(BN) What to Do When the FBI Raids Your Hedge Fund: Jonathan Weil

What a gem of an article!

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What to Do When the FBI Raids Your Hedge Fund: Jonathan Weil

Nov. 26 (Bloomberg) -- As if the global capital markets hadn't suffered enough shocks lately -- artillery fire in Korea, meltdown in Ireland, Eva Longoria Parker's divorce filing -- life just threw America's hedge-fund masters a beanball. It appears the government wants to toss many of them in jail.

This week the Federal Bureau of Investigation executed search warrants at three large hedge funds' offices as part of a widening insider-trading investigation. Several other funds, including SAC Capital Advisors, got subpoenas for documents.

What does this crisis mean for the industry? We already can guess the first question that must have leaped to the mind of every self-respecting wealth maximizer: "How can I use this information to make enough money to buy myself a jet?" The answer, of course, is that it pays to be on the inside.

This raises an even more intriguing existential question. Is it possible for a hedge fund to profit off its own imminent collapse? A little role-playing exercise shows it's not only possible -- it's preordained.

Imagine you are a skilled trader at a hedge fund with a few billion dollars under management. You learn that FBI agents have just arrived to raid your firm. Lesser beings might cower under the pressure. You, though, realize that you now possess the ultimate edge: The knowledge of what is happening to you at this very moment. You scan the latest news for headlines about your firm and, seeing none, set about on an action plan.

One Question

Soon the unsuspecting public will be told that financial stocks are plunging on the news that your firm is being raided. You have the benefit of knowing this in advance. The only remaining questions: Do you short Goldman Sachs? Do you short other large banks, too? More importantly, do you short them for your personal account, or for your fund's? Sensing nothing but upside in the downside, you settle on all of the above.

Next comes the due diligence. Brilliantly, you recall a speech in March by Robert Khuzami, the head of the Securities and Exchange Commission's enforcement division.

"The masterminds leave the fewest footprints, and they are often planning their defense at the same time they are committing the fraud," he said. "To take a simple example, those who trade on insider information may well accumulate at the same time a stack of research reports on a company whose stock they just illegally purchased, and point to that file when law enforcement comes knocking."

As you consider whether to send Khuzami a thank-you note, you hit the print button. Piles of bearish research reports churn out, ready to be placed on your desk as if they had been there for weeks. You're probably just being paranoid, though. For all you know, the trades you executed were legal.

Make a Call

Right about now, your attention starts to shift. There's the question of whom to call first about the FBI raid. Personal lawyer? Spouse? Lover? No, you resolve instead to call your fund's top so-called expert-network service. They helped get you in this mess. Surely they can get you out, right?

Past experience tells you the experts' information always falls into one of two categories: Worthless or way, way too good. You hope for the latter. Even if the network can't lure away Khuzami from the SEC to represent you, maybe the experts could dig up some dirt on the pimply FBI agents downloading your firm's e-mails? Suddenly it occurs to you that all your phones probably are tapped. Better hold off on making that call.

Now the waiting game begins. There will be immediate family members to become reacquainted with, and monstrous legal bills to pay. At least you know better than to let your employer pick your law firm for you. Turning state's evidence isn't an option, not yet at least. Eventually, you figure you can stage a comeback. Your firm, though, is toast.

Where You Stand

It's about this time that it dawns on you: Your social standing wasn't what you thought it was. The FBI wouldn't dare raid the headquarters of a too-big-to-fail bank like Citigroup, much less allow the press to photograph the scene. You, though, chose what you thought was the more lucrative path of working for a hedge fund -- which can, and soon will, fail. The government doesn't care if it starts a run on you.

Passing the time, you run across a stock quote for Allied Irish Banks. It still trades for about a dollar in New York, even though its bailout just took down a whole country. "I never took down a whole country!" you scream inside your head. Reality sets in: You're now lower than an Irish banker.

You also start to recognize you're not as rich as you once thought. You recorded your $10 million bonus last year (after taxes) as an asset on your personal balance sheet. What you should have done was put down a contingent liability of equal size for all the money you'll have to pay to get out of this mess. Oh well, live and learn.

All in all it was worth it, you reckon. We'll be lucky if the whole financial system doesn't crumble anyway at this rate. At least you got what you could while the going was good. Still you worry: Where's a safe place to put it all?

The answer will have to wait. You hear a voice. It's an FBI guy. He's asking you to back away from the computer keyboard.

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net

To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net

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(BN) Bust Is Better Than a Bailout for Irish Patient: Matthew Lynn

A generation? It will be swept under the carpet and forgotten in SIX MONTHS!

What's with the quality of bloomberg's writers nowadays.

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Bust Is Better Than a Bailout for Irish Patient: Matthew Lynn

Nov. 23 (Bloomberg) -- It's not too late. The request for aid may have been made. The negotiations may have started. But Irish Prime Minister Brian Cowen can still refuse a bailout from the European Union and the International Monetary Fund.

It might sound like madness for a drowning man to refuse a lifebelt. But the decision the Irish make in the next few days will shape the future of their nation for a generation.

Ireland would be better off going bust than taking a loan. The conditions attached to a rescue aren't worth it: Once it takes EU money, it will never get off the hook. And the Irish banks aren't worth saving anyway. Defaulting on your debts is a far less scary prospect than usually portrayed.

The real question is whether Ireland's politicians have the courage to take that step.

Last weekend, the Irish surrendered to pressure to accept an EU- and IMF-led package, similar to the deal hammered out for Greece earlier this year. There was no surprise about that. The markets had grown so nervous about Ireland's finances and the cost of its bank bailouts that yields on 10-year government debt reached almost 9 percent this month.

The final amount of the bailout is still to be determined. So are the terms. This means, of course, that it isn't too late. The deal may still fall through, particularly with a general election looming as support for the government wanes.

Bond Chaos

True, that would cause chaos in the bond markets. Trading in Portuguese, Spanish and Italian debt wouldn't be a pretty sight for the few days after rescue talks collapsed. But the Irish should still say no.

Here's why.

First, the conditions are too onerous. The EU may demand an end to Ireland's low corporate-tax rate. Its 12.5 percent rate has been a cornerstone of the country's economy, attracting numerous businesses to relocate there. In 2008, two major U.K. companies, United Business Media Plc and drugmaker Shire Plc, switched their tax residence to Ireland to cut their tax bills.

Even if it isn't explicitly part of the rescue deal, Ireland will come under pressure over the next few years to raise its corporate taxes, which take companies, government revenue and jobs from Ireland's neighbors. It will be hard to explain to businesses in Dusseldorf why their high taxes are being used to help rescue competitors in Donegal.

