Regional Banks, Regional Investments, and Regional Responsibilities: Strengths, Shortcomings and Trends of Thai Commercial Banks' Corporate Governance and CSR Policies
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Regional Banks, Regional Investments, and Regional Responsibilities: Strengths, Shortcomings and Trends of Thai Commercial Banks' Corporate Governance and CSR Policies

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By Carl Middleton, Chulalongkorn University, Thailand

By Carl Middleton, Chulalongkorn University, Thailand

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  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers
  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers
  • Dr. Carl Middleton, MAIDS program, Faculty of Political Science, Chulalongkorn University 26th August 2010 "International Seminar on Rural-Urban Tensions, Violence, & Conflict Transformation" Chulalongkorn University, Thailand
  • Dr. Carl Middleton, MAIDS program, Faculty of Political Science, Chulalongkorn University 26th August 2010 "International Seminar on Rural-Urban Tensions, Violence, & Conflict Transformation" Chulalongkorn University, Thailand Hongsa - 70 percent financed by loans and the remaining 30 percent provided by the company. Financed in Nov 2010
  • Dr. Carl Middleton, MAIDS program, Faculty of Political Science, Chulalongkorn University 26th August 2010 "International Seminar on Rural-Urban Tensions, Violence, & Conflict Transformation" Chulalongkorn University, Thailand
  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers Note, civil society groups
  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers SET-listed Ch Karnchang Plc (CK) will raise the registered capital of its subsidiary CK Power Ltd (CKPL) from 100 million baht to 9.2 billion by next year's first quarter and float shares of the power holding company on the local bourse by the end of 2012. NN2 also accessed funding on Thai SET
  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers Put image of SET here
  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers
  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers Nam Ngum 2 Displacing approx. 6,100 mainly ethnic minorities from 17 villages; Questionable land availability and livelihood proposals EIA and RAP not disclosed.
  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers
  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers
  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers
  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers
  • Public Forum on Democratic Governance and Human Security in the Age of Globalization 18 May 2011
  • 10 December 2010 Carl Middleton, International Rivers
  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers
  • International Workshop on Rural Studies in the Mekong Region Friday 17th July, 2009 Carl Middleton, International Rivers
  • Public Forum on Democratic Governance and Human Security in the Age of Globalization 18 May 2011 "International Seminar on Rural-Urban Tensions, Violence, & Conflict Transformation" Chulalongkorn University, Thailand

Regional Banks, Regional Investments, and Regional Responsibilities: Strengths, Shortcomings and Trends of Thai Commercial Banks' Corporate Governance and CSR Policies Presentation Transcript

