An opposition parliamentarian today expressed concern over possible bilateral and trade repercussions due to the government's decision to award a multi-billion ringgit railway contract to a local consortium instead of the two foreign firms originally identified.

Expressing grave concern over a possible souring of ties with India and China, Kubang Kerian member of Parliament Husam Musa warned that Malaysia is in danger of losing its major Asian trading partners if it is not careful.

He said this in relation to the deal to build and electrify 636km of railway track as part of the Trans-Asia route from Singapore to Kunming in China.

Keretapi Trans-Asia Bhd (KTAB) - a consortium comprising engineering giants Indian Railway Construction Co (Ircon) and China Railway Engineering Corp (CREC) - reportedly submitted a reduced bid of RM24 billion from the initial RM40 billion for the project.

Last week, however, latecomers Gamuda Bhd-Malaysian Mining Corporation Bhd (MMC) announced they had been awarded the contract for RM14.5 billion. It will be the country's single largest privatisation project to date.

usam urged Prime Minister Abdullah Ahmad Badawi to review the decision, proposing that Ircon and CREC be given an equal stake in the project.

"The cancellation was done without prior notice or mutual consultation with the parties concerned, clearly revealing bad management practices by the transport ministry," he said, reading from a statement at a press conference at the Parliament lobby.

"It 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 prime ministers of both countries."

Noting the hasty announcement by Gamuda-MMC on the letter of award on Oct 22, he said it was the same day Ircon and CREC reportedly entered a further reduced bid of RM14.3 billion following the government's request to re-submit their tender.

"Denying them the opportunity on the same day by immediately awarding the contract to another is unprofessional and appears to have a hidden agenda, creating doubts and violating the established management ethical code," he said.

Ircon was scheduled to handle a 340km stretch between Ipoh and Padang Besar, while CREC was to take on the 296km southern stretch between Seremban and Johor Baru.

The project to lay double tracks is part of the US$30 billion 5,500km trans-Asia link initiated as a government-to-government deal. It included a counter-trade arrangement to swap an estimated eight million tonnes of palm oil in exchange for rail works over a five-year period.

'Unbecoming decision'

In a letter to the Indian High Commission in Kuala Lumpur today, Husam reiterated his concern over the Economic Planning Unit's decision which "(defied) the international agreement witnessed by the Indian prime minister and other dignitaries".

"The government's integrity in honouring an international agreement is an issue since it has a significant impact on the international investment community (who may now) shy away from Malaysia," he said.

"The unbecoming decision by the government to revoke the letter of intent issued to Ircon and CREC in mid-2002 is bad news to Malaysians, especially my colleagues in Parliament."

(However, it is still unclear if the letter of intent was in fact revoked by the government.)

Husam said the word among foreign investors is whether the government could still be relied upon, especially due to the unpredictability of policies.

He also questioned the future of Malaysian construction companies that want to work in India and China due to this issue.

He said the decision has jeopardised trade ties with India, currently the largest importer of Malaysian crude palm oil. India, which had RM10 billion worth of bilateral trade with Malaysia for 2001, was expected to up the import volume by 35 percent after the rail deal.

Husam said Ircon has done railway work in Malaysia worth over RM2 billion since 1988, with several major jobs pending.

"We wonder if this decision (awarding the contract to Gamuda-MMC) had taken into consideration the interest of taxpayers who are funding the companies' investments overseas.

"My colleagues are worried that the issue will eventually lead towards an unhealthy trend involving trade disputes, thus hurting long-standing trade relations with India and China."

Contacted today, India's deputy high commissioner Dr DM Vinod Kumar said the latest development will be "clearer" when high commissioner Veena Sikri returns from New Delhi next week.

Meeting requested

Husam also sent a similar letter to the Chinese embassy dated Oct 29 requesting a meeting with the ambassador and trade attache for "an informal discussion" in the interest of both countries.

"We (in Parliament) would like to see the country's integrity preserved and Malaysian investors protected from (the adverse effects) of this decision."

He said Malaysia and China have enjoyed good trade ties, citing the trade volume for 2002 that was worth US$14.2 billion and the creation of job opportunities.

"We are looking forward to more remarkable years ahead and we trust that you (China) will be able to deliver the US$25 billion target by 2005."

He described the Trans-Asia rail project as a "significant milestone" in bilateral trade relationship with India and China committing to import eight million tonnes of crude palm oil as one of the payment modes.

"This arrangement is very encouraging news to Malaysians, especially oil palm planters," he added.

Husam said he planned to call at the Indian High Commission, before meeting Chinese Embassy officials tomorrow morning.