While the government continues keep mum on the status of the proposed mammoth incinerator in Broga, the Japanese firm contracted to build it announced today that the project has been torched.

According to a Reuters report, engineering firm Ebara Corp said it had lost the order worth more than 50 billion yen (RM1.57 billion) to build Malaysia's first mega-incinerator, touted as the biggest in the region.

The cancellation of the controversial project, which drove Ebara shares down by as much as 5.2%, could erupt into a diplomatic spat between Tokyo and Kuala Lumpur.

Residents near the proposed site just south of Kuala Lumpur had mounted a strong campaign against the incinerator, voicing concerns about emissions.

Ebara spokesperson Toshiaki Suzuki said that he was aware of the protests but did not know if this had prompted the cancellation of the plant, which would have been able to process 1,500 tonnes of trash a day.

The termination of the contract, worth about 10 percent of Ebara's revenues in 2005, is unlikely to affect its earnings, said Suzuki.

This is because it happened at an early stage of a project that would have lasted more than four years, he said. Construction for the mega-project had not yet started.

Waiting for confirmation

A senior official at Hartasuma Sdn Bhd, Ebara's Malaysian partner for the project, said he had no immediate comment.

"We will wait for official government announcement on the project," Mazlan Mohamad told Reuters .

Singapore's Straits Times newspaper said this week that Japan had warned Malaysia of dire consequences if it terminated the project.

Japanese diplomats were not immediately available for comment but the newspaper reported the Japanese embassy in Kuala Lumpur had questioned why Malaysia was reviewing the project after a contract had been awarded.

While government sources revealed that the incinerator project had been shelved, there had been no official confirmation.

Last Friday, Housing and Local Government Minister Ong Ka Ting maintained that there was no official announcement on the matter.

The government's stand had irked the residents in Broga, who are demanding for an answer.