godfather 1

How to be a Godfather, #1: Get in character

‘We are so accustomed to disguise ourselves to others that in the end we become disguised to ourselves.’
La Rochefoucauld

The post-Second World War, post-independence environment described in the previous chapter was one of great turbulence. But the enduring interdependence of separate political and economic élites was not broken. Certainly the era of rising class consciousness and aggressive nationalism in the 1950s and 1960s (and earlier in Thailand) was threatening to the overseas Chinese and Indian communities. But the people who really suffered were shopkeepers, small businessmen and labourers, not the godfather class. As organised labour and nationalism were reined in by a new group of authoritarian leaders, it was striking how they not only fell back on colonial era modes of interaction with ethnic minority businessmen, but in many instances reinforced them. The challenge to the godfathers therefore came not from any structural shift in society, but in coping with the struggle for power among indigenous political élites once the colonials had exited. In this respect the tycoons’ ability to get into, and change, character was more important than ever.
In Thailand, Field Marshal Sarit’s 1957–63 regime stabilised relations with Chinese and Indian trading élites based on the military as their passive business partners. Although the country’s post-1932 political history is superficially chaotic – Sarit’s is only one of eighteen coups to have taken place, the most recent being the ouster of Thaksin Shinawatra in 2006 – after 1957 it was rare for incoming juntas and governments to move against incumbent tycoons. Instead, the godfathers became adept at backing all factions. As Sarasin Viraphol, Dhanin Chearavanont’s top executive at his sprawling chickens-to-telecoms CP group, says, it is a matter of money and good housekeeping: ‘We back everyone … And you would always have a portrait of the military leader on the wall. That was general practice. And of the commander of police, the commissioner for metropolitan Bangkok …’1 Even Chin Sophonpanich, who was so tight with Sarit rivals and heroin traffickers Phao Sriyanonda and Field Marshal Phin Choonhavan that he skipped town to Hong Kong when Sarit took power in 1957, was allowed to continue building Bangkok Bank into Thailand’s largest financial institution from exile. It was, says Sarasin, a ‘gentleman’s game’ of coups.
There was greater godfather discontinuity in Indonesia in the 1960s than there was in Thailand after Sarit put an end to populist nationalism. Following Sukarno’s chaotic nationalisation of foreign business in the 1950s, the repatriation of tens of thousands of Chinese in 1960 and the anti-communist blood bath of 1965, Suharto turned reflexively to the Chinese businessmen he was familiar with after he seized power. This meant a handful of relatively unknown business people being catapulted to the top of the godfather pile. The most important were long-time associate Mohamad ‘Bob’ Hasan, an ethnic Chinese convert to Islam, and Liem Sioe Liong, also known as Sudono Salim, who rose from petty trader to the nation’s leading businessman in a few years. The precariousness of Suharto’s position – or at least his perception of it – as he shored up his power in the late 1960s made the relationship between him, as the Javanese political insider, and his business cronies, as unthreatening ethnic Chinese outsiders, all the more important. Throughout his reign, Suharto was said by confidantes in Jakarta to complain that pribumi businessmen could not be ‘trusted’;2 the Chinese could. In time a small number of ethnic Indian and Sri Lankan businessmen also became key dependents. The best-known of these was the Sri Lankan Tamil Marimutu Sinivasan, a long-term conduit for political slush funds for Suharto’s Golkar party. Sinivasan’s Texmaco Group was able, on Suharto’s authority, to secure US$900 million in hard currency from the central bank at the height of the Asian financial crisis and, after the dictator fell, was said by the Indonesian government to be its biggest delinquent creditor, owing US$2 billion.3
In the Philippines another usurper, Ferdinand Marcos, demonstrated a similar response to Suharto’s with respect to the possibilities of godfather relationships. After winning two presidential terms in (distinctly dirty) elections, Marcos circumvented his country’s two-term presidential limit by declaring martial law in 1972. Like Suharto, he also looked beyond the established godfather élite – in the Philippines, traditional Spanish and Chinese mestizo families – to find some of his key business proxies. The archetype was Lucio Tan, a first-generation immigrant and one-time janitor who became, under Marcos’ patronage, the Philippines’ leading tobacco vendor, as well as having interests in everything from banking to real estate. It is probable that – as with Liem Sioe Liong, who knew Suharto from the latter’s military postings in central Java – Tan and Marcos knew each other from Ilocos, the president’s home region where Tan had his first, small cigarette factory.4
Both Suharto and Marcos signalled regime change by promoting new, non-indigenous outsiders to godfather roles. Tan was a clear break in the ethnically more mixed and integrated Philippines because he represented the so-called ‘one-syllable Chinese’ – those who had not assimilated and adopted local surnames. The promotion of new outsiders achieved two useful things for the dictators: it provided ultra-dependent, ultra-loyal sources of future finance for them and their families; and it served as a warning to the established, more integrated economic élite that it was not indispensable. In the pre-Marcos Philippines, businessmen of every ethnic make-up had been increasingly successful in overrunning and manipulating a weak parliamentary system and thereby obviating the need to make deals with ultimate political power. Ferdy reversed this trend, though it remains a latent tendency in both the Philippines and Thailand whenever central leadership is weakened.
Malaysia’s chronology ran later than those of surrounding nations, but still observed a pattern of rising populist class consciousness and nationalism followed by a return to nested relationships between political and economic élites. Colonial rule did not end until 1957 and its last decade was bound up with a fight against a significant communist insurgency, led by the largely ethnic Chinese (with a few Indians) Communist Party of Malaya (CPM). The departure of the British gave way to an era of somewhat phoney independence in as much as the colonial economic architecture was left almost untouched; this was agreed to by the Malay aristocrats who assumed power. Nationalism eventually arrived with the 1969 riots, leading to the New Economic Policy (NEP).
The promise of pro-bumiputra affirmative action, however, could never disguise the persistence of what came to be known in Malaysia as ‘political business’ at the élite level. Affirmative action in education and employment targeted ordinary Chinese and Indians – the latter were big losers because they were turfed out of the civil service – while financial sector policies benefited upper-class bumiputras. Rural bumpitutras remained poor, while Chinese and Indian godfathers became richer than ever. Racial ghettoisation was sustained, not least because the rising political star of the 1970s, Mahathir Mohamad, saw it as all but inevitable. Mahathir set out his unabashedly race-based views on the roots of economic success in his book The Malay Dilemma, published in 1970 while he was briefly expelled from the ruling United Malays National Organisation (UMNO), and banned in Malaysia. It is indicative of Mahathir’s thinking that one solution he proposed for Malays’ perceived genetic handicap was intermarriage with other races. He himself had an Indian Malayali father from Kerala and a Malay mother, a fact that is never publicly mentioned in Malaysia.5 In popular politics, Mahathir’s racial arguments were used to justify affirmative action. But in terms of personal conduct his own prejudices shone through. After becoming prime minister in 1981, he patronised a small group of ethnic Chinese and Sri Lankan Tamil businessmen whom he deemed the people most likely to carry forward his vision of a thoroughly modernised Malaysia. It was left to his long-time political ally Daim Zainuddin to try to nurture bumiputra winners. South-east Asia’s four major post-war autocrats – Mahathir, Lee Kuan Yew, Suharto and Marcos – all had a fundamentally racist view of life, and this was good news for godfathers.
Meanwhile, in Town …
When Lee Kuan Yew became prime minister of Singapore in 1959, local godfathers did have one problem: that he did not much like private businessmen. Lee had no personal experience of business; he was a political organiser brought up in an anglicised environment and influenced by both the radical statist schools of the 1930s – communism and fascism.6 As the Singaporean state expanded its economic reach, opportunities to acquire private shares in cartels or monopolies were reduced; they went to the government. On the other hand, Lee – a super-élitist – was not about to let the boorish proletariat upset his or the godfathers’ lifestyle. He suppressed dissent, tamed unions and started to construct the world’s leading nanny state. Some incumbent tycoons – usually ones, like Lee, who were more ‘sophisticated’ and formerly closer to the colonial establishment, such as bankers Lee Kong Chian and Wee Cho Yaw – got on okay with the new leader. Others, like the rougher-at-the-edges smuggler and speculator Kwek Hong Png, were less palatable. But Kwek also owned a lot of assets, especially real estate, in Singapore, and Lee Kuan Yew was not in the business of forcible expropriation. There was room enough for the odd Kwek type to prosper in tandem with a dirigiste city state.
In Hong Kong, there were particularly vociferous calls after the Second World War for the cancellation of knighthoods, for investigations and even for trials of tycoons who were perceived to have co-operated all too willingly with the Japanese. But the British had no replacement for the anglicised Chinese and mixed-race Eurasian élite who facilitated their rule, and they were swiftly restored. Local newspaper editors were told to leave stories about collaboration with the enemy alone.7 In the aftermath of the war, the tycoon group, along with its British peers in the form of the leaders of the major colonial conglomerates, or hongs, was instrumental in blocking tentative British plans for democracy; that was the end of the local class threat for half a century.8 Instead came the expanded, but largely impotent, Legislative Council (Legco). Big business played out its political role through its members and lobbyists appointed to the Legco. This pseudo-oligarchical system was preserved by the British for the Chinese in 1985 – when the Joint Declaration on resumption of Chinese sovereignty in 1997 was agreed – by the creation of ‘functional’ constituencies, which allowed godfather interests in banking, real estate, insurance and the like to place more lobbyists inside the Legco. Separately, the Chinese set up their own ‘advisory committee’ on the colony’s return, whose membership was dominated by tycoons. The main point, however, is a simple one: whether Hong Kong has been ruled by British colonialism, Japanese imperialism or Chinese communism, it has always been managed through the same group of people.
Despite Hong Kong’s claim to be a city of free trade, there has long been plenty to play for in terms of tycoons’ political activities. Information is always valuable, as seen in 1946 when several establishment godfathers made millions from speculation in Hong Kong dollars issued by the Japanese that were redeemed by the returning British. A connection to political power was also essential to the tycoons’ ability to present themselves as community leaders who ‘understood’ the best interests of the population at large. But more than anything in the post-war era, political influence was about maintaining a heavily cartelised domestic economy which provided generous economic rents to a small number of businessmen. Chinese tycoons, as we shall see, already had a solid position in what was a closely rigged real estate market. From the 1970s, local godfathers began to wrest control of large parts of other cartels from the British-controlled conglomerates that had developed them. It would have been most unedifying if, in the transition of ownership, there had been politically inspired moves to introduce more competition into the local economy.
