Malaysia today denied foreign investment inflows would be adversely affected if it failed to sign a free trade agreement with the United States after formal talks ground to a halt.

Trade Minister Rafidah Aziz also insisted negotiations for the FTA were not deadlocked, although negotiators were mired in 58 unresolved issues.

"The Americans have long been here before the FTA ... To them the FTA is just another bonus, if it does happen," Rafidah told reporters, when asked about the impact of stalled talks on investment.

"It will not have any impact, negative or positive ... The trend has been good even without an FTA," she said.

Washington has been racing to conclude the free trade agreement (FTA) by the end of March to give the US Congress the requisite time of three months to consider the deal.

Negotiations between the US and Malaysia faltered during a crucial fifth round of talks on Friday after US negotiators revealed that "difficult issues" had arisen.

Rafidah brushed off suggestions that talks were stalled, despite there being no formally-scheduled sixth round of negotiations.

"There is no deadlock ... It's a very comprehensive negotiation ranging from goods to services and even economic collaboration," she said.

"At the moment, the talks are still on. Informal negotiations are still going on all the time."

'What can we do?'

However, the minister said there were 58 issues still unresolved and that both sides would not make the March deadline.

"It's difficult to achieve a conclusion. Of course, we would like to meet the deadline but we can't. What can we do?" Rafidah said.

The FTA must be passed through Congress before US President George W. Bush on July 1 loses his trade promotion authority which allows deals to be fast-tracked, and there are fears a Democrat-controlled congress will not renew that authority.

Deputy US Trade Representative Karan Bhatia has warned both countries risk signalling they are "not open for business" if the deal is not forged.

The US is Malaysia's largest trading partner, with trade in 2006 totalling RM170.8 billion in 2006.