Gloomy outlook as trade ban takes effect

(First Edition)

BRITISH companies in Malaysia will be starved of business and forced to close their operations down in the years ahead.

That was the gloomy picture being painted privately by local officials and business executives as the impact of Wednesday's decision by the Malaysian cabinet, to scrap future public sector deals with Britain following adverse press coverage, sank in.

Such is the closeness of the ties between the public and private sectors, and so strong is the Malaysian government's grip on commerce, that all British companies - not just the major contractors - will be affected. One local businessman pointed out that his colleagues were all keen to please their government, and that the corporate influence of UMNO,

the ruling party, goes far beyond the public sector. Many politicians have extensive shareholdings. The loss to Britain of a trading partner which, despite its small size, is larger in export terms than China, is disastrous.

It emerged yesterday that five memoranda of understanding covering major projects signed by John Major on his visit to Kuala Lumpur in December will now not go ahead. The five are:

Agreement for an Anglo-Japanese consortium led by Balfour Beatty, GEC, and Trafalgar House to build the new Kuala Lumpur International Airport;

A steel plant to be built in the Klang Valley by Trafalgar House;

A British company, Specialist Vehicles, to develop bus and coach transport in the Malaysian peninsula;

British Gas to erect a power station;

John Brown to construct a gas turbine power station in Johor.

In all, the five projects total billions of pounds worth of work, and many jobs in Britain and Malaysia.

In a desperate attempt to avert the crisis, local expatriate business leaders have drawn up a five-point plan. Effectively a PR campaign, it was circulated among companies exhibiting at the nearby Singapore Air Show.

The campaign is primarily designed to redress the critical media treatment of some British activities which has so upset the Malaysians. It includes

advertising in praise of Malaysia in the British press, lobbying editors, journalists and politicians and working closely with the British High Commission in Kuala Lumpur. The chances of it succeeding however are virtually non-existent. Sources close to the Malaysian government have confirmed that the Prime Minister, Dr Mahathir Mohamad, was not prepared to reconsider his position. Officials at the High Commission said they had no doubt the policy was here to stay. No immediate plans were being made for any senior diplomats or politicians to fly from London. Reports of Baroness Thatcher being ready to mount a rescue mission and sweet-talk her old friend Dr Mahathir were not being taken seriously.

High Commission officials admitted there was little they could do. In what could be seen as a tacit admission that they expect the fall-out to extend much wider than the large companies, they have cancelled a press conference scheduled for Monday by a trade mission from small firms based in Suffolk and Norfolk.

While there is not any evidence of anti-British sentiment on the part of local people they have been quick to applaud their government's action. They have not read the hostile British press - the Malaysian media is heavily censored and has carried virtually no reports on the Pergau dam affair and subsequent revelations of links between overseas aid and arms deals. But many locals say they are fed up with the arrogance of some British companies and alleged over-charging. Others speak of anger at the way some British companies exploited the warmth between Lady Thatcher and Dr Mahathir. If deals were not going according to their liking, the British companies would threaten officials that they had a direct line to Dr Mahathir. 'Not any more they don't,' said one local sub-contractor gleefully.

Officials were keen to try and explain last week's Sunday Times article which accused Dr Mahathir of taking a bribe and pushed him over the edge on Wednesday. The officials claimed that Wimpey was duped by a con-man who said he had access to Dr Mahathir, promising to help win a pounds 600m contract. The man had no connection with the Malaysian PM, say the officials, but that did not stop him from submitting a claim for a dollars 50,000 bribe.