But Singapore is unlikely to be tainted as expatriates surveyed by the Hong Kong-based group once again rank it the least corrupt economy in the region.

The annual survey also rated Hong Kong and Japan highly among 13 Asian economies. The Philippines was deemed the most corrupt for the second consecutive year.

Thailand, China, Indonesia, India and Vietnam fared poorly too.

The 1,400 expatriates surveyed in January and February this year were asked to grade the extent that corruption detracts from the attractiveness of the business environment they work in.

Singapore scored with its 'no-nonsense approach to corruption', the report said.

Perc said the 100 expatriates polled here were of the view that the Singapore Government is 'doing an excellent job of keeping corruption low'.

'It is not excessively bureaucratic and does not impose onerous compliance costs, but it is strict about regulations and thorough in its monitoring,' the report said.

Perc highlighted the integrity of the public sector as a factor that impresses foreign investors. It said the lack of corruption also enhances the Republic's credentials as a business and financial centre.

As for opposition politicians' stand that the Government's use of the courts to punish critics is a form of corruption, Perc said that does not seem to worry expatriates working here.

'They are concerned less with politics than with the business environment,' it said in its report.

Perc also warned that corruption could erode the competitiveness of economies such as China, Vietnam and India, and aggravate political and social instability, as it had in the Philippines and Thailand.

As for Malaysia, Perc cited Prime Minister Abdullah Badawi's failure to follow through with his promise to fight corruption as a key reason the ruling coalition lost five states and its two-thirds parliamentary majority in last Saturday's elections.

It also warned that corruption could become more of an issue in the coming 12 months, as Taiwan, Indonesia and India move into election mode, and the Philippines, China and South Korea wrestle with scandals.

'Economies will be slowing. People's moods will also be adversely affected by high food prices.

'Corruption will be seen as a bigger variable affecting political stability and economic performance,' it said.

Assistant Professor Scott Fritzen of the Lee Kuan Yew School of Public Policy agrees.

'Public expectations on the issue are high and rising, stoked in part by the very leaders who often fail...to deliver effective remedies.

'This, in short, is a recipe for continued political turbulence surrounding the issue, particularly when scandals erupt and the economic growth that so often is seen as forgiving other governance shortcomings falters.'

Singapore International Chamber of Commerce chief executive Phillip Overmyer said the graft that worries investors is the high-level sort that can sway decisions on who government contracts are awarded to, not graft by low-level officials as that is typically written off as part of business costs.

chinlian@sph.com.sg