Even so, it would be a huge mistake. Low taxes and an open business culture are what made Ireland successful. You don't cure a sick patient by taking out a lung.

'Hotel California'

Second, the EU-IMF rescue looks like financial methadone. It numbs the pain and gets you off drugs, but it's addictive. The cure can be worse than the disease. Months have passed since the Greek bailout, and there isn't much sign of Greece accessing the capital markets. The yield on Greek bonds remains more than 11 percent. It's a "Hotel California" package: You can check out anytime you like, but you can never leave.

Third, this is mostly about rescuing EU financial institutions. It is the Irish banks that are in trouble, and if they go down, it will cause massive losses at other European lenders. But why should the Irish people worry about that? If French, German or British banks suffer big write-downs, let their governments deal with them. Ireland could just close its banks -- such a small country doesn't need its own finance industry any more than it needs its own carmakers.

Emigration Wave

Fourth, Ireland risks tipping into an economic spiral. A key to the Irish economic revival of the last 20 years was reversing emigration. For a century, young Irish people went abroad to make their careers. When they started staying at home, it was a boon to the economy. If a generation is saddled with these debts, why not move to London or New York where the prospects are better? It's already happening: Emigration is exceeding immigration for the first time since 1995. It will be the most highly skilled, energetic people who leave. How exactly is that going to help the nation recover?

Five, going bust isn't so bad. Russia and Argentina defaulted on their debts. It wasn't the end of the world. The financial markets portray it as a catastrophe, but that is mainly because bankers and bond investors stand to lose a lot of money. So long as it is done in an orderly, structured way, a default is often the best solution to a financial mess.

Underneath the property bubble -- which was caused by low euro-area interest rates -- Ireland has a competitive, export- oriented economy. September figures show exports rose 2 percent and the trade surplus increased. In a weak global economy, that's a very decent performance.

If it defaults on its debts, Ireland can bounce back fairly quickly. If it accepts an EU bailout, it will be stuck in recession for a generation.

(Matthew Lynn is a Bloomberg News columnist and the author of "Bust," a forthcoming book on the Greek debt crisis. The opinions expressed are his own.)

To contact the writer of this column: Matthew Lynn in London at matthewlynn@bloomberg.net

To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net

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(BN) China's State-Planned Economy Is Doomed to Flop: David Pauly

Why, it looks even more convincing when I find and replace ' china' with ' US ' and ' state planned' with 'democracy and liberty'...

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China's State-Planned Economy Is Doomed to Flop: David Pauly

Nov. 23 (Bloomberg) -- The biggest obstacle to China becoming the world's No. 1 economy is China.

The communist nation's determination to keep as tight a rein on its economy as it has on its citizens will lead to failure -- just as it has for other countries that embraced central planning schemes.

China is reversing its flirtation with a type of quasi- capitalism that allowed entrepreneurs to thrive and propelled the economy forward at an annual rate of about 10 percent.

The Chinese now follow the so-called Beijing consensus, a belief that concentrating more control of industry in government hands will avoid the financial debacles caused by free markets.

The nation's state-owned companies are buying up independent businesses in the auto, steel and energy industries. A government-run company even plans its own Internet search business to compete with Baidu Inc., whose shares trade on stock exchanges.

Monopolies in China might appeal to investors who think merged companies can cut costs and maximize profits. Though huge Chinese companies may be well run today, they will die from the inefficiencies, cronyism and corruption that often plague state- controlled enterprises.

Manipulating the Economy

Inflationary pressures springing from China's rapid growth has the government threatening to interfere even more in the economy -- by imposing price controls on items including food and fuel.

Capping prices doesn't stop inflation, it's merely a delaying tactic. China's decision to raise interest rates and this month's order to force banks to increase reserves are better tools to combat the current inflation rate of 4.4 percent.

As it moves away from free markets, China ignores two recent central-planning failures.

Remember Japan Inc.? Thirty years ago, pundits said Japan's economy would rule the world as its bureaucrats allocated capital to key industries, protecting them from foreign competition. The U.S. railed against Japan's manipulation of the yen to keep its exports moving -- just as today it moans about China keeping the yuan low.

Russia's Troubles

Although Japan did become the second-largest economy after the U.S. -- until being dethroned by China earlier this year -- it's been in a prolonged stall. Its peak growth rate in recent years was 3.4 percent in 1997.

The collapse of the Soviet Union starting in 1989 is a more pertinent cautionary tale. The communist nation that controlled everything within its borders down to the barbershops is now defunct. Sadly, Czar Vladimir Putin is reversing Russia's chaotic moves toward democracy and capitalism.

China won't collapse tomorrow. Its exports continue to flood the globe, earning it money to make major investments -- and amass political clout -- abroad. But don't let so-called experts fool you into thinking China has discovered a new and better way to organize an economy. State-run capitalism is an oxymoron.

(David Pauly is a columnist for Bloomberg News. The opinions expressed are his own.)

To contact the writer of this column: David Pauly in Fort Myers, Florida, at dpauly@bloomberg.net

To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net

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The US is entirely off the mark in its approach to this issue. There are a few things US MUST recognise:

1. North Korea is a province of China. 

Without China, North Korea is nothing. North Korea will have to listen to China no matter what, and it is clear China will not tolerate nonsense from it. Consider China the father, and North Korea is kid. When the kid misbehaves, the responsibility lies on the father, who has not taught the kid well.

2. Responsibility is China's.

If North Korea launches any attack, it must be clear that China will be responsible for this, because NK will not be doing anything without China's blessings. 

3. It is just NOT A BIG DEAL

Since NK is part of China, it is not at all a big deal if NK has nuclear weapons. It is only a problem if NK exports its weapons, in this case, it is China needs to pick up the pieces also.

4. Who says North Korea is the bad boy?

Korea was born out of Japan and China, and sandwiched in between. NK has its way of doing things, and is still frozen in time. It is clear the world and China are moving towards progress and NK is left in the past. Let time do its work, it is a matter of time SK and NK reunite. But China will need to bring NK into the 21st century else SK will collapse under the malnutrition of NK.

If US can look at this issue from the right perspective, put the responsiblity of NK clearly and squarely on China's hands, and hold it responsible, then it can focus on what works, and have more time on Afghanistan the Middle East and its own economy.

