Firms 'lose out in exports battle': Executives say curbs on overseas aid budget affect trade. Chris Blackhurst reports

BUSINESSES in Britain are losing out in the international fight for export orders because of rule changes in the allocation of the overseas aid budget, it was claimed yesterday.

Senior executives from three of the companies most closely involved in the controversial Pergau dam project in Malaysia told the Commons Foreign Affairs Committee that other countries had no qualms about offering large amounts of aid to win contracts. 'They use their aid in a ruthless way,' John Lippitt, of GEC, said.

He cited two recent instances in China where GEC was poised to win enormous orders to build a metro system and rolling stock, with help from the British Aid and Trade Provision - the part of the overseas aid budget designed to develop new business - only to see Germany snatch away the contracts with much higher offers of aid.

In one case, the German offer, personally endorsed by Chancellor Helmut Kohl on a visit to Beijing, amounted to 68 per cent of the total size of the project - well in excess of international regulations.

As if that was not bad enough, the businessmen said, Britain was capping its ATP awards to dollars 48m per project and to countries with average per capita incomes of dollars 600 - well below the limits set by the Organisation for Economic Co-operation and Development.

Alan Gormly, of Trafalgar House, likened the self-imposed restriction to 'walking the plank', while Mr Lippitt said it was the same as being in an advance party of troops going into battle - 'we all know what happens to them, they all get massacred'.

The plea for greater flexibility - Mr Lippitt pointed out that in only one year out of the last six had the Government used up its entire ATP budget - was part of a robust performance by the businessmen.

They were responding to MPs' questions over Pergau and the spending of pounds 234m in public money on the project, deemed unnecessary and a waste by the National Audit Office, the public spending watchdog, and an 'abuse' by Sir Tim Lankester, former permanent secretary at the Overseas Development Administration.

It was not their fault, they said, that the Government in the shape of Margaret Thatcher, the then Prime Minister, had given an oral commitment to aid for Pergau based on just a 48-hour assessment by the ODA. Its officials had not even visited the site prior to the offer.

'It was absurd,' said Mr Gormly, whose Trafalgar House group owns Cementation which is building the dam. David Sumberg, Tory MP for Bury South, asked if they had ever known a similar situation. Sir Robin Biggam of BICC, the parent company of Balfour Beatty, Cementation's co-builder, replied 'no'.

All three denied the companies had brought pressure to bear on the Government for a quick decision. Asked if Baroness Thatcher was motivated by political considerations - presumably a reference to a desire to patch up relations with Malaysia - Mr Gormly replied, 'you will have to ask others'.

They defended the sudden rise in the cost of the project of more than pounds 80m, claiming the lower figure was not a contract price; and had been based on a much earlier study.

At one point, their evidence appeared contradictory. Asked how many jobs Pergau secured in Britain, Mr Lippitt replied that 'jobs were a small part of an ATP application'. Sir Robin said: 'Jobs in the UK is what ATP is all about.' Neither could give an actual figure.

They agreed, though, that the majority of the ATP budget had gone to contracts won by just five firms, including their own. Others, they explained, did not have the resources to take on big orders. And much of the work was subsequently sub-contracted to smaller companies.

Donations to the Tory party did not influence the awarding of aid, they said. Trafalgar House made large donations, but Mr Gormly said: 'I've never seen them influence in any way, wit or jot, the actions of officials.'