A Forthcoming commodities exchange has been suspended following a letter from the Ministry of Commerce stating it is not allowed to operate.
Myanmar firm MICEx had aimed to bring a commodities exchange online in the next few months, but is now left waiting while it discusses the situation with government authorities. While company officials admit they are not ready to launch, they say they had been making progress preparing the groundwork.
“We will not launch our trading operation until we have received regulatory approval,” said MICEx business consultant Ashok Kawalsot.
Before the letter from the Ministry of Commerce, MICEx had received some government approval for its exchange. The firm showed The Myanmar Times a copy of a permit from the Ministry of National Planning and Economic Development from April 2013 allowing it to run businesses including “to manage, run and operate such international standard commodity exchange centres in Myanmar, either solely or jointly with foreign and local counterparts”.
While MICEx was some way from beginning operations on the exchange, company officials claim to have held discussions with other government bodies including the Ministry of Finance, which oversees the Securities and Exchange Commission of Myanmar, on providing oversight for the online marketplace.
Last month, the firm received a letter, dated March 31, from the Ministry of Commerce Department of Trade Promotion, claiming that following a launch event at the Myanmar Convention Centre in Yangon, MICEx did not have legal permission from authorities to launch a commodities exchange in beans and gold. It had initially planned to begin with trading these two commodities.
The letter was signed by director general U Toe Aung Myint, and forbids the firm with operating the commodities exchange business, as well as spreading information and collecting fees for it.
Company officials told The Myanmar Times they were surprised by receiving the letter and are looking at ways to discuss the suspension with the Ministry of Commerce. Members of the ministry’s Department of Trade Promotion could not be reached for further comment yesterday.
MICEx is chaired by U Sein Win Hlaing, who is also president of the Myanmar Paddy Producers Association.
The Myanmar Pulses, Beans and Sesame Seeds Merchants Association (MPBSA) has also objected to the plans for an exchange.
Association secretary general U Min Ko Oo said there must be proper rules and regulations in place to support an exchange and ensure it is fair to the public, farmers and the country.
“A commodity exchange would cover the whole country, like the stock exchange,” he said. “While founding the [Yangon Stock Exchange], it is being done against a strong backdrop of support, including cooperation from Japan.”
U Min Ko Oo said he supports the Commerce Ministry as it stops MICEx’s work toward launching the exchange.
MICEx is now focusing on launching two other businesses, according to MICEx project manager Kedar Sirohi.
First up will be an attempt to disseminate price information of commodities to farms through SMS messages. Mr Sirohi said this service will allow farmers to find the true value of their crops and demand actual market prices from merchants and middlemen.
Another business will be warehouse receipt financing, which allows crops to be used as collateral for short-term loans. Farmers would deposit their crops at the warehouse instead of selling them immediately upon harvest. MICEx previously inked a memorandum of understanding with a Myanmar-based division of India’s Sohan Lal Commodity Management (SLCM) to provide the service.
The MoU was terminated by SLCM on April 7 after disclosure of the letter from the Ministry of Commerce, though the two firms have not ruled out working together in the future once the ministry’s concerns are met.
“At SLCM we follow the world’s best corporate and legal practices; we decided to terminate the MOU referring to the same,” wrote corporate communications general manager Vaishali Sharma in an email.
Since the MoU was terminated, MICEx has been looking for other partners for warehouse receipt financing, talking to India-based warehouse companies, local banks and the Myanmar Paddy Producers Association. It is also preparing to move forward on the SMS messaging component of its business.
Educating stakeholders such as farmers about the company’s mission has proved a challenge for the company. The online exchange is on hiatus until the Ministry of Commerce’s concerns are addressed, and MICEx is focusing on spreading knowledge of the firm. It recently revealed a new logo with the tagline, “Where trust begins”.
“We need confidence first,” exchange chair U Sein Win Hlaing told The Myanmar Times in a previous interview. “Operation later.”
Source: Myanmar Times