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Australian exports to Malaysia at risk due to the Prime Minister's failure to apologise to Dr Mahathir -

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QUENTIN DEMPSTER: The perils of being PM - one slip of the tongue, whatever the provocation, and suddenly Australia has a major diplomatic crisis on its hands. Whether Dr Mahathir ever forgives Paul Keating or not, Australian exporters now are being frozen out of Malaysia by the chill in relations, are screaming murder. With every day that passes without the Prime Minister using the 's' word, another contract is in tatters. Peter Cassuben reports on the price of political pride.

PETER CASSUBEN: When a single company can afford to employ more than 150 people in a provincial city the size of Tamworth, you know it's doing something right.

JOHN JONES: The ambulance business in Australia is suffering from the recession. Our business has flattened out and we've recognised this coming up for some years and we've been chasing export contracts now to fill that gap.

We've been working hard on Malaysia now for some two to three years. We've invested hundreds of thousands of dollars and now in one day the whole thing is in jeopardy.

PETER CASSUBEN: Jakab is an Australian enterprise set to grow bigger by exporting very good products, ranging from ambulances through to buses and caravans. But it's the fibre glass ambulance module that's transferable to three successive Holden utility chassis before it reaches the end of its life, that's attracted most interest from overseas. Not having to replace the entire investment each time the mechanics wear out, makes for a cheap ambulance.

JOHN JONES: I think we are regarded as innovators in the ambulance market. We've been in this field now for some 15 years, and to stay in front we've had to be innovative with our designs and with the features within the vehicle.

PETER CASSUBEN: This military ambulance, worth $A120,000, is very similar to the one the Malaysians are considering buying for their army and another version for civilian use. They're so interested, in fact, they took one very similar to this on their peacekeeping efforts to Somalia and, according to Jakab, they're very happy with it. But now after years of hard work and hundreds of thousands of dollars spent on negotiations, contracts totalling $30 million are suddenly hanging from a very thin thread indeed.

JOHN JONES: Well, we were horrified. We faxed the Prime Minister, Peter Cook - Minister for Trade, Senator Loosley, as well as our local politicians to request an apology; that was about two weeks ago, the day after it happened, in fact.

PETER CASSUBEN: And what was the response?

JOHN JONES: Well, we've had no response at this point in time, no.

PETER CASSUBEN: As bizarre as it may seem, the future of this Australian manufacturer, its 154 employees and the Tamworth economy, will be influenced by the Malaysian leader, Dr Mahathir, hearing just two words 'I'm sorry', but they can come from just one man.

What's your feeling about the way Mr Keating has been handling this?

JOHN JONES: Oh, I think it's pretty bad. I mean, in my view, we have to respect the different culture of our neighbours and we have to, when in Rome, do as the Romans do, in my opinion. And I think he now has to back track and tender an apology, very urgently, otherwise a couple of billion dollars worth of trade is down the gurgler.

PETER CASSUBEN: When you say it's pretty bad, is it simply a question of two leaders not agreeing about something, or is it a lot more serious than that?

JOHN JONES: No, I'm talking on a personal level. I believe that Paul Keating just made a gaffe, you know, and that he's not man enough to back off and say so.

PETER CASSUBEN: Around the country, it's a similar story. This Victorian company manufactures industrial compressors and has worked hard to break into the Asian market. Many of these were destined for factory floors in Malaysia, but not any more.

WAYNE St BAKER: This is one of the units that won't be going on the ship. We have gone in there, boots and all, and to have the rug pulled out from under you, after you've done all that, is not very easy to take.

PETER CASSUBEN: In South Australia, the Auspine Wood Company has spent more than two years building up consultancy work in Malaysian forest regeneration. The company claims Mr Keating's behaviour is destroying a multi-million dollar business.

ADRIAN DE BRUIN: We've just been ruled off. We've virtually been annihilated from the Asian map.

PETER CASSUBEN: In Brisbane, architectural firm McKerrell Lynch recently secured a lucrative contract to design a multi-million dollar tourism complex in Malaysia, but this has now been suspended. They've been told the involvement of an Australian firm is now an embarrassment.

BEVAN LYNCH: It's a situation that was created by one man in one situation, it really is in his court to remedy it, and I don't really see that an overreaction or an over-zealous effort to retrieve that situation has any long-term dis-benefit to this nation. It might dent an ego or two, but I think that's about the extent of it.

PETER CASSUBEN: What must the Prime Minister now do?

JOHN JONES: Well, he obviously needs to apologise to Dr Mahathir. The feelings in Malaysia .. I get the media from Malaysia each day, and feelings over there are very, very strong. They are demanding an apology. They won't accept anything less. The buy Australia last policy is in place now, believe you me, although it hasn't yet been confirmed by their Cabinet. So, he must apologise. He needn't do it in a way that costs dignity. I'm not talking about grovelling here. I'm simply talking about a fair dinkum, genuine apology; that's all that's needed.

QUENTIN DEMPSTER: Well, Foreign Minister Gareth Evans says he has had a helpful telephone conversation with his Malaysian counterpart today, and Prime Minister Paul Keating waves the olive branch again in a speech tonight, although he doesn't say sorry. However, Shadow Foreign Minister Andrew Peacock says it's a case of too little, too late, and he fears the dispute could be damaging and protracted.