In the shopping malls of Kuala Lumpur one finds standing about in odd corners life-size cardboard cutouts of a sharp-eyed character caparisoned in boxing trunks, said to be coming to town to engage in an exhibition of pugilism in the Bukit Jalil stadium. Many of these poorly positioned paper portraits are greasy with graffitti. Is there then lack of respect?

It is a nervous likeness of a man whose teeth you would not want close to your ear. Standing there with his defiant look, he is not a pleasant person to contemplate having a disagreement with. He is forceful with women. It is frightening to think he might someday be alone with your daughter.

The buses of Kuala Lumpur carry the same square-jawed face and defined-muscle torso. After some searching, and several rejections, a suitable oppponent was found in an alleyway gymnasium, and the promoters applied for the police permit. Not being a political event, this did not present a problem. This venue, as usual, was available. The light transit would handle the overflow of fight fans.

All is in readiness. But now the news comes hard ... it is not to be. There is to be no grand Formula One Fight, no Mauler in Malaysia. The ticket sales have flopped, and the promises of a portly purse are prelude to a pout. Those with front row tickets in tight fists want a bout, but instead find their money refunded. The promoters are closing up shop. It is a thing not meant to be. We must be content.

Other things in Malaysia were also not meant to be. In the second half of 2000 there was excited expectation the KLCI would broach the 900 level before year end. All was in readiness; nothing could hinder the short advance necessary to demonstrate the vibrancy and inherent bouyancy of Malaysia's economy. The signs of minor deterioration observed in the US market were discounted. The prime minister made merry with a mention that Malaysia is insulated and independent. "When their markets go down, ours go up!" Alas, it was not to be. We must be content.

Rather than move back to loftier levels, the market first sighed to solid support from local funds, then, amid public complaints their savings were put at risk, the market dove another hundred points to show its disrespect of the ministers, lined up staunchly before the TV cameras to tout first the fundaments, then the provisions to prop the miserable thing from further freefall. Their performance lacks conviction.

The public notes wearily the daily u-shaped markets which betray market manipulation by means of their savings. The EPF and other local fund managers, mustering what stature they can summon, state that other than a few "paper losses" the money is all there and accounted for. The investments are sound. This comes just after an admission than a large bundle has been lost in shady loan and share dances around the Time/Renong IPO.

The problem is loss of investor confidence. The Anti-Corruption Agenct, in an announced effort to assuage this admitted problem, began to investigate various improprieties alleged in the management of Malaysia's money. In January The Sun newspaper, in a frontpage story, announced in bold headlines an ACA investigation into a large bond scam, amounting to USD5 billion. It was to be completed in a few days, having been underway since the previous July. But still the culprits are not brought to justice. Those involved are officers of the government. The gnarled finger of the ACA points accusingly to the top ministers.

The ACA head has now been removed, replaced with a member of the national police force, who cannot claim to offer the investing public any hope that this or any other matter will ever see light. To the risk of default must be added fraud by officers of the government, a very serious matter for a government hoping to sell new bonds. The full faith and credit of Malaysia is compromised. Holders of existing bonds are looking at them carefully for signs of poor printing. All new bonds will get careful scrutiny, with the poor local funds forced to take anything left (probably 100% of the offering).

Contracts for major equipment to national corporations, under the control of the prime minister and his finance minister, have been connected to huge kickbacks. And again no prosecution has been brought forward. Instead, opposition party members pressing for investigation and reform are arrested on false charges and incarcerated without trial. The prosecutors, the police and the courts have now lost all respect in the public eye. The party-in-power seems unconcerned, adding to the national chagrin.

When the ministers speak, children must be taken from their schools to fill the empty seats. In addition, they must be paid. Many come only to present a list of grievances. The only respect the ministers and the police can command is for the office. All personal respect from the people is long since forfeit. In a total absence of credibility, how can the party-in-power effectively carry out its responsibilities?

The prime minister has taken an arrogant stance against the major trading partners of the country, and denigrates internal dissent. He makes a daily parade, substituting vituperation and venom for forthright executive guidance. No question is too trivial to decorate with a pre-fabriction. The preposterous posturings of statesmanship are so shallow even the hearing impaired are dubious.

His inability to honestly admit the facts of the most minor incident casts a dark shadow on his character, and attention to his choice of words suggests he intentionally addresses an audience from the leftmost portion of the bell curve. To hear a man with a medical degree refer to a Anwar Ibrahim's condition as an injury to his "backbone" suggests he has been too long away from his textbooks. It is embarrassing to watch the prime minister, a once able man, misuse his natural gifts, whatever the circumstances.

