Images from screen

Music

01.00.00

taxis on street,

interior tracking shots, driver driving, George in passenger seat

Negus:  Take a taxi ride in Jakarta these days and you begin a journey into the financial fiasco of South East Asia.

Banter

Negus:  For fighting the traffic here in the capital, Jerry earns 30,000 rupiah, about $3 a day.  That's a quarter of what he earned before Indonesia's currency crashed.

00.25

Jerry:  Problem, big Indonesian problem, yes.

Negus:  Bank of Indonesia?

Jerry:  Debt.

Negus:  Debt?

Jerry:  Yes, problem.

Negus:  Big problems, yes.

Driver's license, traffic on streets, buildings

Negus:  Jerry drives for a company called Steady Safe Taxis.  Nine months ago, Steady Safe was turning over the equivalent of nine million U.S. a year. 

00.45

But, Steady Safe's owners decided they weren't big enough.  They wanted to turn themselves into a massive transport conglomerate spanning the entire Indonesian archipelago.

Negus speaking to camera while travelling in taxi

Negus to camera:  To fund their 'Asian dream,' Steady Safe borrowed 270 million U.S.  As well, they had the 'gold seal of approval' here in Indonesia.

01:04

Tut Tut, the president's eldest daughter - a businesswoman with her finger in any number of big, government-endorsed ventures - was on their Board.  She was also the Chairman of a road toll company in which Steady Safe held fortuitously a multi-million dollar stake.

In other words, what you had was outside money in dollars and Soeharto family involvement.  In other words, classic Indonesian crony capitalism.

George getting out of taxi, Steady Safe on window of taxi, George saying goodbye and going into airport

Negus:  Today, Steady Safe - and what an unfortunately ironic company name that is under the circumstances - is bankrupt.  And our friend Jerry doesn't know if he'll have a job next week.

01:40

Jerry:  Thank you.

Negus:  Take care.  Cheers.

Negus:  Meanwhile, away to the north in Hong Kong there's one particular investment bank that wishes it'd never heard the name Steady Safe.

Fireworks, signs, people watching and cheering

In Hong Kong they say, not even the sky's the limit.  In the past 10 to 15 years, mind blowing fortunes have been made here and very few lost.

02:04

But, this Chinese New Year, the locals were putting on their happy lunar faces, but, there's not a great deal to celebrate in Hong Kong at the moment.

02:25

Only a few months ago here in Hong Kong they were rubbishing their Asian neighbours' woes down to financial amateurism. 

Now even in the great financial citadel itself the unthinkable is happening.  Some of the region's most colourful players are being snuffed out in their prime.

Motorbike driving around night time, enters parking station, gets

Chinese New Year or not, in another part of town, the man they call Dr. Doom is starting work.

03:00

off, walks to

stairway

Don't let the big BMW, the ponytail or the lack of a pin-stripe suit fool you, for 20 years, Swiss-born Dr. Marc Faber has been an investment broker in Hong Kong's land of golden opportunity.

03:21

Pictures, Faber talking to George, sculptures

Marc Faber:  Well, I came to Hong Kong in 73, I brought you know posters of the Chinese revolution.

03:36

Negus:  He's an intriguing mix of eccentric genius and fish-out-of-water.

Marc Faber:  ... then later I brought also other kind of Communist memorabilia, simply as an investment because I thought that this is the art of the revolution and one day if people are so stupid and pay thousands of dollars for telephone cards they will pay thousands of dollars for this kind of stuff.

Computer screen, graphs, writing,

Negus:  But Faber knows his market stuff - in the past the market has ignored his doomsday predictions.  But these days it's Dr. Doom who's mocking the mockers.

04:05

Faber reading from computer

Marc Faber:  In the 1990s Asia came of age.  As we move towards the year 2000, Asia will become the dominate region of the world, economically, politically and culturally.  We are on the threshold of the Asian renaissance.

George asking question

Negus:  Are they talking about the same Asia?

