World Press Freedom Index 2006
Reporters Without Borders

The countries with the worst record are still North Korea, eritrea, Turkmenistan, Cuba, Burma and China. Bracketed are the positions in 2005.

1 (1) Finland
1 (1) Iceland
1 (1) Ireland
1 (1) Netherlands
31 (34) South Korea
35 (31) Australia
43 (51) Taiwan
51 (37) Japan
53 (44) USA
58 (39) Hong Kong
92 (113) Malaysia
103 (102) Indonesia
108 (90) Cambodia
122 (107) Thailand
141 (115) Sri Lanka
142 (139) Philippines
146 (140) Singapore
147 (138) Russia
155 (158) Vietnam
157 (150) Pakistan
163 (159) China
164 (163) Burma
168 (167) North Korea

Asian countries never rate well in these rankings, and hence these surveys are largely dismissed or ignored by most Asian governments. The press/media is still viewed as a crucial tool to hold onto political power in most of Asia. When will the winds of change arrive ...?? Why are certain countries at the top - well, its simple really, just have the following: no censorship; threats; intimidation; physical reprisals on journalists and their work. One can easily repress press freedom on account of "national stability", "political stability", etc... Why then are so many countries that rank well in press freedom have so few political problems?? But countries that rank poorly usually have repressive governments and tons of conflicts - so that argument does not hold water. Singapore being a pragmatic government, should do what yields the best results, and according to these rankings, they should try and move up the rankings for purely pragmatic reasons.

Securities Commission Ruling Needs Further Explanation

Subject : SIME DARBY BERHAD - RULING FROM THE SECURITIES COMMISSION IN RELATION TO THE OFFER PRICING OF CONVERTIBLE SECURITIES IN RAMUNIA HOLDINGS BERHAD PURSUANT TO POTENTIAL MANDATORY OFFER FOR SUCH SECURITIES IN THE EVENT AN AGREEMENT IS REACHED ON THE POSSIBLE ACQUISITION OF A CONTROLLING STAKE IN RAMUNIA ("POSSIBLE ACQUISITION")

Contents : Reference is made to the letter by the SC dated 11 October 2006 (which was received on 12 October 2006) in relation to the Possible Acquisition. On behalf of SDB, CIMB Investment Bank Berhad wishes to advise that the Company is currently still in discussions with the vendor in relation to the Possible Acquisition. On 29 September 2006, for the purpose of seeking clarification on the requirement of the Malaysian Code on Take-Overs and Mergers 1998 ("Code") with regards to the pricing of convertible securities pursuant to a mandatory offer, CIMB on behalf of SDB, had written to the SC seeking the SC Ruling in relation to the offer pricing structure for the convertible securities in relation to the Possible Acquisition ("Ruling Application"), in view of the unique characteristics of certain convertible securities and the requirement for a comparable offer for such convertible securities under the Code.

Summary details of the Ruling Application are as follows:(i) Apart from the Employees Share Option Scheme ("ESOS") options expiring in mid May 2010, Ramunia has in issue the following securities:
1) Extracted from Ramunia's latest Annual Report 2005.
2) Exercise price of Warrants is RM0.55 per Warrant, expiring end December 2014.
3) 5-year 1% non-cumulative ICPS, each convertible into 1 new ordinary share in Ramunia upon its maturity in end December 2009.
4) 3-year 1% ICULS, each convertible into 1 new ordinary share in Ramunia upon its maturity in end December 2007.

(ii) The ICULS and ICPS have the following characteristics (among others):
(iii) In the event the Possible Acquisition materialises, pursuant to Part II of the Code, the Possible Acquisition would trigger a MO obligation on the part of SDB, whereby SDB will be required to offer to acquire all the remaining ordinary shares in Ramunia not held by it ("Offer Shares") subsequent to the Possible Acquisition ("Ordinary Shares Offer").
(iv) Further, in the event the Possible Acquisition materialises, pursuant to Section 30(1) of the Code, SDB is also required to offer to purchase those convertible securities in Ramunia not already held by it (save for the ESOS options which requires conversion into ordinary shares prior to acceptance of the Ordinary Shares Offer) subsequent to the Possible Acquisition.
(v) In view of the above, in the event the Possible Acquisition materialises, SDB proposes to adopt the following offer pricing structure for the ICULS, ICPS and Warrants in Ramunia: Pursuant to the SC Letter, the SC had approved the Ruling Application subject to the following conditions, should the Possible Acquisition materialise and a MO needs to be undertaken by SDB:

(i) If Scenario 1 above is adopted, such ICPS should not be allowed for early conversion before its stated maturity date. Further, the M&A of Ramunia should not be amended to allow for conversion at any time in the future.
(ii) The ICULS holders be allowed to convert their ICULS, and as such, SDB should accept at the Ordinary Shares Offer price if ICULS holders accept the MO by tendering the acceptance form together with their notice for conversion during the offer period, in line with Scenario 2.
(iii) A preliminary announcement to be made immediately by SDB to Bursa Malaysia Securities Berhad, in respect of negotiations with the vendors for the Possible Acquisition, and CIMB's application on the proposed pricing structure together with the SC's decision. At this juncture, SDB has neither reached an agreement with the vendors nor decided on any firm offer pricing structure in relation to the Possible Acquisition. Appropriate announcements will be made by SDB as and when there is material development in relation to the Possible Acquisition. This announcement is dated 17 October 2006.

My Take - Based on the ruling by SC, it only meant that there is no EARLY CONVERSION, which are the terms of the P instruments - that is correct. SC can choose to allow for conversion also if it so chooses, the deliberation would be whether it would be detrimental to minority shareholders. The answer would be NO, the P holders have priority over normal shareholders in the event of a wind up, so allowing them to convert and treat them as raking parri-passu with normal shares would be a plus for everyone.

Even though the SC does not allow for early conversion, it does not mean the P will be priced at a discount. That is another matter entirely. If Sime Darby only offers a weighted average price for the P, the company will have to brace themselves for quite a backlash, plus the SC may not allow that. Hence all common sense prevailing, Sime Darby better offer SAME price for mother share and P of Ramunia. That's because the P, as in Preference share is first in line in the event of a winding up. Pref shares are there usually because they pony up capital/loan to the company. Sometimes they trade at a discount because they are only convertible at the end of a specified period.

