Greg Sheridan, Foreign editor – Julia Gillard's proposal for a regional refugee processing centre in East Timor has been dealt a crippling blow by Malaysia's Prime Minister, Najib Tun Razak, who says he has no knowledge of the plan.

In an exclusive interview at his prime ministerial office at Putra Jaya, just outside Kuala Lumpur, Mr Najib, when asked whether his government had given any thought to the proposed East Timor centre, said: "No, I've not been alerted about that proposal."

Mr Najib's comment indicates that Ms Gillard's proposal has failed to make any headway in the region, and follows the declaration by East Timor's Deputy Prime Minister, Jose Luis Guterres, this week that the centre should not be built in the fledgling nation and would be better located in Australia.

It also indicates the inability of Canberra to get any regional leaders to take the East Timor idea seriously, despite nearly seven months of ostensible Australian diplomatic and political activism on behalf of the idea.

Ms Gillard lobbied Southeast Asian leaders on the proposed East Timor processing centre at the East Asia summit in Hanoi in November and then went to Malaysia to try to sell it there as well.

Mr Najib was sick during Ms Gillard's visit and she saw Malaysia's Deputy Prime Minister, Muhyiddin Yassin, who would not commit to the idea. Instead, he said Malaysia would need further information before deciding on its position.

At the time, Mr Muhyiddin said: "We need more information (about the East Timor centre) because there's a lot of implications."

Ms Gillard has repeatedly said the advent of an East Timor centre would require countries in the region to change substantially the way they deal with asylum-seekers, especially those who want to come to Australia. So far no regional leader has supported the idea.

While it is apparent that Ms Gillard's East Timor proposal has gained zero traction with the Malaysians, Mr Najib expressed his determination to stamp out any people-smuggling activities within Malaysia.

Many illegal immigrants who come by boat to Australia transit through Malaysia.

"We definitely would not want Malaysia to be a staging point for people-smuggling," he said. "We will do whatever we have at our disposal to eliminate this. Malaysia wants to work closely with Australia."

Mr Najib confirmed his government had discussed the people-smuggling problem in general with Australia.

"We have been as co-operative and helpful as possible," he said. "In fact, we have interceded in one or two incidents in which people have been apprehended, having been involved in such odious activities as people-smuggling."

The Malaysian Prime Minister revealed plans to visit Australia in March, although precise dates have not yet been finalised.