  • 1. REGIONAL BANKS, REGIONAL INVESTMENTS, AND REGIONAL RESPONSIBILITIES: Strengths, Shortcomings and Trends of Thai Commercial Banks' Corporate Governance and CSR Policies Carl Middleton Ph.D. David J.H. Blake
  • 2. Overview
    • Thailand’s commercial banks are increasingly lending regionally
    • Despite a growing commitment to Corporate Governance and CSR, Thailand’s commercial banks are yet to implement thorough reform
    • “ Sustainable Banking”:
      • Banks can play a role in achieving socially and environmentally sustainable and just societies
      • “ Sustainable Banking” reduces risks and brings new investment opportunities for banks
  • 3. Changing times, changing actors
    • Declining role of Western donors and International Financial Institutions (ADB, World Bank)
    • Increasing role of the private sector
      • Independent Power Producers (IPPs)
      • Build-Operate-Transfer (BOT) model
      • Public Private Partnerships (PPPs)
    • INTRAREGIONAL INVESTMENT: Project developers and financiers now largely from Thailand, Vietnam, China, Malaysia, Russia
    • Regional banks are now key financiers …. and important decision-makers
    Regional Powertrade Masterplan (ADB)
  • 4. Regional hydropower developers…
    • Thailand:
      • EGCO (Nam Theun 2)
      • Ratchaburi (Nam Ngum 2+3)
      • GMS Power (Nam Ngum 3, Theun Hinboun, Tasang (MDX))
      • Ital-Thai (Ban Koum, Nam Theun 2)
      • Ch. Karnchang (Xayabouri, Nam Ngum 2)
    • Vietnam:
      • EVN (Lower Sesan 2)
      • PetroVietnam (Luang Prabang)
      • Viet Nam-Laos Joint Stock Company (VLPC) (Xekamen 1+3). Consortium includes Song Da
    • China:
      • Sinohydro (Nam Ngum 5, Pak Lay, Nam Ou, Kamchay, Salween)
      • China Southern Power Grid (Sambor, Stung Cheay Areng, Nam Tha)
    • Malaysia:
      • MegaFirst Corporation (Don Sahong)
      • Gamuda (Nam Theun 1)
  • 5. Regional banks are now key financiers …. and important decision-makers
    • Thai Banks
      • Projects include Nam Ngum 2, Nam Theun 2, Theun Hinboun Expansion project, Hongsa…
      • Banks include Bangkok Bank, Bank of Ayudhya, Kasikorn Bank, Krungthai Bank, Siam Commercial Bank, Thai Military Bank
      • ECA: Thai Export-Import bank heavily involved
    • Vietnamese banks
      • Domestic state-owned banks important financiers of domestic projects
      • In Laos: Vietcom Bank and the Bank for Investment and Development of Vietnam (Xekaman 3 – US$200 million)
    • China Export Import Bank (Kamchay, Nam Mang 3)
    • Other financiers
      • Access to bond and stock markets (Nam Ngum 2 on SET?; Xayaburi / CK Power Ltd (CKPL) on the Lao bourse?)
      • Private equity (Leopard Asia – US$100 million…)
      • Pension funds…
  • 6. Which Thai commercial banks fund hydropower in Lao PDR? Nam Thuen 2 Nam Ngum 2 Theun Hinboun Expansion Project Xayaburi (?) Bank of Ayudhya X X Bangkok Bank X X Kasikorn Bank X X X Krung Thai Bank X X X Siam City Bank X X X Siam Commercial Bank X X Thai Military Bank X X Thanachart Bank X
  • 7. Thai commercial banks and co-financing in dams in Lao PDR
    • Nam Thuen 2 and THXP are co-financed with international bank (that are also EP banks).
    • Nam Ngum 2 is financed only by Thai commercial Banks
    • These 7 banks are amongst the 8 largest in Thailand
  • 8. All major Thai Banks are listed on the Stock Exchange of Thailand
    • Asian Financial Crisis revised Thai Commercial Bank’s business model:
      • Foreign investment limits were raised
      • Increasingly, profits from financial services rather than lending alone
    • International bank involvement is by strategic investment and nominee investment
    • Highly active international banks include:
      • JP Morgan Chase
      • HSBC
      • State Street Bank and Trust Company
  • 9. Some Thai banks have strategic foreign investors, or partial government ownership
    • Bank of Ayudhya + GE Money (33%)
    • Thai Military Bank + ING (26%)
    • Thanachart Bank + Bank of Nova Scotia (50%)
    • Krung Thai Bank + Financial Institution Development Fund (FIDF) (55%)
  • 10. Many international investors have committed to international standards
    • Equator Principles
      • HSBC
      • ING
      • Bank of Nova Scotia Yet…
    • ING is a strategic investor in Thai Military Bank which has lent to Nam Ngum 2
    • HSBC has endorsed the WCD, yet manages nominee accounts in Krung Thai Bank that is financing Nam Ngum 2
  • 11. Thai Commercial Banks and Corporate Governance
    • All Thai banks have a Corporate Governance policy, as guided by the Stock Exchange of Thailand
      • Society and environment is identified as an external stakeholder to be considered
