Malaysia will sue if Britain stops loan: PM Mahathir

Malaysia will sue if Britain stops loan: PM Mahathir

KUALA LUMPUR (Reuter): Malaysia's Prime Minister Mahathir
Mohamad said yesterday his government may sue if Britain stops
payment on a concessionary loan for the controversial Pergau dam.

"If they don't pay they would be breaking a contract,"
Mahathir told reporters after Chinese President Jiang Zemin
delivered a speech on Beijing's foreign policy.

Britain's High Court on Thursday ruled that Foreign Secretary
Douglas Hurd had acted unlawfully in authorizing 234 million
sterling (US$376 million) in aid for the dam.

The court upheld an appeal by an aid lobby group against the
subsidized loan, which the government admitted became "entangled"
with a huge British arms deal with Malaysia.

"If you break your contract, there are laws in this country
which apply to those who break their contracts," Mahathir said.

Asked about calls in Britain to cancel the balance of the
loan, he said: "If they don't pay, then we may have to take them
to the courts."

British Foreign Secretary Douglas Hurd said the government
would meet its obligations. "The dam has to be built and we have
to meet our contractual obligations," a statement from the
British High Commission (embassy) yesterday quoted him as saying.

"The British government is considering whether to appeal
against the High Court's decision, which does not alter the
British government's determination to fulfill its commitments in
Malaysia," the statement said.

Mahathir described the court ruling as "an internal matter for
Britain".

Britain has just finished healing a rift with its former
colony. Angered by British press reports about corruption in
Anglo-Malaysian trade, Malaysia banned public contracts for
British business in February. It relented seven months later.

Construction on the 600 megawatt Pergau dam in the east coast
state of Kelantan is about three-quarters finished.

Media report

Controversy about the dam erupted in October when a report
issued by Britain's National Audit Office disclosed that
Britain's Overseas Development Agency (ODA) had not approved the
soft loan, saying the dam project was uneconomical.

Hurd, who faced tough parliamentary and media criticism about
the Pergau loan, has maintained he reacted rightly in
disregarding the ODA's objection. Promises to Malaysia had to be
honored, Hurd said, and he believed the national interest would
have suffered if the loan had been canceled.

Hurd told parliamentary hearings the aid "became briefly
entangled for a few months in 1988" with a 1.3 billion sterling
($1.9 billion) arms deal that former prime minister Margaret
Thatcher signed with Mahathir.

The deal -- under which Britain sold 28 British Aerospace
fighter-trainers, ground-to-air missiles, radar from Marconi and
two fast frigates from GEC-Yarrow -- itself marked an effective
end to a "Buy British Last" policy, imposed by Mahathir seven
years earlier.

At first Malaysia was puzzled over the "arms for aid scandal"
in Britain, with officials saying it was an internal British
affair. But that turned to irritation when what was viewed here
as a perfectly reasonable hydro-electric project was presented in
Britain as a misuse of taxpayer's money.

Irritation changed to outrage when the British press began
examining how business with Malaysia was conducted.

Malaysia imposed the ban on public contracts for British
business days after the Sunday Times of London published a story
saying that a British construction firm was prepared to pay
bribes to Mahathir to secure a building contract.