on October 5, 2007
Studwell's Asian Godfathers challenges the mythos surrounding Li Ka Shing, Robert Kuok and a group of about 50 others, the economic kings of Southeast Asia he calls godfathers. Media consumers have been force-fed repeated helpings of stories about the godfathers as economic clairvoyants, captains of wealth creation, etc. Studwell demonstrates that the godfathers are creating little if any wealth in their areas of operation (Hong Kong, Indonesia, Malaysia, Philippines, Singapore and Thailand)---that they are rather parasites, having gained monopoly access to limited resources (raw materials, port facilities, banking licenses) through guanxi with political cronies, maintaining it through bribery in various forms, and pocketing use fees.
The cover is sappy, but don't let that deter you--Studwell's book is well worth your time if you seek to better understand SEAsia.
on December 19, 2007
This book makes a very interesting read and offers a different approach to understanding the economy of a region: the author looks at these economies mainly through the business sector and avoids overloading the book with graphs, charts, tables, etc. It is an interesting story (although heavily studded with Chinese names). This may result in an incomplete picture, and the book is not quite academic, but this does not avoid it providing a relatively objective look on an important sector of this region's economy.
Studwell is very critical of the corporate sector of the SE Asian countries, including those of Hong Kong and Singapore. He traces the origins of the mostly ethnic Chinese businessmen and their companies from the colonial days to the present. He dismisses any notion of "Asian values" as the foundation for the success of these businesses and their owners, but rather attributes their rise to license-peddling, concessions, monopolistic practises, lots of graft, etc. One is reminded of Balzac's words: "every great fortune, of onknown origin, is usually the result of a crime". His comments on the banking sector are particulary scathing. The author explains that these businessmen are not the cause of this situation, but have merely adapted to a region-wide system of patronage and corruption held in place by the local politicos for hundreds of years to the present (much of it inherited from their colonial masters). The business leaders have saving graces: personally charming, they lead flamboyant lives and they obviously do contribute to their local economies (through employment and investment).
In spite of this, and the crisis of 1997-98 the SE Asian economies have sustained high levels of growth over the past two decades, which Studwell attributes mostly to multinationals, and the export prowess of small local firms, plus the hard-work of the average Asian.
The author's critique goes beyond mere anecdotes and history , as he affirms that the SE Asian corporate sector does not have the efficiency and productivity of the typical world-class company. The origins of these businesses leads to a focus on trading and short-term wheeling-dealing, without a clear strategy, technological strength and branded products. The companies are very much tied to the personality and/or the family of the main owners. Worst of all, they are lacking in transparency, corporate governance and their stock market practises are less than ethical.
Studwell's observations seem vindicated by the markets: since the 1994-97 peak the stock markets of these countries have not fully recovered, and the Hong Kong and Singapore indices are barely above their levels of 10 years ago.
As SE Asia acquires more economic stability it is logical to assume that per-capita income will rise and lead to stronger domestic economies, with less dependence on export-led growth. In this context Studwell is correct in insisting the the corporate sector of these countries clean up their act and become serious and sustainable contributors to their economies.
on October 16, 2013
To catch your attention, let me--I am the husband of Louie, my name is Teodoro Locsin, Jr.--say that as Cory Aquino's speechwriter she called me in a few years before she died of cancer and asked me to write the author of a book that quotes her as calling Lee Kuan Yew "an arrogant bastard". She wanted me to deny it as I was in the best position to do it because I never left her side during her meetings with ASEAN leaders in the early years of her regime when she was beset by military coup attempts. She found Suharto surprisingly candid when she apologized for the extra security that limited the venue of her ASEAN meeting to a hotel flush against the water of Manila Bay and beside the US Embassy. He said, "Oh, don't apologize, why do you think I take General Murdani with me all the time. I don't feel safe leaving him behind." This was greeted by laughter except from Mahathir. Murdani smiled sheepishly. Lee quipped that he put his son in the military just to make sure. Mahathir looked on with ill-concealed contempt of the frivolous turn the talks had taken, and in particular of Mrs. Aquino. He kept imposing his views during the meeting. She asked me later if I didn't find him arrogant but that was all. Mrs Aquino disliked any vulgarity because it was, I guess, vulgar. She was well brought up and went to convent school in New York. An ill word never escaped her lips except once when a trusted ally sided with a coup attempt against and she called him a blue bottle fly. She regretted this. I said I would write the publisher. She assumed I was familiar with the book. Mercifully I failed to contact any publisher. The book I had in mind was a simpering and flattering account of Asian godfathers by someone else. Mr Studwell's is after all the book she meant. I am sorry to be so late in clarifying that she never called anyone least of all Mr Lee "an arrogant bastard;" she rather liked him even if he was open about his contempt of the American-style democracy she had just restored.