Political activity remained extremely important to the aspirant Hong Kong tycoon. He served his own interests, and those of the colonial government, simultaneously, and called his work ‘community leadership’. During widespread strikes in the 1920s, then senior godfather Sir Robert Ho Tung had mediated a seamen’s dispute. Robert Kotewall and Shouson Chow, two other leading figures who went on to receive knighthoods, helped organise street orators to harangue Chinese labourers against joining strikes and ran a force of heavies to protect those staying on their jobs from pro-strike agitators.9 When the proles raised their heads again in the late 1960s, in response to China’s cultural revolution, the tycoons were on hand to lend the government support and urge the population to resist overtures from the Communist Party of China. As Leo Goodstadt, a former chief policy adviser to the Hong Kong government, puts it: ‘The political violence of 1967, in particular, appeared to make the survival of British rule more dependent than ever on the élite.’10 The British Foreign Office and the godfathers saw off the lower classes, and the former’s Hong Kong governors were grateful enough to prove highly resistant to liberal political and social ideas emanating from London in the 1960s and 1970s. Hong Kong’s government and tycoons boasted instead to the world that they had created a great laissez faire society; no one seemed to notice that this was simply not the case in the domestic service sector and construction parts of the economy occupied by the godfathers.
On the Couch, Please
When the dust settled on post-colonial south-east Asia, the godfathers were back where they had always been – managing shifting political relationships in order to profit from particularistic favours and government-induced economic distortions. So what kind of people, up close, are the post-war godfathers?
Only one really compelling piece of empirical research has been completed about the social and cultural backgrounds of south-east Asian tycoons in the past half century.10 It limited itself to the ethnic Chinese godfathers of Thailand, but none the less contains results that resonate for other immigrant groups and other societies. In the mid 1950s, an American scholar, G. William Skinner, achieved an extraordinary level of access to Thailand’s tycoon fraternity. He enlisted the help of two Chinese bank compradors and other well-informed sources to identify the 135 most powerful ethnic Chinese businessmen in Thailand and he succeeded in interviewing 130 of them. He was equipped with fluency in both Thai and Mandarin Chinese, and knowledge of southern Chinese dialects, as well as astonishing tenacity. No academic or journalist has produced a survey of such quality since.
The results pointed unequivocally to a group of men stuck in a cultural middle ground between a Chinese immigrant population they sought to represent as community leaders and a Thai political élite to which they acculturated as a means of gaining concessions and advancement in business. A major finding was that most of the businessmen were less ‘Chinese’ – in terms of language, customs, education – than was expected. With respect to the relationship of the tycoons to the core Chinese community, Skinner proposed a concept of ‘leadership from the periphery’ to capture the fact that the godfathers were leading their communities by dint of wealth and influence, despite being culturally distant from them. ‘One of the major theses of the present study,’ he wrote, ‘[is] that a significant number of the most influential Chinese leaders are, almost inevitably, leaders from the periphery of Chinese society and culture – men whose ethnic orientation and loyalties are mixed.’12
Skinner’s research highlighted all kinds of complexities in the identities of his godfather subjects that are brushed over by normal stereotypes of the ‘Chinese tycoon’. There emerged a broad correlation that the more wealthy and influential a ‘Chinese’ tycoon was, the less demonstrably Chinese he turned out to be. Skinner developed tables that plotted wealth and prestige (as assessed by peers) against the degree of assimilation to Thai culture among his subjects. There was no doubt that success was to do with moving away from ‘Chinese-ness’ and towards the culturally Thai identity of political power. At the same time, there was a requisite amount of Chinese-ness for remaining a leader of the ethnic Chinese community that also supplied the key personnel in tycoons’ businesses.
Herein, possibly, lie the contradictory forces that have informed the identities of godfathers around the region. Without an empirical study like Skinner’s across different states, such a thesis cannot be demonstrated scientifically. But the anecdotal evidence gathered for this book supports the proposition that godfather personalities are stretched and confused. A relative of Henry Fok – a man who early in his career was close to the British establishment in Hong Kong before becoming close enough to the communist establishment in Beijing to be appointed vice chairman of the Chinese People’s Political Consultative Conference – says tycoon behaviour should be viewed through the prism of Eric Berne’s 1960s bestseller The Games People Play, adding: ‘They all want a shrink … to get it off their chest.’13 Berne developed a branch of psychotherapy called Transactional Analysis, which highlights the malleability of identity. Henry Fok, who died in a Beijing hospital in October 2006, knew all about multiple identities. He underwent anglicisation on a British government scholarship to an élite school in Hong Kong, becoming an accomplished tennis and soccer player, and continued his family’s acculturation by sending his sons to the English public school Millfield. But as parts of the British establishment spurned him because of his huge smuggling operations in the Korean War, and Beijing rewarded him with monopoly trading concessions for the same activity, he was reborn as a rabid Chinese nationalist. Forbes magazine tried for years to set up an interview with Fok, who only cared to speak with mainland Chinese journalists he knew would publish official encomia. When he finally agreed to a meeting in Zhuhai, he got out of his car long enough to make the following statement: ‘Once old countries go down – like India, Egypt, even Britain – they never come up again. But China will come up again.’ He then jumped back into his car and sped off, leaving Forbes very short of copy.14
The role-playing that is part and parcel of the godfathers’ lives may explain the insecurity that appears to afflict them. One facet of this is an obsession with status. Asian godfathers collect and display gongs – honorary titles, doctorates, and so on – with a hunger that puts Western billionaires to shame. Stanley Ho, for instance, insists that underlings refer to him at all times as ‘Dr Ho’; Henry Fok used to insist on ‘Dr Fok’. This is incongruous for gambling tycoons; as one of Stanley’s assistants announces on the telephone, in English, ‘Dr Ho’s office’, one can frequently hear Cantonese yelling and the sound of his tribe of bodyguards in the background. In Malaysia, the senior billionaires combine the various titles that federal and state authorities give them with those from academia, and style themselves with triple honorifics. As an example, Khoo Kay Peng of Malaysia United Industries (MUI) is ‘Tan Sri Dato Dr Khoo Kay Peng’. Observing the same tendency in Thailand, where outsider tycoons have long craved titles bestowed by the royal family, Skinner highlighted research into social psychology. Work on minority group situations, he noted, shows that people who undergo a high degree of assimilation are particularly driven to acquire the full set of prerogatives available to the group to which they have assimilated. ‘The most influential Chinese leaders, in point of fact,’ wrote Skinner, ‘are more susceptible than other Chinese to pressures toward further assimilation.’15 The symbols of recognition that constitute official titles therefore become terribly important.
But the godfather crisis of identity goes beyond honorifics (and a weakness for outsize penthouse offices – they like to be literally on top). One controversial theme is the frequency with which the tycoons are attracted to evangelical Christianity. Thomas and Raymond Kwok of Sun Hung Kai and Ronnie Chan of the Hang Lung group in Hong Kong, Khoo Kay Peng of MUI and the Yeoh family of the YTL group in Malaysia, the Riadys of the Lippo group and the Soeryadjayas who controlled Astra in Indonesia are just some of the region’s many born-again Christian billionaires. Among the most aggressively proselytising is Khoo Kay Peng, a friend and business partner of US televangelist Pat Robertson, who bought a disused Kuala Lumpur theatre to serve as a chapel and started a Businessmen for Christ group. The Riadys built a private chapel in Hong Kong’s Lippo Centre office tower, to which they have invited potential converts; a long-time family friend says he lives in fear of being hauled in there.16 Some of those who know the Christian tycoons are cynical about their religious beliefs, but this does not answer the question as to why a substantial section of the tycoon fraternity is drawn to evangelical religion.17 YTL’s Francis Yeoh himself says that Christianity counters the excessive individualism inherent in Chinese culture; the Chinese, he complains, are like, ‘amoeba’.18 In Indonesia Edwin Soeryadjaya, eldest son of family patriarch William, says of Christianity’s attraction: ‘One reason could be there is no certainty in this country. So who do you put your faith in?’19 What no godfather believer suggests, but what may also be true, is that evangelical Christianity allows them to have a strongly held belief where their daily lives are all about expressing no belief at all unless given a cue by political power. It is also possible to believe in religion without upsetting Asian politicians, whereas to have independent political or social views is disastrous.
One more thing that appears to be an expression of insecurity among Chinese godfathers is an obsession with demonstrated ‘Chinese-ness’ and with eugenics; this has only become more apparent recently as China has re-emerged as a regional power. The best-known case study is Lee Kuan Yew, a tycoon of sorts by virtue of the fact that he nationalised and ran much of Singapore’s economy after 1959. Lee had an English education,20 attending the élite Raffles Institution and Raffles College in Singapore as well as Cambridge University (institutions that educated various Malaysian and Singaporean tycoons-to-be, including Robert Kuok and Quek Leng Chan). Back then he was called Harry Lee. In 1967 he told an audience in the United States: ‘I am no more a Chinese than President Kennedy was an Irishman.’21
But as Singapore became prosperous and China began to open up in the 1980s, Lee became ever more exercised in explaining his city state’s success in terms of Confucian culture and ‘Asian’ values. He had learned Mandarin and Hokkien Chinese in the late 1950s and early 1960s as he framed his popular political persona, and the identity of Harry Lee was buried. In its place came the Lee Kuan Yew who warned Singaporean students in 1986 that they must never lose ‘their Confucian tendencies to coalesce around the middle ground, that day we become just another Third World society’.22 As the historian of the overseas Chinese Lynn Pan has written: ‘The remaking of Singapore in the Confucian image is in some ways a larger embodiment of a personal enracinement.’23 Lee’s identity odyssey has seen him become increasingly enamoured of the kind of racist eugenic theories that were popular in Edwardian England. He set up a state matchmaking agency in Singapore, the Social Development Unit, to help pair off mates of similar intelligence, and argued for a return to the upper-class polygamy of traditional Chinese society. Lynn Pan refers to journalist T. J. S. George’s observation that ‘he detected in Lee the insecurity of a man alienated from his Chinese moorings, a man who, because he does not quite belong anywhere, has had to remake Singapore in his own image to compensate for his own alienation’.24
It is not difficult to understand the psychological pressure that goes with being caught between different cultures. The typical godfather needs to be a polyglot who can play out more than one cultural identity to succeed: a big-time Chinese tycoon will speak two or three regional Chinese languages – Cantonese, plus a couple more – as well as Mandarin Chinese, English, a native south-east Asian language like Thai or Bahasa Indonesia, and probably some Japanese picked up in the war. There is a perpetual stress that goes with this, related to what one’s ‘real’ identity is.
Lee is still hung up on the fact that his Chinese is not as good as his English. This is a condition that affects many Chinese educated in the British system. David Li of Hong Kong’s Bank of East Asia, who was sent away to an English public school, is sensitive about the fact that his grasp of written Chinese is far from complete. Budi Hartono, ethnic Chinese CEO of the Djarum tobacco empire and one of the richest tycoons in Indonesia, was schooled by Dutch colonists and still reads and writes Dutch better than he does Bahasa Indonesia; he speaks no Chinese. Conversely Dhanin Chearavanont, the ethnic Chinese patriarch of Thailand’s CP group, is perpetually embarrassed that his Thai is still heavily accented with Chinese even though his family has been operating in Thailand since the 1920s.
