High marks for Malaysia's corporate governance

ahmadk@nstp.com.my

January 13 2007

WORLD BANK REPORT ON OBSERVANCE OF STANDARDS AND CODES

MALAYSIA scored high marks for disclosure and transparency of accounting standards in the World Bank report on the country's Observance of Standards and Codes in respect of corporate governance.

Second Finance Minister Tan Sri Nor Mohamed Yakcop said such a report recognises that Malaysia has a world-class system in corporate governance, which is on par or even better than those implemented in some developed countries.

"This is something we should be proud of but it did not come as a surprise as we have introduced such corporate governance standards and system since the 1990s," he told the Press after launching the World Bank's Report on the Observance of Standards and Codes (ROSC) in respect of corporate governance in Kuala Lumpur yesterday.

In the report, Nor Mohamed said the World Bank has found that Malaysia is in compliance with most of the internationally accepted principles.

In fact, he said Malaysia scored full marks for high quality standards of accounting as well as financial and non-financial disclosure.

Apart from this, Nor Mohamed said in its report on "Doing Business in 2007", the World Bank and International Finance Corp have also ranked Malaysia fourth in terms of investor protection.

"These findings are not only reflective of our strong commitment to corporate governance but also testimony that our standards are comparable with international practices," Nor Mohamed said.

According to the ROSC, the World Bank recognises the strategic steps taken by Malaysia since 1998 to enhance and strengthen its corporate governance framework.

The World Bank report concludes that Malaysia is at a commendable stage in terms of corporate governance practices with room for continuous improvement.

Malaysia also fared well in areas such as stakeholder disclosure and whistleblower protection, the report said.

In this regard, Nor Mohamed said the Government will continue to focus on enhancing and strengthening corporate governance practices in other areas this year.

For instance, he said the Government will monitor the performance of the Government-linked companies (GLCs) and to see how many steps they (GLCs) have implemented based on the various programmes that have been outlined.

Securities Commission chairman Datuk Zarinah Anwar said one of the areas that need further improvement identified by the ROSC is shareholder activism.

"The Minority Shareholders Watchdog Group, the Securities Commission and institutions of shareholders have been working on good best practices for institutional shareholders which we hope to launch sometime this month.

"We hope to encourage and set up the best standard of conduct for institutional shareholders and hope that they in turn agree to take up the role in terms of enhancing the corporate governance agenda," she said.

Meanwhile, World Bank country director for Malaysia, Ian Porter, said the World Bank will continue to work with Malaysia in enhancing and strengthening corporate governance as well as in other areas.

"As Malaysia aspires to move from being a middle-income country to a high-income country, there are bound to be a lot of challenges that need to be addressed.

"We will work together to address these challenges," he said, adding that some of the challenges have been highlighted in the report.

He said among the major issues that Malaysia need to address would be the regulatory framework for private investment and reducing the regulatory burden as an incentive to domestic private investment as well as foreign investment.

"The country also need to address the acute skill strength shortage that is facing Malaysia now," he said.