All that off my chest, let me say that I have not stopped recommending How Asia Works to every thinking person in my country, starting with Solita Monsod, our chief economist, who fought for serious agrarian reform and forfeited her post as a result. My father fought for it in the 50s, 60s and 70s until his arrest upon the declaration of martial law. The defense minister who had my father arrested--he was the publisher of the largest circulation and most prestigious political magazine in the country, the Free Press--told him that martial law was the answer to his prayer for agrarian reform because without the bother of democracy, it would finally be seriously implemented. "Then why did you arrest me?" my father asked. "You have a bad temper and might have reacted strongly to our new approach." How Asia Works vindicates the failed work of many like him and Solita Monsod. Their work was discredited by so-called informed opinion that land reform anyway does not work despite best efforts, the rural poor are too stupid to farm their own farms, and at any rate it is too late if it does work.
I turned to Asian Godfathers after How Asia Works. It puts down in black and white what was merely rumored, the staggering scale of Southeast Asian corruption and detailed explanation of how it works and works still. If I ever find myself a publisher of a newspaper again, I will insist that all business reporters and analysts be tested on their command of Studwell's theses. I understand now what people like my father fought for and why it would have worked if only planters had not stood in the way and we had elected leaders who would push them out of the way if they tried.
What a pity, what lost opportunity. I am curious only why, in Asian Godfathers, the author is not as detailed about corruption in the Philippines as he is about it in Thailand, Indonesia, Malaysia, Hong Kong of all places, and worse under the British at that. Either our godfathers did not steal as much or they are better at concealing their loot than their counterparts in the rest of the region.
on June 29, 2010
Joe Studwell's "Asian Godfathers" is written in a clunky academic style, and takes some time to get into but it's really worth the read. The author has distilled his formidable experience with and understanding of Southeast Asia into this book, and readers will come away with a more nuanced, deeper understanding of the place.
Southeast Asia is a fractured diverse place, but their tycoons share many similarities: they come from wealthy established families, they read well the political winds and they're good (and only good at) massaging the political connections that permit them the monopoloy and cash flow from which their empire is based, they're hard-headed non-ideological businessmen who put their interests above all else, they're racist patriarchs, and they're predators who spend other people's money (from banks and equity markets) in order to advance their business interests. They are the products, the beneficiaries, and contributors to the crony capitalist system in southeast Asia, a system that led to the 1997 East Asian financial crisis -- a crisis that, as a testament to the godfathers' flexibility and power, only made the most powerful godfathers richer.
At the end of the book, Mr. Studwell concedes that he wrote the book about Asian godfathers because he wanted to highlight the financial malaise and political corruption of Southeast Asia. But even if readers do not care about southeast Asia they should still read "Asian Godfathers" because it's also the story of China today. Like southeast Asia's economy, China's economy is growing not because of but despite its tycoons. China's export economy (fueled by the technology of multinationals, the efficiency of local subcontractors, and the limitless supply of migrant workers) is booming, and it's covering up the gross inefficiencies, capital misallocation, and bad practices of the rest of the economy where tycoons (usually relatives of powerful government officials) monopolize a sector or a service, expand with public bank money or rip off shareholders, and spend so much time massaging guanxi that they have no time to focus on their core business (not that they would know how to run a business if they indeed had the time). Like southeast Asia, China also suffers from crony capitalism -- and it's a time bomb waiting to explode.