WARNING TO SECURITIES COMMISSION - If Sime Darby offers to buy the Prefs at a discount to the mother share, AND the SC allows that, the SC will then change the entire valuation and business paradigm for issuance of Pref shares. WHO WILL WANT TO PONY UP MONEY TO GET PREF SHARE IF THEY GET TREATED LIKE SECOND RATE CITIZENS??? The SC can end up changing the entire sub-set of that market. So, brain cells intact, I hope the SC is not so stupid. Plus that Sime Darby and CIMB are not so stupid as to try and buy the Pref at a discount to mother share.

p/s the writer hereby declares that he does not own any Ramunia or Ramunia-P... but have friends who own tons of it .... lol

KL, The Cheapest City On Earth According To WSJ
By Stan Sesser, WSJ

From my hotel window I can see one of Asia's tallest buildings -- the dramatic Petronas Twin Towers. My room is spacious and has all the little touches, such as thick terry cloth robes, that you'd expect from a five-star hotel. Downstairs, near the gym, there is a spa with hot and cold whirlpool baths. The breakfast buffet features specialties from Malaysia, China and Japan. All of this, with taxes and service charge, at the Shangri-La Hotel, is costing me US$107 a night. I haven't asked the manager for a discount, nor have I used airline miles to cover two-thirds of the cost. Rather, my room is so inexpensive because I've taken a trip to the world's cheapest major city.

Every three years, Swiss banking giant UBS does a survey of prices around the world, including what a tourist would pay for a typical overnight package of an upscale hotel room, meals, transportation and theater outings. In this year's survey, released recently, Malaysia's capital, Kuala Lumpur, took the honors, outranking cities with a reputation for budget travel such as Mumbai and Prague. Kuala Lumpur's total UBS travel package costs US$260 -- less than one-quarter of what the same package would go for in London (US$1,180) or Tokyo (US$1,090), the two most expensive cities for tourists. Of the four U.S. cities in the survey, the lowest package cost US$720 in Los Angeles and the highest was US$920 in New York.

Convergence teaches us that with globalization, emerging economies grow so rapidly that the gap narrows between them and developed countries. This might be true for the standard of living and other measures, but it often doesn't apply to tourism prices. For instance, the US$107 I paid for my Shangri-La hotel room, bought through Web site AsiaTravel.com, would have gotten me no more than the Salisbury YMCA in Hong Kong. In London, the cheapest hotel room I could find on the Internet cost US$140, and that had the bathroom down the hall. The startling price differential doesn't end at hotel rooms. Acording to the UBS survey, a three-mile taxi ride in Kuala Lumpur would be just US$1.60, compared with US$11.60 in New York and US$20.30 in London.

Just a few decades ago, Malaysia was a sleepy country living modestly off commodities such as rubber and tin. Now, the economy is booming. The country is a world-class manufacturer and exporter of everything from auto parts to computer components. Much of the explanation lies with the pro-business policies of long-time Prime Minister Mahathir Mohamad, who stepped down three years ago. He introduced tax incentives, spent lavishly on big-ticket infrastructure projects and encouraged multinational investors. Kuala Lumpur is modern and prosperous, and has numerous attractions for tourists. So, why is it so cheap? Yeah Kim Leng, chief economist of RAM Consultancy Services in Kuala Lumpur, ticks off two factors that help make it a budget destination (which also help counteract the converging tendencies of globalization).

Heading the list is an undervalued currency: The ringgit is now valued around 3.7 to the dollar compared with 2.5 when the Asian financial crisis hit in 1997, so a tourist's dollar or euro buys a lot more. Second, the government subsidizes oil prices, which lowers the overall cost of doing business and helps keep taxi fares low. Daniel Kalt, a UBS economist, attributes Kuala Lumpur's relatively consistent performance during the years between the surveys primarily to Malaysia's ability to get a firm grip on inflation. He notes that over the three-year period, Malaysia's cumulative inflation was just 5.6%, compared with 12.6% in India. Yet, for most Americans, Kuala Lumpur and the rest of Malaysia remain off the beaten path. Last year, Singapore attracted more than twice as many American tourists as did all of Malaysia, 371,000 compared with 151,000. Thailand, which borders Malaysia to the north, attracted four times as many Americans, even though Malaysia can match many of Thailand's attractions, such as stretches of uncrowded beaches backed by rain forests and mountains. Mirza Mohamed Paiyab, director general of the government's Tourism Malaysia, says the difference is primarily because Bangkok and Singapore are large air-travel hubs, the first with many connections to Indochina and the second to Bali and Australia.Of course, like any major city, Kuala Lumpur has several drawbacks for tourists. The traffic jams are mind-boggling, making a taxi ride at rush hour an exercise in frustration. Not far from the glitzy shopping malls are impoverished neighborhoods with crumbling buildings -- a reminder that not everyone is sharing in Malaysia's success.But travelers who bypass Kuala Lumpur are missing some enticing features. There's a vibrancy that matches Bangkok, with bars and restaurants crowded late into the night. Restaurants in Kuala Lumpur spill out into the streets, and sidewalk food vendors are everywhere. A mix of ethnic Chinese, Malay and Indian residents makes for a variety of excellent cuisine choices. The city has also retained large swaths of colorful ethnic neighborhoods.The Lake Gardens district offers a bird park, botanical gardens and stately colonial-era mansions. The Islamic Arts Museum is world class. The area around the landmark Petronas Towers can keep shoppers busy for days. Tourists can also take day trips to the former colonial hill station of Bukit Fraser, known as a spot for bird watching, and to the historic seaport of Melaka.And then there are the prices, the accounts of which you'll impress your neighbors with as much as your photographs. I could sample the culinary delights of Kuala Lumpur from morning to night for the cost of a main course in London. Adly Rizal, the creator of a Kuala Lumpur restaurant Web site, Friedchillies.com, notes that "eating in K.L. for only three days is like going to Disneyland in the morning and having to leave by noon."Mr. Rizal took me to an outdoor fish restaurant behind the King's Palace called Gerai Seri Malaka, where three of us ordered two whole freshwater catfish, a whole mackerel, cuttlefish, a local river fish called terubuk and big chunks of stingray, their specialty. The bill definitely won't provoke a protest from the number crunchers who see my expense account. For far more fish than we could eat, as well as accompaniments, we paid US$12.
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p/s prices are but a function of real estate primarily, besides the two factors cited (currency undervaluation and government subsidy on certain products), the following old blogs could make for interesting reading

March 10, 2006 - Why Malaysian Real Estate Is So Cheap

March 23, 2006 - Malaysia & Its Natural Resource - Summertime & The Livin' Is Easy

August 11, 2006 - UBS Study On Price & Earnings Of Cities
Should I Be Thankful?

Having gone through the UBS study on price and earnings of global cities, I am quite convinced on the validity of the assumptions, methodology and conclusions. Firstly, they weighted according to how much it would cost to buy a basket of goods in each city, the breakdown are as follow:Food/groceries 18%; Beverages/tobacco 5%; Hygiene & healthcare 7%; Clothing 6%; Household and electronic devices 7%; Home/house 18%; Heating/lighting 5%; Transportation 14%; Miscellaneous 20%. Cost of living index is calculated on the basket of goods containing 154 items (products and services) - that is then reweighted according to the Consumer price index relevant for that specific country.

