Economics Essays - Commercial Governance and Financial Markets

Corporate Governance & Financial Markets

Case review: Building Financial Market Institution in Emerging Economies: THE FEDERAL GOVERNMENT Pension Fund of Thailand

In 1997 the Government Pension Fund (GPF) was set up in order to fortify the pension assurance and benefits for officers leaving authorities service as well as the Participants and at the same time establish a lasting long-term fiscal plan plan as the gratuity and pension system following a 1951 Gratuity and Pension Take action had uncovered some serious problems. From 1997 to 2001, under the command of Khun Nawaaporn Ryanskul the Finance gained many significant benefits; however, there have been some short-comings in terms of governance issues that the GPF should focus on to improve its performance.

The first critical concern is the qualification of associates of the Plank of Directors. Most of the Board members have no necessary background knowledge on pension-scheme and fund that is essential for management and investment decision making. Hence, the Fund's management decision making procedures are too troublesome as the GPF has in the first spot to educate the Panel members on respected issues.

There is too much treatment from the Mother board area to the Fund's management process since innovative ideas or changes must be approved by the Mother board before they could be implemented. More efforts and time are needed to convince the Board associates due to their insufficient essential knowledge and the resistance to changes or new ideas. Because of this, the GPF management cannot respond quickly to changes in financial market segments and misses some good opportunities.

Moreover, there is absolutely no success in decision making process of the Table as it's quite common in Thailand that unanimous decision must be gained; otherwise a choice is postponed to a later conference. The situation gets worse when the amount of Board associates is increasing over the years. Quite simply, there's a poor incentive framework for efficiency.

Furthermore, those Board users are risk aversion people, they simply just focus on the risk itself associated with an investment decision in stead of how much come back can bring back to the beneficiaries if the chance is used. They are afraid of taking responsibility and of how to make clear and justify decisions they support with their groups of participant. They reduce their problem by helping investment decisions of low economical return alternatively than approving those people of high comes back but high dangers as well. Therefore, part of the Fund of "secure" resources has never eliminated under 81 percent. The Account management and staffs cannot diversify the investment portfolios and the performance of the GPF is as a result ineffective.

Political intervention is also a burning up issue as much investment decisions are made based on political issue but not strictly economic issue. Particularly when the chairman is the Long term Secretary of the Ministry of Finance plus some other government representatives of the Table are appointed by the federal government, the scenario of pension finance abuses will probably happen.

Lack of autonomy in investment is another subject. All of the investment decisions are required to follow the rigid investment policy determined by the Table of Directors and relative to the guidelines and criteria set up by the Ministry of Finance. Hence the Fund's management does not have any flexibility to make investment decisions to maximize financial results as well as to strengthen the individuals' welfare.

Although there is absolutely no limitation of cross-border purchases written in Ministerial Polices, the GPF is prohibited to invest in foreign markets. They have to concentrate on the Thai local market which is terribly influenced by the "Asian Crisis", and where the limitation of selections in Thai stock market is another factor that affects the performance of the Fund.

In addition, the Thai legal construction is weak. You can find poor corporate and business governance, unclear responsibility, poor accountability and insufficient transparency. The scarcity of rating firms that provides reliable information is another fragile region of Thai relationship and currency markets. Therefore, the Fund faces a great deal of difficulties in making effective investment decisions and providing their participants with reasonable results.

Also We Can Offer!

Other services that we offer

If you don’t see the necessary subject, paper type, or topic in our list of available services and examples, don’t worry! We have a number of other academic disciplines to suit the needs of anyone who visits this website looking for help.

How to ...

We made your life easier with putting together a big number of articles and guidelines on how to plan and write different types of assignments (Essay, Research Paper, Dissertation etc)