Saturday, December 29, 2007

Chance for Asia to seize the day

Below is an excellent article in The Straits Times today that defied conventional wisdom. Sophie's World agrees with the writer especially the point about the Asian financial crisis. The writer said the Asian financial crisis and the sub-prime crisis showed that, again contrary to conventional wisdom, the culprit is the financial system in core countries, namely the US and Europe.

Sophie's World had earlier said about the 1997 Asian financial crisis: "True, the crisis was triggered by the Asian countries' flawed policies in some instances. There was no doubt many Asian countries had to reform their faulty economic and political systems then. But the foreign and mainly Western capital must also share the blame, and be regulated to help avoid sudden and overly destabilising effect on the real economies." Please see earlier posting.

Nobody will forget the famous picture of the International Monetary Fund's Michel Camdessus, with his arms crossed in what was seen as an arrogant gesture, overseeing former Indonesian President Suharto signing the agreement for an IMF bailout package worth nearly US$50 billion. The picture was widely used to personify Asia's loss of its independence following the financial crisis in 1997.

Chance for Asia to seize the day
By Joergen Oerstroem Moeller, For The Straits Times

BECAUSE this year marks the 10th anniversary of the Asian financial crisis, observers were prepared for yet more studies on what went wrong and how to avoid another crisis.

Only a few expected another financial crisis, even though it was common knowledge that the property sector in the US and some other countries had entered a period of 'irrational exuberance' - to borrow the famous phrase used by former Federal Reserve chairman Alan Greenspan.

But even those who expected a reversal of the property cycle did not predict the emergence of a threat to global financial stability, with the likelihood of recession in the United States raising uncertainty about global growth.

There are four lessons to be drawn from these two crises.

Lesson No.1 is that the world is actually less globalised than conventional wisdom tells us.

The financial crisis that began in Japan in early 1990, with nose- diving share prices and a property market locked in stalemate for 15 years, did not really affect other countries. This was so even though Japan's economy was the second biggest in the world.

Similarly, while the recession in the US in the first half of 1991 was felt by other countries, it did not drag the world into recession.

The Asian financial crisis in 1997 was the trigger, not the main reason, for a similar crisis in Russia and some Latin American countries. The US and Europe remained remarkably unaffected.

As for this year's sub-prime mortgage crisis in the US, we have to wait a bit before making a judgment, but so far its contagious effect also seems to be limited.

The conclusion one may draw is that while the world may look globalised, it is in fact regionalised. An economic slowdown in one country is felt by neighbouring countries, especially if they belong to the same economic grouping, but it has a limited impact on the global economy. The reason being that regional intra-trade as a share of total trade is high and growing, while dependence on other regions and/or countries is less important.

Intra-European trade comes to about two-thirds of all trade for the European countries. Exports to the US account for only 3 per cent of total European GDP.

Business cycles

LESSON No.2 is that while the business cycles of adjacent countries, and of countries inside the same grouping, tend to converge, the global picture is different.

Many observers expect globalisation and growing trade to synchronise business cycles, but the figures tell another story. International trade amounts to only 31 per cent of global GDP. For most countries, domestic consumption and investment are more important as economic pacesetters. The domestic business cycle is more insulated from outside effects than is widely believed.

This may change, as trade grows faster than GDP, but it will be some time before it rivals consumption and investment.

For the 15 years from 1991 to 2005 there were only four years (1993, 1994, 2001 and 2004) when economic growth in the three major economies (US, eurozone and Japan) moved in the same direction.

If the analysis is narrowed to the US and the eurozone, the business cycle moved in synchronisation in six years out of 15 (1993, 1994, 1995, 1997, 2001 and 2004). Economists may qualify these observations with theories about time-lag etc, but even that does not contradict the conclusion that, contrary to conventional wisdom, the global business cycle is a myth. The global economy is actually controlled by national and regional business cycles.

Lesson No.3 touches on the vulnerability and fragility of financial systems.

The Asian financial crisis and the sub-prime crisis showed that, again contrary to conventional wisdom, the culprit is the financial system in core countries, namely the US and Europe.

They have been irresponsible over due diligence, financial management and corporate governance. Instead, resting on the laurels of their established reputations, they went in blind pursuit of profit and market share without balancing risks against gains.

The Asian financial crisis, as we know now, was due to short- term borrowings (denominated in foreign currencies) to finance long -term investments with income denominated in national currencies. Financial institutions in core countries lending to Asian countries were the guardians of the international financial system.

This role should have compelled them to act as good corporate citizens. Instead they started a race among themselves for short-term profit. When problems arose they jumped out and left the borrower and the international institutions to pull the chestnuts out of the fire, devoting most of their efforts to avoiding losses.

The sub-prime crisis reveals the same behaviour. Financial institutions stepped in to lend without performing the necessary scrutiny. They gambled upon continually rising property prices as collateral for revolving credits, as if the perpetual moving machine had finally been invented - by them!

In both cases, some of the world's most prestigious financial institutions allowed themselves to enter into deals which, by their own rules, were indefensible.

Lack of judgment

NOTE the lack of judgment by all core financial institutions in core countries. It was not the financial systems in developing or newly industrialised countries which started the Asian financial crisis. Rather, it was lending from financial institutions in core countries.

Financial systems in non-core countries have so far - we do not yet know the whole story - weathered the sub-prime crisis far better than their supposedly renowned role models in core countries. To some extent, it may even be that that financial institutions in core countries dragged those in other countries into the mess.

Lesson No.4 is that the prime movers of globalisation are the above financial institutions.

Global capital movements are growing faster than global trade. Over the past 10 years, new financial institutions such as hedge funds and private equity funds have entered the arena and are playing a bigger role.

While the spillover of domestic growth into other countries is limited, the opposite is true for financial operations. Financial institutions are interacting with each other across borders by selling and buying financial instruments. In theory, this distributes risk among many institutions, which in principle should make the system more robust and solid.

But in practice it works the other way, spreading panic as all institutions seek to get out as soon as they smell the risk, knowing that those that get out last will run up the largest losses.

My fifth point is more an observation than a lesson. Most of the world's savings are in Asia. These savings are now being used to rescue or bail out some of the core financial institutions that have had their fingers burnt.

It is not difficult to draw the conclusion that Asian financial institutions, courtesy of the sub- prime crisis, have been given a chance to buy influence in globally established institutions. This will give Asia much stronger control over how its savings are used.

Asia may not have liked seeing financial institutions in the US and Europe earning money while reshuffling wealth originating in Asia, and not being able to do much about it. But now, when these established institutions are on their knees, the chance is there - and it has been taken.

The calamities of the sub-prime mortgage crisis will be temporary. But the impact of the Asian move to gain control over its own savings will be permanent.

The writer is a visiting senior research fellow at the Institute of Southeast Asian Studies, Singapore, and adjunct professor at Copenhagen Business School.

Thursday, December 27, 2007

Half-Black or Female?

OK, back to serious news analysis after one week of satire and entertainment news.

By Uncle Cheng

Do you worry about the United States? I do. In recent months I have heard quite a few of my Chinese friends say things like “America is going bankrupt” or “America is finished - China is the future.”

But it is not just the constant drop in the value of the US dollar, and hence our own money, that is worrying.

Many Chinese seem to think the U.S. has lost its magic touch. They see the world going in one direction and America in another.
I do not know about you, but I find these feelings very troubling.

This is because, despite its many defects, America remains a very important nation and everyone benefits from a rich, stable America. As the old saying states “When America sneezes, the whole world catches a cold.”

