 billion) in 2008. Salaries comprise 28.1% ($ 10.3 billion) of operating expenditures and fixed charges and grants 49.6% ($ 18.3 billion). $ 11.4 billion for development: 7. Gross development expenditure is budgeted at RM 40.0 billion ($ 11.4 billion), 2.1% lower than the revised allocation of RM 40.9 billion ($ 11.7 billion) in 2007 as the government intends to count on the private sector to drive economic growth. This 8% reduction came as a surprise to many analysts, some of whom had projected an allocation of RM 48 to 50 billion ($ 13.7 to 14.3 billion) for 2008. However, the Ministry of Finance also may tap into its supplementary allocation of US$ 2.35 billion when the government does a mid-term review of the Ninth Malaysian Plan in mid-2008. 8. The biggest slice of the $ 11.4 billion development budget will go to education and training with $ 2.1 billion (18.4%), transport $ 1.9 billion (16.9%) and security $1.4 billion (15.2%). Trade & Industry and agriculture will receive $ 1.1 billion (9.7%) and $ 1.05 billion (9.4%) respectively. Plans to cut subsidies? 9. Subsidies will constitute 7.9% ($ 2.9 billion) of operating expenditures, declining 15.8% from 9.8% ($ 3.5 billion) of operating expenditure in 2007, indicating the government will possibly reduce fuel subsidies (perhaps on gas) in 2008. Fuel subsidies are about three quarters of the total subsidy payment. So far, the government has kept its promise not to raise domestic fuel prices this year as crude oil prices continue to rise. High oil prices to keep a lid on deficit, for now: 10. Despite the increase in public spending, the government announced that it expected the fiscal deficit to remain under control at RM 20.9 billion ($ 6.0 billion) or 3.1% of GDP in 2008, down from an estimated RM 19.9 billion ($ 5.7 billion) or 3.2% of GDP in 2007. The government projected revenue to increase 3.7% to RM 147.1 billion ($ 42 billion) in 2008 from RM 141.8 billion ($ 40.5 billion) in 2007, based on an assumption that oil prices will average $ 74 per barrel in 2007 and $ 75 per barrel in 2008. Oil-related revenues are expected to contribute $ 15.9 billion or 38% of total revenue in 2008, up marginally from $ 15.3 billion or 37.9% of total revenue in 2007. (Comment: As the petroleum income tax collection is based on preceding year's income, the government can be confident of its oil revenue in 2008. National oil company Petronas' dividend payment to the government will accelerate to $ 6.9 billion in 2007 from $ 5.1 billion in 2006.) New tax provisions: 11. Following are the most significant changes to the tax code proposed in the 2008 budget: -- Corporate tax, reduced from 28% in 2006 to 27% in 2007, will be reduced further to 26% in 2008 and 25% in 2009. This compares favorably to most countries in the region, with the exception of Singapore (18%) and Hong Kong (17.5%). Vietnam, China, Thailand, India, Indonesia and the Philippines all have higher corporate tax rates, ranging from 28% to 35%. (Taiwan's corporate tax rate is also 25%, but there is an additional 20% withholding tax on dividends.) -- Tax on dividends will no longer be adjusted to meet the recipient's tax rate. Currently, taxpayers in brackets above the corporate rate are required to pay the difference; taxpayers in brackets below the corporate rate are eligible for a refund. (Dividend payments are not subject to double taxation in Malaysia.) Companies may opt for a six-year phase-in of this new provision. -- Small and Medium-sized Enterprises (SMEs) will be exempt from filing monthly tax estimates and paying monthly installments for the first two years of operations. Tax for the full two years will be liable upon filing at the end of the two years. A SME is defined as a company with ordinary paid-up share capital of less than RM 2.5 million (US$ 727,000). -- Information & Communication Technology (ICT) companies will be required to locate within specified geographic areas to retain current tax incentives. ICT companies will qualify for an exemption of import duties and sales tax for broadband equipment not produced in Malaysia. -- Income derived from trading of Certified Emission Reduction (CER) certificates will be tax exempt. -- Tax relief will be provided for post-graduate studies, sports and exercise equipment, children's educational accounts, computers, broadband subscription fees, and some retirement benefits. -- Expatriate income tax will be calculated according to the number of days physically present in Malaysia. -- A 7% cap on deductions for approved charitable contributions will be extended to individual taxpayers as well as companies. (Currently only