Malaysia's ties with the two Asian giants are at risk after Mahathir tears up an agreement, say opposition lawmakers The honeymoon period for Malaysia's new premier, Abdullah Ahmad Badawi, has ended abruptly with allegations the country's ties with India and China have been damaged by Mahathir Mohamad's decision to scrap a huge railway contract. The railway contract for the double tracking and electrification of 636km of line up the Malay peninsula is part of the US$30 billion, 5,500km Transasian railway to provide a high-speed link between Singapore and Kunming in China. The Malaysian government signed a letter of intent with a consortium led by Indian Railway Construction (Ircon) and China Railway Engineering Corp (CREC) in June last year. But just 10 days before he retired as prime minister on October 31, Dr Mahathir tore up the agreement with the Sino-Indian consortium and handed the job to a local group, Gamuda-MMC. MMC is controlled by tycoon Syed Mokhtar al-Bukhary, who won a string of infrastructure deals in the last years of Dr Mahathir's 22-year tenure. The letter of intent with the Indian and Chinese companies followed a state-level memorandum of understanding (MoU) signed by Kuala Lumpur with Beijing and New Delhi in May 2001. Malaysia agreed to pay for the job with an estimated 8 million tonnes of palm oil. 'It [the cancellation] is a diplomatic and bilateral trade failure that has marred the country's dignity as a trustworthy business partner, especially after signing an MoU witnessed by the leaders,' said opposition lawmaker Husam Musa of the Islamic opposition Parti Islam se-Malaysia. 'The cancellation was done without prior notice or mutual consultation,' he said in a statement. 'Is there a hidden agenda?' Opposition lawmakers met Indian and Chinese embassy officials yesterday and have requested details of the deal and why it was aborted. The lawmakers also plan to table a motion in parliament next week urging the government to reveal details of the government-to-government deal signed in May 2001 which preceded the letter of intent. Officials said Indian ambassador Veena Sikri protested to Mr Abdullah over the cancellation of the agreement and sought a review. She is in New Delhi to brief the Indian government. Investors and financial analysts have also questioned the validity of the cancellation and expressed fears that it would invite retaliation, especially from India, and that Malaysia's relations with the two Asian giants would suffer. India is the largest importer of Malaysian palm oil and state governments in India have given at least M$6 billion (HK$12.26 billion) worth of highway construction projects to Malaysian companies. Liu Tian Khiew, senior leader of the opposition Democratic Action Party, said: 'China and India are Malaysia's very important partners, not just in trade but also in politics, culture and education. We urge the government to review the deal to ensure fair play and act in the best interest of the country.' There was also some controversy about the bidding process. An official at the Malaysian Ministry of Finance said Ircon and CREC, working with a local partner, first submitted a bid for M$42 billion and after months of negotiation, lowered it to M$30 billion, then to M$23 billion and finally to M$19.7 billion. It is not clear why the first bid was high and later lowered by one-third when the government's estimate of the project's cost remained unchanged at M$19 billion. Deputy Finance Minister Chan Kong Choy told parliament that Gamuda-MMC was successful because its bid was the lowest. He also said 'there is no question of reimbursement'.