The audacity of hedge funds and their lack of righteousness

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THINK ASIAN By ANDREW SHENG

IN the old days, technical books were read for one's education, but they are so boring that you would fall asleep. You read novels instead for their drama, romance and excitement. In this fast moving world where daily events are more thrilling than fiction, books like More Money than God by Sebastian Mallaby make you want to turn the next page.

Written by a former journalist, who today works for the US Council for Foreign Relations, the book has combined blood and guts story-telling of the hedge fund industry with careful analysis, tracing meticulously how the industry works like Sherlock Holmes. The narrative is so thrilling that when the author described the scene where the hedge funds took down Thailand in 1997, my hair stood on end. I was a ringside witness but I had not known who was doing what and how they did it.

If you want to know how hedge funds sniff out opportunities by talking to honest and nave central bankers who admit that they made policy mistakes and then make more money than God, read this book. It is both a clinical analysis of how hedge funds emerged from nowhere to become the market movers of today, as well as a morality story that raises more questions than it is able to answer. It may not be illegal (at least under existing law) to do a trade that tips a nation into abject poverty because there were tragic policy mistakes, but is it morally right to take home billions by accelerating the process of “creative destruction”?

The central insight of the hedge fund industry is brilliant it is that the academic finance theory is all wrong and we are all naive to believe otherwise. Modern finance theory begins with the assumption that the market is efficient and knows best. The efficient market hypothesis is based on the view that it is not easy to beat the market.

However, the hedge fund industry makes most money from the inefficiencies of the market. If you are not convinced, how between May 1980 and August 1998, the Tiger Fund earned an average of 31.7% per year after fees, beating the 12.7% return on the S&P500 index. The offshoots of the Tiger Fund, created by people who left the Fund to set up on their own, generated returns of 11.9% per year between 2000 and 2009, compared with the average of 5.3% per year for the S&P index.



Mallaby takes the story from the 1949 creation of the first hedged fund by Alfred Winslow Jones to the emergence of a sophisticated and complex US$2 trillion industry. He weaves a wondrous tale of how tribal and interconnected the industry became as it emerged.

Nobel Laureate Paul Samuelson, famous for arguing that randomly chosen stock selection would beat professionally managed mutual funds, was a founder investor of the Commodities Corporation, one of the first “quants” to use computer analysis to trade commodities. The Commodities Corporation was the nursery for three future hedge fund giants, Bruce Kovner (Caxton), Paul Tudor Jones (Tudor Investments) and Louis Bacon of Moore Capital.

Louis Bacon had connections with two of the Big Three in the early 1990s, being related by marriage to Julian Robertson (Tiger Funds) and worked briefly with Michael Steinhardt. The last of the Big Three is George Soros (Quantum Fund), who became famous as the man who made 1bil speculating in sterling and has become a philosopher/philanthropist. Many of these funds were involved during the speculative raids on Asian currencies during the 1997/98 Asian crisis and it is likely that many of them are having a food fest in Europe right now.

The last chapter of the book is a defense of why hedge funds should not be regulated. “The case for believing in the industry is not that it is populated with saints but that its incentives and culture are ultimately less flawed than those of other financial institutions.”

In Mallaby's view, “whereas large parts of the financial system have proved too big to fail, hedge funds are generally small enough to fail. When they blow up, they cost taxpayers nothing.” Yes, but when their prime brokers blew up with them, it cost taxpayers trillions.

Here lies the contradiction of their existence. Hedge funds are symbiotically tied to their prime brokers, the investment banks and large global banks that provide the leverage for their activities. No leverage means no ability to hedge or speculate. The latter group is too big to fail and its proprietary trading, combined with those of the hedge funds, are large enough to move markets.

The earlier argument that the prime brokers would safeguard systemic stability by indirectly regulating hedge funds (many of whom are former staff of the prime brokers) failed when Lehmans collapsed.

