Is guanxi more important than transparency??

Business Times (Singapore)     March 1, 1994 ; Pg. 15

    Singapore's Senior Minister  Lee Kuan Yew,  in an interview with Peter
Seidlitz, explained that  guanxi  (good connections) could be of help not only
to Singapore's business community, but to those who ride on the back of
Singapore companies into China



    QUESTION: How can foreign companies, based in Singapore now, profit from
the regionalisation policy strategy of Singapore?


    Answer: The needs of China are enormous. They can't be fulfilled by
Hongkong, Taiwan or the overseas Chinese. The overseas Chinese have acted as
a catalyst in the years after Tiananmen when the rest of the world stopped
dealing with China.

   They showed that good returns can be achieved in China provided one has
developed  guanxi,  a good relationship, which can make up for the lack of
transparency and certainty of procedures.



Far Eastern Economic Review December 2, 1993

In his keynote address, Singapore's plain-speaking elder statesman  Lee Kuan 
Yew reflected on both the huge opportunity that China represents for the
global Overseas Chinese community and the danger that China investment poses
for regional harmony.

   Lee identified  guanxi,  or personal connections, as an important advantage
that Overseas Chinese should make use of as they compete against Western
rivals  for business openings in China. Western firms feel vulnerable operating
within China's weak legal framework, Lee noted, but Chinese entrepreneurs, provided
they have the right connections, can protect themselves.  Guanxi  "can
make up for a lack in the rule of law, and transparency in rule and
regulations," he said. This  guanxi  capability will be of value for the next 20 years
at least."   

Straits Times JAN 22 1998   
Senior Minister Lee Kuan Yew spoke at the Thai National Defence College in
Bangkok yesterday.        

What caused the crisis? The currency crisis is a complex phenomenon with many causes. I 
want to focus on just two key and inter-related factors. The first is euphoria, which
resulted in reckless and excessive private-sector borrowing. The second is
panic and the subsequent collapse of investor confidence, a contagion that
got out of control. Private-sector borrowing in Asia took place in the context of
an economic boom that started in the second half of the 1980s and looked like
it would go on forever. 

 The computer and information technology have speeded up the globalisation of
financial markets and allowed capital to move swiftly from one centre to
another for higher returns. 

 East Asia became the darling of international investors in the 1980s and
easy credit led to great increases in borrowing in US dollars. Much of this
borrowing went into real estate and stock markets, ending in a
"bubble" economy that has burst. 

 Private-sector companies were the main borrowers. But governments were to
blame for failing to check excessive borrowing. Indeed, they abetted the
process by adopting policies which created a euphoric environment. 

 Governments had liberalised their financial markets without strengthening
their loose financial and banking regulatory and supervisory systems. They
also did not change their inflexible exchange rate system that tied their
currencies to the US dollar during a period when the US dollar was growing
stronger against all currencies, especially since 1995. 

 Against this background, companies borrowed foreign currency on short-term
loans, and banks increased their lending far too easily and rapidly for use
in unproductive investments. 

 Lending was based not on feasibility of the projects, but on personal
relations or cronyism. And in some countries, ministers were unwilling to
discipline wayward financial institutions because politicians were linked up
with, and politically funded by, these same institutions.