The issuance of a bond is tantamount to taking a loan. It is a debt that must be repaid, and in the meantime, regular interest payments must be made. Just as high credit card debt can dampen enthusiasm for new consumer spending by placing unseen limits on retail sales, high corporate debt is a caution that future needs requiring new capital may not be met, because the burden of existing debt is already too heavy.

Today in Malaysia there are many corporations which have missed one or more bond payments. The creditors have the right to foreclose on the enterprise, declaring it bankrupt and sell off the remaining assets. Often the creditors will agree to a postponement if the tangible (saleable) assets are not sufficient to settle an appreciable portion of the debt. The indebted company is allowed to continue on as a financial cripple, although often it is suspended from further continuous trading on the Kuala Lumpur stock exchange. The number of companies on suspension at the present time is over 50, and many more are dangerously close.

The information that is missing in the rating agency's report is the reason the money is needed. If there is a sound business plan in effect, and the profits are dependable, why is it necessary to raise more cash? Normally the reason is given. Perhaps the company wishes to expand. There may be ships to build, or new stores to open. New and improved machinery may be needed that exceeds present funding ability. Normally the reason is a sound one, and the taking on of new bond debt is a prudent decision.

But where no reason is given, the question is a glaring one ... if they have money at hand, why are they trying to get more. And why now, when there is inflationary pressure and the bond buyers are shy. No one asks for a loan without a reason. Before a loan is given, the lender wants to know what it is to be used for, and how it is to be repaid.

In a news report dated August 10, the trade and industry minister reported that foreign investment had not been affected by the Anwar Ibrahim trial. She thanked the foreigners for not "interfering in our internal affairs" and noted that they were willing to continue making investments in Malaysia at the same rate as before, in spite of CNN reports that the foreign investment was falling.

The latest news, however, is that "the West" has largely stopped its foreign investment in Malaysia. The US, which previously was the largest investor in terms of new committments, has now been replaced by Taiwan. Taiwan has made a total investment in Malaysia of just over US$100 million in the first six months of this year. If they are the leading investor, then other investors are making small investments indeed.

We are constantly reminded that the good times have returned. The crisis is over. The rate of growth is now about what it was before 1997. What is troubling about these reports is the high debt level, both in the private consumer sector and the corporate world. New bonds are reported in the pipline. New attempts are being made daily to raise additional cash. But how much cash is available in the bond market for Malaysia? We are told not to worry, the bonds are still selling well.

That is not the problem. The problem is how the bonds are to be repaid. Malaysia cannot maintain an unwise level of government deficit spending along with the increasing sale of unsecured corporate bonds. This is especially true if Malaysia is losing attractiveness as a site for foreign investment, which has been the engine for development.

Any large debt is burdensome. It represents a claim on future earnings. The semi-annual bond payment is a significant responsibility which must be provided for in every monthly report. Interest payments must be integrated as a fixed cost in every budget.