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Việt Nam’s poor governance a danger to equity market

Update: June, 11/2016 - 01:00
Local and international participants discuss ways to help local listed companies adopt best practices in corporate governance in Hà Nội .— Photo ndh.com
Viet Nam News

HÀ NỘI — Việt Nam’s low ranking in corporate governance could scare off investors in the stock market, says Phan Đức Hiếu, deputy chairman of the Central Institute for Economic Management (CIEM).

Hiếu made the remarks at a gathering on Monday in the capital city with more than 300 local and international participants at a conference held by International Finance Corporation (IFC), a member of the World Bank Group, and Deloitte Việt Nam, in partnership with the Hà Nội and HCM Stock Exchanges to help local listed companies adopt international best practices in corporate governance to boost their appeal to foreign investors and spur growth.

Hiếu said under the World Bank’s ASEAN corporate governance scorecard, Việt Nam ranked the lowest among six regional countries of Indonesia, Malaysia, the Philippines, Singapore and Thailand between 2012 and 2014.

Thailand had the highest score of  84.53 per cent while Việt Nam was placed lowest with 35.14 per cent, said Hiếu, explaining that this ranking endangered prospects of investments.

While the Government was trying to mobilise more capital from the stock market, the low rate of corporate governance minimises its attraction, he said.

The conference, which also provided updates of the revised Enterprise Law as well as international best practices in corporate governance and their relevance for Vietnamese companies.

Under the revised law, put into effect last July, public and listed companies were also allowed to set up an audit committee under the Board of Directors, without having a supervisory board, subject to requirements.

“Businesses need to be aware of the vital role of corporate governance and a board’s audit committee in overseeing the effectiveness and integrity of internal controls,” said Hà Thu Thanh, chairwoman of Deloitte Việt Nam. She added that her company was trying to support companies and the market improve transparency, increase efficiency and enhance resilience.

“As competition grows among countries in the region, improving corporate governance in line with internationally accepted practices will help Vietnamese companies become more sustainable and attractive to investors,” said Chris Razook, IFC Corporate Governance Lead for East Asia and the Pacific.

Chris Razook also said “enhanced corporate governance will also strengthen the development of Việt Nam’s capital markets and benefit the overall economy.”

Nguyễn Thành Long, HNX chairman appreciated the revised law, saying that he would help listed companies adopt international best corporate governance practices, as part of the Government’s drive to ensure better corporate governance.

Long said companies would benefit tremendously from attending this conference, which would help them take their corporate governance to a new level. 

Lê Hải Trà, deputy CEO of HoSE indicated that “good corporate governance practices are verifying their importance in reducing risk for investors, attracting investment and improving the performance of companies," adding that HoSE always invested in training, workshops to enhance international standard practices among listed companies.

CIEM deputy Hiếu, who also contributed to the law said companies should be aware that the law only required the minor conditions for practising corporate governance, adding they encouraged companies to perform better to build their own corporate governance.

Hiếu said further cost and human resources for better corporate governance might discourage some companies to apply such measures, however, they needed to recognise how it could benefit them in gaining investors’ trust and develop the sustainability of their enterprises.

According to Nguyễn Thị Nguyệt Anh, corporate governance officer from IFC, said “Việt Nam needs to have a certain change in corporate governance in order to improve the quality of the local companies and to make the market more attractive.”

Anh said more and more companies had been paying attention to the issue since 2007 when IFC started working with the Vietnamese Government to improve the country’s regulations and investment climate, raise public awareness of good corporate governance, build the capacity of its partners, and provide governance advice to individual companies. — VNS

 

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