companies are subject to the cap.) -- Companies located in the Labuan Offshore Financial Center can make an irrevocable election to be taxed at the regular Malaysian rate, allowing them to benefit from bilateral tax treaties that otherwise would exclude them. -- Taxpayers will be permitted to make mortgage payments out of their retirement savings accounts. -- A number of new incentives will be enacted for companies engaged in Islamic finance, including Islamic insurance (reftel). Comment: 12. The issue the Prime Minister isn't bringing up for this election-year budget is the problem of declining oil revenues. Petronas provides 35 to 40% of the GOM's budget. However, Malaysia is projected to be a net importer of oil within the next several years, based on a continued trajectory of 4% annual increases in domestic demand. This is a major problem because Petronas is obliged by the GOM to provide oil and gas for the domestic market at subsidized prices and it is responsible for covering the price gap between international and domestic prices. This of course eats away at its profits and its taxable income which is so essential to government revenue flows. While Petronas increasingly expands its operations overseas, it is unlikely to be able to do so rapidly enough to compensate for lost revenue when oil imports exceed exports. The problem of preventing a ballooning fiscal deficit when that happens is the elephant that everyone pretends not to see. KEITH (September 2007) |
| WIKILEAKS: Islamic Finance in Malaysia Part 2: Obstacles and Opportunities Posted: 13 Oct 2011 01:00 AM PDT The concept of the time value of money is ignored, and the difference between the purchase and resale price is attributed solely to risk. A blind eye is turned to the fact that compensation for "risk" is equal to what a conventional bank would charge in interest, and this "risk" even can be compounded daily. Practitioners acknowledge this and other "impurities" in how Islamic finance is carried out, but hope that someday the industry will grow big enough to establish its own benchmarks. THE CORRIDORS OF POWER Raja Petra Kamarudin
1. (U) Summary: Malaysia is determined to become a global hub for Islamic Finance, and already accounts for two thirds of outstanding Islamic bond issuances (reftel). However, at a recent conference in KL, financial experts discussed a number of obstacles holding back development of this niche market. Chief among them was the inadequacy of the secondary market and the lack of Islamic derivative products. Higher legal fees and complications arising out of the need for Sharia compliance were a burden as well. Nevertheless, the Malaysian government remains optimistic and content to have a pragmatic approach to development rather than get hung up on the need for a "purist" approach to Sharia compliance. End summary. Central Bank Governor Claims 40% Annual Growth in Islamic Bonds 2. (U) At the 2nd Malaysian Islamic Finance Conference in Kuala Lumpur last month, Central Bank Governor Dr. Zeti Akhtar Aziz announced that Malaysia accounted for about two-thirds of outstanding Islamic bonds throughout the world, amounting to roughly US$47 billion in 2007. High savings rates in Asia and the Middle East were driving demand, she said, resulting in an average growth rate of 40% per year in the scale of the Islamic bond market. How to Build the Industry 3. (U) While Governor Zeti focused largely on Malaysia's success with Islamic bonds, other speakers at the conference focused on what needed to be done to build the industry. Malaysia's RHB Islamic Bank chairman Vaseehar Hassan urged Malaysian Islamic banks to venture overseas and establish links with Middle Eastern markets, while also calling for non-Malaysian banks to issue Islamic bonds in Malaysia. Still a Developing Capital Market 4. (U) Investors at the conference complained that the Islamic derivative market was inadequate, and that there was almost no secondary domestic market for Islamic products. There are simply too few players and intermediaries, they commented, so most investors prefer holding their investments. Moreover, few Islamic derivative products exist. Some investors also accused banks of not being transparent in risk management due to the lack of Islamic derivatives for hedging purposes. Similarly, international rating agencies have noted the difficulty in rating Islamic products as there are few products for benchmarking. In the case of Islamic REITs (Real Estate Investment Trust), Moody's Representative Director Christina Maynes said it was very much a conventional REIT in Malaysia's case. However, she commented that Middle Eastern