As for earnings, the wages are calculated across 14 selected industries/job types and only takes data from local people and also the prevailing tax rates.The following are the rankings of PRICES using data but NOT including rentals. The study is based on 71 business cities surveyed. New York city is pegged at 100, meaning if your city is at 95, your city is technically 5% cheaper than New York, etc...
1) Oslo 121.5
2) London 110.6
3) Copenhagen 109.2
5) Tokyo 106.8
7) New York 100
11) Paris 95.6
15) Los Angeles 91.6
19) Amsterdam 87.7
24) Seoul 85.8
27) HK 82.1
30) Sydney 80.4
32) Singapore 76.6
36) Dubai 7440) Taipei 68.9
51) Jo'burg 59.754) Bangkok 55.3
57) Jakarta 51.8
60) Shanghai 50.3
62) Beijing 49.6
67) Manila 46.7
70) Mumbai 38.5
71) Kuala Lumpur 36.8

The PRICES ranking changes substantially if rents were included, and they should be, and especially in major Asia cities: London would become the costliest city with 105.5 with New York being pegged at 100 still. Other cities which moved up the rankings when rent was included were Chicago, Los Angeles, Tokyo, Sydney and HK. But Kuala Lumpur remained the cheapest place at 71st position.

So for WAGES, as long as Kuala Lumpur does not finish at 71st also, Malaysians should be pretty well off, ... right?!! Again using New York as 100:
1) Copenhagen 118.2
2) Oslo 117
3) Zurich 115
5) New York 100
6) London 89.2
8) Dublin 88.3
18) Tokyo 78
20) Sydney 74.6
32) Seoul 44.2
36) Taipei 35.5
38) Singapore 32.3
40) HK 27.4
53) Kuala Lumpur 15.7
59) Shanghai 11.5
66) Bangkok 8.267) Mumbai 7
68) Jakarta 6.3
69) Manila 6.3

Most of the Asian cities would move up by another 10 spaces roughly if we were to take net wages instead of gross. On balance, Kuala Lumpur looks great, cheapest but gets paid by a significantly higher relative quantum, mainly we don't have to worry about excessive property prices/rentals. Fuel is still subsidised as are a number of necessities - thanks to super normal revenue from our resources (oil and gas, plantations, timber, etc...). When you put PRICES and EARNINGS side by side, you get purchasing power.

Here is the more important ranking, which is Purchasing Power, based on net wages, again with New York pegged at 100 (the higher the ranking the better, effective PP):
1) Zurich 115.6
2) Geneva 112
3) Dublin 106.5
7) New York 100
9) Sydney 99
10) Auckland 98.7
15) Oslo 91.2
20) London 86.8
24) Tokyo 81.8
31) Paris 72
35) Seoul 56.2
37) Kuala Lumpur 50.9
38) Singapore 50.8
43) Hong Kong
56) Shanghai 22.9
62) Mumbai 18
65) Bangkok 14.6
67) Manila 13.5
68) Jakarta 12.2

Guess, we should be happy.... now, if we can only get our car prices to be the global average (presently the cost of buying a car in Malaysia and Singapore is about 80%-100% more expensive than the global average).

Why So Mad At Turf Clubs??

Just received confirmation that all racing telecast will be stopped from October 20th. Now, why am I so mad with the committee members. Club members hold themselves in close circle of cronyism, I would like to present a few questions to them:

a) who decides who gets to be a member, what God given right does members have it to lord over the paying public?

b) the race course is supposed to move from Sungei Besi to Bkt Beruntung area, as part of comepnsation, why do members ONLY get to buy certain bungalow lots at priviledged prices, when did turf clubs practicse NEP of their own?

c) can we have a breakdown of public patrons and actual club members at race courses - would I be very far off if the ratio is 85-15?? never have so much carried the burden for so few...

d) do the members have the interest of racing at heart of their own??

e) did Tanjong bitch when the Totalisator Board kept losing RM15-30m a year for the longest time, now they are just making a few moves to improve betting turn over and the biggest fuckers in their way is not the government but the bloody committee members of the fucking clubs....

f) when did turf clubs became profit making entities... the government should just give the running of turf clubs to Tanjong/PMP also, and lets appoint a proper CEO to run the whole thing ... the ex-CEOs of Singapore Turf Club and HK Turf Club were proper professional managers and before that were never involved or connected to racing...

Nextnation
Sounds Like Singapore's New Name For Their Country

A few weeks back I did mention Nextnation as an upcoming stock. The trouble with these stocks is that we don't know the timing of the play. This morning session, Nextnation charged up the volume chart, could be interesting.

Mobile application service provider Nextnation saw its revenues and profits rise in the first quarter ended 31 July 2006. Consolidated revenues totalled MYR 23.5 million, up from MYR 15.2 million in the year-ago quarter. Profit from operations amounted to MYR 5.3 million, up from MYR 4.1 million last year. Net profit rose to MYR 4.8 million, compared with MYR 3.8 million in Q1 1005. Revenues in Malaysia totalled MYR 18.3 million with a net profit of MYR 5.3 million. Revenues from other countries stood at MYR 8.4 million with a net loss of MYR 502,430. The company has credible operations and strategy into India and China.

Recently, NextNation CommunicationBhd has signed a memorandum of understanding (MOU) with Saudi Arabia's Tawasul Telecom Co LLC to collaborate in research, development and theprovision of Internet and wireless technologies and value-added services. The MOU would enable NextNation to penetrate the fast-growing wireless value-added services market and related industries in the Middle East inline with its plan to diversify and grow its revenue base. Tawasul Telecom is involved in the provision of telecommunication, internet and mobile value-added services in the Middle East.

The most interesting bit is the company's involvement in mobile gaming. The company and Indosat Tbk have launched a mobile gaming community, the first in Indonesia, for Indosat's 15 million subscribers. Called "GameWar", the concept enables mobile games to be played as ac ommunity in Indonesia and it is expected to significantly change the mobile gaming landscape in one of the fastest mobile telecommunicationmarkets in the Asia Pacific. The partnership with Indosat, is through its subsidiary Ozura Sdn Bhd, via its Indonesian subsidiary PT Nextnation Prisma. Next up will be deployment in Thailand,Singapore and China. Ozura has developed and aggregated an extensive game catalogues anddistribution network worldwide, representing over 2,000 game titles to over 30 countries.

