223. Telegram From Secretary of State Muskie’s Delegation to the Department of State1
Secto 4080. Subject: Secretary’s Meeting With Prime Minister Hussein Onn.
1. Confidential–Entire text.
2. Summary: The Secretary met for half an hour privately, June 27, with Malaysian Prime Minister Hussein Onn.2 Following this talk the Secretary had a meeting with Prime Minister and seven Malaysian Cabinet Ministers. The Secretary informed the group of U.S. support for Kuala Lumpur as Rubber Council headquarters and undertook to look into Malaysian needs regarding tin agreement and into Malaysian concerns over U.S. opposition to World Bank and ADB assistance for oil palm projects. End Summary.
3. Following 25 minute tete-a-tete meeting with Malaysian Prime Minister Hussein Onn at the Prime Minister’s request, Secretary Muskie and Prime Minister joined meeting in Prime Minister’s operations room with Deputy Prime Minister and seven Malaysian Cabinet members: Minister of Trade and Industry and Deputy Prime Minister, Seri Dr. Mahathir Bin Mohamed; Minister of Transport, Datuk Lee San Choon; Minister of Works and Utilities, Datuk Samy Vellu; Minister of Finance, Tengku Razaleigh Hamzah; Minister of Home Affairs, Tan Sri Haji Muhammad Ghazali Bin Shafie; Minister of Defense, Datuk Amar Haji Abdul Taib Bin Mahmud; Minister of Education, Datuk Masa Bin Hitam and Minister of Primary Industries, Paul Leong. Present on American side: Assistant Secretary Richard Holbrooke: Deputy Assistant Secretary John Negroponte; Executive Assistant, Leon G. Billings; Deputy Assistant Secretary of Defense, Nicholas Platt; Staff Member, National Security Council, Roger Sullivan; Charge Breckon, and Embassy Kuala Lumpur Political and Economic Counselors.
4. Prime Minister Hussein Onn stated how pleased he and his colleagues were that the Secretary came to Kuala Lumpur to meet with him and the Ministers. They were glad to have the opportunity to exchange views individually and collectively. The Prime Minister hoped these exchanges would be of help in assessing thinking of ASEAN countries. He hoped the Secretary could look at issues not [Page 737] only global but also in a regional perspective, but emphasized the Malaysians were not confining their concerns to regional issues. The Secretary responded that he wished to reiterate what he had said in private: that he was in Malaysia because he regarded Malaysia and ASEAN as very important to the United States. He was speaking for the President as well as himself in making this statement. The Secretary said that it was a long trip from Ankara3 but in a sense he was on his first trip of this nature symbolically tying the world together by leaving through the East and returning through the West. The Secretary noted that we all have memories of the Vietnam war; there is a tendency for some, in America as well, to think because we were untangled from that war that we had lost interest in the region. He said he had come to listen and to understand the perspective and judgment of Southeast Asians (he had visited the Indochina countries during the Vietnam war). Secretary understood that although the ASEAN countries share common objectives and views they often had different perspectives. He wished to say that the perspectives that the Prime Minister had given him privately would be of great value to him. The Secretary noted that the Prime Minister had indicated the Ministers might have questions to pose to the Secretary. Before this period began, he wished to be certain to inform the group that the United States would be supporting Kuala Lumpur as the site for the International Rubber Council headquarters. He pointed out that the U.S. relies on Malaysia for a large proportion of its rubber. In this context, he jokingly expressed the hope that Malaysia would not switch too much acreage from rubber to oil palm.
5. Foreign Minister Rithauddeen began the question period by noting that he understood the United States was trying to find a mutually satisfactory accommodation regarding tin. Minister Paul Leong added that he had recently spoken with Ambassador Smith in Geneva. He thought there were good prospects for a compromise. He also wished to thank the Secretary for announcing the U.S. support of Kuala Lumpur as the Rubber Council headquarters. The Secretary responded that he was reasonably optimistic that a tin agreement could be worked out. He was well aware of the importance of these issues to developing countries; of course there were always differences between consumers and producers on prices. He would make every effort on this issue.
