REGIONAL BANKS, REGIONAL INVESTMENTS, AND REGIONAL RESPONSIBILITIES:  Strengths, Shortcomings and Trends of Thai Commercia...
Overview <ul><li>Thailand’s commercial banks are increasingly lending regionally </li></ul><ul><li>Despite a growing commi...
Changing times, changing actors <ul><li>Declining role of Western donors and International Financial Institutions (ADB, Wo...
Regional hydropower developers… <ul><li>Thailand:  </li></ul><ul><ul><li>EGCO (Nam Theun 2)  </li></ul></ul><ul><ul><li>Ra...
Regional banks are now key financiers  …. and important decision-makers <ul><li>Thai Banks </li></ul><ul><ul><li>Projects ...
Which Thai commercial banks  fund hydropower in Lao PDR? Nam Thuen 2 Nam Ngum 2 Theun Hinboun Expansion Project Xayaburi (...
Thai commercial banks and co-financing in dams in Lao PDR <ul><li>Nam Thuen 2 and THXP are co-financed with international ...
All major Thai Banks are listed on  the Stock Exchange of Thailand <ul><li>Asian Financial Crisis revised Thai Commercial ...
Some Thai banks have  strategic  foreign  investors, or partial government ownership <ul><li>Bank of Ayudhya + GE Money (3...
Many international investors have committed to international standards <ul><li>Equator Principles </li></ul><ul><ul><li>HS...
Thai Commercial Banks and  Corporate Governance <ul><li>All Thai banks have  a Corporate Governance  policy, as guided by ...
Corporate Governance: Siam Commercial Bank <ul><li>Social responsibility </li></ul><ul><li>To conduct the bank’s business ...
Corporate and Social Responsibility (CSR) <ul><li>Only Kasikorn Bank has a publicly available CSR policy </li></ul><ul><li...
Demand for Corporate and  Social Responsibility (CSR) is growing Competition in domestic personal banking is growing – CSR...
Proposed Xayaburi Dam:  Banks move towards CSR commitments? <ul><li>Siam Commercial Bank ( Post Today, 25 April 2011 ) </l...
Creating Green / Sustainable / Decarbonized/ Transparent/ Accountable… Banks <ul><li>Equator Principles </li></ul><ul><li>...
Final Thought on Building Banks that are Sustainable <ul><li>Global economic crisis has raised public expectations for com...
Final Thought on Building Banks that are Sustainable <ul><li>Absence of clear definition on CSR and its implementation, in...
Thank you for listening <ul><li>[email_address] </li></ul><ul><li>Master of Arts in International Development Studies Prog...
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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

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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 &amp;quot;International Seminar on Rural-Urban Tensions, Violence, &amp; Conflict Transformation&amp;quot; Chulalongkorn University, Thailand
  • Dr. Carl Middleton, MAIDS program, Faculty of Political Science, Chulalongkorn University 26th August 2010 &amp;quot;International Seminar on Rural-Urban Tensions, Violence, &amp; Conflict Transformation&amp;quot; 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 &amp;quot;International Seminar on Rural-Urban Tensions, Violence, &amp; Conflict Transformation&amp;quot; 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&apos;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 &amp;quot;International Seminar on Rural-Urban Tensions, Violence, &amp; Conflict Transformation&amp;quot; Chulalongkorn University, Thailand
  • Regional Banks, Regional Investments, and Regional Responsibilities: Strengths, Shortcomings and Trends of Thai Commercial Banks' Corporate Governance and CSR Policies

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

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