Meanwhile, analysts expect NextNation's net profit and sales to rise by 23 per cent and 33 per cent respectively in its current financial yeardue to rapid growth. NextNation has recorded a compounded annual growth rate of 382.1 percent for revenue and 258.4 per cent for net profit from 2004 to 2006. The company, which offers a one-stop mobile and wireless solutions to the corporate and consumer markets, also specialises in making software that allows the download of multimedia content like songs on mobilephones. Research houses that follow the company estimated NextNation's revenue to hit RM80-90 million in its current financial year ending April 30 2007, and rise to RM100-120 million in 2008, while net profit should come in at RM18-25 million and RM23-27 million respectively.

So far so good, no bad apples yet and at current price, the market capitalisation is undemanding still, around RM163m.

Sack The Turf Club Committee Members Please!

Barely a month after the launch of live telecast of racing to the homes of Telelink account holders through ASTRO channel 501, the simulcasts have been severely curtailed. The telecasts began in early September, one year after a planned launch was aborted in 2005. Telelink account holders could watch races from Malaysia, Singapore, Hong Kong and Macau "live" in the comfort of their homes. However, no "live" odds and dividends were displayed. On the final week of September, telecast of Hong Kong and Macau ceased with no reason being given by the broadcaster.

Then even the Selangor Turf Club races were cancelled from being broadcasted at the last minute. Now, it is learnt that the three Malaysian turf clubs have withdrawn permission for the live telecasts after suffering huge losses of revenue from gates, parking and rental of corporate boxes in the three weeks of the telecasts. Earlier, the Selangor, Perak and Penang turf clubs have granted ASTRO permission to telecast the races for a one-year trial period. Apparently, after a lot of hoo-hah, the HK, Macau and Selangor races will NOT be shown on Channel 501. Perak, Penang and Singapore races will be shown live.

Is this astute management by the turf club managers and committee members? If all turf clubs took that view, racing would have been severely curtailed in UK, US, HK, Singapore and Australia. Are turf clubs supposed to be profitable?? Are they in to promote racing or racing only in turf clubs?? Are you guys promoting racing and raising the standards, or just minding the club's business?? You guys should have been sacked way, way back... the cronyism, collusions, wink-wink,... sigh... too much already man... stop being a-holes, please!

IJM & Roadbuilder

Chairman Q said... I am not convinced with the rationale of IJM's purchase of Roadbuilder. There is little to gain from the merger as Roadbuilder is facing with declining order book. IJM is better off focusing on building its own order book or buying concessionary assets from roadbuilder. I suspect Tan Sri Chuah is a nominee and his exit is pre-planned long time ago.

My Take - Let's check and see what overpaid analysts are saying:

IJM
CIMB - Neutral, target price RM5.45
Deutsche Bank - Upgrade to Buy, orderbook all time high, target price RM7.65

Roadbuilder
Kenanga - Buy, target price RM3.50 on the 2 for 1 swap
CIMB - Outperform, target price RM3.29

The funny thing is, CIMB basically has a sell on IJM, based on the swap, even at RM3.00 into RM6.00, Roadbuilder would be a good buy for IJM according to CIMB. Why is Roadbuilder a buy and IJM a sell?? Hmmm ... As usual, you have varying reports on what is fair valuation. It has a lot to do with how many institutional buyers and holders you have.

My assessment is IJM is already a very good regional player, a company with a growing reputation and in fact a significant US firm will be coming into IJM soon based on their recent projects and excellent regional strategy. IJM is also buying Roadbuilder, a good company, and extending IJM's book of expertise and strengths. What's not to like about the deal... The deal solidifies IJM's book order management. While it still operates a strong hand domestically, it is increasingly being viewed as a solid regional play especially into India and Middle East. Many Singapore construction and property firms have done well into China, IJM is the clear success story into India and Middle East. More things to come for IJM, so I tend to side with Deutsche report here. Many analysts just look at numbers to base their valuations, even a DCF would not be able to take into account a lot of the intrinsics.

IJM stands out in the eyes of institutional funds due to their professional management ability, regional push strategy, and in particular the execution ability. Their cost management and project management scheduling are solid, now they are relying less and less on Malaysia, and hence will not have to rely so much on political networking and handouts. These few factors will encourage more institutional buyers as a good regional play.

The Next Big Thing?
After Puncak, What Can We Hope For?

Puncak gave investors a good boost. RHB Capital was threatening to do the same for a while but held back. I think based on what was reported and transacted, the next best thing will involve Roadbuilder, IJM, IJM-WB and possibly Tronoh.

There was a big transaction at RM2.55 and then at RM3.00 for Roadbuilder. Chua Hock Chin sold 68 million shares @ RM3. Earlier a 12 million shares block was crossed @ RM2.55. These two blocks amounted to 15% of Roadbuilder outstanding shares. The new owner has not surfaced yet but the old owner of Roadbuilder has basically waved goodbye. Roadbuilder is a very well managed company with good asets and projects.

IJM has been trying to woo Roadbuilder for sometime. IJM is in a solid position, order book nearly RM4 billio, and has ventured overseas successfully. Over the next 3 years, IJM should be able to deliver 20% growth p.a. ... Why does it need to buy Roadbuilder?

Construction companies are evolving. There are not enough growth in big projects to satisfy the top 10 big players. Unless you venture overseas, you will not be able to sustain earnings growth. IJM has done very well in Dubai and has solidified its reputation, on the path to getting more jobs around that region. IJM is presently doing the Swiss Tower in Dubai worth RM49m; the Al Reem project in Abu Dhabi worth RM330m and a 34 storey office complex in Dubai worth RM126m. Also in India, IJM has done exceedingly well. There is no organic growth in domestic markets. Well connected and government linked vehicles will get the bulk of major construction projects. Hence we should be seeing the beginning of a consolidation among the construction players. Already Metacorp has started the ball rolling a couple of years ago.

Even without Roadbuilder, IJM is a buy with a 6 month target price of between RM7.50 to RM8.00. Currently it is at RM6.40-6.50. The terms of purchase price for Roadbuilder has been widely speculated. Apparently, It seems that the deal will not be predicated on an actual price to buy out Roadbuilder, but rather a full-on share exchange. Roadbuilder is at RM2.80 while IJM is at RM6.40, a two for one share exchange would be ideal, i.e. two Roadbuilder for one IJM. This will boost Roadbuilder shares to match IJM's share price. However, knowing the markets, once a deal like this is announced, IJM's share price will run and prompt a similar run up in Roadbuilder's share price. For example, if IJM jumps to RM7.00 on the news, Roadbuilder will be worth RM3.50 but it will trade at a discount as you still have to hold for the actual exchange, so Roadbuilder could go to RM3.20.

