UPDATE 1-U.S. pushes foreign equity in Malaysia trade talks http://today.reuters.com/stocks/QuoteCompanyNewsArticle.aspx?view=CN&storyID=2006-06-12T083826Z_01_KLR117329_RTRIDST_0_TRADE-MALAYSIA-USA-UPDATE-1.XML&rpc=66
Mon Jun 12, 2006
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By Mark Bendeich
KUALA LUMPUR, June 12 (Reuters) - The United States put foreign-ownership restrictions on the agenda for free-trade talks with Malaysia on Monday, saying it wanted such barriers lifted in the country's financial-services sector.
Speaking from the north Malaysian town of Penang on the first day of talks, U.S. lead negotiator Barbara Weisel named several other sensitive areas that Washington wanted to prise open, including Malaysia's murky state-procurement system.
"Lifting foreign ownership restrictions, obviously that's our goal," Weisel told reporters in a conference call when asked if her team would be pushing on this issue. "That would be one of the issues we would like to discuss," she added.
Malaysia limits foreign ownership to 30 percent of local banks and 30 percent of local insurers, though long-standing foreign owners can go to 51 percent in the case of insurers.
Malaysia's government casts a big shadow over the economy, controlling or partly owning more than a third of the stock market, and its promise to conduct an orderly sell-down of state equity has so far led to very few sales of major stakes.
In state procurement, Malaysia has also tightly restricted foreign involvement. Opening it up would be a hot issue because Malaysia uses state projects to redistribute wealth to its poorer ethnic Malay population, often preferring Malay contractors.
"This is one of the most sensitive areas for them," Weisel said. "We will enter into the negotiations understanding that and try to think creatively about how we can accommodate each other."
In return, the United States would give Malaysian firms access to its huge procurement market, she added.
The U.S. federal government buys $200 billion in goods and services every year, according to the American Malaysian Chamber of Commerce, but Malaysian firms are excluded. The chamber wants a bilateral deal to open each other's procurement market.
Washington also wants greater access to Malaysia's market for imported cars, another thorny issue for Malaysia, which has used import tariffs and taxation to favour its two national car-makers, Proton Holdings (PROT.KL: Quote, Profile, Research) and Perodua.
Perodua is partly owned by Daihatsu Motor Co. Ltd. (7262.T: Quote, Profile, Research).
Last year, Malaysia and Japan reached a free-trade deal that would virtually scrap Malaysian duties on imports of large Japanese cars and on Japanese-made car kits by 2008.
But Weisel said her team would not necessarily use Japan's deal as a model in its auto talks with Malaysia, pointing to a more recent liberalisation of Malaysian auto policy, which seeks to level the playing field for rivals to Proton and Perodua.
Malaysia is the United States' 10th largest trading partner and the pair aim to finalise a free-trade deal by year-end. The two countries amassed $44 billion in two-way trade last year.
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