Hurd attacked for overseas aid

PUBLISHED : Saturday, 23 October, 1993, 12:00am
UPDATED : Saturday, 23 October, 1993, 12:00am

FOREIGN Secretary Douglas Hurd came under fire from the Government's spending watchdog yesterday over aid provided for a Malaysian power plant condemned as imprudent, uneconomic and environmentally damaging.

The National Audit Office said Mr Hurd's rejection of advice from a senior civil servant responsible for vetting overseas aid raised British funding of the Pergau hydro-electric power project by GBP56 million to GBP234 million, (HK$646.52 million to HK$2.7 billion) or GBP158 million in real terms as payments will be made over 14 years.

This is the largest cash sum provided for a single scheme by the Overseas Development Administration.

Mr Hurd's 1991 decision to increase funding for the power station was taken after the estimated cost soared from GBP316 million to GBP417 million.

Either the Commons Public Accounts Committee or the Foreign Affairs Select Committee are now expected to carry out their own investigations into what went wrong.

Alan Williams MP, a Labour member of the Public Accounts Committee said: ''In economic terms, there is no justification for this.'' Substantial British aid was the key to the award of the construction contract by the Malaysian Government.

The Malaysian Government and Balfour Beatty, a British company tendering to build the power station with Cementation International, would not enter into a full contract without guarantees of British air support.

The Permanent Secretary at the Overseas Development Administration, Tim Lankester, had warned that additional aid should not be given because the project was uneconomic. It left Malaysian consumers paying GBP100 million more than necessary for electricity over its 35-year life.

Its capacity was not needed until well into the next century.

Mr Lankester warned that Mr Hurd's enthusiasm could stop aid to other projects, including those more beneficial to British business.