||First, I would like to thank you and your publisher
John Wiley & Sons in Singapore for the opportunity to talk with you
1.) Your book Asian Eclipse
was first published in late 1999 but wasn’t really available to most
readers until this month when the issue was updated and republished by
& Sons with much new material. In the introduction you state “This
isn’t about the Asian Economic crisis of 1997-98 but about the
practices that led to the crisis and that have survived it.” What led
to write this book and why do you think the book is something that
businessmen and women should read? (Click here for
I first considered writing the book when I was
researching and writing a report called ‘Overseas Chinese Business
Networks in Asia’
that was published by the Australian Government. While working on that
became aware of many business practices in Asia that were unfamiliar to
business people who are used to operating in more structured and
economies. I wanted to write about these practices but such things were
not appropriate for a report to be published by a government. Shortly
I moved to Jakarta where I worked in business consulting. Again, I saw
business practices that I felt needed to be examined.
All too often books are published about Asia, which talk
about the huge populations, the growing middle class and so on. All the
emphasis is on the positive aspects. Too little attention is given to
how difficult it can be to succeed in business in Asia, especially if
you are an outsider. I wanted to redress this with ‘Asian Eclipse’. It
simply seemed to be a
responsible thing to do.
2. In the book you talk of the
effect of corruption, weak or no enforcement of bankruptcy laws, weak
and a corrupt business news media and the excess that weaknesses in
areas have created for many Asian companies. Aren’t most of these
found to some extent in all developing economies, not just in Asia?
makes Asia’s situation more complex or more onerous than that found in
Of course no economy is perfect. When it comes to enforcement of rules
though it is the degree that is important. The notorious Australian
Alan Bond engaged in many of the sorts of practices that I talk about
Asian Eclipse, but the difference between Bond and all too many
people in say Thailand, Indonesia or even say, Malaysia, is that Alan
went to jail. He was punished, he was made an example of and his
were endlessly reported on and exposed in the media. If Bond was an
Indonesian or a Thai he’d still be in business, or perhaps would now be
or most probably be in both.
The situation in much of Asia (Singapore is usually the
notable exception) is similar to other developing economies. The
cultural overlay of course differs but the same lack of enforcement of
rules applies. The difference though with Asia is that particularly in
the boom years, westerners particularly were rushing in to invest as
much as possible and did insufficient homework.
I have never accepted notions of the mystical East or the
inscrutable orient. Asia is just as answerable and accountable for its
business environment as anywhere else. Asia is not impenetrable.
Analysts use notions of the
mystical East as an excuse for not doing their research properly. The
to me is not the East, but why have the efforts of so many analysts
so poor for so long?
3. You discuss the organization
of Asian companies, the problems created by unfocused growth, lack of
arms length banking, the problems created by Asian conglomerates
operating their own
stock-broking firms, etc. and give examples of a number of particularly
egregious situations. Given these problems, would your recommendation
non-Asian investors that they pass up Asia as a location for investment?
My recommendation is simply that all investors must do their research.
Information is the one commodity that cannot be economised on.
reduces risk and the aim should always be to reduce risk as much as
If you’re not prepared to pay for sound research, due diligence, or
then don’t invest in Asia.
4. Following up on the last
question, can you give counter examples of Asian companies that you
believe are particularly well-run and that have moved beyond these
tendencies for weak or at times corrupt operations?
I believe that all companies when pushed, will engage in unethical
behaviour if the legal system and other modes of enforcing
accountability and transparency are weak. I’ve given up trying to
nominate good companies in Asia. Whenever I do it, someone turns up
with a story of how they were ripped off or someone they know was
treated poorly by the company concerned. Companies that operate in
sound legal environments on average will behave in a way that is more
fair than those that do not on average, that’s about the best I can
5. In the book, you note that in
general an Asian company values services – such as legal, accounting,
consulting, etc. to a lesser degree than other regions. Given the
importance of intellectual property in the high-tech, biotech and so
called New Economy and the importance of services as a key component of
many more developed western economies
and even Asian ones such as Singapore or Hong Kong, how can such a
divergence of views on this issue really continue?
The new edition of Asian Eclipse has a new chapter that deals with
these sorts of issues. Briefly, as economies mature an increasing
of their national output is derived from the production of services.
economies are those with lots of services and countries that want to be
rich need to develop a strong services base. Singapore and Hong Kong
grown rich by providing services to their neighbours – services which
neighbours themselves need but which they are yet to provide for
In this regard, Singapore is to Indonesia and Malaysia what Hong Kong
to Guangdong. If Asia’s economies continue to undervalue services as a
input then they will continue to under-perform. At the very least they
hit a growth wall beyond which they can expect consistently lower rates
of economic growth unless the cultural and structural biases against
are broken down.