The truth is that America’s reputation in the world has been profoundly damaged by President Bush and his cronies. It seems amazing how quickly America has been able to destroy its accumulated international goodwill but that is what has happened.

About a year ago I explained in a previous column why I favoured Obama. A year later I see Barack Hussein Obama as America’s greatest hope for the future. Why, you may ask, do I support the half-black, quarter-or-so Muslim Obama?

Precisely because he is half black and a bit Muslim. He is the only person who stands a chance of transforming the global image of America. Obama was right to claim: “The day I am inaugurated, the world will look at America differently."

I also think the vast majority of the world’s population outside America will support Obama for President. That’s about 6.5 billion people!

People the world over can identify with Obama because he had a black Kenyan father, a white American mother, an Indonesian stepfather, and a Muslim education in Jakarta followed by an American university.
Obama is the only person who as President can act as a bridge to the Islamic world, and a bridge to the many poor people in the world.

A leading Canadian politician expressed it well when he said: “It's clear Barack Obama would be the first globalized American leader, the first leader for whom internationalism would be in his veins."

I see the image of a Muslim terrorist, who is trained to hate America, switching on his TV and seeing an American President who is half black, has an Arabic middle name, and went to a Muslim school. How can the terrorist hate such a man?

On another matter I was greatly amused to read that Obama’s rival, Hillary Clinton, has been accused of being an opportunist and of lacking integrity. I ask you — are not all politicians opportunists and dishonest? Or will Obama prove to be the exception in that regard as well?

But this is not to say I dislike Hillary Clinton. Actually I like her. I am amused to think of Bill Clinton returning to the White House as ‘First Man’. And Hillary would be America’s first female President — also good for America’s image in the world.

Tuesday, December 18, 2007

Ruffled feathers over Singapore's Asian Idol win

Yippee, talkingcock published another piece of satire by Sophie's World. It's reproduced here for your reading pleasure:

by Sophie's World

Not just Malaysia, now other Asians across the region are up in arms over the unexpected victory of Singapore Idol Hady Mirza in the first-ever Asian Idol.

"This is unbelievable. Indonesia's Mike should have won. This is the result of how the Singapore Gahmen undermines Indonesia through a systematic cornering of our telecom market," fumed Indonesian government spokesman Cakap Ayam.

Other Asians who watched the contest and voted via a SMS system also cried fowl over the contest that was held in Jakarta, Indonesia, during the weekend.

"The Malaysian Indian girl was fantastic. Singapore and Malaysian governments must be working together to marginalise our Indian community further," said Indian activist Uthu Ayam Kumar, who added that he will organize another street protest to highlight 'ethnic cleansing' in Malaysia.

Central to the region's unhappiness was the SMS voting system, which they felt favoured Singapore.

Indonesia's Mr Ayam said Singapore Gahmen investment arm Temasek Business Group must have rigged the SMS contest through its control of two telcos – Telkomsel and Indosat.

"This shows our decision to force Temasek to sell one of the two Indonesian telcos is correct and necessary," Mr Ayam said, adding that Singapore must have conspired with the United States and staunch ally Israel to undermine predominantly Muslim Indonesia.

"Apa nama itu (What is the name of the) Temasek guy? Don't you think it's too coincidental that he's called Mr Israel? I rest my case," said Mr Ayam with a smirk.

Singapore Gahmen spokesman Ban Vanity was unruffled, when bombarded by intense media questions that were unseen since Temasek effectively triggered the Thai military coup in 2006.

"Their unwarranted questioning of the legitimacy of our Idol's win is tantamount to questioning of Singapore's sovereignty. We cannot allow that," Ms Vanity read from a prepared statement.

"We will defend our position vigourously and refer to the new Asean Charter to resolve the dispute and uphold our victory."

She added: "What's next if we don't defend our sovereignty over the Asian Idol issue?"

"They will claim Singapore's Idol is actually Malaysia's Idol since Singapore was part of Malaysia briefly, or it's Indonesia's Idol since Singapore's founder Sang Nila Utama was a Sumatran prince. How can like that?"

Monday, December 17, 2007

Hady Mirza is Asian Idol!!!

In an unexpected development, Singapore's Hady Mirza (Pix source: ST) has become the first Asian Idol!!!

Sophie's World is glad that TV viewers voted according to their conscience, instead of voting along nationalistic lines. This is because Singapore's Idol could not have won if voting by TV viewers across Asia were based on nationalism. Singapore has the smallest population among all the participating countries.

This bodes well for Asia's renaissance, despite many problems affecting the Asean region and the continent.

It's also amazing that Singapore's Idol won despite the rather frosty reception towards him at the onset of the competition yesterday.

Saturday, December 15, 2007

Asian Idol Rock On!

TONIGHT'S the night when millions of viewers in Asia will be watching the Asian Idol competition.

According to The Straits Times, Hady Mirza (Pix source: ST), winner of the second season of Singapore Idol, is in the running. The report said he will be pitting his singing skills against a formidable cast of opponents - Indonesia's Mike Mohede, India's Abhijeet Sawant, Malaysia's Jaclyn Victor, the Philippine's Mau Marcelo and Vietnam's Phuong Vy.

Sophie's World hopes everyone will pick the best singer, instead of voting along nationalistic lines. Hopefully, the event will also display the best of Asia and push recent political problems in the region into the background. Asean has no shortage of problems, apart from their inability to deal with the murderers of Burma.

So, let's leave politics aside for a while and enjoy Asian Idol show tonight.

And here's a little satire by Sophie's World that was published by Singapore's premier satirical website talkingcock in October 2006, shortly after Hady won the Singapore Idol. Enjoy!

Proof: No Marginalization Going On
Posted on Sunday, October 08, 2006
Topic: International NewsInternational News
by sophies world

Malays and Chinese are not marginalised in Singapore or Malaysia respectively, contrary to claims from both sides of the causeway.

In Singapore: “This is conclusively proven by the fact that a second Malay has won the Singapore Idol," said Gahmen spokesman Ban Vanity shortly after Hady Mirza emerged as the winner in the hotly contested show watched by more than half of the island's 4 million people.

Ms Vanity pointed out that Hady is the second Malay to have clinched the coveted title, after Taufik Batisah in the previous year.

"The Malays trounced the Chinese for two consecutive years in Singapore Idol. How can Dr M say Malays are marginalized in Singapore? What utter rubbish!" said Ms Vanity at the packed press conference yesterday.

She was referring to Dr M's remarks that Malays are marginalized in predominantly Chinese Singapore.

"We could ask about the status of the Malays in Singapore, why they are not allowed to bear arms in the military or train to handle weapons," Dr M ranted earlier this week.

"Why is it that the Malays in Malaysia are so capable in the military field but the Malays in Singapore cannot hold high posts?"

The Malaysian figure had said it as a reaction to Singapore's MM Lee's comment that the Chinese are systematically marginalized in Malaysia.

But MM Lee was also incorrect about the Chinese in Malaysia, according to analysts who track the Idol phenomenon worldwide.

"A Chinese beat a Malay in last year's Malaysian Idol what!" said Sing Song Woon, referring to Daniel Lee who defeated Norhanita Hamzah for the crown in 2005.

The Idol findings are being regarded by both governments as being conclusive proof of each country’s progressive policies.

“The Idol results are very reliable,” said Singapore spokesperson Ms Vanity. “After all, they are extremely accurate in terms of forecasting talent.”