November 20, 2010

North Koreans Unveil Vast New Plant for Nuclear Use

By DAVID E. SANGER

WASHINGTON — North Korea showed a visiting American nuclear scientist earlier this month a vast new facility it secretly and rapidly built to enrich uranium, confronting the Obama administration with the prospect that the country is preparing to expand its nuclear arsenal or build a far more powerful type of atomic bomb.

Whether the calculated revelation is a negotiating ploy by North Korea or a signal that it plans to accelerate its weapons program even as it goes through a perilous leadership change, it creates a new challenge for President Obama at a moment when his program for gradual, global nuclear disarmament appears imperiled at home and abroad. The administration hurriedly began to brief allies and lawmakers on Friday and Saturday — and braced for an international debate over the repercussions.

The scientist, Siegfried S. Hecker, a Stanford professor who previously directed the Los Alamos National Laboratory, said in an interview that he had been “stunned” by the sophistication of the new plant, where he saw “hundreds and hundreds” of centrifuges that had just been installed in a recently gutted building that had housed an aging fuel fabrication center, and that were operated from what he called “an ultra-modern control room.” The North Koreans claimed 2,000 centrifuges were already installed and running, he said.

American officials know that the plant did not exist in April 2009, when the last Americans and international inspectors were thrown out of the country. The speed with which it was built strongly suggests that the impoverished, isolated country, which tested its first nuclear device in 2006, had foreign help and evaded strict new United Nations Security Council sanctions imposed to punish its rejection of international controls.

A delegation of American experts that included Dr. Hecker has already reported that it confirmed satellite photographic evidence of another new advance by the North — a light-water reactor being built on the site of a facility the country had dismantled as part of an agreement with the international community to end its nuclear weapons program.

Dr. Hecker did not initially mention the surprising discovery of the uranium enrichment operation as he left North Korea. He privately informed the White House a few days ago.

The White House is clearly eager to use the new information to show that North Korea, in violation of United Nations mandates, continues to make significant progress toward advancing its nuclear program, even though it remains under international sanctions for its past violations.

American officials were sent to China, Japan, Russia and South Korea, the other members in the moribund “six-party talks.” The Obama administration also hopes to persuade China, by far North Korea’s most important source of political and economic support, to put more pressure on the government of Kim Jong-il, which has shown signs of becoming more militaristic as it undergoes a leadership transition.

China has been hesitant to cut off trade or fuel to the North, and it appears determined to support its longtime, if difficult, ally during its succession process. But in the past China has taken modest steps to support a tougher line when North Korea has tested nuclear weapons or missiles, defying international commitments.

Dr. Hecker said he was forbidden from taking pictures during his tour of the uranium plant on Nov. 12, and was not allowed to verify North Korean claims that it was already beginning to produce low-enriched uranium. He also said he had doubts that North Korea would fulfill its promise to build a light-water reactor to utilize the fuel. “There are reasons to question whether that’s true,” he said.

There are two routes to a nuclear weapon: obtaining plutonium from the spent fuel produced by a nuclear reactor, and enriching uranium to weapons grade.

Since the 1950s, North Korea pursued the first path, and its arsenal of weapons was manufactured from fuel harvested from a small nuclear reactor at Yongbyon. That produced enough for roughly a dozen weapons, but the facility was decrepit, and under an agreement with the Bush administration it was shut down in 2008, with television cameras running as its cooling tower was blown up.

But meanwhile, the North was already well down the second path, uranium enrichment, much the way Iran has pursued its nuclear program. Like Iran, North Korea insists the fuel is intended for a yet-to-be-built experimental reactor to make electricity.

American officials, though, say they think the intent of the enrichment program is to make weapons fuel. Since the North has blocked international inspections, it may be impossible to monitor how much fuel it has made, or if it could be used to produce or improve atomic bombs.

For roughly 15 years, American intelligence agencies have reported evidence the North was seeking to enrich uranium, largely based on technology it bought from A. Q. Khan, the rogue Pakistani nuclear dealer, in a transaction that dates from 1996. There were later reports of North Korean efforts to buy critical centrifuge components, and a suspicious shipment of uranium hexafluoride to Libya that appeared to be of North Korean origin. The Bush administration accused the North in 2003 of secretly pursuing the technology, leading to the ouster of inspectors.

In interviews, administration officials said that they were watching the area by satellite where Dr. Hecker saw the new facility, but they would not say whether they knew about it before he reported back.

“The intel agencies dropped the ball,” said Jack Pritchard, a former State Department official who visited North Korea’s main nuclear complex, Yongbyon, a week before Dr. Hecker’s visit and heard North Korean boasts of a new capability.

A senior intelligence official said Saturday evening that “it is wrong for anyone to assert that U.S. intelligence agencies somehow missed the boat,” adding, “We have been aware of North Korean uranium enrichment activities for years.”

A senior administration official said the North Koreans “very probably have other facilities” that pre-dated the one at Yongbyon and have not been detected.

In interviews, administration officials said they did not want to talk about possible responses to the North Korean action. But their options are limited. North Korea is already a de facto nuclear state; it conducted its first nuclear test in 2006 and another shortly after President Obama took office. Sanctions have crippled some of the country’s ability to do business, but clearly they have not forced it to give up its nuclear ambitions.

Military attacks on Yongbyon have been all but ruled out. In interviews over the past two days, administration officials have described several possible motives for the North to build the facility, and to boast about it.

The most obvious is to create a new bargaining chip to try to force Mr. Obama to pay off the country. “It’s typical of North Korea, to see if we will reward them” for suspending operations or dismantling the facility, said one senior administration official.

But there are other possible explanations. Just as the North used the sinking of a South Korean warship this year to build the credentials of its leader-in-waiting, Kim Jong-un, the son of the current leader and grandson of the country’s founder, this effort could be designed to show that the North must be accepted as a nuclear state along with the major nuclear powers and Pakistan, India and Israel.

Administration officials said they had no intention of reopening negotiations with the North unless it “demonstrated a seriousness of purpose and constructive action” to live up to its past promises to dismantle its nuclear facilities.

Another possibility, which administration officials declined to discuss, is that the North ultimately intends to build a new generation of hydrogen bombs or thermonuclear weapons, far more powerful than anything in its current arsenal.

The North’s current arsenal of 8 to 12 weapons are all based on plutonium. But uranium, enriched to bomb grade, can also be used to drastically increase the destructive power of a nuclear blast, and that is the main use of uranium in modern arsenals, including United States warheads.

Experts caution, however, that true hydrogen bombs are quite hard to make, so it seems unlikely that North Korea would succeed in that anytime soon.

William J. Broad contributed reporting from New York.

