After the Asian Financial crisis of 1997, corporate governance, sound regulatory framework, and high quality financial reporting have been more critical than ever. They are essential for lowering investment risk and rebuilding trust in the Thai capital market. With a thorough understanding that these aspects are vital for the development of the Thai capital market, the SEC Thailand has worked devotedly towards improving the Thai capital market’s standard. One way to efficiently advance the Thai capital market is to measure it against international benchmarks.
The SEC Thailand has been active in participating in international assessment. In 2005, Thailand participated in the World Bank’s country assessment program on Corporate Governance - Report on the Observance of Standards and Codes (CG-ROSC) for the first time. The second CG-ROSC’s assessment was completed in 2012. In 2007, the SEC Thailand went through capital market regulation assessment under the Financial Sector Assessment Program (FSAP), a joint initiative of the International Monetary Fund and the World Bank. In addition, the SEC Thailand has made great efforts to improve the quality of corporate financial reporting. In 2007, Thailand joined in the World Bank’s country assessment program on Accounting and Auditing - Report on the Observance of Standards and Codes (AA-ROSC) which mainly focuses on the strengths and weaknesses of the accounting and auditing environment that influence the quality of corporate financial reporting.
By approaching the benchmark of international’s best practices, the SEC Thailand has been successful in advancing the Thai capital market towards international excellence. Thailand is a regional leader in corporate governance. In 2012, Thailand obtained a score of 82.83 points from a possible total of 100 in the World Bank’s CG-ROSC report, receiving the highest score in the disclosure and transparency areas. (Click for further details here
This is a great leap forward from when Thailand first joined the CG-ROSC in 2005. (Click for further details here
In addition to legal and regulatory reforms to facilitate corporate governance improvement, the Thai capital market also shows other key areas of improvement, such as, determination of basic shareholder rights and board duties and responsibilities.
The quality of Thailand’s corporate governance was also tested by CG Watch, a regional survey conducted by the Asian Corporate Governance Association (ACCA) and CLSA Asia-Pacific Markets. According to the CG Watch 2012, the Thai capital market held the third place among 11 capital markets in Asia-Pacific, behind only Singapore and Hong Kong. (Click for further details here
According to the FSAP, the Thai regulatory framework for capital market, including supervision of securities settlement systems, was fundamentally sound, secure, efficient, and reliable. While the FSAP’s results reflected a satisfactory level of Thailand’s compliance with the international standards, the SEC Thailand has continued its work towards addressing deficiencies identified in the assessment. The amendments to the Securities and Exchange Act (No. 4), for example, have brought improvements in key areas of weakness on enforcement and compliance. Updates on SEC actions and/or arguments on FSAP recommendations can be viewed here
Working towards having high quality financial reporting in the Thai capital market, the SEC Thailand, as indicated by the AA-ROSC report, has made great efforts to improve the quality of corporate financial reporting and to move towards converging Thai national accounting and auditing standards with international benchmarks. Updates on actions taken in response to AA-ROSC can be viewed here.
A recent success of the SEC Thailand in the area of financial reporting is the mutual reliance on audit oversight systems with Europe. Based on the equivalence of financial reporting quality, the SEC-approved auditors’ works are now recognized by the European Commission.
With the improvements in the areas of corporate governance, regulatory framework, and financial reporting standard, the Thai capital market has successfully built its niche in the area of investor protection. According to the World Bank’s Doing Business 2013, Thailand is ranked 12 out of 185 economies in this area. Further details can be viewed here.
These past achievements of the Thai capital market are not the end of the SEC Thailand’s work on regulatory development. With passion and dedication, the SEC Thailand aims to continuously fulfill its obligation on improving the Thai capital market towards the best international practices and excellence.