Corporate fraud scandals can detonate anywhere

By Andrew Marshall, Asia Political Risk Correspondent

SINGAPORE (Reuters) - When it comes to corporate fraud scandals, nowhere is safe.

Revelations of a $1 billion (658 billion pound) fraud at Indian IT firm Satyam Computer Services do not point to a higher systemic risk of accounting scandals in India, or even in emerging markets versus the developed economies, governance experts say.

With a global financial crisis ruthlessly exposing wrongdoing that would be easier to hide in less stormy conditions, more major frauds are likely to come to light this year. To predict where, traditional analysis of governance offers little help.

Most attempts to measure and compare corporate governance and regulatory quality among countries show standards far higher in richer countries than the developing world.

The World Bank's annual World Governance Indicators rate U.S. regulatory quality at 90.8 out of 100. India is rated 46.1 -- below South Korea (78.6), Malaysia (67.0) and Thailand (56.3) but above China (45.6), Indonesia (43.7) and Vietnam

(35.9).

Assessing the integrity of accounting practices, the Economist Intelligence Unit gives India a rating of 2 on a scale of 0 to 4, where 0 is the best. That puts it above China, the Philippines and Vietnam, rated 3, and Indonesia, rated 4.

The apparent message from these rankings is that a corporate scandal in India was hardly unexpected, but that other emerging Asian economies are even more vulnerable -- and investors in China and Indonesia have plenty of reasons to be worried.