It was a prestigious opportunity for Forum for Corporate Governance in Indonesia (FCGI) to participate as Indonesian delegations in the international forum of 4th Asian Network on Corporate Governance of State-Owned Enterprises (SOEs) held in Bangkok 20-21 May 2009 (“Network”). The Network is annually held by Organization of Economic and Co-operation Development (OECD). An international organization established to help governments in tackling economic, social and governance of globalised economy.
The Network gathered around 50 participants, including the most prominent, active and influential policy makers, practitioners and experts regarding corporate governance of SOEs in the region. They constitute a peer of group that can press for legal, regulatory or other type of reform in this field. The Network aims to raise awareness, evaluate the currents policies of Corporate Governance, and support viable and effective reform on the importance and challenges related to the implementation of good corporate governance of SOEs in Asia countries.
To keep the dialogue focused and produces a tangible outcome, the Network has progressively developed a Regional Policy Brief, providing a set of recommendations and priorities for policy reform in order to improve the corporate governance of SOEs in the economic of Asia. The Network has also developed complete guidelines on the implementation of good corporate governance in SOEs notably in Asia. The guidelines are the first international benchmark in corporate governance of SOEs area. The use of the guidelines aims to raise awareness and promote implementation of good corporate governance in this sector.
As both policy brief and guidelines on the implementation of good corporate governments has progressively made, this 4th network focused on the implementation issues, discussing examples of international best practices, and how to implement the recommendations as provided by the policy brief and guidelines. It was also discussed about monitoring mechanism to follow-up implementation of the Policy Brief in the years to come in Asian countries.
During the Network session over the relevancy of the guideline on corporate governance of SOEs in Asia, all delegation has basically agreed with the guidelines and it has been widely accepted by Asian countries. Even some comments arisen, but generally speaking, the problem of guidelines contents are solely technical problem since the countries has different background, culture and system. Even the content of the guidelines has been accepted, In fact, some Asian countries found difficulties to straightly implement the guideline.
From the discussion within the session, the participants identified some common challenges faced in the implementation of corporate governance in SOEs. The major challenge is the state position as an owner of SOEs, somehow, considerably to much involve in the day-to-day management of SOEs. An excessive right of state as an owner causing some serious problem on the focus of corporate governance implementation in SOEs. This causing some dependency in decision making, bureaucracy problem, and lead to the less professional and undefined objectives.
The problem of director selection and nomination process also emerged. Some countries has problem with mechanism and process of getting the right people for this top job. Political interest in certain countries becoming an immense cause for this. Some government still inevitably appoints the SOE directors on their political future prospect as SOEs are a huge hope for political funding within the political process. In certain countries it worsened with the active participation of parliament in deciding the directors of SOEs either formally through the nomination and selection in the parliament so called fit and proper test or politically influence (intimidate-red) the government to choose on political interest-based, in this regard the president or related ministry who has the final right decision to appoint the directors. Other than state ownership and nomination of board directors, the challenges of ensuring implementation of corporate governance guidelines are regulatory reform, equal treatment to all shareholders, stakeholder interest as well as transparency and disclosure.
Some developments in some countries are also shared within the network session. Some countries like Thailand, Taiwan, Philippine, China, Indonesia and Bhutan shared their impressive development in this field i.e. Thailand has successfully develop principle guideline for their country to implement corporate governance in SOEs. Their focus on corporate governance in SOEs managed by State Enterprises Policy Office, structurally established under Minister of Finance. In the future they will make separation between policy, regulatory and operational responsibilities.
Philippine has developed a score card as an evaluation for SOEs performance on corporate governance implementation. They have also established some kind of independent steering committee in the selection and nomination of SOEs’ director. Even the final decision will be prerogatively made by the president but the steering committee will play an important role to select the right man for the right job. This is will also minimize the collusion or nepotism practice within the nomination process. Some countries has successfully setting up centralize ownership entities i.e. the SASAC in china, SCIC in Vietnam and most recently the Druk Holdings in Bhutan. Indonesia is now on the way to develop this ambitious plan to centralized SOEs ownership by establishing SOEs holding company.
Indonesia has progressively adopted the guideline through regulatory reform until ministerial level. Indonesia has also developed regulations which strictly oblige SOEs to compliance with corporate governance. This aims to provide good system and best practices as well as internalized the penetration of good corporate governance culture in SOEs. In providing the guideline for corporate governance implementation Indonesia has made guideline on sectoral based such as good corporate governance for bank, insurance company and other corporation which also applied for SOEs.
Further, after all challenges and development have been shared and some intriguing discussion has been made within the network delegations, it can be concluded that some priorities should be managed to ensure the implementation issues running well. The priorities are in the areas of regulatory reform, ownership by the state, equitable treatment for all shareholders, transparency and disclosure, selection and nomination process for the board as well the responsibility of the boars. Last but not the least, a monitoring mechanism should be developed to ensure that the priorities well implemented
