KUALA LUMPUR, Feb 28 (AFP) - Malaysia is to revive the huge Bakun dam project on Borneo island which was shelved in 1997 amid the economic crisis, Energy Minister Leo Moggie said Wednesday.

But the cabinet scrapped plans to lay the world's longest undersea cable to transmit hydroelectric power to peninsular Malaysia, Bernama news agency quoted him as saying.

"We will implement construction of the dam to the full original height that has the generation capacity of 2,400 megawatts. So the dam will be implemented based on the original design," Moggie said.

He said the project will take about five to six years to complete and would supply power to Malaysia's Sabah and Sarawak states, Brunei and perhaps the Indonesian section of Borneo.

Installation of machinery and turbines may be done in stages, depending on actual requirements for power.

"We are quite confident that the full capacity of power generated by the Bakun project would be fully utilised in Sabah and Sarawak," Moggie added.

The cost of the project before the economic crisis was put at 13.5 billion ringgit (3.6 billion dollars), including the undersea cables which have now been scrapped.

The project would be handled by a company that has already been established by the finance ministry, Moggie said.

Work on water diversion tunnels would be completed by the end of April while relocation of people affected by the project had been completed.

The 205-metre-high (676-foot) dam involves flooding an area the size of Singapore. It has been Prime Minister Mahathir Mohamad's most controversial mega-project since it was mooted in the early 1980s to tap the hydropower resources of the Rejang River in Sarawak.

After suspending the project during the 1985 recession, the government gave the go-ahead in 1993 to developer Ekran Bhd.

Ekran's plan involved clearing 69,000 hectares (170,000 acres) of forest and displacing some 10,000 tribal residents.

The High Court in June 1996 declared the project illegal for contravening environmental laws following a suit by a group of natives, but the ruling was quashed by the Appeal Court.

In November 1997, as the regional economic crisis began biting, the finance ministry took the project over from Ekran which received nearly one billion ringgit in compensation.

National power firm Tenaga Nasional was made project manager. It later recommended a smaller dam producing 500 megawatts to cater just to Borneo island at a cost of around five billion ringgit.

"It's even more of a luxury now after dropping the undersea cables, East Malaysia doesn't need that much power," said Chan Eu Ky, analyst with Dresdner Kleinwort Benson Research.

He said power demand in Sabah is very small at about 440 MW annually and there were few major power-consuming industries in Sarawak."I think it's very ambitious," Chan told AFP.

Gurmit Singh, adviser to the Environment Protection Society of Malaysia, welcomed the move to drop the undersea cables.

But he said it still did not make economic sense to revive the dam to its original full-scale version as this would mean higher costs and flooding the entire site.

"The government is being stubborn. I cannot understand why they are so obsessed with building the dam at full capacity. Where is the demand going to come from?" he said.

Gurmit said the project "still remained shrouded in secrecy" and urged the government to declassify information to prove its viability.