"Asian Godfathers" is a very important and insightful read for those interested in China.
on November 16, 2007
Solid reporting with a sense of history about many of the people behind Asia's economies. Good background of why and how but the "who" is what is compelling. Had hoped for even more gossip, but lawyers must have counseled care. But there is more than enough to be worth reading if you are involved in Asia or even just interested.
on August 3, 2014
It must have cost Joe Studwell a good deal of work to integrate his knowledge of Asian business and politics and produce this exceptional book.
He has a facility for gaining access to Asia's rather secretive Chinese billionaires since they are obviously not in the habit of sitting around and sharing their fine French wine with any regular gweilo. It may be because he actually quite likes them (and this comes across in the book) which helps but at the same time it doesn't make his job of a balanced analysis any easier.
Nevertheless he succeeds, with the book being built around his statement that, "It is the politicians job to defend societies interests." In some countries they do, such a Japan, South Korea, Taiwan and to a lesser extent China, and in some they don't such as the Philippines, Indonesia, Malaysia and Thailand [and USA ??] with a general divide between NE Asia (successful) and SE Asia (unsuccessful).
He concludes that it is systems, not people that make a country rich, with efficient political and social institutions being the key to prosperity rather than the empty but fashionable idea of "Asian values".
He makes it fairly clear that the traditional Chinese merchant class of SE Asia has successfully exploited weaknesses in their respective governments in classic special interest fashion to gain favours and capture spectacular excess profits. It's the people of these countries that lose as they pay higher prices and stumble from one financial crisis to the next while they are trapped in poverty.
The basic deal is that cash generating monopolies such as gambling, land development rights, mobile telephones, importing and trading foodstuffs, flour manufacturing etc. are granted by politicians to the Chinese "Godfathers" in exchange for a cut (remarkably identified as 10%) in the profits. It doesn't seem to matter in SE Asia what type of government is involved. Democracies, military dictatorships, right and left wing all fall into the same corrupt system with the 10% cut being a recognized prize of political success.
Also the system is so ingrained that the Godfather monopolies have more or less become the only viable economic organizations left standing so SE Asian governments are have to reach agreements with them.
A major and not so obvious conclusion that Studwell emphasizes is that there is no place in these setups for internationally competitive manufacturing businesses with high levels of research and development and skilled labour of the South Korean type. On the contrary, Godfather businesses are designed to avoid competition through licences and tend to concentrate on trading and raw material extraction. So the rather surprising reality is that the Godfather businesses have very little to do with the Asian manufacturing success story. This success is due to large scale western outsourcing to mostly small asian manufacturers starting in the early 1980's and aided by NE Asian governments making a determined effort to educate their populations, develop technical skills and climb the value chain while providing a manufacturing environment that suits foreign corporations.
SE Asia does participate in the lowest levels of outsourced manufacturing but the minimal profits are of no interest to the Godfathers although they do benefit indirectly for the generally increased Asian demand for the raw materials provided by their monopolies.
The author essentially shows the SE Asian Godfathers developing a finely tuned system for exploiting their respective countries in close alliance with corrupt politicians of the ethnic majority. This involves a high degree of artistry and Studwell shows in interesting detail for example how they manipulate their bank ownership to obtain 0% financing and play with Public/Private ownership of their corporations to capture all the upside while dumping all the risk on the public.
A central aspect is of course "Guanxi" (being plugged in/connected) whereby major efforts are made to bribe/entertain/give gifts/praise/be the best friend of those with political power or who may gain political power (Godfathers back all factions), with the interesting result that Godfathers develop a chameleon like nature, changing their names and presenting themselves for example as Thais in Thailand, Filipinos in the Philippines while simultaneously being Chinese with the Chinese.
As a relative of Henry Fok (one of the biggest Godfathers) says, "tycoon behaviour should be viewed through the prism of Eric Berne's 1960's bestseller "The Games People Play", adding..They all want a shrink ... to get it of their chest."