Chinese official says no aim to supplant dollar

You can't supplant the dollar unless you SPEND your yuan dude.

November 20, 2010, 2.14 pm (Singapore time)

Chinese official says no aim to supplant dollar WASHINGTON - A senior Chinese official says his nation harbours no aspirations that its currency will someday replace the US dollar as the world's reserve currency. But Zha Peixin, vice chairman of the National People's Congress of China's foreign affairs committee, said on Friday that China is determined to change how exchange rates are maintained so that they 'better reflect the supply and demand of the market'. Mr Zha told reporters while fielding questions at the Chinese Embassy that Beijing is wary of rapid fluctuations in the value of its Chinese yuan, or renminbi as it is also known, that could discourage entrepreneurs. He said the 'goal is to keep the exchange rate relatively stable'. The US accuses China of undervaluing its currency, something Beijing denies. -- AP

(BN) China Acquires Stake in Mall Owner General Growth in Bet on U.S. Consumer

The flesh eating germ devours, bit by bit. Real estate...be careful now...

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China's General Growth Stake a Bet on U.S. Shoppers

Nov. 19 (Bloomberg) -- China's sovereign wealth fund, in a bet that American real estate and retail spending will recover, has acquired a 7.4 percent stake in General Growth Properties Inc., the second-largest U.S. mall owner.

China Investment Corp. holds 59.3 million common shares and warrants to buy an additional 14.7 million shares, according to a Form 4 filed yesterday with the U.S. Securities and Exchange Commission. The Future Fund Board of Guardians, a manager for Australian government pension funds, holds a 6.4 percent stake in Chicago-based General Growth, documents show.

U.S. consumer spending on Chinese-made apparel and consumer electronics helps drive the trade gap between the two countries, which rose 21 percent to $201.2 billion through the first 10 months of this year. China is using foreign direct investments to capture some of the profits from overseas sales of merchandise that its factories churn out for companies such as Apple Inc., said Dan Rosen, principal at Rhodium Group, a New York-based research firm that specializes in China.

"In addition to making goods, China is getting closer to retailing," Rosen said today in a telephone interview. "The margins that the Chinese enjoy for putting goods together are tiny compared to the profit margins of the Wal-Marts of the world."

General Growth exited the largest real estate bankruptcy in U.S. history on Nov. 9. As part of the restructuring, it spun off Howard Hughes Corp., an owner of master-planned communities and other properties, as a separate publicly traded company.

Brookfield Entities

China Investment and Australia's Future Fund hold their stakes in General Growth through entities created by Brookfield Asset Management Inc., a Toronto-based company founded by members of Canada's Bronfman family. Brookfield and its clients invested about $2.31 billion in the mall unit through the bankruptcy reorganization, with an additional $200 million devoted to Howard Hughes Corp.

Hugh Zwieg, a General Growth officer, didn't return a telephone call seeking comment. Andrew Willis, a spokesman for Brookfield, declined to comment on China Investment's affiliation with the money-management firm.

China Investment, with about $300 billion under management, was created to generate higher returns from the nation's foreign-exchange reserves. China ranks as the world's largest holder of U.S. Treasuries, with $883.5 billion of the securities as of Sept. 30, according to the U.S. Treasury Department.

'Attractive Alternative'

"High-quality U.S. commercial real estate is an attractive alternative for sovereign wealth funds to invest American dollars," said Alex Avery, a real estate industry analyst at CIBC World Markets Inc. in Toronto. "You get the safe-haven currency but you don't have to deal with the low yields of Treasuries."

China Investment committed about $800 million to the $4.7 billion global property fund that Morgan Stanley announced in June, according to Private Equity Real Estate. The fund had also been negotiating to buy some of Harvard University's real estate holdings for several hundred million dollars. That transaction fell through, a person briefed on the matter said in September.

Brookfield formed a $5.5 billion turnaround real estate group in August 2009 to invest in distressed commercial real estate, according to Willis. Under the terms of the arrangement, members had the final say over whether their money was invested in various opportunities identified by the Canadian money manager.

Wealth Funds

When a bidding war to invest in General Growth broke out earlier this year, rival suitors sought financial support from wealth funds in the Middle East and Asia, the Financial Times reported in March. At the time, Brookfield said it might seek financing from investors in the turnaround group including China Investment, the Future Fund and Government of Singapore Investment Corp., the newspaper said.

According to filings, Brookfield received 230.9 million General Growth shares, along with 57.5 million warrants in return for its investment. About a quarter of the stake was allocated to China's sovereign wealth fund, with 64.4 million shares and warrants going to the Future Fund Board of Guardians, which helps oversee about $69 billion of pension assets for the Australian government.

Brookfield was formed by Peter and Edward Bronfman in 1954 after the two brothers cashed out their stake in Seagram Co. Ltd., a Montreal-based spirits company that was ultimately acquired by Vivendi SA in 2000 from other members of the Bronfman family. Brookfield, which specializes in real estate, power and infrastructure investments, has about $113 billion in assets under management, including $20 billion from sovereign wealth and pension funds, Willis said.

General Growth rose 42 cents, or 2.9 percent, to $15.10 at 4:15 p.m. in New York Stock Exchange composite trading. The company issued 135 million shares earlier this week at $14.75 each.

To contact the reporter on this story: Miles Weiss in Washington at mweiss@bloomberg.net

To contact the editor responsible for this story Christian Baumgaertel at cbaumgaertel@bloomberg.net .

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Press freedom: The Singapore grip - My Take

Much is written in English about the Far East by people behind a notebook half a world away. As night in the West is day in the East, many think this East is exotic - they hang and shoot people on the streets, they manufacture, pollute, and have huge surpluses. Even the closest thing to the educated and refined West, Japan, has got umbrella hats, talking bras, and has disgraced CEOs who commit suicide - how strange, this wild, wild East.

But its not difficult to garner support and encouragement when you are in the comfort of a million people around you who think or are brought up the same Western way. Hence, I have little respect for the majority of journalists (or financial analysts) - though not only from the West, but also by those in the East commenting on the West.

Take the death penalty for drug smuggling in Singapore for example. Few people consider that one has actually got to take the effort to smuggle drugs AND be caught. It is an active task. Smuggling drugs and other serious offences, would be no different taking a sharp knife and stabbing oneself repeatedly with it. Yet people continue to take that gamble - they want to take that gamble, and they know the consequences.

