Chapter 8: Governance and Regulation of Provident and Pension Funds in Asia
Mukul G. Asher and Amarendu Nandy Governance and regulation of corporations (or companies) and of provident and pension funds1 involves managing principal-agent (or agency) relationships. These arise when principals (for example stockholders in the case of corporations, provident and pension fund beneficiaries, and taxpayers when government funding is involved) need to rely on agents (corporate managers, provident and pension fund trustees, government bureaucrats) to pursue their (principal) interests.2 Since the 1997 East Asian financial crisis, there has been increasing awareness of the need for good corporate governance practices in Asian countries. The progress in translating this awareness into an effective institutional and regulatory framework has predictably been slow and uneven in Asia.3 A parallel awareness of good governance practices and sound supervision and regulation of provident and pension schemes in Asia has however been much slower. There are several factors which may help explain this phenomenon. First, the pension sector in Asia has been dominated by the statemandated and managed schemes. This has meant relatively low importance of occupational pension plans. The state sector has usually been reluctant to separate service delivery from supervision and regulation functions. As a result, policy formulation, oversight and its implementation are not separated. In addition, in many Asian countries (such as Singapore, China and Vietnam) even the basic socio-economic information is used as an instrument to be used tactically by the policymakers rather than as a public good. In other countries (such as Indonesia, India and Sri Lanka) effective oversight by the Parliament and...
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