Archive for the ‘Financial Crisis’ Category


“Cutting off the nose to spite the face” is an expression used to describe a needlessly self-destructive over-reaction to a problem: “Don’t cut off your nose to spite your face” is a warning against acting out of pique, or against pursuing revenge in a way that would damage oneself more than the object of one’s anger.

The phrase is known to have been used in the 12th century. It may be associated with the numerous legends of pious women disfiguring themselves in order to protect their virginity.

It was not uncommon in the Middle Ages for a person to cut off the nose of another for various reasons, including punishment from the state, or as an act of revenge. Cognitive scientist Steven Pinker notes that the phrase may have originated from this practice, as at this time “cutting off someone’s nose was the prototypical act of spite.”

The expression has since become a blanket term for (often unwise) self-destructive actions motivated purely by anger or desire for revenge. For example, if a man was angered by his wife, he might burn down their house to punish her; however, burning down her house would also mean burning down his, along with all of their

The Embargo Act of 1807, passed by the United States Congress in protest against British and French interference in U.S. shipping. The Act had the side-effect of prohibiting nearly all U.S. exports and most imports, greatly disrupting the U.S. economy.”

Now course we have this 1MDB fiasco at a time when a dipping growth rate and drop in value of the Ringgit was holding out hopes of revival.


Consider the issue that now captures financial market attention: public debt. The experience in Greece, Spain, Portugal and elsewhere suggests that finance capital is increasingly “intolerant” of what is perceived as excessive public debt. Governments seem increasingly incapable of meeting their debt service commitments. Sovereign default threatens investor solvency. We see this now triggering protest and social disruption all around the world, from Wall Street in New York to Australia and now has spread even to Tokyo. It is a crisis. The young are getting desperate because of the contraction of employment and incomes.

Malaysia also seems to have lost its bearings.

Look at the analysis above, the analysis suggests that Malaysia’s gross public debt to GDP ratio increased from 42.7 per cent to 55.1 per cent between 2007 and 2011,  it is among the highest in the region. Malaysia’s 55.1 per cent level compares with Pakistan’s 54.1, Philippines’ 47, Thailand’s 43.7, Indonesia’s 25.4 and China’s 16.5. This is shocking as we have more debts than Indonesia and even Philippines.

Our government is excessively indebted, and we are in the firing line. Really!

Remember, Malaysia has never been an economic wizard. Never in our history since 1963, we find, any original thinker on economy and hence we lack an economic model which we may call as our own. We never cared to evolve an economic model which cared for the needs of our country and sought to utilize our own resources in our way according to our own needs and aspirations, Najib calls it “MY WAY”, my foot lah! We borrow ideas – economic and political – from others and when the idea suppliers fail, we rue and indulge in illusions as Najib Tun Razak and his team are doing today. From our experience we know that whenever our Prime Minister – Najib Tun Razak – tell us not to worry , they mean nothing and we have to actually start to worry. The Rakyat are the real victims. Prices are skyrocketing from “roti chanai” to “teh tarik” to “kon lo mein” and even “nasi lemak”, all are going up up up. We cannot talk of Rakyat because they never had any significance for our Malaysian shining politicians. They are of no consequence and, hence, can not be counted or considered, and this is how the masses feel.

At the rate we are going we are surely heading towards an economic collapse.

In Bank Negara Malaysia’s latest report issued on Oct 14, our country’s national debt currently stood at RM437 billion (as of June 30, 2011), with domestic debt amounting to RM421 billion and foreign debt at RM16 billion.

Malaysia is in a very very vulnerable position. Many economists say that 90% of GDP Debt is point of no return. Malaysia’s exports primarily petroleum and oil palm are heavily dependent on India and China for its trading. Malaysia must resolve its debt problems and sober up, it has to  cut its spending, increase taxes and prepare for more than a lost decade or it can just print money. Either case Malaysia will either face severe deflation, real estate collapses, stock market collapses, low demand leading to joblessness and more Bersih style protest given the youth population of the country. 75% debt is really intolerable for any developing economy. What is happening is in the name of social schemes the government is literally putting the country in debt and eating the money through corruption.

