Speech By Dr Richard Hu, Minister For Finance, For The Corporate Governance Forum Held In Conjunction With 3rd APEC Business Advisory Council 2001 Meeting, On 28 August 2001 At 12 Noon At Shangri-La Hotel28 Aug 2001
Chairman and Members of the APEC Business Advisory Council,
Distinguished Guests, Ladies and Gentlemen.
1 I am happy to join you in this Corporate Governance Forum, which you are holding in conjunction with the 3rd APEC Business Advisory Council Meeting.
2 May I extend a particularly warm welcome to our overseas guests. Your presence attests to the critical importance of sound corporate governance in the advancement of successful businesses. That this forum is being held as a private sector initiative is a significant statement in itself.
3 Corporate governance is turning out to be a major driver in a nation?s economic competitiveness. Any country that hopes to attract investors and investments from around the world must observe norms of corporate governance. These norms give comfort and transparency to those not totally familiar with the local business milieu.
4 This forum will offer a welcome exchange of views and experiences among practitioners. They can serve as guideposts for corporate governance which go beyond theory to practice in the real world. Ideals must be tempered by pragmatism, yet continually serve as long-term goals which we should not lose sight of.
5 Singapore has done well in maintaining its economic competitiveness. The 2001 World Competitiveness Yearbook published by the Institute for Management Development ranks Singapore as the second-most competitive economy in the world for the fifth year running. We retained our top ranking for government efficiency. The 2000 Global Competitiveness Report by the World Economic Forum gives Singapore the second-highest growth competitiveness rating in the world, after the United States.
6 These rankings are at best only an affirmation of our past efforts. The challenge lies in the future. As new technologies fuel the transformation of the global economy, everyone in Singapore must learn to ride the waves of change. They can either be the waves of opportunity washing onto new economic shores, or waves of destruction simply eating away the current economic landscape. Businesses, in particular, must be attuned to these changes. The changes offer new life or slow death, even if not sudden death.
7 The Government has to facilitate this transformation, remove bottlenecks, open new ways. Fundamental to the drive to make Singapore a most attractive place for global business is the need to make sure that our legal and regulatory frameworks are of world standard. They must also keep up with the changing operating environment. This is key to attracting international capital and top-notch companies to Singapore, and at the same time build up strength and muscle in Singapore companies to do well in the global economy. Whether New or Old Economy, it is high standards and superior capabilities that will give Singapore companies the best chances for success.
Review of Corporate Governance and Regulation
8 The Government decided last year to embark on a comprehensive review of corporate governance and regulation in Singapore. The effort is spearheaded by three private sector led committees. These are the Corporate Governance Committee, the Disclosure and Accounting Standards Committee, and the Company Legislation and Regulatory Framework Committee.9 The Corporate Governance Committee completed its review with the publication of a Code of Corporate Governance in April this year. The Singapore Exchange has endorsed the Code, which serves as the benchmark of corporate governance best practices for all public listed companies. While companies may deviate from specific aspects of the Code, they have to disclose and explain deviations from the Code in their annual reports.
10 The Disclosure and Accounting Standards Committee is reviewing the process by which accounting standards are set, maintained and regulated in Singapore. It is also proposing better standards in corporate disclosure, particularly among the listed companies. The issues are not straightforward. The Committee has conducted two public consultations to seek feedback on its proposals, once in December last year and again in May this year. It is now finalising its report. I look forward to receiving its recommendations.
11 The third committee has a very complex task. The Company Legislation and Regulatory Framework Committee (CLRFC) chaired by Dr Philip Pillai, a renowned corporate lawyer and board member of the Monetary Authority of Singapore is undertaking a thorough review of our corporate law regime to improve Singapore as an attractive place for business. A place where there is assurance and predictability in the application of the law, tempered with facility and flexibility for companies to take on best business practices. The Committee seeks to reduce business costs without compromising investor protection. It is working on modernising our corporate laws to reflect current international norms. Its goal is to help Singapore be a world-class business and financial centre. The Committee is drawing upon the best practices in leading jurisdictions, while remaining mindful of our local circumstances. I am told it will soon be issuing its preliminary views for public consultation.
12 The Committee?s review is comprehensive and wide-ranging. It includes simplifying the incorporation process, lowering business regulation costs, and facilitating the raising of capital. Let me highlight some of its broad themes, which will encourage entrepreneurship and enhance Singapore's international competitiveness.
Additional Business Structures
13 The Committee is looking at possible business structures additional to those currently available. In particular, it is studying the desirability of allowing Limited Partnerships and Limited Liability Partnerships. The Limited Partnership is one where the liability of certain partners - known as the 'limited partners' - can be limited, provided that there remains at least one general partner with unlimited liability. Limited partnerships are increasingly used as private equity investment vehicles. The Limited Liability Partnership will allow the benefits of corporate status and limited liability, and yet be internally organised as partnerships. These two additional business structures can broaden the menu of legal structures available in Singapore for domestic and international business, so that each may choose what makes most sense for the business.
Streamlining the Incorporation Process
14 The Committee is also looking at how the incorporation process can be simplified and speeded up. One aspect is the screening for similar names with existing companies and businesses. Though there is public interest in ensuring that company and business names are not confusing, the checks for similar names introduce delays and uncertainties in the registration process. In other jurisdictions, name reservation has been detached from the incorporation process. Challenges of infringement are left to the courts. The Registry of Companies and Businesses will then not have to screen for similar names at the point of registration. This will speed up the registration process.
Costs of Corporate Maintenance
15 The Committee is reviewing how corporate maintenance requirements may be simplified. It notes that in some jurisdictions, there is no statutory audit for small private companies. Whether the accounts of such a company are audited is then dictated by shareholders or external parties, like banks, who may make it a condition for extending loans and facilities to the company. Likewise, the Committee notes that other jurisdictions do not require company secretaries to have prescribed professional qualifications. This opens the way for directors of small compan ies, for example, to undertake the function themselves.
16 These changes in the requirements on statutory audits and company secretaryships are very significant. But at the same time they can offer substantial cost savings and simplified administration. The experience of other jurisdictions suggest they are viable. We have to look carefully at the Singapore context.
17 The Committee is also studying the existing regulatory framework for private and public capital. The aim is to facilitate the raising of private capital and promote Singapore as a venue for global securities offerings. It is updating prospectus disclosure requirements to reflect international norms and practices. It is reviewing the legislation to provide the widest possible range of options for companies to organize their capital structure according to their needs and market demand. This will entail the elimination of several rules relating to capital, which will thereafter be subject to disclosure practices and accounting standards, rather than the Companies Act.
18 You will note that wide changes are being contemplated. The Government will give them the most thorough consideration on receiving the recommendations. We have to change for the future even as we bear in mind the present. We have to align our corporate disclosure and governance framework to the changing needs of the global market, while maintaining the high regulatory standards that firmly establish Singapore as a progressive and secure international business centre.
19 The private sector has a vital role in preparing Singapore for the challenges that lie ahead. Our drive for higher standards of corporate governance and sound regulatory frameworks will only succeed with the Government and the private sector working hand in hand.
20 I wish you an enlightening forum, and every success in your business endeavours. Thank you.