In any event it is the people of SE Asia who lose as their countries stumble from one crisis to the next with a good example being the Philippines. As the 2006 World Development Report said, "15% of Filipinos were living in absolute poverty, and 47% subsisted on an income between US$1 and US$2 a day. Half of the 12 million population of Manila lives in shanty towns that line the expressways, rail tracks and waterways of the metropolis. After 25 years of repeated economic crises, the Philippines economy is now critically dependent on the overseas earnings of an estimated 10 million, mostly female workers - out of a population of 80 million - employed as child carers, nurses and more in richer states around the world."
Studwell quotes the Philippine's best known living author, Francisco Sionil José (from an interview in the far Eastern Economic Review December 2004) saying quite simply, "We are poor because our élites have no sense of nation" and he seems to be right.
A fine example of Special Interests vs. National Interest and highly recommended as one of the best books I've read this year.
on August 28, 2008
The word Mr. Studwell adopts for his title, "godfathers," has of course acquired its relevant connotations from a classic novel by Mario Puzo and the subsequent motion-picture trilogy directed by Francis Ford Coppola.
Messrs. Puzo and Coppola were self consciously creating a myth, romanticizing the ugly reality of mob violence. Mr. Studwell thinks of himself as the debunker of a myth, and he employs the Puzo-Coppola language to reverse its effect.
The myth about Southeast Asia is a matter of Sinocentric cultural determinism. Chinese ethnic groups have scattered about the region and wherever they have gone--so runs a common contention--they have brought with them a Confucian ethos, a dedication to hard work and entrepreneurialism, which has sparked growth and turned the beneficiary nations into "tigers" of productivity.
Those whom Mr. Studwell calls Asia's "godfathers"--the Chearavanont family in Thailand and the Hartonos family of Indonesia are two examples--have taken advantage of this myth to legitimize their own wealth and privilege. He associates them with the Corleones of Sicily and New York, then, in an effort at deflation.
The class at issue isn't, furthermore, as thoroughly Chinese as it portrays itself or as its outside admirers imagine. A few, such as the two families just mentioned, surely are. Many others are partially ethnic Chinese, and in such cases "the non-Chinese bloodline is sometimes seen as a source of embarrassment and played down, particularly in a Chinese setting." Still others aren't Chinese at all. Ananda Krishnan, of Malaysia, surely belongs in any list of the region's godfathers, though he's a Sri Lankan Tamil.
In general, Mr. Studwell contends that the godfather class throughout the region has been a retardant to growth, not the accelerant that its quite successfully promulgated self-image would have one believe. Southeast Asia hasn't shared the successes of Northeast Asia--Japan, South Korea and Taiwan--for three reasons. The northeastern countries have a successful history of land reform behind them. They have seen the development and political encouragement of branded businesses (not merely outsourcing operations for western brands) that compete globally. They've learned the tricky politics of stable multi-party competition. That is the direction forward for their southern brethren.
I learned a good deal from this book. Still, I think that Studwell rather overdoes it, and allows deromanticization to spill over into distortion. I suspect that Confucian values do have something to do with developments in the region, just as Calvinism has had a good deal to do with economic developments in the north of Europe for the last few centuries.
on February 24, 2013
A book about the rich and famous that really contains a story about South East Asia. Studwell rejects the racial explanation of SEA problems and instead pins most of the blame for the region's underperformance to the lack of political will (or some say conscience) of the political elites of Indonesia, Thailand, Malaysia, and the Philippines. Yes, the godfathers do steal, bribe, rob, transgress, and exploit, but they do so within a preset legal and executive systemic political players that enable them. All the while, the hundreds millions of regular citizens in poverty earning USD$2 are waiting for a concentrated noble effort to finally come from a new breed of political elites (and the economic elites who will follow) the like never seen before in the region.
on April 27, 2013
Somewhat out of date now but provides a good background summary of the history and events up until 2004. I was led to believe that there was more individual background on the people as opposed to a general history. An updated version would be great Mr Studwell.
on May 28, 2012
Ever wondered why its difficult to get off the ground in Asia? Even for locals? So we know it's not just a question of adapting to the local culture? Joe Studwell tells you why: monopolies, and unless you're one of them, you can't win. And he tells you why govts are comfortable with this arrangement.