The diversion of public funds continues, and the conspiracy to maintain the cover-up in these difficult times is very frightening to the conspirators. They are desparate, and are making the policemen rich, more than willing to pay well for protection. It is difficult to prosecute a politician in Malaysia, and even harder to prosecute a policeman who has rank, the higher the rank the more rare the event.

The market of the moment is held up by the buying of the local funds, and to support this manipulation the ministers step forward to add their reassurances.

Such unrestrained optimism in the face of increasing market uncertainties brings to mind an observtion by John Kenneth Galbraith:

"Perhaps never before or since have so many people taken the measure of economic prospects and found them so favorable as in the two days following the Thursday disaster. The optimism even included a note of self-congratulation. Colonel Ayres in Cleveland thought that no other country could have come through such a bad crash so well. Others pointed out that the prospects for business were good and that the stock market debacle would not make them any less favorable. No one knew, but it cannot be stressed too frequently, that for effective incantation knowledge is neither necessary nor assumed." [from: The Great Crash 1929, John Kenneth Galbraith (1987) p. 107]

Such official lip service is re-loaded daily in Malaysia. All is well, they say; there is no need for concern. The EPF announces its intention to carry on its practices as before, despite the public outcry. The necessity for change seems invisible to all of them. The 1.5% increase in the consumer price index for the first quarter, reported by the government today, indicates an annual rate of 7-8% if this trend continues, as it certainly will. Yet there is no sign of alarm, no cries of despair, nor even of a caution. There should be.

The prime minister admitted, somewhat tardily, that things in the economy were a little softer than expected, reacting by placing a tighter clamp on the local and foreign media. Malaysia is requesting that the US remove its travel advisory to its citizens planning trips to Malaysia. He fails to mention that the Americans stay away not from fear of kidnapping, but because they object to his rhetorical flights against "foreigners." Tourists don't go where they aren't wanted. They abhore his abominable record of human rights violance. The US is very sensitive to such issues, and the prime minister may soon receive an unwelcome note from the US Ambassador. The US is patient, not impotent.

In Indonesia yesterday the US called for external auditing of state-owned and controlled enterprises as a pre-condition for additional loans, indicating they have finally penetrated the secret of the inscrutible East. This revelation, that the Asian Way won't work on foreign fund managers anymore, has not fazed Malaysia's prime minister in the least. The IMF "can go fry its face" to use the prime minister's words. No objective external auditing will occur in Malaysia. At least not under the present administration. The reason is clear ... the books do not balance, and cannot be made to balance. Asian corporate coffers are constructed like a colander over a cone, all liquid funds draining into private pockets.

The EPF (and other funds) are operated on the assumption that present losses are only "paper losses" and that time will bring a full recovery of their value. This is very hopeful thinking, but historically such dreams fare badly. The fund managers have not reported the reasons why the "paper losses" occurred in the first place, when the risk was visible to all.

The time schedule for full recovery is not announced, and the possibility that the holdings will slowly deteriorate to zero, becoming totally unrecoverable, does not seem to be a concern, although this is happening on every side. Already the losses from bad loans and risky share purchases is significant.

If all the fund assets were marked to the market today, the real value of the funds would be significantly lower than anyone expects; in the case of some funds reduced by more than half. A unit trust managed by the Sabah state government illustrates the risk. It has declined to less than twenty percent of its original value. Foreign advice is somewhat belatedly solicited to recover the "paper losses."

The finance minister, who is responsible for much of Malaysia's financial fiasco, owns a private jet, which obviates the risk of carrying currency on a commercial jet. Each day all watch to see if it is parked at its assigned place. Everyone watches to see if he is moving visibly about in the government. People worry when they don't see him. There are rumours. Relations within the ruling clique are not harmonious.

Late: The deputy prime minister looks grim, grim, grim. The news of the prime minister's intended extension of service until death, coming from Kelantan, has disturbed his digestion. His aspirations have taken the tumble.

The Beserah by-election in Pahang looks more certain. The BA is preening its candidate list, while the BN mourns the permanent loss of the women's vote. PAS has a new pre-condition now ... release those arrested. As a solid second, a demand that Anwar be sent abroad for surgery boosts BA before Beserah.

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