Abstract
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.
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Notes
- 1.
I reported to Hurd through the Minister for Overseas Development, who at that time was Lynda Chalker.
- 2.
I have previously described and analysed this episode in my book The Politics and Economics of Britain’s Foreign Aid: The Pergau Dam Affair (Lankester 2013). I wrote this book primarily from my perspective as the senior official in charge of Britain’s foreign aid, with an emphasis on how and why Pergau was such a bad project and therefore could not be justified for aid financing. But since political and commercial factors loomed large in the causes and consequences of the decision-making, I also covered these in some detail. In this chapter, I switch the emphasis more to the latter, so as to situate the episode within a broader foreign policy context.
- 3.
Colin Chandler was seconded to DESO from British Aerospace plc. He later became chairman and chief executive of Vickers plc.
- 4.
The Independent, 18 July 1995.
- 5.
In my book (Lankester 2013), I undertook a detailed ex-post evaluation taking into account the actual path of international fuel prices since the early 1990s and factoring in a notional social cost for carbon emissions for fossil fuel alternatives (something that the ODA did not do in their original appraisal).
References
Foreign Affairs Committee. 1993–1994. Third Report, Volume 2. London: House of Commons.
Hurd, Douglas. 2003. Memoirs. London: Abacus.
Lankester, Tim. 2013. The Politics and Economics of Britain’s Foreign Aid: The Pergau Dam Affair. Abingdon: Routledge.
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Lankester, T. (2018). When Foreign Aid and Wider Foreign Policy Goals Clash: The Pergau Dam Affair. In: Kruck, A., Oppermann, K., Spencer, A. (eds) Political Mistakes and Policy Failures in International Relations. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-68173-3_11
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DOI: https://doi.org/10.1007/978-3-319-68173-3_11
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