PS (15 Dec 2007): Singers who didn't quite make it to Asian Idol -- Pay Rise Needed to Maintain Hip Hop Lifestyle: Gahmen and MDA Rap Video Sparks Potential Gangsta War

Hahaha. Lovely satire and doctored pix but they are not done by Sophie's World!!!

Friday, December 14, 2007

Union Bank of Singapore

Some commentators have been rather critical about the Government of Singapore Investment Corporation or GIC for coming to the rescue of UBS of Switzerland. GIC will inject US$9.8 billion for a 9% stake in the Swiss banking giant to help it cope with the US sub-prime crisis.

The concerns are fair as it is the biggest single deal for GIC -- the guardian of Singapore's foreign reserves.

But critics are missing the big picture.

According to guest writer Hercules Morse, it's a great deal for GIC and Singapore.

"It's a great way to invest the nation's reserves in a first-class global institution, rather than spend it all on pointless projects," Hercules said.

Hercules Morse reckons that it's a great financial deal for GIC as there is very little premium priced into the conversion price compared to UBS' current market price. This means GIC is being paid 9% coupon on notes before conversion as an implied discount.

More importantly, the UBS deal will help promote confidence in Singapore as the new private banking capital of the world.

Sophie's World agrees. Singapore's two government investment arms -- GIC and Temasek Holdings -- are building up a formidable portfolio of banking assets.

Apart from GIC's stake in UBS, Singapore, through Temasek, has interests in major banking assets such as Standard Chartered (13%). ICICI Bank (7%),
China Construction Bank (6%), Bank of China (5%), and homegrown DBS Bank (28%).

Temasek acquired the Stanchart stake in March 2006 from the family of the late Singapore-based Malaysian tycoon Khoo Teck Puat.

Since then, Stanchart has stepped up its plan in Singapore. I
n May this year, Stanchart made Singapore its global private banking HQ. And Stanchart early this year agreed to take up more than half a million square feet of space at the new Marina Bay Financial Centre -- Singapore's new downtown. Incidentally, DBS, which has been rumoured to be a merger partner of Stanchart, agreed to take up 700,000 square feet of space in the same neighbourhood this week.

It doesn't really matter whether DBS and Stanchart will tie the knot.

What's more important is Singapore's efforts to build a world-class financial centre by hosting the big banking players in Singapore, and by taking direct stakes in them like the UBS deal. By doing so, their fates are intertwined and entrenched.

UBS will, one day, be better known as Union Bank of Singapore!

Additional reading:
Behind GIC's buy into UBS (15 Dec 2007)

Monday, December 10, 2007

Different trades

The stock exchanges of Malaysia and Singapore, which used to be one entity, have performed quite well since they split and went public at the turn of 2000.

They are the only two stock exchanges in Asean that have become listed companies although they remain as market regulators. Bursa Malaysia, formerly known as the Kuala Lumpur Stock Exchange, went public in 2004. The Singapore Exchange or SGX was floated in 2000.

But the two exchanges have not been able to join forces to become a more formidable player despite their close historical links and the natural combined liquidity of the two markets. Their plan to set up a cross-trading platform has effectively been aborted although both sides have not said so.

Their action shows they are more willing to tie up with other partners instead.

For instance, Bursa Malaysia today confirmed a news report that it’s in talk with the United States’s Chicago Mercantile Exchange (CME) on a possible tie-up that may involve equity holding. The Star had earlier reported that CME may buy a 10% stake in Bursa Malaysia at about RM20 per share. This is a huge premium to Bursa Malaysia’s last traded price of about RM15 and values the entire Malaysian exchange at more than RM10 billion.

Earlier, CME had a equal partnership with SGX to list commodity futures products, such as crude palm oil and rubber, on a Singapore-based exchange called Jade. However, in November this year, the CME group abandoned Jade, selling its stake in the venture to SGX. No real reason was given but one cannot discount the possibility that the failure was due to their ability to secure crude palm oil prices from Bursa Malaysia.

SGX has also moved on following the difficulty in setting up a cross-trading platform with Bursa Malaysia since 2005. SGX bought a 5% stake in the Bombay Stock Exchange in March for US$47.5 million, while the Tokyo Stock Exchange bought a 4.99% stake in the SGX in June for US$321 million.

The simple question remains: Why can't the listed stock exchanges of Singapore and Malaysia strike a commercial deal despite their two countries' long list of outstanding bilateral problems?

Sunday, December 09, 2007

Divergent flight paths

Like many things about Malaysia and Singapore, their national airlines have taken quite different paths ever since the two countries split in 1965.

The two airlines used to operate as one entity called Malaysia-Singapore Airlines before they parted ways in 1972. Since then, Singapore Airlines (SIA) has become one of the most profitable airlines in the world, while Malaysia Airlines (MAS) has had a very turbulent flight path despite the recent turnaround.

The Star has a very colourful feature on the MAS story.

But no one should blame Singapore for inheriting the international routes of MSA in the divorce settlement.

This is because Malaysia didn't want the international routes in the first place, preferring to take the 50-seat Fokkers to help link West and East Malaysia. Singapore, with no hinterland, had to go international at all cost with its inherited Boeings.

Many things have changed since then.

MAS has returned to government control following the botched privatisation exercise in the late 1990s. SIA retrenched close to 500 people in one bad year in 2003 despite many good years.

One thing remains unchanged. The stewardesses of the two airlines continue to wear their sarong kebaya, albeit by different designers.

Friday, December 07, 2007

Way back into love

This is one of the best songs I have ever heard. You must watch the movie too!

Thursday, December 06, 2007

Malaysian bullet train going to Singapore?

Malaysian tycoon Francis Yeoh has made it clear again that he plans to build a bullet train service all the way to Singapore from Kuala Lumpur, according to a report today.

Will he and his YTL Corporation succeed in linking the capitals of Malaysia and Singapore via a fast train that could cut down travel time to less than two hours for many long-suffering travelers between the two countries?

“I am confident (to secure the project) because everybody wants it. The Malaysian government is pragmatic and at the end of the day if the public wants it, why not?,” he reportedly said.

Sure, everybody wants it. But can the two governments agree to such a plan that will greatly benefit the people of the two countries? Can the two governments really cooperate for the benefit of the population of the two countries or will they be driven by their narrow self-interest?

Sophie's World is not sanguine. Apart from problems arising from Malaysia's haphazard railway blueprint, the two governments can't even agree on very basic and long outstanding matters such as the:

1. Renewal of the water agreements between Malaysia and Singapore;
2. Redevelopment of the Malaysian railway land in Singapore;
3. Exchange of land in Singapore for the joint redevelopment of the Malaysian railway land
4. Use of Malaysian airspace by Singapore;
5. Sale of Malaysian sand to Singapore for reclamation;
6. Release of CPF funds of West Malaysians who no longer work in Singapore;
7. Dispute over Pedra Branca/Pulau Batu Putih;
8. Diversion of heavy traffic to the Second Link from the causeway;
9. Plan to build an overhead bridge to replace the old causeway; and
10. Cleaning up the filthy Straits of Johor, which separates the two countries.

Like the current talk (just talk) to build a monorail link between the southern Malaysian city of Johor Baru and Singapore, it will be more ideal to build a new bridge to replace the causeway to facilitate the bullet train project. Please read earlier posting.

Now, where is the new Asean Charter?

Dancing in the Rain


Tuesday, December 04, 2007

Sad day for Malaysian Indians, Part 2

How will history judge the current Indian drama in Malaysia?

