Malaysia's slump saves the forest

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Malaysia has confirmed it is halting construction on its biggest infrastructure projects in a dramatic move to slash public spending. The cancelled projects include the building of a new capital city outside Kuala Lumpur at a cost of 20 billion ringgit (pounds 4.5bn).

Anwar Ibrahim, Malaysia's deputy prime minister and finance chief, said yesterday that several other "mega-projects" will also be frozen for an unspecified period. Among them are the controversial M$15bn (pounds 4bn) Bakun Dam in Sarawak, which environmentalists say would destroy more than 69,000 hectares of rainforest, displace thousands of people and produce little economic benefit.

The economically dubious Linear City Project, which aimed to construct the world's longest building at a cost of more than M$10bn, is also to be placed on hold.

Only last month, Mahathir Mohamad, the prime minister, was urging Malaysian businessmen to "think big". The grandiose projects were all part of his "Vision 2020", an ambitious programme to lift Malaysia on to a new level of economic development by the year 2020.

The abandonment of these enormous schemes in the face of a major economic downturn, which has been caused in part by investors' fears that the country is overstretching itself, is likely to meet a favourable response on the financial markets.

Over recent weeks, billions of dollars have been wiped off Malaysia's stock markets and the value of the ringgit has plummeted. But the cutbacks constitute a personal humiliation for Dr Mahathir, whose vision of a 21st- century high-tech Malaysia is now receding.

Central to his plans for a competitive, post-industrial Malaysia is the M$50bn "Multimedia Super Corridor", a 750sq km area of high-tech industries modelled on California's Silicon Valley.

At the heart of this scheme, which was to incorporate an advanced interconnecting digital network to attract high-tech investors, was to be Putrajaya, a new Malaysian capital city of unprecedented technological development. The decision to freeze construction on Putrajaya after completion of only the first phase of the city was the only surprise announcement in the package of austerity measures.

The development of a regional airport in the northern state of Kedah was also put on hold, while the armed forces were warned of stringent budget cuts over the coming months.

Several major infrastructure projects are still going ahead. A new M$9bn international airport in Kuala Lumpur is due to be completed next year. The capital's Light-Rail Transit system, a M$3.5bn attempt to alleviate the city's traffic congestion, will also go ahead, according to government officials. So will a private sector-led project to span the Strait of Malacca with a bridge connecting the peninsular with the Indonesian island of Sumatra.

By cutting back on commitments costing as much as M$100bn, the country will greatly reduce the cost of imports, and may even have a trade surplus. The economic turmoil in Southeast Asia means that Malaysia's future is far from assured, but an immediate crisis may have been averted.