CPI introduction

We are reproducing this recent book review from The Economist. It deals with the sordid politics and economics of foreign aid from the point of view of Britain, the donor country. This case study is of particular importance to us in Malaysia as the recipient country where there has been a string of major scandals associated with dam construction, ranging from Bakun and Baram to Pergau and many others yet uncovered.

According to the book written by Sir Tim Lankester, a former British civil servant who played a central role in the Pergau fiasco, not only could Malaysia have produced electricity far more cheaply from other sources but there were also allegations of corruption “when the Malaysian utility which received the heavily subsidised loan was privatised, its shares were priced far too low… [so] the British aid benefited the well-placed Malaysian institutions and individuals who bought them.”

This scandal took place under Dr Mahathir Mohamed’s watch as prime minister. It is being repeated by the current government’s fixation with mega projects and the potential for massive, hidden and undeserved financial gain it is providing to key players in the political establishment, civil service and private sectors.

The lesson, according to the book review, is one that our decision makers on massive infrastructure projects can well learn from. According to it, “had he (Tim Lankester) or another civil servant blown the whistle earlier on the disgraceful link to the arms deal – which amounted to inter-governmental bribery on a massive scale – the whole sorry saga might very well have been averted.”

‘The Economist’ book review

Aid and trade : At look at the underbelly of foreign aid

Book title – The Politics and Economics of Britain’s Foreign Aid: The Pergau Dam Affair

Author– Tim Lankester

Publisher– Routledge (194 pages)

It is easy to understand why tying foreign aid to exports appeals to rich-world politicians. It seems to kill so many birds with one stone: international do-goodery; jobs and profits at home; perhaps, as a consequence, corporate donations for your party. It is also easy to see why the marriage will always be fraught. The exporters’ interests—to maximise profits—are in direct competition with the interests of the aid recipients. It is more than likely that this tension will be reflected not just in difficult negotiations with the exporters and their customers but in fierce turf battles between the various government departments involved.

Continue reading HERE.