investors generally preferred to invest in real estate directly. Double the Legal Fees 5. (U) Issuers complained about the difficulty and higher cost in coming up with Sharia-compliant products. Legal fees essentially double with the added layer of a board of Islamic scholars who must adjudicate Sharia-compliance. Sharia-compliance a high bar to meet 6. (SBU) In addition, Sharia compliance is stringent: in addition to the basic prohibitions, like alcohol, gambling, etc., income from interest and debt to asset ratios must be below certain thresholds. Ed Teather, Executive Director and Senior Economist for ASEAN Research, told ECONOFF that these kinds of requirements made Islamic finance theoretically viable for refinancing existing assets, but nearly impossible to finance a new initiative that exists only as a blueprint or a business plan. In addition, he pointed out that with the current excess liquidity in the market it simply did not make economic sense for corporations to go to the added trouble and extra expense of issuing Islamic products. Shortage of experts 7. (U) Yet another barrier is a lack of skilled Islamic finance professionals. Banking professionals are seldom proficient in Sharia, while Islamic scholars are seldom proficient in finance. The GOM is providing scholarships to Malays who want to study Islamic finance and has established a training entity funded and coordinated through the Central Bank. The 2008 budget proposes to exempt expatriate Islamic finance professionals from paying income tax in an effort to attract more talent from the Middle East. Working Towards Becoming "Purely Islamic" 8. (U) Islamic finance, as it is currently practiced, is not regarded as "pure" by many practitioners and scholars. However, there is a general consensus among these experts on the need to build the industry until it can become independent of the global conventional finance system. Until then, interest rates remain the fundamental benchmark for pricing and the mingling of Islamic and conventional assets will continue. 9. (U) Islamic finance, which forbids charging interest, uses an underlying asset to structure a "trade" as a substitute for a loan. For example, a contract is written to buy a specific amount of wheat and then re-sell the wheat at a specified later date at a different price. The price difference can be used to finance an entirely unrelated transaction. The concept of the time value of money is ignored, and the difference between the purchase and resale price is attributed solely to risk. A blind eye is turned to the fact that compensation for "risk" is equal to what a conventional bank would charge in interest, and this "risk" even can be compounded daily. Practitioners acknowledge this and other "impurities" in how Islamic finance is carried out, but hope that someday the industry will grow big enough to establish its own benchmarks. 10. (SBU) The concerns of some practitioners go further. Rafe Haneef, Citibank's Head of Islamic Finance for Asia, told ECONOFF that in order to truly practice Islamic finance, one had to be concerned about what the next customer did with the wheat even after the Islamic bank no longer held title to it. The wheat could be sold for consumption, but once it had been used in an Islamic transaction, it should not be used in any interest-bearing transaction. He said this would be "like selling grapes to a winemaker." 11. (SBU) Because the market for Islamic finance remains small, some mingling of funds is inevitable, as there simply are not enough Islamic financial products available. "All roads lead to U.S. Treasury bonds eventually," explained David "Daud Abdullah" Vichary, a longtime Islamic finance practitioner and British national. As the same money gets circulated, it is impossible to shelter it from conventional finance, he told ECONOFF. Comment 12. (U) Whether or not Islamic finance will overcome its obstacles and become a major global industry remains an open question. The vision of its promoters is to tolerate a bit of un-Islamic "impurity" for now out of necessity, but to gradually move toward a "purer" form as the industry grows. In Malaysia, with the government in an activist mode, the approach to Islamic finance is more pragmatic than pure, and it appears to be a growing reality. KEITH (September 2007) |
