Tigers and cubs
Jonathan Mirsky
THE YEARS OF LIVING DANGEROUSLY: ASIA — FROM FINANCIAL CRISIS TO THE NEW MILLENNIUM by Stephen Vines Orion Business, £18.99, pp. 288 Alast, a double kick in the teeth for two vacuous and misleading notions: that there is something called 'Asian values', which underpins 'the Asian Miracle'.
Stephen Vines is what geneticists used to call a sport, 'an animal or plant deviating suddenly or strikingly from the normal type', as my dictionary puts it. Once a respected journalist in the UK, specialising in industrial and labour matters on the (good old) Observer, where we were col- leagues, he moved to Hong Kong for that paper to report on the region. Eventually he founded the most interesting paper seen in Hong Kong for years, Eastern Express. He reported for the Independent; he now writes for the New York-based Daily Deal. But what makes Mr Vines unique is that he is a businessman who operates a chain of catering establishments, including one for the Cathay Pacific staff at the Hong Kong airport, and an up-market kitchen- ware shop. All this puts him in the perfect position to show — in his mordant way why the great Asian crash came in 1997, and why it could have been foreseen. The internal rot which caused it remains, Mr Vines says, although some of the corrupt governments, reckless banks and incompe- tent companies which created the disaster have been swept away.
Vines would not dispute that the decades leading up to 1997 were ones of accumula- tion of vast wealth for some and a general rise in the region's standard of living. What he disputes is that there ever was a miracle from which we were told everyone should learn, as in books like William Overholt's China: The Next Economic Superpower and Jim Rohwer's Asia Rising. He bases this polemic partly on his years of financial reporting in the region, where he remains despised by those who insisted there was something almost magical about Asia and couldn't bear his myth-busting, and partly on his experience as a small businessman. His thesis is that
East Asia ... is stuffed full of badly run com- panies which grew in the asset bubble that developed before the crisis broke . . . The blunt fact of the matter is that Asia is severe- ly deficient in world-class companies.
Even after the 1997 crash, many financial leaders remain in denial:
Instead of acknowledging the shambles that characterises Asian corporate structures, they have lavished praise on the entrepreneurship and agility of these companies.
He focuses on the eight Asian miracle economies: 'the tigers' — Hong Kong, South Korea, Singapore and Taiwan — and the 'tiger cubs' — Indonesia, Malaysia, the Philippines, and Thailand. Here is what happened. On 2 July, 1997, the Thais devalued their currency. Down went the neighbouring cards, Indonesia, Malaysia, the Philippines and South Korea. After over 30 years of growth, sometimes into double digits, by 1998 all the tigers and cubs, except Taiwan, were showing nega- tive economic growth; Indonesia's GDP had plunged back to where it had stood 30 years earlier.
The IMF then attempted 'the biggest collective bail-out in history', giving, for example, $17.2 billion to Thailand and $57 billion to South Korea. As Hong Kong, too, began to crumble, that stronghold of laissez-faire entered the stockmarket in `the biggest stock-market raid ever under- taken by a government', spending $15 bil- lion to buy almost 10 per cent of the market's blue-chip stocks.
The West is partially to blame for this, Vines charges. Not because men like George Soros, scenting blood (like good free-marketeers), raided the region's finan- cial reserves, giving rise to anti-Semitic ref- erences by leaders who earlier had been wooing Soros's investment, but because Western pundits had excused the pervasive corruption of the region as a cultural advantage or alternative way of doing busi- ness. Some of the most famous investment gurus, like Philip Tose of the now bankrupt Peregrine, even suggested that the most authoritarian regimes, notably Indonesia, Thailand, and the Philippines, were espe- cially good bets because they were exam- ples of 'strong government, some would call it dictatorship'. Tose's Peregrine went down the drain with debts of more than $3 billion; it had loaned $260 million to the `Steady Safe' taxi company in Indonesia, partly controlled by the daughter of Presi- dent Suharto, admired by Mr Tose and one of Asia's most corrupt tyrants. When the Indonesian rupiah collapsed, Steady Safe could not service the Peregrine loan, much less repay it.
What Westerners had failed to grasp, or didn't want to grasp, was that the Asian Miracle, allegedly based on magical quali- ties of hard work, discipline, family and hierarchy, was simply a phase, a cycle, like the European Industrial Revolution. In Hong Kong 70 per cent of listed companies are essentially family-controlled, in Indone- sia it is 67 per cent, with similar figures for the rest of the tigers and cubs. 'Preoccu- pied with shuffling their assets, selling some of them off, and buying in others at low prices', they focus on controlling organisations rather than on developing good companies. In such family owner- ships, supine yes-men isolate the patriarchs from reality. Combined with this Vines finds
an edifice of lies, cheating, and outright rob- bery . . . The fundamentals of good govern- ment, good corporate governance and the elementary morality on which good business practices are built were shattered.
Despite the assertions of some apologists that corruption is well-accepted among ordinary Asians, Vines points out that in China in 1989, during Tiananmen, official corruption was the primary target of the angry students, and as corrupt regimes went under in Jakarta, Bangkok and Mani- la, anti-corruption was also the rallying cry.
During financial downturns, Vines says, good companies and good financial systems take knocks but survive. The two Chinese characters for 'crisis', which ornament the cover of his insightful and entertaining book, mean 'danger' and 'opportunity'. On my recent visits to Hong Kong, where there are empty shops everywhere and serious unemployment for the first time in decades; I heard that Mr Vines' own enter- prises are thriving. There was, he writes, no shortage of redundant skilled managers ready to work for him behind his counters.
The crisis was not a lack of people ready to work hard, but of bad, voracious manage- ment which squandered the efforts of these hard-working people.
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