A survey released last week of 11 major capital markets in Asia finds Hong Kong to be tops when it comes to corporate governance practices, though more needs to be done regionally for Asian economies to catch up to governance standards in Europe and the United States.

The survey, CG Watch 2007, was produced jointly by brokerage house CLSA Asia-Pacific Markets and the Asian Corporate Governance Association, a Hong Kong-based good governance advocate. The survey, the groups’ first since 2005 and the first to incorporate Japan, comprised 87 questions in five categories covering: corporate governance rules and practices; enforcement; political and regulatory environment; accounting and auditing standards; and corporate governance “culture.”

Top-ranked Hong Kong was followed by Singapore, India, and Taiwan, with Japan rounding out the top five. Laggards included Indonesia and the Philippines which ranked last and second-to-last, respectively.

Hong Kong displaced Singapore atop the rankings because of “a palpable sense that the pace of policymaking [in Singapore] has slowed,” the survey noted. “Hong Kong may not be attacking its problems with vigour or urgency, but at least it continues to progress.” Hong Kong was also lauded for its efforts in the enforcement, political and regulatory environment category, and the corporate governance culture categories, while the survey noted that “its regulatory officials are well aware of the distance between local norms and international standards.”

Newcomer Japan scored well in the categories of enforcement and culture, owing to recent company law changes and a new omnibus securities law dubbed “J-SOX.” The survey points out, however, that Japan has far to go, given it “has no real concept of ‘independent director,’” and lacks a code of corporate governance, unlike others surveyed. Ninth-ranked China, meanwhile, is praised for its achievement over the past two years in the regulatory realm, noting securities law and exchange listing rule changes that have helped shore-up governance practices, as well as efforts by officials to enhance the quality and quantity of English language material on regulatory Web sites.

Looking broadly, the survey warns that regulators, issuers, and investors have become complacent, placing less emphasis on corporate governance as capital markets in the region have roared in recent years. The lack of movement implies a “degree of regulatory perfection that does not yet exist in any Asian market,” the survey’s authors caution.

Copies of the report are available for purchase by contacting the Asian Corporate Governance Association.