 We'd like to welcome today the Honorable Minister of Trade and Investment of Malaysia, Dr. Xerri Mustafa Mohamed. Welcome to Washington, sir. Thank you. Thank you. I want to ask you, you and Prime Minister Najib have been setting out an ambitious plan to transform Malaysia's economy. That plan is called the National Economic Model or the NEM. Could you talk about what your motivation is to make these changes and what are the key powers of the plan? We became a middle-income developing country about 20 years ago. We've graduated. We wanted to target economies in the world, but, of course, the financial crisis of 97-98 and the recent economic financial meltdown had an impact on us and our rate of growth has not been as high as what it was in the 1990s. Some of our peers have overtaken us and we believe we have to work harder in order to form Malaysia to join the ranks of a developed economy. So the main motivation is to be a developed economy by 2020. That has been our objective, but that objective is in danger unless we change the way we do things. The main pillars of this new model is to, of course, to increase the incomes of every Malaysian to make it inclusive. So that every Malaysian has a share in this growing prosperity to reduce gaps between the rich and the poor, the urban and the rural, and another pillar is to make growth sustainable that's got to do with the environment. So the bottom line is income, high-level income. We believe we've got the potential, we have the resources, we have the human talent, but we need to have a big push and that push has been provided by the leadership of the Prime Minister in the form of a new economic model. We saw an announcement this morning I think from the Prime Minister in New York about the Economic Transformation Program, or the EPT, and some of the national key economic area labs. Could you talk a little bit more about those? We've identified 12 sectors, plus what we call the Greater KL Region. Our aspiration is to turn KL, Kuala Lumpur, capital city to be, truly global city to be a magnet for human talent, for businesses. So there are 12 years altogether. What's different now is that there's focus, there's a considerate effort on a part of government and the private sector. What's happened in the last few months is that the government and the private sector have come together to brainstorm and to go into detail what particular areas have the potential to be developed. For example, in electrical electronics, we have been stuck at the bottom. We've been doing a bit of assembly, but we've not gone into design and development. So going forward, the new economic model, economic transformation is to move up the value chain. In palm oil, for example, there's been some downstream activities, but that's not enough of that. So the intention is to go deeper into downstream activities. All in gas, we believe we've got the potential to be the regional hub in the region. So we are going to develop this sector. So these are some examples. What's different now is that there's focus, there are people who have been assigned to monitor very closely. It's a new way of doing things. It's not just a statement of intentions, but it's also the follow-through, the follow-up and the mechanism to monitor very closely to ensure that all these ambitious goals are being implemented. Do these plans allow Malaysia to plug into global trade agreements more easily? I mean, have you sort of raised the level and addressed areas that have been challenging in the past, like procurement? Is that part of the plan at all? Well, that's part of transparency, governance. We have another program called the Government Transformation Program. And one important issue we have tried to address is governance and transparency. And that's very much at the core of some of these agreements that we have been discussing with our trading partners. Although FTAs are not one of those areas under the Economic Transformation Program, but it's certainly very relevant. We are a small open economy. We believe in free trade. It has been our policy to engage with the world. We have to depend on the world. We have been one of the major beneficiaries of an open trading regime. It is very natural for us to come on board and be part of this movement for more open trade. And for that reason, we are not only committed to ensure the success of our FTA, the ISEN free trade agreement, the success of the ISEN Economic Community, but we have been engaging with our trading partners with Australia, with China, with South Korea, with Japan, with Pakistan, with Turkey. These are some examples. Some we have signed trade agreements. And our negotiation with India, for example, is very advanced. ISEN has signed a trade agreement with India, but Malaysia is having a bilateral trade agreement with India. India is a big country, a very important country. I've been personally involved in this discussion, and I'm pleased to share with you that there's been good progress. So Malaysia accords very high priority to the conclusion of trade agreements, not only with our ISEN neighbours, which is already in place, but also with our major trading partners. I was with your colleague from New Zealand, Tim Grocer, earlier this morning, and he had the highest compliments for you and Malaysia, and he talked about New Zealand's good success and being able to work out some partnerships. We've been discussing a trade agreement in New Zealand for a number of years. In the first August, I think it was finally implemented, but it's been a long process. It was signed last year before our two KMs, Prime Minister Malaysia Najib and Prime Minister New Zealand, and we were the ones who signed it. And that was