Pulling the strings

The most common way to get internet, broadband television and landline telephone services in Hong Kong is through a single package from PCCW, the virtual monopoly controlled by Asia’s richest man, Li Ka-shing.

The service is pretty good – until something goes wrong. Then the cracks start to appear. Li controls all three services, but each one is provided by a different subsidiary and these individual units don’t seem to share service records, use the same technicians or even communicate with one another that much. Solving tricky technical problems may require calls to each one and a fair amount of luck.

This lack of efficiency is supported by the lack of competition. There really is no convenient alternative but to use PCCW – which, to be fair, is generally reliable. Without competition, there is little encouragement to improve or offer better customer service.

It is a flaw that characterizes many of the companies owned by the tycoons that control the economies of Southeast Asia: poor services and weak production hidden behind enormously profitable monopolies first granted by colonial governments and later by local governments not a little tainted by corruption. The tycoons were the people with the connections, savvy and existing capital to acquire monopoly concessions in almost every industry of significance.

Joe Studwell tells the story of these tycoons and their fortunes in Asian Godfathers: Money and Power in Hong Kong and South-East Asia. More than a series of biographies or exposés of some of the most economically intriguing people in the region – and even the world – the book portrays a regional economy much less open than is generally believed.

Even much lauded bastions of free-market capitalism like Hong Kong and Singapore are less open than they appear, it is argued.

Rogue’s gallery

Studwell is the author of The China Dream: The Quest for the Last Great Untapped Market on Earth and has covered the region for more than a decade as a writer and broadcaster. He tells an interesting story in a couple of hundred pages and supplements it with an extensive and informative index of the most high-profile tycoons and businessmen in the region.

Their rise doesn’t have much to do with race. In Studwell’s view, the tycoons profiled are more cultural chameleons than representatives of a nationality or an ethnic group. Interestingly, many of them are ethnically Chinese; the descendants of émigrés to just about every country in the region.

This is tied to a myth Studwell quickly dispels. Few if any of these tycoons are actually working class heroes. Despite their common propensity to paint themselves as rags-to-riches stories, most of them were born into reasonable wealth, married into it or lucked into the right circles through colonial scholarships.

While remarkable, the careers of these tycoons are more those of people that multiplied existing wealth rather than those of people that created it from scratch.

Despite changes in political climates, little has changed in the region and these godfathers continue to enjoy monopolies, often granted to them or acquired by a group of them with little regard for any type of competition.

Excerpt: A game of monopoly

At the heart of the average godfather’s empire is a concession or license that gives rise to a monopoly or oligopoly activity. In the instances this is not the case, a structural economic anomaly created by the 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 noncompetitive 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 Yutung, in bidding for what was to become by the 1970s the third-largest gaming center in the world after Las Vegas and Atlantic City.