On top of this discomfort is the racial prejudice that men of the senior godfathers’ generation suffered in the colonial era. The patronising attitude of the British colonial administration in Singapore cannot have been easy to endure for a man of Lee Kuan Yew’s ego. Robert Kuok, who has become well-known to associates for his genetic theories and strident racial views, was sent to a convent school as a child where nuns told him his family’s visits to Buddhist shrines were a form of devil worship. Both his élite British education – English College in Malaysia’s Johor Baru and Raffles College in Singapore25 – and his emergence as a ‘born-again Chinese’ in the independence era, mirror the trajectory of Lee Kuan Yew. Kuok became a major sponsor of overseas Chinese ‘conferences’ in the 1990s; he signalled the purity of his second marriage (the first was to a Eurasian woman) by giving their children only Chinese names; and he became ever more forthright in proposing the genetic basis of the economic success of the overseas Chinese.
Where cold analysis of the success of men like Lee Yuan Kew, Robert Kuok and Henry Fok finds its roots in their cosmopolitan-ness – their ability to work in different languages and cultures – they themselves have sought a monocultural explanation. This can be uncomfortable for godfather children, many of whom – befitting the cross-cultural environments they grew up in – are married to non-Chinese. An in-law of Robert Kuok describes him as the ‘biggest racial bigot I’ve ever met’.26
The larger point, however, is that the godfathers are engaging in a double self-deception. The first is to pretend that the south-east Asian economic development story is a Chinese one where it is an immigrant one. The second is to avoid the fact that they – the tycoons – usually had the kind of practical advantages among their immigrant peer group that assist success the world over. Returning to Skinner’s work on Thai tycoons, it is obvious what those advantages are. Skinner’s subjects were better-educated than popularly believed: ‘With regard to educational attainment, the leaders unquestionably form a privileged group within Bangkok Chinese society,’ he writes.27 And only a fifth of them could be described as ‘self-made from scratch’. The fact of such widespread advantage of birth is the context of the godfathers’ most striking dissemblance – their determination to demonstrate a rags-to-riches genesis.
We of Humble Origin
Tycoons have long been at pains to establish their status as self-made men of humble origin. As seen above, the regimes of Suharto and Marcos did produce genuine working-class-to-billionaire stories as the dictators reached for unknown outsiders to become their trusty accomplices in divvying up the economic spoils of power. But this was not the norm in more settled political climes. If there is a class stereotype for south-east Asian godfatherdom, it would be that of a rapid-cycling economic aristocracy.
A well-known Chinese proverb refers to three-generation wealth, in which one generation makes a fortune, the next holds on to it and the next loses it. Actual experience in the past hundred years points to a four-generation sequence, in which the first generation establishes a kernel of capital that a second generation, with improved ties to political power, leverages into a serious fortune. A third generation then tries to hold on to an extremely diversified range of assets that reflect the unique personality and relationships of the father. By the fourth generation a lack of application to this task, the decay of the original relationships on which the empire was built, and the inherent weakness of businesses based on family rather than professional management bring the edifice down.
One-generation, rags-to-riches stories are exceptional. The domestic economies of south-east Asia are far too closely controlled by governments to make such a thing likely. As Adrian Zecha, a Chinese–Dutch–Malay–Czech–Thai–German–Indonesian luxury hotelier28 and socialite who knows most of the contemporary tycoons, says of the path to godfatherdom: ‘In one generation it is very difficult because it is not an open economic society. You get that in America. To a lesser extent in the UK. To a lesser extent still in continental Europe.’29 Wang Gungwu, a prolific writer on the overseas Chinese based at the National University of Singapore, concurs: ‘I have yet to find a businessman who started as a coolie.’30
Despite this, there is a long tycoon tradition of mythologising a humble background and a struggle to escape the clutches of poverty. A classic example is Thailand’s richest businessman, and recent premier, Thaksin Shinawatra. In speeches and official publications Thaksin relates tales of a hard-scrabble upbringing and underfunded schools with broken equipment. He proclaimed in a speech in Manila in 2003: ‘Through my modest family background … I learned the hardship of poverty in the rural areas. I learned the importance of earning rewards by working hard.’ In reality, Thaksin’s family is a well-established dynasty from Chiang Mai that was involved in tax farming before 1932, and moved into the silk business as well as finance, construction and real estate thereafter. Thaksin himself went through the best local schools and military academies and married a general’s daughter.31 His rise through the ranks of the Thai police force and access to state concessions were very much an insider’s story.
In Hong Kong, Asia’s richest tycoon, Li Ka-shing, revels in his reputation as the son of a schoolteacher who arrived in Hong Kong penniless in 1940. The official website of his Cheung Kong Holdings instead states: ‘Shouldering the responsibility of looking after the livelihood of the family, Mr Li was forced to leave school before the age of 15 and found a job in a plastics trading company where he labored 16 hours a day. By 1950, his hard work, prudence and his pursuit of excellence had enabled him to start his own company, Cheung Kong Industries.’ In reality, Li went to school for a couple of years and then started working for a wealthy uncle (from the family that owns Hong Kong’s Chung Nam Watch Co.).32 Subsequently he became part of an important subcategory of tycoons who got ahead, in part, by marrying the boss’s daughter. Li’s late wife, Amy Chong Yuet-ming, was a first cousin – the wealthy uncle’s daughter. The business where Li worked in fact belonged to his father-in-law; and what Li did was to build the operation up. According to a long-time intimate of Li’s, his mother-in-law also gave him additional financial backing.33
Marrying the boss’s daughter is not uncommon in godfather development. One well-known example is Singapore’s Lee Kong Chian, who in 1920 married Tan Kah Kee’s daughter and prospered for the next seven years as treasurer of the old man’s business before breaking out on his own. C. Y. Tung, founder of the shipping company Orient Overseas Line and father of Hong Kong’s first post-colonial chief executive, Tung Chee-hwa, married into money in the form of Shanghai’s wealthy Koo family.34 Among the current generation, Cheng Yutung of the New World group married into Hong Kong’s ubiquitous Chow Taifook jewellery business; the company remains his key private vehicle. For the would-be godfather who cannot rely on his father’s wealth to prime a career in business, the recourse has been the wealth of a wife’s family.
There should be no great surprise about this given the social-élitism of south-east Asian societies. Yet it is curious how bound up tycoons are with the rags-to-riches myth. Sir David Li, billionaire head of the Bank of East Asia family in Hong Kong and normally an astute observer of the world around him, is adamant that many tycoons are self-made. Reaching for examples, he cites the film and television magnate Sir Run Run Shaw, Lee Shau-kee of Henderson Land and Henry Fok. But Run Run Shaw and his brothers are sons of a Shanghai textile magnate, Lee Shau-kee comes from a wealthy banking and gold trading family from Shuntak county in Guangdong province, and Henry Fok – though from a genuinely working-class background – was set apart by a British government scholarship to an élite school. Without a Marcos or a Suharto to shake things up, Asian godfathers are not the products of great social mobility. The notion that they are, however, is part and parcel of the tycoons’ self-image. It is important to their personal sense of pride and it is critical to the maintenance of authoritarian political structures and unfree markets in the region which constrain opportunities for many other talented entrepreneurs.
Selective Frugality
Something that further confuses the popular image of the tycoons is their reputation for thrift. Part of this is justified and another part is very much for public consumption. The genuine thrift is that which reflects an entrepreneur’s instinctive desire to preserve capital. As one lifelong Asian investment banker and tycoon intimate observes: ‘They are better at denying themselves immediate earthly rewards than your average investment banker.’35 As an example, Robert Kuok bought a mansion on Hong Kong’s Deep Water Bay Road (a sort of Tycoon Alley close to a nine-hole golf course favoured by the godfathers for their early morning rounds) during the Asian financial crisis for the knock-down price of HK$80 million. He tried living in the house but, according to family members, became obsessed with the notion that the property was excessive, even for a man worth several billion dollars. Eventually he knocked the house down, built five modest townhouses in its place, took one for himself, two for his family and rented out two more. Kuok lives in the kind of house that in Europe or the United States would be associated with a modestly successful bank manager.
Godfathers are also keen to telegraph useful messages to employees and service providers. An investment banker in Malaysia recalls a meeting in London in 1999 with Lim Kok Thay, son of gaming billionaire Lim Goh Tong, to seal the US$2 billion acquisition of Norwegian Cruise Line. Leaving the lawyers’ office in the City, Kok Thay hailed a taxi which the banker assumed would take them to Heathrow airport for a flight they were due to catch to Norway. After half a mile, however, the billionaire heir ordered the cab to stop and ushered the party into an entrance to the London Underground. He saved a few pounds by riding the train to the airport. Once at Heathrow, the nonplussed investment banker found the group were booked into economy-class seats for the flight to Oslo.36 K. S. Li (as Li Ka-shing is often known in Hong Kong) likes to point to his modest appetites by reminding people about the cheap Seiko and Citizen brand watches he has worn over the years – ‘that fucking watch’, as one of his executives who has heard the reference once too often remembers.37 A cheap timepiece has become his symbol. In a rare interview with Fortune magazine, Li inevitably wheeled out the watch theme: ‘Yours is more luxurious,’ he pointed out to the interviewer. ‘Mine is cheaper, less than US$50.’38
Apart from the instinct to preserve capital, and the sensible business tactic of displaying thrift to employees, however, there is a good deal of cant about the supposedly modest lifestyle of the average godfather. Another source of public pride for Li Ka-shing is the fact that he draws tiny salaries from his public companies – just HK$10,000 from his flagship Cheung Kong Holdings in 2005. It is never mentioned that in Hong Kong there is tax on salaries but not dividends, so there is a tax-avoidance incentive for tycoons to live off the latter. Peter Churchouse, a former managing director at Morgan Stanley in Hong Kong, points to the case of one of K. S. Li’s peers: ‘Lee Shau-kee,’ he says, ‘has been taking US$150 million to US$300 million in dividends just from [flagship company] Henderson [Land] for twenty years.’39 Among other things, Lee has used the money to buy 30,000 apartments in the United States. These are not, in the final analysis, men living off small incomes.
The real, secret profligacy of the tycoon fraternity is their high-stakes gambling. Most members of the tycoon fraternity claim that all other members (not themselves, naturally) are at it all the time. ‘They’re all big gamblers,’ says one Hong Kong-based billionaire. ‘The only ones who are not big gamblers are [gambling godfathers] Stanley Ho and Henry Fok.’40 Investment bankers in Hong Kong and Singapore trade endless rumours of golf games played for US$1 million a hole. Or vast losses accumulated on gaming trips to Australia and the US. Of course, nothing makes it into the media because tycoons do not make bets in public. But the rumours are legion and suggest a form of gambling that echoes that of Middle Eastern potentates – vast sums of money blown away by people who do not know its real value because they have not really earned it.
Big Daddy
What is incontrovertibly true about the godfathers is that they hold to male-dominant, patriarchal traditions of the family with a vengeance. In running family businesses they demand total obedience from relatives and use a variety of tactics to secure it. Among the most effective is to keep children and other relatives loyal with the prospect of vast inheritances, while simultaneously keeping them cash-poor. Ng Teng Fong, Singapore’s biggest private landlord and multibillionaire, is not untypical. His eldest son Robert runs Sino Land, the Hong Kong end of the family operation and itself one of the half dozen biggest developers in the territory. Robert, educated at an English boarding school and now in his fifties, still lives in an apartment rented from the company and owns only about US$1 million of Sino Land equity.41 Meanwhile his father telephones each day to check on the business’s cash balances. Younger brother Philip is kept on a similarly tight leash in Singapore.