Hedge funds thrive because of regulatory and information arbitrage. The more the regular banking system is regulated, the more business drifts to the under-regulated shadow banking institutions.

Mallaby argues that it remains unproven whether heavier regulation will succeed. The regulators were scared to regulate, because of moral hazard, that is, the industry would take higher risks and the government would pay. Unfortunately, whenever there is a financial crisis, the government would be blamed and have to pay, irrespective of heavy or light regulation.

While hedge funds are not of public concern if they remain small, their herd like effect becomes a real problem when the momentum play can drive even mid-sized nations over the brink. Europe today is a live experiment of gigantic proportions. If someone makes tens of billions through speculation from the failure of some European countries and millions become unemployed, it is no longer a regulatory issue. Rightly or wrongly, this is a political crisis of the first order.

More Money than God should be the first book for everyone to read if they are to understand how the hedge funds dissect the European crisis as an opportunity.

Andrew Sheng is President of Fung Global Institute and author of From Asian to Global Financial Crisis.

Euro, death approaching soon ?

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Death of a currency as eurogeddon approaches

It's time to think what hitherto markets have regarded as unthinkable – that the euro really is on its last legs.

They need to wake up fast; it's happening before their very eyes. In its current form, the single currency may always have been doomed, but it has been greatly helped on its way by an extraordinarily inept series of policy errors. Photo: AFP

 By Jeremy Warner, Associate editor - Telegraph

The defining moment was the fiasco over Wednesday's bund auction, reinforced on Thursday by the spectacle of German sovereign bond yields rising above those of the UK.

If you are tempted to think this another vote of confidence by international investors in the UK, don't. It's actually got virtually nothing to do with us. Nor in truth does it have much to do with the idea that Germany will eventually get saddled with liability for periphery nation debts, thereby undermining its own creditworthiness.

No, what this is about is the markets starting to bet on what was previously a minority view - a complete collapse, or break-up, of the euro. Up until the past few days, it has remained just about possible to go along with the idea that ultimately Germany would bow to pressure and do whatever might be required to save the single currency.

The prevailing view was that the German Chancellor didn't really mean what she was saying, or was only saying it to placate German voters. When finally she came to peer over the precipice, she would retreat from her hard line position and compromise. Self interest alone would force Germany to act.

But there comes a point in every crisis where the consensus suddenly shatters. That's what has just occurred, and with good reason. In recent days, it has become plain as a pike staff that the lady's not for turning.



This has caused remaining international confidence in the euro to evaporate, and even German bunds to lose their "risk free" status. The crisis is no longer confined to the sinners of the south. Suddenly, no-one wants to hold euro denominated assets of any variety, and that includes what had previously been thought the eurozone safe haven of German bunds.

Investors have gone on strike. The Americans are getting their money out as fast as they decently can. British banks have stopped lending to all but their safest eurozone counterparts, and even those have been denied access to dollar funding. The UK hardly has anything to boast of; it's got its own legion of problems, many of them not so dissimilar to those of the eurozone periphery.

But almost anything is going to look preferable to a currency which might soon be assigned to the dustbin of history. All of a sudden, the pound is the European default asset of choice.

What we are witnessing is awesome stuff – the death throes of a currency. And not just any old currency either, but what when it was launched was confidently expected to take its place alongside the dollar as one of the world's major reserve currencies. That promise today looks to be in ruins.

Contingency planning is in progress throughout Europe. From the UK Treasury on Whitehall to the architectural monstrosity of the Bundesbank in Frankfurt, everyone is desperately trying to figure out precisely how bad the consequences might be.

What they are preparing for is the biggest mass default in history. There's no orderly way of doing this. European finance and trade is too far integrated to allow for an easy unwinding of contracts. It's going to be anarchy.

