MYANMAR companies should be encouraged to investigate capital raising ventures and not just rely on bank loans as they have in the past, according to leading securities market experts.

Some private companies should also investigate the advantages of raising capital by becoming public companies, they said.

“In Myanmar, private companies traditionally raise capital by getting loans from local banks, but the amount of money available to business borrowers is limited to the amount that is initially deposited in banks by customers,” said U Kyaw Sein, executive director of the Myanmar Securities Exchange Centre (MSEC).

The Exchange Centre is a joint venture between the Myanma Economic Bank and the Daiwa Institute of Research, a Japanese securities company that started trading securities in Myanmar in 1996.

A market economy system has been operating in Myanmar since 1989 but efficient shares and bonds market have not been established, another reason why businesses still rely on bank loans for capital.

The push is now on to encourage companies to seek public listing.

“Many public-listed companies will have to emerge in Myanmar if we are to establish a functional securities market,” said Daw Tin May Oo, deputy director of MSEC.

“We need to establish a primary securities market in Myanmar and for that to happen we need many well-developed public companies,” said U Than Maung, an advocate and legal associate of Kelvin Chia Yangon Ltd, which is associated with the Kelvin Chia Partnership, Singapore.

Companies can raise funds by issuing shares or bonds to an agreed amount on the primary market. When investors come to the Over-The-Counter (OTC) market and sell securities they have bought, it is called the secondary market.

As of November 2003 Myanmar had 16,283 private companies registered at the Ministry of Commerce and Ministry of National Planning and Economic Development but there are few public companies.

“There are about 20 public companies in Myanmar,” U Kyaw Sein of MSEC said.

He also said that private companies in Myanmar are reluctant to become public companies because they worry that shareholders’ rights will limit their ability to run their business in the way they want.

“One of the main factors in developing the securities market is for companies to be willing to allow the OTC market only to determine the price of the shares,” U Kyaw Sein said.

He said that some of Myanmar’s public companies set their own share prices. While the prices of shares and bonds should move up and down in the trading market depending on the performance of the companies, some public companies announce that their share prices are rising even though their business is declining.

“Sometimes some public companies announce that they are offering shares but they are not actually selling those shares to the public. Instead they are selling them within their own circles,” said U Than Maung, of Kelvin Chia Yangon Ltd.

“If capital markets emerge in the big cities like Yangon and Mandalay the younger generation will enjoy more employment opportunities,” said U Than Maung.

Some infrastructures are already in place to enable a smooth transition into a capital market in Myanmar.

“We are unlike some other Asean countries like Laos and Vietnam in that we already have some important infrastructures in place like the Myanmar Companies Act (1914) and Myanmar Companies Rules (1940).

There are also many enthusiastic business identities driving toward this aim,” said U Kyaw Sein.

“If legislative powers are enacted, a securities market can emerge overnight in Myanmar,” U Than Maung agreed.

A Myanmar Securities Exchange Law is now being jointly drafted by the Ministry of Finance and Revenue and the Attorney General’s Office.

Myanmar has its own securities such as Treasury Bonds issued by the government and shares issued by Myanmar public companies, but there are no public companies that issue bonds.