In the investment world the activities of public companies are required to be open to routine inspection, and regular reports of all major business transactions must be reported to both the shareholders and the press. Shareholders have placed a bet that the enterprise will prosper, and in due course deliver to them a proper proportion of any profits, delivered to the doorstep as dividends due and distributed regularly by the directors to shareholders as proper owners.

Whatever the industry entered, it is that area of business enterprise that the shareholders find attractive, and they rightfully expect the expertise of the managers to be diligently applied there.

It is disconcerting then, when one finds the managers betting on another man's horse. Watching the Malaysian scene, one notices that this is a favorite diversion, as though the director's prefer the distraction of distal dart throwing over domestic executive decision-making.

The manner in which corporate funds in Malaysia are intertwined is enough to discourage the most assiduous and enterprising external auditor. A recent external auditor included in the audit report a statement that the company had not cooperated in the audit sufficiently to pronounce a credible audit.

When an external auditor is engaged to give an independent examination of the company records, their fee is paid by that company. For a public company to hire an external auditor, then fail in providing accurate and current records is a suspicious act indeed, and one which immediately attracts the attention of the investing public and the shareholders who are awaiting the latest quarterly report.

An independent external audit requires that the sums posted to the books of Company A be compared with the sums posted on the books of all companies with which Company A does business. If Company A says that Company B owes RM1 million in an receivables account that is current, then the auditor expects that a visit to Company B will confirm, saying, "Yes, RM1 million is on our books as accounts payable to Company A, and it will be duly paid as agreed within 30 days."

When the external auditor discovers a discrepancy between what is shown on the books being audited and matching entries in the books of customers and vendors, then explanations from the management are necessary. When these explanations are not satisfactory, or lacking in credibility, the external auditor must make these facts public in its published report.

In Malaysia the routine auditing of company books by independent external auditors is not required, and reports are generally reported as "unaudited." So long as this continues to be the practice, interest in Malaysia's publicly listed companies by both foreign and domestic investors will be mild to missing.

An audit by an independent external accounting firm often reveals substanial investments made in non-related enterprises outside the primary industry of the company, and often outside Malaysia. Obtaining a realistic evaluation of these exterior and foreign assets is usually impossible, and often asset values are carried on the books at cost, when the truth may be known to the management that the investment is actually a total loss, the company having terminated all business activity with no recoverable assets.

Malaysia sends the minister of international trade on junkets around the world in a continuing effort to attract new foreign investment. This now requires tiresome travel to remote regions not known for previous capitalist caprice, because the effort to overcome negative impressions held by members of major foreign investment firms toward Malaysia requires unrealistic dexterity in the creative use of a public platform.

Foreigners who look at Malaysia are somewhat confused when they are thus solicited, because the scene in Malaysia reveals a net outflow of funds, as though Malaysia is making its major bet outside its borders. The government itself has announced that foreign ventures have gained allure, the vales and valleys of England, the sun drenched streets of silicon valley in California, and the far western reaches of mainland China are said to offer investment opportunities more attractive than any available within Malaysia itself.

While the government ministers daily display the increasing expression of interest shown by the pile of new applications from potential foreign investors, the Bank Negara report [Dec 1, 2000] shows at the moment there is actually a net outflow of funds.

The gross direct foreign investment inflow into Malaysia year-to-date (the first nine months) totals US$3.5 bil.

But this is less than the outflow of US$4.1 bil (made up of foreign fund withdrawals of US$2.2 bil plus Malaysian investments abroad of US$1.9 bil).

This net outflow of US$600 mil results from a withdrawal from investments previously made in Malaysian companies and the investment by Malaysians in non-Malaysian ventures amounting to almost US$2 bil.

The effort to attract new foreign funds must then first explain this distressing disparity, of which the government is itself a party, before any significant interest is likely to be generated by rightfully wary foreign investors, already chary from a daily string of anti-western rhetoric and diatribe delivered daily from the depths of the prime minister's new domicile.

The question which comes to everyone's mind is, why should a bet be placed on Malaysia, when Malaysia is betting on another man's horse?