Asia’s new altruists

A foundation can be an incubator for children to join the business later
Three-way split: Li Ka-shing, above, has decided his legacy will go to his two sons and his foundation

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For Hong Kong tycoon Li Ka-shing, it is his “third son”. Alibaba’s founders thought it deserving of 2 per cent of the proceeds of the world’s largest initial public offering. And for a group of wealthy Asian businessmen it offers the opportunity to save a vast stretch of coral.

The “it” is the charitable foundation. Philanthropy it is big business in Asia. The wealth is here — 560 US dollar billionaires at the last count, according to Wealth-X, the data provider that tracks the super-rich — and so too is the growth. Fittingly for a continent of largely self-made tycoons who came from roots both humble and ghastly, there is a desire to give back to society.

Take Li, one of Asia’s wealthiest tycoons whose charitable foundation, which he has called his “third son”, will receive the same inheritance as his two flesh-and-blood offspring.

As he told a Forbes gathering in 2006: “I grew up amid the turmoil of war. It certainly shaped me — the great tug of war with destiny and the taste of poverty.

“They are hardly memories one can forget. It has not been an easy journey. I can still remember vividly the day I started work at 12.”

Almost a decade later he said: “Social capital is the key. Its assets of empathy, compassion, trust, shared values, community involvement, volunteerism, social networks and citizenship have quantifiable value. These assets can be measured.”

Jack Ma, founder of Alibaba, the Chinese ecommerce group, ensured 2 per cent of its equity — valued in total at $168bn at the IPO a year ago — went into his charitable trust, along with 0.3 per cent of annual revenues.

The numbers are growing. An analysis by UBS, the investment bank, of tax authorities’ data (which underestimate total donations as they exclude personal giving) reveal some substantial increases over the past decade — for example, from $830m in China to a staggering $16.5bn last year.

Giving is also evolving from the big-ticket donations — for example, endowments to universities, usually the alma mater, such as the Chan family’s $350m to Harvard University in the US.

So far, so logical. Asia has an enduring respect for education and, as with clothes, the bigger the name the better: consider the Li Ka-shing Centre for Health Information and Discovery at the University of Oxford and Harvard’s TH Chan School of Public Health.

But the interesting activity is at the lower end, as a new generation focuses on self-sustaining giving to beneficiaries who are closer to home.

“It is a more structured way than was the case 10-20 years ago, when you were just writing a cheque and didn’t know how the money was going to be spent,” says Christina Tung, head of philanthropy and value-based investing at UBS.

The question of money spoiling the next generation is also present, adds Annie Koh, academic director of the business families institute at Singapore Management University. “The older generation don’t want the younger ones to have a mentality of entitlement, so they set up foundations to ensure their children don’t get too much wealth and it goes to society,” she says.

Others suggest a foundation is also a useful place to park any offspring reluctant to join the family business and still keep them in the fold.

It can also be an training ground for children who envisage joining the business later.

Finally, tax may not be a driver to the extent it is elsewhere in the world, given the prevailing low rates in the region, but it can provide a fillip. China has lifted its tax deduction to 12 per cent, but there is a strict limit on the charitable bodies this applies to.

Singapore, which is eager to keep charity at home, offers the best rates of all. For the right domestic charities, every dollar invested merits a deduction of up to $3.

Most Asian giving is local, but it can cross borders, as with a recent bid to save the swath of coral that spans Indonesia and the Philippines, down to the Great Barrier Reef off Australia.

But with philanthropy in its infancy in Asia, and billions of dollars pouring in, a whole new industry is being born, complete with its banking eco-system.

Tycoons and their beneficiaries will be hoping, however, that they avoid the ills that have plagued other businesses, from simple value destruction to mismanagement to the more dubious siphoning-off of funds.

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