Children test the credibility of adults with fabrications. Parents teach their children that truth and honesty are the proper guides for conduct. Truth and honesty are the esssential ingredients for ethical behaviour.

In the affairs of the world the intent of parties in communication and cooperation is not always apparent. The difficulty is often a misunderstanding or a translation error. These are correctable with mutual patience and goodwill.

Where there is deceit, however, the ability to conduct any level of communication or cooperation is difficult or impossible. This is true for individuals as well as nations. When suspicion arises in either party that material facts are being concealed to give unfair favor, credibility suffers. If the suspicion is not removed the credibility eventually is totally lost.

Nothing constructive is possible once credibility is lost. The communication must be broken off until credibility can be re-established. Generally this requires new names, new faces. The new faces must completely disavow the old. Strong assurances must be given that the mistakes of the past will not be repeated.

When a party-in-power loses all credibility with the people of the country, this is a serious problem, and the country will suffer until new and fresh faces appear who can remove suspicion and instill confidence. If the credibility loss extends to the international arena the problem is yet more serious, as foreign relations and international trade depend on mutual trust.

Malaysia presently suffers a loss of credibility that arises from perceived deviations from accepted standards of conduct. The party-in-power cannot make a statement of fact or intent that withstands examination. Every problem produces a profusion of promises, but these are followed by a profligacy of production delay. The suspicion arises that the promises are but dissimulation, intended to deceive and lull the public.

The government has been accused of lying in regard to the existence of a conspiracy against the public interest. The accusations are based on the failure of the leaders to provide competent guidance in the investigation of police malfeasance. This gives rise to a total loss of confidence in the ability of the national police force to execute the laws fairly.

The leaders of the party-in-power maintain a firewall of silence when matters affecting the public interest are discussed. Human rights receive no mention at all. Local problems are first stated to be exaggerated, then blamed on foreign influences with malevolent intent. Details of these general accusations are always omitted, generating a sense of fabrication and fiction.

Official silence supports suspicion that the fetish for secrecy is being used to screen a succession of illegal activity. The immunity offered to politicians and officers of the legal community putrifies and stultifies. Even a plea of guilty to a felony is not sufficient to bring punishment. The ex-inspector general of police, a confessed assailant, enjoys a life of luxury in Kuantan, while his incarcerated victim struggles for the right to necessary medical care. Cruelty is thus coupled with corruption.

The prime minister, the finance minister and the head of the central bank give daily assurances regarding the state of Malaysia's economy. None are regarded seriously. There have been too many instances where the truth was trifled with. If the leaders of the government portray deceit and deception, how can anyone, inside the country or without, believe them.

The failure of national institutions to allow audit of their activities invites distaste for participation, both by foreign funds and local fiduciary institutions. In spite of constant reassurance that local resources are sufficient to forestall a faltering economy, facts appear as leaks under the door to betray attempts at public deception.

The ringgit peg is an active area for speculation. While the government insists that the peg offers long term stability, the outflow of reserves is troubling. The government offers reassurance that the reserves are sufficient to meet short term requirements, but fails to mention the effects that continued loss portend. The decline in reserves is at an annual rate of RM36 billion, and this will exhaust reserves in ten months. The trend is toward further reserve reduction.

While the government insists the ringgit peg makes Malaysia more competitive, it is clear that palm oil at the pegged rate cannot compete with palm oil produced by our neighbors. This is an incentive for Malaysian plantation owners to transfer their capital to these countries. This gives flexibility, allowing acceptance of a Malaysian order, but with the option to deliver from a foreign mill.

This activity, though legal, allows currency speculation in size. By these activities palm oil producers and brokers act against the national interest, and are encouraged to do so by government policy. The glut of palm oil is not just the result of competition with other types of plant derived oils, it is also a result of competition against ourself, using currencies that are now lower against the dollar.

The same argument holds true for rubber. It also holds true for manufactured goods that are exported. When the exports are not priced competitively, market forces will move these activities to other countries where there is a currency advantage. So the argument that the peg provides stability is not credible, and one seeks other reasons why the government insists that it is sound economic policy.

The government is hesitant to admit any failure, and every strategem is used to cover up a campaign of conspiracy the party-in-power has concocted to pervert the public purse. This pretense of perfection and perspicacity perpetrated to inspire confidence and mask corruption. It fails. The exact opposite impression is imprinted.

The recent weakness in the capital markets is a message that the game is over. Previously there was a pretense that a proper decorum would be honored. The recent pronouncement by the prime minister that international norms would not longer be a restraint punctured permanently the illusion of respectability. It has triggered a market decline caused by the departure of remaining foreign funds who will not soon return.

The local funds have over RM400 billion with can be used to manipulate the market through furtive means, especially when daily volume is under RM500 million. This means the daily KLCI level is almost meaningless, because the local funds have sufficient buying power to peg it at will. It falls because there is an opportunity to buy the CLOB shares and the foreign fund positions at what are perceived to be depressed prices. The problem is no one can be certain these prices, low as they are, may not, in the near future, look like a picture of paradise.

The long term problem is the inability to present financial and economic information with candor. The position of the country, along with the corporate entities within it, must be reported in total honesty. But this is contrary to the Asian Way, and every facet of business and government is treated as a national security issue. Participation in such an enterprise requires faith that good government accounting and procedure is practiced. But this requires credibility (though an allowance is made for gullibility), and this is the essential ingredient that is missing.

The market in the near term may offer temporary trading opportunities with technical toppings, but the underlying fundamentals of competent management and external auditing are absent. This suggests that the future for Malaysia is bleak, and the prudent head of household will use restraint in making a long term commitment. The present period allows a brief time to resolve present credit burdens and prepare a reserve against unforeseen contingency.

In the absence of credibility supported by candor and ethical conduct the cavalry will not come. Therefore one is prudent to prepare for the siege. It will be a long one, and the faces on the screen today will all be gone before the sun shines again.

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