AT TIIE start of the economic crisis in mid-1997, the                                                                                                 
Malaysian stock exchange had an estimated value of RM550bil.                                                                                          
But by the end of 1997 the value had shrunk to RM348bil, with                                                                                         
a real capital loss of about RM200bil.                                                                                                                
                                                                                                                                                      
As much of these represent capital flight, it is a major                                                                                              
factor that caused our ringgit to depreciate by some 35%. This                                                                                        
and other indirect losses totalled some RM800bil, a rather                                                                                            
staggering sum which will take the country years to recover.                                                                                          
                                                                                                                                                      
As Prime Minister Datuk Seri Dr Mahathir Mohamad has said, we                                                                                         
have been set back by 10 years.                                                                                                                       
                                                                                                                                                      
We have "fought" what Sun Tzu describes as a "protracted" war:                                                                    
                                                                                                                                                      
When a campaign is protracted, the resources of the state will                                                                                        
not be enough to last the strain ... when your weapons are                                                                                            
dulled, your ardour dampened, your strength exhausted and                                                                                             
treasures spent, other rulers will rise to take advantage of                                                                                          
your extremity. when no man, however wise, will be able to                                                                                            
avert the inevitable consequences.                                                                                                                    
                                                                                                                                                      
Thus, though we have heard of stupid haste in war, we do not                                                                                          
see a clever operation that was prolonged. There is no                                                                                                
instance of a country benefiting from prolonged warfare. (Sun                                                                                         
Tzu 2:3-6.)                                                                                                                                           
                                                                                                                                                      
The losses are numbing; While in the previous recession of the                                                                                        
mid- 1980s, we counted in millions, now it is in billions.                                                                                            
                                                                                                                                                      
The currency was not much affected back in the mid-1980s,                                                                                             
probably because the role of foreign funds was minimal and                                                                                            
capital flight was likewise too.                                                                                                                      
                                                                                                                                                      
However, the drastic decline in economic values does not hit                                                                                          
all sectors of the economy equally.                                                                                                                   
                                                                                                                                                      
In fact, some sectors, like plantations, do even better.                                                                                              
Certain manufacturing industries continue to post profits.                                                                                            
Only in certain sectors like property and finance that the                                                                                            
losses are serious.                                                                                                                                   
                                                                                                                                                      
The losses in the finance sector are attributed to                                                                                                    
over-lending, especially to the property sector.                                                                                                      
                                                                                                                                                      
Interviews with businessmen reveal that the single most                                                                                               
damaging factor leading to the precarious position of many                                                                                            
Malaysian firms was over-borrowing.                                                                                                                   
                                                                                                                                                      
Over-borrowing created a false sense of euphoria in which                                                                                             
caution was thrown to the winds. As one national leader notes,                                                                                        
people thought the "good days wit never end."                                                                                               
                                                                                                                                                      
Risk analysis is terrible. There were several weaknesses in                                                                                           
the risk analysis:                                                                                                                                    
                                                                                                                                                      
* According to one critic, the risk should have been                                                                                                  
recognised, as much of the borrowing goes to capital                                                                                                  
development with no clear signs that productive revenue could                                                                                         
service the borrowing;                                                                                                                                
                                                                                                                                                      
* The estimations of productive revenues were often dubious as                                                                                        
all sorts of unrealistic projected demands were made. That                                                                                            
resulted in the over-supply of several types of properties;                                                                                           
                                                                                                                                                      
* In some projects, revenues were inflated and costs minimised                                                                                        
to present attractive but dubious project papers to the bank;                                                                                         
                                                                                                                                                      
* The lack of caution in risk analysis also shows up in                                                                                               
unwise, or rather, uncontrolled expenditures.  Many                                                                                                   
unnecessary things were bought. For when the economic crisis                                                                                          
hit, you could see the lines of repossessed cars being put up                                                                                         
for sale; and                                                                                                                                         
                                                                                                                                                      
* More seriously, some projects had no adequate cost control.                                                                                         
So, many huge projects manifested serious cost overruns which                                                                                         
threatened their financial viability.                                                                                                                 
                                                                                                                                                      
Sun Tzu agrees with those who have highlighted and warned of                                                                                          
poor risk analysis.                                                                                                                                   
                                                                                                                                                      
He wins his battles by making no mistakes (in risk analysis).                                                                                         
Making no mistake establishes the certainty Or victory.                                                                                               
                                                                                                                                                      
Now let us look at the elements in the military art. First,                                                                                           
measurement; second, calculation; third, quantification;                                                                                              
fourth, comparison; and fifth, victory.                                                                                                               
                                                                                                                                                      
Measurement comes from earth; calculation from measurement;                                                                                           
quantification from calculation; comparison from                                                                                                      
quantification; victory from quantification. (Sun Tzu 4:13,                                                                                           
17-18.)                                                                                                                                               
                                                                                                                                                      
No project can have lasting endurance if there are no strong                                                                                          
fundamentals.