It's worth stressing here that for the moment the contingency planning is confined to officialdom. This week, for instance, we've had the Financial Services Authority's Andrew Bailey admit that he's asked UK banks to plan for a disorderly breakup of the euro. He'd be failing in his duties if he hadn't. Europe's political elite, as ever several steps behind the reality, still regards the prospect as unimaginable.
They need to wake up fast; it's happening before their very eyes. In its current form, the single currency may always have been doomed, but it has been greatly helped on its way by an extraordinarily inept series of policy errors.

First there was the disastrous suggestion from Angela Merkel and Nicolas Sarkozy that if Greece didn't buckle under it might be chucked out. Markets reacted logically, which was to sell bonds in any country that looked vulnerable and chase "safe haven" assets, thereby making it much harder for governments to fund themselves.

The blunder was compounded by attempts to underpin confidence in the banking system by forcing banks to mark their sovereign debt to market. This may only have recognised the reality, but it also destroyed the concept of the "risk free asset", forcing banks for the first time to apply capital to their sovereign debt exposures. Unsurprisingly, they stopped buying sovereign bonds, again making it harder for governments to fund themselves.

But perhaps the biggest sin of the lot was effectively to render all credit default swaps (a form of insurance against default) on sovereign debt essentially worthless, or void, by making the Greek default "voluntary".

This has made it impossible to hedge against eurozone sovereign debt purchases, and thereby destroyed the market. Worse, it's made investors believe that the euro cannot be trusted, that it'll repeatedly find ways of reneging on contract. That's the point of no return. This is no longer a serious currency.

Don’t be a total sucker!

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 There is no easy way to make a fast buck other than cheat and there is no such thing as love at first sight. - a warning to people not to be so silly to believe whatever strangers tell them, especially through the Internet

MORE than 10 years ago when the Internet and e-mails first became popular, many crooks found them to be the most convenient way of cheating people, especially those living thousands of miles away.

The scams were simple ones that played on the element of pity and the sums asked for were small.

Some of the con-artists would pretend to represent certain well-known charitable organisations soliciting US$10 (about RM31).

Many kind-hearted and gullible people did reply to such e-mails and ended up sending cash by post.

If 1,000 people around the world responded, these crooks would get away with US$10,000 (RM31,000) but chances are they got a lot more.

However, people then wised up to such tricks and these criminals got more sophisticated.

While previously they preyed on people’s generosity, now they have turned to our greed. Greed is what the “winning lottery ticket scam” is based on.

People would get e-mails informing them that they had won a lottery worth millions. They would be convinced into paying some money in order to get hold of the bigger sum.

Of course, playing on greed is the surest way to make a scam work. There have been various versions of this winning lottery scheme and they are so obviously tricks, yet all sorts of people have been cheated.

I know of a doctor and a magistrate who lost hundreds of thousands of ringgit to these crooks, who more often than not originate from Africa or specifically Nigeria.

Apologies to any Nigerian who feels offended by this statement, but even the Nigerian Police Force (NPF) has set up many task force teams to tackle and arrest such cyber crooks.

Even 10 years ago, I had found that the NPF had set up a website to handle such complaints.

I even took to e-mailing all suspicious looking e-mails soliciting money or trying to tempt me with money to the NPF, which wrote me a letter of thanks for doing so.



The scams have got even more sophisticated and the crooks started registering e-mail addresses with names of people supposedly related to despots, dictators or deposed leaders from the continent. This was called the inheritance scam.

Their claim is that their father/mother/brother/sister/uncle/friend was that deposed leader and had stashed away millions in a secret account in an off-shore bank and needed to use your account to transfer the money out of that country.

They promised to share the loot and hundreds, if not thousands, have fallen for this trick all over the world.

How people can be so naïve and greedy is beyond comprehension.

Look, there is no such thing as easy money unless it is a trick by a conman to get your money from your wallet.

Just like the black money scam, where these people offer to sell you millions of US dollars for a fraction of the value. The catch was that you needed to buy special chemicals that would “wash specially treated black paper” into becoming US dollars.