There's no clear answer yet as the drama is still unfolding. Sophie's World is still saddened by the flurry of wild allegations thrown around. Many people are up in arms over the wild allegations made by Hindu Rights Action Force (Hindraf) in its ridiculous petition, its ridiculous claim of US$4 trillion from the former colonial master, and its leader not ruling out violence to achieve its aim.

Let's get things right before the water is muddied further.

Sophie's World supports any call to improve the welfare of marginalised or poor people, whether they are Indians, Chinese or Malays.

But Hindraf will not earn the respect of Sophie's World and other rational people should it continue to cry 'ethnic cleansing' by the government, or suggest violence to help raise awareness on the plight of the long-suffering Indian community in Malaysia.

Demolition of Hindu temples is not right although many of them are sited on illegal sites. But the act of demolishing illegal temples does not constitute ethnic cleansing. Let's not resort to hyperbole in such a sensitive issue. Ethnic cleansing refers to genocide in one extreme and the systematic removal of a particular race in a less extreme definition.

Although the Malaysian government has long favoured the majority Bumiputra community, such an act, though unfair, does not constitute a systematic removal or elimination of the Indian race or 'ethnic cleansing'.

Do you see the Chinese community crying 'ethnic cleansing'?

The Malaysian government may have no choice but to invoke the Internal Security Act to maintain law and order, and quell the careless propaganda by the Indian group. The Indian group will then cry 'ethnic cleansing' all over again. And the whole world will then condemn Malaysia for the 'persecution' of the minority community.

Here's Sophie's World's take to the long-suffering Indian brethren: The end does not justify the means. Resort to noble means or civil disobedience, instead of resorting to unfair means or violence, to achieve the noble end.

Gandhi would have wanted that too.

Saturday, December 01, 2007

Causeway blues again

Source: Singapore's The Business Times (20 Jan 2007) The illustration shows the current toll rates for lorries and heavy vehicles, not cars and motorcycles.

Sometimes, you have to wonder whether policy makers look at the big picture at all.

Take the case of the toll rate at the Second Link connecting southern Malaysia and Singapore.

According to a report on Thursday, the Malaysian government will jack up the toll rates by 27% on vehicles using the Second Link Expressway from Jan 1. The other bridge connecting the two countries is the overused causeway, which links Woodlands in Singapore and the southern Malaysian city of Johor Baru.

The report said passenger cars using the Second Link route will have to pay RM10.80 (S$4.60) next year, compared with RM8.40 now, The Sun newspaper quoted Works Minister S. Samy Vellu as saying.

Rates will also go up at two other Johor toll booths. At the Perling toll, passenger cars will have to pay RM2.30 compared with RM1.80 now. And at the Lima Kedai booth, the toll will be increased to RM3.90 from RM3.10.

The report said the rise in the toll rates is part of contractual obligations the Malaysian government signed with companies that built and manage the highways.

So far, the argument sounds logical. But the whole argument falls apart when it is seen in the wider context of essential infrastructure between Malaysia and Singapore.

Here are some bigger questions and issues concerning the two major arteries:

1. Shouldn't the Malaysian government be lowering toll rates at the Second Link to encourage more motorists to switch from the perennially congested causeway to the Second Link? Toll rates are substantially lower at the causeway, which is owned jointly by the two countries. Even more motorists will avoid the Second Link and flock to the causeway following the jump in the toll rates at the Second Link.

2. So far, it's not clear whether the Singapore government will follow suit in jacking its toll rate as well on motorists using the Second Link, which was built jointly by the two countries. The Singapore government had a policy of matching the Malaysian toll rate when the Second Link bridge was opened in 1998 although the rationale was debatable.

3. Shouldn't Malaysia and Singapore sit down and discuss ways to promote greater usage of the Second Link and ease the congestion on the causeway? Shouldn't the two governments help facilitate the massive cross-border flow of people instead of imposing any further burden on them?

4. Shouldn't the two governments think of fresh ways to ease the flow of people and goods between the two countries, as they couldn't even agree on a simple overhead bridge to replace the aging causeway and clean up the dirty Straits of Johor?

5. Shouldn't the two governments refer to the recently minted Asean Charter, which waxes lyrical about cooperation and dispute resolution in the Asean spirit, to help resolve their bridge problems?

While the two governments remain at odds with each other over a host of bilateral issues, people on both sides of the causeway will continue to bear the brunt of the causeway bottleneck.


By Uncle Cheng

Next year’s Olympics in Beijing is being heralded as an unprecedented national event of international importance. This, after all, will be the first time the Olympics will have been hosted on Chinese soil.

Apart from Toyko (in 1964) and Seoul (1988), and provided you do not consider Australia (Melbourne 1956, Sydney 2000) a part of Asia, no other Asian country has ever been given an opportunity to stage the games since they were first held over two thousand years ago.

While China’s economic resurgence marches onwards and upwards, it is perhaps understandable that Chinese nationalism treats the Olympics as especially significant. The government in Beijing has been progressively asserting China’s interests internationally.

It has actively cultivated strong economic and political ties in all corners of the world but especially in Africa and Australia, places where China’s understandable self-interest lies in their wealth of natural resources. Raising its international profile can only benefit China’s economic strength.

Against this background there are two aspects to the recent controversy concerning Martin Lee’s recent remarks about the Olympics games. To my mind it is not necessary to come to a definitive view whether Mr Lee was urging foreign countries to boycott the Olympics. As any lawyer might say, he is entitled to the benefit of the doubt.

However, one aspect that worries me is an obvious one. China considers the Olympics to be a matter of “face” and particularly the nation’s international “face”. Directly or indirectly linking the games to China’s record on human rights is fundamentally wrong, and indeed against the spirit of the Olympic ideal that demands the games remain apolitical.

But it is the second aspect that I find more important and crucial if the world is to appreciate the Chinese psyche. Initial strong memories of the 2008 games will necessarily fade in subsequent years but the suggestion that foreign forces and countries can somehow meddle in China’s national affairs is a justifiably sore point for the Chinese.

As any admirer of Chinese history must know, the present government’s approach to foreign influences is no different from that of its predecessors. Since the time of the first emperor 2,300 years ago until today China has always labelled those who seek foreign assistance as traitors. This intolerance of foreign influence is a hallmark of Chinese civilization that has enabled China to remain a unified state with an unbroken civilization for thousands of years.

I do not deny that China has been ruled by foreigners. The Yuan Dynasty of the thirteenth century may have been short-lived but it was essentially foreign. The more recent Ching Dynasty was also foreign but quickly lost its “foreignness” and became utterly sinonised.

To my mind, this is the key to understanding the attitude of the present Chinese government. It really does not matter whether the system in Beijing is feudal, national, communist or democratic. That is not the point. What matters is a full appreciation of China’s ancient and often uneasy relationship with anybody whose interests and loyalties lie outside China.

The classic example of this Chinese political psychology is
Beijing’s strained relationship with the Vatican and its Erastian religion which would require China’s Catholics to maintain loyalty to a foreign government.

Friday, November 30, 2007

Singapore 'wins' in Pedra Branca claim

It's not exactly official but Singapore has trounced Malaysia in the competing claim for Pedra Branca/Pulau Batu Putih, according to an online poll by Sophie's World.

When the three-week poll closed tonight, a total of 334 readers had cast their votes. This is quite a decent number but it is still not big enough as a scientific poll. The three options were:

Who will win Pedra Branca/Pulau Batu Putih?
1. Singapore because it has been squatting on the little rock for more than 150 years;
2. Malaysia because the islet is nearer to the country; or
3. Two countries should re-merge and have joint ownership of Pedra Branca/Pulau Batu Putih

Those who voted for Singapore outnumbered Malaysia 169 to 141. Votes for Singapore represented exactly half of the total number of votes. Support for Malaysia was 42%, while the remaining 24 votes or 7 per cent picked the third option of joint ownership of the little island.