My economist friend from University Malaya tells me Malaysia has insufficient funds to finance the 2011 expenditure, there is RM46 billion deficit and this will be funded by further debts. Truly, it frightens me!


I picked up this letter written to Malaysia Today by a  chap calling himself  “SAS ( Saham  Amanah Sabah) Victim.” This is interesting subject, perhaps to me, because I have many  friends in KK who had invested a fair bit and lost their pants in this investment, after a steep fall of the SAS unit price during Yong Teck Lee’s time as Chief Minister. Till today many curse and swear Yong Teck Lee and Ambrose Lee whom they say is the “mastermind” behind the lost in their life-savings.

What happen was in 1998 there was a share swap deal between Warisan Harta Sabah Sdn Bhd of which Yong Teck Lee was Chairman and Suniwang Holdings Sdn Bhd of which Ambrose Lee was the Boss. The rational of entering into this transaction was that the Government through Warisan Harta could utilise a RM50 million fund. Yes Ringgit 50 juta. The RM50 million was to support counters in which Warisan Harta and Sabahans had investments.

As a result of the share swap deal Warisan Harta lost RM114 million. The RM114 million was lost after Warisan Harta under the chairmanship of Yong Teck Lee disposed its blue chip MISC shares in return for the acquisition of NBT shares and Sugar Bun shares. Both counters are delisted ever since. Both of these share counters  NBT and Sugarbun were connected to Suniwang which was controlled by Ambrose Lee.

A whopping RM 114 million losses in this deal for the State.

So don’t you have to have somewhat of a criminal mind to be a politician? Most politicians are devious. They’ll sell “hope” to the public and they’ll make it seem very rosy and people don’t even know that their investment will be paid for out of their hard-earned savings. These politicians act like it’s fine. Politicians have no problem telling people something’s fine when it’s not. Politicians are worse than criminals because really when you think about it all a criminal does is just steal your money… what politicians do is to lie to people. They’ll lie to you… they’ll tell you what you want to hear… it’s a good deal…plenty of money to make…State Government investment, so must be good. People don’t know people like Ambrose Lee the CEO of Public Companies has got no money and cannot give personal guarantees for 200 million dollars to get this deal fix. It will surely fail because the motive is to milk the cow dry on the expanse of the people.

So I mean aren’t politicians similar to criminals? I know there are exceptions to the rule – like Yong Teck Lee?  Don’t make me puke lah! Read below and make your opinion heard.

Birds of the feather flock together: Joseph Ambrose Lee comes to the rescue of Yong Teck Lee

By SAS Victim

For more than a decade Sabahans have forgotten about Joseph Ambrose Lee Yok Min, 52, who once boasted of himself as the new Syed Kechik of Sabah, after he failed in his scandalous schemes to take over the RM30-billion timber wealth of Yayasan Sabah.

The late Syed Kechik was the de facto Chief Minister of Sabah when he was legal adviser to the late Tun Datu Mustapha bin Datu Harun who ruled the state with an iron-fist from 1967 to 1976.

Ambrose was back in Kota Kinabalu, having made his home in Perth, on August 7 at the Sutera Harbour Resort defending his bosom buddy Yong Teck Lee, who was Sabah Chief Minister from 1996 to 1998, over the fiasco of Saham Amanah Sabah (SAS) arising from a scandalous share-swap between Warisan Harta, the Sabah government’s investment arm, and Ambrose’s Suniwang Holdings Sdn Bhd.

More than 55,000 Sabahans, most of them pensioners and low-income civil servants, lost all their life-savings when the price of the state unit trust plummeted to 17 sen from its RM1.00 unit price soon after he sealed the deal when he became Chief Minister.

At the press conference, Ambrose (that’s what his few friends and many foes call him) made a feeble attempt to defend Yong over the missing RM50 million from the share-swap which Yong has been unable to explain to Sabahans.

