Asia's weak pre
crisis corporate governance standards contributed to the financial crisis. Lax
regulatory regimes, weak market discipline and corporate sectors dominated by
family and state controlled firms created an environment which lacked effective
checks and balances on the commercial activities of companies. This encouraged
firms to pursue risky financing and investment practices, often funded by banks
and finance companies through crony and connected lending. These practices had
very negative distributional impacts as small businesses had little access to
finance and eventually produced huge levels of non-performing loans, putting at
risk financial systems in the worst affected economies. Consequently,
governments had to bail out financial institutions and guarantee depositors, blowing
out government debt and retarding government development programs for many
years.

Many Asian
governments recognise the serious impact lax corporate practices had on their
economies and now are striving to raise corporate governance standards. This
report analyses how East Asia is tackling its corporate governance weakness,
both through direct regulatory enforcement and, probably more importantly, by
improving markets' transparency and efficiency and increasing market scrutiny
of corporate behaviour. Its main audiences are Australian businesses operating
in Asia, Australian companies exporting business services to improve corporate
standards and performance in Asia, the Australian Government, and particularly
AusAID, which is assisting Asian governments raise corporate governance
standards, and East Asian governments, which are actively pursuing this reform
agenda.

Report Outline

Executive Summary

Section One - Overview

Defines the
concept of corporate governance and places the current debate about standards
of Asian corporate governance in the broader context of analysing the
challenges facing Asian countries' as their market economies develop and become
more sophisticated.

Section Two –
Regulatory Reforms to Improving Corporate Governance

Analyses major post
crisis reforms in East Asian economies to upgrade and enforce regulatory and
legal frameworks to improve corporate governance.

Section Three – Market
Reforms to Improving Corporate Governance

Discusses the
impact market structures have on corporate behaviour and identifies recent
reforms to improve market incentives for sound corporate behaviour.

Section Four – Country
Surveys

Provides surveys
on current corporate governance standards in Asia, using objective measures and
business surveys in major East Asian economies - Indonesia, Malaysia, Thailand,
China, Taiwan, Singapore, Hong Kong, the Philippines, Korea and Japan.

Section Five –
Implications for Aid Assistance

Examines donor
community implications of East Asian economies' attempts to develop best
practice corporate governance regimes, particularly post crisis.

Section Six –
Implications for Australian business

Assesses
potential opportunities for Australian business as a result of recent and
anticipated corporate governance reforms in East Asia.