By Pyae Phyo Aung (Ministry of Planning, Finance and Industry)
The 9th December of 2020, the National Victory Day of the Republic of the Union of Myanmar was timed to coincide with the 33rd ASEAN Capital Markets Forum (ACMF) Chairs’ Meeting organized by Viet Nam via videoconferencing, joined by the deputy minister for Planning, Finance and Industry, who is also the chairman of Securities and Exchange Commission and party during which others present were senior officials of the capital markets in the ASEAN region, the representatives of partner organizations, the ASEAN Secretariat, and Asian Development Bank (ADB).
According to the roadmap for ASEAN Sustainable Capital Markets, four key priorities were highlighted in the ACMF Action Plan to develop the capital markets in the ASEAN region from 2021 to 2025, which include fifteen sectors under implementation. The meeting discussed the long-term and mid-term Roadmap of ASEAN Capital Markets for sustainable funding in ASEAN regions, criteria for ASEAN Capital Markets, Sustainability-Linked Bond, procedures for sustainability reporting of ASEAN Corporations, assessment for 6th ASEAN Corporate Governance, technical aids of ADB and ASEAN Capital Markets website programmes and cooperation works between ASEAN Working Committee for Capital Market Development (WC-CMD) and ACMF. The meeting also highlighted Corporate Sustainability Disclosures, Sustainable and Responsible Fund Standards and ASEAN Sustainability-linked Bond Standards. The meeting also agreed to keep carrying out the priority sectors of the ACMF Action Plan (2021-2025) between 2021 and 2015. The ACMF is a high-level grouping of capital market regulators from ASEAN countries, according to the report released by the Ministry of Planning, Finance and Industry.
The Securities and Exchange Commission and the Directorate of Investment and Company Administration are working together on Corporate Sustainability Disclosures, Sustainable and Responsible Fund Standards and ASEAN Sustainability-linked Bond Standards.
Myanmar and Corporate Governance
International Finance Corporation (IFC), a member of the World Bank Group, and the Securities and Exchange Commission of Myanmar (SECM) signed a memorandum of understanding (MoU) in 2017 to strengthen corporate governance regulatory standards and practices in Myanmar and to provide Myanmar technical assistance in this regard. Then the working group was formed with the responsible persons from the Securities and Exchange Commission of Myanmar (SECM), the DICA, Yangon Stock Exchange and the IFC in order to carry out Corporate Governance Scorecard. The IFC provided training. Educative seminars were held after inviting interested and potential companies. Arrangements were made to be able to answer the questions. Detailed negotiations with the interested companies were conducted, and then Myanmar Corporate Governance Scorecard 2018 was released.
Efforts to issue No. 2/2020– Notification on Requirements for Effective Corporate Governance
The Securities and Exchange Commission of Myanmar (SECM) under the Ministry of Planning, Finance and Industry issued No. 2/2020– Notification on Requirements for Effective Corporate Governance on 3 December in 2020. In an attempt to release this notification, the commission has made efforts since the end of 2018. The officials from the SECM and Organization for Economic Cooperation and Development (OECD) signed a memorandum of understanding (MoU) to provide the technical assistance required for the reforms of Myanmar’s corporate governance in the presence of the DICA as a witness during which the advisory committee for reforming corporate governance was formed with the representatives from OECD, IFC, CBM, DICA, SECM, MICPA and UMFCCI and then the notification with regard to the emergence of effective corporate governance beneficial to Yangon Stock Exchange-listed companies and the public companies with more than 100 shareholders could be issued.
Corporate governance can be recognized as a system by which a company or an organization is openly and transparently directed or controlled with rules, practices and processes. Its main objective spotlights sustainable investments of the companies, financial stability, and reputation on which the investors can rely, that’s why, it is to establish a comprehensive environment equipped with trust, transparency, responsibility and accountability. In general, good corporate governance can be assessed with the four following points.
The management has to be accountable to the Board of Directors elected by a majority of shareholders regarding the activities of running and controlling a business or similar association and BOD is responsible for the investment of the shareholders.
Shareholders’ right must be fair among the shareholders, including those with minimum shares under control by rules and processes. Complaints must be handled in an effective and transparent manner.
There must be a system which reports on disclosures of financial data, important decisions, work performances, assets and management are presented in a synchronous manner.
The Management and Board of Directors earlier mentioned above are basically the same but different in their actions. The BOD must independently decide the work matters in accord with rules and regulations agreed by all shareholders. The Management must systematically carry out daily activities without being influenced, where Independent Committees and Independent Directors must be appointed as well, and their assigned tasks must be conformity with the work procedures that are laid down. The activities of the BOD, the Management and the Independent Committees must not be influenced by a person or an organization.
What is prescribed in No. 2/2020– Notification on Requirements for Effective Corporate Governance?
Chapter 7 of No. 2/2020– Notification on Requirements for Effective Corporate Governance issued by the SECM includes 15 provisions obliged by law. There are four main areas in the corporate governance—Control System for the Board of Directors, Audit Committee, Independent Directors and Disclosures/ Directors’ Reports. Based on these four areas, the SECM in cooperation with the DICA negotiated with the organizations concerned about the ways how to draft the notification after seeking technical advises appropriate with the situations of the country.
The DICA issued the notification No 90/2020 in October in 2020 to specify the qualifications of independent directors (“ID”) of listed and non-listed public limited companies (“PLC”) registered under the Myanmar Companies Law for good corporate governance. If an independent director is appointed to a company, (1) he or she must be the one, who worked for the related organization of the company three years ago, (2) family members apart from this person must be the ones who worked three years ago or the ones who are working currently, (3) he or she must own capital or above the one-fifth of vote right and (4) he or she must not be the one, who worked as an executive for the companies that have financial relations. Only those who are free from those criteria must be appointed as the independent director.
Chapter 3 of the notification states provisions as to shareholders’ rights, easy way for voting, adequate information available in a synchronous manner, laying down and announcing a policy on profit sharing. Chapter 4 of the notification expresses provisions as to the Board of Directors, BOD set-up, five basic tasks, BOD meeting to be held at least for four times, the formation of the audit committee, the four-point duties of the committee including the introduction of a system comprising three points that can be well-managed.
Chapter five of the notification states three points to be followed in the decision to share trading among the related persons or organizations. Chapter six indicates 14 mandatory disciplines like reports on profit sharing policy, the formation of the Board of Directors, control system, number of meetings held all year round and attendance lists.
The SECM issued a joint statement on a mandatory directive (3/2020) and notification on corporate governance. It includes mandatory rules as to valuable share trading and transfer. Anyone can visit www.secm.gov.mm of the Website of the SECM for further information.
Benefits from obligations
The main aim of issuing the provisions as to corporate governance is to promote regulatory practices of corporate governance of the public companies running in Myanmar and develop reciprocal control among BOD members, executive officers and shareholders.
Abiding by the provisions of corporate governance ensures more transparency, an increase in trust of the public including the investors, sustainable existence of the company and good basic practices contributing to unbiased work procedures between the company and related persons and organizations. Moreover, our country will have to witness an improving score in Protecting Minority Investor index regarding East of Doing report annually assessed by the World Bank, but some scores are taken into account only when there are at least more than 10 listed companies of Stock Exchange. In addition to the public companies, State-owned economic organizations and private-owned companies can establish sustainable and improved corporate governance regulatory practices as they like by following the provisions prescribed in the corporate governance notification.
* The article “Economic Enterprises and Corporate Governance in Myanmar” written by U Aung Naing Oo
* Discussions on Corporate Governance by Mr. Kanta Fukami, Senior Policy Analyst from OECD
Translated by Htut Htut (Twantay)