6. Minister Leong added he felt that export controls should be retained in the tin agreement. The Secretary said Undersecretary Cooper had informed him of this issue. He was familiar with such [Page 738] export control problems from his own state, e.g., Maine is an important U.S. manufacturer of footwear, yet U.S. beef producers find it more profitable to export hides. Thus he was aware of the competing pressures which can be generated by competing interests.
7. Finance Minister Razaleigh stated that since 1975 Malaysia had been having problems with the World Bank Executive Board regarding its proposals for palm oil projects. The trend at the World Bank appears to be not to consider applications for such projects. He hoped that the U.S. would permit Malaysia to avail itself of World Bank assistance. Palm oil production is most important for Malaysian employment levels. The Secretary responded that U.S. policy in this regard is strongly influenced by congressional attitudes. He would, however, look into the possibilities.
8. Finance Minister Razaleigh also listed the needs for Malaysian assistance in its defense procurement. They have now decided to purchase the US A–4 attack aircraft and will be needing backup (spare parts) for this new equipment. In like manner, the Malaysians would be purchasing warheads for bombs through Canada and required a U.S. backup guarantee. Secretary and Deputy Assistant Secretary of Defense Platt said that Platt would pursue these issues in his meeting on June 28 with Malaysian Defense Minister.4
9. Secretary indicated he would appreciate an analysis of the state of the Malaysian economy. Razaleigh responded Malaysia felt its economy was healthy and expected seven percent real growth in 1980. They were trying to stabilize inflation at six percent per annum; unemployment was at six percent as well. Deputy Prime Minister Mahathir noted that the current U.S. recession could impact adversely on the electronic firms in Malaysia which were among the largest Malaysian employers. The Malaysian Government was watching the U.S. economy very carefully. The Secretary said that he understood the Deputy Prime Minister’s concerns over the possible export of unemployment. He said that it was difficult to predict the direction of U.S. economy. The present recession was likely to be deeper than expected. U.S. policy objectives, significant in an election year, were to moderate the recession. But the fight against inflation must continue. Prime rate was now down from 20 to 11½ percent. Twenty percent prime rate was, in itself, inflationary.
10. Deputy Prime Minister Mahathir noted that Japanese Foreign Minister Okita in his talks had accepted the need for relocating production out of Japan to developing countries because of the high cost of labor and energy in Japan. He wondered whether the U.S. should be thinking in the same way. He considered that this was one way of [Page 739] reducing inflation since there were many things which could be made more cheaply in Malaysia. These approaches had already been discussed within NATO and other Western organizations. The Secretary responded that the U.S. had already exported some of its industry totally. U.S. imports of softwear had risen from five percent to 60 percent of our total consumption today. It was important to understand that the American people would not want to become just a service economy. It was a question of balance. Certainly the concept of exporting our auto industry would not be an easy one to sell! However there was no question that the North must find ways of being of more assistance to the developing world. He noted that there had been considerable discussion on these issues at the Venice Summit.5 He expressed his own view that unless our planet can serve the expectations of the less fortunate of our people the search for peace is being made without an awareness of the real problems involved. Assistance, however, must be carried out on a rational, evolutionary basis. Aid, for example, has not been able to keep up with energy prices in many developing countries, and too much of aid must be devoted to energy needs and not to development.
11. The Secretary concluded by expressing his appreciation of the warmth of his reception and the opportunity to have a private exchange of views with the Prime Minister to which the Prime Minister reciprocated.
12. Comment: Embassy recommendations regarding Malaysian concerns over World Bank assistance with their oil palm project will be sent septel.6
- Source: Carter Library, National Security Affairs, Staff Material, Far East, Box 69, ASEAN Foreign Ministers Meeting in Kuala Lumpur, 6–7/80. Confidential; Immediate. Sent for information to Tokyo, Bangkok, Singapore, Manila, Jakarta, London, and the Mission in Geneva.↩
- No record of this private meeting has been found.↩
- Muskie was in Ankara June 25–26 for the NATO Ministerial meeting.↩
- No memorandum of conversation of this meeting has been found.↩
- The G–7 Summit took place June 22–23 in Venice. See Foreign Relations, 1977–1980, vol. III, Foreign Economic Policy, Document 247.↩
- Not found.↩