Pergau Dam Affair: Diplomats warn of dangers to contracts: 'Sunday Times' story linking Malaysia's prime minister with bribery claims proved the final straw

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The Independent Online
RELIEF in Britain at the end of Malaysia's seven-month-old embargo on awarding government contracts to British firms should be tempered by the awareness that it could easily be reimposed, diplomats and political observers warned yesterday.

This is not the first time that the touchy and autocratic Malaysian Prime Minister, Mahathir Mohamad, has sought to punish perceived insults to him or his country's sovereignty, and it is unlikely to be the last. With the political temperature in Malaysia expected to rise as the next general election approaches, the government could be tempted at any time to take well-publicised offence at a report in the international press or a chance remark by a foreign leader.

The timing of yesterday's decision was not considered significant. Dr Mahathir and other senior figures have been saying for some time that they considered the embargo to have served its purpose. According to British sources, it might have been lifted several weeks ago but for a report in the Financial Times late in July that linked Abdul Ghani Othman, the Malaysian Youth and Sports Minister, to the disappearance of gold coins at Standard Chartered Bank. In Kuala Lumpur's eyes, the haste with which the bank and the British authorities sought to avoid further damage to relations showed improved awareness of Malaysian sensitivities.

Despite the extravagant language used by Dr Mahathir and some of his colleagues in the course of the dispute - his deputy, Anwar Ibrahim, said the British press had implied that doing business with 'brown Muslims' inevitably involved bribery - wider political and economic relations were barely affected. The damage was felt by a relatively limited number of British companies.

'It is impossible to say how much we suffered, but there is no question that we were hurt,' a British official said yesterday. Although British exports to Malaysia shot up in the first half of this year, this may be misleading, since the figures mainly reflect orders already in the pipeline when the embargo was imposed.