MYANMAR: Adopting International Standards Crucial for Sustainable Growth

As Myanmar’s economy liberalizes, traditional business practices are being challenged. The shift towards international standards and compliance has become essential for companies to ensure sustainable future growth.

The Need for a Paradigm Shift

“The paradigm shift is crucial for Myanmar companies,” said Daw Cherry Trivedi, CEO of the Myanmar Institute of Directors. “With local companies now open to international shareholders, there has to be a culture shift towards international standards and compliance.”

Corporate Governance Scorecard

A recent Corporate Governance Scorecard published by the International Financial Centre (IFC), Securities and Exchange Commission of Myanmar, Yangon Stock Exchange (YSX), and Directorate of Investment and Company Administration found that the country’s largest companies scored an aggregate 30%, well below the 2015 ASEAN average of 69%. However, there was significant variation among companies, with a top-performing firm scoring 59% and YSX-listed companies averaging 43%.

Transparency in Myanmar Enterprises

The Myanmar Centre for Responsible Business published its fifth edition of the “Transparency in Myanmar Enterprises” report, which studied 248 of the largest Myanmar companies. The report found an overall average score of 5%, while YSX-listed firms scored an average of 32%.

Traditional Practices vs. International Standards

Traditionally, Myanmar companies have been family-owned and operated, with a lack of modern corporate governance practices. Financing has come primarily from family, friends, and informal sources, such as money lenders. Decision-making is often top-down, with the founder alone responsible for making decisions, limiting transparency and accountability.

Challenges Ahead

However, with Myanmar opening up to international best practices, these structures are becoming increasingly competitive disadvantages. The 2017 Companies Law requires greater corporate disclosure and sets out rules for shareholder rights and directors’ responsibilities. Going forward, standards are likely to become stricter and more comprehensive to attract foreign investment.

Recommendations and Future Directions

The IFC and other bodies behind the scorecard have recommended developing a specific Myanmar Code of Corporate Governance and strengthening monitoring and enforcement of the existing Companies Law. New bodies, such as the Myanmar Institute of Directors, will assist in promoting best corporate governance practices through advice and training.

Conclusion

As Myanmar’s economy continues to evolve, adopting international standards is crucial for sustainable growth and attracting foreign investment. The country must adapt to changing business environments and adopt best practices to ensure a stable and prosperous future.