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Malaysia's government dismisses graft allegation in defense contracts

KUALA LUMPUR, April 26 (AP) - Malaysia's defense ministry on Thursday dismissed allegations of corruption in its purchase of Russian aircraft and French submarines, saying no hefty commissions were paid to middlemen.

In a three-page statement, the ministry said it wanted to put a stop to accusations that it misled the public about a €1 billion deal to buy three submarines in 2002 and a US$900 million contract to purchase 18 Sukhoi Su-30MK fighter aircraft the following year.

Opposition figure Anwar Ibrahim has claimed that Deputy Prime Minister Najib Razak, who is also defense minister, is corrupt and that massive commissions were paid to facilitators in the two deals.

The ministry statement comes ahead of a crucial by-election Saturday that is seen as a test of support for the ruling National Front coalition. General elections are expected late this year or in early 2008.

The National Front faces a tough challenge from the People's Justice Party, led by Anwar's wife.

Najib has denied any wrongdoing and the Ministry of Defense statement Thursday backed him up, saying all contracts were subjected to austere reviews and approved by the finance ministry.

It said accusations that it paid a 540 million ringgit (US$154 million; €129 million) commission in the submarine deal to local firm Perimekar Sdn. Bhd. were "baseless."

Perimekar has a six-year contract worth €114.96 million (US$138 million) to provide support services to French company but this doesn't constitute a commission, it said.

In the aircraft deal, it said Russian state company, Rosoboronexport, directly appointed a local company to coordinate their dealings in the country and this has nothing to do with the government.

Anwar has called for a thorough investigation into the aircraft deal, alleging that US$108 million (€84 million) in commissions were paid to IMT Defence Sdn. Bhd.

The defense ministry said it "hopes that all parties will understand the real situation and will not make any more confusing statements that could stir up negative perception" toward the ministry and the government.

Labels: Islam Hadhari, Malaysia, Rasuah