Thursday, October 7, 2010

Thailand moves up 4 positions in Corporate Governance Asian table

Taken from the Bangkok Post:

Thailand has moved up four spots to rank fourth in Asia on this year's list compiled by the Asian Corporate Governance Association and CLSA Asia-Pacific Markets.

The CG Watch report, which assesses the quality of corporate governance in 11 Asian countries, put Thailand in an eighth place in its last 2007 survey.

Thailand scored 5.5, up from 4.7 in 2007, tying with Taiwan, which also ranked fourth in the previous survey. Thailand was recognised as the most improved country due to highest score improvement.

Singapore was the best performer this year with a score of 6.7, followed by Hong Kong at 6.5 and Japan at 5.7. The Philippines was last on the list, scoring 3.7. Others include Malaysia (6th), India and China (7th), South Korea (9th) and Indonesia (10th).

Scores are based on five categories - CG rules and practices, enforcement, political/regulatory environment, adoption of International Generally Accepted Accounting Principles and CG culture.

Chalee Chantanayingyong, a deputy secretary-general of the Securities Exchange Commission (SEC), said the perception of Thailand had improved because of continuous collaboration from all parties in the capital market.

Among supporting factors are having a capital market development plan on the national agenda, adjustments in laws and regulations to lift CG standards, such as setting clear roles and responsibilities of directors and executives, and the establishment of a mechanism to protect whistle-blowers.

The survey also looked at how CG practices are being implemented by listed companies. Average CG scores of Thai listed companies were the highest in Asia.

Mr Chalee said development of corporate governance will help increase investors' interest in the Thai capital market. However, Thailand still needs to improve law enforcement, which is perceived as one of the country's weaknesses. "Our law enforcement process is quite long compared with other countries," he said.

The SEC is now pushing forward an amendment dealing with enforcement under the Securities and Exchange Act. It would promote implementation of civil penalties, allowing for faster enforcement. A draft is before the Finance Ministry. The move is part of the capital development plan.

Pakorn Malakul na Ayudhya, head of the subcommittee of the Corporate Governance Centre, said Thailand's CG improvement was expected to lift the country's competitiveness in the long term with more investments from foreign funds.

"Foreign investors are looking at the level of corporate governance as a criterion for managing fund risk," he said.

Wednesday, October 6, 2010

Strengthening of the Thai Baht & its consequences

With today’s news that the baht has reached a 13 year high, it is relevant to look at the effect of this appreciation on businesses here in Thailand.

Within the last 20 years, Thailand’s economy has become synonymous with the terms growth and expansion. With an ever increasing middle class becoming more important, investors from the west flock in the hope of exploiting the new market to yield promising returns and reap the benefits of the growth. Evidence of such an influx in capital in to Thailand is the recent strengthening of the baht threatening to reach 29 baht to the dollar before the year is out, a record low not seen since before the Asian financial crisis. The effect of this can be far reaching for overseas companies thinking of investing in Thailand.

Firstly, since Thailand relies heavily on exporting its products such as rice, computer parts, and clothing, these products would increase in price. This increase would cause them to be less attractive to financial weary consumers in the west.

Additionally, this may cause a ripple effect that could, in turn, cause various foreign investors to pull out of Thailand due to cheaper sources of labour elsewhere (ie Cambodia, Laos, China and Vietnam). This is, in fact, already happening in certain industries.

Therefore, establishing a company in Thailand may be more expensive than initially thought.

However, this appreciation in the Thai baht also brings with it its fair share of opportunities for foreign investors. The strengthening of the baht gives the average Thai consumer more spending power and therefore, a higher disposable income not seen previously. With more purchasing power, foreign investors can take advantage of untapped markets formerly thought of as ‘too niche’.

An attempt to capture this market by foreign investors has recently been seen in the opening of the first Krispy Kreme store in Thailand. This store, while selling more expensive donuts than its local counterparts, attempts to capture both Thai waists and wallets by offering a foreign taste of donuts never seen before.

All in all, the rising baht may, in the long run, signal the end of Thailand’s dominance in the primary and secondary sector but may bring about an emergence in the tertiary sector bringing with it a new breed of overseas investors.

Written by Ben Henderson, Support, Sutlet Group Co., Ltd.

Sutlet Group is a leading provider of business services in Thailand, including accounting, visa and work permit management, HR, marketing and other expatriate services. See for more information