      • Requires compliance with countries laws
      • Some banks, such as Bank of Ayudhya, state that they will not fund projects with adverse environmental impacts
    • SET established a Corporate Governance Center in July 2002
  • 12. Corporate Governance: Siam Commercial Bank
    • Social responsibility
    • To conduct the bank’s business with responsibility towards the society and with sensitivity when dealing with issues which are related to public interest ; and to regularly support and participate in activities that are beneficial to communities and the society.
    • Environment
    •   To abide by environmental laws and regulations, implement effective safety and environmental management measures to prevent negative impacts on local communities , and promote employees’ awareness of and concern for the environment.
  • 13. Corporate and Social Responsibility (CSR)
    • Only Kasikorn Bank has a publicly available CSR policy
    • Krung Thai banks supports the “Global Reporting Initiative” standards, releases an annual report on Social Responsibility, and has a Board level CSR committee
    • Most other banks blend CSR with Corporate Governance or “Business Ethics”
    • Largely based around aspirational statements :
      • TMB Philosophy “ …TMB is focused on maximizing the benefits it brings to its stakeholders, customers, and the community at large ”
    • Banks interpret CSR as philanthropic activities and encourage their staff to join in:
      • Education, Youth, Environment, Community Service, Arts…
    • SET has established a CSR Institute, which has prepared non-binding CSR Guidelines.
  • 14. Demand for Corporate and Social Responsibility (CSR) is growing Competition in domestic personal banking is growing – CSR and media is a key factor Siam Commercial Bank and Krung Thai recognize reputational risk as a key business concern ACIHR is presently undertaking a sectorial study of CSR practices within ASEAN, aligned with a strategic objective of the “ ASEAN Blueprint for the Socio-Cultural Community ”
  • 15. Proposed Xayaburi Dam: Banks move towards CSR commitments?
    • Siam Commercial Bank ( Post Today, 25 April 2011 )
      • “ Artit Nanwittaya, deputy managing director of Siam Commercial Bank, said the Bank could not sign loan agreement with other 3 banks for Ch Karnchang's Xayaburi dam as scheduled this month, as there has been a strong opposition from local network in 8 Mekong provinces in Thailand and neighbor counties. As well, the Xayaburi project needs agreement from 4 countries that would be environmentally affected”
    • At the time, Kasikorn Bank and Krung Thai Bank also indicated they were still reviewing the loan application.
  • 16. Creating Green / Sustainable / Decarbonized/ Transparent/ Accountable… Banks
    • Equator Principles
    • UNEP-Financial Initiative
    • UN Principles for Responsible Investment
    • UN Global Compact
    • Extractive Industries Transparency Initiative
    • Carbon Disclosure Project
    • Ruggie Principles on CSR and Human Rights: “Protect, Respect, Remedy”
    • ISO 26,000
    • Or, banks could develop their own in-house sector (agriculture, dams, forestry, …) and issue (biodiversity, climate change, human rights…) policies
  • 17. Final Thought on Building Banks that are Sustainable
    • Global economic crisis has raised public expectations for commercial banks to work in the interest of a sustainable society (Triple Bottom Line investment / Corporate Accountability)
    • Some banks, such as Krung Thai Bank and Bangkok Bank, offer “Green Loan”
    • Kasikorn Bank, Krung Thai Bank, and SCB are members of the Thailand Business Council for Sustainable Development, presently developing voluntary social responsibility guidelines
    • Kasikorn Bank, Krung Thai Bank, and Siam Commercial Bank have won various SET annual awards for their governance reports
  • 18. Final Thought on Building Banks that are Sustainable
    • Absence of clear definition on CSR and its implementation, including on transparency, accountability and enforceability
    • Regional investments entail regional responsibilities of due diligence , strengthening governance
    • Beyond philanthropic and public relations-orientated CSR, social and environmental risk needs to be integrated into decision making processes:
      • Policy, operationalization (systems in place), implementation (resourcing, and training and rewarding staff) and independent grievance/ dispute mechanisms.
      • Sustainability reporting
  • 19. Thank you for listening
    • [email_address]
    • Master of Arts in International Development Studies Programme
    • Chulalongkorn University
    © Suthep Kritsanavarin