Malaysia tops corporate governance survey

Malaysia tops corporate governance survey

SINGAPORE (AFP): Malaysia, Singapore and Hong Kong have the best quality of corporate governance in Asia, a survey of foreign business executives in the region showed.

The survey by the Political and Economic Risk Consultancy (PERC) showed Malaysia scoring an upset over perennial leaders Singapore and Hong Kong in the top rankings based on the perception of expatriate business executives in key Asian economies.

While the two Asian financial hubs remained in the top three rankings, they were judged more harshly this year as reflected in sharp falls in their scores from the previous year, according to the survey.

In a scale from zero to 10, with zero being the best grade possible and 10 the worst, Malaysia emerged tops with a score of 3.0, followed by Singapore with 4.0 and Hong Kong with 4.48.

Malaysia's grade was a 51.6 percent improvement on its score of 6.2 in the same survey last year which asked foreign business executives to rate the quality of corporate governance in their countries of operation.

Singapore's score deteriorated by 100 percent from a squeaky clean 2.0 last year to 4.0 this year. Hong Kong's grade slid 25 percent from 3.59 in 2000.

Corporate governance generally covers how companies conduct themselves in terms of ethics, transparency, accountability, integrity and other practices.

Bad corporate governance, which allowed firms to overborrow, spend excessively and invest wantonly, has been one of the main reasons for the 1997-1998 Asian financial crisis.

Coming fourth in the rankings was Taiwan with a score of 5.38, improving on 6.10 last year. India was in fifth place with 5.63, sharply improving from 9.0 last year.

Japan had a score of 6.00, worsening from 4.0 last year. South Korea was in seventh place with 6.67 from 8.83 in 2000, followed by Thailand with 6.91, the Philippines with 7.00, China with 8.13.

Indonesia and Vietnam had the worst scores at 8.33 and 8.50, respectively. Australia and New Zealand are excluded from the survey.

PERC in an analysis said it disagreed with the survey findings putting Malaysia at the top, as well as with significant improvements in the scores of Taiwan and India.

While there had been progress in corporate governance quality, these were not as large as indicated in the survey, the Hong Kong-based risk consultancy said.

"We strongly disagree with the consensus response to our survey, which rated the quality of corporate governance in Malaysia a three," it said.

"Our own opinion is that corporate governance is not one of Malaysia's strong points. Transparency is poor and there have been too many deals struck by politically well connected firms that disadvantaged minority shareholders," it added.

One possible reason for the better ranking of Malaysia, India and Taiwan is that "expatriates in these countries are trying to get more head office attention."

"When the quality of corporate governance in Malaysia is rated better than in Singapore, you know that personal biases are interfering with sound analysis," it said.

The listing of companies from less developed economies into the stock markets of Singapore and Hong Kong could be blamed for the decline in the their rankings, especially after some of these firms suffered serious financial problems, PERC said.

It cited the case of Indonesia's Asia Pulp and Paper, which is listed in Singapore but whose problems are intertwined with the political crisis in Jakarta.

"There was no way that Singapore, even with its spit and polish regulatory reputation, could stop this collapse from happening," PERC said.

Similarly, the listing of several companies from mainland China such as the collapsed Guangdong Enterprises has tarnished Hong Kong's image, PERC added.