The Mitsui kickbacks scandal is apparently only a small part of a broader controversy dating back to 1992 when the multibillion ringgit Telekom Malaysia's contract was awarded.

The controversy was sparked off eight years ago when then Finance Minister Anwar Ibrahim overruled a decision by Telekom to award the RM2.07 billion digital exchange supply contract to a number of international companies.

The interference sparked widespread allegations of political meddling and favouritism especially since the successful bidders had local partners with powerful political connections to Umno.

Anwar's order came in the wake of Telekom's decision to award the contract to three out of the nine bidders - Swedish-based Ericsson, Japan's Nippon Electric Company (NEC) and Germany's Siemens.

The other bidders were Fujitsu (Japan), Alcatel (France), Nokia Finland), AT&T (US), Samsung (South Korea) and Italtel (Italy). All the nine bidders had local partners.

However, the Finance Ministry, which has a 76 per cent stake in Telekom then, ordered the board to replace Siemens with Fujitsu, and to add another two bidders, Alcatel and Nokia.

The interference by the Finance Ministry sparked widespread allegations of cronyism where senior government officials were accused of rejecting bids by well-established companies in favour of those with political connections.

While Fujitsu's bid was submitted by Koperasi Usaha Bersatu, a cooperative run by Umno, Alcatel's local partner, Yayasan Bumiputra Pulau Pinang, is a foundation said to be closely linked to Anwar.

However, Singapore's Business Times on March 12, 1992 reported that Anwar's aides claimed the minister played no role in adding Alcatel in the contract.

"The minister had nothing to do with it. Alcatel's bid was approved by Telekom itself," Business Times quoted a ministry official.

The daily, however, reported that Telekom tried to convince the Finance Ministry to stick by the board's original decision which did not include Alcatel.

The bid tendered by Siemens, which submitted the second lowest tender, was said to have been struck out by the Telekom Technical Committee and not the Ministry.

Another bidder which was added at the last minute on the award list, Nokia, was alleged to have secured the contract through its local partner Sapura Holdings. Sapura's major shareholder, Shamsuddin Kadir, is said to be closely linked with Prime Minister Mahathir Mohamad.

How the RM2 billion Telekom pie is divided

The controversy became public when two losers in the bids, AT&T and Siemens, wrote protest letters to Mahathir, and this was followed by intense lobbying by well-connected businessmen representing both companies.

The digital exchange, the basis of modern telecommunication system, is a lucrative contract sought by major companies worldwide.

The Mitsui scandal has once again raised questions about the process of awarding contracts in Malaysia and the country's privatisation policy.

Japanese newspaper Asahi Shimbun had reported on Feb 11 that Mitsui paid kickbacks of 300 million yen (RM10.64 million) to Telekom via a consultant firm in Malaysia that turned out to be a dummy company in order to secure the contract.

Mitsui appeared to have made its bid in the Telekom contract through a local subsidiary, Pernas NEC, which was in a joint venture with NEC Corp.

The daily added that Mitsui registered the kickbacks, paid in 1997 to the Malaysian agent under a consultant contract as "commissions" which were construed as "losses", but the Tokyo Regional Taxation Bureau determined that the payments were rewards for the orders and were categorised as taxable "entertainment fees". However, Mitsui had denied paying kickbacks to Telekom.

It was reported in the New Straits Times today that another Malaysian company Perwira Ericsson, the local partner of one of the successful bidders, Ericsson, would also come under investigations by the Anti-Corruption Agency as it was accused in 1997 for "improprieties" when it was awarded part of the contract.