The Honourable Armando Tetangco, Jr.
Governor of the Central Bank of the Philippines;
The Honourable Teresita Herbosa,
Chairperson of the Securities and Exchange Commission Philippines;
Distinguished guests,
Members of the media,
Ladies and gentlemen.
- Good morning. I am extremely delighted to be here at the inaugural ASEAN Corporate Governance Conference 2015, and I would like to thank everyone for being here this morning.
- This event marks an important milestone for the ASEAN Capital Markets Forum, a grouping of capital market regulators from all ten ASEAN countries, which has emphasised corporate governance as a central policy agenda since our inception in 2004.
- On behalf of my ACMF colleagues I would like to express my deepest appreciation to the Philippine SEC for hosting this event, as well as the Asian Development Bank, the IFC, the Philippine Stock Exchange and the Institute of Corporate Directors for their support.
- The SEC, of course, is a firm proponent of efforts to promote greater capital market development and Chair Herbosa has been an active member both within the ACMF as well as the Growth and Emerging Markets Committee of the International Organisation of Securities Commissions (IOSCO).
- We are also honoured to have as our keynote speaker Governor Tetangco. The governor and I meet at the Financial Stability Board meetings where he formerly co-chaired the Regional Consultative Group for Asia and I represent the emerging capital markets as the Chair. We have had some very interesting discussions on regional and emerging markets issues and I am looking forward to hearing his views this morning.
Ladies and gentlemen.
Supporting the ASEAN growth narrative
- It is indeed a happy coincidence for this event to be inaugurated in Manila the same year that we are establishing the ASEAN Economic Community. From my time here, I have become convinced that the energy and dynamism of this city may be seen to represent not only the growth momentum of the Philippines, but also the burgeoning potential of ASEAN as a region.
- Looking further afield, it is clear that this narrative of growth and optimism is also playing out across the region at large, from Kuala Lumpur to Jakarta, Hanoi, Bangkok and beyond. It is this particular narrative that we as policymakers are determined to see through, to ensure that ASEAN’s record of steady economic expansion1 could be sustained and meaningfully translated into rising prosperity as well as greater opportunities for our fellow 600 million ASEAN citizens.
- With a collective GDP of $2.57 trillion in 2014, ASEAN as a bloc is already the world’s seventh-largest economy and projected to become the fourth-largest by the middle of this century. Many across the globe are therefore waking up to the region’s long-term potential, with our growing, youthful and increasingly urbanised population serving as one of the world’s largest yet still relatively under-tapped workforce and consumer markets.
- However, for such promise to become a reality, a wide range of cross-cutting reforms must be pursued for ASEAN countries to be able to pool their strengths in delivering growth across the whole region. It goes without saying that such reforms are complex and manifold, given the diversity of all the member states.
Ladies and gentlemen,
Capital market interconnectivity as an enabler of pan-regional growth
- As regulators and policymakers, the ACMF is very conscious of the role played by the financial system as an enabler of growth in the real economy, particularly in mobilising capital into meeting both private sector and sovereign financing needs.
- In this regard, well-functioning financial markets are a critical form of infrastructure for any economy – without which any large-scale commercial activity or developmental initiative may be either impossible or undertaken only at a prohibitive cost.
- Therefore, for our capital markets to efficiently serve regional as well as domestic needs, it is essential to establish greater interconnectivity by progressively removing barriers to intra-regional flows of capital, services and talent, while introducing a more harmonised ecosystem to provide a seamless experience across different member countries.
- Hence, the ACMF members have put in considerable time and effort over the years in designing initiatives to facilitate intra-regional investment flows and cross-border participation, resulting in the introduction of measures such as the ASEAN Disclosure Standards, Expedited Review Framework for Secondary Listings, ASEAN Trading Link and the Framework for the Cross-border Offering of ASEAN Collective Investment Schemes.
- While these measures are implemented on a staggered basis depending on the readiness of the respective countries, the actual mechanism in each instance has been collectively developed and endorsed by all member states. Such an inclusive approach was adopted to ensure that ACMF initiatives are regionally relevant and aligned with the needs of its members.
- Moreover, we have also pressed on in articulating the ACMF’s post-2015 work programme which shall focus on a number of areas including market developmental initiatives that are tailored to meet the specific needs of our member countries. It is envisaged that this focus on capacity-building and development would help to accelerate participation of all members and enable the benefits of regional interconnectivity to be realised earlier.