Michael Vatikiotis, former editor of the Far Eastern Economic Review and the journalist who gained closest access to Thailand’s reclusive Chearavanont family, recalls having dinner with the patriarch and his middle-aged sons, who were not allowed to speak. An investment banker who has worked with the Chearavanonts paints a similar picture, in which the sons find ‘they have to beg for a new car’.42 Another factor that ensures patriarch power in Chinese families is that there are no rules as to who will take over what part of the family fortune. It is a common misperception that there is some form of primogeniture at work. In reality, an eldest son is only a business heir if he is deemed worthy of the position. It is quite normal to pick a different sibling, although males always come before females. Malaysian casino magnate Lim Goh Tong, for instance, chose Lim Kok Thay over his elder brother. Indonesia’s Liem Sioe Liong bypassed his eldest son Albert when he designated Anthony Salim as heir. Henry Fok sidelined his eldest son Timothy in favour of his sibling Ian. Younger sons are less likely to disappear when they know they are not necessarily out of the running to become the big boss.
The culture of the family business can be stifling, and is often a recipe for much unhappiness, but it is almost never challenged. Moreover this cuts across all kinds of sociologies, unaffected, for instance, by whether a family is mixed-race or whether the godfather went to a colonial school. The patriarch is always king.43 On the outside this manifests itself in what Helmut Sohmen, the Austrian son-in-law of the late shipping magnate Y. K. Pao, calls ‘the love of pre-eminence’.44 The same notion is captured in K. S. Li’s frequent description of himself as ‘the friendly lion’.45 In this respect, the south-east Asian tycoon aspires to benign godfather status. But while this may be possible in terms of public perception, actual authority within families – and often companies – is all too often wielded by mundane bullying. The middle-aged children of major tycoons like K. S. Li and Robert Kuok live in fear of their fathers’ outbursts. An executive of Li’s recalls his eldest son Victor dozing off in a meeting to be awoken as if by electric shock by his screaming father.46 Board members at the South China Morning Post, controlled by Robert Kuok, were not sure where to look at an infamous February 2003 board meeting when the patriarch lost his temper with son Ean, then aged 48, bawling him out in front of a room full of directors. Another Hong Kong-based multi-billionaire, meanwhile, has been seeking to control his outbursts with the help of a behavioural therapist.47
Billionaires are by definition busy people and it is expecting a lot of them that they should achieve what has become known as a ‘work–life’ balance. But the unbridled, unquestioned power of the patriarch is a corrupting influence on family relationships. K. S. Li’s younger son Richard has been a rare example of semi-active rebellion. He was sent away to boarding school aged twelve and his mother is widely believed in Hong Kong to have committed suicide.48 An unauthorised Chinese-language biography published in 2004,49 which can only have been informed by Richard Li’s inner circle, dwells on his close relationship with his mother, the process by which he set up his own company and then took over Hong Kong Telecom without informing his father, and the fact that he describes Lee Kuan Yew – not Li Ka-shing – as his hero. The message to a Chinese audience is extremely clear: that father and son do not fit the harmonious cultural stereotype. Tim Fok, eldest son of Henry Fok, gives away something of the nature of tycoon family life when he describes the bizarre experience of coming home from English public school for the holidays aged sixteen and being sent off by his father to buy the first Hitachi jetfoils for the Hong Kong–Macau ferry route. It is difficult not to sense that there is an element of bitterness when he concludes: ‘I think my father was more interested in going to nightclubs.’50
Nothing defines the godfather’s power within the family as much as his licence to indulge his sexual appetite at will. Henry Fok, who died in 2006, and Stanley Ho both took several wives – polygamy was not outlawed in Hong Kong until the Marriage Reform Ordinance of 1971. Many tycoons enjoy multiple mistresses and copious amounts of extramarital sex. One of the richest men in Asia is remarkably candid in saying that in the godfather lifestyle sexual liaisons are the main punctuation between periods of time spent at the office: ‘It’s all business,’ he says. ‘None of these people has social friends. They fuck a girl, shake off their horniness and then it’s back to work.’51 Of course he is not quite candid enough to admit the observation applies to him as well, though a member of his family assures that it does: ‘If they don’t have a woman a day they can’t function,’ the person says of the tycoon fraternity.52 It would be unduly prurient to dwell on the mechanics of how seventy- and eighty-year-old men organise a constant supply of fresh sexual activity, but suffice it to say that billionaires who own entire blocks of apartments, hotel chains and gin palace yachts have plenty of private space away from home.
There is a long tradition of the godfather-as-stud. Pre-war Indonesian tycoon Oei Tiong Ham’s daughter wrote of her father: ‘All his life he had great interest in women and sex. He had eighteen acknowledged concubines and a total of forty-two children by them.’53 Today’s peer group is somewhat more modest, though Indonesia’s Eka Tjipta Widjaya is associated with at least thirty children. Stanley Ho has only seventeen acknowledged children. None the less, the Asian tycoon still enjoys unusual sexual licence. As one veteran Hong Kong investment banker puts it: ‘Sexual rapaciousness is endemic to their culture … the fact that their wives say nothing about it sets them apart from Western billionaires’.54 This does not mean, however, that children are unaffected. What is noticeable in several godfather families is how resentful and affected male children have become because of their father’s sexual profligacy and its effect on their mothers. What is equally noticeable is that those male children have grown up to be sexual profligates themselves.
Power without Accountability
The final component of the standard godfather make-up is secrecy. This is almost invariably presented as a reflection of Asian and Chinese culture, not least by the tycoons themselves. A 1991 Robert Kuok letter to the Far Eastern Economic Review refusing an interview is typical. ‘The average Chinese,’ wrote Kuok, ‘is publicity shy for various reasons, is averse to indulging in washing linen in public and, consequently, also averse to dealing with the media.’55 But behind the recourse to cultural defences by thoroughly cosmopolitan men like Robert Kuok lies a larger truth: that dealmakers such as him and secrecy go hand in hand in any society. It is worth remembering how the old private banks that dominated international finance in London and New York at the end of the nineteenth century – Warburg, Rothschild, Morgan and others – did not even put nameplates outside their headquarters. The main office of J. P. Morgan & Company at the corner of Broad and Wall in Lower Manhattan had nothing more than the number 23 on the door.
Men like J. Pierpont Morgan lived in a world where business was determined by relationships and insider information. As a result, as Morgan’s biographer Ron Chernow writes: ‘The old Wall Street felt under no obligation to explain itself either to small investors or the citizenry at large.’56 Such is the case in south-east Asia. Most deals involve some element of government licensing or concession, things that both parties prefer to keep private. Domestic markets are heavily cartelised and it is rare that a non-participating business will make a public challenge to a cartel as part of a campaign to break into its activity; Asia’s diversified conglomerates all benefit from cartels and so are dissuaded from complaining in public about specific arrangements that irk them. And it is only since the Asian financial crisis that there has been the beginning of a movement of shareholder activism in the region. In sum, tycoons have been able to maintain a low profile because they have not had to fight for markets – only concessions – and their shareholders have traditionally been passive.
Secrecy, of course, is myth-compounding. Someone like Malaysia’s Quek Leng Chan is, in his hazy public image, the archetypal inscrutable Chinese tycoon, hidden away in a penthouse on the top of his Hong Leong office tower in Kuala Lumpur. But Quek is also a cigar-chomping barrister who was called to the bar at Middle Temple, one of London’s four Inns of Court. His family is now thoroughly anglicised. Cousin Kwek Leng Beng, a hotel and real estate tycoon based in Singapore, also read law in the UK, graduating from the University of London. Kwek can be even more secretive than his cousin. He is infamous at shareholder meetings for refusing to take questions and reading only prepared statements. But is this because he, like his cousin, is ethnic Chinese, or because they are both extremely cosmopolitan but can get away with behaviour that would not be tolerated in US or European markets?
Perhaps the most powerful argument against notions of inherent tycoon modesty in Asia is that their relationship to publicity is far more subtle than their simply wanting to avoid the media. When one does gain access to godfathers, it is striking how often the big boss’s corporate waiting area is filled with literature of the most narcissistic kind. In the course of interviews for this book, copies of Fortune, Forbes and the Far Eastern Economic Review in the era when it was a Dow Jones weekly57 – and featured endless fawning lists of ‘outperforming’ Asian companies – were much the most common literature on display. Titles like Fortune and Forbes are also those to which the tycoons are prone to grant their rare and not terribly searching public interviews. The notion of the egoless Asian godfather is difficult to sustain. It is telling that the first thing Li Ka-shing, master of the image of public reticence, does when he arrives at the office in the morning is to read the papers – those in Chinese directly, with those in English having been translated into Chinese for him. His office keeps copies of articles about him and he is partial to the use of a highlighter pen and margin notes when confronted with those who would criticise him. According to managers of Hong Kong newspapers, anything Mr Li takes serious exception to translates into curtailment of advertising expenditure by his companies. Li businesses stopped advertising with Next magazine and its sister publication Apple Daily after investigations into the circumstances surrounding the death of his wife. But less speculative reporting can produce the same results. A mention of Li’s 1986 censure for insider trading, for instance, in the South China Morning Post in November 2003 – almost two decades later – led to an immediate drop-off in Li company advertisements placed with the paper.58
There is one, undeniably good, reason for Asian godfathers to stay out of public view: there has for several decades in south-east Asia been a problem with the kidnapping of businessmen – usually ones with some Chinese ethnicity, and often with the involvement of Chinese criminal gangs. The Philippines has the biggest problem. John Gokongwei, a pure Chinese tycoon who runs the eponymous J. G. Summit conglomerate, had his daughter Robina kidnapped in 1981, and in 1997 lost his son-in-law, Ignacio Earl Ong, when police fired hundreds of rounds into a car in which he was being sequestered. The Philippines averages more than one hundred kidnappings a year. Elsewhere the threat is less acute, but not to be underestimated. A cousin of Robert Kwok’s – who looks not unlike him – was kidnapped in Malaysia in a case of mistaken identity; in a tale that is probably apocryphal, friends of the family say that Robert Kwok paid the ransom and then asked his cousin to pay him back.