Ambrose stressed that he paid RM50 million in cash through Innosabah Securities, the stockbroker, to Warisan Sabah in a deal that saw him exchanging his over-priced shares of NBT and Sugar Bun for Warisan’s blue chip MISC shares.

No one has disputed this. But what has not been answered is that the money received by Warisan was never given to SSB as Yong has said. Yong was the Chief Minister and Warisan Chairman. Yet he has failed to tell Sabahans what happened to the RM50 million which he, as Warisan Chairman, received and which he never gave to SSB.

Dr Yee Moh Chai, Minister of Resource Development and Information Technology, told the assembly on August 3 that Saham Sabah Berhad (SSB) which manages the SAS has confirmed to him that it has never received the RM50 million out of the share dealings of Warisan Harta.

At the assembly, Dr Yee pointed out that it was Yong who linked the disastrous share-swap of blue chip MISC shares belonging to Warisan with shares of NBT and Sugar Bun, which were cornered speculative stocks. The swap resulted in a loss of RM114 million to Warisan.

Yong had defended the share-swap. As Warisan’s chairman, he was on record to say that “the wider policy in entering into this transaction was that the Government through Warisan Harta could utilise the RM50 million fund.”

Yong said the RM50 million was to support counters (stocks) on the then Kuala Lumpur Stock Exchange (KLSE,now Bursa) in which Warisan and the people of Sabah had investments. The true outcome, according to Dr Yee, is that as a result of the share-swap deals, Warisan Harta lost RM114 million.

Ambrose blamed Warisan for the loss because it refused to accept his offer to pay RM96 million for the difference between its purchase and market price of NBT and Sugar Bun shares which he said fell sharply because of the Asian financial crisis.

What he failed, in Ambrose’s own words, to tell the “entire populace of Sabah” was that he did not have the cash to pay RM96 million. He suggested another share-swap! Thus Warisan sued Suniwang for RM179,825,000. True enough, Suniwang folded. Warisan did not get a sen. If Ambrose had the money, would his flagship Suniwang Holdings Sdn Bhd collapse like a pack of cards?

Ambrose blamed Musa Aman, who was then Finance Minister, for rejecting again his proposal in 2007 to settle his debt of RM179,825,000 by transferring shares of Borneo Marble Corporation Sdn Bhd which he owned through proxies.

He said Warisan had entertained his proposal but the Sabah government rejected it. Warisan officials said it was true that they entertained his proposal but it did not accept it because the company was a liability.

Recently filings with the Companies Commission of Malaysia have proved this to be so. Borneo Marble was formerly known as Galmore Resources Sdn Bhd and was a fully-owned subsidiary of Suniwang Sdn Bhd which was owned by J Ambrose Sdn Bhd.

As at the end of December 2006, Borneo Marble suffered a pre-tax loss of RM108,793. There are no records of its financial filings from 2007 to 2009.

Ambrose boasted that his NBT owned 200,000 acres of timber land under Forest Management Unit which was bought by someone else.

Officials said what he failed to say was that NBT was in debt to the tune that the company was worthless and the timber land was pledged to a bank as collateral. The property was sold by the bank to recover its loan to NBT.

Ambrose had banked on the Sabah government to bail him out which it had rightly refused.

By his own admission, he has a Receiving Order of the court placed on his assets under the control of an official assignee. He has not been adjudicated a bankrupt yet.

Any chance of the Sabah government bailing him out now hinges on the remote chance of Yong Teck Lee becoming Sabah’s Chief Minister again. And why shouldn’t he? After all it was Yong’s late father, Yong Yun, who financed Ambrose’s law studies in London.


THE GLOBAL ECONOMIC CRISIS AND THE FUTURE OF ASEAN
(Keynote Address by Anwar Ibrahim at Chulalongkorn University, March 30th 2009)

When I first uttered the unutterable in Hong Kong sometime late last year that Hayek is history I was then bombarded with accusations of having turned my back on Adam Smith. Not too long later however, we heard reluctant acquiescence from liberal institutions that the free-market principles that guided American financial development would no longer count as biblical injunctions.

