More Vietnamese firms are understanding transparency and information
disclosure are crucial to their development. VIR’s Hong Dung talks with Simon
Andrews, International Finance Corporation’s (IFC) regional manager for
Vietnam, Cambodia, Laos, and Thailand, about what should be done to turn that
improved awareness into common practice in Vietnam.
How would you rate Vietnamese
firms’ information disclosure and transparency?
Transparency has indeed become
ever more a priority for publicly traded companies in Vietnam. Firms are slowly
beginning to understand that building the confidence of shareholders and
investors can be best achieved with a firm commitment to transparency in
reporting and disclosure. It must also be noted that Vietnamese companies still
have some ways to go in reaching international best practices .
IFC’s Corporate Governance
Scorecard for Vietnam 2011 has shown that Vietnamese companies’ disclosure and
level of transparency is still not extensive enough in order to meet global
practices. The report reviewed corporate governance practices, including
disclosure and transparency practices, among the 100 largest companies listed
on the Hanoi and Ho Chi Minh stock exchanges. A compliance rate of 43.2 per
cent in 2010 with global good practices on disclosure and transparency
(improved from 39.4 per cent in 2009) means that Vietnamese companies’
practices need to continue becoming more detailed and comprehensive.
At the regulatory level, Vietnam
has made progress in establishing rules for greater transparency.
Two circulars guiding information
disclosure (Circular 09/2010 and Circular 52/2012) have been issued within the
last two years, demonstrating the government’s continued effort in promoting
transparency. I am glad to see the new circular on information disclosure
(Circular 52/2012) which should help raise the level of disclosure in annual
reports, including information on shareholding structure, Board of Management
and Board of Director performance reports, Board remuneration and corporate
governance reports. The next step is for companies to adopt and comply with the
new regulations and to possibly go beyond compliance by adopting further
transparency principles on a voluntary basis.
What is your view on Vietnamese
companies’ road map to transparency?
It is true that, similar to other
economies in transition, Vietnam’s business environment has yet to be aligned
fully with international best practices. There is, for instance, no complete
regulatory framework and guidance on how to prepare annual reports. At the same
time, I see a considerable shift in Vietnam over the last few years. As the
country modernises and accelerates its integration into the global economy,
local companies are starting to realise that following international best
practices can significantly improve their transparency and that in turn is
beneficial to their firm.
Vietnamese firms are now coming
to see adoption of better practices in their annual report as a way to help
enhance companies’ ability to attract higher quality of capital at a lower
cost. I am confident that the recent changes will continue to increase the
quality of Vietnamese companies’ annual reports and enhance their transparency.
In this context, it will also be important to develop companies’ accounting and
financial reporting capabilities and align them with international best
practices.
However, there are still
shortcomings in companies’ annual report preparing. Why and what are the
measures to address those issues?
The primary responsibility lies
with the companies as they need to understand how compliance with good
international practices contributes to their competitiveness. The OECD
Principles of Corporate Governance are an international corporate governance
benchmark for policy-makers and companies which should serve as guidance in
Vietnam. The OECD principles support the development of high quality
internationally recognised standards, which help to improve transparency and
the comparability of financial statements and other financial and non-financial
reporting between countries. Vietnam’s regulators should assist the move to
greater transparency and higher quality of local companies’ annual reports by
providing more detailed legal regulations guiding the reports’ preparation in
accordance with the OECD principles.
The state, as a major shareholder
in many companies, is in a powerful position to advocate for compliance with
international best practices through its representatives on boards of these
companies. The OECD principles should also be adopted and incorporated into the
listing requirements for Vietnamese companies.
What is IFC’s experience in
enhancing the transparency of companies in the world that is applicable to
Vietnam?
The last decade has seen a steady
rise in public demand for businesses to be transparent about their
environmental, social, and governance performance. However, there is still a
gap in many markets, when it comes to reporting a company’s environmental,
social and governance performance. Many investors, including institutional
investors, need this information to make informed investment decisions. The
lack of sustainability reports is a significant constraint on their ability to
analyse and channel capital to sustainable emerging market companies.
As a member of the World Bank
Group and the largest global development institution focused exclusively on the
private sector, IFC has been working for several years now to address the information
gap, and our partnership with the Global Reporting Initiative is part of that
on-going effort. IFC sees sustainability reporting as a timely next step to
improve transparency and strengthen trust in the private sector. It is also a
management tool that can help companies identify operational efficiency
improvements, innovate their products and services and build stronger
relationships with stakeholders.
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