Alan Shadrake the focal point here, is a classical old fool. He actively sought publicity, and knew he would get it by visiting Singapore. He could very well continue his slander and throw his tantrums from elsewhere. But no, when people stopped listening, he made the choice of his life - he was old, desperate and needed to make a statement - at least Amnesty would take note, and the British press plus their readers would give him a few hundred, maybe a thousand google hits and Alan Shadrake would go down in history as the man who stood up for his Western ideals in a Singapore dungeon.

On the point of press freedom, Singapore is free - there is freedom to do anything, except stupid things that cause racial or internal divide - and there are no shortage of these type of people. But there are lots to do in Singapore, you could start a pub, teach English,  sell wine online - the tools are all there, easier than another country in the world. Or you could try to tear all these down with freedom to peddle drugs, murder, start a mob, enjoy graffiti and  making a fool of yourself, and be a true free democracy, and land yourself in jail or at the gallows doing it - yet again, you did ask for it didn't you.

If the West wants to learn and do business in the East, one would suggest it learn, or at least understand the culture of the East quickly. Because I've seen with my own eyes, many hoping to succeed by parachuting managers from Australia to Asia - how close is Australia to Asia? proximity - close enough, culturally - a world apart. Companies expanding in China, Korea, Japan, Taiwan, Thailand, Malaysia, Vietnam, without understanding the landscape, and they are genuinely puzzled why they fail.

But this leads to something bigger - everything in Asia exists for a reason - the talking bras, the junta, the opposition to the Tibetan monk, the death penalty, fist fights in parliament. They will always exist, no amount of frustration venting in the West or political pressure will change, nor nobel peace prizes, nor even a war declared unilaterally on basis of non-existent WMDs.

To understand why they exist is the challenge - and a challenge that must be overcome before a prudent investor puts his first penny into this region.



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Press freedom: The Singapore grip
The country presents itself as a modern liberal democracy yet has an autocratic political culture
Editorial
The Guardian, Wednesday 17 November 2010
 larger | smaller
Singapore is proud of its place near the top of many international rankings. Its school system is by some measures the world's best. The island state promotes itself as diverse, competitive and cultured – an exciting global hub. But there are two league tables which shame Singapore. The first, compiled by the campaigning group Reporters Without Borders, places the country 136th in the world for press freedom – below Iraq and Zimbabwe. The second is the rate at which Singapore executes convicted criminals: arguably higher, per capita, than any other country in the world.
Singapore presents itself as a modern liberal democracy: it has a parliament, elections, courts, a constitutional right to free speech and the consumerist gloss of capitalism. Its citizens are free to become rich and to travel. Many do both. The country has by any measure succeeded since independence. But its autocratic political culture – overseen by the country's founding father and now official minister mentor Lee Kuan Yew – is highly and needlessly restrictive. The media is largely state-owned. Defamation and contempt laws threaten dissent. The latest victim of these is Alan Shadrake, a British-born writer sentenced yesterday to six weeks in prison and a large fine after being found guilty of contempt of court. His book Once a Jolly Hangman questioned the independence of Singapore's legal system, and its use of the death penalty.
It is depressing that a country as successful as Singapore should feel the need for such restrictions on free speech. Singapore argues that, without them, the balance between the country's Chinese, Malay and Indian populations would be upset. But the reality is that other successful parts of Asia – Hong Kong and Taiwan, for instance – have thrived by extending free speech and the rule of law. Singapore is making itself a less significant place by refusing to give its people the sorts of freedoms that are routine elsewhere.
On a practical level, the decision to prosecute Mr Shadrake was also foolish. His book has had far greater attention because of it, and Singapore's reputation has been harmed. Mr Shadrake is quite right to attack a criminal justice system whose victims are often poor migrant workers. His book was legitimate and – despite the court's claim to the contrary – largely accurate. The suspicion is that the Singapore government resented the exposure of a squalid system of routine executions which sits uneasily with the image it likes to present to the world. Singapore wants to be judged as a first-world nation. It must find the confidence to allow its citizens the freedoms that go with that status. Repression is not the route to success. In the end, it will prove its enemy.
guardian.co.uk © Guardian News and Media Limited 2010

Lipper Fund Awards -- Step right up, Everyone's a winner!

Lipper Fund Awards -- Step right up, Everyone's a winner! 
Posted: April 04, 2008, 1:35 PM by Jonathan_Chevreau 
ETFs, MERs, Index Funds, Mutual Funds 

So you’re in the market for a mutual fund and notice Fund Company X has won a bunch of awards. Should you buy one of the winning funds? Depends on who’s giving the award. If it’s a Lipper award, I’d be skeptical. 

The premier tribute to actively managed mutual funds in Canada is the Canadian Investment Awards or CIA, which takes place every fall. Over the years, the number of categories has risen to a ridiculous extent, which has the effect of diluting the impact for the few deserving funds. 

But you’ve not experienced true award inflation until you see what the marketing wizards at Lipper have done. Lipper — a wholly-owned subsidiary of Reuters —  held its second annual “gala” awards in Toronto this week. 

Lipper unveiled a total of 113 awards by my count. They accomplished this dubious feat by breaking the award winners into four groups: those with the best 1-year, 3-year, 5-year and 10-year performance. So while there are about 31 basic categories — ridiculous in itself — this gambit lets Lipper declare four different winners in each category, thereby spreading the wealth around. 

Thus, if you want to buy an award-winning Canadian equity fund, which one you choose will depend on what performance track record you think is important. If you’re so deluded that you think the last 1-year performance record is the most accurate predictor of future returns, then you’ll go for the IA Canadian Leaders Fund, winner of Lipper’s 1-year Canadian Equity award. 

Ah, but if three-year returns are your bag, you’ll buy instead the Desjardins Environment Fund. Or perhaps the 5-year track record would be more prudent? If so, then you’ll want the AltaFund Investment Corp., winner of Lipper’s 5-year Canadian Equity award.   

But why stop there? Go for the 10-year winner, which is the Fidelity True North Fund. 

Not to sugarcoat the situation but this is financial pornography at its most blatant. Heaven help the poor consumer who opens up his daily paper to find four different vendors proclaiming themselves the winner of Lipper’s “prestigious” 2008 Canadian equity award. 

And so it goes for the usual categories, such as U.S. equity, Japanese equity, high yield fixed income and on and on. 

But wait, there’s more, as the hucksters say. If your favorite fund company can’t squeak in a winner through the aforementioned free-for-all, maybe they can win the “Miscellaneous” award, also spread over 1, 3, 5 and 10 years. 

