It is little known that the economies of Hong Kong and Southeast Asia are dominated by only families, all of whom command multibillion-dollar personal fortunes. Mysterious, shrewd, and ruthless, these tycoons represent 8 of the 25 wealthiest people on the planet, controlling everything from banking to real estate, from shipping to sugar, from gambling to lumber — yet their names would not be familiar to regular readers of The Wall Street Journal. Who are they and how do they do it? That is the question Joe Studwell, author of the acclaimed The China Dream and current editor of the China Economic Quarterly, answers in this incisive myth-breaking exploration of the outsize figures behind the veil. Studwell spent fifteen years as a reporter in the region and uses his unprecedented access to debunk one myth after another while simultaneously painting intimate and revealing portraits of the godfathers. He explodes the complex mythologies which surrounds these men, preconceptions that reflect Asian views on culture, entrepreneurialism and economics.

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Lots of information. Read it with an open mind and reflect. There are big implications here for both China and the USA. East Asia Japan, Korea, Taiwan have developed domestic companies that invent technology and compete globally. South East Asia Malaysia, Indonesia, Philippines, Thailand rented labor to global businesses, but have never built their own globally competitive businesses.

Hong Kong and Singapore are the Switzerland Interesting. Hong Kong and Singapore are the Switzerland of Asia, providing offshore financial services to the rest of the region. The "Godfathers" of South-East Asia like to portray themselves as Horatio Alger , but they were either born into or married into wealth, and parlayed it into far larger sums.

With the exception of cronies of the most corrupt Marcos , Suharto , the UMNO none of the "Godfathers" were self made in a single generation. Culturally, the godfathers are chameleons who tend to be well-educated, cosmopolitan, polylingual and thoroughly insulated from the humdrum cares of their supposed kinsmen.

The tycoons are just highly effective traders in rent-offering environments. The economic effect of this has been to make domestic goods and services — whether an apartment in Hong Kong or flour in Malaysia — more expensive than they would otherwise be and to limit the growth of globally competitive companies. South-east Asia has all the trappings of a modern economy — high-tech factories, stunning high-rise buildings, contemporary transportation systems and utility providers — but no indigenous, large-scale companies producing world-class products and services.

As a result, there are no global brands. Real competitiveness is limited to relatively small-scale businesses because tycoons have plucked all the fat economic fruits for themselves. The key to obtaining godfather status is "core cash flow". Each of the godfathers was able to use early money to purchase a concession concession. Most of the concessions available are gambling related casions, lotteries but if you look carefully, there are concessions available everywhere.

There is only one company authorised to bring sand to Hong Kong for construction. Once core cash flow is obtained, godfathers can afford to take big risk, to make a lot of mistakes, and to ride losses long enough to turn into wins.

Real Estate and associated development projects are the risk of choice. Historically, the economies of South-East Asia have been dominated by the godfathers and their concessions, where these are a relatively small part of typical advanced economies. Vertical integration is also attractive because it gives tycoons considerable discretion over how much income shows up in profit and loss accounts at a particular stage of a business.

Freight charges, for instance, might be increased to divert earnings into shipping, which is an offshore, tax-free activity. In Hong Kong, the families behind the publicly listed real estate companies that operate in an effective cartel all own private construction firms.

This, in theory, provides an excellent mechanism to drain profit from the listed developers. The construction firms, being private, do not have to publish accounts under Hong Kong law.

An operating environment in which guanxi, political favour and licences are relatively more important than the inherent efficiency and global competitiveness of a business make this inevitable.

He speaks English, but prefers to read Chinese, so relevant parts of the English language papers are translated before his [office] arrival. Li also pays close attention to what brokerage reports say about his companies. The phone system alerts them that it is the Big Boss calling.

At Li is ready for a massage. Thereafter, there is time for further administrative tasks before a 1p. Finally, a business dinner before he retires at 10 p. But the task of actually running their businesses, and putting deals cut over golf or lunch into practice, falls to managers. Import substitution produced large companies, but it did not achieve the objective of making local businesses originate internationally competitive manufactures.

Exports grew to a point where they actually exceeded gross domestic product. South-east Asian EOI was very much driven by assembly operations using imported components.

EOI brought growth and jobs, but it was not a mirror image of the north-east Asian experience. In Japan, South Korea and Taiwan, exports were developed by indigenous companies while governments blocked foreign investment. There is also a repeated discussion about the economic purpose of Singapore and Hong Kong: The possibilities for tax evasion and transfer pricing between different south-east Asian jurisdictions have also produced vast funds in need of off-shore havens.

As the European Union finally brought pressure to bear on Switzerland and other European private banking centres to block tax evasion and introduce withholding tax for some non-nationals, Singapore moved to fill a global — as well as its regional — niche. The city increased account secrecy provisions and changed trust laws in a manner designed to attract the kind of money Switzerland had dealt in; the number of foreign private banks in Singapore almost doubled between and


Asian Godfathers: Money and Power in Hong Kong and South East Asia

Lots of information. Read it with an open mind and reflect. There are big implications here for both China and the USA. East Asia Japan, Korea, Taiwan have developed domestic companies that invent technology and compete globally.


Asian Godfathers

Migration came first. Long before European colonists arrived in south-east Asia, Arabs, Indians and Chinese were settling in the region. The early history of these immigrants is sketchy at best. In Thailand, where historical records are more complete than elsewhere in the region, immigrants were employed in a range of court-sanctioned roles from at least the sixteenth century. As of the eighteenth century, Chinese are recorded working for the Thai court as administrators and accountants. In many cases—perhaps most—however, Persians, Arabs and people from the Indian subcontinent were preferred as administrators; the Bunnag clan, which is still prominent in the Thai civil service and politics, were Persian Muslim immigrants who from the late eighteenth century ran the entire greater Bangkok region. Chinese dominance in court-sanctioned commercial monopolies in Thailand became overwhelming in the nineteenth century.

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