(AFP) The government has suspended plans to issue bonds worth RM6 billion to rescue two debt-ridden light railway operators, Finance Minister Daim Zainuddin confirmed today.

Daim told reporters the decision was taken partly to avoid perceptions of a bailout for favoured firms.

The government is waiting for the Corporate Debt Restructuring Committee to announce an alternative restructuring plan for Projek Usahasama Transit Aliran Ringan (PUTRA) and Sistem Transit Aliran Ringan (STAR), he said.

Asked why the bond issue had been postponed, Daim replied: "Some people say it is not worth that much, I suppose, and some people say if we (government) do it, then they say, 'You want to save those investors'."

Prime Minister Dr Mahathir Mohamad announced yesterday the government was reconsidering whether to acquire the assets of the companies.

In December the government announced it would take over the debts of the firms in what it termed a major restructuring of Kuala Lumpur's public transport system.

The acquisition was to be financed through bond issues and the railway networks would be leased back to the private firms to operate.

Lower reserves

Opposition parties at the time criticised the deal as another "bailout" of favoured companies. PUTRA is owned by debt-ridden conglomerate Renong, which is close to the ruling party.

The traffic-clogged city of 1.5 million people has 56 kilometers of light railways, its sole public transport apart from buses.

The government's recent renationalisation of Malaysia Airlines attracted strong criticism after it bought back the controlling stake from a private firm for more than double the market price of the shares.

Asked separately if he is worried about capital flight from Malaysia after external reserves fell to their lowest level since the 1997/98 economic crisis, Daim said: "The last few days, there was inflow (of capital)".

The central bank yesterday announced that net international reserves amounted to RM99.2 billion as of mid-May from RM100.4 billion at end-April.

The new figure is enough to pay for 3.8 months of retained imports.

Daim also reiterated that the ringgit would stay pegged at 3.80 to the dollar.

Analysts say the shrinking reserves make it harder to defend the peg.

Still on leave

The powerful finance minister gave no clue about whether he plans to stay in his job after a two-month "holiday" ends. "I'm still on leave," he said.

Since Mahathir announced April 19 that Daim was taking two months' leave because he may be "tired", but there has been intense speculation the minister may quit.

Daim has been going into his office during his leave and attending some official functions. But he has been skipping meetings of the cabinet and those of the ruling party -- fuelling rumours of a rift with the premier.