View from City Road: A lot of noise about nothing

There was always something odd about the Malaysian trade rumpus. If only half the threats by the Prime Minister, Mahathir Mohamad, had been carried out, Malaysia's interests would have suffered as much as Britain's. What was he really up to?

Many British companies and bankers soon worked out that the answer was not very much - the threats were all hot air. This explains why they spent so much time trying not to talk about Malaysia in public. They sensibly believed that the less they said, the more normal their private trade relationships would remain.

Now we know from the latest trade figures just how right they were to keep a low profile. Kuala Lumpur's outrage at press comment on the Pergau Dam project has done nothing to dent UK exports to Malaysia.

It is just about believable that the Foreign Office and the Department of Trade and Industry used their sweet- talking skills to calm the Malaysians down. More likely, the whole row was just a diversion from Malaysia's own economic mess.

The country has been struggling to keep exports competitive in the face of an over-valued currency, but the campaign has been unsuccessful. The Malaysian central bank, itself notorious for losing money speculating in the markets, has fought an influx of foreign funds.

This spring, the bank tightened reserve requirements and raised barriers to capital movements, but it was not enough. It is hardly a surprise that Malaysian spending power shot up, imports boomed and exports collapsed.

The trade figures tell the story. And while these graver issues exercised the mind of Dr Mahathir, it was business as usual for the likes of GEC and BICC.

In Kuala Lumpur yesterday British and Malaysian officials were stressing that the ban on contracts for UK businesses covered only government business and that private sector trade was proceeding normally.

The difference between a private and public project in Malaysia is not always clear-cut. But British business reports no noticeable difficulty in tendering for either. What a ridiculous row it all was.