| WIKILEAKS: Malaysia's Current Economic Performance Masks Need for Structural Change Posted: 12 Oct 2011 01:00 AM PDT Education was among Ariff's primary concerns. Ethnic Malays were poorly prepared for university, he explained, largely due to a separate one-year "fast track" matriculation which was designed to enable them to secure a place in college more easily. Non-Malays were required to complete a more rigorous two-year program and pass an exam. The end result was that the non-Malays did better once they entered university. Moreover, separate education before college led to patterns of self-segregation at the university, and Ariff observed that the various ethnic groups had little interaction. THE CORRIDORS OF POWER Raja Petra Kamarudin
1. (SBU) Summary: Malaysia's central bank Deputy Governor considers the country's banking sector unexposed to the turmoil in the US sub-prime mortgage market and believes that the economy remains on track for six percent GDP growth in 2007. Private sector economists, however, point out that Malaysia's economy is performing under its potential growth rate by as much as two percentage points due to poor government policy. The racial preference policies set out in the New Economic Policy (NEP) are viewed as the primary source of growth-restraining distortions which primarily have served to enrich political cronies. In the process, not only has the NEP failed to reduce poverty among ethic Malays, it has directly contributed to greater income inequality and poverty. It continues to crowd out of healthy private sector investment by government linked corporations. Perverse education policies have chipped away at Malaysia's ability to produce a competitive work force for a global economy. Prime Minister Abdullah Badawi is not perceived as a politician prepared to make the hard decisions necessary to reform the policies upon which his political supporters have come to depend. Middle of the road rates of economic growth prevent a greater sense of urgency among policy makers, but over time these structural policy failures are expected to create even stronger constraints on Malaysia's ability to deliver on robust economic growth. End summary. CENTRAL BANK: LOOKING ON THE BRIGHT SIDE 2. (U) In a meeting with Economic Counselor and Financial Attach for Southeast Asia, Ooi Sang Kuang, Deputy Governor of Bank Negara, Malaysia's central bank, expressed confidence that the Malaysian economy would remain largely on track to reach government forecasts of 6% growth for 2007, even in light of the U.S. sub-prime lending problems. Ooi said that, although Malaysia was fairly insulated from the U.S. sub-prime lending market, he was concerned about how the "sentimental effect" of a significant reduction in financial markets could impact the global economy. He described the U.S. Federal Reserve's decision to lower interest rates by fifty basis points as having done "wonders" for the global economy. MANUFACTURING SECTOR MUST IMPROVE 3. (U) Ooi described Malaysia's overall manufacturing sector as "not robust" and said it would need to become more competitive. The sector that would suffer the most from an economic downturn in the U.S. was electrical & electronics (E&E), which was largely dependent upon U.S. demand for semiconductors, he explained. He said Malaysia was not moving up the value chain rapidly enough, and that the country needed to transform its economy, particularly in light of a strengthening currency that would make Malaysian exports more expensive. 4. (U) Ooi pointed out that the ringgit's long-term value was increasing, and said Malaysian manufacturers would be forced to either "move up the value chain" or relocate if necessary. He said many Malaysian companies were investing overseas, with labor-intensive manufacturing moving to Vietnam and Indonesia. "MANAGING" FOREIGN EXCHANGE RATES 5. (U) Ooi said Bank Negara continued to intervene in the foreign exchange market, but only to "smooth it out" and "manage" volatility, since large volumes could "disturb or excite markets" if they were not kept within "tolerable levels" of flexibility. He claimed that the central bank intervened in both directions - to smooth both the highs and the lows. (Note: when asked about this, one private sector banking professional responded that this might be true on a one-to-ten ratio, with the central bank mitigating the "lows" once for every ten times it intervenes to mitigate the "highs.") ECONOMY STILL CHUGGING ALONG 6. (U) In spite of the setback in E&E, strong domestic demand continued to fuel the economy, explained Ooi. Demand was being driven largely by higher rural incomes resulting from high commodity prices, a recent 35% civil service salary increase, and large government projects being implemented under the Ninth Malaysia Plan. He estimated that the government projects would remain the primary driver of domestic demand until mid-2008, by which time he expected the private sector would