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Aug 22, 2018 / 07:31

Vietnam companies lag behind in anti-corruption program disclosure

"Transparency is key against corruption, which in turn will have positive impacts on economic growth," economist Le Dang Doanh told Hanoitimes.

Vietnamese companies did not perform well in reporting on their anti-corruption programs, while outperforming their foreign counterparts in the disclosure of their organizational structure and ownership, thanks to local existing regulations, according to Towards Transparency (TT).

Transparency in Corporate Reporting (TRAC) Vietnam 2018 was released on August 21, evaluating the disclosure practices of the 45 largest companies operating in Vietnam, including 15 foreign direct investment (FDI) companies, 15 publicly listed companies (PLCs) and 15 state-owned enterprises (SOEs). 

The report presented an assessment of those companies based on three dimensions: (i) Anti-corruption programs; (ii) Organizational structure; and (iii) Financial information on a country-by-country basis.

Local companies are lagging behind

According to the report, companies scored low (15% on average) on disclosure of anti-corruption program, which demonstrates companies' public commitment to anti-corruption.
 
Source: Towards Transparency.
Source: Towards Transparency.
In particular, 24 out of 45 companies did not disclose any such information, divided almost equally among foreign companies (6), publicly listed companies (9) and state-owned enterprises (9). Those firms included Hoa Phat Group, Mobile World, Saigon Alcohol Beer and Beverages Corp (Sabeco), Masan Group, Truong Hai Auto Corporation, among others. 

Among the studied companies, foreign subsidiaries scored the highest with an average of 31% in this dimension.Among them, Samsung Electronics Vietnam, Unilever Vietnam and Nestle Vietnam took the top spot with 81%. 

Local companies with high scores in this matter included Vietnam Dairy Products (Vinamilk) with 42%, Vietnam Prosperity Joint Stock Commercial Bank (VPBank) with 38% and Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) with 35%.  

Comparing to the TRAC 2017, there were five companies with no improvement in reporting anti-corruption program, including Hoa Phat Group, Mobifone, Mobile World, Saigon Petro Company and Viettel.

On organizational transparency, the average score of 45 companies was 66%. A third of companies achieved the maximum score of 100%. PLCs scored the best performance with an average of 88%, followed by SOEs with an average of 60%, while foreign subsidiaries were at the bottom grouping with an average score of 32%. 
Source: Towards Transparency.
Source: Towards Transparency.
This is a positive signal, according to Nguyen Thi Kieu Vien, TT's founder and executive director, as "public disclosure of "company ownership", "structure of a company group" and "related party transaction" is an integral part of effective corporate governance," Vien added.

On country-by-country reporting (CBCR), 17 out of 18 of the companies to which CBCR is applicable disclosed no key financial information on their oversea subsidiaries. Mobifone is the only exception, but if only reports on its contributions to community in Vietnam. 

Transparency is key

"Transparency is a key to improving business integrity environment in Vietnam. Corporate transparency reduces opportunities for corruption. The more transparent the companies are, the higher trust they gain from investors, partners and customers. Developing and disclosing their anti-bribery programs will help them achieve this end",Vien said.

Positively, the results of TRAC Vietnam 2018 show significant improvements compared with that of TRAC Vietnam 2017, regarding corporate disclosure, both in terms of anti-corruption programs and of organizational transparency, Vien informed. "For example, 10/18 companies assessed in both TRAC 2017 and 2018 have improved their scores in reporting on anti-corruption programs."

Much room remains for improvement with regard to CBCR, Vien concerned. Indeed, the 2017 and 2018 results remain identical, i.e. none of the companies operating outside of Vietnam disclosed key financial information for countries where they operate. 

This finding is troublesome since "CBCR is a tool for the government, the media and citizens to monitor companies' financial transparency practices and tackle associated issues, such as tax avoidance," she continued.  

The report also provided recommendations on improving corporate transparency for the government, businesses, and non-state actors including business associations. Looking ahead, Vien highlighted that "lack of corporate disclosure would raise stakeholders' concerns upon companies' commitment to the country anti-corruption efforts. It is essential that the government enact and strictly enforce legal regulations on corporate anti-corruption policies and programs."

Economist Le Dang Doanh considered joint effort from citizens and enterprises as instrumental against corruption, while there should be a clear legal framework to support those efforts. 

"Transparency is key against corruption, which in turn will have positive impacts on economic growth," Doanh told Hanoitimes.

Additionally, representative of the Electricity Vietnam (EVN) expected transparency in governance will provide the company with competitive edges during its quest of global integration.