In the mid 1990s kidnapping took a spectacular turn in Hong Kong with the arrival of mainland Chinese triad-connected gangs. The group of ‘Big Spender’ Cheung Tze-keung in 1996 grabbed Walter Kwok of the Sun Hung Kai real estate family and kept him in what Walter has privately described as a ‘box’ for five days, until he was ransomed. The experience strained relations with Walter’s two brothers, whom he perhaps suspected of spending too much time haggling over the price. In 1997, Big Spender and colleagues seized Li Ka-shing’s eldest son Victor, demanding HK$1 billion for his return. According to persons close to the Li household, there ensued an experience that would have been comic had it not also been very dangerous. Like the Kwoks, the Li family decided not to tell the police.59 Instead, K. S. Li turned to trusted colleagues and employees to withdraw HK$1 billion from Hong Kong banks at short notice, which is not an easy thing to do. Big Spender, an extremely reckless individual, then turned up at Li’s home above Deep Water Bay to collect the swag. He had not reckoned, however, with the physical volume of the money. He could not fit it all in his car and so took one lot, then came back a second time for the rest. The last laugh, none the less, was on the kidnapper. He was picked up with many of his followers across the border in China, was tried behind closed doors and executed in December 1998. Rumour was rife in Hong Kong that K. S. Li and his private security personnel – headed by a former commissioner of the Hong Kong police – had wanted Big Spender arrested in China proper so that he could be executed. The Hong Kong government – which does not impose the death penalty – made no effort to seek extradition over what were crimes committed in its jurisdiction. Tycoon chief executive Tung Chee-hwa said Big Spender was being tried for crimes ‘planned’ in China. Few people in Hong Kong were sympathetic to the dead man, and his kidnappings are a reminder that godfather families do have reason to think about their security. But the kidnap threat does not go far in explaining the broader culture of secrecy among the tycoons.60
In Conclusion
The history of Asian godfathers has always been one of men who could adjust their identities in chameleon fashion. The ethnic division of political and economic power required this. Colonialism required this. And most recently, for ethnic Chinese tycoons, the re-emergence of China, with its manipulative appeals for ‘patriotic’ overseas Chinese, required this. The tycoon has long been habituated to ‘get in character’ as needs dictate.
At one level this is part of the ‘game’ of Asian business to which the tycoon set, conscious or unconscious of the full import of the metaphor, frequently refers. Henry Fok’s eldest son Tim, for instance, encapsulates his father’s career as follows: ‘It’s not about money,’ he says. ‘It’s a game.’61 A member of Robert Kuok’s family, explaining the futility of the 83-year-old tycoon’s three attempts to retire over the past fifteen years, observes: ‘Why stop doing business and start playing golf? It’s only another game.’62 And Helmut Sohmen sums up the motivation of his late father-in-law Y. K. Pao in the same terms: ‘He liked the game, he liked the work.’63
The game is indeed a lot of fun when a concession is won or a deal comes off. But the contortions of identity to which the godfathers have traditionally submitted themselves have not made for peace of mind. There is no shortage of circumstantial evidence – from the craving for titles and official rank to the recourse to evangelical Christianity – that many of the tycoons are in search of their true identity. This is particularly apparent to the large number of outsiders who have married into ethnic Chinese godfather families in the past half century. Helmut Sohmen, the Austrian who married the eldest of Y. K. Pao’s four daughters, Anna, remarks wryly of the identity struggle: ‘Give it another generation and maybe people will stop thinking about what it means to be Chinese.’64 For now the struggle goes on, leaving some curious impressions. In one instance, the author visited the office of a truculently Chinese billionaire in Hong Kong to find it, unsurprisingly, filled with the most stereotypical pictorial and furniture trappings of ‘Chinese-ness’. Unexpectedly invited back to the godfather’s home, however, what was striking was that there were almost no Chinese cultural ‘markers’ to be found: the walls were decorated with nondescript European art; one rather bad painting, bizarrely, still had the sales label on the front. Still more perplexing was an outburst from the tycoon – a man reputed to follow Chinese superstitions in an almost comic-book manner when making business decisions – as he berated one of his children for wasting time with a Chinese medical therapy. ‘I don’t believe in it,’ he snapped.65 Does this mean the man’s life is a deliberate sham? Almost certainly not. What it points to is a billionaire living with a mixed cultural identity and far from at ease with himself.
The godfather state of mind is not helped by the fact that they are usually completely out of touch with what is known as the real world. In this respect the rags-to-riches fable is particularly misleading because it implies the average godfather has experience of ordinary life. In reality the Hong Kong or Singapore billionaire knows no more about life on the cities’ public housing estates than the Malaysian billionaire cocooned in Kuala Lumpur knows of life in the Malay kampong, or village. Bernard Chan, a grandson of Chin Sophonpanich from the Hong Kong side of the Bangkok Bank family, has – for a tycoon-heir – a highly unusual interest in social policy. He tells of a perhaps unique expedition he organised to introduce a group of older godfathers to the poverty that is widespread among the city’s elderly. He took them far from their own mansions on Hong Kong island and into the estates beyond the Kowloon peninsula. ‘Each one of them was shocked,’ Chan says, as they met people who rent bunk beds by the night.66 They were oblivious to the fact that such poverty exists in Hong Kong. But the point of the story is the reaction of one of the wealthiest men in Hong Kong. In an attempt to provide helpful policy advice,67 he suggested that the poor be relocated to mainland China where their limited spending power would go further. There was no consideration of whether social or medical services in mainland China would be adequate, or whether people were willing to go. Bernard Chan refuses to confirm who the tycoon was; another person party to the trip says it was one of the born-again Kwok brothers. A manager who has spent many years working for Hong Kong godfathers says of their relationship to everyday life: ‘The perception is that tycoons know what it is like. They have no idea.’68

How to be a Godfather, #2: Core cash flow

At the heart of the average godfather’s empire is a concession or licence that gives rise to a monopoly or oligopoly activity. In the instances this is not the case, a structural economic anomaly created by government leads to an environment where a cartel of godfathers can flourish or competition is artificially suppressed. This is the basic reality of tycoon business in southeast Asia. Every rising godfather is on the look-out for this non-competitive core cash flow, the river of molten gold that will keep him going through good times and bad, ensuring that even the most sprawling business empire is difficult to topple.
The source of core cash flow can be extremely simple. Half a dozen of the richest men in Hong Kong and Malaysia depend on money from gaming monopolies to fund expansion of their business conglomerates. Stanley Ho, who obtained the Macau monopoly on all forms of gaming in 1961 and was able to renew it for fifteen years in 1986, is well-known for this. But behind Stanley Ho was Henry Fok, who funded a similar equity share in Sociedade de Turismo e Diversões de Macau (STDM), the private firm set up to run gambling in the former Portuguese colony. These two men were joined by a third tycoon-to-be, Cheng Yu-tung, in bidding for what was to become by the 1970s the third-largest gaming centre in the world after Las Vegas and Atlantic City.1 While Fok has been popularly viewed as a major real estate developer in Hong Kong and mainland China, and Cheng developed a stable of listed companies under the New World name, it was casino earnings that underwrote their expansion. (Fok, who helped China circumvent the United Nations embargo during and after the Korean War, obtained a second cash-churning monopoly on the importation of mainland sand to Hong Kong during the post-war construction boom.)2 The exact shareholdings in STDM have never been confirmed, but company directors over the years have suggested that Ho and Fok held 25–30 per cent each and Cheng around 10 per cent. Despite Cheng Yu-tung’s limited stake, it is speculated in Hong Kong financial circles that his STDM shares generated more cash than his controlling position in publicly traded flagship New World Development.
Ananda Krishnan, Malaysia’s richest resident since Robert Kuok relocated to Hong Kong in the 1970s, is seen as a real estate, telecommunications and media magnate who built what were briefly the tallest buildings in the world, the Petronas Twin Towers in Kuala Lumpur. But for almost twenty years, Krishnan has been able to rely on a steady supply of cash from a monopoly franchise on Malaysia’s racetrack betting.3 Another Malaysian billionaire, Vincent Tan, relies on cash from the sale of formerly state-controlled gaming activities in the 1980s. In 1985 Tan acquired control of Malaysia’s Sports Toto lottery in a ‘privatisation’ that involved no prior announcement of the sale and no public tender. Billionaire Lim Goh Tong was the original post-independence beneficiary of the kind of private gambling franchise that echoed the old colonial vice farms. In 1969 he obtained a three-month, renewable licence to operate Malaysia’s only legal casino. The licence has been active ever since. Lim’s partner was Mohammad Noah Omar, father-in-law to not one but two Malaysian prime ministers – Abdul Razak (1971–6) and Hussein Onn (1976–81). Lim’s Genting group subsequently diversified into plantations, real estate, power generation, paper making and cruise ships, but its vast casino continues to produce most of the earnings.
The earliest government-sanctioned monopolies and cartels after independence in south-east Asia were those for importing and trading foodstuffs. The creation of licences was not simply designed to line the pockets of a godfather class. It aimed to curb speculation and stabilise prices for what were deemed essential commodities. But ultimately the suppression of competition led to guaranteed cash flows that fed tycoons for decades. One of the biggest beneficiaries of import monopolies was Indonesia’s Liem Sioe Liong. After Suharto came to power in 1965, Liem was granted a monopoly on the import of cloves in concert with Suharto’s half-brother Probosutedjo. Separately he was granted a monopoly on flour manufacturing, which in turn made him the noodle king in a noodle-eating country. Here was the core cash flow that allowed Liem to move into everything from real estate to textiles to rubber to logging to steel to cement. Along the way, he could afford to make considerable mistakes given the scale of the economic rents he had been granted. In Malaysia, Robert Kuok was the prime beneficiary of policies restricting imports of refined sugar and flour. A soft commodity trader by background, he also partnered Liem in Indonesia in his sugar and flour businesses. Kuok remains the controlling shareholder in three of Malaysia’s four sugar refineries and is allocated the bulk of a government-set quota for the import of raw sugar. The arrangement is justified on the grounds that Kuok has kept sugar and flour prices stable in the face of international market fluctuation. But, as in Indonesia until the import monopolies were scrapped after Suharto’s 1998 ouster, the other reality is that consumers pay, on average, more than they would in a free market. When Kuok was lobbying for full tariff protection and sugar refining licences immediately after independence, his main co-investors were two other tycoons-in-the-making, Khoo Kay Peng and Quek Leng Chan. The attractions of monopoly were not hard to spot.
In the Philippines a tradition of political allocation of state offices and government largesse built up from the 1920s, under American colonial rule, until it reached its logical conclusion under Ferdinand Marcos. There were trading monopolies for major foodstuff imports, and marketing monopolies for the key local crops – sugar and coconuts. Eduardo ‘Danding’ Cojuangco was one of the leading Marcos monopolists. (It is a reminder of the small and élitist world in which money and power resides in south-east Asia that Danding is from the same landed family as Cory Aquino, whose ‘people power’ movement overthrew Marcos in 1986.) Danding, a Marcos favourite, benefited from a new levy on coconut production that funded the development of United Coconut Planters Bank. He was made president of the bank, which in turn bought up most of the Philippines’ coconut milling facilities. Danding’s coconut cash flows were strong enough to buy up much more besides. He became known as Mr Pacman, after the video game character that eats everything in its path. Marcos monopolies set new standards in the powers they conferred. Lucio Tan’s Fortune Tobacco Co., which was given tax, customs, financing and regulatory breaks that were tantamount to a domestic monopoly on cigarette making, wrote a new cigarette tax code that Marcos signed into law.4 In the same period Tan is alleged to have printed his own internal revenue stamps to paste on cigarette packets. The cash flow from tobacco propelled him into chemicals, farming, textiles, brewing, real estate, hotels and banking. After Marcos fled to Hawaii in 1986, Tan wrote an open letter to new president Cory Aquino in which he asserted: ‘We can proudly say that we have never depended on dole-outs, government assistance or monopoly protection throughout our history.’5
Cartels, Cartels Everywhere
The crudeness of the monopolies handed out by Marcos and Suharto tends to obscure the almost universal presence of monopolies, cartels and controlled markets in south-east Asia. Hong Kong is a case in point, not least because it is regularly voted one of the freest economies in the world. The right-wing American think tank the Heritage Foundation has ranked Hong Kong first (and Singapore second) in its Index of Economic Freedom for the past fourteen years. The Nobel Laureate economist Milton Friedman lauded Hong Kong for decades as a bastion of the free market; a week after the territory’s return to Chinese sovereignty in 1997, he lamented: ‘If only the United States were as free as Hong Kong.’6 Such assertions reflect a focus on Hong Kong’s status as a free port with tariff- and exchange control-free international trade. But Hong Kong’s domestic economy, where the godfathers operate, is a different story. It has long been a patchwork of de facto cartels.
