The Trouble with Asia's Tigers

Asian Godfathers

Money and Power in

Hong Kong and Southeast Asia

By Joe Studwell

Atlantic Monthly Press; 328pp; $26

( below)

Editor's Review

Four Stars
Star Rating

The Good A myth-shattering look at Southeast Asia's powerful Chinese tycoons.

The Bad It's poorly organized: portraits of key characters are scattered across chapters.

The Bottom Line A richly reported study of power and stunted economic development.

Asia's economic ascendancy by turns awes and terrifies Western executives. Yet it's China and India that fascinate now—not the once-fabled Southeast Asian Tiger economies. In the mid-1990s, Indonesia, Malaysia, Thailand, and the deep-water port cities of Hong Kong and Singapore were glorified as epicenters of Asian vitality, guided by an enlightened tribe of ethnic-Chinese empire builders.

Li Ka-shing, Robert Kuok, Stanley Ho, and other business monarchs remain among the richest men on the planet. Yet in a region full of such tycoons, why is one so hard-pressed to identify globally competitive Southeast Asian multinationals? In his intriguing and myth-shattering study of the region's powerbrokers, Asian Godfathers, Joe Studwell argues that this group of grandees has stunted economic growth. With a handful of men controlling vast enterprises, regional economies haven't mastered the "technological capabilities, branded corporations, and productivity gains that drive sustainable economic development."

Crony capitalism contributed mightily to the Asian financial crisis that slammed these economies a decade ago. And Studwell, founder of the China Economic Quarterly and a longtime observer of Asia, thinks these economic distortions linger on. He dismantles the hagiography that surrounds these powerful men. Studwell also demolishes such notions as "Asian values" and the "bamboo network." These cultural clichés have been used to suggest that Chinese-expat business leaders alone figured out that long-term planning, a killer work ethic, and networking skills are smart tactics—and imply that all are beyond the understanding of Western minds.

In fact, the Chinese who gravitated to Southeast Asia early on were neither "born traders" nor uniform in outlook. They came from widely divergent backgrounds inside China and often spoke different dialects that made them incomprehensible to one another. They were part of a much larger mid-19th century migration that included Indians, Sri Lankans, diasporic Jews, and Armenians. As "self-selecting" immigrants—free agents seeking to improve their lives—the Chinese have done better than some others. Indians, for example, mostly came to Southeast Asia as quasi-indentured servants, beholden to British masters in colonial Hong Kong, Singapore, and Malaysia, and therefore have had an additional economic burden.

What set the Chinese apart in the pre-World War II era was their skill at serving as valuable commercial lieutenants to Western colonial powers. Their deftness continued during the Japanese military rampage and occupation that ended in 1945.

For example, an 18-year-old Stanley Ho (the present-day casino magnate) chased the scent of fast money to the then-Portuguese-controlled island and smuggling epicenter of Macau. Ho joined the Macau Co-Operative, a three-way joint venture partially backed by Japan, and supplied tugboats and transport to Japanese troops based in Guangzhou in return for rice and clothing. He then salted away enough money to open a small kerosene factory, which flourished when American bombers knocked out Macau's gasoline terminal late in the war. These early ventures, and later a long-term lock (since lost) on gambling concessions in Macau, were the taproots of his vast fortune.

First among equals in the tycoon class, though, is Li Ka-shing, one of the richest men in Asia with a personal fortune estimated at $23 billion. His Hutchison corporate empire is into everything from telecom and ports to retail. Hong Kongers to this day still call the reclusive tycoon chiu yan (Superman) for his business smarts. However, Studwell tells the unvarnished Li story.

Although Li is no slouch as a dealmaker, Studwell asserts that much of his fabled business acumen is exaggerated, given the cosseted sectors of the former British colony's economy that he grabbed on near-exclusive terms and still controls. A Hutchison unit long ago secured undisputed leadership at the heavily regulated Hong Kong Port, one of the world's busiest, where "container terminal handling charges are also the highest in the world, despite labor costs far below those in countries with comparable GDP per capita," the author writes. This steady cash flow, plus dominant and protected roles in supermarket retailing and electric utilities, has allowed Li to make some spectacular bets on real estate and mobile telephony around the world.

Asian Godfathers is generally illuminating, but it's poorly organized. Portraits of key characters are scattered across chapters instead of in distinct narratives. One would have liked more analysis of the periodic, bloody reprisals directed at Chinese business interests in Indonesia and Malaysia, and whether a further backlash is possible given the moguls' status as outsiders imposing a superlayer of economic power.

Still, this book is richly reported, and the larger thematic points come through clearly enough. Asia's canny powerbrokers are remarkable individuals, all worthy of study. Unfortunately their influence, if left unchecked, might well leave Asia's Tigers lagging in the decades ahead.

By Brian Bremner

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