Myanmar is running behind schedule for starting a stock exchange by 2015 after delays in getting the legal framework in place, said an executive at Japan Exchange Group Inc., which is assisting on the project.

"We're pressed for time," Koichiro Miyahara, senior executive officer at Japan Exchange, said in an interview in Tokyo on Aug. 27. He said the late approval of a capital markets bill has delayed the project, and it's up to the Myanmar government as to how fast it can set up related organizations such as a securities regulator.

Japan Exchange's predecessor Tokyo Stock Exchange Group Inc. and Daiwa Securities Group Inc. were chosen last year to help Myanmar set up a stock exchange as the Southeast Asian nation opens itself from decades of isolation and military rule. Companies from Coca-Cola Co. to Unilever Plc. are investing in the country of 64 million people after the U.S. eased economic sanctions last year.

"Like any other modern economy, Myanmar needs a capital market to allow companies to raise funds," said Moe Thuzar, a Singapore-based research fellow at the Institute of Southeast Asian Studies. "It is more important to ensure that appropriate regulatory and operational infrastructure is in place" rather than meet an arbitrary deadline, she said.

Passed Law

Myanmar President Thein Sein signed the Securities Exchange Law on July 31. The legislation sets rules that include the establishment and operation of a securities regulator to oversee trading activity.

Miyahara, who is in charge of Japan Exchange's contribution to the project, said he had expected the bill to be passed at the start of 2013 and the delay will shorten the time for developing the bourse by about a year. His company will make "every effort" to complete the work on time, he said.

Regulations still need to be developed under the law to outline how the exchange will function, Maung Maung, director general at the Central Bank of Myanmar, said in a phone interview yesterday. The government will begin working on infrastructure such as buildings and software for the bourse next year and it will begin operating in 2015, Deputy Finance Minister Maung Maung Thein said at a briefing on Aug. 23.

Japan Exchange and Daiwa's research unit, both based in Tokyo, have completed a report on the framework for the exchange, including plans for its functions and system infrastructure, Miyahara, 56, said. They will submit the document to the Myanmar government this month, he added.

Investor Interest

The Securities Exchange Law doesn't say whether foreigners will be allowed to trade on the bourse.

Jim Rogers, chairman of Rogers Holdings in Singapore, and Mark Mobius, executive chairman of Templeton Emerging Markets Group, are among investors who see opportunities in the country over time.

"It'll take time for Myanmar, but Myanmar definitely is going to get more and more investment," mainly in infrastructure, Mobius, who manages $53 billion, said in an interview on July 29. He has indirectly invested in the nation through companies listed in Singapore and Thailand.

About eight companies may be listed when the exchange opens, according to Shigeto Inami, managing director of Myanmar Securities Exchange Centre, a joint venture between state-owned Myanma Economic Bank and Daiwa Institute of Research Ltd., a unit of Japan's second-largest brokerage. Two stocks are currently traded over the counter at the center, making them candidates to list on the new bourse, Inami said.

Cambodia, Laos

Those companies are Myanmar Citizens Bank Ltd. and Forest Products Joint Venture Corp. Soe Thein, an executive director at the center, declined to comment on the performance of the two stocks in the over-the-counter market or whether the semi- government institutions are candidates for listing.

Other frontier Southeast Asian economies have opened stock exchanges in recent years, with mixed results. Trading on the Cambodia Securities Exchange began last year and it currently has one company listed, according to its website. The two-stock Laos Composite Index has risen 30 percent since its bourse started trading in January 2011. It slipped 0.1 percent at 9:41 a.m. in Vientiane.

"If you look at Cambodia and Laos, the stock exchanges haven't been a great success," said Thura Soe Paing, managing director of All Myanmar Investment Partners, a Yangon-based investment and business advisory company. "What I hope an establishment of a stock exchange will drive forward is the development and installation of business standards."

Japan Exchange, which itself listed in Tokyo in January following the merger of Tokyo Stock Exchange and Osaka Securities Exchange Co., expects the Myanmar project will enable it to export its expertise elsewhere, Miyauchi said.

Toshiba, KDDI

"We'd like to maximize our experience and know-how to work with countries that are thinking about setting up stock exchanges," said Miyahara.

Other Japanese companies are working on the Myanmar project. Toshiba Corp. and KDDI Corp. won an order from Daiwa Research to supply a data center for the exchange, Tokyo-based Toshiba said on July 3.

President Thein Sein has allowed more political freedom and loosened economic controls since coming to power two years ago. Assuming his government maintains momentum on policy reform, the economy will expand 6.5 percent in the year ending March 2014 and 6.7 percent in the following fiscal year, the Asian Development Bank forecast in April.

Phone Network

One area where Thein Sein has already moved to modernize the economy is in telecommunications. In June, Norway's Telenor ASA and Ooredoo QSC of Qatar won licenses to expand the country's telecommunications network, beating nine other bidders. The government went ahead with the award even after parliamentarians tried to delay the decision.

A stock exchange with a strong securities regulator would help to improve corporate governance in a country that remains plagued by corruption. Myanmar is ranked 172 out of 176 nations in Transparency International's 2012 corruption index.

"I hope Myanmar corporates know that it is a painful process to list and what will be required of them with regards to reporting, transparency and accountability," said Thura Soe Paing of All Myanmar Investment. "It will be worth it in the long run."

–With assistance from Kyoko Shimodoi and Russell Ward in Tokyo, Sanat Vallikappen in Singapore and Tony Jordan in Bangkok. Editors: Russell Ward, James Gunsalus

By Takako Taniguchi and Kyaw Thu

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