[IWAR] MALAYSIA at odds with US

From: Michael Wilson (MWILSON/0005514706at_private)
Date: Sun Dec 14 1997 - 10:17:46 PST

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       Posted at 1:10 a.m. PST Sunday, December 14, 1997 
                   Malaysia, U.S. still at odds on financial agreement
       KUALA LUMPUR, Dec 14 (Reuters) - Malaysia Sunday stuck to financial
       regulations despite implicit U.S. threats to impose sanctions over them.
       Malaysia refused to budge from an offer it made under the financial
       services agreement concluded at the World Trade Organization in Geneva
       on the weekend: a maximum 51 percent ownership of local financial
       institutions by foreign firms.
       The U.S. demands unlimited foreign ownership.
       The issue particularly affects American International Assurance (AIA), a
       wholly owned Malaysian subsidiary of U.S. insurance company American
       International Group (AIG).
       A spokesman for Malaysian Deputy Prime Minister Anwar Ibrahim told
       Reuters that Malaysia would stand firm on its offer, and that AIG would
       have to divest 49 percent of its equity in AIA.
       ``At this time our offer stands at 51 percent on new and current
       companies,'' said Anwar's press secretary, Adlin Zabri. When asked if
       this meant that AIG would have to divest the 49 percent stake, Adlin
       replied, ``Yes, yes.''
       U.S. Trade Representative Charlene Barshefsky said Saturday the U.S.
       would seek improvements in some countries' offers under the deal.
       Barshefsky said countries such as Malaysia that forced divestiture of
       existing rights in the insurance sector would be ``carved out'' from
       U.S. obligations under the pact.
       That means the U.S. would be able to impose sanctions on Malaysia if it
       forced the U.S. insurance company to divest those holdings.
       ``This practice of forced divestiture is unacceptable,'' Barshefsky said
       of Malaysia.
       When the WTO deal was concluded on Saturday negotiators said it would
       help investor confidence by bringing financial services, fastest growing
       sector of the world economy, under WTO rules -- meaning that states
       breaking their commitments can be taken to its dispute settlement
       When enacted in March 1999, it would provide the big Western
       multinationals with guaranteed if phased access to most developing
       economies, increasing capital flows and improving the quality of their
       industries by injecting competition.
       Anwar, who is also finance minister said in a statement faxed to Reuters
       on Sunday that Malaysia was satisfied with the outcome of the talks, and
       that the government ``remained committed to the principle of progressive
       liberalization as inscribed in the WTO.''
       He added that Malaysia's offer to the WTO had ``contained substantial
       improvements to its 1995 offer.''
       ``These include (a) binding 51 percent majority ownership for the
       original foreign owners of locally incorporated insurance companies,''
       said Anwar. Other offers include allowing a higher number of expatriate
       personnel in ``several categories of financial services and...committing
       to issue new licences in the reinsurance subsectors,'' he said.
       Prime Minister Mahathir Mohamad told a business conference on Saturday
       that the 51 percent ceiling which Malaysia had proposed at global talks
       in Geneva would apply to all foreign insurers.
       ``We are now prepared to allow 51 percent foreign ownership. We are not
       willing to have 100 percent foreign-owned companies, foreign-owned
       banks, foreign-owned insurance companies,'' he said.
       ``The U.S. insists that it is 100 percent foreign owned. We are
       insisting on this 51 percent. We are not giving in although we have
       softened a bit,'' Mahathir added.
       Trade superpowers and developing countries concluded the landmark deal
       in the early hours of Saturday to clear away international barriers to
       the expansion of banking, insurance and securities industries.
       The agreement is scheduled to be ratified by the end of January 1999 and
       go into force by March of that year.
       )1997 Mercury Center. The information you receive online from Mercury
       Center is protected by the copyright laws of the United States. The
       copyright laws prohibit any copying, redistributing, retransmitting, or
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