tharman shanmugaratnam : corporate governance developments in singapore and the region speech by mr tharman shanmugaratnam, deputy chairman of the monetary authority of singapore, minister for education and second minister for finance, at the oecd asian corporate governance roundtable, singapore, 27 june 2007. * * * introduction good morning and a very warm welcome to singapore. it gives me great pleasure to be here at the oecd asian corporate governance roundtable. the last time the roundtable was held in singapore was in 2001, and we are happy to be able to host this important international gathering once again. 10 years after the 1997 asian financial crisis, this year ’ s roundtable gives us a good opportunity to do a stock - take, to see where we are now and identify the areas where we must continue to move forward in the region. avoiding complacency in a benign economic environment the macro picture amongst the asian countries is vastly improved. the asian economies are by and large showing strong growth, driven in large part by increased trade and investments both within asia as well as with the rest of the world. investor confidence is back. capital inflows are back to the levels that existed before the asian crisis. and strong inflows of portfolio capital and foreign direct investments have replaced bank lending as a dominant source of capital inflows. last year, the asean - 5 countries, for example, attracted some us $ 50 billion of foreign direct investment, significantly greater than the us $ 28 billion seen in 1997. institutional investors are allocating more funds to asia, in search of higher yields and to benefit from the strong growth in the region. improvements in corporate governance are part of this story. but even in this positive climate, we must remain wary of risks. terrorism and avian flu are not distant threats. the abundance of liquidity in global and asian markets has also led to a narrowing of credit spreads that is unlikely to persist for long. the repricing of risk may be triggered by a variety of events, arising for example from a geopolitical disturbance, an unexpected setback in economic growth, or the failure of a major borrower in global financial markets. the repricing of risk, unwinding of spreads and contraction of liquidity in higher risk assets and markets may be sudden, and may not be orderly. on the positive side, the innovations we have seen in global financial markets, including the extensive securitization of assets and

them in understanding their roles and responsibilities, and to equip them with the necessary skills. even experienced directors need to continually upgrade their skills, to oversee and steer companies in today ’ s rapidly changing and globalised landscape. mas has been in discussion with the singapore institute of directors on how we can build on its very useful work to date, and develop a comprehensive and sustained approach to training and development of directors in singapore. mas will help to fund a study that will help to operationalise this comprehensive approach to training. the study will cover a few areas. first, it will look into benchmarking directors ’ training and development against best practices in other leading jurisdictions. a number of jurisdictions have in the last few years developed extensive structured training programs for directors. secondly, it will examine possible collaborative arrangements between a range of organisations and training providers. thirdly, it will also focus on how best such training initiatives should be financed. this is an important initiative to ensure our companies have skilled directors on their boards, who can help them to grow and expand in the region, and be recognized leaders in both performance and governance. developing practical guides for listed companies and directors a second issue arising from the study has to do with developing practical guides for listed companies and directors. this is in line with helping companies help themselves on the path to better corporate governance, mas will work with industry and professional bodies on practical guides on areas of interest to companies. the importance of an effective audit committee in particular was highlighted in the corporate governance study by professor mak. it noted that almost all corporate scandals involved some form of financial impropriety, with the audit committee often seen to be part of the governance failure. some guidance on the roles, functions and skills required by an audit committee would be useful. we need to encourage well - qualified directors to take on the critical responsibility of being a member of an audit committee. such practical guidance notes could be useful in helping directors on audit committees to understand their roles relative to that of senior management. it could also provide better focus on how they can add value by enabling the important interaction between strategy and financial and accounting controls. i note that the uk has issued similar guidance on audit committees – otherwise known as the smith guidance – to assist companies. conclusion let me conclude. the asian financial crisis has served to highlight the importance of corporate governance. it is a key component that contributes to the strength of our markets and to the performance of our companies. while corporate governance practices across asia have improved