a momentous. New Zealand is a small country, but it's a very important trading partner for us, and it is a high-quality agreement. There were some challenges, but because we're both committed to free trade, we have decided to put whatever differences we have, and there's been some compromises, and now a trade agreement is in place, and it is implemented, and we believe this will further stimulate trade between Malaysia and New Zealand. Congratulations on that. I know how important foreign investment is to Malaysia, and looking at the numbers over the last three years, I think Bloomberg pointed out two days ago in a press piece that foreign investment has been down over the last three years, but it now seems to be surging back under year leadership and that of Prime Minister Najib. We've seen major companies, like global companies, global brands like Coca-Cola and Ace Insurance come back to Malaysia with significant new investments. How do you explain that revival? What's going right? Firstly, let's go back into history. FDIs have played a very important role. Foreign investments have opened up our rubber plantations, the tin mines. It was a British beginning, and in the 1970s, we went aggressively to promote electronics, and we're now one of the biggest locations for semiconductors in the world. So we've been successful in the past, and we've been attracting a steady flow of foreign direct investment, but with the financial crisis of the 97-98 and the recent meltdown, we have been one of the countries that have basically affected. Having said that, of course, in the last few months in particular, we've seen a revival of interest in Malaysia, and Malaysia is coming back again on the map, on the right of the screen. Ace, for example, an American insurance company decided to come to Malaysia because of reform that has been put in place. Before this, an insurance company, a foreign insurance company, can own only 49 percent of equity in a Malaysian insurance company, but the Prime Minister announced in May last year that a foreign company can buy up to 70 percent, and that's a motivation for Ace to come to Malaysia. So what has happened is that I think foreign companies, foreign investments are excited about the reform, which the new administration has put in place, a more liberal environment, a more open environment, more relaxed equity conditions. There was one rule, it's called the Foreign Investment Committee Guidelines. Many investors were against it, both foreign and local as well, and our Prime Minister decided to repeal those rules and regulations, and that was welcomed by many foreign investors. And in April, he announced the opening up of 27 sub-service sectors. So although, of course, it takes a while before this interest on a part of foreign investors can be attracted to Malaysia, but we're beginning to see I'm a straight minister because I travel a bit throughout the world, and I can see a renewed interest in Malaysia. So this is a welcome development. It's got to do with the reforms which are being put in place, and going forward, I believe the momentum is going to steadily pick up. Talking about the benefits of reform and the good response of investors is one side of it, of course, but we all know, and in fact Americans in particular, it seems, know that the politics, domestic politics around trade aren't easy to manage. Could you talk a little bit about the politics of trade and reform in Malaysia? How are you and the Prime Minister selling this to Malaysians, and do you see any risks to the reform? Let me begin with trade. As meeting minister, I'm convinced that the way forward for Malaysia is to open up its economy, and it's not easy. People are being comfortable, being protected for many, many years, for many decades, and we have to market this idea to them. That open trade is good for you. There's been resistance, but I think the commitment of the Prime Minister that we've got to do things differently, and that's been a big help to all of us coming from the top. The signal is very clear, we have to open up and reform, otherwise it's going to be very difficult. I've got to deal with my colleagues, dealing with various sectors of the economy when it comes to free trade agreement. Of course, I've got to persuade them, it's not been easy, but in the end, they've come around to accept the need to open up. That's as far as trade is concerned. On the overall reform agenda, of course, as an open society, as a democratic society, we have to deal with challenges. There are people who are supportive of us, and of course there are others who have been comfortable with the level of protection provided by government, and some people are comfortable with the way things are. They do not want to change, but the test of any strong leadership is the ability and the courage to move forward. For us, there's no turning back. The only road to success is change, unless we are prepared to change. We cannot be a developed country. We can be a middle-income developing country, as we've been for the last 20 years, but we don't think we can move up the income ladder unless we implement radical changes. It's about engaging with the public, engaging with the various stakeholders. The Economic Transformation Program, for example, it is unprecedented in religious history, so is the Government Transformation Program. What has happened is that in the last few months, there has been a lot of engagement on the Economic Transformation Program, for example, 21st to 22nd, we have what are called open days. So we share with the public, this is what the government wants to do, the 12 sectors, you tell us, is this good for us? We are the institution concerned, we'll be gathering