Kuala Lumpur/Mumbai, November 15: Malaysia's move to drop India and China from a USD 3.8 billion railway project, one of Asia's biggest infrastructure deals, may spark trade retaliation and put pressure on the new prime minister, officials said.

Malaysia gave the job of building a dual-track, 600-km (372-mile) railway -- its priciest infrastructure project, to politically well-connected Malaysia Mining Corp and Gamuda Bhd just before former Prime Minister Mahathir Mohamad left office on October 31.
The deal has sparked concerns about trade retaliation -- state-owned Indian and Chinese firms had signed letters of intent with Malaysia amid some fanfare to build the railway -- and whether the Malaysian consortium can complete the project without a bailout.
MMC is the flagship of Syed Mokhtar Albukhary, one of Malaysia's most prominent tycoons and a close friend of Mahathir. It has a wide array of businesses from ports to power. Gamuda is the country's biggest construction firm by market capitalisation.
Both firms deny having bailout clauses in their contracts, saying they would be liable for any delays or cost overruns.
But new Prime Minister Abdullah Badawi, whose maiden speech to parliament focused on the need for more transparency and integrity in the public sector, has come under pressure from within, as well as outside the government, to review the deal.
Malaysian Primary Industries Minister Lim Keng Yaik worried this week about reprisals against Malaysian palm oil, whose biggest buyers are India and China.
Opposition politician Lim Kit Siang has asked Abdullah to disclose the terms of the MMC-Gamuda contract in the interests of "the clean administration you have been trumpeting". While palm oil dealers said they had not seen any visible impact yet on trade or prices from the controversy, Minister Lim said he had received complaints from local shippers that their palm oil cargoes had been rejected by China and India purportedly because of low quality. He did not give details.
Bureau Report