strengthen and the government-funded projects taper off. The economy would also benefit by the imminent opening of the Kikeh oil field, Malaysia's first deepwater operation. FINANCIAL SECTOR LIBERALIZATION 7. (U) For its part, the Government of Malaysia (GOM) would continue to enact financial liberalizations, just as it had been doing for the Islamic finance sector. According to Ooi, the GOM had been adhering to the ten-year Financial Sector Master Plan and in some areas was ahead of schedule. This, coupled with the GOM's recent announcement that corporate tax rates would be reduced to 25% in 2009, would help boost the Malaysian economy. AN ANALYST'S VIEW 8. (U) While Ooi was upbeat about the Malaysian economy's resilience, Dr. Mohamed Ariff, President of the Malaysian Institute for Economic Research (MIER), was more willing to discuss the weaknesses as well as the strengths. He cited similar economic indicators and pointed to the same strengths - strong domestic demand, government stimulus, and a reasonable forecast of 5.3 to 6 percent growth. But Malaysia had much more potential than that, he said. Malaysia would need to "move up the value chain" to position itself to complement, rather than compete with, China and other low-wage manufacturing centers in the region. In fact, he said the GOM had rejected many applications to bring low-tech labor-intensive manufacturing to Malaysia, some of which had requested bringing in a few thousand (low-wage) foreign workers. Rather, the GOM was approving higher-tech manufacturing in the E&E sector, but these more capital-intensive investments were not bringing in many jobs for Malaysians, with 20% of new jobs going to foreigners. REFORMS NEEDED 9. (SBU) To surmount the hurdles and achieve Malaysia's full potential for economic growth, Ariff argued that the GOM would need to enact some politically sensitive - and perhaps unlikely - reforms. First on the list would be to address the "New Economic Policy" (NEP), a system of race-based preferences for ethnic Malays. Most benefits were going to cronies; intra-ethnic inequality was increasing, especially among Malays; and the entire system was creating a "dependency syndrome," putting low priority on academic achievement, he said. 10. (U) Education was among Ariff's primary concerns. Ethnic Malays were poorly prepared for university, he explained, largely due to a separate one-year "fast track" matriculation which was designed to enable them to secure a place in college more easily. Non-Malays were required to complete a more rigorous two-year program and pass an exam. The end result was that the non-Malays did better once they entered university. Moreover, separate education before college led to patterns of self-segregation at the university, and Ariff observed that the various ethnic groups had little interaction. 11. (SBU) Government-linked companies were another politically sensitive issue that would need to be addressed, as they were crowding out other players in the market, according to Ariff. In 1985 the GOM privatized a number of companies, but these simply went to cronies, he said. It was time for another round, but this would need to be done fairly. 12. (SBU) The race-based preferences in general and the poor educational system in particular were impediments to reaching Malaysia's full potential, but Malaysians were afraid of change, he explained. "We need a new NEP," said Ariff, "and a free press not owned by the Barisan Nasional" (the ruling coalition which has been in power since independence in 1957). 13. (U) Ariff also was disappointed that the newly released 2008 budget contained no reference to the proposed Goods and Services Tax (GST) which had been pending since 2004. The GST, similar to a value-added tax, would be desperately needed in several years' time when Malaysia was expected to become a net importer of oil. Currently Petronas, the national oil company, provides 38% of the federal government's revenue, and the country's tax regime will need to be restructured to avert a crisis. 14. (U) Comment: There is widespread agreement on what to expect in the near term for the Malaysian economy: not much. The economy will continue to chug along, growing at five to six percent; cronies will continue to benefit from the current system; and, despite Malaysia's greater potential, there will be little demand for change until things get measurably worse. With elections near, no one expects the GOM to take actions that are politically difficult - least of all changes to the NEP, which is the Malays' sacred cow. KEITH (October 2007) |
