ASEAN’s Huaren Titans Must Pay Their Dues Beyond COVID-19

Indonesian banknotes. Photo by Yamanaka Tamaki on Flickr, Creative Commons License 2.0

In a recently leaked letter, Thai Prime Minister Prayuth Chan-ocha made an unconventional appeal to the kingdom’s so-called “five families” to do more for their country during the ongoing coronavirus crisis. These billionaire business clans with tight ties with China control much of Thailand’s economy. While the pandemic has decimated Thailand’s tourism sector and left many SMEs struggling, the five families’ conglomerates have been shielded by hefty capital cushions and some have even found opportunities to grow their wealth during the crisis.

The Thais suffering from an economy ravaged by the coronavirus will undoubtedly welcome Prayuth’s call on the five families to provide their fellow citizens with “concrete help”. But Prayuth’s appeal draws attention to an issue that goes beyond the current crisis, and indeed beyond Thailand. A huge proportion of Southeast Asia’s wealth is held in the hands of a tightly-knit network of ethnic Chinese—huaren in Mandarin— families.

Patriarchs who fled poverty in China in the early 1900s managed to build vertically integrated conglomerates which have since cornered huge swaths of the Southeast Asian economy by playing a delicate balancing game between cosying up to powerful figures in their adopted countries and profiting off their family ties to China. Many of these tycoon families, however, from the Widjajas and the Riadys in Indonesia to the Chearavanonts in Thailand, have courted controversy even as they have found fortune—while their colossal corporations have been accused of doing more harm than good. Is now the time for a broader appeal—for ASEAN’s industry barons to engage more genuinely with their communities, even after the coronavirus crisis?

Papered-over problems

When Eka Widjaja, the Sino-Indonesian patriarch of the sprawling Sinar Mas empire, died in January 2019, former Indonesian president Susilo Bambang Yudhoyono dubbed him “a role model”. The Widjaja family’s corporate fiefdom, however, has been at the centre of more than a few controversies, from financial impropriety to gross environmental negligence.

Sinar Mas took advantage of Indonesia’s crony-capitalism under General Suharto to become one of the country’s most powerful conglomerates. In 2018, the Group raked in around $30 billion, largely from palm oil producer Golden Agri and paper manufacturer Asia Pulp and Paper (APP).

Meanwhile, Sinar Mas’ environmental and financial stewardship efforts leave much to be desired. The company had to claw back its reputation after APP’s catastrophic debt default in 2001 left it the pariah of the international financial world—only to face fresh criticism over its environmental policies. Environmentalists have charged APP with continuing to destroy Indonesia’s rainforest resources in defiance of zero-deforestation pledges and broken promises on restoration efforts.

The company’s problems have spread outside ASEAN, as well. Sinar Mas’s affiliate Paper Excellence recently had to close a paper mill in Nova Scotia which had been dumping toxic effluent into a lagoon for decades. To add insult to injury, despite the fact that Paper Excellence still owes tremendous sums to the Nova Scotian government, Halifax has already picked up part of the tab for cleaning up the polluted waterway, and the company is expecting the government to continue to write checks.

Suspect financial flows

The Widjajas aren’t the only controversial huaren clan cornering Indonesia’s business sphere. The Lippo conglomerate, run by the Sino-Indonesian Riady family, has faced trouble at home and abroad. One of the family’s scions, James Riady, was put in charge of an Arkansas bank in the early 1980s—where he befriended a young Bill Clinton. The friendship at first seemed lucrative—Riady visited the White House as frequently as five times a week during Clinton’s tenure, often parroting the views of the Chinese and Indonesian governments. At home, the Riadys exploited the perception that they had the American president’s ear to press Suharto for lucrative contracts.

Serious questions, however, were raised about the lavish donations which the Riadys and Lippo board members made to Clinton and the Democratic Party—both whether the grants were an attempt to influence American politics and whether they violated campaign finance laws. It wasn’t the first time—or the last—that the Riadys’ companies were suspected of financial foul play. The Arkansas bank made some $40 million in loans available to entities controlled by the Riady family. The Los Angeles-based Lippo Bank came under investigation for suspected money laundering.

Most seriously, in 2018, Indonesia’s anti-corruption agency raided 10 locations associated with the Lippo Group, including James Riady’s home. The sting operation centered around allegations of bribery involving the conglomerate’s $21 billion real estate project it’s dubbed “the Shenzhen of Indonesia”. Some of the group’s executives were imprisoned over the scandal, but Riady insisted he was unaware of the graft and that the project “wasn’t his idea”.

Cramping SMEs and problematic supply chains

The Thai tycoons which Prayuth exhorted to help their country during its time of need have also courted their share of controversy. Broadly speaking, their titanic conglomerates have been accused of crowding out SMEs and exacerbating inequality. Thailand’s poverty levels rose from 7.2% to 9.9% between 2015 and 2018 and economic growth stagnated, while the profits reaped by the mega-rich skyrocketed. Thailand’s GDP per capita was less than $7,790 in 2019 before coronavirus took hold, while the combined wealth of the five families hovered near $100 billion.

One of these “too big to fail” economic giants has been accused of actively exploiting this inequality. Thailand’s largest private company, the Chearavanont family’s Charoen Pokphand (CP), has had to fend off troubling allegations that its supply-chain relied on slave labour within Thailand’s seafood industry. According to the results of a six-month investigation conducted by the Guardian, workers aboard fishing vessels supplying CP Foods reported enduring inhumane conditions, including 20-hour shifts, beatings and torture, and even execution-style murders.

Like Sinar Mas and Lippo, CP has pledged to clean up its act. The repeated controversies that have besmirched these conglomerates’ reputations, however, suggest that they should “do more” for their communities beyond coronavirus philanthropy. Becoming responsible stewards of the environment, stamping out graft and adopting ethical labour practices would be an important step in the right direction for the huaren families who wield the lion’s share of Southeast Asian wealth.