Kanit Sangsubhan, Ph.D. Director Fiscal Policy Research Institute, - - PowerPoint PPT Presentation

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Kanit Sangsubhan, Ph.D. Director Fiscal Policy Research Institute, - - PowerPoint PPT Presentation

Aug 30, 2023 214 likes •326 views

Fiscal Policy Research Institute, Bangkok, Thailand Improvement of Corporate Governance in Thailand: A Decade after the Crisis Kanit Sangsubhan, Ph.D. Director Fiscal Policy Research Institute, Thailand 1 1 Fiscal Policy Research Institute,

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Fiscal Policy Research Institute, Bangkok, Thailand

Improvement of Corporate Governance in Thailand: A Decade after the Crisis

Kanit Sangsubhan, Ph.D.

Director

Fiscal Policy Research Institute, Thailand

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Fiscal Policy Research Institute, Bangkok, Thailand

Before Crisis 1990-96 Crisis Management 1997-98 After Crisis 2000-06

Massive Capital Outflow

Capital A/C Liberalization “Favorable Environment”

  • 1. Quantitative:

Regulatory Changes

  • 2. Price: Exchange rate /

Interest rate

Massive Capital Inflow

Prudential Regulatory Changes Further Liberalization Prudential regulation Management of FX De-international LCY Crisis Management Double Mismatch

Balance Sheet Problem

Inadequate Risk Management Weak Corporate Governance Favorable of global financial markets Bail-out or Bail-in

(K-injection / K-Control)

Tight or Loose Macro Policy (Fiscal/Finance) Flexible Exchange rate scheme Bubble in Housing & Equity

CG Improvement

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Fiscal Policy Research Institute, Bangkok, Thailand

Property Development Sector

On Dec. 93, Sector Index = 2266.55 On Dec. 93, Market

  • Cap. = 500.38

billion baht 500 1000 1500 2000 2500 J a n

  • 9

1 A u g

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1 M a r

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2 O c t

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2 M a y

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8 M a r

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9 In d e x 100 200 300 400 500 600 b illio n b a h t

Banking Sector

On Jan 96, Sector Index =1494.57 On Jan. 96, Market

  • Cap. = 1094.15

billion baht 200 400 600 800 1000 1200 1400 1600

J a n

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I n d e x 200 400 600 800 1000 1200 B i l l i

  • n

b a h t

Crisis can be viewed as a dualistic problem: Wrong policies and inappropriate CG system

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Fiscal Policy Research Institute, Bangkok, Thailand

Improvement of CG: A National Agenda Improvement of CG: A National Agenda

Subcommittee on Law Amendments and Enforcement Subcommittee

  • n Accounting

Standard Subcommittee on Best Practices of Listed Companies Subcommittee on Improvement of Corporate Governance of Com mercial Banks, Finance Companies and Insurance Companies Subcommittee

  • n Improvement
  • f Corporate

Governance

  • f Securities

Companies Subcommittee on Investors Education and Public Relations and on Corporate Governance in Thailand

Chaired by Prime Minister

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Fiscal Policy Research Institute, Bangkok, Thailand

1. Gradual moving with target 2. Supporting not enforcing 3. Closely monitoring with punishment 4. Balancing of incentive and enforcing measures 5. Rules and regulations must base on appropriation and practical

Five Core Principles

Certification: All directors must pass IOD (Institution of Directors) Auditing: Every listed company must have Audit Committee chaired by independent director + 2 IDD AGM: Strict guideline on arranging AGM (Annual General Meeting) Minority shareholders right

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Fiscal Policy Research Institute, Bangkok, Thailand

R egulatory D isciplines M arket D isciplines Self D isciplines

G

  • od CG

Three Pillars Moving Good CG

Issuance of principles and best practices Disclosure of compliant and non-compliant Training program: a lot

  • Investors Association:

Right of share holders

  • Institution Investors Club

CG as investment policy

  • Government Pension Fund

Lead CG enforcement

  • Awards:

Disclosure /Board of the Year / Q mark (CCT and TIF) OECD Principles in law

  • Basic right
  • Proxy vote
  • Required documents
  • Insider: close monitoring +

tape recording all transactions

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Fiscal Policy Research Institute, Bangkok, Thailand

CG in the Real Estate Business CG in the Real Estate Business

  • Regulation and protection

Regulation and protection

  • Consumer protection agency

Consumer protection agency

  • Escrow account

Escrow account

  • Required infrastructure of the whole project

Required infrastructure of the whole project

  • Information

Information

  • Real Estate Information Center

Real Estate Information Center

  • New Private Initiative

New Private Initiative

  • Don

Don’ ’t buy house that not yet finished t buy house that not yet finished

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Fiscal Policy Research Institute, Bangkok, Thailand

Prudential Regulation in the Banking Sector Prudential Regulation in the Banking Sector

  • Prudential Regulation

Prudential Regulation

  • Subjected to BOT and SEC regulation

Subjected to BOT and SEC regulation

  • Financial Institution Development Plan

Financial Institution Development Plan

  • IAS 39 / BASEL II

IAS 39 / BASEL II

  • Risk Management

Risk Management

  • Information

Information

  • Disclosure of financial position and NPL

Disclosure of financial position and NPL

  • Credit Bureau

Credit Bureau

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Fiscal Policy Research Institute, Bangkok, Thailand

Thailand Thailand’ ’s CG s CG-

  • ROSC

ROSC

Source: CG-ROSC assessment of Asian Countries during 2001-2005

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Fiscal Policy Research Institute, Bangkok, Thailand

Thailand Thailand’ ’s CG Watch (As of October 2005) s CG Watch (As of October 2005)

5.0 (6)

3.9 8.2 4.3 4.0 5.1 Korea

4.6 (7)

3.1 8.2 5.0 2.2 5.3 Philippines

4.4 (8)

2.2 6.8 5.0 4.0 4.3 China

3.7 (9)

2.8 6.8 3.0 2.9 3.3 Indonesia

5.0 (6) 3.5 7.3 5.0 4.0 5.8 Thailand 5.2 (5)

3.3 5.9 6.5 4.9 5.3 Taiwan

5.6 (4)

3.8 7.5 6.0 4.9 5.9 Malaysia

6.1 (3)

4.3 7.5 6.5 5.6 6.6 India

6.9 (2)

5.4 9.1 7.8 5.8 6.4 Hong Kong

7.0 (1)

5.7 9.5 7.3 5.6 7.4 Singapore

Country Score Institutional mechanisms & CG culture Adoption

  • f IGAAP

Political/ Regulatory environment Enforcement Rules & Regulations Countries

Source: CG Watch (2005), a joint report by CLSA Asia-Pacific Markets and ACGA

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Fiscal Policy Research Institute, Bangkok, Thailand

Problems and Way Forward Problems and Way Forward

  • CG is not yet the business culture

CG is not yet the business culture

  • Top 50 + SOEs are OK

Top 50 + SOEs are OK

  • Family

Family-

  • owned and SMEs, not yet
  • wned and SMEs, not yet—

—MAI not famous MAI not famous

  • Law enforcement is the next target

Law enforcement is the next target

  • Education and training needed for agencies

Education and training needed for agencies (Might required training and TA) (Might required training and TA)

  • Government

Government-

  • owned bank needs consolidation
  • wned bank needs consolidation
  • Contribution

Contribution

  • Transfer a

Transfer a “ “Gradual Step, and Market Friendly Gradual Step, and Market Friendly” ” approach to approach to CLMV and others through training and technical assistant CLMV and others through training and technical assistant