THAILAND

As Thailand's companies start to move abroad and into markets that are relatively new to them, a focus on emphasising on good corporate governance will be the key to keeping them competitive and winning acceptance in the marketplace.

In practice, corporate governance is different depending on the nature of each business, but no business can overlook lessons from the past, says Mr Kosit.

Thailand's crisis in 1997 and the collapse of financial institutions at the time showed how the growth that was perceived to be permanent was in reality not sustainable, said Kosit Panpiemras, the chairman of the executive committee of Bangkok Bank and a former industry minister.

The crisis, he said, brought into sharp focus the need for better corporate governance (CG) to protect organisations from a repeat of severe reversals.

Mr Kosit said the financial sector had been blamed as the root cause of the 1997 crisis, but this led to the emergence of many regulations that now may have gone too far. He argues that businesses can and should do more to regulate themselves.

"The current situation of over-regulation is challenging us," he said at a recent panel discussion. "I think that each financial institution must set up from the inside [a system to] drive the efficiency corporate governance action that will be the best tool to protect against a return of the crisis."

Looking at the broader picture, he believes that industries can also promote governance standards that apply to entire sectors. All players in each sector should overlook competitive aspects and join in promoting governance practices that can strengthen their industries. This would make them stronger domestically and position them to be more competitive abroad.

He pointed to industries in Taiwan and South Korea as examples of how good governance can lead to growth.

Another good example comes from the aviation industry, where the Star Alliance, of which Thai Airways International was a founding member, sets standards that all members try to follow. The result has been a strong growth story for the industry.

"As we are all undergoing a phase of globalisation, we should think about the public, and all industries should join hands and I believe that corporate governance would be an important instrument to build permanent growth for every firm," he said.

In practice, Mr Kosit said, corporate governance is different depending on the nature of each business, but no business can overlook lessons from the past.

Prasert Bunsumpun, the president and chief executive of PTT Plc, said various surveys across the world showed that good governance improves competitiveness and helps build brands by adding value to businesses.

According to the 2009-10 Global Competitiveness Index by the World Economic Forum, the United States and Singapore in that order were the three most competitive economies. All three are known for a strong emphasis on governance. Malaysia ranked 24th and Thailand 36th.

Mr Prasert agreed with Mr Kosit that the best corporate governance plan must include not only business but all related aspects such as social and environmental conditions.

PTT has received many awards for good governance, and Mr Prasert said governance plans must provide multi-directional communication to balance profits for all stakeholders, not only investors but also clients and society.

PTT has subsidiaries operating in many countries, so it needs to maintain high standards of corporate governance as a way to serve the countries and people where it operates.

Privy Councillor Prof Dr Kasem Wattanachai said governance had four main principles: responsibility, accountability, transparency and auditability.

However, he expressed concern that the Thai government does not support good corporate governance because there is too much political interference. Too many decisions in government are made by only one person from the political side, even when the authorised people have the capability.

Despite the poor example set by the government sector in Thailand and some other countries, Prof Dr Kasem said there were many examples of the private sector going ahead with admirable plans. One such example is the Wenzhou model in China.

"The model showed the power of the public to develop the country without waiting for the government, while good corporate governance was the main instrument to drive the model success," he said.

Wenzhou is one of the prosperous old foreign treaty ports in China. It contains about about 30 industrial clusters, each including several hundred private enterprises. When the communist-led country began its economic reforms in 1978, Wenzhou was the first city to set up individual and private enterprises as well as a shareholding co-operative economy in China.

Without much dependence on state investment, the development of the city came to rest oh the efforts of the local population. The development of a private economy in Wenzhou has subsequently created the model that inspired the modernisation drive in China.

From 1978 to 2009, the GDP of Wenzhou increased from 1.32 billion renminbi to 252.8 billion. Net per capita income for rural residents increased from 113.5 to 10,100 renminbi, the third highest among Chinese cities, after Dongguan and Shenzhen.

Prof Dr Kasem said the structure of corporate governance classifies responsibility into four levels. First is the ownership to set up the goals of the firm. Second is the board or committee setting the policy that supports the firm to reach the goal. Third, executives must conduct strategy based on the board's policy. Finally, the strategy will be adapted to an action plan for every party.

"This is the universal structure that can be adapted for all firms, large or small, and can fit any management system," Prof Dr Kasem said.