So if you like to invest in stock exchanges over 1-year periods, the Caldwell Exchange Fund is  the 1-year miscellaneous winner. Move to three years and the “miscellaneous” winner is the TD Latin American Growth Fund, which also wins in the 5-year category; for 10 years it’s the AGF China Focus Fund.  Wow, TD won in two of the four categories: better stock up on it now. Gives  new meaning to the term "Latin lover." 

It gets worse. On Thursday, the Toronto Star ran a ten-page advertorial supplement which featured the following banner headline: “Spotlight shines on RBC Asset Management.” Beneath it was another unbylined story headlined “Lipper Fund Award Winners from A to Z.” 

As already noted, there aren’t enough letters in the alphabet to cover all the Lipper awards. The supplement appears to be a raging success for the ad sales people: full-page ads were purchased by Mackenzie Financial, AIM Trimark, Manulife Investments and Dynamic Funds, with smaller ads from other industry players (or is it “payers?”). 

Naturally, all the winners flooded journalists’ inboxes yesterday with breath-taking emails announcing their award-winning funds. Dynamic claims to have “stolen the show” by winning the “greatest number of Fund of the Year” awards, with 19, count ‘em, 19 awards. 

Of course, that’s counting the four-fold inflation factor of spreading the awards over the four performance time periods. Thus, Dynamic was able to tout its Dynamic Power Global Growth Class as the 1-year Global Equity category winner as well as the 3-year and 5-year winner. Alas, the pattern was broken by the 10-year winner though it was still in the family: Dynamic Global Value Fund. 

Not to be outdone in the press release wars, RBC Asset Management announced that for the “second consecutive year” it was named “Best Overall Fund Group” in Canada. It then explained how it had received Lipper awards “over various time periods” in various categories. 

Compared to Dynamic’s winning 19, you’d think CIBC Asset Management would want to hide the fact it won only four of the 113 awards available. And AGF Funds didn’t even blush when it issued its release saying it was “honored with two top prizes.” Nor did AIM Trimark, which also won two. 

Investors Group kept the precise number vague, saying it had “been recognized for industry-leading fund performance” at the “prestigious Lipper Fund Awards ceremony.” Fidelity Canada said it is “very honoured to be recognized” for its seven fund winners and so on. 
  
Go here and if you can navigate your way to the Canadian-specific data you can get a list of the rest of the winners. If you’re a fund company marketing executive, don’t forget to go to the “Certificates” section which lets you “share the good news about your fund’s achievement.” 

Lipper makes it easy for you to “use your certificate and award log in your marketing communications to promote your success throughout the year.” 

Yep, it’s all about marketing. But the final touch is the award trophies, which Lipper describes as “an instantly recognisable symbol of fund performance and success.” 

Now I don’t know about you but when most of us see all those Hollywood actors and actresses clutching their Oscars on TV, don’t we kind of assume they’ve been given the statuettes?   

Lipper’s web site is selling fund companies award trophies so they can  “order as many replica trophies as they need, to display in offices around the world.” In addition, you can order a trophy for “awards not catered for at an Awards evening.”   

So even if you’re such a sad-sack fund company that you couldn’t muster up a single win in the 113 categories, there may yet be hope for you. You can order a large Lipper trophy for just $155, a medium one for $119 or a small one for just $95. 

Manufacturers of index funds or ETFs need not apply. 


Comment: 

From KCM's Adrian Mastracci: Liked your Lipper blog. 

Let's put it this way. Say there are 9,000 funds in Canada of which 113 got the trophy. 

That means about 1 1/4% of them are winners and about 98 3/4% of them are in the non-winner category. 

So given the propensity for investors to load up on winners vs non-winners, they now have nearly a 100% chance of picking the laggards for their future returns. 

I assume that history repeats itself most times where the current winners have a difficult time staying on top of the perch over the next few years! 

Nothing has changed in investing. The same gaffes are repeated, over and over. 

Adrian Mastracci 

Portfolio Manager, R.F.P., 

Commencement Address 2000 Marshall School of Business

Certain extracts here, to avoid reproducing it in entirety.

I don't agree with most of the points, and obviously, Steve Jobs took a few leafs from this speech. 

My view is that given everyone is at the same intellectual capacity and works equally hard, then its 100% luck.

Commencement Address

May 12, 2000, Marshall School of Business, University of Southern California

© David Bohnett, May, 2000. Not to be reproduced without permission

A Bachelor of Science degree in business from USC says a lot about you. It says that you can read a financial statement, develop a marketing and promotional plan for a new business or product, create spreadsheets, analyze the competition, and design an e-commerce Web site. But I learned very early in my career that having those skills alone doesn't guarantee success in the business world. Furthermore, if you do master the art of business, climb the ladder of responsibility, and reap financial rewards, none of that necessarily leads to happiness, or to personal growth and satisfaction.

My message today is that it's time for all of us to dream big - to create greatness within ourselves, and for ourselves. I am thankful for the success of GeoCities and for having the financial wherewithal to make a concrete difference in the world. But we all continue face the same challenge: To maintain faith in ourselves when everything-around us suggests that we should do otherwise. And even more, to tell the truth about who you are, even when everyone around us would prefer that we remain quiet.

My success in business has opened doors I never dreamed possible. Influential political and business leaders ask me my opinion. I get invited to participate in forums debating important subjects. My voice, and, through me, I hope the voice of others, is heard. But what about you? What about your voice, your passion? I challenge each of you to pursue not just financial reward or career accomplishments, but to pursue your dreams, your passions, your true interests, and if you do that, with all your heart, I promise you that the financial success and the career goals will take care of themselves.

So I urge you, no, I implore you, all of you, to take what you have learned here at USC out into the world and make a difference. And not just when you become, as I expect all of you to be, successful. Not just when it is easy, or it is comfortable, or it is convenient.

I was 38 years old when I started GeoCities. I had had a career in the software business prior to that, having held a variety of positions in finance and accounting, as well as in operations and marketing. I'd worked for a number of companies, large and small, and had been exposed to a wide variety of industries and individuals. There are but a few business colleagues who stand out in my mind as having made a real impact on my thinking and on my approach to business. The common theme among these individuals was not necessarily their skills or expertise, although each was an expert in his or her field. The attributes each of these folks had in common was a true passion and commitment in what they were doing, and an incredible vision and drive to pursue what they believed in. What these people taught me was that true success in business is not learning how to read a financial statement or develop an e-commerce Web site, real and tangible success comes to those who follow their hearts as well as their minds. Finding that thing which you are passionate about above all else, and pursuing that activity which you love to do, these are the keys that unlock every door.