Just on Monday night, 76 people, mostly Africans, were arrested by Federal police for cheating hundreds of people of RM29mil through various scams.

Bukit Aman commercial crime investigations deputy director SAC Datuk Rodwan Mohd Yusof said the police received 945 reports from January to October over con jobs that included parcel scams, black money, inheritance swindles and black magic.

A parcel scam is where the schemer would inform a victim that he or she had received parcels with expensive gifts, jewellery or cash, but the parcels had been detained by Customs.

The victim is then persuaded to make a payment to a stipulated account for the parcel to be released.
The schemers reaped RM19.6mil through this scam, the biggest loss suffered by the victims.

This was followed by the black money scam, which netted RM1.4mil.

“The crimes involving African scams are getting serious, with more people falling prey to them,” SAC Rodwan said.

This should be a warning to people not to be so silly to believe whatever strangers tell them, especially through the Internet.

But these scams only rob your pockets, unlike those who prey on innocent ones, especially young women, into becoming drug mules.

Again many Africans are being blamed for this.

They use the social media, namely Facebook, to befriend Malaysian women and lure them to carry a bag to a foreign country.

There are about 100 such women languishing in jails in places like Peru and China for trying to smuggle drugs into those countries.

Deputy Foreign Minister A. Kohi­lan said these syndicates were targeting young women, aged between 20 and 35, without any criminal record.

Kohilan said he spoke to six women who were caught for drug trafficking in Peru during a bilateral visit there last year.

“They claimed that they were cheated. One said a man had promised to marry her and asked her to carry a luggage to Peru,” he said.

Police have found that these tricksters are usually good looking and had the gift of the gab.

Young women easily “fall in love” with them and end up willing to do anything for them.

Parents should remind their daughters that there are many predators on the Internet and all of them have no good intentions.

A recent survey by the Women’s Centre for Change (WCC) found 80% of 100 girls, aged between 15 and 17 surveyed over eight months, had received calls or text messages from strangers via mobile phone while 54% of them had chatted online with strangers.

The centre’s programme director Dr Prema Devaraj said the findings showed young women were now easily accessible to people whom they did not know, including potential perpetrators.

“Many of them don’t seem to understand the danger in making friends with strangers by chatting online or over the phone.

“They may feel ‘safe’ because they are not in the presence of the person they are chatting with,” Dr Prema said.

It is not enough to teach our children to be streetwise.

They must also be taught to be cyberwise. There are just too many crooks and monsters out there.

Malaysia's ‘Peaceful’ Bill off to a rocky start, at odds with PM’s speech

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‘Peaceful’ Bill off to a rocky start

Analysis By Baradan Kuppusamy

The Peaceful Assembly Bill 2011 seeks to regularise public protests. The Opposition, however, claims the conditions are so strict it makes demonstrating even more difficult.

THE Peaceful Assembly Bill 2011 ran into heavy flak from the Opposition the moment it was introduced for first reading in Parliament on Monday by Minister in the Prime Minister’s Department Datuk Seri Nazri Aziz.

 

   

 Prime Minister Najib Razak’s move comes ahead of a general election expected early next year

They want the law, which provides for public protest without the need for a police permit, withdrawn.

They say conditions attached to public protest are stiff and numerous; police are still the arbitrators and that the notion of allowing public assemblies is defeated by the new Bill. 

 At the same time the  Bill was tabled, Nazri also tabled the amendment Bills repealing Section 27 of the Police Act that requires an organiser to get a police permit for any gathering of more than five persons.

In a nutshell, the need for a permit - one of the things the Opposition and civil rights groups have been campaigning for - has been removed.

They should be rejoicing but they are not.

Opposition MPs and civil society advocates say that although the provision for a permit has been repealed, the Peaceful Assembly Bill stipulates numerous conditions that hamper the people’s constitutional right to peaceful assembly and exercise their right to protest.

