Asian institutions in flux amid recovery

Asian institutions in flux amid recovery

SINGAPORE (AFP): Malaysia's competitive edge over its Asian neighbors may suffer due to poor perceptions of its national institutions while those in Thailand have improved significantly as the region emerges from its economic crisis, an independent think-tank says.

Indonesia needs five years to restore its national institutions to functioning levels, criticism has emerged of Singapore's well-run institutions and the Philippines' economic institutions are viewed more favorably than its judiciary and police.

These are among the findings of a survey of expatriates in Asia conducted early this year by the Political and Economic Risk Consultancy (PERC). Respondents were asked how they viewed the police and judiciary, the monetary authority, the legislature and the stock market regulators in 11 countries.

Ratings of Malaysian institutions slid from a year earlier, attaining an overall grade of 6.43 compared to 5.71 last year. Ratings are made from zero to 10, with zero the best grade possible and 10 the worst.

Malaysia is arising from the crisis "with bigger question marks hanging over it - foreign firms in the financial sector are particularly nervous - and this could make it more difficult for Malaysia to compete with other Asian countries for certain types of foreign investment," PERC said.

The poor perceptions were attributed to the imposition of capital controls to shield the country from the impact of volatile foreign capital flows, and the arrest and trial of former deputy prime minister Anwar Ibrahim.

"In contrast, Thailand - whose institutional weaknesses were a major contributing factor not only to the country's economic problems but also to the negative fallout that shook the rest of Asia - has consciously tried to rebuild the credibility of its national institutions," PERC noted.

Thailand garnered an average of 7.31 for its institutions, up from 8.19 last year.

"Many of the faces are the same and the internal politics are as contentious as ever, but the government has pushed ahead with a reform program. The legislature may have debated key points and slowed down actual implementation, but it has not blocked reforms and Thailand is better for it," the consultancy said.

Indonesia, which underwent massive social and political upheaval amid the economic turmoil, could only hope for an interim period "in which the presidency is relatively weak but the country gets a breathing space during which national institution-building can take place."

The peaceful elections in June compared to the May 1998 riots was "more a reflection of the good sense of both the current power holders and their political opponents than evidence of the inherent stability of the Indonesian political system," PERC said. Indonesia's overall rating fell marginally to 8.13 in 1999.

The Philippines' central bank won praise for its handling of the crisis but expatriates felt much must be done to improve transparency in the stock market.

The decline in kidnappings helped improve perception of the police and judiciary but "corruption remains a serious problem throughout the system," it said.

The country received an overall rating of 6.41 this year, up slightly from 6.72 in 1998.

Singapore once again topped the survey but its overall rating declined to 3.37 from 3.00 last year.

While the island state's institutions were still professionally run, there were controversies suggesting they may face some challenges in the future.

There is also a growing cynicism among Singaporeans about how their institutions operate and this could "surface in unexpected ways in future conflicts where the political elite is less united than it is at present," it added.

Hong Kong's grade fell to 3.94 from 3.86.

But expatriates were hopeful that Hong Kong's legislature would serve as a "check and balance on the system and hopefully will ensure that the integrity of the judiciary is not seriously compromised in the years ahead, even though Hong Kong's judiciary has to operate in the shadow of China's - rated one of the worst in Asia," the consultancy said.