That being the case, the upside is not enormous for all. Tronoh may rally a bit as it owns some related shares in the group. The best instrument to have exposure to this pending deal would be IJM-WB. Expiring in 2010, with an exercise price of RM4.80, it is currently at a slight discount even at RM1.50. If IJM jumps to RM7.00, you should see IJM-WB come close to RM2.00. IJM will jump should the hypothesis be true because its a huge feather in IJM's cap, extending the company's skills and breadth of coverage.

Selamat Hari Raya, Puncak Niaga
Watch A Master At Work

Talk about "duit raya", my gosh ...

a) you get the government to approve a water tariff hike

b) the company is effectively giving back RM767.84 million to shareholders

c) you get a 1-for-1 bonus, which is a non event, but nonetheless good in the eyes of many

The timing is not accidental, I tell you. Must do this before Raya la. Plus more importantly, you have the warrants expiring on 20 November 2006, so the better to push share price to facilitate conversion to shares. Warrants that don't get converted means the company will have to pay off the bonds themselves. If the share price encouraged conversion, its the warrant holders who will pay the extra cash for new Puncak shares, and those proceeds will be used to pay off the bonds (a warrant is the detached portion from a convertible bond, after detaching the warrant, the bond becomes a straight bond).

So, how high can it go? Your guess is as good as mine. It would be treacherous to buy today. If you bought before today, you should be smiling. The convergence of all good factors with regards to the stock is a master stroke. Investors always worry, ... when is the company going to pay off, ... when will the company get a water tariff hike, ... what about the convoluted Syabas thingee ... The warrants would fly and make a lot of people very happy.

Would there be a sell on news? Well, the controlling shareholders would be holding onto their shares for the capital repayment, so too will the fund managers. The controlling shareholders would definitely be holding and converting the warrants (as it is still way in the money and at a discount). So, where got sellers. However, having said that, the warrants came in for a lot of speculation over the last 2 hours today, the people in the know (and those who could not buy as many mother shares) bought a lot of warrants. The share price stayed firmly at RM3.00 throughout the day, the warrant traded at an 10 sen discount in the morning session. Towards the end of the day, buying came in on the warrants while the mother share stood firm, narrowing the discount to 7 sen. The warrants will never trade at a premium with expiry just a month away. It will need to give a healthy discount for people with real money to buy and convert (e.g. fund managers). A 8-12 sen discount will give a lot of incentive for bargain hunters to buy and convert and hold for capital payment. If the warrant trade with little discount, time to sell.

The master stroke by Master Sifu Rozali cannot be over stated here. Here's to all CEOs and company owners, forget about playing up your shares every now and then, you try to rip off the public investors for your gain - plus you don't even succeed all the time. Learn from Sifu Rozali, build your business. Everyone has contacts and network, learn to use them but also parlay them to build a solid company. Treat minority shareholders well. Those who invested for the longest time with Puncak Niaga will gain enormously.

You may play your shares a couple of time a year, after a few years what will you have - name me 5 (if you could) Second Board owners who came out from the 95-97 super rally with cash intact!!?? In just one masterstroke, Rozali has doubled, even tripled his wealth. I tell you, we should really have an award, just call Rozali the "BURSA Man of The Year".

p/s latest research note update
RHB Securities - RHB Research has upgraded Puncak Niaga Holdings Bhd to an "outperform" from a "market perform" . In a note to clients, RHB Research said it has raised its net profitforecasts for Puncak by 16 pct for 2006 and 13.5 pct for 2007-08, based on an assumption that the new water tariff structure will take effect on Dec 1. As a result, its fair value for Puncak has also been raised to 4.73 rgt from 2.98 rgt. "With the 15 pct water tariff now in the bag, Puncak's valuations have become too compelling," RHB said in the note.
TA Securities - Target price RM3.35
CIMB - Target price RM3.50
OSK Scurities - Target price RM3.60
Affin Securities - Trading Sell, Target Price RM3.04
Kim Eng - Target Price RM3.60

101 Economic Wealth

1) Par Value measurement - That's like saying what was your worth 5 years ago or 10 years ago. That's like saying holding one Magnum share has the same economic wealth as holding one Genting share as both have same par value??!! You are trying to measure economic wealth NOW, not 5 or 10 years ago, right or not??

2) GLCs not part of equation - Very simple, just divide according to racial composition of market value of GLCs. Not to include GLCs in economic wealth calculation would be quite ridiculous.

These are just 2 points from the methodology being brought into questioned. If we can find huge faults with the present day calculation, why even bother implementing the 30% NEP, just pick any figure then!!! Hence the government will have to explain clearly how the thing is calculated.

1945 - Isn't That A War Game?

Of course I am refering to the 19% and 45% bumiputra share of economic wealth debate. The government's estimate is of course the lower figure. The ASLI report basically questioned the methodology of the government in coming up with their figure. Naturally, this kind of thing is as significant as finding out that Hang Tuah and Hang Jebat were actual Chinese gangsters (hint... hint..).

In my opinion, the government and UMNO cannot just come out and the ASLI report is rubbish, where is the evidence??!! Malaysians are not stupid. People who refute without any explanation are just "dying chickens kicking the rice pot cover". I am not even going to bother to get both sides to fully explain their methodology YET, ... I would like the government to give the people their course of action should "certain figures" come out. That's because the NEP was continued based on the 19%.

So, say the government and respective bodies agree on an independent globally recognised team of experts in methodology (I know, that is very unlikely to happen), what I would like to know is what the government will do if the eventual figure is:
a) 15%
b) 19%
c) 30%
d) 40%
e) 45%

For each of the eventual figure, there must be a course of action to be taken, right??!! If the government does not even know what the course of action will be for each of these figures, WHY BOTHER arguing over the figure. That's because even if we can get proper independent verification, of say a 35%, the government can still end up doing tai-chi (i.e. nothing).

The questions won't die down, the Chinese and Indian coalition parties may not be saying much but it is certainly dicey and this is the time for Badawi to show his political will, political integrity and be the bigger person to revolutionise the history of the country ... and somebody please... please .. shut KJ up.

Jenting & Resorts

sopskysalat said...
Well Dali,What really make you so bearish about Genting? It may stand a really good chance of winning the IR in Sentosa. Yes, the investment is huge, but the news may be good to nudge it higher with Merril Lynch being one of the sole house to push the stock.