The court hearing ended on Nov 23 and the judges are still deliberating on the decision. The International Court of Justice's judgement is expected within the next two months.

The issue has naturally divided readers on both sides of the causeway, due probably to nationalism and differing interpretations of history.

Sophie's World is still betting on an official victory for Malaysia despite the odds against the country.

Wednesday, November 28, 2007

Haphazard Malaysian railway blueprint

Malaysia's railway blueprint is as haphazard as the country's current political climate.

The Straits Times today reported that the government is set to revive part of Malaysia's massive railway project with the award of a RM12.5 billion contract to a joint venture led by businessman Tan Sri Syed Mokhtar Al-Bhukary.

The report said MMC Corporation, the corporate flagship of Tan Sri Syed Mokhtar's vast business empire, will team up with Lin Yun Ling's construction house Gamuda to build an electrified, double-track rail system stretching from the central city of Ipoh in Perak to Padang Besar on the Malaysia-Thai border.

The news is not unexpected although the project to build the entire track was shelved by the current administration following the retirement of former PM Mahathir Mohamad in 2003. The lobbying to revive the project has been intense.

The cost also appears to have ballooned. The plan to build the entire track along the peninsular was estimated to be RM14.5 billion back in 2003. But the price tag is now reported to be RM12.5 billion for a segment of the Malaysian peninsular.

Another point that's not been made clear by the government is the other major leg of the Malaysian railway blueprint -- between the Malaysian capital of Kuala Lumpur and Johor Baru and/or Singapore.

A report this week by Singapore's The Business Times cited JP Morgan as saying that Francis Yeoh's YTL bullet train project between KL and JB is set to take off. The price tag also appears to have gone up -- RM11 billion from the reported figure of RM8 billion earlier.

Will the two railway projects be able to coordinate their operations and make fast train service seamless from southern Malaysia to the tip of the Thai border? Will travelers be able to hop on the train one day in Singapore and travel all the way via Malaysia and Thailand to reach Kunming in China as part of the Asean dream?

Sophie's World doesn't have high hopes, after so many false starts amidst all the problems within Asean.

Maybe, Malaysia must continue to rely on the good old, snail-pace Keretapi Tanah Melayu.

Monday, November 26, 2007

Sad day for Malaysian Indians

I read news about the massive protest by Malaysian Indians (Pix source: The Straits Times. You can see more pix at Screenshots) in Kuala Lumpur with a tinge of sadness.

I feel sad that many Indians feel marginalised over the years in their country of birth due to socio-political reasons, one of which is the Bumiputra policy that has been favouring the Malays since the 1970s.

Their unhappiness over a litany of issues, including the recent demolition of a temple in the state of Selangor, erupted over the weekend.

Reports said Malaysian riot police fought running battles with more than 5,000 Hindu protesters gathered at various places for the banned rally in the Malaysian capital yesterday.

ST reported that many held posters of Indian independence leader Mahatma Gandhi and waved identity cards and Malaysian flags to show they were also Malaysians, as they demanded equal rights.

The report said the gathering was organised by the Hindu Rights Action Force, ostensibly in support of a suit it filed against Britain in August claiming US$4 trillion for the suffering of Indians, whose ancestors were taken to Malaysia by the British as indentured labourers 150 years ago.

Another report cited the organisers as claiming that more than 100,000 members of the ethnic Indian community had signed a petition, addressed to the Queen, asking for help to end racial discrimination under Malaysian law.

Apart from feeling sorry for their plight, I feel sad that some Malaysian Indians made such a ridiculous appeal and claim against the former colonial master.

Yes, the British brought Indians and Chinese to Malaya then. But Malaya, like many other former colonies, has since gained independence. The country has had 50 years -- read half a century -- of rapid economic development, albeit several dark chapters of its history.

The answer is not to make the ridiculous appeal to the Queen or the huge monetary claim, which is equivalent to nearly one-third the value of the US economy today!

Instead, the Indian community should work within the system to improve it instead of blaming the former colonial master. At the same time, the Malaysian government, which is led by Umno and other members of the National Front coalition, must not ignore the grievances of the Indian community or any other marginalised communities anymore.

All parties must work together to help improve the system, and show that Malaysians can run the country well, long after the departure of the British.

Postscript: I have just read the petition by the Hindu Rights Action Force and am totally disgusted with the complete misrepresentation of the situation in Malaysia. The petition even resorted to describing Indians as being "persecuted by government backed Islamic extremist violent armed terrorist" and even suggested "ethnic cleansing" in Malaysia. The petition is even more ridiculous than what I have imagined earlier! Gandhi would not have condoned such an act!!!

Sunday, November 25, 2007

Singapore 'pips' Malaysia in Pedra Branca claim

Sentiment in blogosphere towards the court tussle for Pedra Branca/Pulau Batu Putih seems to have turned in favour of Singapore instead of Malaysia when the hearing ended yesterday, at least according to the online poll of Sophie's World.

Some 275 people have taken part in the poll so far. With just five days to go before the poll closes, votes for Singapore have outnumbered Malaysia 132 to 121. Another 22 voters picked the third option of joint ownership of the little island in the South China Sea.

As stated earlier, the sample size is just not big enough to make a conclusive statement. At best, it's just an indication of the mood of a group of people.

Sophie's World noted the swing of votes happened when the photograph saga happened last week. Votes for Malaysia were ahead of those for Singapore until the Singapore legal team questioned the veracity of the photograph evidence submitted by the Malaysian legal team.

Since then, some readers, including readers from Malaysia, have lambasted Malaysia for using the photograph, which exaggerated the closeness of the island to Malaysia. Many bloggers on both sides of the causeway also ridiculed Malaysia for using the photograph from an unverified and little-known blog although the photograph is not the crux of whole court battle. The photo is merely an image of the island, regardless of its distance to the Malaysian shores. The photograph should not be used as the basis of the court judgment, which will be made next year.

What's more important is the argument whether Malaysia or Singapore had effective ownership of the island. Was Singapore merely a lighthouse operator on an island owned by Malaysia? Did Singapore or Malaysia act in good faith in the whole issue? Or was either side being legalistic in the bid to win at any cost?

Sophie's World is still rooting for Malaysia despite the odds.

Saturday, November 24, 2007

Can everyone fly KL-Singapore? Part 2

IT's finally confirmed that Malaysia and Singapore will open up the long-protected Singapore-Kuala Lumpur air route to limited service by budget airlines.

According to The Straits Times, from Feb 1, at least one low-cost carrier from each side will be allowed to operate two daily flights - a total of four extra services a day.

The report said all restrictions on the lucrative sector will be lifted on Dec 1, 2008, to allow airlines on both sides of the Causeway to fly as often as they want between the two points. ST added that the liberalisation of one of Asia's most restricted air routes is in line with an Asean initiative to free up air links between capital cities of the 10-member bloc by December next year.

It's definitely a step in the right direction but will it make much of a difference to many long-suffering travelers of Singapore and Malaysia? For air travelers, they will see lower fare but will the cost saving be significant to the bulk of the passengers?

Budget airlines -- AirAsia of Malaysia and Tiger Airways of Singapore -- will put pressure on the national carriers but the bulk of the air rights are still lodged with the national carriers until the end of next year.

