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.