RI most plagued by corruption, PERC says

RI most plagued by corruption, PERC says

Agence France-Presse, Singapore

Corruption is the major obstacle to investment and business growth in Asia's developing economies with Indonesia suffering the most, a poll of foreign executives showed on Monday.

In contrast, Hong Kong and Singapore -- two of the most developed Asian economies -- are rated as the places where graft is most under control, the Political and Economic Risk Consultancy (PERC) said.

Singapore topped the survey of 96 leading foreign executives based in the region with a score of 0.89 where the best grade is zero and the worst is 10.

Arch economic rival Hong Kong was second at 1.22 while Indonesia was the worst with a score of 9.44, PERC said in its survey of 12 regional economies.

Japan was third, followed by South Korea, Malaysia, Taiwan, Thailand, China, India, the Philippines and Vietnam.

The gradings by Singapore and Hong Kong reflect confidence in the judiciary system which is why the former British colonies have remained big recipients of foreign investment despite lower labor costs elsewhere, PERC said.

"Labor is usually much less expensive in neighboring countries, and except for the excellent harbors, world class physical infrastructure facilities and educated labor forces, neither Hong Kong nor Singapore has many natural resources to draw investors," it said.

"However, foreign companies find it easier and more straightforward to do many types of business in Asia's two island economies, which is one of the main reasons they have attained "regional business center" status.

"The low level of corruption and victims' ability to seek legal redress though the local legal system when they do encounter graft are major attributes of Hong Kong and Singapore that enhance the quality of the overall business environment."

In Indonesia, graft is seen a major drawback for foreign investors but they are encouraged by President Susilo Bambang Yudhoyono's drive to stamp out corruption, the survey showed.

"The legal system in that country remains highly suspect, but President Susilo Bambang Yudhoyono has stepped up the fight against graft," PERC said,

"There have been a few high profile examples of officials being arrested and prosecuted, and these anecdotes are raising hopes that one of the biggest barriers to doing business in Indonesia, namely, corruption, is being reduced."

Similarly in China, investors like efforts by Beijing to punish corrupt government officials, PERC said, adding that being a member of the World Trade Organization (WTO) has helped the anti-graft drive.

"China stands out as the country where the trend seems to be improving the most," it said.

In Malaysia, graft is seen as a problem but it is not as severe as in most neighboring economies, like the Philippines where the problem is not improving and the government is seen as nothing about it, the survey said.

Meanwhile, executives recognize Thai authorities have changed laws and regulations but consider it to benefit large businesses, many of which have close links with influential politicians, the survey said.