6. Your book has a table listing
25 key differences between management and corporate structures in Asia
the West (click here to view the table).
of these differences say for example the second one which notes the
difference between a focus on profits and a focus on growth would
strike many as not necessarily a matter of one being right and one
being wrong. Can’t these also be looked in some of these cases as in
effect solely being a difference in focus and as just another way to
reach the same ultimate goal?
Yes. The table merely looks at differences in styles. It contains no
7. Also in your book you look at
the two major economies in Asia – Japan and China and your assessment
for both is really quite negative. Can you explain why you see Japan as
less in terms of business practices as being little better than
Asia and China as essentially a black hole?
Japan is something of an anomaly. It has grown wealthy on a framework
of third world corporate governance. It did very well out of having the
United States write its constitution after the second world war and
various regulatory agencies established by the Americans that were
on US agencies. On top of that, Japan has had a comparatively long
of significantly investing in education which South-East Asian
do not have. These factors were very important to Japan’s economic
post-world war two. However, eventually problems derived from Japan’s
of corporate governance, inadequate common law procedures and
enforcement accumulated and what had been the relatively efficient
of the Japanese economy simply fell apart and was unable to demonstrate
the agility and flexibility to adjust to changing external conditions.
China has a big population but not much else. A big
population without a comprehensive and enforced legal system does not
make for a good economy, it merely makes for a big population. The
for sustained economic success is a comprehensive and enforced legal
system. Until China has that it will continue to disappoint.
8. Every society and every nation
has its problems. Have there been developments in any of the Asian
countries over the last two years since the crisis that you believe
bode well for
Asia? Could you give us some specific examples on these?
The awareness of the need for better corporate governance has been
raised in most Asian economies. The Kuala Lumpur Stock Exchange for
example commissioned a study on corporate governance awareness among
Malaysia’s listed companies. The report that was produced is quite
impressive. The arrogance of some
of Asia’s leaders too has been curtailed by the economic crisis. That
important. Economic growth was masking all sorts of abuses but now
have been laid bare. Leaders in the west often don’t develop the sort
arrogance that some leaders in Asia developed because they tend to be
removed from office by due electoral processes.
9. How do you assess the future
Patchy. In the boom years, all of Asia was lifted by the enthusiasm to
invest in the region. Now, investors will pick their companies and
much more carefully. Those Asian countries with better and enforced
structures, Singapore and Malaysia particularly, will do well. Those
do not will under-perform. Consequently Asian economic development will
become even more disparate and uneven than it is now. This will
have regional security implications.
10. In your book you make a
strong argument for the reality of globalism and argue that Asia can’t
have a separate set of rules. As you well know the whole concept of
globalism is under
criticism by a broad coalition of forces that came together visibly to
the concept both inside and outside major international meetings like
in Seattle, Prague and elsewhere. Despite the vocal nature of these
do you see any option to a global set of norm in business?
No. Globalism means jobs, trade and cooperation. Barriers to trade and
investment mean isolationism, unemployment and wars. The benefits of a
economy are too great. In the region, the Malaysian government has been
prominent in voicing its concerns about globalisation but Malaysia has
particularly well from the flow of foreign capital. In 1985, for
when the Government there was very keen to attract foreign money to
itself out of recession, one study demonstrated that 13 American
manufacturers spent more than US$100 million in that year in Malaysia
training Malaysians, mostly technicians and engineers. By the late
more than 85,000 Malaysians were employed in the electronics industries
and many of these were formerly poor, rural Malay women. That is what
is really about.
11. At this point I’d like to ask
you a question you pose in the last chapter of your new book because I
think it is one that many of the readers must be asking themselves at
this point. The question is “Given how business has been and will
continue to be done in Asia, what should outsiders look for when
seeking to do business there?”
As I said before, information is gold and should not be economised on.
Be better informed than your competitors and you will make better
decisions about where to invest in Asia and with whom.
12. Lastly I’d like to complement
you on Asian Eclipse. It is not only insightful and educational, even
for someone like me who has spent over 30 years in Asia, it also is a
good read because of your use of real life examples and the keen
descriptions of personalities and events. Could you let us know about
the future projects that you are
working on and when we can look for another new book?
Thank you. I currently write several regular newspaper and magazine
columns that focus on business in Asia. I’m also close to completing a
looks at Malaysia’s capital controls and the policies of Malaysian
minister Daim Zainuddin. I’m also writing a book set in Europe. To that
end I currently divide my time largely between Paris and Kuala Lumpur.