What the Government has done is to introduce a Bill that says you can protest and the need for a permit is repealed but only within the accepted parameters and without impinging on the rights of others who are not a party to the protest.

The Opposition and civil society’s immediate reaction is that the attached conditions are strict and makes public protest more difficult than under the Police Act.

Under Section 27 of Police Act you just organise a protest – with or without a permit - and subsequently face the consequences.

This is the preferred method of the Opposition and that’s why illegal assembly cases still continue in the courts for participation or organisation of the first Bersih protest in 2007.

Those involved were activists and rabble rousers but have since been elected MPs and will be voting to oppose the Peaceful Assembly Bill in Parliament!

Under the new Bill, public protest is regularised – while the right to protest over a certain cause is given, the right to not protest or to oppose is also given.

That’s why there are stringent conditions, sometimes impossible conditions, attached to the right to protest which includes that the OCPD should be notified within 30 days. He would respond within 12 days and children 15 years and below are barred from participating.

And then there are increased penalties for those who break the rules like up to RM20,000 for bringing an underage person to an assembly.

The OCPD can impose restrictions which, if not followed, would lead to fines of up to RM10,000.

There is an appeal clause to the minister on the restrictions within four days and the minister has to respond within six days.

Lastly some areas are off-limits for any protest – like places of worship, schools and hospitals.

On the face of it, the restrictions are stringent and probably unworkable especially the one requiring protestors to give 30 days’ notice but as Lord Denning said: “Your rights end where the rights of others begin”.

That’s exactly what the formulators of the law have in mind by imposing conditions that are deemed necessary to allow protest without needing to get police permits.

Unfortunately, one has to sacrifice something to gain something.

Even in some advanced countries like the United States and Britain, protests are only allowed at designated areas.

In New York, for instance, you can protest in front of the United Nations but some distance away.

In other places, too, police broke up the Occupy Brooklyn Bridge protest and Occupy St Paul’s Cathedral in London. In Hong Kong, police prefer night protests conducted away from the all-important business district.

Each country has its “soft underbelly” that it wants to protect and maintain without disruption and Malaysia has said places of worships and schools are off limits.

While the giving of notices and the waiting for responses take out the spontaneity of public protests, the gain is that you don’t need a police permit for any protest of five or more people.

But the people have been asked to pay a heavy price for it in the form of numerous restrictions.

As PAS leaders said, if Israel were to attack Saudi Arabia, Malaysians would have to wait 30 days before protesting.

Perhaps, as the Bar Council suggests, a standing committee could be formed to rectify the weakness at the committee stage of the Bill’s passage – especially the provision to give 30 days’ notice.

This would allow Members of Parliament to study the Bill and its provisions in greater depth and lessen the restrictions to allow the public to exercise their democratic right to protest.

Bill at odds with PM’s speech

ROAMING BEYOND THE FENCE By TUNKU 'ABIDIN MUHRIZ

The drafters of the Peaceful Assembly Bill now before Parliament must have missed what was undoubtedly the Prime Minister’s finest speech of his administration so far, delivered on the eve of Malaysia Day.

I was looking forward to reading the Peaceful Assembly Bill tabled this week. I was expecting a document that would re-affirm and strengthen the freedom and liberties mentioned by our Constitution.

I was hoping furthermore that perhaps, finally, Malaysians would have a government that would once again speak fondly about freedom and liberty in the same way that our first Prime Minister did about those principles: whether in speeches at home or abroad (such as in his now-forgotten condemnations of apartheid in South Africa), or whether in print to other world leaders or through his columns in this newspaper.

These hopes were dashed. Lawyer-commentators are still picking through details as I write this, but it seems apparent that it might result in an even more suffocating environment for freedom of expression than what exists now.

The ban on “street protests”, defined by the Bill, is outright.

