KUALA LUMPUR - MALAYSIA on Tuesday shelved a 1.7 billion ringgit (S$707 million) deal to buy 12 military helicopters from Eurocopter because of the bleak global economy.

'At the moment, we have decided not to purchase the helicopters. We need to delay it ... because of the financial crisis. We need to have money,' Prime Minister Abdullah Ahmad Badawi told reporters.

Mr Abdullah's decision to scrap the deal for the 12 Cougar EC725 helicopters awarded to the European company is one of the government's first major cost-cutting move as it re-prioritises its budget to cope with the worsening global financial crisis.

'We just cannot be borrowing every time. We need money. The best thing to do now is to reallocate our budget,' said Mr Abdullah, who is also defence minster.

He said the government would focus on spending on projects which generate income given the deteriorating economic climate.

Eurocopter Group is a wholly-owned division of European Aeronautic Defence and Space (EADS). The group's products account for 30 per cent of the total world helicopter fleet.

Eurocopter Malaysia has a regional maintenance facility near Port Klang, west of the capital Kuala Lumpur.

The company was awarded the contract to replace the defence ministry's fleet of 28 military Nuri transport helicopters last month.

The move was criticised by opposition leader Anwar Ibrahim who alleged there were irregularities in the defence procurement.

But Mr Abdullah said selection of the Eurocopter was based on an open tender as stipulated by the defence ministry and according to the specifications of the helicopter.

'I don't believe there are irregularities,' he said.

He said the Eurocopter helicopters could be used for search and rescue operations and combat as well as transport.

'Once the financial situation improves, we will buy. We need new helicopters to replace our ageing fleet,' he said.

Malaysia would review its decision to buy the helicopters in 2011, Mr Abdullah said.

The US-made Sikorsky S-61 Nuri helicopter has been in use since 1968 and 28 of them remain in the Malaysian air force - its main transportation vehicle.

The decision to phase them out was made after a fatal crash last year which killed six Malaysian military personnel.