My Take: i was using the jenting thing as an example, but yes, i am also a bit bearish. i have rarely seen a stock that was bought up on potentially good news, to rise even further on actual good news, have you?? i think jenting did a fantastic job strategically, not with the sentosa thing but with the european takeover, that makes it a global player. the sentosa will be icing. however, the whole thing will burden the company with some debt. the excessive buying prior to actually getting sentosa will ensure mostly sellers should they get it, can u imagine if they do not get it. people should be happier that they got the european thing and not sentosa as the latter has a long drawn out payback, the other is immediate cashflow. i believe there would be a better entry price for jenting after the announcement of sentosa.

i am more bearish on resorts, i think the run up over the last 3 days is very very silly. where is the growth man.... its a dividend stock at best and the star cruise shit is about to hit the fan. ask them why they just borrowed so much money - if its to help finance jenting international should they be successful in getting sentosa, then very bad (ala old berjaya sport financing scheme); if its to rescue star cruise also bad... my recent blog on resorts:

Hence things look very rosy for Genting International, but not so good for Resorts World. Bearing in mind Resorts is basically the casino on the hill and the hotels, and the over-rated Star Cruises. Growth is constrained by population in malaysia and helped by the fact that it is the sole licensed casino. Resorts World has been hovering between RM11-12 for the longest time but many research analysts put the value of Resorts at RM15-17, only a smart minority pegs it closer to RM9-10. Why am I bearish on Resorts World:
1) Exposure to Malaysian gamblers, minus Malay community, the growth is limited.
2) Failure to recognise that the younger crowds do not like casino games that much.
3) Failure to recognise that casinos are competing for the same gaming dollar as football, horse racing and 4-D. Casino games are closer in characteristics to 4-D, while more gamblers prefer gambling with games that have more variables and/or inside information / edge in analysis / such as football or horse racing - Resorts is limited by that.
4) The Singapore IR projects, the Macau strip - you can bet the high rollers will avoid Resorts World.
5) The company's management still markets the company as a growth company, fergetaboutdit already. The company can save itself by presenting itself as a high dividend yielding company. Start by declaring a target dividend yield or setting aside of a high percentage of profits for dividends. Then you can get RM13-14 a share, futile to think it can go any higher.
6) The overhanging Star Cruises issue, a bit like Tanjong's German sheperd which has gone haywire.

Regulated Short Selling Will Fail Dismally

Bursa will not like to hear me on this. They'd probably think I have a deep vendetta against them. First, Bursa is too greedy to try and act as the Central Lending Agency. Brokers, custodians and investors all have to go through Bursa to things done. This creates an unecessary layer which adds to cost.

Secondly, Bursa failed to appreciate why an OTC market would have been better. Not all lenders want to lend shares at 2%, some may only lend at 5% or even 10%. Take Google shares for example, at US$400, probably a lot of people would want to short it, hence the lenders could actually ask for a higher rate before lending out. A transparent and free-market OTC makes for real activity and better returns for bot sides. I am not sure if Bursa even have the mechanism to change the lending rates?? (..what, change the rates... every now and then ... so much work la...).

Thirdly, too much red tape, inteference, scrutiny... blah blah... Having said that, as long as people can make big money, they can withstand the trouble to invest, if they can make 30% in a month in Timbuktu exchange, you can betcha they will try to get there. But it probably won't happen in Bursa's RSS - limited shares for shorting, do you think there will be 1 million of a company's shares for shorting? Chances are, it will be sporadic and insignificant, which will turn people off. That is why an OTC would have stood a better chance to survive. Imagine the current scenario, with Genting jumping on the news of Harrah's withdrawal, I think its a good time to short Genting shares, but no one wants to lend at 2%, so I put up a willingness to borrow 50,000 shares at 4%, I am sure someone will bite.

The failure to allow for a free flowing capital markets. The shallow opinion of thinking that by being the Central Lending Agency, somehow that could prevent disasters. You mean, the 1997 implosion was due to short sellers??? Please grow up, that shows how naive and poorly educated and uninvestment-savvy the current crop of people in unthinkably high positions are... sigh... You cannot molly-coddle a capital market, it has to be relatively laissez-faire ... look at global best practices... please...

p/s btw, I totally agree there should be short selling, just do it better ... man...

NagaCorp IPO In HK
You Have Been Warned, My HK Friends

The institutional order book of Cambodian casino operator NagaCorp's initial public offering is 10 times full, although the retail portion generated a lukewarm response. NagaCorp's initial public offering, which could raise as much as HK$800 million, has attracted orders for about 10 times the number of shares allocated to institutional investors. However, NagaCorp, owned by Malaysian tycoon Chen Lip Keong, generated about HK$306 million worth of margin orders on the second day of the retail share sale. Compared with Beijing department store operator Jingkelong [8245], which was listed on September 25 and which attracted close to HK$1 billion on the second day of its initial public offering, NagaCorp was not very hot.

Its not like CLK (of FACB fame) did not try to list the damn thing in Malaysia or Singapore.... even they rejected the bloody thing. It would have made a lot more sense to list in Thailand as the proximity and intimate knowledge of Cambodia by the Thais should be a positive, but ... no. HK was chosen, your guess is as good as mine, last resort ... hopefully HKers will gobble them up. Watch this space, the thing will crash like a rock immediately on listing and just check on it a month or 6 months later ... I am betting that it will halve its IPO price. I shall refrain from putting up more reasons why NagaCorp will fail as it will get personal / political . Let's just say ... Its like "The Sopranos" Meet "The Office" In Cambodia!

My fellow HK firends who have been unfortunate enough to be successful in getting NagaCorp, may the force be with you.

Ramunia Again

godzilla said: It was speculated that Sime Darby will offer to buy all Ramunia shares, ICULS and Preference at RM1.20 each and .65 for the warrants, translating to RM750mil total value for the whole company. Given that Ramunia makes approx. 25 mil a year, this translates to a pe of 30x. I think this is too rich for Sime Darby... what do you think ?

It is not cheap, but some buyers may pay more for certain reasons. Sime will be able to pay more as Ramunia has the expertise, crew and order s on hand. Sime also knows that it will be able to throw a lot more jobs Ramunia's way, which will make the current purchase price seem not so expensive. The only troubling thing is that M&As such as the rumoured Esso and Ramunia and even Roadbuilder are taking so damn long. Best global practice in M&A activity is to conclude the deal asap. But Malaysians seem to like to dilly-dally. Why is speed a global best practice - it removes uncertainty, it removes excessive speculation, it takes away arbs trying to inject volatility to the share price, it allows companies to move on quickly and plan for the future - just reverse it and you have Malaysia M&A activity style??!!

The Departed Infernal Affairs

Allow me to indulge for a moment in movies. I was always amused with movie titles, when Infernal Affairs came out, I thought it was a documentary about ISA. When The Departed came out, I thought it was quick-commercialised cash-in on Thaksin's legacy. There was a time when I thought Waiting To Exhale was a movie about Malaysian public toilets!