In the presence of such an erudite audience today, let me take the liberty to indulge further in the discourse. Just to be clear, I make no claim to pioneering new ideas but suffice to say that I am a mere commentator having had some experience in managing an economy which was also going through one of the worst financial turmoil in Asia. We need to remember only the boom-and-bust cycles articulated by the 19th century economists such as John Stuart Mill or Alfred Marshall, before we get carried away with the modern orthodoxy, which depicts financial markets as effective, stable, and self-correcting mechanisms.

The advocates of spontaneous order which had hitherto attained the level of religious orthodoxy having rammed free market strictures about self correction and deregulation are now conspicuously silent. What went wrong?

True, the reaction against command economies of the Orwellian kind as exemplified by the Soviet Union and other Communist countries in the past was well founded. But was there really a need to subscribe to a theory where absolute reliance is placed on the law of chaos? The issue here is not whether the free market system and the pricing mechanism based on competition is viable; but in stubbornly holding on to the view that markets are benign, championed by the likes of Hayek and a distinguished pedigree of Nobel laureates such as Milton Friedman and his Chicago protégés, with Alan Greenspan as the turn of the century poster boy, Wall Street enjoyed more than two decades of financial deregulation. During this time, we witnessed the unfolding of Enron, Worldcom, and so on and the Sarbanes-Oxley laws dealt only piecemeal. But what was left unchecked was the proliferation of the weapons of financial mass destruction —such as mortgage-backed securities and collateral debt obligations. In place of the earlier institutional giants, we now have on parade the largest financial institutions in the world, brought down to their knees.

The unprecedented government bail outs nailed the lie to the dictum that the State should not interfere in the free market processes. Hayek’s devotional mantra that the invisible hand will eventually work to rectify things has vaporized into mere Harry Potter hocus pocus.

The stimulus packages in America, the UK and some other EU countries are so massive that even die hard Keynesians are spoofed. It is true that the Keynesians believe that pump priming itself with the necessary checks and balances is indeed the most effective way of powering economies out of their recessionary corners but the concern we have is the unfettered adoption of polices of reducing the cost of funds to near zero, while government goes on a spending spree on even more borrowed money. The Federal Reserve and other central banks buy up Treasury bonds and other government papers in order to give that much needed shot in the arm for the economy still waiting for the invisible hand to appear. They call this “quantitative easing” but everyone knows this is just a euphemism for borrowing one’s way out of debt.

It remains to be seen whether this phase of irrational exuberance in borrowing is different from the Keynesian prescriptions to counter the 1930s Great Depression. To be sure, the once unassailable doctrine of spontaneous order has been dealt a body blow that is destined to consign it to the dustbin of economic history. That America is opting to bail out its banks and insurance companies at arbitrary values rather than allowing the law of free market supply and demand to take its course is therefore a damning indictment of its fundamental economic principles.

What then is the real lesson to be learned from this crisis?

Is this a systemic failure arising from the unbridled practice of free-market principles or is it a case of the prophetic truth coming home to roost, that is, he who sows the wind must reap the whirlwind?

One of the strongest arguments today is that deregulation has led to the current fiasco. To go further some have made the case that regulations were always there but the regulators slept on the job. Some finger pointing here is inevitable. Alan Greenspan has already been whipped. Fannie Mae and Freddie Mac, they say, is a classic case of regulators failing to detect the cheating by accountants, something that would have been easily uncovered by a bit of fraud specific forensic accounting. It would have required just a bit more diligence perhaps but certainly it was no rocket science.

The underlying causes however must go back to the question of easy money which remained the substratum of the American political economy for the last three decades. This came on the back of a new religion of financial alchemy spawned from the fertile womb of Wall Street, a religion using sophisticated financial reengineering calculated to transform debt into wealth. This was the philosopher’s stone by which the largest economy in the world by sheer consumption alone was able to not just eke out an existence but to thrive and prosper.