The origin of the cartels lies in the colonial era. The best known of them dominates the territory’s real estate market and is the core source of wealth of every Hong Kong billionaire. The British administration set the scene for real estate oligopoly because it chose to depend heavily on land sales – all land was deemed ‘Crown land’ until sold – to fund its budget. As Hong Kong grew in the post-Second World War era, the government auctioned off development land in ever more expensive chunks: US$1 billion a pop for large plots by the mid 1990s. Anyone who acquired land in the secondary market that was not designated for building – agricultural acreage in the New Territories was targeted by the tycoon families behind Sun Hung Kai and Henderson in the 1970s and 1980s – had to pay a hefty upfront conversion premium before construction could begin. The effect was to rule out small players and persons without good connections to the large British banks. A government-commissioned 1996 report by Hong Kong’s Consumer Council found that three-quarters of new private residential housing was supplied by only ten developers between 1991 and 1994, and 55 per cent came from the four biggest developers. A separate look at profitability considered thirteen large residential developments. Margins were extraordinary, especially where conversion fees had been set by private tender on large lots of agricultural land. In such cases, the lowest return the Consumer Council found – as a percentage of total estimated development costs, including land – was 77 per cent. The highest was 364 per cent.7
Such high levels of concentration in the real estate market are, at the level of economic theory, bound to be anti-competitive. Rumours of bid-rigging are a traditional source of Hong Kong discourse. ‘The property guys used to do a bit of bidding. Then one guy gets it. Then a tea party where it’s all divided up,’ remarks Sir William Purves, former chief executive of HSBC, matter-of-factly.8 So long as land revenues flowed in and budgets were balanced, colonial governments (and the always-influential HSBC, the biggest mortgage lender and developer financier) were not unhappy with the real estate arrangements. The system was simple and low maintenance. As one of the real estate tycoons puts it: ‘British capitalism as practised in Hong Kong has always favoured the big boys.’9 Middle class Hong Kongers, meanwhile, paid low nominal taxes but some of the world’s highest rents, or mortgage repayments, and apartment management fees equivalent to 13–15 per cent of rents.
The Hong Kong colonial tradition of working with a small number of ‘big boys’ – originally these were the British hongs which ran cartels in everything from air-conditioners to elevators – echoed the indigenous south-east Asian autocrat’s need for trusted commercial lieutenants. An interesting example of this came in the 1950s and 1960s when the Hong Kong government successfully negotiated the world’s largest textile export quotas for local manufacturing industry. It was admirable behaviour by a colonial administration since it went against the best interests of British textile producers. But when it came to distributing quotas, the government showed little impartiality. Instead of auctioning the right to export to the highest bidder or finding some other formula to identify the most efficient producers, bureaucrats simply gave away the enormously valuable quotas to the largest manufacturers and export houses. Many of these were run by former Shanghai textile magnates, who had moved to Hong Kong in 1949, and were close to the colonial establishment. There then developed a secondary market in quotas whereby those receiving them for free became rentier capitalists and sold the export rights on.10
Hong Kong has no competition law and its godfathers, Chinese, British and otherwise, extract hefty tolls on local services. The port, the busiest in the world, is perhaps the source of greatest chagrin. Hong Kong’s container terminal handling charges are also the highest in the world, despite labour costs far below those in countries with comparable per capita GDP.11 The typically small manufacturing firms across the mainland border that use Hong Kong’s port have campaigned against the port oligopoly for years, as have shippers, but without success. The shareholders that dominate the container terminal operating companies are the big tycoon real estate players: Hutchison, New World, Sun Hung Kai, Jardine’s Hongkong Land and Wharf. Li Ka-shing’s Hutchison is the undisputed leader of the pack, with current control of fourteen of twenty-four berths.12 It is cash flow from his port operations that has allowed K. S. Li to take huge speculative bets in the real estate market over the years; investment bankers believe he would have been bankrupted during a mid-1980s property crash but for the Hutchison port revenues.
Other Hong Kong de facto cartels include supermarkets, where K. S. Li’s PARKnSHOP and Jardine’s Wellcome control about 70 per cent of the groceries trade, and drug stores where Li’s Watson’s and Jardine’s Mannings are similarly dominant. Efforts to break the multibillion dollar groceries duopoly by French retailer Carrefour and a well-funded local start-up, Admart, during the past decade, foundered. The incumbents, with their big property arms, own key retailing sites around Hong Kong and make clear to suppliers that their business will be cut if they work with new competitors. According to Mark Simon, who shut down the Admart business after losses of US$120 million, the company’s delivery trucks were not allowed into residential and office buildings controlled by K. S. Li.13 Li also has half of Hong Kong’s electricity-generating duopoly, in which the other half is held by the Iraqi Jewish Kadoorie family’s China Light and Power. A government regulatory scheme links the profit the companies are allowed to make to capital expenditure, creating an incentive to over-invest in fixed assets with long depreciation periods. The side effect is higher electricity prices. Other important cartels include ones in buses, petrol, ready-mix concrete and professional services.
It is telling that almost every major Hong Kong business in which K. S. Li operates has cartel characteristics – real estate, ports, power, cement, concrete, asphalt and chain retailing. As Simon Murray, who ran Hutchison for Li from 1984 to 1993, observes: ‘Hong Kong is a cartel environment … If the government’s going to give you a monopoly, grab it.’14 Among Murray’s major deals was the takeover of Hongkong Electric. One former cartel and one monopoly that operated in Hong Kong have been dismantled in recent years. An interest rate cartel was employed by the territory’s banks from 1964 for more than three decades, with managers meeting every Friday to set rates (government also employed ad hoc measures to restrain the entry of foreign banks and thereby helped keep HSBC and sister bank Hang Seng’s share of deposits around 50 per cent).15 But the biggest attack on a Hong Kong monopoly came with the deregulation of the telecommunications industry under the last governor, Chris Patten. Interestingly, it led to a frenzied rush by tycoon-controlled conglomerates to enter the telecommunications business, destroying profit for all comers.16 The message seemed to be that the tycoons were unused to operating in conditions of genuine competition.
One of the earliest substantive actions of the first post-colonial government, led by shipping tycoon Tung Chee-hwa, was to reject the Hong Kong Consumer Council’s call for a general competition law. The position has not substantively altered under Tung’s successor as Hong Kong chief executive, career bureaucrat Donald Tsang, although popular demands for a curb on cartels continue to rise. International bodies including the World Trade Organisation, the Organisation for Economic Co-operation and Development, and the European Parliament have criticised Hong Kong’s failure to enhance competition in its domestic economy. As Professor Richard Schmalensee, dean of the MIT Sloan Management School, put it: ‘The fact that Hong Kong doesn’t have a law against price fixing and basic cartel behaviour is fairly amazing.’17 Yet, somehow, the influence of big business on government is such that this remains the case.
Until recently, Singapore was the only other developed economy in the world without a competition law. The more southerly city state passed a Competition Act in 2004, which started to come into force in 2006. However, vast swathes of the domestic economy – electricity, gas, water, sewage, telecommunications, media, postal services, ports and some banking services – that are controlled by public companies are exempt from the legislation. It is far from clear that local competition in Singapore will become any freer than it is in Hong Kong. The contrast between globally competitive external economies – those of the export manufacturers – and cosseted domestic economies – those of the tycoons – is equally apparent in both cities. In Hong Kong and Singapore, for instance, banks can happily force retail and small business customers to queue for an hour before hitting them with charges that are unknown in other developed economies.18 Hong Kong banks charge shopkeepers to provide them change for their businesses. Singapore banks monopolise the sale of mutual funds and staff often know little of what they are selling. Customer experience is not what one would expect when walking into the sleek skyscrapers that dominate these cities.
Rentiers Then, Rentiers Now
The pursuit of core cash flow is about obtaining monopolistic or oligopoly licences, wherever a godfather operates in south-east Asia. The main difference between locales is that these rights were distributed afresh by post-colonial era governments in Thailand, Malaysia, Indonesia and the Philippines; they were – with the exception of some banking and real estate entitlements – grabbed by the government in Singapore; and they were gradually transferred in Hong Kong as local tycoons began to challenge and take over the established British hongs starting in the 1970s. Fundamentally, however, everywhere has witnessed a process of evolution that echoes the colonial carve-up of economic rights. An unnamed commentator in a 1991 profile of Robert Kuok – perhaps the region’s most accomplished transnational tycoon – put it as succinctly as is possible: ‘Robert Kuok,’ he said, ‘modernised the rentier system in south-east Asia.’ And that is what other godfathers did.
Along the way, tycoons have greased plenty of palms. The author did something of a double-take when one of the region’s leading billionaires, in an off-the-record conversation, nonchalantly described bribing a prime minister in order to obtain an important licence that was extended soon after one nation’s independence. Of course, he said, he always referred to the bribe as a loan, recalling the precise amount half a century later.19 An ethnic Chinese tycoon with businesses in several south-east Asian countries is scathing about what he regards as a graft-seeking culture among indigenous politicians: ‘They’re broke every week,’ he says. ‘Feed your mouth, feed your prick. That is how they think.’20 But the same person is not much less damning of the iniquity of the colonial regimes he dealt with. He refers to ‘unseemly practices’ in Hong Kong, senior civil servants and Hongkong Bank executives holding court in private boxes at the races, and the cosy relationship that British big business enjoyed with the colonial regime. As an example he recalls John Bremridge, who transitioned from running British hong Swire in Hong Kong to being Hong Kong’s Financial Secretary, in which post he stood before the Legislative Council and announced the territory would not license more than one airline. The incumbent, Cathay Pacific, was and is one of Swire’s principal businesses. Bremridge left government in 1986 to return to a job at Swire’s headquarters in London.21 A similar trajectory was followed by Baroness Lydia Dunn, who joined the Swire group in 1963, became the senior member of Hong Kong’s Executive Council, and then returned to London with Swire.
