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Business

Myanmar's new Companies Act can be 'game changer'

Conglomerate CDSG sees law kick-starting stagnant economy

Capital supermarket is one of CDSG's major retail units. (Photo by Shinya Sawai)

TOKYO -- Little in the way of positive news has come out of Myanmar in recent months. The situation in Rakhine State has seen de facto leader Aung San Suu Kyi come in for severe criticism from the international community as her government struggles to deal with the crisis and the realities of running the country.

Since she came to power, there has also been little, if any, progress made on Myanmar's stagnant economy; it slowed considerably in fiscal 2016. Having prioritized peace negotiations with ethnic groups in the north, the government has failed to deliver on its reform plans.

According to Siva Prakash, chief financial officer of conglomerate Capital Diamond Star Group, however, change could be afoot in terms of attracting foreign investment to the country, which could at least ease some of the pressure coming from the business community. 

"It is going to be a game changer," said Siva, referring to new legislation that will allow investors from abroad to hold up to 35% of shares in a local company without being classified as a foreign entity.

The draft Companies Act is currently being debated in the upper house of the national legislature and is set to replace the old act, which dates all the way back to 1914.

The legislation will also enable foreign citizens to take direct stakes in local companies and trade shares on the Yangon Stock Exchange. In a country that relies heavily on foreign investment, there are high hopes that the changes can get the listless economy moving forward.

"The fundamentals [for economic growth] are there. We just need to get some of these policies across the line," Siva said.

Group CFO Siva Prakash

CDSG is one of Myanmar's biggest conglomerates and the country's leader in food and fast-moving consumer goods, owning several well-known brands such as Premier coffee. "[The food business] is where we have the investment from Mitsubishi Corporation, and we are going to expand that. We are also talking to reputable Japanese companies like Nissin on a joint venture to produce instant noodles in Myanmar," Siva said.

"We are doing the extension of our flour mills ... we have an agriculture business, which we are looking at expanding," he added. "We have close to 300 [convenience] stores. We plan to expand that to close to 1400 stores over the next couple of years."

Fostering capital markets

The group has grand plans like these for just about all of its businesses, including retail and real estate. But that means funds need to be raised more than ever before. With the country's capital market still in its nascent stage, that is a no easy task for CDSG -- or any other company for that matter.

"Once [the law] happens, you will see a breakthrough even in the capital markets," Siva said. "It will start bringing foreign institutions in. It will facilitate the increase in FDI into Myanmar."

"You start getting the Myanmar companies gearing up towards looking at IPO as a real possibility, [and] the market liquidity will improve [and be] able to attract institutional investors who are able to hold investments longer."

But if there is one thing investors and business dislike, it is instability, and security in the country is a major worry.

Siva said there is "obviously concern" among businesses. The issues "need to be tackled relatively quickly" so that the situation does not escalate, he said.

"We have got 100% confidence in the government being able to manage these issues and I think once you get the economy moving, and you get that activity back to full steam, people start focusing more on the economy," he explained. "Because the economy is down and you have these issues, people start thinking about all this. [This is why] we really need to get the economy moving in the right direction."

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