excellent insight of Asian business community ( )

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 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.

The rather surprising but inescapable conclusion 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 also participates in the lowest level 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) quite simply saying, “We are poor because our élites have no sense of nation.”

Highly recommended. ( )