In closing, I am reminded of the story of the great French Marshal, who once asked his gardener to plant a tree. The gardener objected that the tree was slow-growing and would not reach maturity for a hundred years. The Marshal replied, "In that case, there is no time to lose; plant it this afternoon."

There is a world of challenges waiting for each one of you and you have no time to waste. I am honored to be here today, and I appreciate the opportunity to share my thoughts with you. There is no time to lose. Let us all go out and plant a forest of trees this afternoon.

Thank you very much.

David Cameron should not have worn that poppy in China

David Cameron should not have worn that poppy in China

Chinese officials apparently asked the UK delegation not to wear Remembrance Day poppies because they were a symbol of China's humiliation at the hands of Europe in the opium wars. To comply would have been good manners

Wearing poppies, David Cameron, George Osborne, Vince Cable and Michael Gove drink a toast at a contract signing in China. Photograph: Stefan Rousseau/PA

I don't doubt David Cameron's sincerity in gently lecturing his Chinese hosts today about the importance of political freedom, the rule of law and a free press in sustaining a stable and successful society. But and but again. Those Remembrance Day poppies say it all.

It's not that Cameron is wrong. I agree with the main thrust of what he is saying and what many other western leaders have said on similar trips to Asia where they try to combine business opportunities with advice on how authoritarian Asian political regimes might be improved.

Barack Obama, himself America's first Pacific president, has been doing the same sort of thing this week on his way to the important meeting of the G20 in Seoul, which is itself a reminder of how the world is rapidly tilting south and eastwards. Remember the G7? White guys plus Japan?

Funnily enough, Obama and Cameron's hosts won't see it quite that way, not least because they have their own value systems and priorities – often much older than ours – and because most of them were exploited western colonies within living memory. They learned a great deal from the experience, the bad as well as the good.

The ailing Chinese empire was big and indigestible enough to avoid that fate, though it was touch and go for a while during the century of humiliation that ended only after the Communist party seized power – and kept it.

That's where those Remembrance Day poppies come in, the lapel poppies sported by Cameron and his team of coalition ministers on newspaper front pages – including the Guardian's, which cropped Wen Jiabao, the Chinese premier, from the toast-sharing shot.

Chinese officials apparently asked them not to do it because the poppy is a vivid symbol of China's humiliation at the hands of the European powers. "We informed them that they mean a great deal to us and we would be wearing them all the same," a British official explained.

Oh dear. That sounds pretty priggish. I have no wish to reopen the Jon Snow no-poppy controversy, which has kept overpaid columnists in work all week – and Tania Branigan sets out a few further examples of double standards in today's paper.

But surely no better example of residual western arrogance combined, oddly enough, with a hint of Maoist conformity (exactly what Snow was complaining about), could be offered than the sight of our chaps all wearing their poppies in Beijing?

To Chinese officialdom, whose collective memory goes back 2,000 years further than Whitehall's, the poppy speaks of the two opium wars forced on them by the British empire when – then as now – Britain had insufficiently attractive export products with which to offset its imports from China – but unlike now had the military means to address the deficit.

In the 1830s tea was the main Chinese export via Canton. But the Chinese, deeply introspective and arrogant in their own way, rejected UK manufacturing goods, then at their global zenith. So the East India Company exported Indian opium for both medical and narcotic purposes, 900 tons in 1820, 1,400 by 1838.

The Qing empire restated its ban and was ignored by both British and Chinese merchants, despite the imposition of the death penalty for trafficking. (Little wonder that they ignored British pleas for clemency when a British citizen was sentenced to death for drug trafficking last year.)

In 1839 an official delegation from Beijing succeeded in getting the British superintendant at Canton to hand over 20,000 chests of opium, which were destroyed. "Why ban it at home, but sell it to us?" Queen Victoria was asked in a letter, so Jonathan Fenby records in The Dragon Throne (Quercus, £16.95).

But after the burning of a temple and the murder of a Chinese man by British sailors, both sides dug in. In the name of free trade – did Cameron mention this to the Chinese students, I wonder? – in 1840 the Brits seized a rocky island called Hong Kong, blockaded the Pearl – and later the Yangzi – rivers and sent in troops.

No match for modern European firepower, the Chinese had to settle and the 1842 Treaty of Nanjing became the first of the many "unequal treaties". The British got Hong Kong and smaller islands, ports were opened, compensation paid for the lost opium, missionaries allowed into China, foreigners relieved from trial by Chinese courts. France and the US piled in behind. In 1856-58 the process was repeated with the same results as the west penetrated the interior.

Cameron's college audience in Beijing will know all this stuff just as British kids know about the wickedness of Hitler and the ambitions of Napoleon or Phillip II of Spain – all pluckily thwarted by you know who.

Whether they know that their own insular leadership still didn't grasp that the barbarian foreigners were not "no more important than dogs or horses" but – however briefly – rulers of the world is more doubtful.

When Japan was forcefully opened up a few years later it got the point and modernised so fast that its empire defeated a quasi-European power, Russia, within 50 years. In 1894-95 Japan also defeated China and joined the G7 pillage, gradually taking over much of the country until stopped by nationalist and communist armies in the 1940s.

In the circumstances, if I knew all that but still wanted to sell Rolls-Royce engines and the rest to my hosts I think I'd have put my poppy to one side for a day or two even if it did upset the Daily Mail or Sun. After all, Rupert Murdoch has been kowtowing to Beijing to promote his business interests for decades.

A conciliatory retreat would have been both good manners and shrewd tactics, a small gesture to a proud and sensitive political elite whose economic and political power is accelerating fast. The rise of China is going to be the story of our lifetime – and we'd better get used to it.

It doesn't help either that similar western arrogance in the handling of the global banking system sustained a car crash in 2007-09 that angered the west's Chinese creditors mightily. A big trade and currency row is brewing at the G20 summit – one that might seriously damage our lives as much as the opium wars damaged Chinese ones.

The poppy skirmish was one we could have done without.

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guardian.co.uk © Guardian News and Media Limited 2010

(BN) Worst Plunge in Year for China Stocks Marks Buying Opportunity, HSBC Says

EDIT on 29 Feb 2011:

SSE stands at 2878 today. That's 3.5% off when the comment was made on Nov 2010, and we have 4 more months to see if we will get the 10-15% rise talked about by HSBC...or have they now revised their forecasts to take into account "new realities"?


You know China is HOT when:

A foreigner sitting in a comfy location outside China, who likely does not speak the language, surely does not conduct meetings in Chinese, definitely does not read local papers, talks to Bloomberg like he lived his entire life in China.



