Burma’s government has committed to developing a viable stock exchange in the country by 2015, and will start selling shares in state-owned enterprises next year.
Burma currently has a securities exchange which was set in 1996 up as a joint venture between a Japanese company called Daiwa Securities Co and the then-military government. This however only attracted two companies, and is described by Reuters as potentially the “world’s smallest stock exchange.”
The local Weekly Eleven reported that the process would be done in three stages to establish a “capital market”, as opposed to a “money market”, the former being for longer term borrowing, or the selling of stock equities in a given company.
It is unclear which company would be in the driving seat for the latest attempt, which Australia-based economist Sean Turnell states has been on the government’s wish list since 1991. Previously a South Korean company had expressed interest in developing a Burmese bourse.
However Turnell believes that the biggest problem would be a lack of the “rule of law. Stock markets require rule of law – they absolutely require property rights. This is why in developing countries banks are the main channels through which capital is distributed rather than stock exchanges”.
He added: “If you’re buying a share how do you know that the company isn’t going to run off?”
The government however has expressed a clear commitment to economic reform. An anonymous senior official from the Ministry of Planning told Reuters in September that, “The emergence of a stock exchange is very important for us in bringing the country in line with the rest of ASEAN.
“Some important laws have already been drafted. After enacting these laws, the Securities and Exchange Committee will be formed. Then there will be rapid progress.”
A team from the IMF is already in the country with a view to advising the government on how to reform the country’s multiple exchange rates, seen as one of the prime stumbling blocks for more general reform of the economy. The team is expected in the capital Naypyidaw and claim to be in the country specifically for “legal issues”, which may include “discriminatory currency arrangements or multiple currency practices.”
Economists have regularly accused the government of maintaining the multiple exchange rates for their own benefit. As a result commentators see these reforms as a crucial litmus test for the authority that self-avowed reformers have over the more traditional military hierarchy.
The Burmese economy has for decades been plagued by corruption, and was labelled as more corrupt than Afghanistan by the anti-corruption watchdog Transparency International. Its financial institutions are labelled as hotbeds of money laundering and the extent of graft has, according to the president’s chief economic adviser, U Myint, meant that regular tax collecting is “impractical” because of the ubiquitous nature of corruption.
However economist Dr Zaw Oo earlier told DVB that the government seemed committed to changing its role from controlling the economy to merely regulating it.
The year 2015 will be a key one, both economically and politically, with allowances over import tariffs from other ASEAN countries for the emerging economies of Laos, Cambodia and Burma set to expire. Moreover, an election is scheduled in which Thein Sein’s government will no doubt be judged upon the efficacy of reforms made now.