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The following is the full text of an opening address (English only) delivered by the Acting Financial Secretary, Mr Rafael Hui, at the OECD Second Asian Roundtable on Corporate Governance today (May 31):

Mr Kondo, Mr Umezu,

Ladies and Gentlemen,

I am delighted to welcome you all to the OECD Second Asian Roundtable on Corporate Governance in Hong Kong. This particular roundtable brings together over 120 delegates from many countries in Asia as well as international and regional bodies such as the OECD, the World Bank and the Asian Development Bank. The depth and spread of this representation illustrates very clearly the increasing importance attached to good corporate governance as a force for economic efficiency, growth and reform in the region.

The First Asian Roundtable organized by the OECD in Seoul in March 1999 was inevitably dominated and motivated by the Asian economic downturn. While a number of factors were responsible for causing this downturn, it is now widely recognized that the absence of or inadequacy in corporate governance systems, particularly regarding corporate accountability and transparency, had actually exacerbated the crisis.

Given this background, it is hardly surprising that the focus of the First Roundtable was on developing appropriate corporate governance principles for the region, building upon certain core values which lie at the heart of good corporate governance, namely: equitable treatment, responsibility, transparency and accountability.

As we all know, these values are global and equally relevant to Asia as to other parts of the world. However, the way in which these fundamental principles are realized in practice must, by definition, vary from place to place, bearing in mind the differing economic, political, social and cultural contexts. The key role of these principles is to serve as a reference point for governments as they examine and develop their legal and regulatory frameworks for corporate governance that suits the individual needs of their economies.

Within this overall framework, the theme of the Second Roundtable is disclosure. In my view, it is the most basic of corporate governance principles because potential investors and shareholders, big or small, must be given sufficient information to make informed decisions about their shareholdings and safeguard their interest in any given company.

At the very least, one can say that better disclosure would have allowed both governments and companies to react to underlying economic problems in a more timely manner. Disclosure therefore is a critically important element in the management of any modern economy.

I understand that the Roundtable meetings in the next two and a half days will look at three important aspects of disclosure -

* the role of the board of directors in overseeing disclosure;

* accounting and audit; and

* non-financial disclosure such as related parties, ownership structures and government policies.

I am particularly pleased that the co-hosts for the Second Asian Roundtable are the Hong Kong Society of Accountants, the Stock Exchange of Hong Kong and the Securities and Futures Commission. These three organizations have been at the forefront of the drive towards enhancing Hong Kong's corporate governance standards for many years.

There are also other Hong Kong organizations and Government departments with vital roles to play in this area, such as the Hong Kong Institute of Company Secretaries, the Institute of Directors and the Hong Kong Monetary Authority. In particular, the Companies Registry has been, as one of its principal statutory duties, enforcing the disclosure provisions of our Companies Ordinance, thereby ensuring that corporate data on the half a million companies incorporated and registered in Hong Kong is available for public search.

The timing of the Second Roundtable is very fortuitous as it will give a high profile here in Hong Kong to the subject of corporate governance at a time when we have just embarked upon a Corporate Governance Review. This will be a fundamental review of the subject drawing on the expertise and resources of Government departments, regulators, professional bodies and the private sector. The Review, which was announced by the Financial Secretary, Mr Donald Tsang, in his Budget Speech on 8 March, will be undertaken by the Standing Committee on Company Law Reform, which is chaired by the Hon. Justice Anthony Rogers, who is with us today. Three sub-committees have been established under the Standing Committee to examine and make recommendations on Directors, Shareholders and Corporate Reporting, each chaired by a member of the Standing Committee drawn from the private sector and members comprising government officials, regulators, businessmen, academics, accountants, company secretaries and lawyers.

Two years ago, when the Asian economic downturn was very severe, there was a clear need for corporate governance reform in the region and a collective will to take appropriate action. Today, with the recovery of many Asian economies steadily underway, it is easy to forget the need for corporate governance reform. It is therefore very important that the collective will to take action does not weaken, for we live in an international world in which boundaries of space and time are being eradicated and where international standards are becoming increasingly the norm. In this context, there is a very close relationship between corporate governance practices and the increasingly international character of investment. If individual markets are to reap the full benefits of global capital, corporate governance arrangements must be credible and well understood across international borders.

Hong Kong's corporate governance standards are, I think, amongst the highest in Asia but we recognize that we still have some way to go. The views expressed at this Roundtable will provide very valuable input to not only Hong Kong's own Corporate Governance Review but also the efforts of other countries in the region to enhance their own standards.

We are honoured to have so many distinguished guests from all over the world in Hong Kong to discuss a subject which is of vital importance to the future growth of our economies. We all have a keen interest to ensure that international corporate governance standards in Asia are as widespread as possible although the mechanisms through which we achieve them may differ.

May I wish the Second Asian Roundtable on Corporate Governance, fruitful and stimulating discussions resulting in practical and robust conclusions. Thank you.

End/Wednesday, May 31, 2000

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