Many of you who follow this blog
will have also followed the upheaval in Thai politics that started with the
military coup in 19th September 2006. One side of the political
equation has been referred to as including a segment of Thai businessmen (mostly
Thai-Chinese ), joining the traditional old elites and a smattering of new
“liberal” democrats. These groups are united in their nearly universal aversion
to the former prime minister (and the individuals who succeeded him in rapid
What has received less attention is
the underlying dynamic of origin and nature of the economic and political
interest and how they’ve remained fairly consistent in Thailand for many decades
despite the fact that governments and constitutions have regularly changed. This
partnership of convenience has an enduring quality.
The perception that Thaksin
policies threatened to upset this partnership with its existing players, caused
a sense of panic, followed by determination to do what was necessary to
eliminate the threat.
To understand the working
relationship between the business community (overwhelmingly ethnic Chinese) and
the other big political players such as the bureaucrats, the “old-money” class
and men in uniforms, you would do well to read Joe Studwell’s Asian Godfathers.
Studwell does an excellent job of revealing how the Godfathers
succeeded in Southeast Asia, including the Thai godfathers contingent. In any
Southeast Asia patronage system where concessions, licenses, cartels and other
monopoly practices have had a long history, the Chinese were skillful in
cultivating the right political connections and exploited them to create a herd
of rich cash cows. Whether it was ports, banks, telecommunications, mining,
rubber, or timber, having an exclusive right to a monopoly coupled with the
guarantee to exclude competition was a surefire way to rake in a large amount of
money. The other factor that Studwell identifies as significant to the rise of
billionaire Asian Godfathers was access to easy and cheap credit. This allowed
them to expand their business interests.
As the global financial recession
continues accelerate, it will likely eliminate the easy and cheap credit that
Asian godfathers have grown accustomed to tapping. How many of the Asian
Godfathers have been over-leveraged? As this is a secretive group, probably no
one really knows the answer to this question. The same is true of another
question— whether the cash flow from the Asian godfathers’ traditional
concessions and licenses will see them through this financial crisis.
Local economies in Southeast
Asia are contracting as well. Less of everything is selling. Having a monopoly
over resources or services will be a cushion but will it prevent injury when the
fall this time is from such a great height? No one, again, can predict how much
of a haircut the Asian Godfathers will be in for this time. The likelihood is,
once the dust settles, and the accounts are reconciled, we will discover some
heads that have been shaved clean.