| SUBJECT: INDONESIAN TIES WITH MALAYSIA FALL VICTIM TO ANOTHER DUST-UP Posted: 11 Oct 2011 01:00 AM PDT On October 6, members of a private, volunteer Malaysian militia (RELA) detained the wife of Indonesia's cultural attache to Malaysia. The latest incident follows on the heels of several cases of alleged mistreatment of Indonesian migrants working in Indonesia. For example, Indonesians were outraged when an Indonesian soccer coach was roughed up in August and when a young Indonesian woman, 20-year-old Suriyani Nas, alleged that in April she was bound, gagged and raped for a month by a Rela volunteer. THE CORRIDORS OF POWER Raja Petra Kamarudin
Classified By: Pol/C Joseph Legend Novak, reasons 1.4 (b)(d). 1. (U) This message was coordinated with Embassy Kuala Lumpur. 2. (C) SUMMARY: The brief detention--on illegal immigration charges--of an Indonesian diplomat's wife based in Malaysia has sparked an uproar in Indonesia. Despite a formal apology, the Indonesian national legislature (DPR) has demanded that the GOI take steps to freeze ties with Malaysia. The Indonesian government has rebuffed those demands and ties remain stable, but Indonesians--who are already inflamed over cases of alleged migrant labor abuse in Malaysia--are feeling increasingly touchy toward their neighbor. END SUMMARY. A BRIEF DETENTION 3. (U) On October 6, members of a private, volunteer Malaysian militia (RELA) detained the wife of Indonesia's cultural attache to Malaysia. The uniformed personnel--officially authorized to pick up illegal immigrants and deliver them to detention centers--reportedly failed to recognize Nurdin's diplomatic ID. Rela detained the woman for about two hours while her daughter fetched her passport, according to media reports. The Indonesian Embassy filed a formal protest. Embassy official Shanti Utami Retnaningsih was quoted as saying -- "They treated her like an illegal immigrant...It's unacceptable. This incident shows disrespect to members of our embassy." MALAYSIANS APOLOGIZE 4. (SBU) Reacting to the incident, Malaysia's Ambassador to Indonesia gave an official apology on October 10. Despite this, Malaysian Deputy Prime Minister Najib Tun Razak went on to deny publicly that Nurdin was detained at all, claiming that she was merely asked to wait while authorities verified her credentials, according to a Malaysian media report which also received coverage in Indonesia. BACKLASH IN INDONESIA 5. (C) For their part, Indonesian legislators reacted strongly in the week following the incident. Several DPR members spoke out publicly, calling for withdrawal of the Indonesian ambassador to Kuala Lumpur, freezing the export of Indonesian migrant labor to Indonesia, and halting annual joint military exercises. Foreign Minister Hassan Wirajuda said--given the official protest and official apology--the matter should now be laid to rest. Based on Pol/C's soundings over the October 13-14 weekend, Indonesian politicians were still angry over the incident, claiming that it shows that Malaysians have "no respect" for Indonesians. 6. (SBU) Sentiments of bruised nationalism have spilled over into culture as well, with recent calls by prominent Indonesians to boycott Malaysian products because of allegations that Malaysia has infringed upon the copyrights of popular Indonesian folk song "Rasa Sayang" ("Feeling of Love"). A song with the same tune and near identical lyrics has recently been employed to promote Malaysian tourism. Theo Sambuaga, Chairman of the DPR's Commission I which deals with foreign and security affairs, stated publicly on October 9 -- "We ask Malaysia, its apparatus and the media, to stop denigrating Indonesians." TIES A BIT BRUISED -- BUT STABLE 7. (C) The latest incident follows on the heels of several cases of alleged mistreatment of Indonesian migrants working in Indonesia. For example, Indonesians were outraged when an Indonesian soccer coach was roughed up in August (ref B) and when a young Indonesian woman, 20-year-old Suriyani Nas, alleged that in April she was bound, gagged and raped for a month by a Rela volunteer (ref A). 8. (C) In spite of all the problems, Indonesian-Malaysian ties remain stable. The perception is growing among Indonesians that they are somehow not being treated with respect, however. At the heart of the matter, is sentiment among Indonesians that Malaysians have a superiority complex and treat Indonesians as if they are second-class citizens. A bit embittered, Indonesians increasingly are taking a touchy, nationalistic stance toward their cousins across the strait -- "They just treat us like dirt," said one official to Dep/Pol/C. HUME (October 2007) |
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