The powers conferred upon the police are enormous, not only in weighing the rights of “other persons” who (they may claim) are affected by assemblies, but also in demanding 30 days’ notice, thus preventing spontaneous gatherings of the sort that we have seen throughout the Arab Spring, or 65 years ago during the opposition to the Malayan Union (that partially resulted in the parliamentary democracy, constitutional monarchy and federal system that we all enjoy today).

Perhaps the legislation will be amended for the better if and when it passes through the various readings in both Houses of Parlia­ment.

For now, though, the Bill seems disgracefully at odds with what was undoubtedly our current Prime Minister’s finest speech of his administration, delivered on the eve of Malaysia Day this year. I wonder if those drafting the Bill missed it.

Still, we Malaysians are connoisseurs of witnessing disgraceful behaviour from the political class.
My fellow columnist Datin Paduka Marina Mahathir provided some wonderful examples in her article on Wednesday.

Sometimes, however, a decent member of the political class is in fact a victim of the disgraceful behaviour of someone else. (This is why the efforts of CPPS and UndiMalaysia to get us to assess our YBs are very important – we all benefit from further granularity in our opinions of individual politicians.)

One example of this has just surfaced. It concerns the Deputy Higher Education Minister Datuk Saifuddin Abdullah, who I have praised before and will continue commending if he continues with his progressive, common-sense statements.

He was invited to speak about his latest book Kalau Saya Mahasiswa (downloadable at saifuddinabdullah.com.my) by the Law Students Association of the International Islamic University on Monday, but at the last moment, the programme was cancelled and ostensibly postponed.

This was apparently after orders by the university’s Rector herself.

Regular readers will no doubt recall that I described the earlier suspension of Professor Abdul Aziz Bari as “thoroughly idiotic”, but – I may now be banned by the university myself for saying this – I can think of no better way than to describe the cancellation of an appearance by a Government deputy minister as utter genius.

I am sure that these actions will really get the university up there in the league tables.

My apologies – sometimes bone-headedness can only suitably be countered by the lowest form of wit.

Thankfully, there are still many inspiring distractions that punctuate these crazy weeks as everyone clears their to-do lists for 2011.

On Saturday I attended the Royal Gala Concert of the first International Festival of Classical Music organised by the Chopin Society of Malaysia.

The event truly was international (despite some scepticism before the show), with players hailing from 14 countries.

The repertoire consisted of pieces designed mostly to showcase technical skill, and virtuosity was certainly in ample supply that evening.

One piece that was both technically demanding and gorgeously tuneful was Chopin’s Fantaisie-Impromptu, which brought back some memories as it was my A-Level performance piece back in 1999.

That evening it was played by an 11-year- old Malaysian, Brian Ting Yit Zheng, and many were amazed by the emotion he managed to transmit during the lyrical middle section.

Then again, young people who are musical are often so much more mature than their peers.

The concert ended with the world premiere of …Shadow… (scored for piano, gamelan and Malay percussion with shadow puppet accompaniment) by Seremban boy Ng Chong Lim, STM (Setiawan Tuanku Muhriz).

He was one of four musicians awarded during the Birthday Honours of the Yang di-Pertuan Besar of Negri Sembilan in January – the others being pianist Foo Mei-Yi, STM; harpist Katryna Tan, STM; and pianist-composer Chong Yew Boon, DTM (Darjah Tuanku Muhriz); whose work on Berkatlah Yang di-Pertuan Besar continues to arouse patriotism during many a peaceful assembly throughout the state.

■ Tunku ’Abidin Muhriz is president of the Institute for Democracy and Economic Affairs.

Economic policies that do not add up

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Analysis By Baradan Kuppusamy

The lack of economic expertise in Pakatan Rakyat underlines the many difficulties the Opposition would encounter if it captures Putrajaya.

WHILE Pakatan Rakyat has been quick to capitalise on Barisan Nasional’s political setbacks like the current controversy over the National Feedlot Corpora-tion, it is weak in its economic policy formulation, and one reason is the lack of qualified economists.

