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China's leading power grid operator SGCC and Malaysian development fund 1MDB said on Monday they will establish massive energy projects worth 11 billion dollars in Malaysian Borneo.

Prime Minister Najib Razak unveiled the joint venture between government development and investment firm 1Malaysia Development Berhad (1MDB) and SGCC (State Grid Corporation of China).

"In a short period of time 1MDB and SGCC, which is China's leading power and distribution company, will be collaborating to identify and plan a number of multi-billion-dollar projects," Najib said in a speech.

"I understand this project will have a total value of 11 billion dollars."

Najib did not give details of the projects, but Malaysian officials said they will focus on the energy sector.

The Star newspaper has reported that 1MDB and SGCC will establish hydropower plants and a massive aluminium smelter in Sarawak state on resource-rich Borneo, an island split between Malaysia and Indonesia.

Meenakshi Raman from Friends of the Earth Malaysia said the group was "very concerned about this huge investment" and called on the government to clarify its development plans for Sarawak.

"Our concern is that these companies will be going into dirty industries like aluminium smelters and dams and coal power plants which will only degrade the environment further in Sarawak," she said.

Plans for up to a dozen vast hydro-electric dams in Sarawak have raised alarm among indigenous groups and environmentalists who have spent decades campaigning against rampant logging and plantation activity.

The 2.2 billion dollar Bakun dam is nearing completion despite setbacks and delays since its approval in 1993, and fierce criticism over its environmental impact.

Transparency International has labelled Bakun a "monument of corruption" and highlighted debate over whether there will be enough customers in 2011 when it becomes fully operational with a 2,400MW capacity.

The dam forced thousands of indigenous people off their ancestral lands, and there are now concerns over the fate of the tribal communities living in the catchment area of the next of the planned mega-dams, the Murum dam.

"We also question the need for more power generation facilities when the Bakun dam and others like the Murum are already expected to produce more than enough capacity," Raman said.

Foreign investment in Malaysia plummeted in 2009 as a result of the global financial crisis. The newly created 1MDB is aimed at forming global partnerships to drive long-term economic development.

Last September, 1MDB and Saudi Arabia said they would establish a 2.5 billion dollar partnership to invest in oil and gas and real estate projects in Malaysia and abroad.

Najib said the Sarawak investment proposal was developed when he visited China in June.

"This interest was crystallised when the Chinese president (Hu Jintao) visited Malaysia in November last year," he added.

SGCC president Liu Zhenya said the firm's plans were part of a boom in trade and energy sector cooperation between the two countries in recent years.

"The Chinese government is very supportive of Chinese enterprises' involvement in the infrastructure projects in Malaysia in a more extensive way," he said.

AFP/de