And so it was in business as well...

In a crisis, the family, cronies, and trusted servants bond even closer together, so these traditions are still very much of both Asian culture and business today. For in a world gone mad, we seek refuge in the only ones we can trust.

Guanxi is still the key to doing business in much of Asia today. On the other hand it is counter-productive to competitiveness in a region where the difference between stunning success, survival and bankruptcy affords little margin for entrusting your business or country in the hands of those who got there by patronage and protection alone.

In South Africa, black empowerment is at risk as the rush to empower black companies resulted in the handing of power to those who had all the contacts but little of the expertise. When you are rushing to ride the crest of either an economic boom or a popular sentiment, businesses and governments spare little time for recruiting and appointing on the basis of competence. It takes too long. ..Much easier and faster to appoint those you know and trust already.. family, friends of the family, political associates... Management, professional or financial competence runs a poor second to having the right connections.

In South Africa, many of the black empowered companies are having a hard time. Despite having advantages in a better relationship with unions, a politically correct relationship with their own and other governments, many are coming the cropper. According to a recent report in "The Economist" the black companies that are failing are those that rely on political connections..

Shares in Mawenzi Resources, an investment firm headed by Mzi Khumala. a hero of the struggle against apartheid, plunged by 78% in 1998. New Africa Investments, run by Nelson Mandela's doctor, has struggled.

One problem is that black empowerment deals have done little to establish genuine business. To impress the government and perhaps to avert racial unrest, white banks and business decided they should nurture black capitalists. Because few blacks had much capital, banks lent money to well-connected black consortia that wanted to acquire shares in white business.

...the millions of Rand poured into flashy, paper shuffling empowerment deals has reduced the amount banks can share for real black entrepreneurs...

(Economist April 17th 1999)

And even for religion...

Korean Reverend Sun Moon's Moonies cult, which enabled the rise of a major business which bought into many US businesses including the ultra-conservative Washington Times newspaper, is currently reeling after revelations of the behavior of Rev Moon's sons hypocritical family life. In Asia, more and more we are questioning our belief that genes have anything to do with business acumen as the offspring of successful business men have brought previous business empires to their knees. And its not all the developing countries too. Well we know the story of the demise of the Bunnings retail giant in the US, overseen by both a night-clubbing son and a dense one.

Now over in our part of the world, Malaysia's Prime Minister Datuk Seri Dr Mahathir Mohomad himself accepts that the major business losers during the Asian crisis have been the new Bumiputra companies, encouraged as part of the NEP to engage in business just like the Chinese do. What Mahathir doesn't mention as much is that much of this business and the benefits accruing from it did not go to the Malays in general, but rather a small group of insiders with political connections. And these people have been as adept as the Chinese at keeping the rewards amongst the family and friends. The "trickle-down" effect, where it is assumed that when the rich get richer the benefits will eventually trickle-down to the up-station kampungs and the workers is a baseless assumption in a region where you look after your family first. Same story in Malaysia as elsewhere, the Asian crisis is causing the most problems for those who relied on government protection and patronage, regardless of race, industry, or location.

While former Singapore Prime Minister's son Lee Kuan Yew's B.G. Lee is himself one of the brightest business minds in Singapore, the patriarch of modern Singapore is signalling that it is time for Singapore to reward competence as well as loyalty and connections.

In a blunt statement yesterday, Lee said that Singapore banks had thrived so far not because they had "wonderful bankers". ...It is because I protected them, along with a former top official of the Monetary Authority of Singapore (MAS)..." (co-incidentally, "Mas" in Bahasa Malayu means "Gold").

Lee said he prevented foreign banks from opening branches and having automated teller machines and allowed local banks to feed their ATM's and their branches throughout the Singapore heart-land - the Housing Development Board flats "...And now they have become important financial institutions for us. But if they continue to play in that league we will be wiped out..." said Lee.

At a time when Singapore is about to open up the banking industry to foreign competition, Lee urged bankers to reform, recruit foreign talent, from partnerships with other banks in the region, inject capital, and keep abreast with technological changes to meet the competition.

When I was just a baby Rat, I asked Grandma Rat what banks do..

"...Well they keep your money in a building so you don't lose it...", was the sagacious reply.

'...So how come they give me more than I put in..?"

"...Well that's called interest dear... they loan your money to someone else and give you some of what those people pay the bank..."

"...And is that all they do?... Do they make anything like the teddy bear biscuit factory down the road?..."

"...Well, no dear..", said Grandma with remarkable patience but some testiness...".. they just shuffle your money around...."

"...Great! maybe I can be a banker when I grow up and play with other people's money!..."

With that the old lady emerged from her chair and propped herself up on her walking stick... "...Money is the root of all evil...", she muttered as she got up to check her money hidden under the bed.

Those who do business in this region know that a lot of effort and money in business is spent on enhancing connections, and political maneuvering. While the 5 star hotels, karaoke bars, some politician's bank managers and golf clubs are not complaining, this is money that can not be spent on staff development, and increasing professional competence to become more competitive.

Singapore is again saying and doing the right things at the same time.