This shortcoming would weigh heavily on the coalition if it were ever to capture Putrajaya.

Its weakness in formulating economic policies like the Alternative Budget 2012 that Datuk Seri Anwar Ibrahim read out to reporters a day before Prime Minister Datuk Seri Najib Tun Razak presented his Budget in Parliament, is a sign of its incompetency in ruling the country.

The Pakatan Rakyat budget was a wishy-washy affair. More thought should have gone into it beyond a cursory glance at where revenue is coming from and the expenditure incurred.

Instead Anwar just “handed out cash to the poor, teachers and farmers”.

The failure to formulate a serious, alternative Budget is yet another example of the weakness of the coalition that would affect their ability to rule the country.

Its inability to go beyond making unrealistic and populist demands and criticising the policies formulated by the experts i.e. Bank Negara economists, is a setback to Pakatan growing into a valid and competent coalition.

Populist policies are easily made but their implementation is hard, if not totally unrealistic.

For instance, Anwar campaigned in 2008 that if you voted for him and he takes Putrajaya, the price of oil would be lowered the very next day..

He can do it by further subsidising the price of “subsidised oil” – and that is economic madness and unsustainable.

Furthermore, Anwar is economic adviser to the Selangor government, earning a fee of just RM1 – another populist measure that gels well with the rakyat in the state. But how much FDI (foreign direct investment) has he brought into Selangor?

Beyond sloganeering like merakyatkan ekonomi, what are the realistic economic steps that he has taken thus far?



The lack of qualified economic formulators is glaring and shows how the Barisan federal government is far superior in that respect to the proposed Pakatan government when it comes to administering the economy, warts and all.

This lack of economic know-how was apparent in a leaked US State Department cable by Wikileaks on Nov 8, which stated that Pakatan lacked economic policy formulators within its ranks and how this shortcoming weighs on them as a coalition.

It also speculated why this was so and suggested that it could be due to Pakatan’s failure to give them high wages and that “politics” could have frightened them away.

The lack of economic expertise among them underlines some of the many difficulties they would encounter if they capture Putrajaya.

While the Opposition-run states are struggling without competent experts, their politicians also show little aptitude for heavy economics.

Except for Tony Pua, the DAP MP for Petaling Jaya Utara, there are no competent economic advisers working with Opposition controlled states that are struggling to line up economic advisors, the cable noted.

Pua is a one-man-band and he has his hands full. Besides, “one swallow does not make a summer”.

And, if Pakatan captures Putrajaya, PAS will pull the country one way and PKR in another and the DAP, a third way – demanding that affirmative action policies are abolished immediately.

Each is committed to its own constituents in different ways. There is little cooperation among them on economic matters beyond agreeing on political matters like seat sharing and working to capture Putrajaya.

There’s is no deal on how Pakatan would rule the country, no documents stating the basis of their rule and no power-sharing formula.

They have no shadow Cabinet.

Their power-sharing formula, in the event they capture Putrajaya, is simply that Anwar would be prime minister and his deputies would be DAP’s Lim Kit Siang and PAS president Datuk Seri Abdul Hadi Awang.

There is also not much difference between Barisan and Pakatan in the broad policy framework for the country. They are both for an open economy and for FDI to grow the economy.

But there the similarities end and the differences emerge.

There are differences over affirmative action policies that is favoured by Barisan, PKR and PAS but not by the DAP. This is a cause for dissension.

While all three Pakatan parties are against corruption along with Barisan there is a realisation that much of the corruption is linked to the affirmative action policies and that corruption can only be defeated if that policy is abolished.

This is the DAP’s stand and it is markedly different from the rest.

Pakatan’s weakness in economic matters would show immediately and in a serious manner if they ever were to capture power. There would be chaos as they find their bearings, if at all.

The state will be pulled in different ways – between Anwar’s populist promises, PAS’ Islamic economics and the DAP’s desire to streamline the civil service and abolish affirmative action.

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