To my mind, this financial maelstrom undermines not only the economic foundation but the political and moral substructure of Western capitalism. We still believe that market economies which stand solely on the feet of homo economicus are doomed to fail because the dictates of a humane economy impel us to consider ideas about right and wrong, social justice and the dignity of man. Shakespeare’s dictum against making “the orphan pine while the oppressor feeds” is a timely reminder. It must jolt us back to the issues involving the great divide between general welfare and distributive justice.

We don’t say this perched on any kind of moral high ground. It was a similar kind of profligate spending that had got us into the 1997 Asian financial crisis. And we lectured and hectored. But unlike the scenario in the U.S. there was certainly greater oversight in Asia and more regulatory control. Corruption and abuse of power featured more prominently in the case of Asia. In fact, there was a case that rogue institutions were working hand in glove with lawyers and accountants to maneuver their way through the regulatory process.

In Asia it was a case of over legislation providing a labyrinthine cover for shady and questionable transactions. And the rich were bailed out at the expense of the poor. This is where the question of accountability and transparency reigns high.

To be sure the lessons of moral hazard were relentlessly knocked on our heads in the wake of the Asian crisis and at the risk of sounding repetitive, let me say again that the massive bail outs that we are seeing today in America are nothing if not classic instances of moral hazard going bezerk, made all the more ironic considering that we are looking at the bastion of free market capitalism.

Perhaps it’s time we took another look at the factor-price equalization (FPE) theorem. We know that it was through exuberantly inflated prices of goods and services that made it possible for Americans to carry on indulging in overconsumption while the rest of the world particularly Asia had to settle for much less. As those trained in economics and international trade will tell you, this mirage will be shattered eventually as the FPE theorem sets in to bring into equilibrium the relative prices of these goods and services across the world. This may have been a tad too theoretical in the distant past but with the pace of globalization and international finance and free trade flowing the way it is now, the impact can be real.

And it is one of the great ironies that this poster nation of liberal democracy and free market capitalism is so heavily indebted to the poster nation of autocracy and command economy. Indeed it is well known that China is the biggest funder of the US federal deficit. Other Asian nations as well as Middle Eastern countries not renowned for open and liberal governments are also substantial investors.

There is the dynamics of economic self-interest and geopolitical imperatives. The question is still how long will Asian and Arab investors continue to prop up these prices?

Yes, the world has had a good five years or so of robust economic growth spearheaded no doubt by the emerging economies, but the policy shift in Asia is already under way from monetary tightening to monetary loosening. The East Asian juggernauts are moving fast with the billions in spending package proposed by Taiwan, Japan and China together with de rigueur tax cuts and interest rates lowering.

While at the start of the financial implosion, there were still brave echoes of decoupling immunity shielding Asian countries, any suggestions today would have been dismissed by the bloodbath that went on in the Asian equity markets. While it is true that generally banks in Asia are still holding up, the fact is that our economies are too closely intertwined with those in the locus of the financial meltdown. The upside of globalization that allowed export-oriented countries to thrive has a very sharp downside as well so a recession on one side of the world spreads quickly to the other. The 9% reduction in global trade predicted for this year is rendering a crushing blow to once vibrant and thriving economies.

The myth that if your exports dry up for the U.S. market there is always the emerging economies as a buyer of last resort is all but shattered. All domestic demand indices until only several weeks ago were falling. Property prices are heading south in India and construction figures in China show the steepest ever decline particularly for Shenzhen.

Growth through productivity and competitiveness remains our pathway to prosperity. It has liberated millions from the scourge of poverty and destitution and enabled our people to enjoy freedom and decent living conditions.

The temptation to explode the government bureaucracy during recessionary times must be avoided. The weight of a bloated and inefficient bureaucracy can do more harm in the long term. Money invested in entrepreneurship and stimulating the private sector will generate more value for the economy in the short and long term.

