Asian govts urged to improve corporate governance

Asian govts urged to improve corporate governance

Reuters, Kuala Lumpur

Western standards on corporate governance may not work in Asia, but they could provide a starting point for governments trying to restore confidence in foreign investors, experts said on Wednesday.

"What works in the West may not work in the East," Moses Cheng, chairman of Hong Kong Institute of Directors, told Reuters on the fringes of a conference on governance.

"You can't wholesale slap on deterrents, not when the majority of your investing public cares only about making money, when success is measured only by a person's ability to make money -- even if that's done through unscrupulous means." The two-day seminar discussed issues including different types of corporate transparency models, duties of directors, protection and voting rights of institutions and small investors.

An Australian don said developing home-grown rules might take too long and borrowing some to start the ball rolling was better than having none.

"One size doesn't fit all," said Nara Srinivasan, a professor at Edith Cowan University. "That's true, but East Asian countries also depend on foreign investors who want some minimum standards. These people have to be convinced."

Nara ranked Australia, where the call for greater transparency began in the mid-80s, as the regional leader with the highest disclosure standards. He said Hong Kong was next best, then Malaysia -- ahead of neighboring Singapore. "Great strides have been made throughout the region and Malaysia has done a lot," he said.

Like many Asian peers, Malaysian firms are mostly family or state controlled, with shareholding concentrated in the hands of a few.

That led Morgan Stanley Capital International to halve the country's weighting on its indices, which are widely tracked by global fund managers.

Foreign portfolio investors have pulled out as much as US$3 billion from Malaysia since mid-2000, angered by a string of schemes hatched by corporate chieftains with close ties to top politicians as they tried to cling onto their debt-riddled business empires.

The government has tried to undo the damage, acting to re- brand Corporate Malaysia with tighter rules to safeguard minority investors from unfair practices.

But rumblings of backsliding are stirring again, leaving investors worried that last year's push to clean up will not last.

Megat Najdmuddin, president of the Malaysian Institute of Corporate Governance (MICG), on Tuesday called on the government to act "fast, firmly and decisively" to prevent backsliding.