SOURCE: Milken Institute

April 30, 2008 09:00 ET

More Countries Adopting Good Governance, International Reporting Standards Policies, Raising Scores in Opacity Index Released by Milken Institute, U.S. Falls in Rankings

LOS ANGELES, CA--(Marketwire - April 30, 2008) - Global investors looking for a positive trend have some good news: adoption of International Financial Reporting Standards has increased financial transparency and lowered risk for investors, as measured by the 2008 Opacity Index, released today by the Milken Institute. According to the report opacity works like a hidden tax on business, costing countries growth, companies profits and investors higher returns.

Additional improvements in corporate governance and compliance with voluntary codes of conduct have helped raise the scores of most of the 48 countries ranked by risk in the index. The United States, however, fell in its standing due in part to delayed effects of the Sarbanes-Oxley Act of 2002.

According to the report, opacity is measured by small-scale but frequent risks, such as corruption and opacity in financial markets that work as deterrents to economic growth. A single-point increase in an Opacity score means foreign direct investment as a percent of GDP can decrease by 0.18 percentage point.

Finland scores best, reflecting the country's solid regulatory environment, low levels of corruption and compliance with international standards for accounting rules and practices. "Companies in Finland are more transparent to foreign investors and partners, whose due diligence, legal, and accounting costs are reduced," the report states. Lower overall business costs allow higher-wage countries like Finland to compete for investment capital with lower-wage countries.

In the 2008 rankings, the United States fell to 13th place from 4th place because of turbulence in the markets and other factor, including over-regulation due to Sarbanes-Oxley.

The top 10 markets (with 2006 ranking):

Rank                 2008 Opacity Score
1.  Finland (2)             9
2.  Hong Kong (3)          12
3.  Singapore (16)         14
4.  Sweden (9)             15
5.  Australia (7)          15
6.  Denmark (5)            16
7.  Austria (9)            16
8.  Ireland (9)            16
9.  United Kingdom (1)     17
10. Germany (13)           17

The Opacity Index measures five factors: corruption, legal system efficiency, economic and enforcement policies, accounting standards and regulatory effectiveness. Together, these factors form the acronym CLEAR. Higher levels of opacity in each of the CLEAR factors indicate poorly functioning governments, which increases the cost of doing business, as well as the risk.

The countries covered in the index account 77 percent of the world's population (in 2007), 94 percent of 2007 world GDP, 93 percent of world financial assets and 99 percent of world equity trading volume.

The 2008 Opacity Index is available on the Milken Institute web site,

About the Milken Institute: The Milken Institute is a nonprofit, independent economic think tank whose mission is to improve the lives and economic conditions of diverse populations around the world by helping business and public policy leaders identify and implement innovative ideas for creating broad-based prosperity. It is based in Santa Monica, Calif. (

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