Hong Kong has edged out in Singapore for the first time in CLSAÆs annual corporate governance report on Asia.

ThatÆs mainly due to SingaporeÆs loss of pace rather than a dramatic improvement in Hong Kong, says Jamie Allen, secretary-general of the Asian Corporate Governance Association, which collaborates with CLSA on the annual report.

India, Taiwan and Japan have come in third to fifth in ranking, while Indonesia, the Philippines, and China are at the bottom three.

The market rankings reflect the degree of emphasis that regulators, issuers, intermediaries and investors have placed on corporate governance over the past two to three years.

ôThere has been a palpable lessening of the pressure for reform around the region, as one would expect during such a time, and many governments, regulators and market participants have taken their eye off the governance ball,ö says Allen.

ôCertain regulators are positively complacent about what they have achieved in the past decade, recounting with pride how much their stock markets have risen, and saying that all they need do now is to refine their rules and improve implementation of best practices,ö he adds.

Allen notes that even in the developed markets of the US and the UK, corporate governance reform remains an ongoing process.

Hong Kong has moved into first place for a range of reasons, one of which is that it continues to grapple with some difficult reform issues and its regulatory officials are well aware of the distance between local norms and international standards.

Singapore, in contrast, gives the impression that its reform process has reached an acceptable plateau while its officials seem less concerned that some key local rules and practices are not in line with global best practices.

ôEven though the process of reform is continuing in Singapore, such as in proposed amendments to securities laws, there is a palpable sense that the pace of policymaking has slowed,ö Allen says.

ôHong Kong may not be attacking its problems with vigour or urgency, but at least it continues to progress,ö he says.

The CLSA report notes Hong Kong is also well ahead of Singapore in terms of shareholder rights and, in recent years, it has closed off several loopholes that undermined investor protection.

In terms of other markets that have shown improvement, both Taiwan and China have moved up one notch from their respective rankings last year, the report shows.

TaiwanÆs regulatory authorities have become increasingly open in recent years to engaging in a discussion about the strengths and weaknesses of their governance system, and have made real strides in improving not only their rules, but enforcement as well, Allen says.

He notes, though, that TaiwanÆs listed companies have yet to show the same degree of enthusiasm - except in sectors like information and telecommunications that are subject to international competition - and it remains a frustrating place for investors trying to vote their shares.

ChinaÆs achievements over the past two years are mostly in the regulatory realm, Allen says. These include major amendments to both the Company Law and the Securities Law, a series of changes to the listing rules of the Shanghai and Shenzhen exchanges, and a wholesale revamping of the countryÆs accounting and auditing standards in line with international norms. Public enforcement does not stand out for its excellence, though it does seem to be improving gradually, he adds.

One area where China has made a definite leap forward is in the quality and quantity of the English language material on its regulatory websites, especially that of the China Securities Regulatory Commission (CSRC), Allen says.

Meanwhile, although India is ranked third place in terms or overall governance, that doesnÆt necessarily mean its standards are good, Allen says. It only means that IndiaÆs corporate governance regime is, on balance, slightly better than the markets below it, he adds.

Among IndiaÆs strengths are the high financial and non-financial reporting standards of its largest companies, which are in some cases, truly world class, Allen says. Among the weaknesses are the huge disparity between the high standards of many large caps and the rest of the market, which is made up of thousands of small listed firms.

Over in Japan, reporting standards of large caps are also high and quarterly reports are fairly robust and detailed. But while listed companies have been willing to improve their disclosure practices and enhance communication with shareholders, they have felt less compelled to change their organisational structures and open themselves to outside scrutiny.

In Indonesia, which is at the bottom of CLSAÆs corporate governance ranking, the present governmentÆs anti-corruption drive is yielding some results. In contrast to the Philippines, Indonesia continues to try to improve its corporate governance regime through, for example, revising its national code of best practice and bringing in a new corporate governance code for banks.

However, while the government may be amending its corporate governance codes, few consulted for the CLSA report believe it is truly serious in its efforts.

The Philippines, meanwhile, suffers in ranking due to having poor quality of non-financial reporting, even among large companies. Specific issues in the Philippines include having disclosure rules relating to material transactions that could be improved, having a regulatory system does not deter insider trading, and the non existence of voting by poll, which is considered difficult and time consuming by companies there.