Leading Article: Trade but no honour salvaged from Pergau

IT IS welcome news that Malaysia has relaxed its ban on British companies competing for government contracts. The veto lasted seven months, occasioned by the anger of Prime Minister Mahathir Mohamad over allegations of corruption by the British press. But relief on all sides that the affair has concluded should not allow some pertinent facts to slip from memory.

The Malaysian imbroglio showed British policy made with little accountability and not much scruple. Dr Mahathir had conducted a two-year 'buy British last' campaign which endured until 1983. Margaret Thatcher, then Prime Minister, was determined to repair the damage in person. She did so by one-to-one diplomacy, arms sales and development aid.

The Overseas Development Agency awarded generous grants to Malaysia for water supply projects. In 1988 an arms deal worth pounds 1.3bn was concluded. Two years later Kuala Lumpur ordered British Aerospace training aircraft worth pounds 403m and the Malaysian navy subsequently contracted to buy two frigates. But the apotheosis of this policy was the Pergau dam affair. The British taxpayer contributed pounds 234m of the pounds 400m contract, all of which went, no doubt meritoriously, to British companies. John Major and Douglas Hurd intervened to overrule the then head of the ODA, Sir Tim Lankester, who argued that the scheme was 'an abuse of the aid programme' and of dubious value.

Mr Hurd later admitted that arms and aid policy became briefly entangled at the time, a conclusion endorsed in tones of ringing condemnation by the Commons Foreign Affairs Select Committee. Presidential-style diplomacy a la Thatcher, blurred distinctions between aid and trade, policies made in cabal and implemented by a secretive clique: none should feature again in British dealings with our overseas partners.

Mr Major dealt better with Dr Mahathir's ban than he had with the original contract. Britain opted for quiet diplomacy, leaving the megaphone to politicians in Kuala Lumpur whose general irritation with the Western press found a ready target in journalism that did not always shine with integrity. Malaysians, like others in the developing world, are entitled to be angry when sections of the Western media routinely ignore serious political and economic news from their countries only to descend in full cry when scandal, disaster or tragedy strikes. Perhaps the least desirable effect of this affair would be to reinforce Asian politicians like Dr Mahathir in their belief that prosperity counts more than freedom of expression.