Press Release
“CalPERS
Withdrawal from Asian Markets Counter Productive”
“CalPERS’ decision
to withdraw investment from the emerging markets of South
East Asia viz
Malaysia, Indonesia, Thailand and Philippines is counter
productive and not in the interest of its own shareholders.” says
Dr Madhav Mehra, President World Council for Corporate Governance.
In
his interview with BBC World Dr Mehra stated “Emerging markets
in South and South East Asia represent some of the most
innovative companies engaged in people- oriented businesses
applying best practices in corporate governance and developing
new business designs and products that offer the best prospects
of value creation for investors.” CalPERS – US’s largest
pension fund with assets of over $15 billion - has already
banned investments in India and Pakistan. CalPERS’ explanation
of their decision to be the result of their continuing effort to
withdraw from unethical investments “sounds hollow on the face
of Enron’s record. CalPERS admit Enron has caused them loss of
$105 millions. Enron is not a one off case of fraud. Its
auditors have claimed that the accounting practices used to
cover up were within the law and are followed by thousands of US
firms”, asserted Dr Mehra.
Dr Mehra
added, “It is also difficult to justify withdrawal on the
grounds that these countries are low on performance,
transparency and political stability. Some of the knowledge
based pharmaceutical and telecom companies have outperformed
despite recession. Whilst one can admit some political turmoil
in Indonesia and Philippines, there is no serious political
instability in the 4 other countries. Certainly, despite its
other problems, India’s record of democratisation is
unmatched.
In
regard to standards of transparency when there is so much
evidence of cooking the books in developed economies, it is
wrong to single out a few South East Asian economies and punish
them for such lapses.
The
withdrawal appears more likely due to the risk factors in these
countries. CalPERS’ concern for the investor, therefore, is
quite understandable. Nonetheless, one must realise that
stability is the thing of the past and that rapid obsolescence,
demographic changes and shift in public values have profoundly
changed the competitive environment. Markets of 21st
century are driven by aspirations of innovation and
sustainability. Short term focus on profits is the surest way
for shareholder value destruction.
This
decision will dampen the efforts of Alan Greenspan to
resuscitate the US economy.
There is already an investment famine in Asia. The unprecedented
increase in dollar reserves of these Asian countries to almost
$1 billion mark is an indication that they are no longer buying
US products. Withdrawal will suppress the demand further.
In
any event, investment decisions have to be based on the policies
of companies and not countries. You cannot outlaw a whole nation
because of the failings of a few. You have to judge each company
on its own merits. It is not significant that the countries that
have been banned by CalPERS represent some 25% of the world
population. What is significant is that it is the 25% that are
the potential powerhouse of pent up demand needed to lift the
US economy out of its current recession.”
22
February 2002
