ABSTRACT

The British government used its aid budget to fund the Pergau hydro-electric scheme for reasons other than sound development: the real purpose was to secure Britain’s commercial and political interests in Malaysia, including giving a major boost to defence exports and providing orders for civil contractors. The project was grossly uneconomic as judged at the time by ODA, the World Bank and even Malaysia’s own power planners. The Malaysian government nonetheless wanted the project because of the subsidy provided from the ODA budget, and because Dr Mahathir wanted a major project for backward Kelantan state and to diversify Malaysia’s energy sources. Unsubstantiated allegations of bribery in the British media infuriated him and caused a temporary rupture in trade relations. The decision to fund the project from the aid budget was eventually found to be unlawful.