Singapore still the least risky country in Asia: PERC

Yahoo News, February 27, 2007
SINGAPORE: Singapore has retained its ranking as the least risky country in Asia in the social and political spheres.

This is according to Hong Kong-based Political and Economic Risk Consultancy, which surveyed 14 economies, mostly from Asia but also including Australia and the US.

Singapore topped the survey among Asian countries, with a score of 2.74.

Malaysia scored 4.66 while Indonesia 6.79.

Singapore came up on top among the Asian countries based on several factors including the quality of the government's policies, tough anti-corruption stance, effective judiciary and strong financial system as well as predictability such as the recent expected cut in its corporate tax rate.

Robert Broadfoot, PERC's Managing Director, said: "A lower tax. Businessmen like that. What businessmen don't like is tax flip flops - that's more important from a risk point of view.

"They don't like capital controls - they don't like what Thailand did in September when it suddenly imposed capital controls. They don't like what Malaysia did after 97/98 when it put on capital controls.

"Or, if you suddenly (change tax policies) just like what Korea has done in the past year when it unilaterally looked at tax treatments with offshore centres and started taxing companies which had invested in Korea and were trying to repatriate. All of a sudden, they found their profits were subject to taxes. These sorts of things bother businessmen. They are risks and they don't encounter them in Singapore, which is why it is seen as a safer place."

The downside, though, is that there has been a big increase in external political risks.

The survey said this was because Singapore's biggest companies are investing heavily in other Asian countries where the risks are much higher and more difficult to manage.

The report highlighted the example of Temasek's investment in Thailand's Shin Corporation, which could potentially expose Singapore to new economic and diplomatic problems.

PERC noted that low risk, though, is not always most profitable.

Mr Broadfoot said: "For example, China which is rated much more risky. It's getting higher levels of Foreign Direct Investments because the returns are considered to be warranted."

Singapore also scored well in the quality of the civil service as well as its healthcare system.

However, it was perceived to have some threat of religious extremism compared to five years ago, with the discovery of its home-grown terrorist group in 2002.

But PERC noted that the number of people involved was very small and the government cracked down hard and effectively.

The biggest threat faced by Singapore is from an outside group, namely the Al-Qaeda.

Mr Broadfoot said: "The issue for Singapore is that there are a number of different types of risks. You can have domestic political risks. Singapore manages those quite well. You can have domestic social risk - labour activism, insurrection movements. Singapore does an excellent job.

"It's not that there aren't targets in Singapore that terrorists would like to hit. There are, probably more than most countries in South East Asia. But Singapore has mitigated that risk by having a very efficient national security organisation."

Of the 14 economies surveyed, Indonesia received the worst score overall.

But the report highlighted that perceptions had improved considerably over the past years on the political and social order landscape.

The PERC report also looked at physical factors such as pollution and infrastructure deficiencies.

And this is one area that could trip up the most rapidly growing economies in Asia, like China, India and Vietnam.

The reports cautioned that bottlenecks might develop and this could interfere with the economy and possibly disrupt social and political conditions in these countries.

The PERC findings were culled from some 1,485 corporate managers and bankers polled in the countries analysed. - CNA/ir