Crony capitalism key stumbling block to reform in SE Asia

Crony capitalism key stumbling block to reform in SE Asia

P. Parameswaran, Agence France-Presse, Manila

Crony capitalism is flourishing in Southeast Asia even though
it was cited as a key cause of the economic malaise that resulted
from the region's worst financial crisis about four years ago,
analysts say.

Under crony capitalism, politicians in power offer business
contracts and other favors to their relatives or friends. It
breeds corruption, nepotism and political patronage, among other
evils.

Several Southeast Asian leaders, including long-time
Indonesian dictator Soeharto, were toppled following the Asian
financial crisis in 1997-98 when many companies collapsed due to
inefficiencies caused by crony capitalism.

But analysts at a regional forum on crony capitalism in Manila
lamented that reforms in business and politics that appeared
imminent in the region following the economic turmoil had fizzled
out.

"In spite of the political upheavals following the financial
crisis, there have been little fundamental structural changes in
politics and in business, particularly involving the links
between the two," Edmund Terence Gomez, a Malaysian associate
professor, told the conference at the weekend.

Among cases cited at the conference were recent scandals
involving the husbands of Indonesian President Megawati
Soekarnoputri and Philippine President Gloria Arroyo -- two women
leaders who stormed to power last year.

Gomez said one of the main factors fueling crony capitalism in
Southeast Asia was that with the emergence of democracy, "the
state is increasingly being captured by capital" which influences
the outcome of elections.

"Since political contests are being extremely influenced by
access to money, this brings into question the quality of
democracy that is emerging in the region," Gomez said.

In Malaysia, he said, Prime Minister Mahathir Mohamad's
powerful United Malays National Organization had an "overwhelming
influence" over the corporate sector and that Mahathir
"protected" well-connected businessmen.

"Malaysian capital remains very subservient to the
government."

In Indonesia, "the downfall of the Soeharto regime does not
mean the end of cronyism," said Benny Subianto, an Indonesian
visiting research fellow at the University of the Philippines,
told the conference.

He said crony capitalism under President Megawati has been
"decentralized" unlike during Soeharto's 32-year authoritarian
rule, when he and a few of his confidants "were able to control
and centralize the intact lucrative resources in their hands."

Megawati came under fire last month for appointing her husband
-- businessman and legislator Taufik Kiemas -- as head of a
ministerial visit to China last month, even though there was
alleged conflict of interest.

In the Philippines, Mike Arroyo, the husband of President
Arroyo, led a list of "people you love to hate" in a recent issue
of the respected Newsbreak weekly magazine, "given persistent and
vivid accounts of him putting up a shadow cabinet and supposedly
dipping his hands in big questionable business deals."

Arroyo was installed to power a year ago after a popular
military-led revolt ousted her corruption-tainted predecessor
Joseph Estrada.

"Her administration has been smeared by various scandals that
reek of crony capitalism mainly through the questionable
activities of her husband," Aquilino Pimentel, the opposition
leader in the Senate, charged in his opening remarks at the
conference.

"Incidentally, some of the crony capitalists who are still
highly visible in the unabashed game of currying favor with the
President are old faces who have managed to survive transitions
of power," Pimentel said.

Businessman-turned-prime minister Thaksin Shinawatra of
Thailand is said to be the clearest reflection of the intimate
links between money and politics in the region.

The billionaire politician was swept to power a year ago with
the biggest majority ever achieved in Thai polls but seven months
later narrowly got off the hook on charges of concealing part of
his enormous fortune.

Ukrist Pathmanand, assistant director of the Institute of
Asian Studies at Thailand's Chulalongkorn University, said it
would be difficult to pursue political reform and anti-graft
measures under Thaksin.

"Such policies would result in curtailing the strong economic
and political power base he and his friends enjoy -- something
which is at this point quite improbable," he said.