When Foreign Aid and Wider Foreign Policy Goals Clash: The Pergau Dam Affair
The funding of the Pergau hydroelectric project in Malaysia in the early 1990s was the worst failure in Britain’s foreign aid programme in its 50-year history. It involved a gross misuse of the aid budget because the project was exceptionally uneconomic. It was also indirectly tied to a major arms deal which was contrary to international rules and Britain’s official aid policy. The aid was eventually determined to have been contrary to UK law, and Malaysian politicians were suspected of taking bribes. The result was a political storm at home and a sharp deterioration in relations between the UK and Malaysia. The chapter analyses how the wilful misuse of aid turned into a serious foreign policy blunder.