The controversial British decision linking arms to aids in the Pergau dam project in Malaysia has recently resurfaced in the British media. The Economist weekly recently highlighted what it described as the “British government’s muddled trade and aid when dealing with Malaysia over a large arms contract”, with the following report:
“THE Pergau dam in Malaysia, which is being built with £234m ($377m) of British aid, is perhaps the most notorious example of how not to encourage exports. Illegal and expensive, the deal has been an embarrassment to the British government ever since it was first exposed in 1990.
“Britain promised to provide aid to Malaysia in March 1988, during negotiations over a £1.3 billion deal to sell Hawk fighters there. The agreement directly linked aid to the arms deal, pledging that the more was spent on arms, the more aid there would be. Mrs (now Lady) Thatcher confirmed the arrangement in September 1988.
“When details of the link between arms and aid first appeared in the British press, they were strenuously denied by the Foreign Office. Which was hardly surprising: this use of aid, the High Court declared later, was illegal.
“Lord Justice Rose ruled that the project on which the aid was going, the Pergau dam, was economically unsound, as well as unlawful. It appeared that their enthusiasm for the arms contract drove British ministers to ignore the law, rising costs and their own officials.
“In 1993, the National Audit Office, the government's accounting watchdog, reported that officials had warned ministers the hydro-electric scheme was not a ‘prudent and economic’ use of aid. In February 1990, the Overseas Development Administration (whose money was being used), said the project was ‘a very bad buy’. The then foreign secretary, Douglas Hurd, gave the project his go-ahead anyway, in July 1991. (He later explained that he believed he had no option in view of the prior commitment given to the Malaysian government.) Sir Tim Lankester, the top civil servant in the ODA, formally dissented, telling ministers the spending was improper.
“The government has since exacted its revenge on Sir Tim. He was obliged to leave the civil service after the Department of Education, where he was permanent secretary, was merged with the Department of Employment. He is now director of the School of African and Oriental Studies at the University of London.
“Meanwhile, in Malaysia, relations with Britain have been soured by the affair and the dam, which is still under construction, gets ever more expensive. The latest estimate of its cost is over $800m.”
The first thing Malaysians want to know is whether it is true that the cost for the Pergau dam has escalated from the original RM1.3 billion to over RM2 billion and the reasons for such escalation, and why Malaysians have never been informed about the new increased costs for the Pergau dam.