Note: While reading a book whenever I come across something interesting, I highlight it and later turn those highlights into a blogpost. It is not a complete summary of the book. These are my notes which I intend to go back to later. Let’s start!

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.

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.

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.’ The symbols of recognition that constitute official titles therefore become terribly important.

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.

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. 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.). 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.

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. 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.

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.’ 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. 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. 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.’ 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.’ 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.’ 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.

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. 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’. 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.

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.’ 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?

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.

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.’ 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.’ 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.’ 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.’ 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. 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. 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, 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.’

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. 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.) 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. 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. 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.’

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.’ 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 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.

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. 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. 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. 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.’ 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). 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. The message seemed to be that the tycoons were unused to operating in conditions of genuine competition.

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, 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. 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. 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.

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. Mahathir was sold, and to this day retains a vast, fishbowl-shaped private office at the top of one of the towers. 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.

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 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 it).

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.’ 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’. 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. 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.’

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’. 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. 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.’

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.’

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.’ 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.

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. 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. 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.

How hard does a godfather work? This is an intriguing question. Received opinion is that they work hours that mere mortals would be incapable of. Tung Chee-hwa, the shipping magnate’s son who became Hong Kong’s first chief executive, frequently made public reference to his marathon shifts, eventually claiming that the effect on his health of a lifetime of 16–18-hour working days forced his resignation from the top government post. Tycoons from Y. K. Pao to Li Ka-shing have been defined by their pre-dawn waking hours and contempt for the notion of ‘holidays’. There is no doubt that godfathers put in the hours. But the nature of their working day is not that of a regular executive. As the chief financial officer to a Singaporean tycoon, and former executive of a major Indonesian family, reflects: ‘Do they work hard? They work their relationships …’ This is an important distinction. In Western management terms, godfathers are commonly perceived as chief executives. But in reality their activities are more like those of supercharged chairmen: setting strategy, deal making, hobnobbing, but ultimately leaving others to execute the substance as well as the detail of what they put in train. An operating environment in which guanxi, political favour and licences are relatively more important than the inherent efficiency and global competitiveness of a business make this inevitable. Godfathers, and their immediate support staff, spend inordinate amounts of time making sure photographs of the tycoons with ascendant politicians are on display in their offices (and that images of out-of-favour politicians are taken down), organising golf games, putting tycoon homes, yachts and hotels at the disposal of persons who need to be ingratiated, resolving the problems of politicians’ wayward children and sending gifts around the world.

Golf is the base ingredient of this social–business mix. Almost without exception, godfathers play the game. In Hong Kong, for instance, the top tycoon rank – K. S. Li, Robert Kuok, the Kwok brothers, Lee Shau-kee, Cheng Yu-tung – are all long-time players and several of them own their own courses (over the border in mainland China) at which to host their guests in private. Asian dictators, too, have been big golf aficionados. Suharto played weekly, while Marcos claimed to have the lowest handicap of any world leader (his bodyguards stand accused of kicking his mis-hit shots out of the rough; playing partners said he never had a bad lie). Golf, more than any other activity, is the social lubricant of Asian big business. As a result, golf is part of work. As is attending weddings and funerals of business associates and politicians – what Hong Kongers dub ‘doing red and white’: red being the colour of Chinese weddings, white that of funerals. As is conducting business while eating; godfathers are rarely seen at home for meals. And as is throwing endless parties and receptions.

Since everything counts as work, Li and other godfathers can claim to put in sixteen hours a day. But the task of actually running their businesses, and putting deals cut over golf or lunch into practice, falls to managers. There are many of these, but in most tycoon businesses there is a clearly identifiable person who might be called ‘the chief slave’. This is the first person who gets called when the godfather wants something done. In Li’s case it is Canning Fok, the somewhat overweight executive with a greying, pudding-bowl hair cut who can occasionally be seen in public handing Li a mobile telephone with both hands – the ingratiating Asian gesture normally reserved for name cards. Fok undertakes tasks great and small. On the one hand he has overseen the investment of more than US$20 billion in Li’s third-generation mobile telephony business. On the other, it can fall to him to bawl out equity analysts who have put a sell call on a Li company.

Those closely acquainted with chief slave characters say it is not just their salaries, but the sense of power and proximity to the godfather that motivates them. The frisson of power is that much greater than in an impersonal multinational business, particularly since the tycoons’ position is more directly bound up with their political access and favour. Ultimately, however, the chief slave’s status is a mirage. He may receive share options but control of the business will never pass to him; rather it will go to the next generation of the tycoon’s family. In this sense he suffers the whim of a capricious employer for nothing.

The line attributed to the famous American bank robber Willy Sutton – ‘I rob banks because that’s where the money is’ – would not be an inaccurate job description for a good many Asian godfathers. The havoc that tycoons wrought through their abuse of private and public banks was accentuated by the region’s unusually heavy dependence on bank finance. Before the financial crisis, bank lending accounted for between half and four-fifths of all financial assets in south-east Asian countries, compared with one-fifth in the United States. Lending in these countries in the decade before the crisis was fuelled by an average annual increase in domestic bank deposits of more than 20 per cent, as household savings rates increased. The metric was simple: ordinary people put their money in banks and godfathers took it out to finance their investments, driving a six-fold lending increase across Thailand, Malaysia, Indonesia and the Philippines between 1986 and 1996.

Asset trading had come to define south-east Asian business. The trajectory of one of the region’s brashest new tycoons, Vincent Tan Chee Yioun, bears this out. Tan began to ascend Malaysia’s greasy corporate pole in the 1980s in the traditional manner. He constructed his links to Mahathir and the Malaysian political élite. He formed a close relationship with Mahathir’s favourite nephew, Ahmad Mustapha bin Mohamad Hassan, and brought him on to several company boards; Tan and his brother Danny were also involved in a car trading business with a brother-in-law of Mahathir. In 1984, Vincent Tan obtained his first untendered privatisation, buying a small industrial company from state investment agency PERNAS. A year later came his core cash flow, in the form of a lottery privatisation, again untendered. Tan then went on an acquisition spree, building a stable of seven listed businesses involved in everything from consumer durables to infrastructure to media to hotels to logging to stockbroking. But what was most striking about his sea of corporations – he had an airline, too – was how little operating profit was produced. Almost all income came from buying and selling assets, often between Tan’s own listed companies. He had a textile firm that became a logging business; he had a logging business that became a financial services conglomerate; his lottery franchise was sold out from under the noses of his gaming company investors, only to reappear via a reverse takeover a year later. From 1989 to the mid 1990s, exceptional gains from asset trading constituted between two-thirds and all of Tan’s holding company’s profits in any given year. Net operating profit as a share of revenues was sometimes less than 1 per cent. By 1995, minority investors had figured out what was going on and were marking down shares in his companies; but the banks kept backing him. Vincent Tan and those like him were a calling card for business running off the rails.