Anyways... if there was no IA, The Departed would have been an excellent movie on its own as there would be no comparison. But there is, .... still, TD came out as slightly different but still A rated. When you are Martin Scorcese, you better make it differently. The story has to change a little. Basing it in Boston, the gang initiation thing could not possibly work, hence that initiation thing was kinda lost as to why Matt Damon was so close to Jack. The good twist was that the only girl in the movie was involved in a triangle, instead of the two having differing girlfriends. This was a shrewd rewrite and puts more meat into the girl character, at once bringing into her character questions about integrity, loyalty, attachment, disengagement and truth.

As usual Jack was a little over the top but still good. DiCaprio was very very good, the nuances and double-reverse psychology turns. Damon was a revelation, did extremely well but the fleshing out on his motives were not clear (not his fault, but more the director's and the screenplay). When you see TD, you'd be very glad to that there was Mark Whalberg's character, he did well but his character is more one-dimensional. MS did poorly on Martin Sheen, the emotional attachment or character rooting for Sheen's character was incomplete, unlike Wong Chau Sang's characterisation, you rooted for his character and his demise hits hard on the audience and on Tony Leing's character.

The violence was more vivid in TD, and unexpected, good stuff. The profanities in TD was a lot, but I think in reality, that's what happens, so don't be a sissy, get real. The envelope thing was way, way overdone by MS, looks amateuerish. One camera angle would have suffice, not 10 repeats.

IA was a lot better in colours, themes and visual layering. Dark suits, night time dealings, very stylish and minimalistic. TD will do well but this will prompt more viewers to appreciate IA even more. Both are excellent movies but hands down Infernal Affairs is a better movie.

All Time High / 6 Year High
So What

The Malaysian bourse seems to be just catching up to the highs being registered by Dow Jones, Hang Seng, etc... For all Malaysian dealers and remisiers, stop for a moment and ponder, this is a 6 year high and just look at the market activity, look at your take home pay... does it feel like a 6 year high??? When your market is at a 6 year high and you are still not taking friends and families out for dinner and stuffs, ... can you imagine what it will be like if its not at any kind of highs?? The Bursa and Finance Ministry must take a lot responsibility for the capital markets road map we have taken for the past few years. In all probablity, we have adequate people at the top, but even more obvious is probably the people we have are not good enough. Anyone with the political will to do something??? !! Sometimes, its not enough to have average employees, especially when the stakes are so high. The secondary institutions deemed to be responsible would be Khazanah and EPU. The right people at the top will make the right things to happen. Right now, we are basically going with the flow, not making inroads in things that really matter.

When our markets are just playing catching up, it also helps to mask our problems. Currently, no one at the these institutions (or high level politicians) admit much is wrong. Going after GLCs is just maybe 10%-20% of our problems. Sigh.... why is blog writing so depressing... and I am being optimistic here.

Why Andy Xie Resigned?
By Steven Irvine

Morgan Stanley's vocal star analyst suddenly resigns. An email he wrote about Singapore may explain why. The market was shocked on Friday when Morgan Stanley announced that its Asia economist, Andy Xie, had resigned. The announcement was brief and mysterious, giving no explanation of why he was going or where he was going. With Morgan Stanley's bonus period only two months away, it looked like a very strange time for the Shanghai-born Xie to leave the firm. The Hong Kong rumour mill quickly began speculating as to why Xie had left. Attentions have focused on an email that Xie penned on September 18. Many copies of the email - which was about Singapore - have since been passed around by the region's fund management and banking community.

The subject line of Xie's email was 'Observations on the IMF/ World Bank conference'. That event was hosted in Singapore, and the email was written just after the conference finished. The email consisted of nine paragraphs but it is the third and fourth that have attracted most attention. "I tried to find out why Singapore was chosen to host the conference," wrote Xie. "Nobody knew. Some said that probably no one else wanted it. Some guessed that Singapore did a good selling job. I thought that it was a strange choice because Singapore was so far from any action or the hot topic of China and India. Mumbai or Shanghai would have been a lot more appropriate. ASEAN has been a failure. Its GDP in nominal dollar terms has not changed for 10 years. Singapore's per capita income has not changed either at US$25,000. China's GDP in dollar terms has tripled during the same period."

Xie then continued that he thought some "were competing with each other to praise Singapore as the success story of globalisation. Actually, Singapore's success came mainly from being the money laundering centre for corrupt Indonesian businessmen and government officials. Indonesia has no money. So Singapore isn't doing well. To sustain its economy, Singapore is building casinos to attract corrupt money from China." These remarks were made in an email that Xie intended to be circulated internally within Morgan Stanley. But it got leaked, and was soon making its way around the region. This proved to be a highly embarassing situation for Morgan Stanley. Singapore is one of the US firm's key investment banking markets in Asia. Commenting on Xie's departure a spokesperson for Morgan Stanley says: "We do not comment on personnel issues. We do not elaborate on the reasons of our employees' departure."

But on the subject of the email, the spokesperson adds: "This is an internal email based on personal suppositions and aimed at stimulating internal debate amongst a small group of intended recipients. The email expresses the views of one individual and does not in any way represent the views of the firm. Morgan Stanley has been a very strong supporter of Singapore and has a great deal of respect for Singapore's achievements."

Xie joined Morgan Stanley in 1997 and was a managing director. He regularly ranked highly in investor polls as one of the region's most popular economists, thanks in large part to his direct style and forthright opinions. The 46-year-old, who has a doctorate from MIT, previously worked at the World Bank and Macquarie Bank.

p/s .... sigh....(again) ...

Only In Singapore
A True Or False Quiz, Can You Get All Correct?

1) Large sized woks will no longer be sold in Singapore. The size and shape apparently made it easy to convert them to satellite dishes. This may actually imply that the wok must have been invented more than just for cooking purposes. Maybe 500 years ago, the Chinese were already communicating with alien forefathers while making their tummies warm. As usual, the Prime Minister's office decreed that smart and savvy Singaporeans must be protected from undesirable foreign broadcasters. I guess, soon, you cannot place a large order of Sing Chow Chowmein, cause the chef would have cook the bloody thing twice on his smallish wok!!

2) In order to maintain their record of cases won, the Lees have now decided to sue the orangutan from Singapore Zoo. After barring certain foreign publications earlier in the week (the government imposed a rule requiring all foreign publications to place a bond and appoint a local rep, so that they can be sued should the need arises), the orangutan has been served for being anti-government. The O.U. was found to be not wearing white shirt and white pants during National Day celebrations. The O.U. will probably be found guilty by the High Court and have its passport seized, failure to produce a passport will result in additional rule breaches (overstaying without a permit, plus entertaining or in employment without a proper permit, plus not filing appropriate returns). Probably the O.U. will be pursued till it becomes a bankrupt, and subsequently will be barred from running for political office.