The provision for budget airlines of 16 daily flights a day represents 8 per cent of the current total number of flights between Kuala Lumpur and Singapore a week. According to the news report, Singapore Airlines and Malaysia Airlines operate about 85 per cent of the over 200 flights a week, charging about S$400 for a return flight that lasts 45 minutes each way.

As pointed out by Sophie's World earlier, what's more important is the fall in the average airfare for the sector, not the headline-grabbing lowest fare for a few early birds.

Wednesday, November 21, 2007

Wake up, Asean!!! Part 2

ix of the deadly crackdown of the pro-democracy demonstration in September.
Pix source:

Asean, which kowtowed to the murderers of Myanmar this week, still has many grand plans although it is beset by many unsolved regional disputes and problems.

One of the grand plans is the idea of a common stock exchange for easier cross-border trading in big-cap stocks, AFP cited an official at the Thai bourse as saying today.

The report said Singapore, Thailand, Malaysia, the Philippines, Indonesia and Vietnam would jointly set up an exchange for regional trading in late 2008. Under the plan, large-cap shares in each participating country could be exchanged on the new trading board.

Asean, please wake up! Can an Asean-wide stock exchange realistically take off next year when the two historically linked stock exchanges of Malaysia and Singapore can't even set up a joint trading platform after talking for more than three years?

And the two bourses -- Bursa Malaysia and Singapore Exchange -- are the only two publicly-listed stock exchanges within Asean. Their status would have made it easier for them to undertake commercial decisions such as setting up a joint trading platform. But the proposed cross-trading mechanism remains a pipe dream.

Asean members must resolve the long list of outstanding bilateral issues first, before the bloc could truly undertake real regional joint efforts or have greater moral authority to preach to Myanmar's dumb generals.

Wake up, Asean!!!

Alamak! All the Asean leaders formed a human chain with PM Thein Sein of Myanmar, which is ruled by murderers and dumb generals.

They formed the traditional Asean human chain following the signing of the Asean charter in Singapore this evening (AFP pix on ST).

Sophie's World is speechless and disgusted. Read Choo Zheng Xi's far more eloquent piece in The Online Citizen.

Wake up, Asean!!! It should not be business as usual anymore. Myanmar didn't just disperse protesters with tear gas. It killed unarmed protesters and monks!!!

And yes, the so-called historic Asean charter is generally full of motherhood statements as expected, and procedural matters that should have been in place after 40 years.

Tuesday, November 20, 2007

Pictures don't tell a thousand words!

Photo submitted by Malaysia (Pix source: The Straits Times, which said the Malaysian photograph, taken with a telephoto lens, magnifies the height of the hill by seven times)

Singapore's The Straits Times said this photo was taken with a camera that approximates what the human eye sees.

It’s truly fascinating that the current trial over who should own Pedra Branca (according to Singapore) or Pulau Batu Putih (according to Malaysia) has, at times, focused on form rather than substance.

In the rebuttal to Malaysia, Singapore chastised Malaysia over its photo evidence of the little outcrop, saying that Malaysia had misrepresented the distance of the island to Malaysia. Singapore seems to be technically correct as seen in the two photos in The Straits Times.

It’s odd that the Malaysian government had resorted to using a picture from an little-known blog to back up its photo evidence. Singapore has correctly questioned the veracity of the blog and the picture.

The truth of the matter is simply that the little island – whatever you call it, Pedra Branca or Pulau Batu Putih – is 25 nautical miles or about 40km from Singapore. The Singapore press would never fail to mention the distance between Pedra Branca and the Republic.

But Singapore press would generally leave out the mention of the distance between Pulau Batu Putih and Malaysia, which is actually 7.7 nautical miles or about 12.3 km.

Sophie’s World had earlier mentioned the distance as one of the factors in favour of Malaysia, but Singapore is banking on the legal notion of adverse possession to claim ownership of the islet.

Regardless of the photo evidence submitted, the indisputable point is that the little rock is a lot nearer to Malaysia.

I guess a picture doesn’t quite tell a thousand words!!!

Monday, November 19, 2007

Temasek not guilty

As expected, Singapore government investment arm Temasek Holdings has been found guilty of unfairly dominating and manipulating Indonesia's telco market.

Temasek issued a terse but strong statement to say it is not guilty of the charges and will appeal the sentence.

Simon Israel, Temasek’s executive director, stated: “We are not guilty. The decision makes no sense. It ignores the facts. The charge against Temasek is groundless – Temasek has no shares in Indosat and Telkomsel, and we play no role in their business decisions and operations.

Telkomsel is controlled by the Indonesian Government which also has a golden share in Indosat. The telecommunications industry in Indonesia is regulated. It is inconceivable that the Indonesian government and the telecommunications regulator would allow the prices to be fixed or cause a loss to the consumer. Temasek will fight this decision.”

Sophie's World agrees that the Indonesian ruling doesn't quite make sense as the Indonesian government has a bigger say than Temasek in the two Indonesian telcos. The ruling will no doubt dent Indonesia's image among foreign investors. Will leave it to Indonesian experts to talk about this.

Temasek is technically correct though to say it doesn't own shares in the two telcos. The shares are held through two Temasek subsidiaries. Temasek owns 56 per cent of Singapore Telecommunications which in turn owns 35 per cent of Telkomsel, Indonesia's largest mobile phone carrier. Temasek owns all of Singapore Technologies Telemedia which, along with Qatar Telecom, owns a 41.9 per cent stake in Indosat, the second-largest telecommunications company in the country.

Although Temasek is probably sound on the technical and legal fronts, the ruling has wider implications on Temasek as a sovereign wealth fund. This is not the first time that Temasek has had missteps in the region.

Last year, Temasek caused an uproar in Thailand when it acquired Shin Corporation from the family of former PM Thaksin Shinawatra. The Thai court ruled against a unit of Temasek-controlled Shin following the takeover by Temasek.

Thailand is still involved in the protracted review of its foreign ownership rules to ascertain whether Temasek did indeed breach the rule in the deal, which subsequently triggered a military coup that ousted Thaksin.

It seems that some quarters are determined to whack Temasek at all cost as it is seen as the vehicle of the Singapore government.

There is definitely no shortage of volcanic problems within the Asean family.

Saturday, November 17, 2007

Asean a happy family?

The ten Asean members will sign a charter in Singapore to mark yet another commitment to build a stronger community with over 500 million people.

According to news reports, the charter marks the first time that the 40-year-old bloc, which has often been described as a family by its member nations, will codify its basic principles and organisational rules.

The Straits Times said the 31-page Charter includes provisions for leaders to meet twice a year, new rules for settling disputes peacefully, more flexible decision-making processes, and steps to beef up the organisational structure of the grouping so that it is able to monitor and implement what members have agreed to do together.

Sophie's World has not seen the implementation details but is curious about the provision to resolve disputes. Will it be a motherhood statement about the need to resolve disputes peacefully without resorting to violence? Or will the charter spell out something concrete like all neighbourly disputes be referred to an international court or arbitrator if affected parties are unable to come to terms after 10 years of bilateral negotiations?

