Ties That Bind

Colonialism is partly to blame for this state of affairs, and for the whole tycoon system, though not entirely. In Thailand, which was never formally colonized, kings were employing Persians and Chinese to operate trading monopolies and tax farms from the 16th century. In Indonesia, Chinese entrepreneurs also entered into monopoly management arrangements with Javanese aristocrats before the arrival of Europeans.

Typically, there was a racial division of labor in which locals were political entrepreneurs focused on maintaining political power against indigenous rivals and, later, in partnership with Western colonists. Outsiders, often Chinese immigrants, were the economic entrepreneurs. So in Indonesia, the Dutch gave key ethnic Chinese traders both monopolies and pseudomilitary titles: majoor, kapitein, luitenant. The Spaniards who controlled the Philippines until 1898 named the top Chinese trader the gobernadorcillo de los sangleyes—the governor of the businessmen. In Malaya, the British and local royals sold trading, mining and other licenses to Chinese and Indian immigrants while encouraging rural indigenes to stick to farming.

When independence came, in the 1940s and 1950s, the region's new leaders built on a system in which politics rules the economy. In Thailand, military leaders demanded substantial equity positions and a board presence in ethnic Chinese-run companies; the Malay political elite made its financial expectations of Chinese businessmen very clear, in what became known locally as "the bargain." While the Thai and Malay elites stuck with established Chinese trader families, the two great Southeast Asian dictators of the postwar era—Suharto in Indonesia and Ferdinand Marcos in the Philippines—turned to unknown small-timers of whose absolute loyalty they could be sure. They were men like Liem Sioe Liong, a trader who in a few years became Indonesia's top tycoon, and Lucio Tan, a man who once worked as a janitor but ended up as a Marcos billionaire.

To this day, there are precious few Southeast Asian tycoons whose wealth is not rooted in some form of state-sanctioned monopoly. (The exceptions are a couple of lesser Hong Kong billionaires, Patrick Wang of micromotor maker Johnson Electric and Michael Ying of clothing business Esprit, whose money was made in recent years in manufacturing in mainland China.) Soft-commodity monopolies for consumer items like sugar and flour produced early cash flows for Indonesia's Liem and Malaysia's Robert Kuok. Gaming licenses primed Stanley Ho in Macau and Lim Goh Tong, Ananda Krishnan and Vincent Tan in Malaysia, and lumber concessions made Mohamad (Bob) Hasan, Prajogo Pangestu and Eka Tjipta Widjaya in Indonesia.

In Hong Kong and Singapore, real estate became an effective cartel because of the way British colonial regimes structured the land market—selling off "crown land" in large lots that created a barrier to entry for all but a few big players. In the 1990s land packages in Hong Kong were commanding prices of about US$1 billion. The city-states also restricted access to their banking markets, creating other huge rents for local players; the biggest of all went to the institution that is now known as HSBC.

After access to concessions, access to capital was the second prerequisite of Southeast Asian tycoons. Elsewhere in the region, tycoons used their political influence to secure credit lines from state banks or opened their own institutions, which served as private piggy banks. The Philippines has lurched from one banking crisis to the next for almost a century, some based around state banks and others around private banks set up by tycoons. The country has never recovered from the financial-sector meltdown in the mid-1980s, when Marcos went into exile.