Southeast Asia a haven for ‘crony capitalists’

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Crony capitalismBritish magazine The Economist in its Crony Capitalism Index published March 15 found that Southeast Asia is one of the world’s most buoyant regions for “crony capitalism”, a term describing the rich getting richer in developing countries due to close ties to mostly corrupt governments.

Most countries in South-East Asia, including Indonesia, Thailand and the Philippines, saw their scores get worse between 2007 and 2014, as tycoons active in real estate and natural resources got richer. In the Philippines for example,  billionaires saw their wealth “doubling relative to the size of the economy.”

The Economist ranked the country in its list for having huge crony-sector wealth, created by rent-seeking practices of the wealthy.

But the study found that efficient governments are no guarantee of a good score: Hong Kong and Singapore are packed with billionaires in crony industries. This reflects scarce land, which boosts property values, and their role as trade hubs for shiftier neighbours. Hong Kong has also long been lax on antitrust: it only passed an economy-wide competition law two years ago.

Sectors where crony capitalism is prevailing the most are

  • Casinos
  • Deposit-taking banking and investment banking
  • Infrastructure and pipelines
  • Real estate and construction
  • Oil, gas, chemicals and other energy
  • Steel, other metals, mining and commodities
  • Utilities and telecoms services

These industries are said to be vulnerable to monopoly or requiring state licensing, which makes them a likely venue for graft and bribery, it added.

Hong Kong topped the list for crony sectors’ 58 per cent share in its GDP. Russia ranked a far second, while Malaysia, Ukraine and Singapore are the other three countries which surpassed the Philippines’ crony capitalism score. Thailand made a huge leap from rank 23 to 16.

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Reading Time: 1 minute

British magazine The Economist in its Crony Capitalism Index published March 15 found that Southeast Asia is one of the world’s most buoyant regions for “crony capitalism”, a term describing the rich getting richer in developing countries due to close ties to mostly corrupt governments.

Reading Time: 1 minute

Crony capitalismBritish magazine The Economist in its Crony Capitalism Index published March 15 found that Southeast Asia is one of the world’s most buoyant regions for “crony capitalism”, a term describing the rich getting richer in developing countries due to close ties to mostly corrupt governments.

Most countries in South-East Asia, including Indonesia, Thailand and the Philippines, saw their scores get worse between 2007 and 2014, as tycoons active in real estate and natural resources got richer. In the Philippines for example,  billionaires saw their wealth “doubling relative to the size of the economy.”

The Economist ranked the country in its list for having huge crony-sector wealth, created by rent-seeking practices of the wealthy.

But the study found that efficient governments are no guarantee of a good score: Hong Kong and Singapore are packed with billionaires in crony industries. This reflects scarce land, which boosts property values, and their role as trade hubs for shiftier neighbours. Hong Kong has also long been lax on antitrust: it only passed an economy-wide competition law two years ago.

Sectors where crony capitalism is prevailing the most are

  • Casinos
  • Deposit-taking banking and investment banking
  • Infrastructure and pipelines
  • Real estate and construction
  • Oil, gas, chemicals and other energy
  • Steel, other metals, mining and commodities
  • Utilities and telecoms services

These industries are said to be vulnerable to monopoly or requiring state licensing, which makes them a likely venue for graft and bribery, it added.

Hong Kong topped the list for crony sectors’ 58 per cent share in its GDP. Russia ranked a far second, while Malaysia, Ukraine and Singapore are the other three countries which surpassed the Philippines’ crony capitalism score. Thailand made a huge leap from rank 23 to 16.

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