Bloomberg News, sent from my iPad.
Worst Plunge in Year for China Stocks is Time to Buy, HSBC Says
Nov. 13 (Bloomberg) -- The worst plunge in China's stocks in more than a year is a buying opportunity for investors as the country's benchmark index may advance as much as 15 percent by June, according to HSBC Private Bank's Arjuna Mahendran.
"The medium-term outlook is good," said Mahendran, the head of investment strategy for Asia in Singapore at HSBC Private Bank, a unit of Europe's largest lender overseeing $460 billion globally. "The momentum of the economy is strong. The question is whether it's too strong."
The Shanghai Composite Index tumbled 5.2 percent to 2,985.44 yesterday, the most since August 2009, as investors speculated policy makers may raise interest rates for the second time in two months to curb inflation. The measure had a six-week winning streak halted after government reports showed October consumer prices rose at the fastest pace in two years.
Consumer prices jumped 4.4 percent in October, more than the 4 percent median forecast in a Bloomberg News survey of 28 economists, the statistics bureau reported Nov. 11. The previous day, the government had announced the first nationwide increase in bank reserve requirements since May, which Guotai Junan Securities Co. said would fail to drain funds from the financial system because there is "too much liquidity."
The Shanghai Composite climbed 1 percent on Nov. 11, the day after the ratio increase, before yesterday's tumble.
"Regulators have been clear they wouldn't condone rising prices," Mahendran said in a phone interview. "Inflation is going to be an issue for the next six to 12 months."
Stay Cautious
While rate "normalization" will be a "headwind" for stocks, Mahendran predicted that China's equity market will extend its rally since July.
"This is an opportunity to buy stocks at decent prices," said Mahendran, who foresaw a decline in China's equities on Jan. 20 and said on July 29 that a mid-year rally in equities would falter should the government be able to contain inflation.
The Shanghai Composite slumped 8.8 percent in January. The gauge rose less than 0.1 percent in August after a 10 percent surge the previous month. Consumer prices jumped 3.5 percent in August, accelerating from July's 3.3 percent increase.
Zhao Zifeng, who helps oversee about $10.2 billion at China International Fund Management Co., said investors should be wary after yesterday's stock tumble given the lack of clarity over the government's tightening policies.
"The plunge may not fully reflect further tightening by the government such as interest-rate and reserve requirement increases," he said in a phone interview in Shanghai. "I would say it's better to be cautious."
Economic Growth
The Shanghai gauge has rebounded 26 percent since reaching this year's low on July 5 on expectations central banks around the world will inject more cash into their economies to boost growth. The index remains down 8.9 percent this year after the government raised bank reserve requirements, including a percentage-point increase for some banks, and curbed lending growth to cool the economy.
Companies in the stock gauge are valued at 19.2 times reported earnings, compared with 26.4 times at the beginning of the year, according to weekly data compiled by Bloomberg.
Mahendran recommends Chinese consumption stocks including retailers given the nation's growth outlook. China's economy grew 9.6 percent in the third quarter, exceeding the 9.5 percent median estimate of economists in a Bloomberg News survey. Moody's Investors Services upgraded China's debt rating this week, citing the resilience of the economy.
"You just have to wait for the dust to settle," he said. "The trend is upward. I'm not too concerned. I see gains for the index of between 10 percent to 15 percent by June next year."
To contact the reporter on this story: Allen Wan at awan3@bloomberg.net .
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net .
Find out more about Bloomberg for iPad: http://m.bloomberg.com/iphone

Sent from my iPad

S'pore may win by a nose in M'sia GDP photo finish

Singapore will win, not now, then next year. But nothing is for free. It has paid a price for this. Published November 12, 2010

S'pore may win by a nose in M'sia GDP photo finish Its economy looks set to surpass Malaysia's US$205b (SINGAPORE) The economy of Singapore is poised to go past Malaysia's in absolute terms. Singapore's gross domestic product (GDP) will cap its fastest annual growth this year since independence, rising as much as 15 per cent to about US$210 billion, while the economy of Malaysia, a country 478 times its size, will expand 7 per cent to US$205 billion, government forecasts show. The nations are scheduled to release their 2010 data by February. The island that former economic adviser Albert Winsemius once said was considered a 'poor little market in a dark corner of Asia' is now ranked by the World Bank as the easiest place to do business, has the world's second-busiest container port, and boasts the highest proportion of millionaire households, according to the Boston Consulting Group. 'Singapore kept on moving to the next level as the world economy evolved and adjusted to market demands and investors' interests,' said Lee Hock Guan, senior fellow at the Singapore-based Institute of Southeast Asian Studies. 'Malaysia was struck by the curse of resource-rich countries: It didn't optimise its human capital.' Singapore's economy has grown 189-fold since independence in 1965, helping boost GDP per capita to US$36,537 last year from US$512. Malaysia's economy expanded at one-third the pace during the same period and had a GDP per capita of US$6,975 in 2009, up from US$335 in 1965. Malaysia's growth fell to an average 4.7 per cent a year in the past decade, from 7.2 per cent in the 1990s, when former prime minister Mahathir Mohamad wooed overseas manufacturers, built highways, and erected the world's tallest twin towers. 'Development is like a marathon and all policies geared toward it must be sustainable and continuous,' said Thomas Lam, chief economist at OSK- DMG, a venture between Malaysian securities firm OSK Holdings Bhd and Deutsche Bank AG. 'Malaysia runs the marathon like a 100 meter event, so you see the initial spurt but not continuous progress in the race.' Much effort has gone into Singapore's growth. 'Economic development does not occur naturally,' said Ravi Menon, a senior official at Singapore's Ministry of Trade and Industry. 'This is where free marketers are disenchanted with Singapore. The government has never hesitated from guiding the development process or intervening in markets where it believes such intervention will lead to superior outcomes.' The government invested about $500 million in its Biopolis biomedical research hub after attracting drugmakers including Pfizer Inc and Novartis AG. It cut corporate tax rates by nine percentage points since 2000 to 17 per cent, compared with 25 per cent in Malaysia. The Malaysian government unveiled an economic transformation programme in September aimed at attracting investment, including US$444 billion of programmes this decade ranging from mass rail to nuclear power, led by private and government-linked companies. Singapore beat 182 economies to take first place in the World Bank's annual ranking of business conditions, which looks at property rights, taxes, access to credit, labour laws, and regulations on customs and licenses. Malaysia climbed two steps to 21st, according to the Nov 4 report. -- Bloomberg