feedback from the public, and I think this is most welcome by the people, and by this process of engagement with stakeholders, hopefully they'll be buy-in, and hopefully there will be less opposition to the radical changes we are putting in place in Malaysia. It sounds like a good plan, and of course I guess if those investments flow in, then you'll have strong job creation, and that probably will help. As you move to transform the economy into a high-value economy, I assume one of the key performance indicators has to be enhanced education, and obviously, you know a lot about this in your previous role in cabinet related to education. Could you talk a little bit about what your view is, how important education is to this process, and maybe some of the things that the Malaysian government is doing in this area? We have made a lot of strikes in education in terms of literacy, in terms of primary education. But the main issue is quality, and secondly, the main issue is supply and demand. To meet the requirements of industry, another issue is language. So those are the three main issues. Quality, supply and demand, and language skills. And when I say language, it's not just English. It's got to do with foreign languages, Mandarin. We have not been doing too well in that. I mean, we are in between China and India. We should have more people speaking foreign languages. So that's one area. But the two biggest problems will be quality and matching supply and demand. Let me take up the issue of supply and demand. For example, we have what we call the multi-meter super corridor, which requires many ICT graduates of a certain standard. So there are challenges there. We're not producing enough numbers. So what we have done is to have some short-term measures. We brought in infosys from India, or we brought our students to the infosys campus. So that's one way in which we try to mesh the supply and demand. This sector is growing fast. The ICT sector in Malaysia and demand is high. And we have a number of successful companies, global companies, which has decided to make Malaysia as a base for its original operations. Some of the most prominent American Korea companies, some of the biggest banks in the world have got their data centers in Malaysia. But we need the skills. So that's one area. Another is engineering. We need people to do research and development. We need more PhDs. So the challenge for us is to produce more PhDs in engineering, more masters in engineering. And that's got to be ramped up quickly. And the government recognises that we need to get this done quickly. And at the end of this year, we're setting up the talent cooperation. The talent cooperation is about enhancing the skills of Malaysians. It is also about attracting Malaysian talent overseas. It is also about attracting the best talent globally. We have tried this many times in the past. Success has been limited. But with the commitment and the realisation, we improve the quality of higher education in particular. It's going to be very tough for us to be a fully developed nation. So, going forward, we have put in place a number of measures, including getting industry and universities to collaborate, close it to each other, getting all the research funding in the universities to be commercialised. It's got to be a new way of doing things. You, ASEAN, Malaysia is obviously the third largest economy in ASEAN. And ASEAN has been moving very aggressively on some trade agreements with major partners. Has Malaysia benefited from these FTAs? And could you talk about the nature of those FTAs? I think some in the United States have the assumption that the ASEAN, or some of the FTAs in Asia are less than the standard that an American negotiator might pursue. But Minister Grocer, for instance, was disabusing me of that idea earlier this morning. I'd be interested in your perspective on that. And also, if you could compare or talk about Malaysia's trade policy, are you and how your potential involvement in the Trans-Pacific Partnership might fit into that policy? Let me begin by saying a few words about the ASEAN Free Trade Agreement. First January 2010, we have 97% of tariff lines at zero within ASEAN. We are almost there, but by 2015, we suppose an ASEAN Economic Community, zero tariffs across the board in ASEAN. ASEAN is a region of 580 million people and there has been an increase in intra-ASEAN trade from 15% say 20 years ago, now it's about 25% to 6%. So in our view, that's the direct result of the lowering down of tariff barriers within ASEAN. So we're trading more among ASEAN. Second would be ASEAN FTAs with our trading partners. We have China, Japan, Korea, India, Australia and New Zealand. So these are the FTAs which ASEAN and Malaysia as a very active member of ASEAN of course, we stand to benefit from all these free trade agreements. Yes, it is true that any trade agreement has got exceptions, but these exceptions are very few in number. By and large, we've been able to benefit from these free trade agreements. Before tariffs were higher, now tariffs are lower, in some cases zero, and our people have been responding. For example, you look at the forms before you avail yourself a facility according to the free trade agreement, you've got certain forms to fill. Looking at the number of forms being issued to exporters and also importers, there's been a fairly big increase in the volume of trade. So we have been beneficiary not only of free trade given among ASEAN members, but also between ASEAN and its major trading partners. And ASEAN has been talking to the Gulf countries to further advance this agenda of trade liberalisation. On TPP, this is a new initiative which is propelled by eight