Myanmar’s government is seeking to turn the Yangon Stock Exchange (YSX) into one of the most prominent bourses in South-East Asia. New reports indicate that it recently took the latest step in achieving this target, by signing a deal to strengthen the YSX’s corporate governance standards.
The YSX was set-up in December 2015, while securities trading first commenced on the bourse in March 2016. It started growing from there, with the first firm – First Myanmar Investment – launching shares on the YSX in May 2016. Demand for these shares was so high, that a second company launched in June of that year. This time it was consortium the Myanmar Thilawa Special Economic Zone and its shares saw similarly high demand. As of March 2017, there are now four firms listed on the YSX.
More companies are looking to list on the YSX, and it the bourse has started launching measures to make the bourse attractive to even more businesses. For example last year, the YSX decided to collaborate with Daiwa Securities, a financial firm in Tokyo, to create a blockchain-based bourse. This will allow the YSX to include Daiwa’s equity trading on its platform, to improve record keeping, which would act as a safeguard against false orders, due to the distributed nature of blockchain, making the YSX more appealing to investors.
The YSX has now taken an additional step in achieving this aim. According to Frontier Myanmar, the Securities and Exchange Commission of Myanmar (SEC) has struck an agreement with the International Finance Corporation (IFC), a global sector body, to bolster corporate governance standards on the bourse. The IFC will also provide Myanmar with corporate governance training, as well as give best practise guidance on subjects such as investor rights, to help the YSX build capacity.
Commenting in a joint statement, Myanmar’s SEC and the IFC said: “A better regulated market will bolster investor confidence and help draw more investment to Myanmar as the country continues to open up.” The statement also noted that the IFC will collaborate with the commission to compile a stronger set of corporate governance regulatory standards for the YSX. The bodies are furthermore planning to hold a range of events to heighten awareness of corporate governance in Myanmar.
Great step forward
Speaking out on this landmark agreement U Maung Maung Win, the SEC’s Chairman and Myanmar’s Deputy Minister of Planning and Finance, noted: “With the Yangon Stock Exchange in its early stages of operation, it is high time to introduce good corporate governance practices in the Myanmar market… The cooperation between IFC and the commission is a great step forward in that direction.”
Adding commentary, the IFC’s Vice President, Jingdong Hua, argued: “Implementing good corporate governance practices is a prerequisite to the development of a more mature and robust capital market… Well-run companies will generate greater returns for shareholders and contribute to the sustainable development of Myanmar’s private sector and overall economy.” The statement also suggested that many of Myanmar’s firms could benefit from global corporate governance practises, as they currently possess only basic control frameworks.
Myanmar has a robust frontier economy, which has recorded a minimum of 6% gross domestic product growth per annum since 2012. To tap this potential, it is key that the nation boosts foreign direct investment (FDI) flows, to supply firms with the capital required to fund growth. Myanmar’s government is creating the favourable investment environment needed to attract more investors, and this is proving effective, as it managed to surpass its FDI goal in the most recent fiscal year.
The YSX itself was set up with the intention of increasing Myanmar’s FDI, as it provides investors with the means to champion the nation’s firms with ease. The SEC and IFC said that they are bolstering the YSX’s corporate governance standards to make the bourse more appealing to foreign investors, and inspire more FDI expansion. Investors like certainty, as it allows them to cultivate stable returns, so introducing globally accepted corporate governance best practises into the YSX should convince more investors to operate on the bourse, as they can be sure their capital will be handled responsibly. Ultimately, this could lead to higher FDI flows and a brighter tomorrow for Myanmar’s economy.