Thatcher, Pergau Dam, ATP

Recently, with the death of Baroness Margaret Thatcher, the Guardian ran two articles discussing her impact on development: Short-lived legacy: Margaret Thatcher, neoliberalism and the global south and Margaret Thatcher: her impact and legacy in global development. What was not clearly mentioned in these articles was her various foreign aid/ODA policies.

Given that she “reigned” from 1979 to 1990, this post will not talk about aid policies every single year. However, aid levels would be an easier place to start with.

source :

This great diagram from Owen Barder’s blog evidently shows that aid during Thatcher’s time dropped substantially, though her supporters would still argue that aid rose in  several distinct periods. (This is all aid as a proportion of GNI but is a widely used measurement).

OK, so she wasn’t so generous in providing aid. What she and her very last Cabinet, did was to instigate a “development” deal with Malaysia. This is placed in parentheses as well, it is widely known in the International Development circles as the [ugly] “Pergau Dam Affair”.

This affair can be summed up in this Economist article. If you look at the timeline, the event arose after that Iron Lady left office, however, she (and her foreign secretary) were the key players in forging that deal with then Malaysian Prime Minister Dr. Mahathir Mohammed. It was one of the hallmarks, well last ones, of the notorious Aid and Trade Provision (ATP).

In a nutshell, ATP means: you get our aid on condition that you buy good from our companies and only our companies. (see White, 1998: 154 and others for a clear explanation). Pergau was financed and Malaysia in return bought (may not be the right term) around billion pounds of British military hardware (just old jet fighters if I’m correct). This later resulted in a furious uproar and enquiry.This article clearly indicated Thatcher’s role in fostering the deal:

On 6 August 1988, on a visit to Australia, she stopped in Kuala Lumpur and spent two hours with Dr Mahathir. According to a parliamentary answer, they discussed arms, aid and air rights for the Malaysians at Heathrow.

A month later, they signed a memorandum of understanding covering the purchase of pounds 1bn of arms from Britain. In March 1989, in a meeting with Dr Mahathir in London, Lady Thatcher offered aid for the Pergau dam.

Yet, she refused to appear before the Foreign Affairs Select Committee inquiry. It was then Foreign Secretary Douglas Hurd who bore the brunt of the whole matter. Pergau later became the key case for the creation of a Cabinet-level aid department, known as the Department for International Development (DFID). Under its first (and quiet fiery) Secretary of State Clare Short, ATP was fully removed with the creation of the International Development Act 2002.

For Thatcher, she, unlike Hurd, escaped the wrath of the Pergau investigation. Given a nice place the House of Lords, she simply slipped away. Fast forward now to 2013. One of the foreign guests who attended her funeral was Dr. Mahathir himself. Now, for full disclosure, I’m not saying that there’s any link between the Pergau Dam, the invitation of Mahathir, and Thatcher. More importantly, this post is explaining a part of Thatcher’s legacy less talked about.

Pergau will be forever Pergau. But one must not forget the Iron Lady’s hand in the whole matter.

White, H., 1998, “British aid and the White Paper on International Development: Dressing a wolf in sheep’s clothing in the Emperor’s new clothes”, Journal of International Development, 10(2), pp.151-166

For more about the Pergau Dam, also see Barder, O., 2005, Reforming Development Assistance: Lessons from the UK Experience, Working Paper 70, Washington DC: Center for Global Development (Appendix 1)

and as of 2012, read Lankester, T., 2012, The Politics and Economics of Britain’s Foreign Aid: The Pergau Dam Affair, Abingdon: Routlege.


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