MYANMAR companies should look to consolidate their financial position through merging to compete on the international stage, economic experts have told Myanmar Times.

They agreed that Myanmar’s ability to reach international markets depends on company mergers, with the result that most will then become public companies with greater access to human and financial resources as the company grows in size.

“Mergers can create steeper competition, greater wealth and a larger workforce,” explained U Win Thin, a partner of Win Thin and Associates Certified Public Accountants.

He said that in other countries, particularly in the United States and Japan, mergers are much more common than in Myanmar.

“Merging is a business requirement but it won’t happen as long as the market does not demand it.”

In Myanmar, the law is silent on mergers. However, companies can merge by means of the Myanmar Companies Act, which permits the setting up of a new corporate entity or the absorption of a company by another. Once a company has more than 50 shareholders, it must then become a public company.

Mergers usually take place for two reasons, said U Win Thin. Companies that have become weak financially tend to merge to boost their security. In addition, companies sometimes merge in order to eliminate competition.

“The main point is that there should be intense domestic and international rivalry within a healthy competitive environment to compel companies to merge,” a senior banking officer told Myanmar Times.

He said most ASEAN countries do not have merger laws, but he expects the business environment will demand a greater legal framework once mergers become more popular.

“Mergers are like getting married – if two people have nothing in common or they cannot communicate well, this marriage will not work out,” he added. “So a management system which shares control and vision is vital.”

To avoid clashing egos when companies merge, the banking official recommended a high percentage of independent directors on the board, a common practice in other countries.

Experts cite the example of a recent merger involving three Myanmar banks as a sign of change. The merger between Cooperative Bank, Cooperative Farmers Bank and Cooperative Promoters Bank was supervised by the Ministry of Cooperative. Following the merger, the resulting company – named Cooperative Bank – has gone public.

“Our merger has really increased security, as well as our services and image,” said U Khin Maung Aye, a vice chairman of Cooperative Bank.