Chronic corruption in China, Vietnam and India could erode their economic competitiveness if they fail to reduce it, warned a report released yesterday.
The three countries ranked among those seen as most corrupt in Asia in an annual survey of 1,400 business people by Hong Kong-based Political and Economic Risk Consultancy Ltd (PERC).
It warned that foreign companies in those economies will be more sensitive to bribery and other corruption as land and labor prices and other business expenses rise.
"Corruption is yet another cost," the report said, "and if the governments do not reduce it as an issue, the competitiveness of their environments, at least in terms of producing for export, will be eroded that much faster."
Those surveyed think governments have made little progress in reining in corruption over the 20 years that the annual survey has been conducted, the report said.
"Even more depressing, in a few cases perceptions today are worse than a decade ago," it said.
The Philippines was seen as most corrupt among 13 economies, receiving a 9 rating on a 0-to-10 scale, followed by Thailand at 8 and China and Indonesia at 7.98. Those seen as least corrupt were Singapore at 1.13, Hong Kong at 1.8, Japan at 2.5 and Macau at 3.3.
China's image will be affected by how it handles any corruption stemming from this summer's Beijing Olympics, which the authorities are eager to show are graft-free, PERC said.
"If it is too passive and some major scandals emerge to embarrass the national leadership, the government's anti-corruption commitment could be brought into question," the report said.
Instead of bribe-seeking officials, China's biggest problems are with state-owned companies and those with access to government assets, the report said. It said that 10 percent of land revenues, investment and government spending are stolen or misappropriated by one estimate.
In India, the biggest problem is civil servants demanding bribes in a system where "it is difficult to distinguish bureaucracy from corruption," the report said. "A number of companies we have interviewed claim they are squeezed even more for payments in India than they are in China."
Vietnam suffers from a legal system that has failed to keep up with rapid economic change, leaving investors liable for what would be normal business activities elsewhere, the report said.
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