E. Asia risks losing lure for investment<\/p>\n
SINGAPORE (AFP): East Asia risks losing its attraction for
\nforeign investors if the region relaxes corporate governance
\nstandards to spearhead capital market development, a conference
\nwas told yesterday.<\/p>\n
Corporate governance is the system by which companies are
\ndirected and controlled and concerns the effectiveness and
\naccountability of directors to their shareholders.<\/p>\n
"To remain as an attractive market for international investors
\nand thereby sustain rapid economic growth in the whole East Asian
\nregion, there must be good corporate governance..," Singapore
\nFinance Minister Richard Hu said.<\/p>\n
Hu told a conference organized by the Stock Exchange of
\nSingapore that the rapid expansion of regional capital markets
\nhad created a temptation to lower standards of corporate
\ngovernance to spearhead further development.<\/p>\n
"If we do so, standards will fall and the risk of investing in
\nthe region increase," he warned. "In the long-run, the region
\nwill lose its investment rating and attraction among foreign
\ninvestors.<\/p>\n
"Investor confidence is a scarce commodity. Once lost, it will
\nnot be easily revived," Hu said.<\/p>\n
Detractors say that high corporate governance standards
\nimposed by regulators on listed companies burdens companies,
\nstifles enterprise and scares off potential users of the capital
\nmarket, and want guidelines to be kept to a minimum.<\/p>\n
They also cite the high costs of maintaining monitoring
\nmechanisms to ensure that managements comply with procedures.<\/p>\n
Hu said corporate governance standards helped directors manage
\ntheir companies' operations better.<\/p>\n
"Rogue traders at NatWest and Sumitomo could not have covered
\nup their huge losses for so long had better internal controls
\nbeen in place," the minister said.<\/p>\n
Corporate frauds such as the much-touted discovery of massive
\ngold deposits in Indonesia which turned out to be a hoax,
\nemphasized the "huge cost to investors as a result of the
\nbreakdown in corporate governance," he said.<\/p>\n
Many developing countries in Asia rely on foreign capital
\ninflows to finance their economic development, and financial
\nscandals and incidents of corporate collapse will undermine
\ninvestors' confidence, Hu said.<\/p>\n
Adrian Cadbury, former chairman of a British committee on
\ncorporate governance, said the emergence of "truly global
\nmarkets" would spur movement towards an international standard
\nwhich companies around the world will have to meet.<\/p>\n
Cadbury told the conference that institutional investors
\nseeking opportunities outside their domestic markets would demand
\nproperly constituted boards, reliable financial reporting, full
\ndisclosure, effective internal financial controls and equal
\ntreatment for all shareholders.<\/p>\n
And companies that wish to raise money on international
\nmarkets can only do so if they obey their rules, he said,
\nalthough it can prove uncomfortable.<\/p>\n
Cadbury cited the example of Daimler-Benz which found that the
\nprofit it had declared in Germany became "an embarrassing loss"
\nwhen its accounts were restated in line with US accounting
\nstandards when it sought a quotation on the New York Stock
\nExchange.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/e-asia-risks-losing-lure-for-investment-1447893297",
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"sponsor": "Okusi Associates",
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