The provision is definitely an important point because there is no shortage of disputes within the so-called Asean family. Some of the family tiffs include:

1. Asean members' inability to rehabilitate the dumb generals and killers of Myanmar;
2. Malaysia and Singapore are crossing swords at the ICJ over a rock known as Pedra Branca or Pulau Batu Putih in the South China Sea;
3. Singapore and Malaysia still can't resolve their bilateral problems after nearly two decades;
4. Malaysia and Indonesia are still banning sale of sand to Singapore;
5. Indonesia and Singapore couldn't seal a treaty to extradite any Indonesian criminal in Singapore;
6. Singapore and Indonesia could not seal a defence cooperation agreement;
7. Nearly all Asean members are pissed off with Indonesia's annual haze;
8. Thailand is still seething over Singapore government investment arm Temasek Holdings' controversial deal with former Thai PM Thaksin Shinawatra's Shin Corp;
9. Indonesia and Malaysia have not fully embraced each other after another round of Konfrontasi;
10. Malaysia and Singapore can't even agree on a new overhead bridge to replace the old causeway to help improve the massive cross-border flow of goods and people, although Asean dreams about a region with free movement of goods, services, investment, skilled labour and freer flow of capital by 2015.

The Singapore charter is definitely a step in the right direction to set up a proper framework for the interaction of its ten family members.

But individual members of the Asean family must look at wider interests, not just their narrow self-interest.

Sophie's Note: Wikipedia
entry showing
satellite image of the 2006 Southeast Asian haze over Borneo.

Friday, November 16, 2007

Malaysia 'pips' Singapore in Pedra Branca claim

Malaysia has pipped Singapore in Sophie's World's online poll on the likely winner of the tussle for Pedra Branca/Pulau Batu Putih.

Sophie's World started an online poll a week ago, asking readers whether they think Singapore or Malaysia will emerge triumphant in the current court tussle for the tiny rock in the South China Sea.

Many readers had been rooting for Singapore, until today.

Readers supporting Malaysia outstripped Singapore 34 to 32 as of today. Another 7 readers voted for the third option -- the two countries should re-merge and have joint ownership of the disputed island.

It's still early days as we still have 15 days to go before the online poll closes. Do take part in the online poll but be objective! :-)

Whatever the outcome of the poll, it's not likely to be conclusive as the sample size is way too small. A poll needs at least 3,000 voters to be reasonably credible. News reports have been rather divisive on this issue as well.

Nevertheless, Sophie's World is still betting on a victory for Malaysia despite the earlier odds against the country.

The little rock is nearer to Malaysia. It sounds reasonable for Malaysia to say that it didn't make any claim on the island earlier because it has always regarded it as part of Malaysia although Singapore has been squatting on the rock for 150 years.

Singapura was also once part of the Malay sultanate. The old Singapore was given away to the British by the Johor sultanate for a song. Hence, one can argue that the Johor Sultan transferred ownership of Singapore but not Pulau Batu Putih to the British.

And as correctly pointed out by another blogger, Singapore was once part of Malaysia between 1963 and 1965.

Tuesday, November 13, 2007

Mickey Mouse going to Malaysia? Part 2

Can Malaysia's southern state of Johor succeed in luring Mickey Mouse (Image from Wikipedia) when it can't even get the basic infrastructure in place?

According to Bernama yesterday, Johor chief minister Abdul Ghani Othman said there is a need for a better transport network between the state and neighbouring Singapore as investments flow into the Iskandar Development Region in Johor.

The Johor state has grand plan to house a Walt Disney theme park within IDR.

The chief minister said building a rail link to connect to Singapore's Mass Rapid Transit subway system remains crucial. But Johor's own light rail system remains a concept at this stage.

The chief minister also suggested building more ferry terminals to ferry people across the Straits of Johor, which separates the two countries.

Will the ferry plan work? It will have rather limited effect as the Straits of Johor is blocked by the land-based causeway. The two countries have not been able to agree on a simple plan to build a new overhead bridge to replace the old and dilapidated causeway, as noted in a previous posting.

As a result, many people on both sides of the Causeway have had to endure the daily crawl on the overused land bridge, compounded by slow immigration clearance by the two governments.

The new Malaysian Immigration complex, which was supposed to be linked to the aborted bridge project, will soon be completed. Will it help ease the bottleneck? Unlikely. This is because the causeway, which was built more than 80 years ago, simply cannot handle the volume of traffic today.

More tourists will continue to flock to Singapore and Malaysia in the next few years. In the case of Singapore, Las Vegas Sands and Genting International have gone full-steam ahead in building their casino resorts that are expected to be completed in 3-4 years.

But don't expect tourists to Singapore to make a beeline to see Mickey Mouse in Malaysia if Johor can't even fix the basic infrastructure of its southern gateway.

Saturday, November 10, 2007

Corporate comeback of Mokhzani Mahathir

Mokhzani Mahathir - the second son of former Malaysian Prime Minister Dr Mahathir Mohamad - has staged a comeback since he quit the corporate scene six years ago. He appears more focused now, as seen in the Raffles Conversation in The Business Times of Singapore today.

Back with a vengeance
Malaysian businessman Mokhzani Mahathir, written off after the 1998 Asian financial crisis, has made a spectacular comeback with the listing of his 46.7 per cent-owned firm Kencana Petroleum. S JAYASANKARAN reports

IN what has proved to be a well-timed return to the market, Malaysian businessman Mokhzani Mahathir floated his 46.7 per cent-owned firm Kencana Petroleum on the Kuala Lumpur stock exchange earlier this year, offering investors' shares at RM0.41 apiece. Given the boom in Malaysia's oil and gas industry, Kencana's shares soared and at current market valuations, Mr Mokhzani has emerged richer by at least RM236 million (S$102 million).

That's a triumphant comeback for a businessman who was all but written off after the 1998 Asian financial crisis. For Mr Mokhzani, however, his movement into oil and gas represents a back-to-roots event.

'By profession, I am a petroleum engineer anyway and I started my career with Shell,' he says. 'It was the first thing I did after I got back to Kuala Lumpur. It was also the first thing I did when I set out on my own.'

Then the businessman, the second son of former premier Mahathir Mohamad, got bitten by the Think-Big mentality that typified much of the Malaysian corporate sector in the 1990s.

In his words: 'Unfortunately, I got sidetracked and went into the other businesses which you know about and got into trouble. Tongkah, Pantai, I leveraged both the companies and me personally.'

In 2001, to stave off creditor banks and to blunt claims that his father's administration was practising nepotism (see sidebar), he had to sell the two companies, which had been involved in operations as diverse as healthcare and financial services.

'It was the same in both politics and business,' said Mr Mokhzani, who used to be assistant treasurer of the youth wing of the ruling United Malays National Organisation. 'I suppose the moral of the story is ... when you lose your way, go back to what you started from.

'We tried to settle all our debts but we couldn't. Nevertheless, the effort was made and it put us in good stead with some banks. Some of them wanted to maintain relationships with us, said they would be willing to help going forward. And the economy began turning and a few proposals had come to our table.'

One such proposal came from HL Engineering, a fabricator and petroleum services company. 'A lot of people make the mistake that it stands for Hong Leong,' says the businessman. 'But, no, it stands for Hin Loon after Chong Hin Loon, now the managing director of Kencana. We bought into it in late 2001 and we built it up and took it public this year.

The shares now trade at over RM2.50 apiece, which means the businessman is well and truly back. 'I have gone through the whole process of seeing shares fly and then crash,' he says, shrugging. Still, in Kencana's case at least, the shareholders have enjoyed seeing their shares going up.

A new shareholder is Quek Leng Chan, the tycoon behind the Hong Leong conglomerate, now reported to be among the top 10 shareholders. 'He is quite an aggressive investor,' says Mr Mokhzani. 'But I didn't know he was coming in. I only heard about it through a mutual friend, and I don't know what his strategy is.'

He intends to stick to Kencana. 'It is our main vehicle,' he says. 'We want it to be a brand name. I know there are others out there with the same name but they aren't related. For example, there is Kencana Property Management which recently bought Sungei Wang Plaza in Kuala Lumpur. We got calls over that but they are no relation.'

