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.