KAJANG, Friday.

MALAYSIA hanged British drug trafficker Derrick Gregory at dawn today

in a jail surrounded by walls covered with anti-drug slogans.

Britain, which made 11th-hour appeals for clemency, immedi- ately

expressed disappointment at the execution.

''The British Government had hoped that representations made at all

levels to the Malaysian authorities . . . would have succeeded. We are

disappointed they have not,'' said a British High Commission spokesman.

Gregory, a 42-year-old painter described in court as having a serious

personality disorder, was the third Westerner hanged under Malaysia's

tough anti-drug laws.

The condemned man, from Middlesex, went to the gallows at 6am in

maximum-security Kajang Prison on the outskirts of the capital Kuala

Lumpur, prison officials said.

He was sentenced to death in March, 1987, five years after his arrest

at the airport on the resort island of Penang while trying to leave the

country with 576 grams of heroin in his boots and underwear.

Dozens of journalists watched as a truck took his body from the jail

whose walls are covered with anti-drugs slogans in Malay and English and

topped with rolls of barbed wire.

Prison guards later unloaded Gregory's blanket-covered body on a

stretcher at a nearby mortuary.

Defence lawyer Rasiah Rajasingam said the High Commission was making

arrangements to transport the body back to Britain.

Gregory's parents Kenneth and Mary left Malaysia yesterday after

paying a last visit to their son, he said. The whereabouts of his

brother Paul were unknown.

Rajasingam said a Malaysian pardons board rejected Gregory's appeal

for clemency, the last legal recourse available, last week. A British

Government appeal to Malaysia's King Sultan Azlan Shah was turned down

this week.

Gregory, said by a psychiatrist at the trial to have a serious

personality disorder as a result of a childhood illness, testified he

was forced to smuggle the drugs after death threats from two men he met

in Penang.

Malaysia has executed more than 70 drug offenders, mostly Asians but

including two Australians, since 1975 when it introduced a mandatory

death penalty for possession of more than 15 grams of heroin or 200

grams of cannabis.

The widely-publicised hangings of Australians Kevin Barlow and Brian

Chambers in July, 1986, were criticised by several countries, including

Australia, New Zealand and Britain, from which Malaysia gained

independence in 1957.

But the Government of Prime Minister Mahathir Mohamad, due to host a

Commonwealth summit meeting in October, has said it will not tolerate

drug offenders of any nationality.

''After Barlow and Chambers no one really expected Malaysia to change

its stand on the Gregory issue. Mercy is very remote,'' said a Western

diplo- mat.--Reuter.