Indonesian legal system rated the worst in Asia
Indonesian legal system rated the worst in Asia
SINGAPORE (AFP): The Indonesian legal system has been rated the worst in Asia by expatriate businessmen, according to a regional survey.
The Political and Economic Risk Consultancy Ltd. (PERC), which conducts periodic opinion polls on the business environment in the region, said the financial crisis of 1997 and 1998 exposed major legal weaknesses in Asia.
"Without the rule of law, creditors were unable to lay claim to collateral pledged against loans that turned sour," PERC, which has offices in Hong Kong and Singapore, said in a report received over the weekend.
As a result, foreign banks and multilateral agencies like the International Monetary Fund (IMF) pushed countries like Indonesia, Thailand and South Korea to improve bankruptcy laws, and the process "is still not really complete".
The chaos in East Timor as well as China's bid for membership in the World Trade Organization also helped put the spotlight on Asia's legal shortcomings, PERC said.
In the PERC survey, Singapore, Japan and Hong Kong are ranked as the best in Asia.
Under a grading system in which zero is the best possible score and 10 the worst, Singapore had a rating of 2.57, Japan 3.00, Hong Kong 3.76, Taiwan 6.00, the Philippines 6.50, Thailand 6.67, South Korea 6.83, Malaysia 7.43, India 8.40, Vietnam 9.00, China 9.33 and Indonesia 9.38.
Perceptions of Indonesia's legal system were slightly better than last year, when it was also the worst performer, but the system is "still very very weak" and "corruption is a problem at all levels," PERC said.
The legal system is seen as vulnerable to political pressure, foreign creditors have found it nearly impossible to use the law to recover billions of dollars in debt, and courts have passed judgments against foreign companies in favor of Indonesians, it noted.
"It is likely that Indonesia's legal system will be perceived by foreigners as simply being not weak but also biased. Such a perception could be a major deterrent to new foreign investment in the country," PERC remarked.
While Singapore's legal system has been criticized by outsiders on the question of protecting individual rights, the PERC survey reflects the opinion of locally based expatriates impressed with the efficiency of the city-state's legal system in dealing with commercial issues, it said.
"They also appreciate the law-abiding environment. Singapore is one of the safest cities in the world," PERC commented.
The survey involved more than 1,000 respondents, mostly in the countries assessed, but also took in the views of expatriates and nationals in Australia and the United States for comparative purposes. Australia got a score of 4.50 and the United States 5.00, placing them below the three most highly regarded Asian countries.
"Asian governments can argue that the foreigners are wrong and that their legal systems are much better than our survey grades indicate," PERC said. "As in so many things, however, perception can be just as important as reality."