04:33

George with Faber speaking at the computer

Marc Faber:  Well, I think where others got it wrong is that people were living in self delusion and there they were looking after themselves, trying to make everything look good and there was never really an Asian miracle. 

There was a recession in 1990 in Europe and the U.S.  It was bypassed in Asia.  We had the Mexican crisis, it didn't touch Asia.  Each time the Asians got more and more confidence and said "Nothing can go wrong, there is no more business cycle in Asia, we will dominate by the year 2000, the whole world."  And now you have a huge setback.

04:53

Television footage of people moving boxes

Super:  CNBC News - Jan. 1998

CNBC:  Peregrine staff arriving at company headquarters on Monday morning were met by a media barrage.

05:19

People at computers, standing around

Negus:  As recently as a few weeks back, Peregrine Holdings was the fearless face of the Asian investment community.  How they came unstuck in their deal with Steady Safe Taxis, is a lesson that all of Asia is learning.

CNBC:  Company sources say most employees are packing up their belongings before the liquidators move in.

People walking through building and through guards, talking standing around, man leaving in car

Negus:  At the height of their trading frenzy, the boastfully Asian bank gambled with billions of dollars across 16 countries - dealing hard and fast in just about anything they could get their hands on  - equity, bonds, asset management, property, luxury cars, electronics - even shrimps in Burma.

05:43

Press conference, Philip Tose speaking at microphone, people listening

Peregrine's chairman, Philip Tose, was an uncompromising free marketeer who actually condemned democracy for getting in the way of his ambitious risk taking.

06:07

Tose:  Steady Safe is one of our deals ...

Negus:  But when he lent over a quarter of a billion dollars to Steady Safe taxis back in Jakarta, Tose took one risk too many.

Tose:  It was an unfortunate transaction but it certainly was not the sole reason for us having the problems that we did.

06:30

Roomful of people working on computers, Henny Sender speaking to George

Henny Sender:  Everybody that I talked to had meetings about Peregrine, should we ...

Negus:  Henny Sender, the Finance Editor for the Far Eastern Economic Review saw the meltdown coming ...  Last year on this program, Henny told me the Asian economic boom was "an accident waiting to happen."

Henny Sender:  Every single firm had meetings saying what do we do about Peregrine, they've got to be vulnerable, do we want to have any exposure to them at all.  And Peregrine went around and saying, "No problems for us,"  and people would say, "Well, what about Indonesia?"  And Peregrine would say "Absolutely no problems in Indonesia."

07:08

Buildings, people walking along, getting into lift, woman walking into room, sign, people loading van

Negus:  But Peregrine had a huge problem.  Much to their horror, shareholders discovered the $270 million U.S. loan to Steady Safe was a quarter of the bank's net worth.

07:27

When the Indonesian rupiah collapsed Steady Safe couldn't repay one million dollars let alone 270.  And the very bullish Peregrine had neither hedged the loan nor gone to the market for the funds.  On January 16th the bank went bust - and the liquidators moved in.

Interview with Henny Sender

Super:

HENNY SENDER

Far Eastern Economic Review

Henny Sender:  Peregrine was a very ambitious Hong Kong grown financial institution and it wanted to grow in a hurry and they found they could go to Indonesian companies, and say, we can raise money for you from the rest of the world, for so much less than you're paying your bankers now.

08:10

And there just seemed to be no constraints so they could go to a taxi company that earns money and rupiah and not a hell of a lot of it and say, "We can sell your debt in U.S. dollars to investors all over the world and it's so cheap for you."  And it just seemed like magic.

Int: Faber

Marc Faber:  You have to look at the picture of the fellow who runs the taxi company, you would have to be a super-idiot to lend him any money.

08:49

Negus:  I would have thought so.

Super:

Dr. MARK FABER

Investment Broker

Marc Faber:  Yes, look, I still feel somewhere, somehow there's some common sense in business and I mean if you ask me to risk even 5% of my capital to this character, I wouldn't do it. 