His point is that the company will stick to its core business. 'Kencana concentrates solely on oil and gas and nothing else,' he insists. 'And we intend to remain that way. It's not going to be an investment holding company like Tongkah and Pantai were. No more, this time we are going to be very focused and concentrate on just one thing at a time.'

He does have other interests but they are relatively insignificant. 'They are not under Kencana and they are small,' he says. 'I have the franchise for Porsche, an IT company in education software and some very small property development.'

Porsche? 'I've always loved high performance cars, which is why I am involved in motor-sports and the Sepang International Circuit ,' replies Mr Mokhzani, who is chairman of the F1 circuit in Malaysia. 'In 2001, someone approached me to take up the Porsche franchise and I thought, 'why not, it's a good brand'.'

How many cars does he sell? 'We sell around 130 a year which is nothing compared to the 300 or so that are sold annually in Singapore,' he says. 'It's just amazing, the number they sell there.'

He has bowed out of active politics. 'I used to be treasurer of Umno Youth but now I no longer have any political ambitions,' says Mr Mokhzani. 'My father used to say 'choose one or the other, business or politics'. So I choose business.'

Still, he thought at one time that his business benefited his politicking. 'At the beginning, it helped,' he recalls.

'My hospital group came in very handy because I could send doctors to the villages to give free treatment and medicine ... My manufacturing division gave people jobs. Once I left all of that, I lost the ability to do that.' Mr Mokhzani's younger brother Mukhriz, however, is still in active politics and is an elected member of the executive committee of Umno's youth wing.

Mr Mokhzani downplays his property ventures. 'We have invested in a small way,' he says. 'It's just that we occasionally take up 5 to 10 per cent in other development projects through a private company.'

But he waxes enthusiastic about oil and gas. 'Global oil prices are high and so there is a lot of new investment,' he says. 'The oil people are hungry for concessions. I think it will remain bullish and it will last for quite a while.

'When companies sign a production sharing contract in Malaysia, it is usually for around 25 years. The first five, to explore and find, then you develop for the next 20 years. Once you sign, you have to work, that's the way it is. And Malaysia has signed quite a few PSCs (production sharing contracts) so for us, the support services, there is plenty of work. For the next three to five years, it will be bullish.'

But he wants to take it slowly and to lead through alliances. 'We are the new boys on the block and our shareholders' funds are still small,' he says. 'I don't want to stretch our resources. It's better for us to team up with known players rather than going it alone.'

One recent venture was an alliance between the Singapore-based unit of Thailand's Mermaid Maritime to form a drilling services company. Separately, another joint venture between the two awarded Kencana a US$136 million contract to design, construct, equip and deliver a new-build tender rig.

Mr Mokhzani is enthusiastic about the alliance. 'It has done three things for us,' he says. 'We signed a contract to create our own drilling service where we have a 60 per cent interest. Two, we formed a company to own a vessel where we have 25 per cent. And, three, we won a contract to build a vessel for them at US$135 million. Building such a vessel has not been done in Malaysia, so we will be the first.'

He is bullish about the company's potential. 'We are going to grow 10-15 per cent a year, easy,' says Mr Mokhzani confidently. 'We think Mermaid will give us another order in six months, this time for a US$200 million vessel. Our order book right now stands at RM1.8 billion. When we listed, it was around RM800 million. So we are delivering.'

'We have expanded our yards significantly but still we have our hands full at the moment,' he continues. 'The Mermaid deal is a very big undertaking for us and we are bringing in technical experts. It will jump-start the business for us.'

On a separate note, the businessman, who is an F1 buff and chairman of the Sepang International Circuit, does not see a problem with Singapore's entry into motor-sport. 'Every year there are, what, 17 to 18 races throughout the world?' he says. 'When the season starts, we are the second race and they will be, maybe, the 13th. And the races are getting better in the sense that this year - with the Hamilton/Alonso thing - was really exciting.'

'I know Ong Beng Seng (the hotelier who helped bring F1 to Singapore) very well,' confides Mr Mokhzani. 'We had begun to talk about this two years ago and we have helped them. They've come here and we have shown them the workings of the track. To my mind, we are not really competing. Next year may be their first but it will be our 10th.'

He thinks it's been a great boon to the country. 'We have aggressively marketed it and by doing so we have promoted the country,' he says. 'Consumers are spoilt for choice - they have the English Premier League, they have rugby, all sorts of things. So we have had to hard-sell it to bring in the tourists, RM6-RM7 million a year in promotion. I believe Singapore is also looking at it from that point of view.'

Painful lessons from Asian crisis

MOKHZANI Mahathir surprised everyone when in April 2001 he declared that he was giving up his business interests in a bid to protect the family name in response to people who had accused his father's administration of nepotism. Mr Mokhzani's father is Malaysia's fourth prime minister Mahathir Mohamad, now 82, who stepped down on Oct 31, 2003.

Mr Mokhzani informed the stock exchange that he was selling his interests in two listed concerns - Pantai Holdings and Tongkah Holdings - which were then involved in healthcare, manufacturing, financial services and property development. He sold at a time of depressed stock market prices and couldn't have made much out of those transactions.

It was clear from his tone during that period that he was tired of repeated attacks from his father's political opponents that his corporate climb had been due to family ties. 'I am fed up with all these allegations,' he told a newspaper then. 'In this political climate, everything these companies do is construed as favouritism, and it's unfair to other shareholders.'

The onset of the Asian financial crisis deepened tensions between Dr Mahathir and his deputy Anwar Ibrahim, who was sacked in September, 1998, accused of 'moral misconduct'. Political temperatures soared and, in the process, the scrutiny over the business interests of Dr Mahathir's children intensified, hurting the premier's prestige.

Now Mr Mokhzani is back and enjoying favourable investor attention again through his company Kencana Petroleum which he took public late last year. But he's not about to forget those dark days. 'In 1999, the political temperature was quite hot,' says the businessman. 'And there was the economic crisis. And so for me, it was one step forward and several steps back.'

Is there anything he will carry over from the Asian crisis? Mr Mokhzani does not hesitate: 'With 20:20 hindsight, I guess I was far too diversified, I spread myself too thin and geared up too highly.'

The moral for the businessman is simple. 'Don't borrow too much,' he says. 'I geared up personally so I should know. You know, Pantai Holdings was a gem of a company, it had cash and it had a good, viable business with concessions. But we had to sell, you have to be able to survive so you step away and wait to come back another day.'

At the height of the crisis, Mr Mokhzani was reported to have racked up debts of close to RM200 million. He sold his interest in hospital specialist Pantai Holdings to Malaysian businessman Lim Tong Yong who controversially sold it to Singapore's Parkway Holdings last year. That caused a brouhaha as Pantai had two lucrative government concessions. In the end, state investment agency Khazanah Nasional stepped in and took up a majority interest in Pantai.

'I didn't have much of a surplus after I sold everything, not at all, just sort of enough to keep the bankers off my back,' continues Mr Mokhzani. 'But I did the right thing. Someone once told me never to be emotional about my companies. There should be no sentiment in business.'

He does not state the extent of his debt. 'Frankly, I'd rather not remember,' he says, wincing. 'It pushed me to take drastic action. We were getting letters from the banks with some threatening to take legal action against me. Not all though, one or two stood by us. Now, the bankers who stood by me are happier today than they were five years ago.'

Sophie's note: Wonder why Mokhzani has such short hair nowadays? He took a real haircut recently! :-)