China among most corrupt, India no better
REUTERS[ TUESDAY, MARCH 08, 2005 10:37:05 PM]
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HONG KONG: Corruption in Asia is as endemic as it was a decade ago, but China is where it could potentially cause the most damage, a survey by the Hong Kong-based Political and Economic Risk Consultancy shows.
“China’s growing economic role in the region and the world ensures that the global fallout from any crisis precipitated by corruption on the mainland would be severe,” the survey said. “
In view of the growing reliance of MNCs on China as a production base, such a crisis would wreak havoc with a lot of companies’ bottom lines.” China fared better than Indonesia, the Philippines, Vietnam and India in the annual survey, which polled more than 900 expatriates working in Asia for their views on corruption.
Countries were ranked from zero to 10, with zero being the best grade. Indonesia was ranked worst with a score of 9.25 while Singapore came out on top at 0.5, followed by Japan at 3.5 and Hong Kong a 3.6.
China was graded 7.33, better than India’s 8.33 but corruption in China was considered more dangerous because state-owned companies were listing overseas to strong investor demand, the survey report said.
“The track record of these entities, from Guangdong Enterprises to China Aviation Oil, is hardly encouraging,” the report said.
“What’s worse, when they get in trouble, the mainland parent usually washes its hands of the whole affair, saying it was not its fault, and the local regulators, where the companies have listed, rightly argue that they cannot be blamed since the troubled companies have hidden facts from them.”
This was effectively fraud or corruption, the report said. “However, no one seems to want to offend China by using these kinds of words when discussing these cases,” it said.
China Aviation Oil was at the centre of Singapore’s worst trading scandal since the 1995 fall of Barings Bank last year when its Singapore-listed unit China Aviation Oil (Singapore) lost $550m betting on derivatives and had to seek protection from creditors.
The CEO of the Singapore unit remains on bail and under investigation. “It is hard to imagine that there are not going to be many more CAO-type scandals, and if the amounts involved are large they could have global repercussions,” the report said.
In contrast, in India the overall quality of corporate governance might be poor but companies that listed overseas generally had high standards of transparency and governance, the report said.
Across Asia, perceptions of corruption were little better than a decade ago even though governments had lost power in part because of their reputation for nepotism and cronyism and been replaced by administrations promising cleaner governance.
“Many of the same old problems continue,” the report said. “Only the actors have changed.” Political and Economic Risk Consultancy is a consulting firm providing analysis for companies doing business in Asia.
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