Adequate measures for ensuring good governance are essential. Government spending guided by a policy that shows little transparency in the award of contracts is a clear warning sign of mismanagement of the economy.

More importantly the spending packages that have been announced should focus on projects that are good for business and good for people. A social agenda during recessionary times would ensure that critical institutions such as public health and education are not neglected. Infrastructure development should seek growth areas in industry, public housing and strengthening transportation and communication between urban and rural areas. Fiscal intervention could then find areas to increase demand through tax cuts and incentives to hire workers and enhance their human capital through training and development.

For us in Asia, history has proven that growth through increased productivity and competitiveness is the only path to achieve prosperity. It has liberated millions from the scourge of poverty and destitution and it has enabled our people to enjoy freedom and decent living conditions. In region dominated by the economic powers of China and India the 600 million people living within Asean represent a formidable foundation upon which to regain prosperity.

It is true that our interests have never been more closely intertwined. As Asean nations buy and sell more from and to each other, as our economies become even more intimately linked by investment flows and multinational operations, and as our national borders become more porous, our fortunes will become even more inseparable and indivisible. A determined effort will be necessary to crystallize these bilateral ties into a firm and coherent pact.

A cohesive Asean regional cooperation remains an elusive goal and history has taught us that when push comes to shove Asean nations will tend towards unilateralism. This should be avoided at all costs. We would agree with Prime Minister Abhiset’s view that “As the financial crisis deepens, the world will look towards our region for action and for confidence.”

There is a greater calling that we face during these uncertain times. A looming recession and the risk of social upheaval make for a volatile political situation. Growth oriented policies that ignore the social dimension will spurn greater disenchantment. The overall societal objectives of distributive justice and fairness must not be ignored as we identify a way forward. With millions at risk of sinking into poverty as jobs become scarce the steps taken to revive ailing economies must not overlook the needs of the poor and marginalized.

We are likely to witness some leaders revive the mantra of Asian Values – that in the pursuit of economic growth the rights of the individual are peripheral. Unpopular governments would certainly need a pretext upon which they can silence dissent against policies that fail to address the problem of unemployment, poor public infrastructure and lack of quality social services.

On the contrary a prosperous Asia is merely an illusion if material wealth is subsumed in a sea of repression and denial of basic human rights. True prosperity must be accompanied by with political empowerment of the ordinary citizen. Fundamental freedoms such as the freedom from hunger, freedom from fear and exploitation, and the freedom to peacefully practice one’s religious beliefs are so basic for the growth of a truly humane society.

The growth of civil society and renewed economic prosperity will not be possible without regional stability. The political resolve to formulate an Asean pact with a mechanism to institutionalize agreements on trade, finance and human rights is necessary. This has proven no easy task but is still attainable. We must establish strong interdependibility, economic and political. The nurturing of democracy and civil society, in tandem with economic growth — for democracy and growth are not mutually exclusive — is our best guarantee of regional peace and security for future generations.


As far as I can see, this is just a bailout exercise. The 5 billion from EPF via Valuecap Sdn Bhd is to bailout UMNO link corporations in the KLSE which has taken a real beating the last 6 months after March 6th. They are putting wool into our eyes by using our hard-earned EPF contributions trying to solve their problems.

There should be NO BAILOUT! Besides, greed got them into trouble. Bad money practices got them into trouble. Corruption got them into problems. They don’t have financial prudence’s and they are all overrated. They know now to make money by only selling assets . Let them get themselves out of it. They did not pay any taxes on the excess profits that they made getting themselves into trouble. They dug their own grave. Let them claw their way out on their own. They got into trouble trying to justify their high priced executive packages with risky financial instruments back by imaginary money.

I really feel sorry for them that they can no longer make payments on their Bangsar Apartment and London escapades and the shopping sprees in Hong Kong. 

These fellows are running the country down so fast down the slippery slope and its getting more and more cloudy.  We are in a mess.

Malaysia needs help!