DVB Multimedia Group

Transparency to rule in post-sanctions Burma: business watchdog

None of the companies listed on the Yangon Stock Exchange have produced significant statements of the shareholder risks they face. (Photo: DVB)

The lifting of US sanctions against Burma, long the Holy Grail of the local business community, will only be a boon to Burmese companies if they learn to embrace a new ethos of transparency, according to a Rangoon-based business watchdog group.

At a press conference on Friday, the Myanmar Centre for Responsible Business (MCRB) urged local companies eager to take advantage of the opportunities that will arise in post-sanctions Burma to disclose more information about their operations. And the best way to start, the group said, was with a website.

“We’d like to see more significant companies have a website and disclosing more information,” said MCRB director Vicky Bowman, noting that a survey by the group found that, even of those with a website, around 45 percent did not have a fully functioning website or published little to no data relating to corporate governance.

In its latest report, the group found that several well-known companies — among them First Myanmar Investment (FMI), Serge Pun and Associates (SPA) and Max Myanmar — scored high for evidence of disclosure of financial data, anti-corruption training, grievance mechanisms and environmental and social impact assessments.

Others, however, did not even have corporate websites where this information could be published.

“There are some familiar names on the list, including Zaykabar, International Group of Entrepreneurs (IGE), and a number of companies involved in the jade trade” that did not meet this minimal requirement, said Bowman.

Even as she urged these companies and others to remedy this problem, however, Bowman was quick to add that a website alone was no guarantee of transparency.

In some cases, she said, websites need to be as carefully scrutinised for what they don’t disclose as for what they do. One example she cited was the website of Asia World, which makes no mention of its palm-oil plantations, even though its involvement in this environmentally destructive business “has been documented in the recent Flora & Fauna International report based on government documents from last year.”

Life after sanctions

Another reason Burmese businesses need to think about setting up websites and sharing more information is that in the post-sanctions era, they will need every competitive edge they can get to differentiate themselves from competitors.

This will be especially important, said Bowman, when it comes time to find foreign partners, who will be keen to know about their financial data, grievance mechanisms, and environmental and social impact assessments.

“Foreign companies we talk to are looking for them to have strong corporate anti-corporate corruption policies, to state clearly what their business is, and to be compliant with the law. And to not have a bad relationship with their stakeholders,” said Bowman.

She added that just because companies are being removed from the sanctions list doesn’t mean that foreign investors will rush to do business with them.

“Companies like Zaykabar and Yuzana are going to get left well behind,” she said. “I don’t see how them coming off the list is going to lead to a rush of multinationals wanting to partner with them unless they significantly lift their game on corporate governance.”

Economist Sean Turnell, an expert on the Burmese economy, agreed that the lifting of sanctions would increase, not decrease, the pressure on companies to improve their ways of doing business.

Turnell, who long supported sanctions but now believes that the time has come to focus on making economic gains to cement recent political reforms, warned that doing business with the West wouldn’t be easy for companies with entrenched habits from the past.

“What delivers prosperity is trade, and historically a lot of that is dealing with the West, who have the governance practices in place and that have shareholder activism,” he said.

But it wouldn’t just be up to companies to raise their game: regulatory bodies, such as an anti-corruption commission and a banking system that applies anti-money laundering rules, will also need to take a firmer stance to stamp out practices that could adversely impact on the overall economy.

For healthy growth, Turnell argues that businesses and government will need to work together to eliminate practices that could harm the economy as a whole, even as they deliver short-term gains for some.

“We would like the anti-corruption commission to go out and ask businesses where are the hotspots, which processes are most liable to corruption,” he said, speaking to DVB on Friday.

Laying down the law

Meanwhile, legislators also have to do their part, by passing laws that will enshrine best practices long absent from the Burmese way of doing business. One example is a new Companies Law that is still waiting to go to parliament, which will require an annual director’s report to review the company’s performance for the year as well as risks facing the company.

“Companies elsewhere in the world disclose their risks around issues like labour, land, stakeholders and requisition, [and this] is also becoming an emerging regulatory requirement,” said Bowman.

At present, there are some very worrying shortcomings in the requirements for greater corporate accountability, she said, noting that none of the three companies listed on the new Yangon Stock Exchange — FMI, Myanmar Thilawa Special Economic Zone (SEZ) Holdings and Myanmar Citizens Bank — have produced significant statements of the stakeholder risks they face.

Bowman pointed out that the SEZs are particularly vulnerable to such risks, “given the number of households need to be resettled as part of the rezoning and ongoing opposition from some groups to the project.”

In this area, too, some companies stand to do better than others.

According to this year’s MCRB report, Myanmar Petroleum Resources, an exploration and production group owned by Moe Myint, ranked as the stand-out example of best practice in human rights, grievance mechanisms, policies and implementation.

“We are particularly impressed by their grievance mechanism, whereby the 11 villages in the Mann Field block have the ability to report complaints to the company and have them dealt with,” said Bowman.

Few companies scored high with the actual implementation of human rights policies, as most lacked statistics and real case studies.

One area that was found to be particularly lacking was disclosure of Environmental Impact Assessments (EIAs) under a procedure that was introduced by the government last December, which calls for assessments to be made public 15 days after they are submitted to the Environment Ministry.

Despite this new rule, half of the oil and gas companies surveyed this year failed to publish their examinations, and in other sectors like manufacturing and mining, “you find almost no EIAs disclosed,” said Bowman.

“We are currently in a world in which there are several hundred unprocessed EIAs in the ministry and several thousand projects that have never done an EIA or environmental management plan, so it’s going to be a transitional process.”

To make the process smoother, she said, the ministry should remind companies of their  disclosure obligation when they submit their reports. The quality of EIAs also needs to improve, said Bowman, stating that local companies are about to receive a “wake-up call” when it comes time to start living up to international standards.