Region's Chinese business clans still going strong

Region's Chinese business clans still going strong

By Lim Say Boon

SINGAPORE: "Gong xi fa cai" and its various dialect variations (for Happy Chinese New Year) once again echoed across ballrooms and halls packed with Southeast Asia's Chinese business elite last week.

And while the "happiness" portion of the equation would have been a matter of personal disposition, the wishes of "prosperity" rolled off their tongues without as much conviction as they did prior to the 1997 economic catastrophe.

Yes, there is a huge dose of sensationalism and a certain amount of schadenfreude in Western observers' dismissive comments about the so-called "bamboo network", post-Asian crisis.

The Southeast Asian ethnic Chinese remain a potent force in business, one whose place in commerce and enterprise is not so much assured as won every day (and, since the regional economic crisis, won back) through dogged persistence, an almost instinctive focus on education and excellence, and street smarts cultivated through generations in business.

But there is no denying either that the wealth, power and influence of many of ethnic-Chinese business clans have been diminished throughout Southeast Asia over the past 3 1/2 years -- especially among the ranks of the second-tier tycoons -- and in Indonesia and Thailand.

Further, the results of the battle to restore their former financial and political standing have been patchy.

Indeed, in Indonesia, where the damage has been greatest, it will take another generation for most of the affected business families to restore their former wealth.

Beyond that, and perhaps most importantly, Southeast Asia's Chinese business clans face the urgent challenges of the globalisation juggernaut.

The rapid breakdown of national economic boundaries and the abrupt entry of international (mostly Western) giants signaled a challenge symbolically as powerful as the arrival of gunboats in imperial China.

The dynastic nature of top management and decision-making within Southeast Asia's Chinese business families will be severely tested.

Interestingly enough, outside of Indonesia and Thailand, the ranks of Southeast Asia's ethnic Chinese "super rich" have not been affected noticeably by the regional economic crisis.

Even where they have been hurt, the damage has nowhere been as great as the Western media had made it out to be.

I took a look back at the Southeast Asian ethnic Chinese names on the Forbes "super rich" list circa mid-1996, and did a "whatever happened to..." exercise.

From Singapore, the list included Ng Teng Fong (and son Robert), Kwek Leng Beng and family, Khoo Teck Puat, the Lee Family and Wee Cho Yaw.

Even if some observers thought Ng would have had a few anxious moments during the Singapore property crash that followed the regional economic crisis, the entire Singapore membership list had emerged unscathed.

The same would have applied to Malaysia's ethnic Chinese "super rich": Hong Leong Group's Quek Leng Chan, Robert Kuok, timber magnate Tiong Hiew King, Genting Group's Lim Goh Tong, Yaw Teck Seng, banker Teh Hong Piow and power and property tycoons Yeoh Tiong Lay and family.

But in the wealth pecking order below the above superstars, Malaysian tycoons have been and still are struggling with debt- restructuring exercises.

From the Philippines, the list included Tan Yu, banker George Ty, Andrew Gotianun, Lucio Tan, John Gokongwei, and retail king Henry Sy.

This list had emerged largely intact. Indeed, it is still reportedly "business as usual" even for Estrada supporter Lucio Tan.

The damage on to the Thai ethnic Chinese tycoons was much greater, as one would expect, given the financial damage done to the baht. It had been said that before the crisis, approximately 50 ethnic Chinese families controlled most of Thailand's business sector.

Prominent economist Ammar Siamwalla, of Thailand's Development Research Institute, a Bangkok-based think-tank, was reported in the Financial Times as saying: "Where there were 40 to 50 big- business families in control, there are now only four or five."

But the devastation was nowhere near as great as that suffered by the Indonesians.

The Indonesian list included the Wonowidjojo family of clove- cigarette producer Gudang Garam fame, Sinar Mas group owners Eka Tjipta Widjaja and family, Liem Sioe Liong and family of Salim Group fame, the other kretek tycoon Putra Sampoerna, one-time timber king Prayogo Pangestu, property developer Ciputra, Sjamsul Nursalim of Gajah Tunggal fame and the Lippo Group's Riady family.

Even in Indonesia, the survival rate among the "super rich" is decent. Diminished, yes, but survivors nonetheless.

Possibly the hardest hit on the list were Prayogo Pangestu and the Nursalim family.

The Salim Group has been forced to sell huge chunks of assets to pay the state for funds lent to support its bank, Bank Central Asia. And it is still haggling with the Indonesian government over outstanding amounts claimed by the authorities.

But there is little doubt it remains a regional conglomerate to be reckoned with.

The Widjaja family has suffered serious dilution of its stake in its bank Bank International Indonesia, as a result of shares issued to the Indonesian Bank Restructuring Agency to recapitalize the bank.

But there is little doubt that the Widjajas, from the cash flowing from their pulp and paper and plantations businesses, will buy back the bank. And they have never been regarded as anything less than the serious business force they were before the crisis.

The Riady family underwent a similar experience and accepted lower shareholdings in the restructuring of their group interests. But they continue to be players of serious influence in Indonesian business.

But beyond surviving crises, the unrelenting quest for regional and global scale will test severely the ability of the ethnic Chinese business families in coming years.

Accepting strategic alliances with global giants -- and usually, that involves selling out a sizeable, or even a controlling stake to the foreigners -- to access international technology, management, products and markets will prove difficult for family-run dynasties.

Some, like Thai Farmers Bank's Banyong Lamsam, may be content to let the family quit the business. Others, such as UOB's Wee Cho Yaw, may have other ideas.

And it is not a simple matter, either, of surviving by accepting strategic alliances. That's a nice business-school term for selling down or selling out.

The challenge is how the Chinese business dynasties engineer their own survival as the entrepreneurial force they had been for the best part of a century if they accept dilution to minority status, playing passive partners to international corporations.

That is a difficult juggling act that will prove even more challenging than surviving financial crises.

The writer is Director of OCBC Investment Research Pte Limited. The views expressed in this article are his own.

-- The Straits Times/Asia News Network