countries. We have expressed our intention formally to come on board. Discussions are quite advanced. My people were in Lima, Peru to engage with every country, every one of the eight countries, which are in this process. And the report I get is that they all want unanimous. They all want Malaysia to be on board. Malaysia is a small country, but a very important trading nation in the world. And they are very excited at the possibility of Malaysia being a full-fledged participant in discussions on TPP. So we've expressed our intention and we're getting green light from all these countries. And we hope this will come in the very near future. And once we are formally accepted as a full participant, of course, we'll be participating as a full-fledged member in this negotiating team. Hopefully that will happen soon. Well, that would be quite welcome. I mean, I guess that's the way we'll end up with a U.S.-Malaysia FTA. We were, as you know, on that for a number of years. Now we have formally, both of us have formally abandoned the idea of having a bilateral FTA. This is a superior solution. FTA, TPP, eight countries, and hopefully Malaysia will be one of them, will be the ninth country. Some of us in the sort of the think tank sector have the luxury of being outside of government, so we're not constrained by some of the statutory requirements. And I, for one, have sort of been pushing on the idea that the U.S. should probably try to engage in a free trade agreement with ASEAN. How do other partners of ASEAN deal with the wide disparity of levels of development in ASEAN? And I guess of the countries you mentioned, Australia and New Zealand would also have had to deal with the politics of the Burma issue. You've been at the table for these discussions. How are other partners dealing with those issues? First, as you know, in general, we are two groups of countries. One, the more advanced, with Singapore, of course, being a developed economy. And the other would be the lesser developed economies of ASEAN. In many ways, because of the vast levels of development, the big gap in levels of development, the trade agreement we have signed with Australia and New Zealand or Japan, the level of ambition has got to be a bit lower. By having said that, of course, it is a good agreement. So that's how we deal with differences within ASEAN by lowering the level of ambition to take into account the level of development in some of these countries. The other way we deal with that is to, in terms of tariff reduction, if for the more developed economies, it's going to happen faster. So in the case of lesser developed economies, it is staggered. So that's how we deal with the situation. Myanmar has been a difficult issue for especially the western world. But in our part of the world, it's not an issue. China has got very close ties with Myanmar. Japan has got close ties with Myanmar. South Korea also in New Zealand. So Myanmar has never been an issue. But when we talk to America or Europe, for example, we have been talking with this idea of having FTA between ASEAN and EU. And one something block, of course, was the status of Myanmar. So yes, with some countries, Myanmar has been an issue. But in general, we do not have any problem dealing with our Asian neighbors on this issue. Myanmar is not an issue at all. Fair enough. Thank you very much. You've been visiting the United States for the past week or so, I think, talking to your counterparts and American companies. And we know the US is a major market for Malaysia and Americans are some of the top investors in your country. What's your mission here in the United States? And what sort of reactions are you getting to Malaysia and your pitch? Firstly, I would like to highlight the fact that the new installation of the Najib has decided that we should re-engage with America. There's been ups and downs in Malaysia. And the Najib has decided that we should come here more often. This is my second trip here in May. I'm here again. It is quite unusual for a trip minister of Malaysia to come here two times. So that in itself is a clear demonstration of the commitment to re-engage and to talk to our counterparts as well as American companies. I must say that the results have exceeded my own expectations. I was in Atlanta, I was in Philadelphia, and I'm now in Washington, especially the level of understanding about Malaysia. I was quite impressed that many people know us, corporate people. I ran seminars in Atlanta and also in Philadelphia. They were attended by two groups of people. One, people who are in Malaysia. Another group of people who have not been to Malaysia. Especially among those who have been to Malaysia, they are happy doing business in Malaysia. The service provided by Maida, for example. The handholding, the facilitation. That's good news for us. Coming from them, from the bottom of their heart. And I'm indeed gratified. I met a few companies which have decided to expand their operations, existing operations, and in some cases to go into new businesses. As I said, these have exceeded my own expectations. But I can see there's a lot of goodwill in my discussions with Ron Kerr. I can invest in a guarantee with a few other members of the US Congress. I can see that there's a lot more goodwill. There's better rapport, there's better understanding. And that's very much in line with the policy of the current government in Malaysia. Which is to re-engage, to develop closer collaboration. And America, as you know, is number two in Malaysia in terms of investment. Many of the top American names are in Malaysia. Intel, Dell, AMD, Kuala Lumpur. So GE, I'll do that. And I've been talking to some of them on this trip. And I'm pleased