In Hong Kong and Singapore, relations between businessmen and political power have long been carefully choreographed to avert any appearance of overt collusion. In Hong Kong there are the Leglislative and Executive Councils to provide a patina of representative government, despite the fact that they are packed with the unelected representatives of big business. In Singapore, the relationship between establishment political power and tycoons is shrouded in greater mystery. One correlation that may be apparent and which dates back to the colonial era, is that favoured families show their appreciation through the works of a local charity, hence the Shaw Foundation (set up by the Shaw brothers in 1957) and the Lee Foundation (set up by the family of Lee Kong Chian in 1952). This tradition continues. Those tycoons who survived or prospered despite the British, or their successor Lee Kuan Yew do not bother with high profile charitable activities. Kwek Hong Png, rubber-smuggler-made-good, and son Kwek Leng Beng, who sought and were denied the core cash flow of a Singaporean banking licence, have not thrown money at a foundation.
Elsewhere the business–politics nexus is much cruder. Suharto used charitable foundations – yayasan – controlled by himself and his family as vehicles to collect billions of dollars in bribes. But the calculation for the godfather who wants to survive is much more complicated than hitching his cart to a leading politician and paying him off. There is a long list of tycoons who paid the price for putting all their eggs in one political basket. Liem Sioe Liong was the inevitable primary target of the backlash against what Indonesians dubbed ‘KKN’ (‘korupsi, kolusi dan nepotisme’ – ‘corruption, collusion and nepotism’) during the Asian financial crisis. Rioters made a beeline to his north Jakarta home, looting it and painting the words ‘Suharto’s dog’ on the gate. In Thailand, Chin Sophonpanich fled to Hong Kong for several years after Marshall Sarit’s 1957 coup because of fears his closeness to the ousted regime would put his life at risk. In Malaysia, whole cliques of businessmen had their fortunes irreparably damaged because they were too close to former finance minister Tengku Razaleigh Hamzah when he challenged Mahathir for the leadership of UMNO in 1987,22 or to Anwar Ibrahim when Mahathir decided to terminate the deputy premier’s political career a decade later. When a Malaysian tycoon has been described as one of ‘Anwar’s boys’ or ‘Daim’s boys’ – after finance minister Daim Zainuddin – it has usually turned out to be a sign he was headed for a fall.23 The truly great godfather never allows himself to be identified with only one side of a potential political argument.
It is no coincidence, then, that the two richest Malaysians, Robert Kuok and Ananda Krishnan, are masters of being all things to all politicians. Kuok’s relationships are impeccable partly by virtue of longevity. His father played mah jong with Onn bin Jaafar, aristocrat and founder president of UMNO, when Robert Kuok was growing up in Johore state. Robert attended school with Onn bin Jaafar’s son and Malaysia’s third prime minister, Hussein Onn, and was a contemporary at Raffles College of Malaysia’s second prime minster, Abdul Razak, as well as Harry Lee Kuan Yew.24 It was all but inevitable he would know the entire evolving establishments of independent Malaysia and Singapore. Despite sometimes strained relations with Lee Kuan Yew and Mahathir, Kuok never put himself in a position where his investments in Singapore or, remarkably, his still-functioning soft commodity monopolies in Malaysia, came under threat.
Krishnan is still more remarkable. In the 1960s and 1970s he was an intimate business partner and friend of Razaleigh, and advised the finance minister on the creation of Petronas, the national oil company, and the nationalisation of tin mining. When Mahathir became premier in 1981, Krishnan continued to find favour, being appointed a director of the central bank in 1982 and a director of Petronas in 1984. As relations between Razaleigh and Mahathir soured, Krishnan remained close to each of them, taking holidays with both men and looking after the children of the latter when they were abroad. Other tycoons close to Razaleigh, like Khoo Kay Peng, found themselves out in the cold after their patron’s defeat in the 1987 UMNO election, but not Krishnan. He had covered every angle. When a reconciliation of sorts was effected between Razaleigh and Mahathir in 1996, the meeting took place at Krishnan’s home.25
Few Asian godfathers play politicians so well. The deal for which Krishnan is best known – the 88-storey Petronas Twin Towers that define the Kuala Lumpur skyline – was a master class in the art of gentle manipulation. The man who had already nailed his core cash flow with Malaysia’s off-course betting monopoly then identified the 39-hectare site of the Selangor Turf Club in downtown Kuala Lumpur for a gargantuan real estate development. He went to the Argentinian–American architect César Pelli with a remit that Mahathir would find irresistible – the tallest buildings in the world, commensurate with the premier’s Vision 2020 to make Malaysia a developed nation by that year, with a design that incorporates elements of Islamic architecture.26 Mahathir was sold, and to this day retains a vast, fishbowl-shaped private office at the top of one of the towers.27 According to documents filed with Malaysia’s Registry of Companies, Krishnan obtained the project site at a total cost of MYR378 million. But private appraisers immediately valued the site at over MYR1 billion (about US$385 million at the time). Krishnan was able to borrow against the independent valuations and, with Mahathir’s support, bring in Petronas as a cash investor and anchor tenant. The upshot was that the godfather obtained 48 per cent of a real estate development that was capitalised at MYR1.3 billion without having to use his own money. He then called in Japanese and Korean construction companies – to put up a monument to Malaysia.28
Krishnan repeated the trick with media and telecommunications, pandering to Mahathir’s fantasies about developing an Asian media industry. Assisted by government subsidies, he put Malaysia’s first satellites into orbit. He set up production companies to make wholesome Malay-language programming devoid of ‘Western’ influence. But mixed in with these high-tech, morally wholesome undertakings were businesses yielding great profits. Krishnan obtained exclusive licences that made him the pre-eminent player in cellular telephony. He cornered the only bit of the satellite television market that is seriously profitable – supplying imported Chinese-language programming, wholesome and otherwise, to Malaysia’s Chinese population. And he received further cash investments from government companies; state investment agency Khazanah Nasional put up US$260 million for 15 per cent of his satellite television business. Like other godfathers, he bought in whatever technology and content he required on a turn-key basis.
The Real Home of Guanxi
The Chinese word guanxi, meaning a connection or relationship, is used a great deal in Asia as shorthand for the role that personal ties to holders of political power play in facilitating business. Guanxi carries with it the implication that bribes might be paid and accepted. With respect to China, the term is much overused. This is not because China is short on corruption. It is instead because the size and complexity of China are at odds with the simplicity suggested by the concept of finding the right person, greasing his palm and closing a deal. Foreign businessmen who fail to understand this spend vast amounts of time in Beijing sucking up to national politicians who are usually powerless to deliver the concessions and deals they want. South-east Asia is different; it is much more like the world of guanxi is supposed to be. A deal made by a Suharto, a Marcos or a Mahathir sticks. Hence the pursuit of good guanxi with such people is a rational business choice (Lee Kuan Yew, whose probity is beyond question, discovered the contrast with China, to the Singaporean tax payer’s considerable cost, when his government invested billions of dollars in building an industrial town in China’s Suzhou; despite Lee’s unparalleled guanxi in Beijing, the local government took against the Singaporean project, promoting an alternative development zone, and quickly undermined it29).
It is colonial legacy and the traditional separation between indigenous political élites (aristocratic and anti-business by prejudice) and outsider economic élites that guarantee that south-east Asia is the real home of the guanxi merchant. The godfathers are entertainers and gift givers on a grand scale. When political leaders – or their families – travel abroad, the tycoons’ homes, hotels and staff are at their disposal. Ananda Krishnan, whose attention to the private lives of politicians and their children is legendary, maintains a private jet, a huge yacht and homes in Switzerland, Australia and London. There is also no shortage of remunerated directorships for those who need to be kept happy. In Malaysia, for instance, it is the norm to both reward families from the ruling UMNO party and persons from the state royal households with shareholdings and directorships. Lim Goh Tong’s casino empire keeps its Malay shareholders under very close wraps since gambling is an anathema to Islam; almost all the large shareholders in his main listed vehicles are nominee companies. But Lim cannot hide his dependence on close relationships with Malaysia’s powerful police force. Retired officers take many jobs at his giant casino, while directors and executives of Genting, his main company, have included a former inspector general and deputy inspector general of the national police force. Tycoon Quek Leng Chan has used Malaysian royalty, a brother-in-law of Mahathir and children and siblings of former premiers, deputy premiers and ministers as directors. Sometimes, long-term investments in well-connected persons pay tycoons back. When Mahathir unexpectedly gave way to Abdullah Badawi in November 2003, Robert Kuok was able to push to the fore an executive, Lim Chee Wah, who had been building relations with Badawi ever since they attended the University of Malaya together. When other businessmen tried to challenge Kuok’s near-monopoly in Malaysian sugar under the new regime, the government rebuffed calls for reform.
Mostly, however, directorships, free or underpriced share distributions and straightforward hand-outs are just a cost of business. Businessmen need political favour and those with power expect to be rewarded for their own investment in political entrepreneurship. As one of Badawi’s political secretaries observes of the system in Malaysia: ‘The template is corruption.’30 None the less, while the south-east Asian system is corrupt, it is more efficient than ones that pertain in societies where holders of power also seek to be exploiters of business rents. South-east Asia is not comparable with the kleptocracries that have ruined many African countries. In most cases south-east Asian politicians sell public resources and economic rights to private businessmen and do not interfere in the running of the businesses. When Asian despots do behave more like African kleptocrats – as with the increasingly uncontrolled indulgence of Suharto’s children in the last decade of his rule – the results are more similar.
The normalcy of political pay-offs in the region leads, from time to time, to unexpected admissions. The billionaire’s casual recollection of bribing a prime minister, cited above, has an echo in the description by one of Chin Sophonpanich’s sons of the process of paying off Thai politicians and generals as being ‘gentlemanly’.31 This is not a word that an outsider would naturally reach for, but it is employed by the great Thai tycoon’s son without irony. Long before Thaksin Shinawatra became Thailand’s prime minister, the Thai historians and authors Pasuk Phongpaichit and Chris Baker asked him what the standard kickback was on government-linked projects in the country. He replied without equivocation that 10 per cent was the norm, but that this might fall to 3–5 per cent on very large projects.32 In the same way, businessmen spoke of rack rates of fees payable on business deals entered into under the Suharto regime in Indonesia; his wife, Madame Tien, was known in business circles as Madame Tien Per Cent. Sudarpo Sastrosatomo, owner of Indonesia’s largest shipping company, describes the foundations Suharto used to collect kickbacks as a ‘parallel tax system.’33
South-east Asia’s centralised states, with their class-based social structures, make the region the Asian capital of guanxi. It was notable that when John McBeth, a veteran Far Eastern Economic Review correspondent in Indonesia, surveyed the country’s leading luminaries as to what had gone wrong between independence and the Asian financial crisis, they pointed not to Sukarno or Suharto but to enduring feudal traditions. Roeslan Abdulgani, a respected political figure from the birth of the republic and a foreign minister under Sukarno, lamented: ‘The upper classes in these structures were only looking for tribute.’34 In Indonesia and Malaysia, the habit of selling concessions and licences transitioned through independence without interruption. Under the Dutch, Indonesia’s priyayi aristocracy had always had saleable rents, assets and power. This was still more the case in Malaysia, most of which was not a formal British colony, thereby leaving land and many other valuable economic rights in the hands of the different royal families. Robert Kuok’s big early real estate deals, for instance, were not based on transactions with the British, but with the Johore royal family. When the colonials departed, the concessions in their gift simply added to economic rents already in the hands of local political élites. In Thailand, there was a seamless continuation of rent-offering practices across the 1932 revolution that ended absolute monarchy; all that occurred was that a share of the spoils passed to the civilian bureaucracy and the military. In the Philippines, the corrupting of an ostensibly democratic political system was a work in progress under American colonial rule, as Washington gradually devolved power to Manila; the corruption was simply perfected after independence. Crude political corruption was not of the same order in Singapore and Hong Kong – although both cities had widespread bribe-taking cultures until the 1970s35 – since their ability to attract regional capital depends on being relatively ‘clean’ and ‘stable’ compared to their hinterlands. But the amount of collusion between private business and government in both cities is none the less far greater than is popularly imagined.
