In mid February 1994, the British paper, the Sunday times ran on article which alleged that a 1 billion sterling ($ 750 M) sale of equipment by British companies to Malaysia was secured only after bribes had been paid to the Malaysian government officials and after the British overseas development administration (ODA) had agreed to approve a 234 million sterling grant to Malaysian government for a hydroelectric dam of (according to Sunday times) dubious economic value. The apparent implication was that UK officials, in their enthusiasm to see British companies win a large defense contract, had yield to pressures from the “corrupt” Malaysian officials for bribes – both personal and in the form of 234 million sterling development grants.

What happened after that took everyone by surprise. The Malaysian government promptly announced a an on the impact of all British goods and services to Malaysia and demanded an apology from British Government. Officially the ban applied only to government orders for British goods and services; the private sector was free to busy as it chose. Though, British companies with experience in the region were nervous that the private sector would follow the government’s lead in shunning British products. At stake was as much as 4 billion sterling in British exports and construction actions in Malaysia and a presence in one of the world’s fastest growing developing economies (that is, Malaysia’s economic growth has averaged 8% per annum as 1989). In announcing the ban, Malaysia’s Prime Minister, Dr Mahathir Mohammad, noted that the British media portrays Malaysians as corrupt because “They are not British and not white”…And “we believe the foreign media should learn the fact that developing countries, comprising a country led by brown Moslem, have the capability to manage their own affairs successfully”.

The British government responded by stating, it could not tell the British press what and what not to publish, to which Dr Mahathir replied there would be ‘no contracts for British press freedom to tell lies’.

At similar time, the British government came beneath attack from members of parliament in Britain, who suspected the government acted unethically and approved the ODA hydroelectric grant to help the British companies win orders in Malaysia.

problems:

1)  If you are the CEO of a British company which now faces the loss of a lucrative contract in Malaysia because of the dispute? What action must you take?

2) How do you think British government must respond to the Malaysian action?