IFC CEO’s speech at the Launch of the Vietnam Corporate Governance Code of Best Practices

Opening Remarks by IFC CEO Philippe Le Houérou at the

Launch of the Vietnam Corporate Governance Code of Best Practices

Ho Chi Minh City, August 13, 2019

Good afternoon. I would like to thank the Ho Chi Minh Stock Exchange and the State Securities Commission of Vietnam for their hospitality, as well as Mr. Tran Van Dzung, the SSC Chairman; Mr. Vu Bang, former chairman of the SSC and a member of the Prime Minister’s Advisory Group; and Mr. Le Hai Tra, Acting Chairman of the Ho Chi Minh Stock Exchange.

I would like to welcome Her Excellency, Ms. Beatrice Maser Mallor, Ambassador of Switzerland to Vietnam.

I’d like to thank Switzerland’s State Secretariat for Economic Affairs (SECO), for its partnership and support. SECO has been instrumental in developing capital markets around the world. Its work here in Vietnam, including support for IFC, has been invaluable.

It is an honor to be here today to introduce the first Vietnam Corporate Governance Code of Best Practices.
It’s also fitting to be launching the Code in this building, where the stock exchange was founded with advisory support from IFC 19 years ago.

Good corporate governance is key to building investor trust, and this is important for attracting capital.

This isn’t just theory – it is backed up by data. A study of IFC’s equity investments showed that companies with strong corporate governance delivered higher returns but also produced stronger development outcomes.

Vietnam recently made important strides by improving minority investor rights.

I also welcome the recent creation of the Vietnam Corporate Governance Initiative Council that will guide future reforms, and the creation of the Vietnam Institute of Directors, supported by IFC and SECO.

The most recent edition of the World Economic Forum’s Global Competitiveness Report still ranks Vietnam 102nd in terms of corporate governance.

But we can rapidly improve. And today we are making a big step in that direction.

The new Corporate Governance Code lays out principles to strengthen the functioning of boards, build sound risk and control frameworks and increase the amount and quality of disclosures.

As a result, we expect that Vietnamese companies will become more competitive and perform better over time. This, in turn, will help build a thriving and sustainable private sector in the country.

And we know that good corporate governance and the development of well governed capital markets are critical for economic development and growth. In fact, the two are closely linked.

McKinsey’s Asian Capital Markets Development Index ranks Vietnam’s markets as “very shallow”, below those of Pakistan, Indonesia, and the Philippines.

So moving beyond corporate governance, more reforms are needed to improve this ranking and successfully deepen Vietnam’s capital markets.

The good news is that Vietnam has embarked on a journey to change that. I am very encouraged in particular that many of the reforms needed were outlined in a plan that the Prime Minister unveiled earlier this year.

We can progress very quickly: for example, a measure that could help is to standardize bond documentation. This would ease the bond issuance process for both buyers and sellers.

Also, a unified, common platform for bond pricing, so that the market has a single yield curve, would make the pricing and trading more efficient.

And over the medium term, attracting and establishing an international rating agency would increase transparency and allow bonds to be objectively benchmarked.

In addition, we recommend that Vietnam prudently moves forward with relaxing foreign-ownership limits. It would help make the country’s capital markets larger and more liquid.

These practical reforms will help Vietnam’s objective to move on the MSCI World Index from “frontier market” to “emerging market”.

This will be a major breakthrough!

It will further grow and deepen the country’s capital markets, which in turn will improve the funding alternatives for Vietnam’s corporate sector. And sustain the country’s impressive growth, as well as improvements in living standards.

Ladies and gentlemen:

As Vietnam moves ahead to deepen its capital markets, good corporate governance will be a vital part of that journey.

The launch of Vietnam’s Corporate Governance Code of Best Practices today is an important step in that direction.

Thank you. Cảm ơn!