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CORPORATE
GOVERNANCE IN
VIETNAM
Hannes Valtonen, VinaCapital
Introduction
   Set up GRC function in Vietnam at largest
    foreign fund manager
   Prior experience
     Asia   9 ye...
Agenda
   Background on Vietnam
   Regulations for foreign investors
   Securities markets / IPOs
   Corporate governa...
Agenda
   Background on Vietnam
   Corporate governance in VN
   Regulations for foreign investors
   Securities marke...
Background - Key facts
   Population                     87 million
   Population growth              1.1% growth
   Un...
Background - Context
   Doi Moi reforms                      1986
   US embargo lifted                    1994
   ASEAN...
Background - Context
   IPO take-off                2006-2008
   Investment/Enterprise law   2006
   WTO membership    ...
Foreign investment FDI
   Investment Law 2006 allowed foreign
    investment in any sector except if restricted
   Local...
Foreign investment (portfolio)
   No restrictions on selling and buying Vietnam
    stocks (except FX)
   FX regulated ,...
Securities markets
                     2005   2006     2007     2008     2009
                                           ...
World Bank
   Capacity of securities regulator
   Framework/standards for informal markets
   Code of CG for listed fir...
Doing Business 2010
Ease of…                         2010 Rank out of 183 economies
Starting a business                   ...
Why is governance important?
   Underpins market confidence, financial
    markets integrity and economic efficiency
   ...
Perspectives
   Economy in transition
   Knowledge, skills developing
   Institutions under development
   Ambitious p...
Challenges
   Transparency and disclosure
   Legal environment and contracts
   Land ownership / use rights
   Board g...
Transparency/disclosure
   Lack of experienced auditors
   Annual reports limited disclosure (notes)
   Inconsistent ap...
Legal environment
   Developing legal environment
   Inconsistent implementation of law at different
    levels
   Tran...
Land ownership / use rights
   Complicated and opaque regulations and
    approval processes
   Development often involv...
Board Governance
   Lack of experienced independent directors
   Oversight lacks independent audit committee
    (superv...
Summary
   Transitional developing economy
   Asian society, values, networks
   Don’t assume, get good advice
   Know...
Corporate Governance and Risk Management in Vietnam
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Corporate Governance and Risk Management in Vietnam

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Hannes Valtonen, Director of Risk and Compliance - VinaCapital Group - Vietnam

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Transcript of "Corporate Governance and Risk Management in Vietnam"

  1. 1. CORPORATE GOVERNANCE IN VIETNAM Hannes Valtonen, VinaCapital
  2. 2. Introduction  Set up GRC function in Vietnam at largest foreign fund manager  Prior experience  Asia 9 years (Japan, Korea, China, Vietnam)  Europe 4 years  Sectors: fund management, automotive, retail  Internal audit, compliance, operations, risk management
  3. 3. Agenda  Background on Vietnam  Regulations for foreign investors  Securities markets / IPOs  Corporate governance in Vietnam  Risk management and challenges  Reputation and branding strategy
  4. 4. Agenda  Background on Vietnam  Corporate governance in VN  Regulations for foreign investors  Securities markets / IPOs  Risk management and challenges  Branding strategy
  5. 5. Background - Key facts  Population 87 million  Population growth 1.1% growth  Under 25 years about 50%  GDP per capita (2008) $1,040  Real GDP growth (1999-2008) 7.5%  Agricultural output (2008) 21% GDP  Employed in agriculture (2007) 57%  Private sector employed (2006) 72%
  6. 6. Background - Context  Doi Moi reforms 1986  US embargo lifted 1994  ASEAN membership 1995  HCMC stock exchange 2000  Foreign investment/enterprise laws 2000  US bilateral trade agreement 2001
  7. 7. Background - Context  IPO take-off 2006-2008  Investment/Enterprise law 2006  WTO membership 2007  Global economic crisis 2008
  8. 8. Foreign investment FDI  Investment Law 2006 allowed foreign investment in any sector except if restricted  Local and foreign companies same standing  Conditional/prohibited FDI sectors  Opening in stages with WTO commitments  FX regulations, but right to repatriate investment and profits
  9. 9. Foreign investment (portfolio)  No restrictions on selling and buying Vietnam stocks (except FX)  FX regulated , but right to repatriate investment and profits
  10. 10. Securities markets 2005 2006 2007 2008 2009 July Stocks 40 183 249 338 367 Market cap mil$ 590 13,780 31,560 13,010 24,100 Daily turnover mil$ 0.8 10 71 42 74 Performance 20% 147% 26% -66% 32% Foreign volume 15% 23% 27% 22% 13%
  11. 11. World Bank  Capacity of securities regulator  Framework/standards for informal markets  Code of CG for listed firms  Enforcement of regulatory compliance  Training directors in CG  Better quality, timely, access to information
  12. 12. Doing Business 2010 Ease of… 2010 Rank out of 183 economies Starting a business 116 Construction permits 69 Employing workers 103 Registering property 40 Getting credit 30 Protecting investors 172 Paying taxes 147 Trading across borders 74 Enforcing contracts 32 Closing a business 127 Doing business (overall score) 93
  13. 13. Why is governance important?  Underpins market confidence, financial markets integrity and economic efficiency  Basis for transition from planned to market- based economy  Crucial for attracting foreign investment  Lessons from Global Financial Crisis for Vietnam in developing standards and institutions
  14. 14. Perspectives  Economy in transition  Knowledge, skills developing  Institutions under development  Ambitious plans, implementation difficult  Laws drafted, practice  Different perspectives by business sector/approach
  15. 15. Challenges  Transparency and disclosure  Legal environment and contracts  Land ownership / use rights  Board governance
  16. 16. Transparency/disclosure  Lack of experienced auditors  Annual reports limited disclosure (notes)  Inconsistent application of accounting and valuation policies =>Extensive due diligence, investigation
  17. 17. Legal environment  Developing legal environment  Inconsistent implementation of law at different levels  Transparency/corruption  Lack of precedent/enforcement Carefully align interests of parties Milestones, payments in stages
  18. 18. Land ownership / use rights  Complicated and opaque regulations and approval processes  Development often involves resettlement and negotiations =>local partner almost always necessary
  19. 19. Board Governance  Lack of experienced independent directors  Oversight lacks independent audit committee (supervisory committee)  Policies on related party transactions Board representation Minority protections, veto rights
  20. 20. Summary  Transitional developing economy  Asian society, values, networks  Don’t assume, get good advice  Know your partners, align interests  Strong international influences and changes taking place
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