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Myanmar produces first corporate governance scorecard

Myanmar companies need to improve their business practices to become more competitive in local and regional markets, a new report shows.

The Myanmar Corporate Governance Scorecard 2018 is the first report of its kind in the country and assesses the performance of 24 companies in the country. It is published by the International Finance Corporation (IFC), the Securities and Exchange Commission of Myanmar, the Yangon Stock Exchange and the Directorate of Company Investment and Company Administration (DICA).

The report, which assesses companies on the basis of the Association of Southeast Asian Nations (ASEAN) Corporate Governance Scorecard, reveals that Myanmar firms scored an average of 30 percent, compared to the ASEAN average of 69pc. Some Myanmar players are observed to be performing significantly above the average and listed companies are outperforming public and private ones.

While noting the assessment was undertaken before the new Companies Law came into effect, it recommends companies should focus on key areas including rights of shareholders and stakeholders, improving companies’ disclosure, transparency, governance structures, and board composition along with board accountability for company decisions.

“Good corporate governance is a critical component for the sustainable development of any organisation,” said U Maung Maung Win, chair of Securities and Exchange Commission of Myanmar. “It is important for Myanmar companies to improve their corporate governance practices whether they are seeking to expand their business, foster stronger ties with international partners, or develop a smooth succession plan.”

The scorecard identifies the areas which should be prioritised not only by the companies but also by Myanmar regulating bodies, commented Nicolas Delange, managing partner of Myanmar-based consultancy firm Yever.

“Business owners should now consider how to start this journey: it might be a little bumpy as it is when we change.

“Company owners who want to evolve with the changing corporate and market standards will start planning their succession, embrace transparency about related-party transactions and champion better corporate disclosure. Those leaders will prepare their business to be more sustainable, more future-proof and they will thrive where others will struggle,” he added.

The report offers recommendations on how companies can improve to close the gap with other ASEAN markets, boosting the Myanmar economy. It identifies areas for quick improvement as well as longer-term actions requiring close collaboration between government, private sector, and civil society organisations.

Jenni Hall, private sector development lead for the UK’s Department for International Development (DFID), said the report provides practical solutions to enhancing performance in these areas.

“These recommendations are a leap towards creating a favourable, predictable, facilitative and friendly investment climate broadly.”

It also highlights the prospect for domestic businesses to improve corporate governance which will help them access external financing for expansion, according to Vikram Kumar, IFC country manager for Myanmar and Thailand.

If companies boost their corporate governance practices they will become sustainable in Myanmar and regional markets.

Practices such as risk management and anti-corruption controls are areas where Myanmar companies need to address in order to access finance from international sources as well as from domestic banks, observers say. This is increasingly relevant for Myanmar banks as greater controls are put on non-performing loans by the local banking sector.

For the IFC, good corporate governance is an equally important consideration for local banks as well as foreign banks operating in Myanmar to provide access to finance to Myanmar companies.

“For example, banks could require their clients, among other things, to have clear and transparent financial reporting and adopt the rules on approval and disclosure of related party transactions, in large part to reduce their own credit risk,” the IFC told The Myanmar Times.

How is the Myanmar Corporate Governance Scorecard 2018 different from the Pwint Thit Sa report?

The Myanmar Corporate Governance Scorecard is different from the Pwint Thit Sa (PTS) report undertaken by the Myanmar Centre for Responsible Business (MCRB).

Pwint Thit Sa uses only publicly available information, whereas authors of the Scorecard had access to consider confidential data and information.

MCRB’s report shows companies disclosure on a broader number of categories where else the Scorecard report was focused on corporate governance to support further policy discussions with facts, data and evidence.

PTS covers 248 companies and 69 of the most relevant criteria from ASEAN Corporate Governance Scorecard (ACGS) supplemented by other performance criteria drawn from the Integrated Reporting Framework. In comparison, the Myanmar Corporate Governance Scorecard uses 142 criteria.

Source: Myanmar Times

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