Myanmar public companies trail behind private firms in corporate disclosure

Public companies in Myanmar – companies whose shares can be bought by the public – lag behind privately-owned firms in corporate disclosure and governance, according to the latest transparency report released on Tuesday.

This is the fifth Pwint Thit Sa report (Transparency in Myanmar Enterprises) undertaken by Yangon-based Myanmar Centre for Responsible Business (MCRB) in partnership with Myanmar consulting firm Yever.

In 2019, the Myanmar companies with the highest transparency scores are City Mart Holdings (CMHL), First Myanmar Investment (FMI), Max Myanmar and Shwe Taung. These companies have consistently featured in the top 10 of previous Pwint Thit Sa reports and this year’s report found that all of them continue to improve their disclosures.

At the other end of the scale, 108 (44 percent) of the 248 companies reviewed do not have corporate websites. Most of those these companies publish little or no corporate governance and performance data.

First launched in 2014, this year’s report assesses information disclosure on the corporate websites of 248 large Myanmar enterprises, including five listed, 55 public, and 160 sizeable privately-owned companies. For the first time, it also covers 28 of the most important state-owned economic enterprises (SOEs). This amounts to the most ambitious public report ever published in Myanmar about the state of corporate disclosure (CD).

The findings reveal that a number of private companies chose to go beyond the legal transparency provisions. Under the new Companies Law, a privately-owned company only needs to file an Annual Return with the Directorate of Investment and Company Administration (DICA). But, there isn’t a requirement for private companies to publicly disclose this information.

However, seven privately-owned companies in the top 10 list have done so: City Mart, Max Myanmar, Shwe Taung, UAB, Dagon Group, Myan Shwe Pyi Tractors and AYA Bank.

This shows that the business case for transparency and governance is what motivates those companies, instead of regulatory requirements, said MCRB director Vicky Bowman.

“Even though private companies do not have legal requirements to disclose a lot of information, they are actually on average doing better [than public companies].

“They see it as a means to attract investors and business partners, and build their social licence to operate. But they also see a focus on performance – for example on energy efficiency – as a means of making savings for their bottom line.”

In contrast, Myanmar has extensive regulatory disclosure requirements for listed companies and public companies, particularly those with more than 100 shareholders. These are set out under the 2017 Companies Law and the notification related to Continuous Disclosure issued by the Securities and Exchange Commission of Myanmar (SECM). The Central Bank of Myanmar has also issued more governance and disclosure requirements in 2019 for financial institutions.

“What our assessment shows is that quite a few of the companies which are caught by these disclosure requirements are failing to fully implement them. We suspect that many may not even be aware of them,” Yever’s managing director Nicolas Delange added.

He emphasised the need for companies and particularly financial institutions to invest in compliance functions and for company boards to have professional auditors, lawyers and other support.

The assessment also reveals that listed companies continue to outperform the rest. The five firms on the Yangon Stock Exchange scored 32pc on average, compared to the overall average of 5pc.

In contrast, SOEs had the poorest average score. The leading SOEs for disclosure are Construction and Housing Development Bank (CHDB) and Yangon Electricity Supply Corporation (YESC), the only two SOEs to score just above the overall 5pc average.

The fifth Pwint Thit Sa report continues the methodological approach adopted in 2018, assessing online disclosure of information on corporate profile, corporate governance, sustainability management and reporting, based on the ASEAN Corporate Governance Scorecard (ACGS). However, this year’s review increased the weight of “performance” criteria relevant to sustainability. The change also reflects global and regional trends for non-financial reporting, including in the Singapore and Thai stock exchanges.

The change is to “stretch the companies that came top in the 2018 report”, Ms Bowman said. The added criteria go beyond the basic corporate governance disclosure expected under the ACGS.

“These criteria recognise and reward those companies which publish data on how they implement their policies. This is a way to measure whether the company ‘walks the walk’ or just ‘talks the talk’. It is more challenging, as it requires companies to put in place systems to capture and measure performance data.”

The change in metrics explains why the average score has dropped from 7pc in 2018 to 5pc in 2019, even though overall disclosure is up, particularly among the top 20 companies.

The report calls on the Myanmar government to implement the requirements in the 2017 Investment Law concerning publication of investment summary proposals prior to Myanmar Investment Commission (MIC) decisions and remind holders of MIC Permits of their legal duty to publish an annual sustainability report for the permitted project. It also highlighted current regulatory requirements concerning corporate governance, corruption, environmental impact assessment (EIA) and beneficial ownership, and outlined recommendations for companies, government and other stakeholders.

What is a public company in Myanmar?

The Companies Law (MCL) defines a “public company” (or Public Limited Liability Company) as a company incorporated under the MCL, or under any repealed law, which is not a private company. A “public company” can issue shares to the public. It must have at least seven shareholders/ members, and at least three directors, at least one of whom must be a Myanmar citizen, ordinarily resident in Myanmar. It must also apply for a Certificate of Commencement of Business before its operations begin.

Generally public companies in Myanmar are not foreign owned, while only five have listed on Yangon Stock Exchange.

Many of these companies were barely operational and had poor compliance on governance and disclosure. In Pwint Thit Sa 2018, the average score of a public company (excluding listed firms) was 4pc compared to an overall average of 7pc. In the 2019 assessment, the equivalent figures are 4pc for public and 5pc overall.

Among the 2019 Pwint Thit Sa report’s top twenty players, four are non-listed public companies. They are: Grand Guardian Insurance, MAPCO, Myanmar Agro Exchange, and Great Hor Kham.


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