• by IPS Correspondents (london)
• Friday, November 11, 1994
• Inter Press Service

LONDON, Nov 11 (IPS) - Britain's Conservative government looks set to resolve its bilateral problems with Malaysia arising from the Pergau Dam debacle -- but the wider implications of its illegal use of aid funds for the giant project will continue to reverberate.

The government, reeling under the impact of a High Court ruling that it illegally provided 234 million pounds (about 375 million dollars) in development aid for Malaysia's Pergau Dam, has now pledged to maintain its payments to Malaysia.

But it is now faced with the curious problem of having to cooperate with the lobbying group that secured the High Court ruling in order to ensure that Britain's aid budget to the rest of the developing world actually conforms to the government's own regulations concerning aid disbursement.

After two senior British judges ruled yesterday that the development aid flouted aid rules, Malaysian Prime Minister Mahathir Mohammed warned that his government would retaliate if loan payments were held up by withholding its own payments to the main contractor on the 390 million pounds (625 million dollars) dam, Britain's Balfour Beatty construction company.

Britain, said Foreign Secretary Douglas Hurd, would not go back on its legal commitments to meet the cost of repayments on a loan taken out by the Overseas Development Administration, the government's aid organisation, to finance the Pergau Dam project.

If necessary, Hurd said, the government would provide the money from elsewhere.

While Hurd's statement should ensure there is no real prospect of continued dispute with Malaysia over the controversial project, it does not resolve the government's domestic dilemma over its action in flouting its own government aid guidelines.

Nor does it settle the question of whether it will now have to furnish the development aid budget -- which is supposed to be used to back development in countries that are generally much less prosperous than Malaysia -- with additional funds to replace money used to finance the Pergau Dam scheme.

ODA officials told IPS that it had so far paid out 34 million pounds (55 million dollars) to meet the cost of loan repayments. It was not certain whether it would be asking the Treasury to reimburse it for this expenditure.

© Inter Press Service (2014) — All Rights Reserved. Original source: Inter Press Service

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