3) Sir Elton John and his life partner were detained when arriving into Changi airport last week. They were strip-searched an questioned. Apparently, outwardly professing to have had gay sex is a crime and hence constitute a bad influence in Singapore. Elton John had planned to attend a charity event in Singapore and together with his partner, were detained under Sections 377 and 377a of the penal code.

4) Minister of Health will push through to the Parliament to legalise oral sex, which is archaically still illegal in Singapore. At the same time, the Minister will petition to make penile-anal sex prohibitive for Singaporeans - offenders will have to wear pink coloured jump suits and do community service for 50 hours such as cleaning the display windows of DKNY, Dolce & Gabanna, etc.. Anyway, back to the oral sex thing, the push to legalise was prompted from research indicating oral sex could prevent the spread of HIV as it is deemed to be safer than penile-vaginal sex.

5) NEWater, the name given for reclaimed wastewater in Singapore, is wastewater that has been treated by a dual-membrane osmotic technique. This produces drinkable water. A premium line of NEWater is in the offing, to be priced at 7x the price for normal NEWater. The premium line will be wastewater from politicians from PAP, only Deputy Ministers and Full Ministers "samples" will be collected for processing. The premium line will be called: NEWater - Cabinet Sauvignon 2006.

6) A Singaporean contractor who was surveying the site for the first integrated resort project at Marina Bay, exclaimed that the government will have to import a lot of sand from Malaysia for the project. Following much hoo-hah, the contractor was appeased when explained that the Las Vegas Sands Casino will not be built using primarily sand only.


p/s the mostly TRUE stories were numbers: 1, 4 and 6 .... sigh...

Mudslingers by Anwar Ibrahim
As printed in WSJ

The recent spat between former Malaysian Prime Minister Mahathir Mohamad and his successor, Abdullah Ahmad Badawi, is farcical to say the least. Dr. Mahathir has been whining like a wounded lion as he sees some of his policies reversed. But the irony is that Mr. Abdullah's actions have so far been too weak and indecisive to constitute any serious challenge to his predecessor's legacy.

The former prime minister's initial grievance was the government's decision last October to lower tariffs on auto imports, thus threatening the viability of the national carmaker Proton, which Dr. Mahathir has always championed. Then, in April, the Abdullah administration decided to scrap one of Dr. Mahathir's pet projects, a bridge linking Malaysia and Singapore, after the island state demanded concessions on other issues in return for allowing the project to go forward.While we are not privy to the vows exchanged in the throne room when Dr. Mahathir anointed Mr. Abdullah as his successor before stepping down in 2003, it's reasonable to conclude they included assurances that the new prime minister would not turn his back on his predecessor's megaprojects, or derail the pet industries he had nurtured.

Hence Dr. Mahathir's outrage, which has now broadened far beyond his initial grievances. In recent months he has accused the prime minister of compromising sovereignty by offering to sell sand to Singapore, and leveled charges of nepotism against Kamaluddin Abdullah and Khairy Jamaluddin, Mr. Abdullah's son and son-in-law, respectively.

In response, the prime minister went on television to deny that either had abused their connections or profited from government favors. Dr. Mahathir has even accused his successor of seeking to destroy Malaysian democracy, saying that he has been deprived of opportunities to speak openly and that the state-controlled media are not reporting his charges. But it's clear the former prime minister has overreached himself. Not only does he have little public support, he's even been abandoned by his former allies in the ruling United Malays National Organization, which Dr. Mahathir ruled throughout his 22 years in power. His call for party members to overthrow Mr. Abdullah was dealt a humiliating blow on Sept. 9 when UMNO members in his home state of Kedah refused to nominate him as a delegate to the party's general assembly in November.

Ordinary Malaysians can see only too clearly the hypocrisy of Dr. Mahathir's behavior. When he complains of being muzzled by the media, Malaysians remember how his opponents repeatedly suffered the same fate during his more than two decades in power. His grumbling about being threatened with the Official Secrets Act, for revealing secret government documents relating to the bridge project, sound strange coming from a man who presided over a period when this act was repeatedly invoked against his critics. That doesn't mean ordinary Malaysians harbor any illusions about the Abdullah administration. While there may be more openness than during Dr. Mahathir's years, the climate of fear remains. Dissidents are discouraged with the threat of persecution, while bloggers and other Web sites are intimidated with reprisals if they criticize the government in too strident terms. Citizens held under the Internal Security Act during Dr. Mahathir's reign remain detained without trial, and the government shows no interest in repealing a law which permits such indefinite detentions.

Similarly, in the legal arena, there appears to be a greater measure of independence in the courts thanks to a handful of judges displaying moral courage in certain high-profile cases. These include my 2004 acquittal by a Federal Court on trumped-up sodomy charges. But we mustn't forget that most of today's senior judges first rose to prominence under Dr. Mahathir's rule, and so must share responsibility for the abyss into which the legal system sank during that period. Nor has there been a cleansing of key personnel in other organs of state power that were abused for political purposes during Dr. Mahathir's rule, such as the police and the Attorney General's office.

Though commended for his initial pronouncements against corruption and the reversal of Dr. Mahathir's megaprojects, Mr. Abdullah has yet to offer a substantive agenda for economic growth and public sector reform. This has fed the growing perception of him as a leader incapable of confronting the real challenges facing Malaysia. China is increasingly dominating the region, and India is on the rise. But while most other Asian nations are scrambling to diversify in order to survive, Malaysia's economy remains obstinately reliant on electronics manufacturing, in direct competition with the two emerging giants. No wonder export growth is waning.

Far from charting a new way forward, the Ninth Malaysia Plan that Mr. Abdullah unveiled in April retains one of the ugliest legacies of the past: the race-based affirmative action policy that favors bumiputra -- mostly Muslim Malays -- for educational and business opportunities. While this policy may have served a useful purpose in promoting more equitable growth during the initial decades after Malaysia's 1957 independence, it has long since outlived its usefulness. In recent years, it has devolved into an instrument for corruption and rent seeking that heightens racial tensions and deters foreign investments. Most of all, it demonstrates the Abdullah administration's lack of resolve in dealing with the challenge of global competitiveness while ensuring social justice for all.

These are the real issues facing Malaysia, rather than the current mudslinging between Dr. Mahathir and Mr. Abdullah. It would be easy for those of us who have no love for either to watch the two sides volley accusations of corruption and cronyism. But that would ignore the real challenge ahead in building democracy, freedom and a vibrant and prosperous market economy in Malaysia.