You know, a quarter of your net worth to a character like this, I mean, but this is in an atmosphere of bullishness and optimism - people, and this is a characteristic of every bubble overtrading - go on margin, borrow and lend.

09:12

George walking in to Peregrine's, security tries to stop him

Negus:  Hello.  Excuse me.  We're from Australian Television ...

09:40

Negus:  It's just two floors down from Dr. Doom, it's all over for Peregrine ... With overheated Asian economies grinding to a standstill, Peregrine's collapse is now being seen as a metaphor for the miracle that's become a mess.

Woman:  I think you better speak to the liquidator.

Negus:  To the liquidator?

10:00

Woman:  Yeah.

George speaking to camera

Negus:  Since the collapse of Peregrine, the silence from Hong Kong officials has been close to deafening, except for the government of Tung Chee Wah making it clear that have no intention whatsoever of becoming Phillip Tose's 'white knight' - finance jargon for a bail-out.

10:06

In other words, the swooping Peregrine lived by the sword and they can die by it.

Crowd of people, woman speaking

But Peregrine weren't the only cowboy capitalists in town.

10:25

Lisa Hung:  Where are the debtors and borrowers?  Will they be detained in Hong Kong to give proper explanations to the victims?

Negus:  A week after Peregrine collapsed, another Hong Kong trading house, CA Pacific Investments, went down.

Demonstration, people walking along and chanting

Chanting:  Give me back my shares.  Give me back my shares.

10:41

Negus:  When Peregrine crashed in January, no 'little people' were damaged - only big ones like Phillip Tose who could afford it.  Not so with CA Pacific.

Chanting:  Give me back my shares.

Demonstrators walking into building

Negus:  These angry victims protesting their way to the city's Stock Exchange are not exactly dangerous left-wingers out to smash the system.

In this unashamedly market-driven place, they're classic 'petty cappos' seeking accountability.  Like Lisa Hung, a freelance tourist guide already hit by the slump.

11:13

Lisa Hung:  The government is to blame.  They know perfectly well that some share trading companies have money-lending arms - but it doesn't try to regulate them!    They haven't warned the public of the risk in investing in these companies. 

11:27

Negus:  And Lisa, like a lot of others has lost her entire life's savings - not exactly a great start to the Chinese New Year!

Interview with Marc Faber

Marc Faber:  The problem with running an investment bank is this, you hire traders and they have no capital in the firm, they are desperados.  In other words they make a lot of money, they get a cut of the money they make, say twenty percent of the profits, so they take a huge risk. 

11:56

If they win they can make 20, 30 million U.S.  If they lose they walk away and go somewhere else.  At worse, they go for one year in gaol and they write a book and make another million dollars.

Int.: Henny Sender

Henny Sender:  You know I think Hong Kong to me has become very schizophrenic.  You know, on the surface things seem to, people are putting on a brave face but underneath you know, property transactions have dried up. 

12:26

You know this place is so vulnerable to high interest rates and interest rates are going higher and you know, it's all very well for people to say, "Look around, every skyscraper has lights on at night, this isn't a ghost town like Bangkok."

But you know, you can have an oversupply in price as well as in supply and I think you know slowly beneath the surface all the foundations are beginning to crumble, whether it's property or ports.

12:54

George walking into building,

Negus:  John ...

meets man, goes

through building with him, into room

John Au Yeung:  How are you George?

Negus:  Nice to meet you.

John Au Yeung:  Welcome.

Negus:  Wow this is something.

Negus:  In Hong Kong, money, in a couple of words, means real estate.  And John Au Yeung flogs the world's most expensive and sought-after realty here at 'Wealthy Heights' on Hong Kong's Mount Victoria.

Negus:  So this is 44f?

13:25

John Au Yeung:  Yes.

Negus:  If Peregrine made some insane investments, it's more conservative brethren aren't exactly guilt free.

