Transparency Ratings Revealed - PricewaterhouseCoopers' Opacity Index report summary for Singapore - Brief Article

Internal Auditor, April, 2001 by A. Scott

ACCORDING TO A RECENT survey, Singapore leads 35 countries in its efforts toward transparency of business, economics, and regulatory affairs. PricewaterhouseCoopers' Opacity Index report -- developed from surveys of chief financial officers, equity analysts, bankers, and the firm's consultants in each country -- presents an estimate of the adverse effects of opacity on the cost and availability of capital.

The report offers a composite opacity-factor (O-Factor) ranking for each country based on the lack of transparency in five areas that affect capital markets: corruption, legal system, government macroeconomic and fiscal policy, accounting standards and practice, and regulatory regime. The O-Factor is based on a scale of zero to 150, with the lower numbers indicating a greater degree of transparency. Singapore, with an O-Factor of 29, topped the list in all areas except "accounting standards/corporate transparency," where the United States, Italy, Chile, and Mexico produced better scores. Singapore shared the top spot with the U.S. for economic transparency, and with Chile for the legal regime. Overall, the U.S. and Chile, each scoring 36, shared the No. 2 spot on the Opacity Index. China and Russia were the least transparent overall, with O-Factors of 87 and 84, respectively.

According to the report, factors that contribute to a country's opacity include: corruption in government bureaucracy that allows bribery or favoritism; unclear, conflicting, or incomplete laws governing contracts or property rights; economic policies -- fiscal, monetary, and tax related--that are vague or change unpredictably; weak, inconsistent, or unenforced accounting standards; and unclear, inconsistent, or irregularly applied business regulations. The report considers the impact of opacity from two perspectives: as a form of hidden tax and as a risk premium when countries borrow through sovereign bond issuances in international or domestic capital markets. The countries included in the index were chosen to be representative geographically and also to provide measurements for a sample of countries taken from the World Bank's economic tier -- upper income, upper middle income, lower middle income, and lower income.