- In essence, by encouraging greater regional capital market activity, the ACMF aims to ensure that ASEAN businesses can be largely self-financed through ASEAN capital, and that ASEAN households can in turn benefit from the growth of these businesses, be it as investors or consumers. At the same time, such interconnectivity also provides the ASEAN asset class with greater scale and visibility at the international level, thus making it a more attractive business and investment destination.
Nevertheless, ladies and gentlemen,
Staying the course through current uncertainties.
Nevertheless, ladies and gentlemen,
Staying the course through current uncertainties
- Our firm optimism in ASEAN’s long-term potential does not mean that we are unaware of current challenges that are affecting not only markets within the region, but also emerging markets globally.
- But it is clear that where efforts have been made by policymakers to strengthen their capital markets such as the strengthening of institutional structures, the development of deeper local currency bond markets and the introduction of stronger regulatory frameworks, it has done much to strengthen the resilience of their economies and financial markets.
However, ladies and gentlemen,
Corporate governance as a source of resilience
- While regulatory and institutional reforms continue to be critical, we must also recognise that another important source of resilience – both at the macro and firm level – is none other than corporate governance.
- With the private sector playing an increasingly dominant role in driving ASEAN growth, it is clear that the health and longevity of our corporations are becoming significantly more intertwined with the fate of our economies at large, through their impact on not only national income but also employment and government revenue, which is vital in the delivery of essential public services – thus making corporate governance a public interest imperative.
- While this fact has long been recognised by the ACMF, in recent years it has also gained greater attention at the highest levels of international policymaking including the FSB, IOSCO and OECD, particularly since the global financial crisis of 2008 illustrated how even the most sophisticated markets were not impervious to systemic weaknesses in corporate governance.
- As a result, global regulators are increasingly emphasizing the role that high standards of corporate governance play in building trust and confidence, which is imperative in resilient and robust capital markets.
Ladies and gentlemen,
ASEAN commitment towards corporate governance
- At the ASEAN level, I am pleased to see that the private sector has been very receptive towards efforts made by the ACMF to further strengthen corporate governance practices in the region – and I must commend you for your commitment. The ASEAN Corporate Governance Initiative is indeed one of the success stories of the ACMF Implementation Plan, with one of the highest rates of participation among all of the measures introduced over the last few years, and the award ceremony later this evening serves as a testament to the progress made by leading ASEAN public-listed companies on this front.
- I am also pleased to note that our collective determination in this regard has not gone unnoticed, with the Asian Corporate Governance Association acknowledging the growing momentum for corporate governance reform in Southeast Asia. Many important milestones have been recorded in recent years, including the issuance of a governance plan for state-owned enterprises in Thailand, the release of a corporate governance roadmap in Indonesia as well as the launch of the Philippines’ own blueprint on corporate governance by the end of this conference – and I must congratulate them on this achievement.
- In Malaysia, corporate governance remains a core policy priority for the Securities Commission, who has led efforts in this area since the resolution of the Asian financial crisis. As one of the earliest in the region to introduce a dedicated Code on Corporate Governance, our early efforts focused on designing rules that clearly elucidate regulatory expectations for good governance and corporate conduct.
- Over time, as such expectations were increasingly internalised by companies and market participants, our focused moved towards empowering the rest of the capital market ecosystem to play a more active role in incentivising firms to adopt a culture of good governance – an approach articulated in our Corporate Governance Blueprint which was released in 2011.
- A number of important outcomes have arisen from the Blueprint, including the introduction of a stewardship code for institutional investors, the establishment of an institutional investor council as well as changes to voting procedures during shareholders’ meetings to allow for more equitable exercise of control and representation.
Ladies and gentlemen,
Conclusion
- It is clear that ASEAN has made tremendous progress in our efforts to further strengthen corporate governance within the region, which was in no small part due to not only the perseverance of the policymakers but also the commitment and support of the private sector and civil society. Such collaboration underscores how corporate governance is ultimately our collective responsibility.
- As we move forward together as the ASEAN Economic Community, it is essential for all of us to continue to press on with our reform agenda – an agenda that is likely to become more challenging as we seek to embed the notions of good governance and responsible conduct not only within the regulatory architecture of the capital market, but also its very culture and DNA – an undertaking which demands a mastery of the intersection between rules and incentives, as well as ethics and morality.
- Once again, thank you for being here today and I look forward to a productive conference.
Thank you.
