A few years ago, I missed my connection DME-FRA-ICN, LH metal and LH ticket due to delay DME-FRA. LH refused to put me on an earlier flight ex DME without paying a ridiculous amount (the earlier flight had only J bucket available and I had a D ticket) which p**sed me off so I asked for compensation for delay. I had a 20+ hour delay but was told by LH that since the flights do not originate or terminate in EU I am not entitled to any compensation. Just to be sure I contacted a lawyer as well, who also said it is a grey area and I most likely am not be covered by EU 261 directive.
I guess this is a similar situation.
LH is an EU carrier, of course EC261/2004 applies.
The only gray area is in fact LH flight KUL-CGK.