to note that some of them have got plans for Malaysia. Hopefully investment flows from America will go up. At the same time, I must remind you that Malaysia is also going abroad. Malaysians are going abroad. Our companies have gone to Asia, other parts of Asia, to China. One of our companies have gone to New York in the gaming business, for example. So Malaysian companies are also going out. Although at present they are in Asia, they've gone to India in construction, Middle East construction, banking in Asia. And there will come a time when Malaysian companies will come to America. So it's a two-way kind of process. I'm here to promote Malaysian exports. But at the same time, of course, we need to be prepared to buy more from America. That's the nature of any trade. It's got to be mutually beneficial. So it's not just Malaysian me coming here to attract American investments, or to get America to buy more products. It's also about Malaysians coming to America at some point in time to invest in this country, and also Malaysians buying more from America. And in the end, it's going to benefit both of us. Well, that approach is quite welcome. And actually we've seen the Najib paradigm, if you will, outside of the trade area, also in security. Yeah, security, education. We're doing in Afghanistan, for example. The collaboration, we're training the teachers, the police force, the medical team. As I said, this will not have happened without the close cooperation which has been put in place in the past one year between the two governments. It's not just trade investment. Of course, education has been there a long time. We have more than 100,000 Malaysians who have got the qualifications in this country. I know it on education. The number of Malaysian students in this country is... It's about 6,000 now. There used to be twice as many, at least. At one time, there were 20,000. During my time, I studied here as well. There were about 20,000 Malaysian students here. Those were the days when we were richer. Our currency was a lot stronger. I think the United States has some room to move forward on its education policy to make it easier for Malaysian and Asian students to come back to the United States. This is an area that we're looking at at CSIS, very close. Besides all this, I think... Exactly. Final question. Since you're here and you've been kind enough to give us an interview, I think the final question is, what advice do you have for Americans thinking about doing business in Malaysia, coming to Malaysia? What should an American who may not have visited your country know about Malaysia? Firstly, we've got a number of officers here. Maida, which is involved in investment promotion, has got six officers. Matri, involved in trade promotion. Three officers. Of course, we've got an embassy here in Washington. So the first place to go, we have people here. So, you know, good to see them. And we have a strong team in your embassy in Malaysia. They've been very supportive, helpful. They've been bringing Americans to Malaysia. Not only big companies, also small guys, people in small business. We welcome them. Malaysia has got good infrastructure. Many people speak English in Malaysia. We have good IP protection. Five years ago, that was an issue with another American company. Now they're happy with the system we put in place, including the setting up of IP courts, for example. Malaysia is a good place to live. It's an open society. We are moderate Muslim country. We're stable politically and good infrastructure. So these are some of the assets that we have. And those Americans who have been to Malaysia know what I mean. We have, last year, 220,000 American tourists coming to Malaysia to enjoy the good food, the good scenery, ecotourism, the beaches. So we hope more Americans will come to Malaysia. And there's a lot of good will, as I said. More than 100,000 Malaysians have studied here in the last 40 years. And that's a big help. I mean, you are here for four years. You have friends. You know the system here. And that's a big reservoir of good will that we have in Malaysia. So Malaysia is in the center of Asia, in between China and India. We speak English. Americans are most welcome to Malaysia. Well, as an American who's been coming to Malaysia for about 25 years, I can attest to everything you just said. It's a fantastic place to live. Those who live in Malaysia know what I mean. So I think, as we say, to know Malaysia is to love Malaysia. Malaysia is truly Asia. If you happen to not only visit Malaysia, but more importantly, live in Malaysia, then you know that we are nice people. We are open to foreigners. We are an open and tolerant society. And this has got to do with the education that we get. Because Malaysians are everywhere. You go to China, you have Malaysian students. Australia, India, Pakistan, Egypt, Poland, Russia, UK, Canada, you name it. We have Malaysians everywhere. And all these Malaysians will come. Many of them will come, not all. Many will come back. They'll bring back with them the qualifications, the experience. And I think that's one reason why Malaysia is a dynamic society. Because we have encouraged our people to go out and anywhere in the world to get a good education. We have Malaysians in Germany who speak French, Malaysians in France doing engineering, Malaysians in Japan, in Korea, in China, in Hong Kong, in Taiwan, Singapore. Malaysians are everywhere. Many of them come back. And I think that adds to the dynamism of Malaysia. And there are many Malaysians who understand America well. Minister, I really want to thank you for your time. Your country is lucky to have you out there on point. And I wish you every success in your mission.