Anwar 's plans to topple the government through a crossover of BN MPs to the Pakatan Rakyat fold, the continuing and growing scandal associated with the Altantuya murder trial, the looming economic crisis and other events have seriously eroded the credibility of the government.

Umno is in a state of panic; the leadership is divided and infighting between different factions is growing to alarming levels.

In a desperate attempt to cling on to power and maintain control over the levers of power and wealth, the leadership is now engaged in a momentous struggle to contain the political and economic crisis.

The race card is being played in a reckless manner as evidenced by the secret talks with PAS, the objective being to destroy the PR coalition and thwart Anwar 's designs for seizing power. Another front that has been opened is that represented by the sodomy allegations.

While these charges have gained no traction and public opinion has largely discounted the allegations, there has been outrage at the manner in which he was taken in for questioning. The display of excessive force has had the perverse effort of a rise in the level of anger.

The international media 's reporting of these events has been extensive and highly negative.

High-profile friends and admirers of Anwar such as the former heads of the IMF and the World Bank (Messrs Camdesus and Wolfensohn). amongst many others, have issued strong statements condemning the actions of the Malaysian government.

Strong statements have been made by the US State Department and Senator Joe Biden, the powerful chairperson of the US Senate Foreign Relations Committee, that have called on the Malaysian government to desist from actions that are contrary to the rule of law and a respect for human rights.

Counter statements have been made by Syed Hamid Albar, the home minister, and the foreign ministry took the somewhat unusual step of sending a formal note protesting these statements as ‘an intrusion’ into the domestic and internal affairs of Malaysia.

A further escalation of the exchanges took place with US Secretary of State Condoleezza Rice and the Malaysian Foreign Minister Dr Rais Yatim trading words on the sidelines of the Asean Meeting in Singapore.

In a sense, the manner in which events are unfolding, is a stark reminder of the events of a decade ago.

In the diplomatic arena, events are moving fast. Putrajaya, in an attempt to engage in damage control, is gearing itself to taking ham-fisted countermeasures. These include re-appointing former Malaysian diplomatic corps staff to the US.

These people served in Washington during the tense period of the first Anwar episode when they engaged in mounting an effort to discredit Anwar. They oversaw the channeling millions of ringgit to lobbyists and dubious think tanks in the US.

These included Jack Abramoff who was the subject of extensive investigations by the US Senate Committee on Indian Affairs and he was later convicted and sentenced to serve a jail sentence.

The US Senate report provided detailed documentation, including invoices, linking the Malaysian Embassy to the lobbyist. Funds were also channeled to a number of neo-con institutes and think tanks.

These activities were in breach of US laws and any former Malaysian embassy staff may therefore be held at arms length and thus ineffective to the US at a critical point with a new administration taking office in Jan 2009.

Well placed sources in KL indicate that the re-appointment of these former US Malaysian embassy officers is opposed by Wisma Putra. Are they being sent back to Washington, armed with slush funds to be used as previously, to spread misinformation about Anwar and to counter adverse publicity linked with government actions?

Meanwhile, International Trade and Industry Ministry officials in KL confirmed that one these former high-ranking staff was in Washington recently as part of the US-Malaysia FTA negotiations.

He apparently contacted various officials in the US government and in congress as well as the in the chambers of commerce regarding Anwar 's alleged sodomy and also to lobby for support.

Hence what is largely a domestic Malaysian political eruption is now growing into a major highly- damaging event with repercussions extending beyond the political into the economic and diplomatic fields.

The media publicity, despite denials, has affected the investment climate. The KL stock market has fallen in part because of the withdrawal of hedge funds from the market; there are also indications that FDI flows are on the decline.