Saturday, May 24, 2014

Anglo-Westerners Overrate Connections Inside Asia

How much do you folks know about Asia?  If you're native to the Anglo-West, probably not much.  If you have familial connections to Asian business leaders, probably a lot.  Family counts for much in Asia.

I sat in a business meeting a couple of years ago with corporate executives touting their connections to the Mongolian central government.  Their credibility rested on the regulators' supposed willingness to greenlight the final development of their planned coal mine near the Chinese border.  Lo and behold, Mongolia went through a fit of resource nationalism shortly thereafter.  The government halted all foreign-owned development projects and partially nationalized a few of them.  Those overconfident Western miners and their investors got their rear ends handed to them on a silver platter.

Many Southeast Asian societies are open to Western investment only in theory.  In reality, the Chinese diaspora retains enormous economic leverage.  The current instability in Thailand is a great example.  The Thai-Chinese ethnic minority controls most of the economy and sides with the military in opposition to the populist Shinawatras.  Westerners trying to get their foot in the door with foreign direct investment can look forward to more onerous terms now that the military has seized the government.  

Westerners underestimate Asian inscrutability at their peril.  Bamboo curtains and double sets of accounting books keep real economic leverage away from prying foreign eyes.  Westerners who employ ethnic Chinese with blood ties to business elites stand the best chance of avoiding ripoffs.  That may not be much of a chance at all, but it's better than winging it with superficial knowledge and cursory connections.