Guanxi Does Not a Bamboo Network Make
Relationships are important in south-east Asia because they yield results. But while tycoons run around honing their guanxi with politicians, a considerable mythology has grown up about the manner in which the godfathers work with one another. This is the mythology of the ‘bamboo network’ that supposedly exists among the ethnic Chinese tycoons, providing them with a region-wide web of co-operation that is unique to their culture. The evidence that is held up to support this is the fact that Chinese godfathers invest together, which is undeniable. Asian business magazines and some academic tomes routinely feature diagrammatic illustrations of their co-investments. However, the bamboo network theory is misleading. The reality is that tycoons are typically forced to invest together because of the nature of the environment in which they operate. Licence-based economies require investors who cross borders to find politically influential partners; cartels also require co-operation. The partners will often be ethnic Chinese because of the pre-eminent economic role of Chinese emigrants in the region. But Chinese tycoons co-invest and co-operate with non-Chinese partners as well. Almost all of them operate joint ventures with multinational companies to obtain technology and management skills. They work with godfathers of other ethnicities too. The bamboo network is both an undue simplification and a romanticisation. While in the era of massive, first-generation migration, working-class Chinese depended on networks that were defined by dialect and were certainly a bamboo network, cosmopolitan godfathers have never been so circumscribed. They co-operate where they have to, but most of the time they compete – most obviously for political favour. Up close they are anything but the mutual assistance club that the notion of a bamboo network suggests.
The relationship between Indonesia’s Liem Sioe Liong and Malaysia’s Robert Kuok, two of the region’s best-known tycoons of the past half century, is a good illustration. Kuok has been the dominant, licence-protected player in agricultural commodities – including sugar and flour – in Malaysia since the late 1950s. When he wanted to move into Indonesia, a major sugar producer, he turned naturally to his nearest equivalent in that country. Liem’s influence with Suharto was unrivalled, and Suharto had made sugar trading a military monopoly, running much of the business through Liem. Kuok encouraged Liem to also lobby Suharto for an import monopoly on wheat, for flour milling, to be shared with the military. Kuok and Liem became co-investors in wheat and sugar trading businesses, and sugar cultivation, for three decades. The men were frequently hailed in the media as key network allies, whose families hailed from towns in China’s Fujian province that are only forty kilometres apart. In reality, Liem and Kuok were partners in a forced marriage of convenience, like those of myriad other tycoons. In the mid 1990s, Kuok sold out of Bogosari, the Indonesian wheat importing and flour milling monopolist, convinced that Liem and the military were cheating him of his fair share of the profits. When the Asian financial crisis engulfed Liem’s empire, Kuok returned the favour – along with many other Liem ‘friends’ – by refusing to loan him money. As Philip Purnama, a senior executive working with Liem’s son Anthony to try to rebuild the family business, remarks: ‘During the crisis when Anthony needed money this so-called network was asking him for 70 per cent interest.’36
The point about the real nature of tycoon co-operation was further clarified for the author at a breakfast meeting with one of Asia’s very richest men. Perhaps because of an unexpectedly enjoyable godfather party the night before – he had slept only five hours – the tycoon was surprisingly unguarded in discussion of other billionaires with whom he was said by outsiders to be particularly close. He began with a man he had invested with for half a century, whom he dismissed as ‘very uncouth’ and ‘unsophisticated’, describing his conversion to Christianity as nothing more than an effort to ingratiate himself with white people. Another long-time business partner was ‘a rascal’ who cooks the books in their joint ventures. The interviewee said he once invented a sob story about having lost US$100 million in a shipping deal as a means to bargain with the fellow tycoon for a more equitable pay-out on one of their joint ventures; he received what he thought was an additional US$5 million, but then found it was deducted from his next dividend. A third longtime business partner received a racial lashing for the perceived shortcomings of his Chinese dialect group – which was deemed to be ‘a mafia’ – and was also condemned for his sexual lasciviousness. This was at least kinder than remarks reserved for the billionaire’s direct competitors. One was ‘a baby-faced killer’. Another, described as ‘a cobra’, recently sent a box of chocolates to one of the godfather’s sons. The tycoon advised his heir to first feed a chocolate to his dog and, if the animal was still alive after a couple of hours, ‘to try one on his wife’.37
Simon Murray, recruited by K. S. Li to run Hutchison after Hong Kong’s top tycoon acquired the former British hong, recalls his own learning curve about the relationships between godfathers. Not long after his appointment, Murray received an invitation from Cheng Yu-tung, billionaire head of the New World group, to meet him for a chat. Since Cheng and Li are renowned as golfing and card-playing buddies, this seemed quite natural. When Murray mentioned Cheng’s contact to Li, however, he was surprised by the reaction. He recalls that Li warned him quite sternly: ‘Be very careful with these people. They are almost as smart as we are.’ Murray notes: ‘The theory was they were friends.’38
Looked at another way, the real nature of the relationship between tycoons is conveyed in the outcomes when they have attempted to proactively co-operate as groups in business. This is not the same as the more passive co-operation required to maintain a cartel or divide up an economic rent. A well-known example in Malaysia was the setting up under the auspices of the Malaysian Chinese Association (MCA), the main Chinese political party, of Multi-Purpose Holdings (MPH) in the mid 1970s. MPH was a collaborative investment vehicle that promised to defend Chinese commercial interests in the face of the government’s pro-Malay affirmative action programmes. Although the company attracted around 30,000 mostly Chinese investors, few tycoons would have anything to do with it, preferring to seek out their own accommodations, direct with government leaders. The prominent businessmen who were involved with MPH oversaw a disaster. By the mid 1980s the conglomerate was posting the biggest losses in Malaysian corporate history and its chief executive, Tan Koon Swan – a former senior manager at Lim Goh Tong’s Genting – went to jail in both Singapore and Malaysia for fraud. He had siphoned off MPH funds to one of his own companies. A less dramatic but similar tale of failed tycoon co-operation, was the setting-up in Hong Kong in the early 1990s of a China-focused investment group in which Li Ka-shing, Stanley Ho, the Riady family of Indonesia and the Singapore Trade Development Board were among the partners. The New China Hong Kong Group achieved precisely nothing, because its plutocrat backers were unwilling and unable to work together.
Relationships, as the luxury hotelier Adrian Zecha observes, are critical in south-east Asia because societies are so élite-driven. ‘If you are a developer,’ he says, ‘the chances are the planning guy was at school with you.’39 It is certainly true that a tiny number of educational establishments, usually colonial in origin, are the common provenance of élites from Hong Kong to Malaysia to Singapore. But the importance of relationships should not be confused with notions of co-operative networks. Asian business is a dog-eat-dog world in which aspirant godfathers compete for a finite supply of political patronage. It is this which defines the tycoon as a thoroughly charming, individualistic and ruthlessly pragmatic species.
Core Cash, Vertical Integration, Random Diversification
Bamboo networks do not make Asian godfathers rich; core cash flows derived from unfree markets do. Those cash flows also mask a good many business failings. Shortly after the richest man in the region, Li Ka-shing, acquired his dominant interest in Hong Kong’s de facto port cartel, its perennial cash flows came to his rescue. In 1982–3, a global recession combined with a local political crisis, as negotiations for Hong Kong’s return to Chinese sovereignty began. The property market went into freefall, and with it earnings at Li’s core real estate company, Cheung Kong. Worse, Li was widely rumoured to be exposed to heavy losses via private companies that made property purchases on which he guaranteed minimum returns. Not to matter. In March 1984 Hutchison, the former British hong through which Li’s port interests are held, poured out some of its cash through a special US$256 million dividend, the main chunk of which went to Li. (The dividend was paid only on preference shares – of which Li owned a great many – not ordinary stock). He was saved. Although K. S. Li has regularly been referred to in the Hong Kong press as ‘superman’, his investment career has been dotted with mistimed business deals and acquisitions that took a painfully long time to bear fruit. In the early 1990s, he soaked up considerable losses on early mobile telephony and paging investments in the UK, Australia and various Asian countries. He then made a vast windfall profit with Orange in the late 1990s, before plunging into 3G, which is still burning through unprecedented amounts of money. His 1987 move into Canada’s Husky oil, and subsequent increases in his equity, brought years of losses and write-downs. All through these investments, core cash flow from ports, retail, electricity and other Hong Kong cartels underwrote Li’s expansion. The experience of one of the region’s best investors is a good guide to what has kept lesser rivals afloat.
Core cash flow is a godfather’s insurance policy. It also encourages two other traits common to tycoon businesses. The first is vertical integration of activities that surround a monopoly or oligopoly. When Henry Fok acquired the monopoly to import mainland Chinese sand to Hong Kong in the 1950s, he soon bought up the barges with which to transport it and the warehouses in which to store it. Other monopolists go much further. To return to the example of sugar, discussed earlier, Robert Kuok has companies that grow sugar, that refine sugar, that make the bags in which the sugar is put, that trade sugar, that market sugar, as well as ships that transport sugar. Since Kuok has an effective monopoly on the distribution of sugar in Malaysia there is a natural temptation to invest in related activities. 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.
The second impact of monopoly cash flows is somewhat counter-intuitive. Around the vertically integrated cartel businesses that generate most of their cash, the godfathers indulge in random diversification. Almost every one of them runs a conglomerate. It is quite normal for a top-tier tycoon to control three or four hundred private companies and up to twenty listed vehicles. In part this reflects the mentality of a licence-based operating environment in which competition is limited by the state and so any new business opportunity is to be grabbed at. There is also, as we shall see in chapter 4, the relatively weak influence of minority shareholders who would prefer more focused public companies with maximised earnings. And there is the impetus to own many different assets, in many different jurisdictions, in case the political winds in a godfather’s home state blow from a different direction. But more than anything, diversification is the product of too much easy cash and too much easy credit. As elsewhere in the world, tycoons in south-east Asia are inclined to try lots of different things when they have cash geysers. This is true across the ethnic divide. Malaysia’s ethnic Chinese Quek Leng Chan, with his nineteen listed companies in activities from banking and air-conditioners to semiconductors and real estate, is not much different from ethnic Tamil Ananda Krishnan, who turns his hand variously to animation, telecommunications, electricity generating, gaming, oil and gas exploration, and real estate. And neither is far removed from the world of the ethnic British Swire family that is engaged in businesses that include running a monopoly airline, shipping, retailing, soft drinks and a respectable, second-tier position in the Hong Kong real estate cartel. Ultimately, monopoly encourages monopolists to spread their money around.