Book of the Week: Armed for business with the Asian tigers

Asian Eclipse: Exposing the Dark Side of Business in Asia

By Michael Backman

(John Wiley, pounds 12.99)

ASIA'S ECONOMIC crisis ceased to be a story for most of us when fears that it would leap continents like a fiscal plague gave way to the realisation that a holiday in Thailand could be cheaper than a break in the Channel islands. This easy transition from trepidation to amnesia by the majority is now being matched by some equity investors, eager to hunt fresh pelts among the weakened Asian tigers.

Michael Backman's brisk examination of the factors he considers helped to trigger the 1997-98 crisis that tore apart most of Asia's econ-omies should be required reading for the latter group. But the real strength of Asian Eclipse is its accessibility to non-specialists through its startling insights into the business interests, machinations and relationships of groups and individuals who redefine the concept of "East Enders".

Thirty years ago, James Cameron, one of the wisest, wittiest and most humane of postwar British journalists, said the day would come when a pivotal individual or group would emerge in Asia with a name too obscene in English for a newspaper to refer to it. This void would create a seemingly inexplicable series of events that would baffle and bore distant readers. Apart from a few startling acronyms - the exiled Cambodian anti-Communist Front Union Khmer was saved from obscurity by the strategic insertion of an N to produce the printable FUNK - Cameron's whimsy has yet to be met. But his thesis remains sound, and in many respects forms the core of Backman's argument.

Our culture's emphasis on ethnic and racial sensitivities, laudable as part of the long-term process of integrating and demystifying differing strands of national origin and experience, can create problems if applied too closely by those engaged in international business or other commercial relations. This delicate area may cause squeamishness and help form the void James Cameron was alluding to in the late 1960s.

Backman opens his book with an examination of the debate over Asian values - values based on a mix of paternalism and communitarianism (and always juxtaposed against the West's emphasis on individualism, seen as a negative by many Asian leaders). First extolled by local politicians for their alleged role in underpinning the region's economic prowess, Asian values have led to friction between the region and the West.

The debate has sharpened since the economic crisis rocked the region in 1997-98. Politicians such as Malaysia's Prime Minister, Mahathir Mohamad, have accused the West of deliberately undermining Asian values to help to reduce the region again to colonial dependency. Backman views the Asian value debate as at best a diversion. He is right. At worst, such views correspond to the sophistry developed in South Africa in the 1950s that sought to justify apartheid on the basis of separate but equal development.

The core of this book rests on the role of relationships in defining the Asian business environment. Backman considers Western business will always operate at a disadvantage in the region because of these links, which he sees as displacing law and other more neutral arbiters. This insider business culture is strengthened by the dominant commercial role of the overseas Chinese communities in the region.

Centred on Malaysia, Singapore, Thailand, Indonesia and the Philippines, these communities control the private business sector. A combination of lingering or actual antipathy against the Chinese by the majority, and the Chinese preference for doing business with those with whom they share close personal links, has created an efficient but often ruthless commercial culture.

Simply understanding that the Chinese dominate the private sector in much of South East Asia is a key lesson for anyone wishing to understand the dynamics of the region's economic and political realities. Backman's excellent and extensive case studies are aimed at pointing out the pitfalls for foreign investors or contractors operating in a milieu where the legal system is subsumed by political imperatives, business transparency virtually non-existent, and routine information regarded as state secrets.

More piously, perhaps, Backman also sets out prescriptive measures he argues are needed if Asia is to gain any long-term benefit from the economic shock. Stock markets across the region are already springing back to life, and foreign institutions such as the World Bank and International Monetary Fund have made cautious but encouraging noises about the end of the crisis.

The region is facing the most severe of tests. The impact of the economic crisis was uneven, badly affecting some countries (Indonesia will take many years to return to anything approaching its pre-crash stage of development) while barely touching others (Taiwan has shown little sign of distress). Within individual economies many suffered, often the middle classes, who lost assets and savings. But others prospered, particularly those in "dollarised" agriculture sectors where commodities are denominated in the US currency.

The recovery period after any major economic collapse is often attended by a rise in nationalism and the pursuit of scapegoats. While the focus of much of Western interest in the Asian economy is on the financial sector, particularly the huge debts amassed by the state and private sectors and owed to European and North American banks, the real story for millions of Asians is the economic and social impact of a sudden plunge back to poverty.

At this point anti-foreign sentiments may be stirred as such "national assets" as banks and local business groups go under the hammer and are acquired by international companies. Foreign ownership can be easily presented as a return to dependency, a sensitive issue in a region where memories of colonialism are strong and often painful.

Political efforts to manipulate these sentiments are likely to take precedence over efforts to placate what local leaders may choose to see as Western efforts to capitalise on their misfortune. If so, relations between Western and Asian countries and institutions can be expected to deteriorate, adding further complexities to the business environment portrayed in the Asian Eclipse.

The reviewer has spent many years in Asia and is now Senior Asia Analyst at Control Risks Group, an international risk consultancy based in London.