The use of credit should be viewed as a convenience, though it is not without its dangers. The best use of credit is to provide immediate payment when adequate resources exist to satisfy the debt in a short time. When debt is stretched over long periods of time it represents a permanent burden, as any car buyer who elects to finance for eight years can attest.

Governments are judged by their good faith and credit. This refers to their history of paying bills when due. Any government which defaults in the payment of interest or principal on its bonds will have difficulty marketing new bonds in the future. Governments thus protect their credit rating by prompt payment of all outstanding claims as they fall due. This keeps the interest required to sell their bonds at a competitive market rate, and also protects the value of the paper they circulate in the world as national currency. The exchange value of the pretty printed paper is propped up by proper propriety of the political party in power.

Political parties have their own financial affairs, sometimes more extensive than the government they control. It is a temptation to commingle the funds of the two, and therefore every effort is made to assure the public and the world the two treasuries are distinct and discrete. The political party in power has a budget, and expends its income on necessary salaries and expenses. It builds buildings, installs fixtures and furniture, and has other tangible assets. For these expenses there must be dependable income, and the contracts must be paid as agreed. But in Malaysia it is not polite to press the politicians for payment.

The political party in power is the Umno-BN coalition. The prime minister is the president of Umno-BN, and the finance minister is the treasurer of Umno-BN. Neither the government nor the political party opens its books or makes details of transactions known. The amount of commingling is therefore unaddressed and unresolved. Any misdeeds await a new administration.

A company in Taiwan has now chosen to make public a large contract for CD's which is in default. The contract was made on the purported strength of financial support from the Umno-BN party. The connection is reported to be fictional. Deliveries have been made, alternative orders have been refused, and the agreed payments are not received. The matter is to be referred to the courts. Court cases anywhere are the anathema of business, but in Malaysia there are additional constraints. The judiciary often decides by Bolehland law. Since Bolehland law is deficient in recognised precedents, it is impossible to represent a client in Malaysia without a copy of Alice In Wonderland in hand.

The implied presence hypothesis becomes operative, and the question arises how many instances are there of unpaid bills. Public knowledge of the number of claims denied, and the number of contracts where payments are delayed or extended would indicate the true size of the problem.

Many Japanese and German contractors are waiting patiently for payment on work-in-progress and project completions. In some cases it appears that cash was paid up front to non-existent consultants. Now that the equipment has been delivered the subcontractors expect to be paid. Some contracts were for expensive buildings built for the Umno-BN party. The impressive PWTC and adjacent Umno party headquarters are rumoured to have payments in arrears for years on overdue contracts.

It is customary for well-connected companies to take large contracts without competitive tender, then sub-contract the work to other firms with appropriate experience and capability. When these subcontractors are not paid as agreed, the project soon comes to a halt. This is the case throughout Malaysia, where the derelicts of delayed development dot the countryside.

The political party in power has interfered in a large oil royalty contract between the national oil company, Petronas, and the northern state of Terengganu. On the surface this surprise step by the Umno-BN was justified as a re-evaluation of the 25 year-old contract, and perceived to be purely political in purpose. Petronas has posted its latest profit, and it is clear it is not sufficient profit to pay the royalty. Technically Petronas must now be regarded as in default of the royalty agreement, as inability is abed with unwillingness.

The financial strength of Petronas supports a failed shipping line controlled by the son of the prime minister. Petronas has bought the controlling interest in the national car manufacturer, Proton. It has financed a large F1 racetrack, and supports an expensive F1 racing team in Switzerland. Recently the chairman of Petronas was appointed to also guide the national airline, MAS, un-privatised in what is widely perceived as another bailout of a politically connected crony.

Fundamentally, the situation in Malaysia faces a freefall. Though a great government effort is made to project a picture of economic health, with a manipulated stock market and projections of an 8% GDP, the facts argue otherwise. Stock valuations no longer reflect underlying unencumbered tangible assets or earnings ability. Without fund support they would fall to a market valuation, if a market were available. The government has depended on deficit spending for its budget for several years, and the same shortfall is expected for the foreseeable future.

Deficit spending is another name for credit, and of course there must a lender. Lenders, however, are leery of Malaysia. The government is not a popular one with the people, and a potential for explosive unrest exists. The government is not an enlightened one. Repression is the knee-jerk response to cries for reform, and it is not effective. The Umno-BN ministers are held accountable for continuing cruelty to crowds containing women, children and elders.

When lenders are independent, they give credit to those who plan wisely, and who demonstrate both ability and willingness to repay as agreed. Malaysia, in spite of elaborate efforts to appear creditworthy, shows more and more the deleterious effects of excessive spending, coupled with a casual contempt for a contract. The peg of the ringgit to the US dollar is a play for creditworthiness in the world arena. It must be backed by the full faith of the goverment and the party in power. At the moment, unfortunately, this is missing, and if more unpaid claims appear, Malaysia will find fewer foreign financiers willing to fund further fun under a tropical sun.

Petronas, the poor national donkey, gives an appearance of being over-loaded, and its ability to carry the national economy is in doubt. After a year of high oil prices, profits are down. They are not sufficient to pay royalties due. The future is further clouded by the prospect of receding oil prices.

Tourism, the second largest source of foreign exchange, is jeopardised by an increasing world awareness of Malaysia's bad human rights record. The well-publicised case of the mistreatment of Anwar Ibrahim, who is in ill health and denied health services, is costing the government much more than giving him the operation he needs. In addition, there is a growing reputation for poor services that low prices cannot overcome.

Malaysia's dependence on manufacturing for export, the major income provider, makes for a vulnerability not easily protected against. Though rosy predictions abound, the Malayisan economy depends heavily on uncontrollable factors in the economies of foreign buyers, especially the much maligned West.