Negus:  So this part of Hong Kong is called 'mid levels'?

John Au Yeung:  Mid Levels West.  Right.

Negus:  Over the past decade here in Hong Kong, banks have been doling out money hand over fist to property speculators.

Buildings through window, pans through apartment

Negus:  By Australian standards I'd say this is maybe a $200,000 apartment with a five million dollar view.

13:44

(laughter)

John Au Yeung:  There are two guest rooms in this flat, this is one of the guest rooms ...

Negus:  That's also not big either, is it?

John Au Yeung:  Well, it's not small by Hong Kong standards.

Negus:  Yeah, that's true, we forget that.  Yeah, we come from a big country.

Negus:  If you were an optimist you might call this place fashionably minimalist, but to a cynic, it's just plain bare ...

14:04

So what's it worth now?

George sitting with John Au Yeung on sofa, tracking shots of apartment

John Au Yeung:  Oh, I mean, personally I would say it should cost somewhere around eighteen and a half million.

14:11

Negus:  Eighteen and a half million - about four million Australian dollars.

Negus:  If that seems ridiculous, consider that six months ago you would have paid an extra one million Australian dollars for this place. 

On a clear day you can see all the way to your bank manager's office.  And with apartment prices plummeting that's exactly where a lot of property owners may soon be heading.

Int.: John Au Yeung

John Au Yeung:  At the peak of the market, we though it was going too high, too fast but we didn't expect it to collapse.  We expected there was going to be some adjustment.

14:45

Negus:  But you didn't expect the impact on the rest of the Asian countries on you.

John Au Yeung:  No, that's right.

Faces, candles, people milling around temple

Negus:  And so the panic spreads ....  This is the Wong Tai Sin Temple in the middle of residential high-rise Hong Kong.  Over the lunar New Year, hundreds of thousands flocked here to pray for protection against the economic down-turn.

15:13

You can hardly blame them.  Last year they must have thought their oriental luck had run out.  They also come here to have their fortunes told.  Not surprisingly, in the current climate, they want to know whether to buy or sell their stock and property.

George reading and speaking to camera

Negus:  According to the Chinese Lunar Cycle, this year, 1998, is the Year of the Tiger.  And the Tiger is supposed to be dynamic and daring, hates interference.  At best, warm hearted ... at worst, selfish.  And this one enjoys taking risks but has a tendency to rush into things without proper consideration.

15:48

Sounds like a market analysis of Peregrine.  Maybe Phillip Tose should have consulted his Chinese astrologer or even these fortune tellers here instead of his market whiz kids.

Crowds of people, burning incense

 Int.: with Marc Faber

Marc Faber:  I'll tell you I've been in Asia since 73.  I have never seen a wealth destruction on such a massive scale happen.  You tell me where it will end. 

16:20

I tell you it will end all in disaster.  But will it end in disaster tomorrow, in three months, six months, nine months.  That I don't know but I tell you, the whole system is a threat because of the leverage the world is living on.

Soldiers marching, traffic, posters

Negus:  Back in Indonesia, the starting point of the Peregrine down fall, the Asian flu that struck down Steady Safe is virulent throughout the country.

16:54

The IMF and the World Bank have moved in, committing billions in recovery money that many remain convinced is part of the problem, not part of the solution.  And a politically desperate President Soeharto is making all sorts of promises about the end of cronyism.

Driving through

Man:  Thank you.

17:24

toll gate, tracing

shots from car and of taxi driver, traffic

Negus:  Tut Tut, the president's daughter ...  Well, don't ask me how but her toll company picked up a quiet 140 million out of Peregrines ill-fated loan of 270.  Some things change, others remain the same.

As for Steady Safe, the company is now worth a grand total of half a million dollars and as far as we know, Jerry's still earning his three dollars a day.

And oh, yes, the Indonesian rupiah is still so low, Steady Safe might not be making any money but it's currently offering the cheapest taxi fares in Asia.

17:51

ENDS

18:05