Steel accuses Thatcher 'close circle' over Malaysia dam deal

night when Liberal Democrat Sir David Steel alleged that members of

Margaret Thatcher's ''close circle'' played key roles in the Pergau dam

deal.

On the eve of Foreign Secretary Douglas Hurd's appearance before the

Commons Foreign Affairs Committee over the affair, Sir David accused

close contacts of the former Prime Minister -- including a business

associate of her son, Mark Thatcher -- of involvement.

Among those named under the protection of parliamentary privilege by

Sir David -- the Liberal Democrats' Foreign Affairs spokesman -- were

Steven Tipping, a business associate of Mark Thatcher and best man at

his wedding.

Also named were Sir Tim Bell, a former public relations adviser to Mrs

Thatcher and an adviser to the Malaysian Prime Minister and to Tan Sri

Armugam who, Sir David told MPs, controlled GEC Malaysia, ''heavily

involved in several of the contracts under the deal''.

The dam project has been the subject of deepening controversy since it

was disclosed that Ministers approved the aid against the advice of

officials.

The Commons Foreign Affairs committee is investigating the

''entanglement'' between Britain's aid to Malaysia and a #1 billion arms

deal.

Press coverage alleging Malaysian government corruption over aid for

the dam prompted Malaysia last Friday to ban British firms from being

awarded new contracts.

Mr Major said last night he had no regrets over the Government's

involvement in the Pergau dam, and refused to talk of retaliation over

the Malaysian trade sanctions.

Sir David told the Commons: ''In the course of batting for Britain,

which our former Prime Minister did extremely well, her close circle

often seems to have been closely involved.

''In this case, Sir Tim Bell, well known as her PR adviser is also

adviser to the Malaysian PM and to Tan Sri Armugam, who controls GEC

Malaysia, heavily involved in several of the contracts under the deal.

''And another person who helped broker parts of the deal is Mr Steve

Tipping, a business associate of Mr Mark Thatcher and indeed best man at

his wedding.

''Tim Bell told the Sunday Times when asked to clarify Tipping's exact

role: 'What he does for a living is introduce people to each other'.''

Sir David went on to suggest connections between companies which had

benefited most from the Government's aid-for-trade deals, and major

donors to Conservative Party funds.

''Companies linked by such donations have been the main beneficiaries

to the tune of 42% of the Aid and Trade Provision (ATP) since this

Government came to power.

''They include Cementation International, owned by Trafalgar House,

Balfour Beatty, GEC, AMEC International, Biwater and Davy -- not to

mention the walk-on part by our old friend the privatised British

Airways.''

The allegations were immediately denied by Foreign Office Minister

Alastair Goodlad.

He said Sir David's attempt to suggest there was some connection

between companies that had worked on ATP-

funded projects and contributions to the Conservative Party was ''a

classic case . . . of the smear and innuendo that the Malaysians have

found so offensive''.

However, Labour Overseas Development spokesman Tom Clarke said:

''Vested interests have a deep control of the Tory Party and have very

little to do with the needs of the Third World and the poorest''.

He called the Pergau project ''one of the most shameful episodes among

many in the history of this Government''.

Meanwhile, the Prime Minister, asked last night if Britain would

retaliate over the Malaysian trade sanctions said: ''I am not going into

that matter. I think it's a matter I hope we will be able to sort out.''

''I don't think it is at all reasonable for British firms to find

themselves in the present position,'' he told Channel 4 News in

Washington, in his first interview about the dam project since the

Malaysians imposed sanctions.

Of Malaysian anger at British media reports, Mr Major said: ''The

British press is free.

''It is not always comfortable with the Government, it may not always

be comfortable with other people, but it is free. It is going to remain

a free press.

''The dispute cannot be between British firms and the Malaysian

government. I hope soon it will be possible to sort it out and have that

readily understood.''

Malaysian Prime Minister Mahathir Mohamad said yesterday he was

disappointed by the British Government's refusal to comment on UK media

reports that he and other officials had accepted bribes to award

contracts.

''We have no quarrel with John Major but with press freedom in that

country,'' he said.

* Sir David, asked on Channel 4 News last night whether he could prove

his allegations, said: ''Well, it is true.

Pressed whether he was suggesting personal contacts of the former

Premier directly affected Government policy on the dam, he said: ''Well,

it is a matter of guesswork.

''We are entitled to ask why was it that Douglas Hurd and John Major

endorsed the original agreement made by Margaret Thatcher. She obviously

felt very strongly about it.

''The question is: Was it a valid deal in the first place? My argument

and the argument of the National Audit Office and various other people

is that it wasn't.

''Mrs Thatcher herself did this deal in a private meeting where

officials were excluded, so we cannot know what was the background to

the agreement.''